PETER’S BUSINESS & FINANCE BRIEFING – Wednesday 27 March 2024, 06:00 Hong Kong
• Western CEOs to reportedly meet Xi Jinping • Alibaba scraps IPO of logistics unit Cainiao • South Korean stocks hit 2-year highs
Wednesday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 16,553 -66 points -0.4%
Nikkei 225 (Japan) Projected Open: 40,510 +112 points +0.3%
Quick Summary - 4 Things To Know Before Asian Markets Open
Several executives in China are extending their stay in the country after receiving invites to a meeting today with a top leader, widely anticipated to be President Xi Jinping. Almost 90 Western CEOs, including Tim Cook of Apple, HSBC’s Noel Quinn, and Pfizer’s Albert Bourla, as well as heads of multilateral organisations such as the IMF, have been attending the two-day China Development Forum in Beijing which opened Sunday and is known as China’s version of Davos. Premier Li Qiang promised that Beijing would prepare regulations to smooth market access for foreign enterprises and efforts to boost domestic consumption. The conference came as China’s trading partners confront oversupply risks in major industries including electric vehicles and steel, which could spur manufacturers to dump excess goods on global markets.
China says it has filed a complaint at the World Trade Organization over what it says are discriminatory US subsidies for electric vehicles. Starting this year, US car buyers are not eligible for tax credits of US$3,750 to US$7,500 if critical minerals or other battery components were made by Chinese, Russian, North Korean or Iranian companies. The credits are part of President Joe Biden’s signature climate legislation, named the 2022 Inflation Reduction Act. The Chinese Commerce Ministry said in a statement posted online that the US formulated discriminatory subsidy policies for new energy vehicles in the name of responding to climate change. It said the US move excluded Chinese products, distorted fair competition and disrupted the global supply chain for new energy vehicles.
Hong Kong home prices have extended a 10-month losing streak, dropping to their lowest level since September 2016. The lived-in home-price index fell 1.7% in February versus 1.2% in January, according to the Rating and Valuation Department on Tuesday. Prices were down almost 13% from a year earlier. The price decline last month preceded the government’s lifting of all property cooling measures that has dented demand for property.
South Korea’s benchmark Kospi index has hit a two-year high. The Kospi rose 0.7% on Tuesday, closing at its highest level since April 2022, boosted by advances from chipmakers. Gains in chip stocks were led by index heavyweights Samsung Electronics which jumped 2.2% and SK Hynix which rose 4.3%, bringing its gains for the year to date to almost 25% as investors rotate into semiconductor names with exposure to artificial intelligence. The Kospi has posted a 15% gain over the past 12 months, and a 4.9% advance since the start of 2024.
Western CEOs To Reportedly Meet Xi Jinping
Several executives in China are extending their stay in the country after receiving invites to a meeting today with a top leader, widely anticipated to be President Xi Jinping. Almost 90 Western CEOs, including Tim Cook of Apple, Darren Woods of ExxonMobil, HSBC’s Noel Quinn, Pfizer’s Albert Bourla and FedEx’s Raj Subramaniam, as well as heads of multilateral organisations such as the IMF, have been attending the two-day China Development Forum in Beijing which opened Sunday and is known as China’s version of Davos. Premier Li Qiang promised that Beijing would prepare regulations to smooth market access for foreign enterprises and efforts to boost domestic consumption. The conference came as China’s trading partners confront oversupply risks in major industries including electric vehicles and steel, which could spur manufacturers to dump excess goods on global markets. IMF managing director Kristalina Georgieva said China’s economy is at a “fork in the road” where it must choose between past policies or “pro-market reforms” to unlock growth. She said with a “comprehensive package of pro-market reforms” China could add 20% or US$3.5tn to its economy over the next 15 years.
China’s premier didn’t meet with foreign business executives at the Forum, in a break with precedent. Li Qiang also this month didn’t deliver the premier’s annual press briefing at the National People’s Congress, breaking a three-decade norm. The annual roundtable with business leaders was one of the few annual chances for foreign business leaders to engage with Chinese government officials of his stature. Among those on the list for Wednesday’s meeting with President Xi are reportedly Stephen Orlins, head of the National Committee on US-China Relations, Craig Allen, president of the US-China Business Council and Evan Greenberg, chief executive officer of the insurer Chubb.
