Five Things You Need to Know to Start Your Day
All eyes are on Chinese equities as Beijing rides to the rescue of the nation’s beleaguered stock investors. And Indonesia is set for another key interest-rate decision. Here are some of the things people in markets are talking about.
PBOC to the Rescue
China announced fresh measures to ease the funding strains of private companies, as top officials seek to restore confidence in the world’s second-largest economy. The State Council announced it would support bond financing by private firms on Monday, and said the central bank will provide funding to facilitate this. The People’s Bank of China soon after announced a plan to support such issuance, without providing any details of the size of the plan, or when it would begin. In a separate statement, the central bank also announced a 150 billion-yuan ($22 billion) increase in its relending and rediscounting quota. These are tools that allow the central bank to supply financial institutions with money to lend. The quota was also raised by 150 billion yuan in June.
Southeast Asia’s Boom
Southeast Asia is seeing a boom in foreign direct investment as the intensifying trade war between the U.S. and China prompts companies to shift production to the region. Vietnam saw manufacturing inflows jump 18 percent in the first nine months of 2018, according to a Maybank Kim Eng Research Pte. note on Monday. In January through July, Thailand’s net FDI rose 53 percent from a year earlier, according to central bank data. In the Philippines, net FDI into manufacturing surged to $861 million in the same period from $144 million a year earlier. “The U.S.-China trade war may be attracting more firms to set up in Asean to circumvent the tariffs,” Maybank economists Chua Hak Bin and Lee Ju Ye said in the note. “Sectors such as consumer products, industrial, technology & telecom hardware, automotive and chemicals have indicated interest in Southeast Asia.”
China’s Spurious Stock Rally
Don’t get too excited by the steepest rally in Chinese stocks since 2016, says Bank of America Merrill Lynch. The Shanghai Composite Index’s two-day gain is a sentiment-driven, short-term rebound that is unlikely to be sustained, said David Cui, BofAML’s head of China equity strategy who predicted China’s 2015 equities crash. Deep-pocketed state funds have been absent from the market, and their participation would be a last resort only if things get worse, he added, without giving specific index targets.
U.S. Shares Continue Slump
Most U.S. equities fell Monday, with financial and commodity shares pacing losses ahead of a spate of key earnings reports this week. The dollar rose to the highest level in two months. More than three stocks fell for every two that rose in the S&P 500 Index, with banks tumbling the most. Energy producers slumped more than 1 percent as crude traded at a five-week low. The FANG cohort lifted tech-heavy Nasdaq indexes ahead of a spate of megacap earnings later this week. Yet risks still abound across global markets, from the continuing U.S.-China trade showdown and tension surrounding the killing of a Saudi journalist to Italian budget fears and President Donald Trump’s unpredictable actions ahead of American midterm elections.
China’s stock market may be the focus, but there are plenty of other happenings set to capture investor attention Tuesday, with Bank Indonesia's rate decision foremost on the list. While policy makers are expected to hold rates, the rupiah's tumble this year will have FX traders poring over every utterance from Governor Warjiyo. Chinese President Xi Jinping may attend the opening of the Hong Kong-Zhuhai-Macau bridge, so that could give him fresh opportunity to talk up the stock market. Other key data highlights include Singapore and Hong Kong CPI, along with Taiwan industrial production. ``Davos in the Desert'' is also supposed to get started.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- The world's longest sea bridge brings China closer to Hong Kong.
- Apps can track you even after you uninstall them.
- China says the U.S. should think twice about leaving the INT missile pact.
- Singapore stocks are on bulls' shopping lists.
- A high-stakes Afghan vote paves the way for the 2019 election.
- Emerging markets need fixes to stay calm, Mohamed El-Erian says.
- These are the women powering India's #MeToo movement.
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