David Fuller and Eoin Treacy's Comment of the Day
Category - China

    Hong Kong Stocks Have the Worst Start to a Year Since 1995

    This article from Bloomberg News may be of interest to subscribers. Here is a section:

    Further evidence of slowing Chinese growth weighed as a closely-watched manufacturing gauge had its lowest reading since May 2017.

    “There are a lot of uncertainties lying ahead,” said Banny Lam, head of research at CEB International Investment Corp. “The markets will likely be stuck in a downtrend over the next few
    weeks.”

    Property stocks were among Wednesday’s biggest decliners on the Hang Seng Index, with China Resources Land Ltd. and Country Garden Holdings Co. both falling more than 6 percent.

    “Some funds are readjusting their positions for the new year and may be dumping stocks in sectors with an uncertain outlook like property and health care,” said Linus Yip, a Hong Kong-based strategist with First Shanghai Securities Ltd. “That’s why we’re seeing a sell-off.

    Read entire article

    Email of the day on a China slowdown

    Many thanks for another great year of top-class service. All the very best for 2019 and beyond. The following article in today's Observer gives on-the-ground evidence of the slowdown in the Chinese economy. 

    Read entire article

    China says direct trade talks with U.S. in January, pledges more opening

    This article by Yawen Chen and Ryan Woo for Reuters may be of interest to subscribers. Here is a section:

    China has also said it will suspend additional tariffs on U.S.-made vehicles and auto parts for three months starting on Jan. 1, adding that it hopes both sides can speed up negotiations to remove all additional tariffs on each other’s goods.

    Bloomberg, citing two people familiar with the matter, reported on Wednesday that a U.S. trade team will travel to Beijing the week of Jan. 7 for talks.

    A person familiar with the matter told Reuters last week that talks were likely in early January.

    In yet another reconciliatory sign, China issued on Tuesday a so-called negative list that specifies industries where investors - domestic or foreign - are either restricted or prohibited.

    The unified list is seen as another effort to address concern among Western investors that there is no level-playing field in China. Investment in key Chinese sectors, however, is still prohibited.

    Gao said China would “comprehensively” remove all market access restrictions for foreign investors by the end of March, in areas not included in a foreign investment “negative” list published in June.

    Read entire article

    U.S. Accuses China of Broad Economy Espionage as Tensions Simmer

    This article by Tom Schoenberg, Chris Dolmetsch and Jennifer Epsteinfor Bloomberg may be of interest to subscribers. Here is a section:

    Secretary of State Michael Pompeo and Homeland Security Secretary Kirstjen Nielsen said in a statement they were “concerned” that the alleged operation violated a 2015 agreement China made with the U.S. to stop supporting cyber theft of intellectual property and trade secrets.

    The indictments against the two, unsealed in federal court in Manhattan on Thursday, underscore one of the primary U.S. grievances in the ongoing trade fight between the Trump administration and Beijing: the systematic theft of U.S. intellectual property and forced technology transfers from companies doing business in China.

    Those complaints are a central issue in negotiations U.S. and China are working under a 90-day deadline President Donald Trump and Chinese President Xi Jinping set after agreeing Dec. 1 to halt additional tariffs and trade penalties. Since July, the two countries have imposed tariffs on a combined $360 billion in each other’s imports, a bruising conflict could undermine the global economy at a time when growth is leveling off.

    The hackers, known in the cybersecurity community as Advanced Persistent Threat 10, stole information from companies in an array of industries, including banking and finance, telecommunications, biotechnology, automotive, health care and mining, according to the indictment.

    The group hacked the U.S. Navy, making off with the personal data of more than 100,000 personnel, and successfully infiltrated computers linked to NASA’s Jet Propulsion Laboratory, the indictment said. Zhu and Zhang were indicted in abstentia.

    Read entire article

    Xi's Speech Gives No Hope for Stock Traders as Asia Markets Sink

    This article by Moxy Ying for Bloomberg may be of interest to subscribers. Here is a section: 

    Expectations that Xi’s speech would give stocks a boost (or at least, prevent a sell-off) were thwarted, and since “nothing special” was announced, Asian shares are following the overnight sell-off in the U.S., said said Castor Pang, head of research at Core Pacific-Yamaichi International HK.

