|Day's range||27,405.26 - 27,687.76|
|52-week range||24,896.87 - 30,280.12|
Japanese big manufacturer’s business mood sank to a near seven year low in the fourth quarter, a closely watched central bank survey showed, as the U.S.-China trade war and soft global demand weighed on the export-reliant economy.
U.S. President Donald Trump is expected to meet with top trade advisors on Thursday to discuss planned December 15 tariffs on some $160 billion in Chinese goods, three sources familiar with the plans said, according to Reuters, as markets braced for potential negative impacts.
(Bloomberg) -- Hong Kong’s dollar climbed into the strong half of its trading band against the greenback for the first time since July, boosted by elevated borrowing costs in the city.The currency climbed as much as 0.13% to 7.7982 per dollar on Thursday, crossing the 7.8 threshold. Local interbank rates have stayed high since November, outstripping the income a trader can expect on U.S. dollars. That’s undermined the so-called carry trade, where traders sell Hong Kong dollars and buy greenbacks, which had been profitable for years. Equities in the city also rose.The Hong Kong dollar’s strength is also coinciding with year-end regulatory checks on banks that typically sees higher demand for cash. That may lock up funds, tighten liquidity and stoke local rates into the final days of 2019. The Federal Reserve on Wednesday left interest rates unchanged and signaled it would stay on hold through 2020, limiting the room for Hong Kong rates to fall even after the seasonal factors are out of the way.“A softer dollar, better yield differential, perhaps some easing off on the outflows may have contributed to the sharp move that we’ve seen,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. “After the Fed policy decision overnight, the dollar is staying softer.”The Hong Kong Monetary Authority said Thursday that foreign-exchange and money markets continue to operate smoothly and that the exchange rate remains stable.One-month interbank funding costs for the currency, known as Hibor, have been higher than comparable rates on the greenback for 24 straight sessions as of Tuesday -- the longest stretch in four years. That means investors who had profited by borrowing the Hong Kong dollar cheaply and selling it against higher-yielding currencies since 2017 now may have to shift their strategy.The Hong Kong dollar Hibor climbed above the greenback’s funding costs, known as Libor, last month, and has remained elevated. The premium briefly reached the highest since the 1990s. That came as large share sales in the city drained liquidity and six months of political unrest stoked concern about capital outflows.Before mid-2019, Hibor had been lower than Libor for most of the past few years. The short Hong Kong dollar trade became so popular that the currency was repeatedly pushed to the weak end of its trading band against the greenback, prompting the local de facto central bank to intervene.The Hong Kong dollar will likely return to the weak half of the band as year-end effects fade, said Eddie Cheung, an emerging markets strategist at Credit Agricole CIB.“That’s because we currently don’t have major drivers for strong inflows, the city’s economy will face significant pressures in the first half and the medium to long-term prospects on the trade war aren’t great,” he said.The Hong Kong dollar pared its gain to trade at 7.8061 as of 3:43 p.m. local time. A gauge measuring the demand for bearish options on the currency over bullish wagers tumbled the most since early 2015. In stocks, the benchmark Hang Seng Index added 1.4%, set for the highest close since Nov. 19.\--With assistance from Livia Yap.To contact the reporters on this story: Tian Chen in Hong Kong at email@example.com;Claire Che in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, Philip Glamann, Christopher AnsteyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- U.S. stocks rose with Treasuries, while the dollar fell after the Federal Reserve left interest rates unchanged and its chairman signaled it would keep policy “somewhat accommodative.”The S&P 500 halted a two-day slide as investors viewed the last Fed decision of the year as dovish because the central bank signaled rate hikes are unlikely unless there is a meaningful change in the outlook for the economy. The 10-year Treasury rate fell below 1.8%.The Fed, in its first unanimous vote since May, said it will continue to monitor the implications of data for the economic outlook “including global developments and muted inflation pressures.”“It’s ‘steady as she goes’ from the Fed today,” said Jason Pride, chief investment officer of private wealth at Glenmede Trust. “This accommodative stance should provide a measure of support for risk assets heading into the new year.”Equity gains had been muted throughout the session as investors kept an eye out for trade headlines. The Dow Jones Industrial Average was little changed amid more trouble for Boeing Co.’s Max plane and Home Depot Inc.‘s weak forecast. Crude slipped after U.S. inventory data.With the world’s top two economies still wrangling over an interim deal, Thursday may bring news as Trump is expected to meet with his trade team, according to people familiar with the talks.Here are some other key events to watch:Brazil’s central bank also decides on interest rate.The next European Central Bank policy meeting is on Thursday.The U.K. holds a general election Thursday.And these are the main market moves:\--With assistance from Claire Ballentine.To contact the reporters on this story: Sarah Ponczek in New York at firstname.lastname@example.org;Vildana Hajric in New York at email@example.comTo contact the editors responsible for this story: Jeremy Herron at firstname.lastname@example.org, Dave LiedtkaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Perhaps capping stock market gains are comments from White House Economic advisor Larry Kudlow, who on Tuesday downplayed reports of a tariff delay, noting the Trump Administration could still move forward with new levies targeting Chinese goods.