The meeting comes as China’s trading partners confront oversupply risks in major industries including electric vehicles and steel, which could spur manufacturers to dump excess goods on global markets. Beijing has set a growth target of 5% for this year, the same as in 2023 but low compared with previous years, and analysts expect the economy to slow further in the medium term on the back of a property downturn and demographic decline. Beijing will be seeking to counter international criticism of its response to weak demand from a property slowdown, which is to further stimulate manufacturing. This policy is incentivising oversupply and dumping on global markets, threatening the “deindustrialisation” of trading partners, analysts said.
Releasing a report last week detailing China’s efforts to “de-risk” its economy by reducing its dependence on foreign suppliers, Jens Eskelund, president of the European Union Chamber of Commerce in China, called for immediate talks between policymakers in China and the EU to avert trade tensions as European producers struggle to compete with dumped products. “I think what we see right now is the unfolding of a slow-motion train accident,” Eskelund said at a briefing on the report. “I think there’s still a possibility of finding off-ramps, and that’s what we hope.” He said overcapacity in Chinese industry was “across the board” and “I don’t think we’ve seen the full impact yet”. “There needs to be an honest conversation between the EU and China on what is this going to be,” he added, “because it is hard for me to imagine that Europe will just sit by quietly and witness the accelerated deindustrialisation of Europe.”
China To Speed Approvals Of New Loans To Private Developers
Regulators in China are urging banks to speed up approvals for new loans to private property developers, according to a report by Reuters. The banking regulator wants faster loan approvals for residential projects under the “whitelist” mechanism, with effect from last week, Reuters said. The so-called “whitelist” mechanism covers projects of state-backed and private developers that need fresh financing of 1.5 trillion yuan (US$207.51bn). China is seeking to revive homebuyer sentiment, and these efforts come as prices of new homes fell in China for an eighth straight month in February. Developers say banks have been reluctant to grant new loans to property projects, while mostly extending maturity and lowering interest rates of existing loans. In the directive, the regulator gave banks until the end of June to finish approval and issuance of all loans.
China Files Complaint Against US At WTO Over EV Subsidies
China says it has filed a complaint at the World Trade Organization over what it says are discriminatory US subsidies for electric vehicles. Starting this year, US car buyers are not eligible for tax credits of US$3,750 to US$7,500 if critical minerals or other battery components were made by Chinese, Russian, North Korean or Iranian companies. The credits are part of President Joe Biden’s signature climate legislation, named the 2022 Inflation Reduction Act. The Chinese Commerce Ministry said in a statement posted online that the US formulated discriminatory subsidy policies for new energy vehicles in the name of responding to climate change. It said the US move excluded Chinese products, distorted fair competition and disrupted the global supply chain for new energy vehicles.
Under new US rules that took effect January 1, only 13 of the more than 50 EVs on sale in the US were eligible for tax credits, down from about two dozen models in 2023. Automakers have been scrambling to source parts that would make their models eligible for the credits. China is the dominant player in batteries for electric vehicles and has a rapidly expanding auto industry that could challenge the world's established carmakers as it goes global. China’s EV exports surged in 2023, up 77.6% year-on-year and with more than 120 million vehicles shipped according to official data. The European Union, concerned about the potential threat to its auto industry, launched its own investigation into Chinese subsidies for electric vehicles last year. US Secretary of Commerce Gina Raimondo said in February that China’s EVs could pose a data security risk, as they collect a “huge amount of information about a driver”. Shortly thereafter, the White House announced it would be conducting its own investigation into China’s vehicles, which could lead to heavier import tariffs.
China’s EV Exports To EU Slump
China’s exports of electric vehicles to European Union countries dropped by nearly a fifth during the first two months of the year, according to official Chinese data, amid a probe by Brussels into unfair subsidies of the industry. Just over 75,600 EVs shipped to the EU’s 27 member countries in January and February, Chinese customs data showed, down 19.6% from last year. Earlier this month, the EU said it’s moving closer to imposing additional tariffs on Chinese electric vehicles entering the bloc, citing what it called new proof that the government in Beijing is providing illegal financial support for the industry.