    Francis Lun, chief executive officer of Geo Securities, agreed. Investors were disappointed by the speech as they had been expecting some comments on economic stimulus or the further opening-up of the Chinese economy, he said. “But he didn’t mention it. That’s why A shares dropped 1 percent and also dragged down Hong Kong stocks.”

    Read entire article

    Markets Conclude U.S. Is Riskier Than China

    This article by Matthew A. Winkler for Bloomberg may be of interest to subscribers. Here is a section:

    They would be pricing in various economic realities: the slowing rate of U.S. economic growth, the U.S. government's exploding debt, the diminished Treasury revenue caused by the 2017 tax cuts, and the Fed's pursuit of a monetary policy keeping rates well above their average for the decade.

    Investors see growth slowing, and it shows. Extreme fluctuations in the stock and bond markets the past month reflect investor anxiety over the transition from a brightening economy to the creeping sense that the best of this cycle has come and gone.

    U.S. government debt is also moving in the wrong direction. Since 2016, when the federal budget deficit as a percentage of gross domestic product declined to a decade-low of 2.2 percent from more than 10 percent in 2009, the deficit nearly doubled to almost 4 percent. GDP increased to a record $19.39 trillion at the end of 2017 as the annual rate climbed to 2.2 percent from 1.8 percent in 2007. But U.S. growth will deteriorate to an annualized 1.9 percent by 2020, according to economists surveyed by Bloomberg, putting more pressure on the widening deficit. Revenue isn't stepping in to close that gap. The Trump tax cuts are estimated to increase these deficits by $1 trillion during the next 10 years.

    Read entire article

    China's State Media Offers Some Clarity on U.S. Trade Deal

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    There’s still no official statement from Beijing that the deal reached Saturday to not raise tariffs is only for a 90-day period and is dependent on the outcome of talks. China’s government has been slow to formulate its response to the summit as senior officials were still out of the country with Xi,
    Bloomberg News reported.

    The Global Times is affiliated with the state-run People’s Daily, and published a separate Chinese-language editorial on Tuesday noting that the U.S. had made no mention of Beijing’s “Made in China 2025” plan in any statements after the Xi-Trump meeting, nor criticized China’s industrial policy. China’s government has yet to issue official comment on those details.

    The day after Xi and Trump met, the WeChat account of the People’s Daily’s overseas edition published an article detailing some of what was discussed at their talks. The article was by Mei Xinyu -- a researcher at a think tank under the Ministry of Commerce -- and cited a White House statement.

    It explained that China and the U.S. had agreed to work together on issues including widening market access, protecting intellectual property rights, avoiding forced technology transfers and jointly fighting against cyber theft.

    The China Daily also published a commentary on Tuesday noting the 90-day period, explaining it was a truce and saying the U.S. would likely escalate the trade war if no permanent deal was achieved.

    Read entire article

    G-20 Gives Markets a Short-Term Respite

    This article by Mohamed A. El-Erian for Bloomberg may be of interest to subscribers. Here is a section:

    For the economic reasons discussed here, the most likely outcome was in the middle of that range: a cease-fire with a pathway to a more decisive de-escalation of tensions – or, to use a recent historical parallel, an agreement similar to the one that followed the White House visit of EU President Jean-Claude Juncker in July. And that is what materialized, with the important addition of a three-month deadline for progress.

    At the end of almost three hours of what the White House called “highly successful” discussions, the U.S. agreed to refrain for 90 days from implementing additional tariffs on $200 billion of imports from China. In return, China promised to use the time to make progress in three areas of concern to the U.S. and other countries: relaxing an array of nontariff barriers, including joint-venture requirements, that result in forced transfers of technology, operational models and other proprietary information and business practices; combatting intellectual property theft and other cyber interferences; and reducing the bilateral trade surplus by importing “very substantial” quantities of certain goods from the U.S.

    Read entire article

    The Big Picture

    Thanks to a subscriber for this report from Societe Generale which may be of interest. Here is a section: