|Day's range||28,551.20 - 28,809.59|
|52-week range||24,540.63 - 30,280.12|
(Bloomberg) -- Sign up for Next China, a weekly email on where the nation stands now and where it's going next.After beating almost all rivals in China with 45% return in one equity fund, investor Qu Yang is shifting his money into Hong Kong.The money manager at Qianhai Kaiyuan Fund Management Co. has boosted the proportion of Hong Kong shares in one of his winning funds to more than 30% over the past three months, according to the fund’s latest fact sheet. That compares with just 13% at the end of the first quarter and is the highest allocation to Hong Kong stocks in almost two years, the fund’s historical reports show.“Hong Kong stocks have a better chance than A shares of outperforming in the second half," said Qu in an interview on July 4. Qu, whose Qianhai Kaiyuan SH-SZ-HK Advance Selected Flexible Allocation Mixed Fund is beating 98% of its peers, has sold some of his best-performing mainland stocks and bought the city’s casino and consumer-related shares.A likely rate cut by the U.S. Federal Reserve should draw more foreign investors to equities in the city, where valuations remain below historical averages, according to the fund manager who oversees some $970 million.Global traders are expecting a quarter-point interest rate cut by the Fed this month, with officials possibly easing by a half-percentage point, moves that would lure capital out of the U.S. to markets elsewhere that offer higher returns. The Hang Seng Index is one of the world’s cheapest major benchmarks.Hong Kong stocks are near the widest discount to their mainland peers in 16 months. Chinese investors piled into Hong Kong shares at the fastest pace in more than a year in June and continued their purchases this month, according to data compiled by Bloomberg. Credit Suisse this week upgraded both China and Hong Kong stocks to market weight from underweight in its Asia allocation excluding Japan.Shenzhen-based Qu is bullish on firms that benefit from China’s growing domestic demand, including internet companies listed in Hong Kong. Macau casino operators also stand to gain from their grip on the world’s biggest gambling hub, as well as increasing inbound travel to the city, he said.According to his fund’s quarterly report, Qu boosted assets in SJM Holdings Ltd. in the second quarter, while Sands China Ltd. and Tencent Holdings Ltd. were among the fund’s top 10 holdings by value. Representatives for Qu’s firm have not replied to Bloomberg’s requests for an update on his views since the July 4 interview.A-Share Picks Qu isn’t abandoning mainland equities. He still likes high-end liquor makers, for one. Kweichow Moutai Co., which featured among the fund’s top 10 holdings at the end of June, has climbed about 60% this year and recently became the first Chinese stock to hit 1,000 yuan ($145).“More consumers will be willing to buy more expensive baijiu due to China’s consumption upgrade,” Qu said, referring to the popular liquor Moutai makes.The holdings Qu sold last quarter include pig breeders because of uncertainty caused by the spread of African swine fever in China. He has cut holdings of one of his top-performing stocks Wens Foodstuffs Group Co., according to the fund’s quarterly report. Wens rallied 55% in the first three months of 2019 and then fell 12% in the second quarter.(Updates prices.)To contact the reporters on this story: Jeanny Yu in Hong Kong at firstname.lastname@example.org;Ludi Wang in Shanghai at email@example.comTo contact the editors responsible for this story: Sofia Horta e Costa at firstname.lastname@example.org, Magdalene Fung, Will DaviesFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
It’s been more than two weeks since U.S. President Donald Trump and Chinese President Xi Jinping agreed to resume trade talks between the two economic powerhouses. However, conditions haven’t improved much.
Wall Street eased back from record highs on Tuesday amid worries over US-China trade talks, adding to the cautious mood in global markets as investors fixated on the first round of earnings from America’s banking heavyweights. President Donald Trump told reporters at the White House the US still has a long way to go before reaching a trade accord with China. The remarks helped drag stocks from record highs seen in the prior session.
Due to the uncertainty caused by the US-China trade dispute, and the possibility that trade tensions may escalate again, some investors are sitting on the sidelines, hoping the People’s Bank of China steps in to introduce more fiscal stimulus in the months ahead to steady the economy and to prevent it from slowing too quickly.
On July 10, Federal Reserve Chairman Jerome Powell helped turn the global equity markets higher after he signaled a rate cut by the Fed at the end of July. He cited slowing business investments across the U.S. due to lingering uncertainties over the economic outlook as key reasons for his dovish tone.
South Korea’s KOSPI fell as shares of technology industry heavyweight Samsung Electronics fell more than 1% after reporting that second-quarter profit likely dropped 56% as compared to a year ago. There is a growing dispute between Japan and South Korea over wartime forced labor, which will likely exacerbate the situation for Samsung, as well as other semiconductor rivals in South Korea like SK Hynix.
Shares in Australia are being boosted by the Reserve Bank of Australia’s (RBA) decision to cut interest rates for the second consecutive month. Higher commodity prices are also providing support for the Australian stock market. They are being driven by rapidly rising iron ore prices.
Given the generally weak performance in the major U.S. indices after the gap-higher opening, the rise in chipmaker stocks probably prevented an across the board loss for the day. The Reserve Bank of Australia cut its benchmark interest rate to an historic low of 1 percent.
(Bloomberg) -- Belle International Holdings Ltd., the biggest women’s shoe retailer in China, filed for an Hong Kong initial public offering of its sportswear distribution arm.Belle’s Topsports International Holdings Ltd. unit submitted a listing application to the Hong Kong stock exchange, according to a filing on the bourse’s website late Thursday, which confirmed an earlier Bloomberg News report. Bank of America Corp. and Morgan Stanley are joint sponsors of the offering, the filing shows.The share sale could raise as much as $1 billion, people with knowledge of the matter said earlier Thursday, asking not to be identified because the information is private. Topsports didn’t specify a fundraising target or other terms of the deal in its filing.Any transaction would add to the $8.7 billion raised in Hong Kong IPOs this year, data compiled by Bloomberg show. The sportswear business sells brands including Adidas, Nike and Puma in China, according to Belle’s website.Private equity firms Hillhouse Capital and CDH Investments took Belle private in a $6.8 billion deal in 2017. The Shenzhen-based company’s main footwear business operates more than 20,000 retail outlets that sell shoes under brands including Belle, Staccato, and Millie’s.Pou Sheng International Holdings Ltd., which also sells Nike and Adidas sportswear in China, trades at 14.1 times forecasts for its adjusted 2019 earnings, according to data compiled by Bloomberg. Shares of Pou Sheng, which operates the YY Sports chain, have risen 21% in Hong Kong this year. The benchmark Hang Seng Index has gained 10% over the period.(Updates Hang Seng Index performance in the final paragraph.)To contact the reporters on this story: Crystal Tse in Hong Kong at email@example.com;Vinicy Chan in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Fion Li at email@example.com, Ben ScentFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- It has been an unsettling year for Asia stock investors. And while easier financial conditions and undemanding valuations might help temper investor sentiment for the remainder of 2019, the trade war, muted earnings growth and a resilient dollar may continue to damp enthusiasm.“You can’t dismiss the large number of binary risks -- the key one is the potential for trade escalation,” Nathan Thooft, head of global asset allocation at Manulife Investment Management, told Bloomberg TV. “It’s not something we can fully control for and therefore while we want to be risk-on in our posture generally speaking, we don’t want to be reaching for the stars when it comes to getting too aggressive in portfolio positioning.”Read more: Asia Investors Dive Into Stocks Pushing Volumes Toward RecordIn June, stocks have attempted to recoup last month’s decline. The world’s central banks spent last week embracing easier monetary policy, with interest rate cuts from the Federal Reserve expected as soon as next month. The MSCI Asia Pacific Index is set to post the biggest gain since January. Chinese stocks are poised to post their first gain in three months -- keeping them in the No. 1 spot for the region this year.Here’s a breakdown of what’s appealing and what is not, around Asia:Underweight StanceInvestor allocation to stocks across Asian emerging markets is low, according to Citigroup’s Markus Rosgen. That’s especially the case in China, Korea, Taiwan and Malaysia, he said, adding that economic data would need to improve and the U.S. dollar to retreat for money managers to increase holdings. His preference is for equities in Hong Kong, Singapore and Taiwan.Volatility WorriesPascal Blanque expects volatility in markets to rise. The chief investment officer at Amundi SA, which oversees about 1.48 trillion euros ($1.68 trillion), says it’s prudent to scale back risk -- though cautions not to take this too far and miss further upside for stocks.