BYD 2023 Profit Falls Short Of Analysts’ Estimates
After the Asian markets closed Tuesday, Chinese carmaker BYD posted a weaker-than-expected 81% rise in its full-year net profit, as the EV maker feels the squeeze from intensifying competition and softening demand in the world’s largest electric vehicle market. The Shenzhen-based company, which surpassed Tesla as the world’s largest pure EV maker by sales in the fourth quarter of last year, made Rmb30bn (US$4bn) in net income in 2023, the highest on record, but missing analysts’ estimates of Rmb31bn. BYD has slashed prices of almost every model in its line-up since the start of 2024, as the group vowed to win battles both with EV upstarts and with traditional brands such as Toyota and Volkswagen.
US Faces ‘Market Shock’ On Ballooning Debt
The US faces a Liz Truss-style market shock if the government ignores the country’s ballooning federal debt, the head of Congress’s independent fiscal watchdog has warned. Phillip Swagel, director of the Congressional Budget Office, said the mounting US fiscal burden was on an “unprecedented” trajectory, risking a crisis of the kind that sparked a run on the pound and the collapse of Truss’s government in the UK in 2022. “The danger, of course, is what the UK faced with former prime minister Truss, where policymakers tried to take an action, and then there’s a market reaction to that action,” Mr. Swagel told the Financial Times. The US was “not there yet”, he said, but as higher interest rates raise the cost of paying its creditors to US$1tn in 2026, bond markets could “snap back”.
Meanwhile, Bond fund giant Pimco told the FT it was holding a smaller than usual position in US Treasuries and preferred the bonds of countries such as the UK and Canada. The fund manager believes inflationary pressures may lead the Federal Reserve to cut interest rates more slowly than other major central banks. Andrew Balls, chief investment officer for global fixed income at the firm, which holds US$1.9tn in assets, told the FT that weaker economic growth in some countries was helping ease price pressures there faster than in the US. “Outside of the US we are seeing more evidence of inflation correcting,” he said. “I think you see the balance of risks on the Fed going slower in cutting rates than is priced in but outside the US there is some risk of central banks delivering more than is priced in.”
Larry Fink Says World Must Address Growing Retirement Crisis
The world faces a looming “retirement crisis” that requires a rethink of pensions and working patterns as medical breakthroughs boost longevity, BlackRock’s chief executive Larry Fink warned on Tuesday in his closely watched annual letter to chief executives and investors. “As a society, we focus a tremendous amount of energy on helping people live longer lives. But not even a fraction of that effort is spent helping people afford those extra years,” Mr. Fink wrote in his annual letter to shareholders. BlackRock, the world’s largest money manager with US$10 trillion in assets, says more than half of the assets it manages are for retirement. Getting more people investing more of their assets in capital markets is key to securing comfortable retirements, Mr. Fink says. “No other force can lift more people from poverty or improve quality of life quite like capitalism,” he wrote. He cited UN projections that one in six people globally would be older than 65 by 2050, up from one in 11 in 2019.
In past letters addressed to the CEOs of the companies BlackRock invests in, Mr. Fink pressed them to disclose more about the social and environmental effects of their businesses and warned that BlackRock may vote against boards that don’t. That landed him in hot water with critics on both sides of the political aisle. Blackrock has lost investment mandates from Republican-led US states for allegedly being “hostile” to fossil fuel and been lambasted by Democratic activists for not doing more to divest from it. Citing his trips to 17 countries last year, Mr. Fink wrote that global politicians and businesspeople increasingly planned to invest in both oil and gas for energy security and green power for the energy transition.
Asia's Economy To Grow 4.5% In 2024
The Boao Forum for Asia Research Institute on Tuesday projected that Asia's economy will grow by 4.5% this year, up from 4.3% last year. The forecast came as the Boao Forum for Asia Annual Conference 2024 kicked off on the Chinese island of Hainan. Secretary General of the Boao Forum for Asia Li Baodong said while the continent faces challenges, including geopolitical tensions and extreme weather, growth will continue, especially in the South Asian region. "India, Indonesia as well as Saudi Arabia are among the Asian developing economies that have very good growth prospects, and Asia will continue to be the region contributing the most to world economic growth,” Mr. Li said. He added that China’s economy will also continue to see resilient growth.
With the theme "Asia and the World: Common Challenges, Shared Responsibilities", the four-day Boao event is said to have attracted some 5,000 participants this year. Zhao Leji, chairman of the National People's Congress Standing Committee, will deliver a keynote speech at the forum on Thursday.