US stocks closed slightly lower, marking a cautious response to media reports Washington and Beijing had signalled a Sunday deadline for the imposition of new round of tariffs on Chinese imports could be extended. Trade negotiators from the US and China have indicated in recent days that December 15 is not necessarily the final date for duties to increase on $165bn of imports if a so-called “phase one” deal is not reached beforehand, the Wall Street Journal reported about an hour out from Wall Street’s opening bell on Tuesday.
China’s consumer inflation climbed to nearly eight-year peaks in November as pork prices doubled, but factory-gate prices remained in the red, adding to uncertainty over whether the manufacturing sector is bottoming out as trade risks persist.
China’s exports in November shrank for the fourth consecutive month, underscoring persistent pressures on manufacturers from the Sino-U.S. trade war but growth in imports may be a sign that Beijing’s stimulus steps are helping to stoke demand. Top White House economic adviser Larry Kudlow said on Friday that a December 15 deadline is still in place to impose a new round of U.S. tariffs on some $156 billion of China’s remaining exports to the United States.
Stocks in major Asian markets saw gains on the first trading day of December as Chinese factory activity presented a positive surprise in November.
The Wall Street Journal reported Thursday that Washington and Beijing are still in disagreement over the size of China’s agricultural purchases. Meanwhile, China has given little indication on how negotiations with the U.S. are progressing.
in local elections, dislodging their pro-Beijing rivals and delivering a decisive thumbs down to the city’s chief executive Carrie Lam and China’s President Xi Jinping. The elections followed almost six months of anti-government protests in the Asian finance hub that have left the city’s Hang Seng index up just 0.8 per cent this year, versus a nearly 28 per cent rise for China’s CSI 300.
A number of leading Wall Street banks are advising clients to make heavy bets on Hong Kong stocks, urging them to look again at a market that has been hammered by months of political tumult. On Wednesday, the IMF predicted Hong Kong’s economy would contract 1.2 per cent this year and grow just 1 per cent in 2020 in comparison with a 3 per cent expansion in 2018. Companies listed in the index derive much of their revenue from mainland China, meaning they would benefit from a “phase one” trade deal between the Washington and Beijing.
