GMT EIGHT

Be cautious! The Bank for International Settlements warns that there still exists risks in the market similar to the unwinding of carry trades involving the Japanese yen.

The Bank for International Settlements warned that the financial system is at risk of experiencing another round of volatility, similar to when a popular hedge fund strategy collapsed this summer, affecting the entire market. In a report released on Monday, the Bank for International Settlements stated that as major central banks withdraw liquidity globally, investors will be forced to reduce leverage and review risk strategies. The so-called arbitrage trade unwinding is the latest example of the potential consequences of this shift. "We shouldn't have any illusions. This is not the first time, and it won't be the last time that markets experience turmoil," said Claudio Borio, Head of the Monetary and Economic Department at the Bank for International Settlements, at a press conference. "It's part of the bigger picture, inevitable symptoms of the transition from a period of extremely low interest rates and ample liquidity." Following the Bank of Japan's rate hike in July, traders who had borrowed large amounts in yen and invested cash in high-yield assets were forced to unwind their positions quickly. These intense fluctuations spilled over into other assets and raised concerns about leverage levels in the financial system, leading traders to speculate whether there will be more leverage in the market. The Bank for International Settlements stated that it is seeking to improve its tracking of arbitrage trades to better understand market vulnerabilities. Currently, information on forex derivatives, including forwards, swaps, and options, lacks clear explanations of each transaction's specific purpose. The Bank for International Settlements is working with its member central banks to gather more data on these transactions. One challenge is that investors often use forex derivatives for speculative arbitrage trading, as well as hedging and liquidity management purposes, making assessing overall activity difficult. In its report, the Bank for International Settlements noted that before the August meltdown, arbitrage trading strategies were very crowded and highly leveraged. The Bank for International Settlements stated that because the motives for participating in arbitrage trading strategies still exist, policymakers need to closely monitor developments. Hyun Song Shin, Economic Adviser and Head of Research at the Bank for International Settlements, said, "We need to keep a very close eye on the potential risks that are building up. The financial condition is crucial for the implementation of monetary policy, which is crucial for central banks."

16/09/2024

What signal? Traders are once again crazy betting on the Fed cutting interest rates by 50 basis points this week.

Bond traders once again believe that the possibility of the Federal Reserve policy makers cutting interest rates by 50 basis points at this week's meeting is greater than 25 basis points. Interest rate swap pricing related to the Federal Reserve's local time rate decision on Wednesday shows that after almost completely ruling out the option of a 50 basis point rate cut last week, the probability has once again exceeded 50%. This has pushed the two-year U.S. Treasury yield back to its lowest level in two years, dragging the U.S. dollar index to its lowest level since January. The pricing reversal in the past few trading days has increased the risks of the decision on September 18. Investors are conflicted about how much policy support the economy needs and what signal the Federal Reserve's decision to significantly cut interest rates will send. Senior U.S. strategist at Rabobank, Philip Marey, wrote: "This is a tough call." He expects the Federal Reserve to cut rates by 25 basis points. "Powell's lack of guidance may indicate that the FOMC has not reached a consensus yet. More importantly, Tuesday's retail sales could still change this calculation." Macro strategist at French Industrial Bank, Kit Juckes, said the market could force the Fed to cut rates by 50 basis points. He added that upcoming U.S. retail sales and industrial production data in the coming days could influence people's views. He said that if weak retail sales push pricing higher, the FOMC may be concerned about falling behind the curve. However, some major banks remain cautious about a 50 basis point rate cut by the Federal Reserve. Standard Chartered Bank issued a statement on Monday saying that a 50 basis point rate cut by the FOMC at the upcoming meeting could be worse than a 25 basis point cut. The institution pointed out: "There is no convincing reason in economic data to justify a 50 basis point rate cut at the upcoming meeting." Standard Chartered Bank then added: "A 50 basis point rate cut and getting it wrong could be worse than a 25 basis point rate cut and getting it wrong." The bank emphasized that Powell and the Federal Reserve cannot disappoint the market. The company believes that the risks of a 50 basis point rate cut are greater because it could lead to an increase in the unemployment rate in September. Standard Chartered Bank believes that a 25 basis point rate cut could have an impact and attached a clear message: "The FOMC will closely monitor the situation if a 50 basis point rate cut is implemented." Market turmoil All of this is happening against the backdrop of increasing tension in U.S. politics. The FBI is investigating a apparent assassination attempt against former President Trump, just two months after the Republican presidential candidate was shot at a rally in Pennsylvania. On Monday, the two-year U.S. Treasury yield fell by 4 basis points to 3.54%, continuing its rise after a sharp drop from highs above 5% at the end of April. U.S. stock index futures showed mixed movements. As Federal Reserve members are in a blackout period ahead of the policy meeting from September 17 to 18, traders have little data to rely on, including August retail sales data released on Tuesday. Meanwhile, repricing expectations have also affected the U.S. dollar, which has weakened against most major currencies over the past month. The yen is one of the currencies that has seen the largest gains, breaking through the key level of 140 yen per dollar on Monday. Strategist at National Australia Bank, Rodrigo Catril, said: "We believe that the Federal Reserve is about to enter a new period of easing, which is a major negative factor for the U.S. dollar. As the Federal Reserve eases monetary policy next year, lowering the funding rate to neutral or even below neutral, the dollar will start to decline cyclically." Although a technical indicator shows that the dollar will be supported as momentum turns bearish, the market mostly expects the dollar to weaken. A survey of analysts shows that by this time next year, the euro, yen, Canadian dollar, and Australian dollar are all expected to strengthen against the dollar.