Australia Consumer Confidence Falls In March
The Westpac-Melbourne Institute Consumer Sentiment index in Australia fell 1.8% to 84.4 in March from 86 in February, easing from 20-month highs amid renewed concerns about the economic outlook and family finances. The 12-month outlook for the economy slid 4.5% in March, while the 5-year outlook rose 1.1%. The measure for family finances also fell 1.4%, and the 12-month outlook for family finances dropped 1.5%. The index has held below the neutral 100 mark since February 2022, the longest streak since the early 1990s recession. Matthew Hassan, a senior economist at Westpac said, "last month we saw some promising signs that the consumer gloom that has dominated over the last two years might finally be starting to lift. The March survey update shows that progress continues to be slow at best."
South Korea Consumer Sentiment Drops To 7-Month Low
South Korea’s Composite Consumer Sentiment Index (CCSI) fell to 100.7 points in March, down from the previous month's level of 101.9, which was the highest reading since August 2023. It ended three consecutive months of gains, and was the biggest monthly decline since August 2023, driven by soaring prices of farm goods and a slump in private spending. Consumer sentiment concerning current domestic economic conditions decreased to 68 from 70 points, and that concerning future domestic economic conditions was unchanged at 80.
Hong Kong Trade Deficit Slightly Narrows in February
Hong Kong’s trade deficit narrowed slightly to US$41.7 billion in February from US$45.4 billion in the corresponding month of the previous year. Exports fell 0.8% year-on-year to US$284.1 billion, while imports declined at a faster 1.8% from a year earlier to US$325.7 billion. For the period from January to February, the country's trade deficit sharply decreased to US$38 billion from US$70.7 billion in the same period of 2023.
Hong Kong Home Prices Fall To Lowest Level Since September 2016
Hong Kong home prices have extended a 10-month losing streak, dropping to their lowest level since September 2016. The lived-in home-price index fell 1.7% in February versus 1.2% in January, according to the Rating and Valuation Department on Tuesday. Prices were down almost 13% from a year earlier. The price decline last month preceded the government’s lifting of all property cooling measures amid slower than expected economic growth and a high-interest rate environment that has dented demand for property. Hong Kong's private home rent index for February this year was down 0.12% month-on-month. It has been falling for two consecutive months, dropping 0.32%.
Singapore Manufacturing Output Rises More than Expected
Singapore’s manufacturing production grew 3.8% year-on-year in February, following a downwardly revised 0.6% gain in the previous month, handily beating economists’ forecasts of a 0.5% rise. The upturn was mainly boosted by a sharp rebound in the production of biomedical manufacturing (27.4% vs -25.9% in January), electronics (2.6% vs -4.7%), and chemicals (11.2% vs 3.9%). On a monthly basis, manufacturing activity surged 14.2%, rebounding sharply from an upwardly revised 6.7% fall in the prior month and the most since February 2022, and far above market forecasts of a 3.1% rise. Singapore’s economic development board said that all clusters of the country’s manufacturing sector expanded in February, except for the general manufacturing and precision engineering sector.
Thailand Export Growth Below Forecasts
Exports from Thailand grew 3.6% year-on-year to US$23.38 billion in February, less than the 4.4% expected by economists and easing sharply from a 10% surge in the prior month. It was the seventh straight month of expansion in shipments but the softest pace since last September. For the first two months of the year, exports rose by 6.7%. Thailand set a target for exports to rise 1%-2% this year. Last year, the country's exports dropped by 1%.
Imports to Thailand increased by 3.2% y/y to US$23.94 billion in February, exceeding economists’ forecasts of 1.5% and accelerating from 2.6% growth a month earlier. It was the steepest pace in purchases since last November as recovery in domestic demand gained momentum, with Bangkok reportedly preparing to launch a “digital wallet” cash handout scheme later this year.
In the first two months of the year, the trade balance posted a deficit of US$3.31 billion, with exports and imports rising by 6.7% and 2.9%, each. Last year, the trade shortfall stood at US$5.2 billion as exports fell by 1% while imports dropped at a steeper 3.8%.
Sri Lanka Unexpectedly Cuts Interest Rates
The Central Bank of Sri Lanka unexpectedly cut its benchmark Standing Deposit Facility Rate by 50 bps to 8.5% on Tuesday, the first rate cut since last November, amid easing inflation. The Standing Lending Facility Rate was also cut by 50 bps to 9.5%. The central bank said it expects its easing measures to pass through swiftly into the economy “by the financial institutions, thereby accelerating the normalisation of market interest rates in the period ahead.” The central bank has reduced interest rates by a total of 700 bps since June last year. Annual inflation slowed to 5.9% in February, moving closer to the central bank's target of around 5% in the medium term. Sri Lanka's economy expanded by 4.5% in the fourth quarter of 2023, following 1.6% growth in the prior quarter, mainly driven by industry, construction, and services sectors. At the start of 2024, the country raised its value-added tax to 18% from 15% to meet revenue targets under the four-year US$2.9 billion IMF program, which helped to slow inflation.
US Consumer Confidence Weakens To Lowest Level Since November
US consumer confidence fell to a fresh low in March as Americans became more pessimistic about future economic conditions. The Conference Board’s consumer confidence index dropped to a reading of 104.7 (1985=100) this month, just below the downwardly revised 104.8 in February, the organisation said on Tuesday. That was the lowest level since November and missed economists’ expectations of 107. Expectations for the next six months fell to their lowest level since October as Americans became more pessimistic about future labour and business conditions, as well as income expectations. Meanwhile, inflation expectations for the next 12 months barely changed in March, rising 0.1 percentage point to 5.3%, while the perceived likelihood of a recession over the next year declined. “The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy,” said Dana Peterson, Chief Economist at The Conference Board.
US Durable Goods Orders Rebound In February
New orders for long-lasting goods in the US increased in February, driven by an uptick in aircraft spending, while underlying measures of business spending improved. Orders for durable goods, which include washing machines, cars and aircraft, increased 1.4% in February from the previous month’s downwardly revised 6.9% decline, according to the Census Bureau. That beat expectations for a 1.1% increase. Excluding transport, new orders for durable goods increased 0.5% from a 0.3% decline in January. New orders for nondefense capital goods excluding aircraft, considered a proxy for business investment, increased 0.7% in February up from a downwardly revised 0.6% decline the previous month.
US Home Prices Rise At Faster Pace
The S&P CoreLogic Case-Shiller 20-city home price index in the US rose by 6.6% year-on-year in January, accelerating from a 6.2% increase in December and compared with market expectations of a 6.7% advance. It marked the largest increase in home prices since November 2022. On a monthly basis, home prices fell by 0.1% in response to elevated borrowing costs. Although mortgage rates eased in January, high borrowing costs have still put pressure on prospective homebuyers. Prices declined in 17 of the 20 cities covered by the index.
China Hacking Accusations Escalate
The New Zealand and Australian governments on Tuesday joined Britain and the US in expressing concerns about malicious cyber activity by Chinese state-backed actors. New Zealand accused China of “malicious cyber activity” linked to Chinese state actors, who targeted its parliament in 2021. The government “expressed concerns today about malicious cyber activity, attributed to groups sponsored by the Chinese Government,” New Zealand’s Foreign Minister Winston Peters said on Tuesday. “Foreign interference of this nature is unacceptable, and we have urged China to refrain from such activity in future,” Mr. Peters said. “The use of cyber-enabled espionage operations to interfere with democratic institutions and processes anywhere is unacceptable,” Judith Collins, New Zealand’s minister for communications security bureau said in a separate statement.
Meanwhile, Australia has also joined in condemning China’s alleged cyber attacks targeting UK democratic institutions and parliamentarians. In 2019, Australian intelligence reportedly determined China was responsible for a cyberattack on its national parliament and its three largest political parties before a general election, though the government never officially disclosed a culprit. A statement from the minister of foreign affairs said, “the persistent targeting of democratic institutions and processes has implications for democratic and open societies like Australia.”