(Bloomberg) -- Alibaba Group Holding Ltd.’s landmark $11 billion share sale and listing in Hong Kong on Nov. 26 was galvanized by expectations the Chinese e-commerce giant will attract a vast pool of capital from its home country. But some investors caution against unrealistic expectations, especially by mainland investors, and highlight certain restrictions that still govern -- and potentially curtail -- trading activity in Alibaba’s Hong Kong shares.The company’s sheer size and the unprecedented nature of its secondary listing (the primary listing is still in New York) and unique management structure present challenges for investors hoping to gauge everything from Alibaba’s inclusion in indexes -- crucial because they direct the flow of capital from tracker funds -- to its listing status.Here’s what we know.1\. Will Alibaba get added to the Hang Seng Index?Not right now. Alibaba will be added to Hang Seng Composite Index on Dec. 9, but it isn’t qualified to join the benchmark Hang Seng Index or the Hang Seng China Enterprise Index because they comprise only primary listings and corporations without so-called weighted voting rights (WVR).Membership of the 50-member Hang Seng is coveted by corporations because it could trigger billions of dollars of inflows from funds tracking the 50-year-old gauge. Hang Seng Indexes Co. plans a consultation in the first quarter to discuss issues including whether firms with weighted voting rights, like Alibaba, should be eligible for the HSI. Any conclusions should be published by May, Daniel Wong, its head of research and analytics, said in a statement. Even if the index compiler decides to overhaul its rules, the required process means it may not be until late 2020 before Alibaba could join the major Hang Seng benchmarks.Representatives for HKEx and Alibaba declined to comment.Read more: Why Now, and Why Hong Kong, for Alibaba’s Share Sale?: QuickTake2\. Will Alibaba be included in the stock connect program?Maybe, but a lot hinges on policy makers. China doesn’t spell out criteria or qualifications for joining the program, which allows mainland investors to buy stocks listed in Hong Kong. Unlike the HSI, the program isn’t limited to primary listings. It does require review by the China Securities Regulatory Commission, the stock market watchdog.The first companies in stock connect with weighted voting rights were Meituan Dianping and Xiaomi Corp., which mainland investors got access to in late October through the program. That’s after similarly structured Chinese firms started listing in July on Shanghai’s new tech-focused Star board. Many investors expect Beijing to ultimately allow Alibaba’s Hong Kong shares to trade through the stock link with the city as well.But it may not necessarily be in China’s best interest to do so. That’s because other U.S.-listed Chinese firms -- among the country’s largest corporations, from JD.com Inc. to Baidu Inc. -- may be encouraged to follow in Alibaba’s footsteps and conduct their own secondary listings in Hong Kong, bypassing the Shanghai or Shenzhen bourses. That may run counter to Beijing’s longstanding ambitions of developing healthy, vibrant mainland exchanges, particularly as unrest grips Hong Kong.3\. Can Alibaba change its primary listing to Hong Kong?It’s possible -- thereby attracting investors with a preference for main listings, and at the same time scoring brownie points with some in Beijing who could view that as supporting China’s policy ambitions. Alibaba was given the green light to list in Hong Kong based on a new “Secondary Listing” rule, or Chapter 19C. It allows companies to conduct follow-on share offerings without complying with more stringent rules laid down by Hong Kong Exchanges & Clearing Ltd. governing first-time listees.Alibaba may enjoy special status in having more freedom to comply with Hong Kong listing requirements. Under rules laid out in a consultation paper in April last year, Chinese firms that went public before Dec. 15, 2017 don’t need to comply with “WVR” safeguards if they later switch their primary listing to Hong Kong. Alibaba, which debuted in New York in 2014, said in its Hong Kong listing prospectus it’s a “WVR” company similar to Meituan and Xiaomi.Meanwhile, Alibaba employs a fairly unique structure in which a group of partners have the right to nominate a majority of the firm’s board -- exerting outsized influence on Alibaba’s direction.In addition, Hong Kong listing rules say if trading volume there exceeds 55% of global turnover over an entire fiscal year, the stock has to adopt primary listing status in Hong Kong. HKEx gives such Chinese companies a year to comply. But with Hong Kong’s stock registration office listing just 23% of outstanding Alibaba shares as of Nov. 28, a majority of trading volume occurring there may be a tall order.\--With assistance from Paul Geitner and Fox Hu.To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Edwin Chan, Kevin KingsburyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The Australian share market suffered its worst day since mid-August on renewed fears over global trade uncertainty. The sell-off wiped on $50.8 billion in value from the market and was the largest single-day drop since a 187.8 point loss on August 15.
Donald Trump declared on Tuesday that he was prepared to wait until after the US election next year to reach a trade deal with China, fuelling global economic tensions and unnerving investors a day after the US stepped up a dispute with EU allies. Mr Trump said there was no deadline for the US-China talks, raising doubts about the prospects for resolving the dispute with Beijing.