“We are conscious of the unforeseeable side of protectionism,” he said. “We don’t see it as being priced into risk assets. We expect the tug of war between softer and harsher tones to continue, resulting in further market volatility.”China BullsThe MSCI China Index will rise 6-8% through the remainder of this year and the country’s shares trading in Hong Kong -- known as H-shares -- could have even greater upside, according to Sean Taylor, chief investment officer for Asia Pacific at DWS. His worry is that any escalation in trade frictions could quickly dampen the earnings prospects. Goldman Sachs Group Inc. strategists said it’s a good time to buy call options on the Hang Seng China Enterprises Index.Chinese equities, already the region’s best performers this year, are among the top picks for Goldman and DWS, with valuations appealing near to long-run averages. Many strategists and investors are united on trade, saying if U.S.-China relations deteriorate it would be the single biggest impediment to equity returns.Korea and TaiwanThe worst of the cuts to earnings forecasts may be in the past, increasing the chance equities in the two countries outperform, according to strategists at Goldman. While acknowledging these markets typically underperform when global growth is sluggish, cheaper stocks and the dividend appeal in Taiwan will work in their favor, they wrote.Earnings PotentialBlackRock’s Andrew Swan is avoiding technology hardware stocks in favor of sectors with better growth prospects, such as healthcare and education.“I struggle to see how corporate profits grow in Asia in the current environment,” said Swan, the firm’s head of global emerging market equities. “The outlook for the region is a very subdued environment in the new regime that we’re now in.”Read more: Asia Equities on Wobbling Foundation as Earnings Outlook DimsStill, valuations may provide some cushion if central banks move to boost policy support, lowering the discount rate and pushing up the price of equities around the world.“Valuations remain attractive,” said Virginie Maisonneuve, chief investment officer of Eastspring Investments, nothing that price-earnings multiples are below the recent average.\--With assistance from Shery Ahn, Cormac Mullen, Moxy Ying and Gregor Stuart Hunter.To contact the reporter on this story: Adam Haigh in Sydney at firstname.lastname@example.orgTo contact the editors responsible for this story: Christopher Anstey at email@example.com, Divya Balji, Joanna OssingerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Hong Kong’s pension system has left savers paying fees for stock-index funds that are a multiple of those investors can get in the open market, contributing to a crisis of poor retirement preparation for millions of workers.Take the biggest fund run by HSBC Holdings Plc that tracks the Hang Seng Index. With HK$35.5 billion ($4.5 billion) in assets, it’s the largest in Hong Kong’s Mandatory Provident Fund system. Savers pay an annual fee of 0.80%, compared with the 0.09% cost of an exchange-traded fund that tracks the same index. And HSBC’s offering is one of the lowest-cost available.The extra amounts go to pay for everything from the marketing of the fund and the administrative paperwork to the compensation of the fund managers and any profits logged by the providers. Compounded over time, the fees leave performance well below those of the underlying indexes.“It’s a drip, drip, drip effect,” said David Webb, a former Hong Kong Exchanges & Clearing Ltd. board member who advocates overhauling the city’s retirement program to let savers have self-managed brokerage accounts. “There would be a bit more outrage if people realized how much of the returns on their savings have vanished in expenses.”The HSBC fund lagged behind the Hang Seng Index by some 25 percentage points over the past decade, a gap that Charlene Hui, a spokeswoman for HSBC, said was due to the fees for managing the MPF fund. The Tracker Fund of Hong Kong, the city’s most heavily traded ETF, underperfomed the index by about 8 percentage points.“One cannot directly compare the fees of retail tracking funds with MPF tracking funds,” Hui said in an email. She also said the fees for the funds the bank offers through the pension program have been lowered on seven occasions over time.One challenge with Hong Kong’s system, which covers about 4 million workers and involves compulsory payments by employees and their employers, is mandatory contributions are set relatively low -- at HK$36,000 a year for most people. That’s left the funds with smaller pots across which to spread administrative costs. Obligatory contributions in Singapore’s system are more than four times higher, a government-chartered review said in February.