It comes one day after the US and UK claimed China-linked hackers were behind a cyber espionage campaign that stole British voter data and targeted millions of individuals, including lawmakers, academics, journalists, and defence contractors. China has consistently denied accusations of espionage and wrongdoing. The Chinese embassies in Washington, London and Wellington also issued denials to the claims by the US, UK and New Zealand. "We have firmly fought and stopped all kinds of malicious cyber activities in accordance with the law, and have never encouraged, supported or condoned cyberattacks," a statement by the Chinese embassy in London said. "The UK falsely accused China of attempting to interfere with UK democracy. This is nothing more than a publicity stunt. This is also a typical example of a thief crying 'catch thief'." The Chinese embassy in New Zealand accused Wellington of "completely barking up the wrong tree". "As a matter of fact, China is a major victim of cyberattacks," the embassy said.
Hong Kong MTR Fares To Rise About 3% From June
Hong Kong’s sole rail operator will raise fares by a maximum of 3.09% this year, the second increase since authorities imposed a new formula that factors in profits from its property developments to mitigate ticket price changes. A basket of factors, including inflation and the MTR Corporation’s productivity and profitability, are used to determine the fare rise, which comes into effect from June. Inflation rose 2.4% year-on-year in December last year, and new government data showed the wages of transport sector workers had increased by 5.2% over the same period. After subtracting the productivity factor, which is linked to the firm's property profits, the fare change would be 3.2%. But the affordability cap, based on the fourth quarter’s median monthly household income, limited the fare rise to 3.09%.
In a statement, the MTR said the decision had taken into account how affordable it would be to the public. “The 'affordability cap' arrangement has taken its effect this year in striking a balance between public affordability and the corporation’s need to maintain, upgrade and renew the railway system," said Jenny Yeung, a managing director with the MTR. DAB lawmaker Ben Chan, who chairs Legco’s transport panel, said the rail operator should fulfil its corporate responsibility to relieve citizens' pressure. "This fare increase will be an extra burden to citizens. It is equivalent to piling more hardship on them under the current economic situation," he added.
Alibaba Scraps IPO Of Logistics Unit Cainiao
Alibaba said Tuesday it is cancelling the proposed initial public offering of its Cainiao smart logistics unit. The company has withdrawn its IPO and listing application for Cainiao and will instead buy the remaining shares of the company it doesn’t already own. Joe Tsai, Alibaba’s chairman, said in a statement the company took the decision to pull the Cainiao IPO as “we believe this is an appropriate time to double down” on the logistics business. Alibaba currently owns a 64% stake in Cainiao. It says it intends to invest up to US$3.75 billion to acquire the remaining 36% from minority investors and employees with vested equity. The offer values Cainiao at US$10.3 billion, Alibaba said. The shelving of the planned IPO, which would have been a boon to Alibaba, handing it an injection of cash with a key exit deal, comes after deteriorating market conditions in China. Cainiao, which Alibaba first launched in May 2013, provides warehousing and fulfilment services, last-mile delivery and pick-up posts, and reverse logistics to customers of Alibaba’s Taobao and Tmall e-commerce sites.
South Korean Stocks Hit 2-Year Highs
Most Asia-Pacific markets rose Tuesday, with South Korea’s benchmark Kospi hitting two-year highs as investors digested a fresh batch of economic data. The Kospi rose 0.7% on Tuesday, closing at its highest level since April 2022 and snapping a two-day losing streak, boosted by advances from chipmakers. Gains in chip stocks were led by index heavyweights Samsung Electronics which jumped 2.2% and SK Hynix which rose 4.3%, bringing its gains for the year to date to almost 25% as investors rotate into semiconductor names with exposure to artificial intelligence. The Kospi has posted a 15% gain over the past 12 months, and a 4.9% advance since the start of 2024. On the economic data front, South Korea’s consumer confidence fell to 100.7 in March, down from a six-month high of 101.9 reached in February.
Japan’s Nikkei 225 Index fell under 0.1% to 40,398, while the broader Topix Index rose 0.1% on Tuesday, with Japanese stocks recouping some losses from the previous session, helped by gains in the technology sector. Markets are now looking ahead to a raft of economic reports in Japan later this week, including unemployment, retail sales and industrial production figures.
Australia’s S&P/ASX 200 fell 0.4%, giving back gains from the previous session where it came close to a new all-time high. Traders are awaiting domestic inflation figures this week for clues on the path for Reserve Bank of Australia monetary policy.
In India, the BSE Sensex closed 0.5% lower at 72,470 on Tuesday following a long weekend, led by tech shares. In its monthly economic review, the Indian Finance Ministry said that higher freight costs and insurance premiums for trade in the Red Sea due to Houthi attacks place significant risks on India’s inflation and make Indian exports less competitive, pressuring growth and weakening the rupee.
