Notable market news this past week (19-Nov-23)
Here is the Skeptivest roundup of the latest market headlines for the week
🇺🇸🇨🇳 President Xi Jinping's first trip to the US in 6 years, against a backdrop of escalating US-China tension
Meeting with President Joe Biden were unexpectedly positive: While expectations were low, the two leaders reached agreements to address the issue of fentanyl, restore high-level military communications, and later, Xi agreed to send pandas back to the United States.
- Fentanyl: President Biden and President Xi reached an agreement that China would curtail the export of items associated with the production of the opioid fentanyl, a significant contributor to drug overdoses in the US. As per the agreement, China will target specific chemical companies responsible for producing fentanyl precursors.
- Military: President Biden called for the institutionalization of military-to-military dialogues between both countries. United States Secretary of Defense Lloyd Austin is set to meet with his Chinese counterpart once the appointment is made, according to a senior U.S. official.
- Pandas: As a goodwill gesture, President Xi announced that China would send new pandas to the US as part of the two countries' efforts to alleviate tensions.
Biden still believes Xi Jinping is a dictator: Despite progress made during the meeting in San Francisco, US President Joe Biden said Wednesday he maintains the view that Chinese President Xi Jinping is a dictator. “Well, look, he’s a dictator in the sense that he is a guy who runs a country that is a communist country that’s based on a form of government totally different than ours,” Biden told CNN’s MJ Lee. “Anyway, we made progress.”
🏢 China's plan to fix its property slump
In recent weeks, Beijing has identified two focal points for its housing policy: the construction of social housing and the revitalization of dilapidated inner-city districts. These initiatives enjoy high-level political support and may soon receive central government backing of 1 trillion yuan ($138 billion) or more. The change in policy could significantly contribute to economic improvement, particularly considering the substantial negative impact that the real estate sector has had.
Cheap central bank loans to finance the projects: Officials are contemplating the option of providing cheap central bank loans to key state-owned policy banks for project financing. The discussed amount, subject to potential augmentation through additional leverage and alternative funding sources, represents approximately 10% of the annual volume of new home sales.
Challenging to implement: Past governmental efforts to implement large-scale social housing projects have encountered obstacles due to insufficient funding and issues related to corruption. Additionally, private developers might still face financial constraints, posing challenges to a potential resurgence in the private market. Significant adjustments to the long-standing funding model for local governments would also be necessary.
☕️ Quick fire happenings to note
🌏 Global macro
- Lower than expected US CPI: The effects of lower-than-anticipated US Consumer Price Index (rose by 3.2% in Oct vs prior year, down 3.7% in Sep) release on Tuesday are still reverberating in the markets as the markets become increasingly convinced that global central banks are done hiking rates. Core CPI rose 4% vs prior year, the smallest increase since Sep-21.
- ExxonMobil's $15b investment into Indonesia: According to a statement from the palace, Indonesia's President, Joko Widodo, mentioned that ExxonMobil is intending to invest as much as $15b in a petrochemical project and facilities for carbon capture and storage (CCS) in Indonesia. The planned CCS facilities would be the biggest in Southeast Asia.
- UAW workers narrowly endorsed their new agreement with GM: Despite initial uncertainty about its approval, 55% of United Auto Workers members voted in favor of ratifying the labor contract with General Motors. This decision secured historic wage gains and other benefits for the workers who had participated in the 6 weeks strike against the automaker.
- CRISPR gets first ever regulatory approval: UK drug regulator The Medicines and Healthcare products Regulatory Agency (MHRA) announced on Thursday that it had authorized the use of Casgevy, a CRISPR gene-editing therapy, to treat people with two blood diseases: sickle-cell disease and beta-thalassemia.
- Revival of AT1 debt: Barclays is joining UBS in returning to the market for additional tier 1 debt, signaling a resurgence in these bonds after the significant write-down at Credit Suisse.
- Israel-Hamas War update: The Israeli military conducted a raid on Shifa Hospital, the largest in Gaza, as part of efforts to verify its assertion that Hamas operated a significant command center beneath it. Hamas has consistently denied such claims. While publicly supporting Israel's response to the attacks on October 7, the Biden administration is becoming more and more dissatisfied with Israel's handling of the war. More difficult conversations with Israel were cited by officials.
- Outrage at Elon Musk: The repercussions of an Elon Musk post endorsing antisemitic views escalated on Thursday, eliciting outrage from Tesla investors. Earlier in the day, a significant advertiser announced its decision to withdraw advertisements from X due to pro-Nazi content on the blogging site owned by Musk.
🏦 Individual stocks/companies
- OpenAI's Altman leaves: OpenAI ex-CEO, Sam Altman was fired Friday, when directors led by OpenAI Chief Scientist Ilya Sutskever said “he was not consistently candid in his communications with the board.”. People familiar with the negotiations report that a coalition of OpenAI executives and investors, striving to reinstate Sam Altman as CEO, have encountered a deadlock concerning the composition and responsibilities of the board.
- Sea Limited tanks: Sea posted a 3Q loss of US$144m, falling short of market expectations, which anticipated a profit of US$102m. These losses coincide with the company's strategic shift towards emphasizing growth in its e-commerce segment. Read our analysis written at the start of the year here.
- Alibaba slumps: The group reversed its decision to spin off and list its $11b cloud business due to US chip export restrictions. Chairman Joseph Tsai and Chief Executive Officer Eddie Wu, both long-standing lieutenants of Alibaba-founder Jack Ma, stated that the company required a "reset" in strategy. Shares slid 10% as the markets reacted quickly.
🇸🇬 Singapore related
- Assurance Package cash payments in December: Every adult (21 years old) Singaporean will receive a financial assistance package ranging from $200 to $800 in December as part of the government's Assurance Package to alleviate the increasing cost of living.
- Singapore is wide open for business - Enterprise Singapore launches overseas centre in San Francisco: PM Lee, who officiated the opening, said - "For our American friends seeking opportunities in Singapore, or in the vibrant and growing Asia-Pacific region, our message to you is this: Singapore is wide open for business,".