‘Not Enough’High fees are also one reason individuals have largely avoided putting in more than they’re required, according to the review by the Hong Kong Financial Services Development Council. The study concluded that MPF assets are “not enough for Hong Kong people’s retirements.”Lower fees certainly would help.A worker who made the mandatory contribution every month into the HSBC fund since it launched in 2000 would have about HK$1.3 million net of fees, according to calculations by Bloomberg. That’s about HK$184,000 less than an investor in the Tracker Fund of Hong Kong, before transaction costs.The average pension product marketed as a Hang Seng Index tracker in the MPF system -- there are more than a dozen -- has an expense ratio of 0.89%, according to data from the MPF Authority. That’s lower than the 1.52% charged by the average fund in the system, which spans actively managed equity funds as well as bond, money market and balanced funds -- all of them dedicated offerings for the MPF that aren’t open to investment for other purposes. Average expenses for all the funds have fallen by half a percentage point since 2007, according to the authority.Three of the Biggest Index TrackersThe fund offered by Manulife Financial Corp. is “priced competitively among the MPF universe,” said Jacqueline Kam, a spokeswoman for the company in Hong Hong.BCT, or Bank Consortium Trust -- a pension provider set up by a number of local banks -- has proactively reduced fees “from time to time,” spokeswoman Stella Wong said. “MPF products are required to meet substantially more regulatory requirements.”The MPF Authority said in a statement that it “understands the concern of the public over the cost of MPF and has never turned a blind eye to the issue.” It said it has no statutory power to regulate fees.What the MPF Authority did do in April was launch an online platform aiming to let savers easily compare costs. And it is digitizing systems to cut expenses. There are up to 100,000 paper-based transactions a day, a Legislative Council document showed last December.Fees have been an issue in other countries’ retirement-savings programs as well. In the U.S., excessive index fund fees in retirement plans have been the subject of lawsuits in recent years, and a number of companies have reached settlements over accusations of unreasonable costs and poor fund selections. In Australia, too, retirement accounts known as superannuation funds have been the subject of lawsuits over fees, and a government-commissioned review in January concluded there were structural flaws.Cost LayerIn Hong Kong, complying with administrative work required by the MPF authority “adds an additional layer of cost and complexity with no clear benefit” compared with a system like the U.S. 401(k), said Tariq Dennison, co-founder of GFM Asset Management, which provides retirement advisory services to high-net worth individuals in the city.Still, the MPF system has its benefits for people without financial expertise -- including a lack of entry or exit fees, or the costs associated with setting up a brokerage account, said Francis Chung, executive chairman of MPF Ratings, which consults with employers on retirement obligations and analyzes fund performance. Financial investments in Hong Kong are relatively expensive, and the MPF can be a better deal than other products such as life insurance, he said.What could help drive savers to advocate for lower fees is greater transparency. Chris Tse, a former chairman of the Institute of Financial Planners of Hong Kong, said the MPF Authority could do more to strengthen disclosure.MPF account holders “do not have any knowledge about the relative performance of index tracking constituent funds without knowing the tracking errors or difference against the index benchmark,” Tse said.\--With assistance from Yusuke Takeshita.To contact the reporter on this story: Gregor Stuart Hunter in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Christopher Anstey at email@example.com, Cormac MullenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The global equity markets were mostly lower ahead of the opening bell as investors digested tensions between Iran and the US. There are two Fed member speeches today that stand to move the markets, depending on the message conveyed.
The early sentiment in Asia indicates that sellers have gained the upper hand. It’s not a bearish tone, per se, but rather one being dictated by long liquidation by those investors who want to avoid the pain of another steep sell-off, and aggressive short-sellers betting on the worst outcome.
US equities are set for a modestly higher open while global equities are mixed to start the new week. The focus for equity traders will be on a meeting between Trump and Xi that takes place later this week.
The new worry is a potential escalation of the tensions between the United States and Iran. This could limit gains today by encouraging investors to lighten up their long positions.
After presenting a plethora of data and projections, Fed Chair Jerome Powell held a press conference. It was at this press conference that he opened the door to the possibility of a rate cut as soon as July. He said, “Many participants now see the case for somewhat more accommodative policy has strengthened.”
“The news on the talks in Osaka is a short term positive for asset markets, but we believe any talks will change little unless either side makes some meaningful concessions, which we do not view as likely at this time,” Pang added. While there is only a 20% chance of a rate cut in June, traders want to hear the Fed is leaning to its first cut in 10 years in July. If this isn’t stated clearly then the markets could weaken.
Australian shares are moving higher on Tuesday after the Reserve Bank of Australia (RBA) said further easing was likely. However, investors are largely targeting defensive sectors ahead of the two-day Fed meeting.