Notable market news this past week (13-Oct-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇨🇳 Recap on China's Ministry of Finance press conference and NDRC (economic planner) briefing
8th Oct Tuesday National Development and Reform Commission (NDRC) - Running short on details and lack of urgency
- NDRC Chairman Zheng Shanjie described China's economy as "stable" and on track for 5% growth, but the absence of new stimulus measures and a lack of urgency disappointed investors. Concerns over U.S. elections, Middle East conflicts, and profit-taking from the recent rally also weighed on sentiment.
- "So far, the NDRC press conference appears to run short on details with regards to stimulus measures. Hopes were raised but the delivery was disappointing," said Christopher Wong, currency strategist at OCBC.
- This comes at the back of high expectations following the slew of monetary policies from by PBoC (read summary here).
12th Oct Saturday - China Ministry of Finance Press Conference - More information this time. However, no large-scale stimulus announced (need NPC approval), though positive forward guidance of an unspecified large stimulus given
- An additional RMB 400 billion in local government bonds (LGB) will be issued from local government debt balance limit. This aims to enhance local government spending, support the restructuring of investment project debts, and reduce arrears to corporations in Q4 2024.
- A significant one-off increase in the debt quota will support the swap of local governments' implicit debt. The Ministry of Finance indicated this will be "the largest in recent years," but did not disclose the exact amount.
- RMB 2.3 trillion will be available by end-2024 from special local government bonds (LGBs) that have been issued but remain unused, including RMB 300 billion for this year.
- New issuance of special central government bonds (CGBs) will be used to inject core tier-1 capital into larger state-owned banks, with the exact size and timing dependent on bank proposals and final NPC approvals.
- Support for disadvantageous groups small: In addition to the one-time assistance for those in extreme poverty before National Day, Vice Minister Guo announced increased support for students, including a doubling of national scholarships and an increase in award standards, along with enhanced student loan support. However, the overall macro impact is expected to be limited, with JP Morgan economists estimating scholarship-related fiscal support rising from 7.5 billion yuan to approximately 10 billion yuan, an increase of around 2.5 billion yuan.
- Overall, fiscal measures focus on risk mitigation (local government hidden debt, housing, banks), not additional stimulus (consumption or investment)
Attention is focused on the upcoming NPC meeting: The next key event being monitored is the NPC Standing Committee meeting, which is expected to provide further clarity on the extent of additional fiscal support.
☕️ Quick fire happenings to note
🌏 Global macro
- September US CPI figures came in hotter than expected: US Consumer Price Index (CPI) increased 2.4% y/y, slightly exceeding economists' expectations of 2.3%. On a m/m basis, it rose 0.2%, surpassing the forecast of 0.1%. Meanwhile, the core inflation rate, which excludes energy and food costs, climbed 3.3% year-over-year against expectations of 3.2%. Those hoping for a significant rate cut from the Fed next month may need to temper their expectations.
- Economic policies and trade tariffs under candidates Harris and Trump: Both Harris and Trump aim to stimulate the U.S. economy through tax cuts and increased spending, potentially worsening the already high deficit and national debt, while facing hurdles in an evenly split Congress. Additionally, Harris is likely to maintain existing tariffs, whereas Trump plans to significantly expand them, which economists warn could undermine the economic recovery fostered by the Federal Reserve.
- French bond futures rise following Budget announcement: French bond futures edged higher on Friday after the government revealed its budget plan, a key component of Prime Minister Michel Barnier's strategy to restore political and fiscal stability. The €60.6 billion spending plan aims to address France's struggling public finances and rebuild investor confidence amid challenges from a hostile parliament and declining tax receipts. Parliament will begin reviewing the proposals next week, with amendments possible before a year-end adoption deadline.
- Indonesia asks Apple, Google to block China's Temu to protect small merchants: Indonesia has asked Alphabet's Google and Apple to block Chinese fast fashion e-commerce firm Temu in their application stores in the country so it cannot be downloaded, a minister said on Friday.
- Possible China retaliation following EU's tariffs on Chinese electric vehicles - Pork and Diary among possible retaliation: Read about the EU tarriffs here. Pork is particularly vulnerable to China's response; if tariffs follow Beijing's inquiry, major suppliers like Spain, Denmark, and the Netherlands will be affected. Dairy is also at risk, with the Netherlands, France, and Ireland as key suppliers. The EU is challenging China's dairy subsidy investigation at the WTO and has warned that the EU could lose Chinese EV investment and opportunities for transforming its car industry if tariffs are imposed.
🏦 Individual stocks/companies
- Google faces Antitrust challenges amid industry shifts: Google, a long-time leader in the search sector, is confronting a potential breakup due to ongoing antitrust proceedings, with a federal judge mandating access to its app store for competitors and the Justice Department considering a spin-off of certain services. Meanwhile, Apple is moving away from its traditional annual product upgrade cycle, potentially enabling more frequent releases and reducing delays.
- Tesla's (-12.5% last 5 days) robotaxi event disappoints investors: But despite his many reassurances that an autonomous car would be a reality "next year," the company still doesn't have a lot to show. Elon Musk unveiled Tesla's long-awaited robotaxi, the Cybercab, promising a 2026 launch at under $30,000, alongside a surprise 20-seater Robovan. But the flashy presentation left plenty of glaring questions unanswered. For one, the company didn't show off the long-awaited "Model 2," a rumored $25,000 passenger vehicle that shareholders have said could help the company boost sales.
- Affirm Holdings (+19.28% past 5 days) re-rating: Analysts at BTIG upgraded Affirm from Neutral to Buy on an optimistic view of the firm’s 2025 operating margin and increasing market share in POS financing. The analysts noted that margin expansion is “positioning it favorably against Amex.”
- Norwegian Cruise Line Holdings (+15.86% past 5 days) re-rating: Shares surged on Wednesday following multiple upgrades for the cruise line, fueled by positive sentiment regarding the company’s strategic shift and expansion plans. Norwegian plans to add 13 ships to its fleet by 2036, introduce dynamic pricing options, and implement "open jaw itineraries." Citi projects nearly 50% upside, setting a price target.
🇸🇬 Singapore related
- Singapore's economy grew 2.9% in Q2 of 2024: MTI advance estimates: This was slightly slower than the 3% growth recorded in the first quarter of 2024. OCBC is upgrading its full-year GDP growth forecast from 2.3 per cent to 2.6 per cent to account for the growth in the first half of the year. The external economic environment has improved, but the geopolitical landscape has "remained fraught", with the US presidential elections being the key risk on the horizon.
