Notable market news this past week (29-Sep-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇨🇳 Chinese market rallies ahead of Golden Week with new policy package announced on 24 Sep followed by unusual Politburo meeting to discuss economic issues on 26 Sep
Stock market: Improving risk appetite and liquidity in the market via swap facilities and stock special relending program.
- Pledge by PBoC to support the stock market via setting up swap facilities so investors can obtain PBoC funding by pledging assets in order to obtain liquidity to buy stocks.
- Additionally, PBoC set up special relending facility for commercial banks to lend listed companies and controlling shareholders to conduct stock buybacks.
Property Market: Easing refinancing stress on existing homes and reducing mortgage downpayment to increase appetite for new home purchases
- 50bps rate cut for existing mortgages alongside lower downpayment ratio for second house purchase of 15% from 25%.
- Increase in funding support ratio from 60% to 100% for the PBoC’s CNY300b relending program for affordable housing.
Broader Economy: Step up in monetary policies to revive confidence
- Policy rate cut. PBoC cut 7-day reverse repo rate by 20bps, which according to the Governor, will translate to 30bps and 20-25bps cut in medium-term facility and loan prime rate respectively. In other words, lower interest rates across the board for banks, corporates and households.
- Cutting reserve requirement ratio by 50bps soon, which is expected to release CNY1t of long-term liquidity in the banking system. Another 25-50bps cut in reserve requirement ratio is expected by end of 2024 alongside 10bp cut in 1Q25. In other words, banks will need to keep less of their deposits as reserves with PBoC and thus can lend out more.
Read more in our quick take here: https://www.skeptivest.com/blog/quick-take-china-rallies-on-supportive-policies
☕️ Quick fire happenings to note
🌏 Global macro
- Israel escalates conflict with Hezbollah amid claims of Nasrallah’s death: Israeli Prime Minister Benjamin Netanyahu vowed to continue strikes on Hezbollah, targeting the group's leadership in Lebanon. With claims of Hassan Nasrallah’s death and rising casualties, the conflict risks escalating into a broader regional war involving Iran.
- Kamala Harris gains slim lead over Trump in key battleground states: A recent poll shows Kamala Harris leading Donald Trump by an average of 3 points in seven key battleground states, effectively diminishing his economic advantage. As the campaign intensifies, both candidates are making bold promises, while online political strategies, including targeted ads, play a crucial role in engaging voters.
- EU Banks launch Wero Project to challenge Visa and Mastercard: The European Union's largest banks are introducing Wero, a new payment platform aimed at reducing reliance on Visa and Mastercard. Supported by 16 major financial institutions, Wero will enable seamless transactions across borders, allowing customers to pay directly from their bank accounts
- Zimbabwe devalues gold-backed currency and raises interest rates amid economic doubts: In response to ongoing economic challenges, Zimbabwe has devalued its gold-backed currency, the ZiG, by 43% and raised interest rates to stabilize the economy. Introduced in April to replace the severely weakened Zimbabwean dollar, this sixth attempt at establishing a viable local currency faces widespread skepticism among the populace.
🏦 Individual stocks/companies
- Micron (+16% past 5 days) beats: The company crushed its latest earnings, reporting a 93% annual sales jump to $7.75b and earnings of $1.18sh, up 90% quarterly. “Robust AI demand” was the key phrase that fired up the firm’s financial outlook, guiding sales of $8.7b next quarter vs estimates of just $8.3b.
- Meta's 2024 Connect event: Meta's recent Connect event unveiled significant investments in its AR/VR and AI segments, showcasing the Orion AR glasses and Meta Quest 3S headset. Despite a decline in revenue from Reality Labs, the company's shift toward innovative technology suggests a strategic focus, though tangible results may take time to materialize.
- US automakers face downgrade amid tension with China: U.S. automakers, including GM, Ford, and Rivian, received downgrades from Morgan Stanley analyst Adam Jonas due to rising inventory levels, which may force price cuts and negatively impact margins. Simultaneously, a new U.S. ban on modern Chinese car imports could further complicate the market landscape and affect long-term demand for these automakers.
- TikTok exits music streaming, shifts focus to social engagement: TikTok has announced its decision to discontinue its fledgling music streaming service, which only launched trials last year in select markets. Despite its music-centric origins, TikTok is pivoting away from direct competition with established services like Spotify, opting instead to enhance music consumption directly on its platform, capitalizing on its younger user base and the evolving dynamics of music monetization.
🇸🇬 Singapore related
- Ongoing train disruption due to rail damage: Train services between Jurong East and Buona Vista MRT stations will remain disrupted on September 30 following the discovery of 12 new cracks in the rail, initially damaged by a faulty train on September 25. SMRT and the Land Transport Authority are working to restore services by October 1, pending the completion of necessary repairs and safety tests, which may be impacted by expected weather conditions.