A private survey on Monday showed China’s manufacturing activity expanded more than expected in November. Chinese state media said Sunday that Beijing wants a rollback of tariffs in the phase one trade deal that the two economic powerhouses are aiming to reach.
(Bloomberg Opinion) -- Hong Kong property companies, whose shares have been beaten down amid this year’s protests, are missing an opportunity to unlock value for shareholders. More should consider packaging their trophy assets into real estate investment trusts to release capital and improve the market’s view of their prospects.The Hang Seng Properties Index has slumped more than 17% from an April high as the unrest disrupted business, deterred home buyers and caused tourists and shoppers to stay away. The broader Hang Seng Index has lost 11%. Many real estate companies are trading at a steep discount to the value of their underlying assets.To understand why developers are trading at a discount, look at the ownership structure. Many are controlled by founding families, who are reluctant to part with their most prized properties. Take Hang Lung Properties Ltd., for example. Chairman Ronnie Chan owns more than half the company, which trades at a price-to-book ratio of 0.52 times.As a result of the reluctance to divest, companies end up acting essentially as landlords rather than developers, stunting the potential for growth. In effect, investors are participating in a bond-like structure by collecting rental income instead of achieving an equity-like return via property development and sales. Concern that Hong Kong is at the peak of a property cycle has also helped to depress valuations, with investors discounting developer shares to reflect the risk of a decline. Hang Lung’s price-to-book ratio has dropped from a peak of more than 1.8 times over the past decade as Hong Kong real estate prices surged.Spinning off rental properties into trusts, or REITs, could help to narrow the discount to net asset value. Such a maneuver would enable family-owned entities to retain control while generating capital from REIT offerings that could be redeployed into better-yielding projects. That in turn would raise return on equity, benefiting owners and investors. The parent company would enjoy higher growth prospects through a relatively asset light model while the REIT provides a steady income stream.Income taxes are the primary obstacle to expansion of Hong Kong’s REIT market. At the moment, Hong Kong property trusts are taxed like corporations at 16.5%. Singapore, by contrasts, grants a tax exemption to REITs holding both domestic and foreign properties as long as they pay out 90% of their income in dividends. In 2014, Hong Kong’s Financial Services Development Council urged the city’s authorities to stimulate the REIT market by introducing a tax break, so far to no avail.That discrepancy has helped Singapore to maintain its lead over Hong Kong as a center for REITs. Singapore, which issued its first property trust in 2002, has 43 now with total assets of $112 billion. Hong Kong’s first listing was Link REIT in 2005. Nine more have followed since, bringing total assets to $67 billion. No new REITs have been issued in Hong Kong since 2013; by contrast, Singapore has seen 11 listings in the past five years.Share performance has also been superior in the Southeast Asian city-state. The S&P Singapore REIT index has returned 25% this year, compared with less than 4% for its Hong Kong equivalent. The valuation gap is stark: Singapore REITs trade at about 1.1 times book, versus 0.6 times for Hong Kong.That might suggest that Hong Kong property companies have little to gain by packaging assets into trusts. Besides the tax issue, the discount may reflect that most REIT listings in Hong Kong to date haven’t included companies’ highest-quality properties. In any case, there’s another solution for the city’s developers: List their REITs in Singapore. That might even sway Hong Kong authorities into reconsidering their stance. (Corrects the year of Link REIT’s listing to 2005 in the seventh paragraph.)To contact the author of this story: Ronald W. Chan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Ronald W. Chan is the founder and CIO of Chartwell Capital in Hong Kong. He is the author of “The Value Investors” and “Behind the Berkshire Hathaway Curtain.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Friday’s sudden tumble in Hong Kong stocks spread to the onshore market, with selling accelerating amid nervousness over a lack of clear triggers for the slump.The market was rife with speculation: health-care shares tumbled in Hong Kong when a document circulating on social media suggested Beijing could add dozens of new drugs to another round of procurement. Others said there was too much macro risk going into the weekend, with increasing uncertainty on the trade-war front. In onshore trading, the selling accelerated in the afternoon session as investors took profits in crowd favorites like Kweichow Moutai Co.The Hang Seng China Enterprises Index lost 2.5%, while the FTSE China A50 Index of onshore-listed large caps fell 1.3%. Hong Kong’s Hang Seng Index dropped 2% on volume that was 36% higher than the 30-day average. Some traders said Thursday’s U.S. holiday meant investors lacked cues in Friday’s Asian session.“There’s no obvious trigger” for Friday’s weakness, said Linus Yip, a Hong Kong-based strategist with First Shanghai Securities Ltd. He said continued uncertainty over the outcome of U.S.-China trade negotiations could be one factor weighing on sentiment.There’s persistent concern over how China may retaliate against a U.S. bill on Hong Kong signed by Trump this week. Beijing on Thursday reiterated its threat to take action, without elaborating. Chinese authorities have been known to make significant announcements late on Friday. Month-end maneuvering was also seen as a possible factor.Hong Kong stocks rose Monday after pro-democracy candidates swept the board in district council elections, putting pressure on the city’s government to address issues that have fueled months of protests. Days later, Trump signed a bill into law expressing support for Hong Kong’s protesters.Moutai fell 4% Friday, its biggest loss since Sept. 11. CSPC Pharmaceutical Group Ltd. and Tonghua Dongbao Pharmaceutical Co. almost 10%, among the biggest laggards on the MSCI China Index.To contact the reporter on this story: Cindy Wang in Taipei at email@example.comTo contact the editors responsible for this story: Sofia Horta e Costa at firstname.lastname@example.org, Richard FrostFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Thursday’s selling pressure was mild when compared to previous breaks in the stock market in reaction to potentially negative news about a breakdown in talks between the United States and China. The news creates uncertainty, which usually encourages investors to lighten up on risky positions. However, it’s probably not a deal breaker.
Last week, negative headlines dominated the news, leading to some light profit-taking in the stock market. This week, there haven’t been any negative comments, and the rally to record highs in the U.S. has resumed. However, there are some whispers over the lack of concrete evidence that progress is being made in the trade talks.
(Bloomberg) -- Most mainland investors can still only watch gains in Alibaba Group Holding Ltd., as China’s most valuable listed company extends increases after its Hong Kong stock exchange debut.Fund mangers say the shares will be a must-have once they are included into the city’s trading links with the mainland, timing of which remains uncertain. The industry is unfazed the company’s U.S.-listed equity has nearly tripled in price since September 2014’s initial public offering, predicting that Chinese investors’ familiarity with the e-commerce firm will push Alibaba’s market valuation higher still.“It’s a unique and rare asset -- like Tencent and Meituan -- that can’t be found in mainland-listed stocks,” said Qu Shaohua, managing director at Acroguardian Investment Co. “Though we don’t own Alibaba shares yet, I think it’s important that we do once it becomes available through the stock connect -- at the right price.”The stock is eligible to join the Hang Seng Composite Index, of which many components can be traded through Chinese exchanges’ trading links with Hong Kong’s. But due to Alibaba’s unequal voting rights structure, its shares must trade for some seven months in Hong Kong and meet other requirements in areas like trading volume before being included into the stock connect, according to rules published by the Shanghai and Shenzhen stock exchanges.The mainland bourses didn’t immediately reply to faxes, calls and emails seeking comment on Alibaba’s eligibility for the stock links.Jiang Liangqing, a fund manager at Ruisen Capital Management in Beijing, has Alibaba high on his shopping list and expects other institutional investors to add the stock as an “essential part” of their portfolio, just like they did with Tencent Holdings Ltd. when its shares traded in the city became accessible to mainland investors a few years back.Alibaba finished up 3% on Wednesday at HK$193.2, after gaining 6.6% on its debut. The closing price was around 25 times projected earnings for the next 12 months, versus Tencent’s 26 times and Meituan Dianping’s 117 times.The company is not totally strange to Hong Kong’s stock market. Business-to-business marketplace Alibaba.com Ltd. was floated there in 2007, but Alibaba bought back the shares five years later at the IPO price.The parent company then went public in New York in 2014 after being turned down by Hong Kong. It has created more than $250 billion in wealth for investors since its IPO.Many mainland China traders say they are not fretting about missing out on the gains, instead projecting optimism that domestic investors -- who shop, order takeout and get groceries delivered through Alibaba’s services on a regular basis -- will give its Hong Kong stock a lofty valuation over time.“Mainlanders are going to go crazy over this one, when they can finally buy a piece of Alibaba with yuan,” said He Qi, a fund manager at Huatai Pinebridge Fund Management whose mandate includes Hong Kong shares.One of the latest Chinese technology firms to be eligible for trading by Chinese investors through the link with Hong Kong’s stock exchange, Meituan was the most net-purchased stock by mainland investors in the two weeks following its stock connect inclusion in late October, according to figures compiled by Bloomberg.To be sure, some traders aren’t in a rush to jump on the Alibaba bandwagon, highlighting risks such as China’s still-slowing economic growth.“Alibaba is faced with heightened competition, both on its home turf of e-commerce and in the booming short video realm,” added Wei Hai, chief investment officer at Jungle Gene Associates. The hedge fund holds a position in U.S. stocks.(Updates with stock close seventh paragraph.)\--With assistance from Jeanny Yu, Lujia Yu and Mengchen Lu.To contact Bloomberg News staff for this story: April Ma in Beijing at email@example.com;Ken Wang in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, Fran Wang, Kevin KingsburyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Alibaba Group’s Hong Kong shares closed their first trading session up 6.6% from the issue price after this year’s largest stock sale. Australia’s Westpac Banking said on Tuesday its CEO will step down and its chairman will bring forward his retirement as a money-laundering scandal rocks the country’s second-largest retail bank.
(Bloomberg) -- Equity traders cheering the prospect of a restoration of stability in Hong Kong keep getting disappointed.Stocks fell 0.3% on Tuesday as the city’s leader Carrie Lam offered no new concessions in her first public comments since Sunday’s vote. It follows Monday’s 1.5% gain in the Hang Seng Index, partly triggered by a landslide election victory for pro-democracy forces. Some analysts were predicting the results would force the government to address issues that have fueled the unrest.It’s getting increasingly difficult to have a view on Hong Kong’s equity market. Despite violent street protests and events such as a university siege, stocks have shown a tendency to revert to the mean for the better part of four months. The Hang Seng Index is more than twice as volatile as when protests began in early June, even though the index is basically flat.“When you have a very wide range of outcomes, it becomes difficult to come up with a specific view or build a reliable trading or investment model,” Isaac Poole, chief investment officer at Oreana Financial Services Ltd., said by phone. “Market sentiment and market momentum become key drivers. It’s not an easy environment.”This month has been particularly tricky for anyone trying to time the market. Hong Kong stocks lost $118 billion in value on Nov. 11, their worst day in more than three months, after police shot and wounded a protester. A week later they rose, despite a dramatic standoff between protesters and police at a local university. A short squeeze then followed, stoking the world’s biggest gains. That ended after only two days.For investors tired of the whiplash, hopes were high that another day of gains for the Hang Seng Index on Tuesday would provide a much needed breather. But even if the weekend’s peaceful vote removed some near-term uncertainty, stock bulls have plenty of reasons to stay on the sidelines. Turnover in Hong Kong was below this year’s average for 14 straight days before Alibaba Group Holding Ltd.’s debut, showing a lack of conviction either way.“Now that the election is out of the way, markets will turn to fundamentals,” said Hao Hong, head of research at Bocom International. “If you look at economic fundamentals, they are deteriorating. Investors will eventually have to focus on that.”(Updates prices throughout.)To contact the reporter on this story: Elena Popina in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Richard Frost at email@example.com, Sofia Horta e Costa, David WatkinsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.