Hong Kong Stocks Lead Gains In Asia
Hong Kong’s stock market led gains in Asia on Tuesday. The city’s benchmark Hang Seng index rose 145 points, or 0.9%, to 16,618, closing higher for the first session in three. The Hang Seng Tech index increased 1.0%. The Hang Seng China Enterprises index of mainland large cap stocks listed in Hong Kong added 1.2%.
China Merchants Bank rose 4.3% after announcing a better-than expected dividend on Monday. Baidu led gains among technology names as it added 3.7% owing to a potential partnership with Apple on artificial intelligence services. China Resources Land added 2.3% following a full-year earnings announcement where revenues beat estimates.
In cautious trading on the mainland ahead of industrial profit data out of China later today, followed by official PMIs figures over the weekend, the Shanghai Composite rose 0.2% to close at 3,031. Mainland stocks snapped a three-day decline. Meanwhile, Chinese regulators are urging banks to speed up approvals for new loans to private property developers, according to a Reuters report.
European Stocks Close Higher On Rate Cut Hopes
European equities closed higher on Tuesday after comments from policymakers boosted traders’ bets that the European Central Bank will soon begin easing monetary policy. Bank of Greece governor Yannis Stournaras said consensus was building within the ECB to deliver an interest rate cut at its next monetary policy meeting in June. The region-wide Stoxx Europe 600 rose 0.2%, erasing losses from earlier in the session. Retail stocks were up 1.5% while mining stocks fell 0.5%. Germany’s Dax rose 0.7% to a new record high, buoyed by gains for rate-sensitive real estate stocks. London’s FTSE 100 gained 0.2%, closing at a 13-month high.
Shares of Maersk closed 2.6% lower, paring losses slightly, after confirming it had chartered the container ship which crashed into the Francis Scott Key Bridge in the US city of Baltimore in the early hours of the morning. Shares in the UK-based grocery retail and fulfilment group Ocado climbed 3.3% after it reported an increase in quarterly revenues and growth in retail sales at Ocado Retail, its joint venture with Marks and Spencer. Shares in the UK-based multinational engineering business Smiths Group advanced 2.2% after it reported a rise in half-year profits and appointed a new chief executive. Shares of German holiday group Tui were up 4.6% even as the company warned that travellers should expect delays this Easter holiday period due to strike action.
US Equities Close Lower As Economic Pessimism Increases
US stocks ticked lower on Tuesday as fresh survey information showed increasing pessimism about the US economy. Data showed that consumer confidence fell to a fresh low in March as Americans expressed more pessimism about future economic conditions. The S&P 500 fell for the third straight session losing 0.3% to close at 5,204. The Dow edged 31 points lower, or 0.1%, to settle at 39,282. The Nasdaq Composite lost 0.4%, finishing at 16,316. Healthcare and financials were the top performing sectors, while utilities and technology lagged. Nvidia slid 2.6% after hitting new records earlier in the session.
All three indices hit record highs last week after Fed officials maintained their projections for three rate cuts this year. The major averages are on pace for their fifth-straight winning month. The S&P 500 is up more than 2% in March. The Nasdaq Composite is looking at a 1.4% advance for the period, while the Dow is up 0.7%.
Shares of Apple dropped 0.7% after official data showed iPhone shipments in China fell about 33% in February from a year earlier, extending a slump in demand for the flagship device in its most important overseas market. The government figures showed foreign brands shipped only about 2.4 million smartphones last month. Apple accounts for the vast majority of those shipments, as the only overseas player with a meaningful market share. The return of Huawei Technologies as a viable rival in the premium phone segment, has stolen market share away from Apple and the slowdown in iPhone sales prompted rare discounts from the US company in January.
Donald Trump’s social media business rose more than 50% at one stage on its first day of trading, potentially unlocking billions of dollars for the former US president as he faces mounting legal challenges. Trump Media & Technology group, the company behind the former president’s Truth Social website, closed 16% higher, erasing more than half the day’s gains, after merging with the special purpose acquisition company Digital World Acquisition Corp on Monday. The surge in DWAC, which trades on the Nasdaq under the ticker DJT, could provide Mr. Trump with a windfall as he faces a series of legal and financial woes ahead of what is expected to be the most expensive election campaign in US history. The company with barely any revenues was worth almost US$10bn at its peak Tuesday, according to Bloomberg data. Mr. Trump owns 69% of the company but is unable to sell for six months.
