Notable market news this past week (31-Dec-23)
Here is the Skeptivest roundup of the latest market headlines for the week
🏢 Real Estate Stress is Brewing in Asian Markets
Overshadowed by China: The real estate challenges in other Asian markets are often overshadowed by the focus on China's property slump, despite significant issues in these regions.
South Korea's Real Estate Decline: The South Korean property market is showing the most strain after China as it experienced its sharpest decline in 25 years in 2023. This was driven by the Bank of Korea's policy rate reaching a 15-year high, leading to increased bad debts and financial strain.
Indonesia, Vietnam and Hong Kong's Property Market Issues: Indonesia's aggressive interest rate hikes put significant pressure on indebted builders, while Vietnam's real estate sector faced challenges due to government anti-corruption campaigns and oversupply issues. Hong Kong also faced a significant downturn with a sharp drop in home prices and decreased revenues from office and retail spaces. This trend is intensified by stringent COVID restrictions and the Federal Reserve's monetary tightening.
Prospects and Measures Ahead: Looking forward, the real estate sectors in these countries require strategic approaches to mitigate ongoing challenges. This includes adapting to changing economic conditions, managing debt and consumer spending power, and navigating regulatory environments.
☕️ Quick fire happenings to note
🌏 Global macro
- Indonesia introduces 10% import tax on e-cigarettes: Starting from Jan 2024, the SEA country will impose a tax on e-cigarettes in effort to limit consumption, in line with WHO’s warning in the dangers of vaping. The policy is to make e-cigarettes less affordable as the country saw a ten-fold increase in use of vape in the decade to 2021.
- Russia plans to boost diesel exports by 18% in Jan: Russia plans to boost diesel exports from its major western ports to 3.39 million tons in January, equating to 817,000 barrels per day. The increased in flows is due to refineries increasing their processing rates.
- China factory activity posts worst contraction in 6 months: China’s manufacturing PMI declined to 49 in December. The decrease was mainly attributed to subdued demand, both domestically and overseas. Non-manufacturing activity showed slight improvement, mainly driven by the construction sector's expansion due to increased government infrastructure investment. The overall economic weakness in China is expected to prompt policymakers to implement pro-growth measures in 2024.
- China appoints new defence minister: Navy veteran, Dong Jun will replace its predecessor, Li Shangfu who was ousted in October this year. Dong’s appointment will help smooth the path for the resumption of top-level military talks between US and China. This also signifies that China is designating the South China Sea as a new priority area of geopolitical contestation.
- China gaming shares rebound after regulator's assurance: This week, China gave the green light to over 100 domestic video games, signaling a shift in its approach. This move comes as Beijing appears to be easing its stance, following the implementation of industry restrictions that previously resulted in an $80b rout.
- Overseas investors shield away from China stocks in 2023: Faced with a range of worries such as a precarious economic recovery and geopolitical tensions, foreign funds only acquired a net total of 44b yuan (vs 87.1b in 2022, 432.2b in 2021, 208b in 2020, 351.8b in 2019 and 294.2b in 2018) in onshore stocks through trading links with Hong Kong this year.
- North Korea accelerate war preparations: North Korean leader Kim Jong Un has ordered its military, the munitions industry and the nuclear weapons sector to accelerate war preparations to counter what he called unprecedented confrontational moves by the US, state media said on 28-Dec.
🏦 Individual stocks/companies
- Ant Group removes Jack Ma: As part of the process to appease Chinese regulators, Ma announced his retreat from the finance company. The PBOC granted an application to remove any controlling stakeholders from Ant’s payment platform, Alipay. The bank now lists Alipay as a firm with no actual controller. The change of status will not affect the company’s day-to-day operations.
- AirAsia Malaysia CEO Leaves: Riad Asmat, CEO of AirAsia Malaysia is leaving his role at the airline and appointed to become a board member at AirAsia Aviation Group. Riad will continue to sit on several related company boards and provide consultancy work for Capital A Aviation Services. AirAsia is undergoing restructuring and will be providing updates in due course.
- Apple resumes sale of watches after appeal court lifts US ban: The Apple Watch Series 9 and Ultra 2 resumed sales after court granted a temporary pause on sales ban imposed by US ITC due to a patent infringement. Apple's response includes a software update to address the infringement issue, pending approval from the US customs agency.
- Xiaomi unveils its first EV: Xiaomi introduced its first electric vehicle, the SU7, with aspirations to compete with global carmakers like Tesla and Porsche. Despite a challenging regulatory landscape, Xiaomi's $10 billion venture into EVs marks a significant step in diversifying beyond its smartphone roots. The car's pricing hasn't been disclosed yet, but it's expected to be competitive in the medium price range.
- Huawei’s revenue surge by 9%, exceeding 700b yuan: Driven by a revival in its smartphone business and strong 5G equipment sales. Another key factor was the introduction of a sophisticated 7-nanometer Kirin processor, which raised questions about the effectiveness of US restrictions. Despite geopolitical and economic challenges, Huawei is investing in emerging technologies like artificial intelligence to maintain its competitive edge.
🇸🇬 Singapore related
- CPF monthly salary ceiling to increase from 1 Jan 2024: Announced by DPM Lawrence Wong in Budget 2023, the CPF monthly salary ceiling will be raised in stages to $8,000 by 2026. Earlier this year in September, the monthly salary ceiling increased to $6,300. On Jan 1, 2024, it will rise further to $6,800.
- Core inflation eases to 3.2% in Nov: Overall inflation eases to 3.6%, down from 4.7% the previous month. The decrease is attributed to lower inflation in retail, utilities and food. Looking ahead, core inflation is expected to remain stable while overall inflation may experience short-term volatility due to recent swings COE premiums. Economic projections for 2024 suggest overall inflation to hover around 3-4% and core inflation around 2.5-3.5%, excluding GST rate changes.
- Singapore crosses record 3b gross tonnage mark in ship arrivals: The Port of Singapore reached a record volume of vessels despite the 2016 maritime industry downturn and COVID-19 disruptions. The port continues to innovate, focusing on efficiency with a new digitalPORT@SG platform to facilitate optimal departure and arrival times. This signifies Singapore’s commitment to remain a leading maritime hub amid changing global dynamics.
- MAS imposes S$3.9m penalty on Credit Suisse: This action is due the bank’s failure to detect or prevent misconduct by its relationship managers in Singapore. These managers provided clients with misleading post-trade disclosures, leading to overcharging in OTC bonds transactions. Following MAS’s review, the bank has paid the penalty and strengthened internal controls to prevent similar misconducts in future.