Treasury Yields Fall
The 10-year Treasury yield, which moves with inflation and growth expectations, dipped 2 bps to 4.23%. Traders will be focused this week on the February reading of the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, which is due on Friday, when stock markets will be closed. The likelihood of a rate cut in June is currently estimated at 67% according to the CME FedWatch tool.
Yen Finds Support On Intervention Fears
The US Dollar Index was unchanged Tuesday around 104.3. BofA analysts declared the dollar bulls are back in a note, revealing that both hedge funds and real money are buying the dollar.
The Japanese yen steadied around ¥151.5 per dollar, finding support as the currency’s weakness prompted verbal intervention from authorities. Japanese Finance Minister Shunichi Suzuki said that he would not rule out any measures to rein in weakness in the yen, adding that excessive volatility raises uncertainty for business operations and the wider economy. Those remarks came a day after the country’s top currency diplomat Masato Kanda said the yen’s weakness did not reflect fundamentals and described recent moves as speculative.
The Chinese yuan dipped slightly even as the People’s Bank of China fixed the currency higher than expected. On Tuesday, it set the trading band for the renminbi at around Rmb7.0943. On Monday it set the midpoint of the band at Rmb7.0996, stronger than estimates. The yuan weakened 0.1% to Rmb7.2176 in Shanghai. The PBoC had surprised markets on Friday by letting the currency weaken past Rmb7.20 to a four-month low of Rmb7.2291 against the dollar.
Other major currencies traded in a narrow range. The euro was down 0.1% at $1.0832. Sterling slipped 0.1% to $1.2625.
Gold Steadies As US PCE Inflation Data Looms
Spot gold prices surged up to $2,200 intraday before giving up much of the gains to trade around $2,175 an ounce on Tuesday. It was 0.2% higher as investors awaited the personal consumption expenditures price index data on Friday.
Cocoa Prices Cross $10,000 Per Metric Ton In Historic Rally
Cocoa prices hit a record level on Tuesday, crossing above $10,000 per metric ton for the first time in history. Year-to-date, cocoa prices have soared nearly 139% as a poor harvest in top producing countries Ivory Coast and Ghana led to supply shortages. El Niño brought heavy rains in December, leading to crop damage and the spread of black pod disease. A global shortage of cocoa beans heralds higher prices for chocolate bars. The market was “out of control”, said Andrew Moriarty, price reporting manager at Mintec, a commodities data group. “Everyone is just bracing for impact.”
Oil Prices Slip As Traders Assess Ukraine Drone Strike Impact
Crude oil futures slipped Tuesday as traders assessed the effect of the wars in Eastern Europe and the Middle East on the supply picture. The Brent contract for May lost 0.6%, to settle at $86.25 a barrel. Ukraine has escalated its drone strikes against Russian oil refineries, knocking an estimated 900,000 barrels per day of capacity offline, according to Goldman Sachs. The outages could take weeks to repair, and in some cases there may be a permanent loss of capacity, the investment bank said. The disruptions’ effect on crude prices will likely be mixed, with a decline in refinery demand bearish and a potential reduction in Russian oil exports bullish, Goldman noted.
Bitcoin Drops Back Below $70,000
After Monday’s big surge of 10%, bitcoin dropped back below the $70,000 level. It ended the New York session at $69,780. It had been in correction mode last week, after hitting an all-time high of $73,797 on March 14. Last Wednesday, it slid to as low as about $60,800.
Peter Lewis’ Money Talk Podcast
On Wednesday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Alex Frew McMillan, a free-lance writer and Asia columnist for TheStreet.com, and Andrew Sullivan, founder of Asian Market Sense. With a view from Japan is John Beirne, Principal Economist at the Asian Development Bank.
The podcast is also available on Apple Podcasts, Google Podcasts and Spotify.
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Apple Podcast
This podcast is sponsored by Surfin Group, which is headquartered in Singapore and offers online financial services to 30 million customers across 10 countries. You can find out more about them by going to their website www.surfin.sg