16/09/2024

Cui Dongshu: The pressure for collapse of fuel companies is significant. Promoting vehicle sales in rural areas requires more effort rather than suppression.

Secretary-General of the China Association of Automobile Manufacturers, Cui Dongshu, stated in an article that in 2024, the Chinese car market achieved the expected strong start in retail sales. Subsequently, there was a significant differentiation between new energy vehicles and traditional fuel vehicles. From January to August 2024, retail sales of new energy vehicles reached 6.01 million units, showing a strong growth trend with a 35% increase, which was close to the 36% growth rate seen in 2023. With the introduction of national scrappage and renewal policies and a doubling of subsidies in July, new energy vehicles experienced accelerated growth. In August, traditional vehicle retail sales decreased by 28% compared to the previous year, while new energy vehicle retail sales increased by 43%, resulting in a 71-point difference. Heavy taxes on fuel vehicles and incentives for purchasing new energy vehicles have put significant pressure on traditional fuel vehicle companies. Rural residents have a high sensitivity to prices, with a considerable number of people inclined to purchase pure electric vehicles priced below 70,000 yuan. Currently, A00 level vehicles are not exempt from taxes for those with a range of less than 200 kilometers, giving them a disadvantage compared to low-speed electric vehicles. Therefore, policies supporting the economic aspects of electric vehicles are still needed for new energy vehicles to penetrate rural areas. The inadequate construction of charging infrastructure in county and township markets hinders widespread use, making the promotion of photovoltaic energy storage electric vehicles a good way to encourage the penetration of new energy vehicles in rural areas. The sales structure of new energy vehicles in small cities, counties, and towns has changed from being 87% pure electric vehicles in 2021 to 56% in 2024, showing a gradual convergence with the situation in large cities. The promotion of automobiles in rural areas should involve strengthening rather than restricting. The sales structure of pure electric vehicles in small cities, counties, and towns has shown a noticeable decline trend, with A00 level vehicles accounting for 66% in 2020 falling to 35% in 2024. While the scrappage renewal policy has had some impact on A00 level electric vehicles, the support provided is insufficient. To better cater to the practical and relatively lower purchasing power of the elderly in rural areas, it is necessary to ease the vehicle purchase tax exemption for electric cars with a range of under 200 kilometers instead of squeezing them into buying low-speed electric vehicles. 1. Strong Wholesale Performance of New Energy Vehicles in August 2024 In August 2024, wholesale sales of new energy passenger vehicles reached 1.05 million units, surpassing the historic peak level. Due to factors such as the Spring Festival and price cuts, there was a significant drop in February, with the market gradually recovering and showing a huge increase in August compared to the previous month. Since 2023, the prices of raw materials such as lithium and nickel have fallen, leading to a downward trend in the prices of power batteries. The low sales in February were advantageous for companies to reduce production at the beginning of the year, clear historical inventory, and achieve continuous growth in sales of new products. In August, the wholesale of new energy passenger vehicles reached 1.05 million units, with a year-on-year growth rate rising to 32%, a strong performance compared to the 30% growth rate from January to July. The overall growth from January to August was relatively fast. The wholesale growth in August was relatively lower than the retail growth, reflecting the market's driving effect. 2. Wholesale Penetration of Shanxi Guoxin Energy Corporation In August, the wholesale penetration rate of new energy vehicles manufacturers reached 48.9%, an increase of 13.3 percentage points from the 35.6% penetration rate in August 2023. In August, the penetration rate of independent brand new energy vehicles was 63%; the penetration rate of new energy vehicles in luxury cars was 43.2%; while the penetration rate of new energy vehicles in mainstream joint venture brands was only 7.8%. Comparatively, traditional vehicle manufacturers saw a 24% decrease in wholesale sales in August, while new energy vehicle retail sales increased by 32%, highlighting the significant pressure on traditional fuel vehicles. 3. Strong Growth in Retail Sales of New Energy Vehicles in August 2024 In August 2024, the retail sales of new energy vehicles in the market reached 1.03 million vehicles, showing a stronger performance in August than in July, indicating a sustained strengthening trend in retail sales. The effects of increased demand due to the allocation of license plates in Beijing from June to August are evident, and some price-watching groups have started purchasing cars, while the scrappage renewal policy has increased enthusiasm for buying. From 2023, the cumulative retail sales of new energy vehicles reached 7.75 million vehicles, with a 36% year-on-year increase. The strong performance in August, with a 43% growth rate, indicated a relatively strong trend from January to August, with 6.01 million new energy vehicles sold, a 35% increase relative to 2023, which is a commendable achievement. 4. Retail Penetration Rate of Shanxi Guoxin Energy Corporation In August, the domestic retail penetration rate of new energy vehicles reached 54%, an increase of 16.7 percentage points from the 37.3% penetration rate in the same period last year. In August, the penetration rate of new energy vehicles in domestic retail was 75.9% for independent brands; 33.5% for new energy vehicles in luxury cars; and only 8% for new energy vehicles in mainstream joint venture brands. In August, traditional vehicle retail sales decreased by 28% compared to the previous year, while new energy vehicle retail sales increased by 43%, resulting in a significant difference of 71 percentage points, indicating significant pressure on fuel vehicles. The sustained breakthrough of the penetration rate of new energy vehicles in the domestic passenger car market exceeding 50% is due to: 1. The empowering effect of the strong advantages of the industrial chain brought about by China's manufacturing strength, with super advantages in battery, motor, and chip production in the equipment manufacturing and component industries; 2. Under the promotion of new productive forces, Chinese auto companies have vigorously developed new energy vehicles, driving China's automotive industry from large to strong; 3. The guiding ideology of open development in the passenger car industry has promoted the comprehensive entry of internet companies, intelligent consumer manufacturing enterprises, and international new energy car companies, activating industry competitiveness and innovation capabilities; 4. The innovative development of Chinese auto companies in plug-in hybrid technology, achieving breakthroughs in narrow plug-in hybrid and extended-range technologies, enriching the technical routes of global new energy development, and achieving a breakthrough advantage with China's plug-in hybrids accounting for 78% of the global market share; 5. In August, the country further intensified the scrappage renewal policy for passenger cars, with subsidies for pure electric plug-in hybrids and other new energy vehicles exceeding traditional fuel vehicles by 0.5 yuan, further supporting the development of new energy vehicles. These measures have driven the penetration rate of new energy vehicles in the slack season of July and August to exceed 50%, helping to promote the popularization of new energy vehicles to a new level. This phenomenon is worth paying attention to. 5. Analysis of New Energy Vehicle Markets in Urban and Rural Areas The criteria for classifying urban and rural areas (State Letter [2008] No.60) explicitly states that "based on China's administrative division, using the jurisdiction of resident committees and village committees confirmed by the civil affairs department as the basis of classification, based on actual construction, China has been divided into urban and rural areas. Among them, "urban areas include urban and town areas. Urban areas refer to areas within cities."The actual construction of residents' committees and other areas connected to the district and municipal governments in areas with and without districts and cities. Townships refer to the county people's government headquarters and other towns outside the urban area, where the actual construction of residents' committees and other areas connected to the government headquarters; while "rural areas" refer to the areas outside the towns designated in this regulation.Due to the fact that insurance data is national data managed by the China Banking and Insurance Regulatory Commission, its classification is not as detailed as that of the National Bureau of Statistics. Therefore, we cannot see the distribution of urban and rural areas from the insurance data of the China Banking and Insurance Regulatory Commission. We can only base our analysis on the classification of prefecture-level cities and make approximate reference analysis. According to the differences between the China Banking and Insurance Regulatory Commission and the National Bureau of Statistics, insurance data is official data from the China Banking and Insurance Regulatory Commission. From this data, we can only analyze based on the proportions of large cities, medium-sized cities, small cities, and county town markets. Therefore, we collectively refer to county town markets and small city markets as these small county town markets. In the analysis of these small county town markets, the sales of pure electric new energy vehicles are continuously increasing. In 2020, the sales proportion of new energy vehicles in small county town markets was 0.5%, which increased to 5.3% by 2024, showing a trend of continuous growth. The increase in small county town markets mainly relies on the growth of plug-in hybrid electric vehicles and pure electric vehicles. The market in small county town areas has also shown strong growth due to the increased popularity of plug-in and pure electric vehicles as alternatives to fuel-powered cars. In terms of the distribution of new energy vehicle sales in small county town markets, the sales growth of pure electric vehicles in the Northeast, North China, Northwest, and Central regions is relatively fast. Recently, the performance in the Northwest and Northeast regions has been good, the performance in North China is relatively strong, while the overall performance in the eastern regions of Southern and Eastern China is relatively average. In terms of vehicle structure, the sales of A00-class pure electric vehicles in small county town markets in August have increased significantly, with A00-class vehicles in various regions continuing to grow by over 50% compared to July in the Northeast, North China, and Northwest. In the past, micro electric vehicles faced significant pressure due to the cancellation of vehicle purchase tax incentives, leading to increased competition with low-speed electric vehicles. A0-class mid-to-high-priced electric vehicles have also seen some growth in small city markets. Therefore, in the county town market, the demand for A00-class electric vehicles suitable for farmers has not been effectively released, but there was a noticeable growth in August. The difference in vehicle models between large and medium cities and county town markets in China is significant. Tesla Model 3, Model Y, and Xiaomi SU7 perform relatively well in large cities, while Model Y and Model 3 also have strong performance in large cities. In county town markets, vehicles like BYD eSeagull perform relatively well, and there is strong demand for economical electric cars such as Wuling Hongguang Mini, Wuling Hongguang Binguo, Chang'an Lumin, BYD Yuan, Pand...However, there is a good demand in the market for small and medium-sized cities. The demand for personal plug-in hybrid vehicles in the county and rural markets is growing rapidly, and the performance in August was also strong compared to the previous month. The proportion of unit-use and rental plug-in hybrid vehicles continues to shrink. The main demand for plug-in hybrid rental models is in super large cities and large cities, with a significant decline in the rental of plug-in hybrids in super large cities this year.In August, the sales of plug-in hybrids were strong, with medium and large non-restricted cities still being the main market for plug-in hybrids, while the demand share in restricted cities decreased. Plug-in hybrids have formed a good driving force in county and township markets. In recent years, the proportion of plug-in hybrid vehicles in non-restricted cities has gradually increased, with BYD and Geely relatively strong. The Qin and Haibao performed strongly in the county and township markets in August, surpassing some established models. Low-priced plug-in hybrids like the BYD Qin and Song performed well in medium and small cities. 11. Regional Demand for Extended Range Vehicles The main users of extended range vehicles are individuals and organizations, with organizations accounting for a higher proportion than individual users, reflecting that extended range models are more suitable for organizational users. The main market for extended range vehicles is still medium and large cities, but with the growth of boundaries and deep blue areas, small cities and county and township markets are gradually emerging. 12. Regional Penetration Rate of Pure Electric Vehicles - August Currently, the proportion of pure electric vehicles in restricted cities has remained largely stable, increasing from 20% in August 2021 to 37% in 2024. In non-restricted cities, the sales proportion of pure electric vehicles in large, medium, and small cities is basically the same, with the sales proportion in medium cities increasing to 29% in August of this year and the penetration rate in county and township markets increasing to 25%. The penetration rate of plug-in hybrids continues to increase in markets nationwide, especially in mega-cities, where the market share of plug-in hybrids reached 23% in August this year; in medium and small cities, the market share of plug-in hybrids also shows a continuous increase, narrowing the gap in penetration rates among various types of cities. Due to the boost from the plug-in hybrid license policy in Shanghai, plug-in hybrids accounted for 11% in August, up 7%. 13. Strong Enterprise Differentiation in Various Regional Markets The performance of rental markets in different regions varies greatly. Strong performance in the rental markets in Guangdong, Jiangsu, Zhejiang, Sichuan in August this year. The performance of various manufacturers in rental markets in different regions also varies greatly, with some local products in certain areas not necessarily having a high market share. The private market has shown strong performance recently in Zhejiang, Shandong, Jiangsu, Henan. The characteristics of the private pure electric vehicle market are relatively distinct, with a clear trend towards high-end products. BYD performed well, leading in Jiangsu, Guangdong, and other developed regions. Wuling performed well in Shandong, Henan, and Hebei. New forces in the automotive industry, such as NIO and Xiaomi, have performed well, and traditional car manufacturers have also performed well in the private electric vehicle market. In the private plug-in hybrid market, BYD and Ideal Auto showed strong performance, especially BYD leading in major cities, Ideal Auto coming in second overall, and Chongqing Changan Automobile ranking third. Chongqing Sokon Industry Group Stock, Geely, and Great Wall also showed a strong trend. The plug-in hybrid market outside of BYD is mainly extended range vehicles, so the performance of joint venture private plug-in hybrids is relatively weak, making the breakthroughs by Great Wall and Geely in plug-in hybrids significant. 14. Trends in the Beijing Market The new energy vehicle market in Beijing in 2024 has been relatively stable, with sales reaching 30,000 units in August, staying at a high level compared to the same period in previous years, with license plate indicators fully absorbed. Since the relatively tight new energy vehicle indicators in 2018, the trend in the Beijing market has diverged from the national trend in 2022. Currently, the growth rate is low, and some users who bought cars in 2018 should be considering upgrading, but the overall market volume is still not high, with the effect of consumption suppression brought about by the pace of indicator issuance. The sales of new energy vehicles in Beijing were strong in the second half of last year, and considering the lack of indicators and limited supply from Tesla, the performance in August was relatively strong. The overall level of new energy vehicles in Beijing is practical, reflecting the good demand for household use. 15. Trends in the Shanghai New Energy Market The trend of new policies in the Shanghai market is significantly different from that of the Beijing market, with extreme stability from 2019 to 2021. A buying spree at the end of 2022 led to a slump at the beginning of 2023, with a significant decrease in sales in early 2024. In August 2024, the sales of new energy vehicles in Shanghai reached 29,000 units, a 5% decrease from the 31,000 units in August of the previous year. The impact of policy adjustments on Shanghai's new energy vehicles from the previous year is gradually recovering, with the tightening of license plate policies having a significant impact on the new car market in early 2024. 16. Trends in the New Energy Passenger Vehicle Market in Restricted Cities The performance of new energy vehicles in restricted cities is relatively strong, reaching 244,000 units in August 2024, showing a good growth rate of 44% compared to the same period last year. The cumulative sales of new energy vehicles in restricted cities in 2024 reached 1.5 million units, reflecting the continuous growth in demand for new energy vehicles in restricted cities. 17. Trends in the New Energy Passenger Vehicle Market in Non-Restricted and Non-Limited Areas Non-restricted cities refer to areas where traditional fuel vehicles are not restricted or limited. Since traditional vehicles are not restricted or limited, the demand for new energy vehicles in these cities represents genuine market demand. Currently, non-restricted cities are showing strong and rapid growth trends, with sales of new energy vehicles at relatively high levels. In 2022, the cumulative sales of new energy vehicles in non-restricted cities reached 2.73 million units, with a 96% year-on-year growth, showing strong growth characteristics. The performance of new energy vehicles in non-restricted cities in 2023 reached 4.06 million units, with strong growth of 50% in sales from January to August 2024 at 3.44 million units.

16/09/2024

Goldman Sachs: Hedge funds continue to sell global stocks for the ninth consecutive week, financial sector stocks are getting popular.

A report from Goldman Sachs shows that banks, insurance companies, and trading firms are back in favor with hedge funds, with these funds aggressively buying up the stocks of these companies at the fastest pace since June 2023. The report released last Friday showed that financial stocks, which had been net sellers in seven out of the past eight weeks, became the most popular stocks for Goldman Sachs' institutional brokerage trading department. The department provides loans to hedge funds and tracks their trades. The report stated that these bets are almost all long positions. In the week ending last Friday, the pan-European Stoxx 600 banks index rose by about 1.9%, while the Dow Jones banks index fell by 1.6%. The report noted that hedge fund buying was mainly concentrated in North America and Europe. Hedge funds held long positions in banks, insurance, and capital market companies that facilitate trading. Goldman Sachs also mentioned that they moderately sold stocks of consumer finance companies and mortgage trust companies. The report added that overall, hedge funds increased their short positions in the stock market by the end of last week. They sold global stocks for the ninth consecutive week, at the fastest pace in five months. The bank stated that the weekly return for stock-picking hedge funds was 0.42%, partially due to the general rise in stock markets. Last week, the S&P 500 index rose by over 4%, while the broadest European stock index rose by 1.85%. The report stated that in the week ending September 13, the yield for systematic stock traders was -0.18%.

16/09/2024

In the second quarter, the total income of local residents in Hong Kong increased by 8.1% year-on-year to HK$847.5 billion.

The Census and Statistics Department of the Hong Kong government today released the preliminary statistics for the second quarter of 2024 on the total income of local residents in Hong Kong and related figures. The total income of local residents in Hong Kong in the second quarter of 2024, calculated at the market prices at that time (referring to the total income earned by Hong Kong residents through various economic activities), increased by 8.1% compared to the same period last year to HK$847.5 billion. The estimated local Gross Domestic Product (GDP) at market prices for the same quarter was HK$757.3 billion, with a year-on-year increase of 7.6%. The total income of local residents in the second quarter of 2024 exceeded the GDP by HK$90.2 billion, equivalent to 11.9% of the GDP for that quarter, mainly due to net inflow of investment income. After adjusting for the impact of price changes, the total income of local residents in Hong Kong in the second quarter of 2024 increased by 6.0% compared to the same period last year, while the GDP increased by 3.3% in the same quarter. The total inflow of primary income (mainly including investment income) for Hong Kong in the second quarter of 2024 was HK$596.2 billion, an increase of 1.9% compared to the same period last year, equivalent to 78.7% of the GDP for that quarter. At the same time, the total outflow of primary income in the second quarter of 2024 also increased by 0.1% compared to the same period last year to HK$506 billion, equivalent to 66.8% of the GDP for that quarter. In terms of the main components of investment income inflows, direct investment income decreased by 5.0% compared to the same period last year, mainly due to a decrease in direct investment income from large local companies abroad. Securities investment income recorded an increase of 6.5% compared to the same period last year, mainly due to increased interest income from non-local debt securities acquired by local investors. In terms of the main components of investment income outflows, direct investment income decreased by 3.5% compared to the same period last year, mainly due to a decrease in direct investment income from large multinational companies in Hong Kong. Securities investment income decreased by 0.1%, mainly due to a decrease in interest income from local debt securities acquired by non-local investors. In terms of country/region analysis, Mainland China continued to be the main source of total inflow of primary income in Hong Kong in the second quarter of 2024, accounting for 39.3% of the total inflow for the quarter. This was followed by the British Virgin Islands, accounting for 16.6%. In terms of total outflow of primary income, Mainland China and the British Virgin Islands continued to be the main destinations in the second quarter of 2024, accounting for 37.5% and 19.6% of the total outflow for the quarter, respectively.

16/09/2024

In July, Hong Kong's overall export volume and import volume increased by 8.7% and 6.5% year on year, respectively.

Following the earlier publication of the value of goods traded with foreign countries in July 2024, the Hong Kong government's Census and Statistics Department today released the volume and price statistics of goods traded with foreign countries for that month. Compared to July 2023, Hong Kong's overall export volume and import volume increased by 8.7% and 6.5% respectively in July 2024. Compared to the same period in 2023, Hong Kong's overall export volume and import volume for the first seven months of 2024 increased by 7.8% and 4.1% respectively. Seasonally adjusted figures show that for the three months up to July 2024 compared to the previous three months, overall export volume and import volume of goods increased by 0.6% and 2.0% respectively. Compared to July 2023, the overall export prices and import prices of goods increased by 3.9% and 2.8% respectively in July 2024. Compared to the same period in 2023, the overall export prices and import prices of goods increased by 4.1% and 3.7% respectively for the first seven months of 2024. The Trade Price Ratio Index is calculated based on the ratio of the overall export price index to the overall import price index. Compared to the same period in 2023, this index increased by 1.0% in July 2024, and by 0.4% for the first seven months of 2024. Compared to July 2023, the overall export volume to Vietnam (20.4%), Mainland China (16.7%) and the US (12.2%) recorded increases, while the export volume to Taiwan (-8.0%) and India (-27.6%) decreased. At the same time, the overall export prices to the US (6.0%), Mainland China (5.3%), Taiwan (3.2%) and Vietnam (1.5%) increased, while export prices to India decreased by 1.4%. Compared to July 2023, the import volume from South Korea (27.3%), Taiwan (17.3%) and Mainland China (8.6%) recorded increases, while the import volume from Singapore (-2.8%) and Japan (-5.7%) decreased. Meanwhile, import prices from all major suppliers increased: Singapore (5.2%), South Korea (5.2%), Mainland China (3.0%), Taiwan (1.5%) and Japan (0.6%).

16/09/2024

Hong Kong's Securities and Futures Commission reaches first settlement of its kind, resulting in Hong Kong-listed Kangpai Holdings compensating public shareholders to the tune of HK$192 million.

Recently, the Securities and Futures Commission of Hong Kong (hereinafter referred to as "the SFC") reached a settlement with Convoy Global Holdings Limited (hereinafter referred to as "Convoy Global") and its management team members Wu Guohui, Liu Tianli, and Li Minta, agreeing to resolve the legal proceedings against them in the Hong Kong High Court through a simplified procedure. According to the settlement agreement, the three defendants will pay approximately HKD 192 million to Convoy, to be distributed to the independent public shareholders of the delisted company. The three defendants are Wu Guohui (male), Liu Tianli (male), and Li Minta (male). The settlement proposal must be approved by the court before it can be implemented. The court has scheduled a hearing on April 2, 2025, to consider the settlement proposals of all parties. If approved, this will be the highest compensation ever paid by a delisted company to independent minority shareholders in the form of special dividends. As part of the settlement, upon court approval, the three defendants will pay approximately HKD 192 million to Convoy. Convoy has agreed to distribute the entire compensation amount to its shareholders through special dividends. In addition, two shareholders holding a combined 24.4% of Convoy's shares have pledged to return their entitlement to special dividends in order to redistribute them to independent public shareholders. If the court approves the settlement plan, independent public shareholders will receive HKD 0.066 per share, which is 2.75 times higher than Convoy's last closing price before the trading was suspended. This settlement arose from an investigation initiated by the SFC in July 2018, which found serious concerns regarding Convoy's operation and the conduct and integrity of its management team. To protect the interests of investors, the SFC directed the Stock Exchange of Hong Kong Limited (SEHK) to suspend trading in Convoy shares on May 29, 2019. Prior to the suspension of trading, the last trading price of Convoy shares was HKD 0.024 per share, with 75.6% of the shares held by independent public shareholders. On May 18, 2020, the SFC initiated legal proceedings against the defendants. Convoy shares were delisted by the SEHK on December 24, 2020. In addition, as part of the settlement, the SFC and the defendants have reached an agreement on a statement of fact, which includes: Wu has been a shadow director of Convoy since 2016, with only Liu and Li as executive directors during critical times, following Wu's instructions to operate Convoy's business. Wu, Liu, and Li caused Convoy to enter into transactions to acquire two subsidiary groups in 2016 and 2017. The pricing of the two acquisitions was significantly inflated by a total of HKD 229 million. These acquisitions allowed Wu to misappropriate funds from Convoy for personal gain, creating a false impression that Convoy had significant business and assets, which was used as a reason for the continued listing of its securities. The two acquired subsidiary groups consisted of fictitious or false businesses instigated by Wu. Wu, Liu, and Li caused Convoy to borrow without any business justification, resulting in payments of approximately HKD 64 million in fees and interest. Wu, Liu, and Li falsely inflated Convoy's earnings for multiple accounting periods between 2016 and 2019, resulting in a total loss of over HKD 293 million for Convoy. Based on the above reasons, Wu, Liu, and Li violated their fiduciary duties to Convoy. Ms. Leung Fung-yee, the Executive Director of the SFC, said: "This is the first such settlement of its kind that allows minority shareholders of Convoy to directly benefit from compensation paid by wrongdoers. We have always strived to maintain the integrity of the market, seek justice for minority shareholders, and make wrongdoers pay the price." The court has scheduled a hearing on April 2, 2025, to hear the settlement proposals of all parties and the statements made in the statement of fact. Updates on the court's ruling, including decisions on compensation and the distribution of special dividends, will be announced in due course. The SFC reminds shareholders and the investing public to exercise caution when trading Convoy's shares.

16/09/2024

OpenAI aims for a valuation of $15 billion: completes convertible note financing within two weeks, with the valuation of the convertible notes depending on company structure

The valuation of 150 billion dollars is not a dream when revolutionary "structural change" accelerates the absorption of "super funds"! Earlier, there were reports that OpenAI, the maker of ChatGPT, was in talks to raise $6.5 billion from investors at a company valuation of $150 billion. The latest news shows that this financing is expected to be completed within two weeks, in the form of convertible notes, and its valuation of over $100 billion will depend on whether OpenAI can disrupt complex company structures and eliminate investors' profit caps. Disruptive "restructuring" of non-profit structures Founded in 2015, OpenAI is a non-profit research project aimed at creating artificial intelligence that benefits humanity. The company has accelerated its commercialization process by selling subscription services such as ChatGPT to consumers and businesses, with its number of users now exceeding 200 million. Currently, the company's for-profit division is controlled by the non-profit parent organization, a structure that presents certain challenges in attracting investors. According to Fortune magazine, company co-founder and CEO Sam Altman said at an all-staff meeting, "OpenAI's structure is likely to change next year to make it more like a traditional for-profit enterprise." In a statement, OpenAI said, "We remain focused on creating AI that benefits everyone, as we have said before, we are working with the board to ensure that we can complete our mission in the best possible way. The non-profit organization is at the core of our mission and will continue to exist." However, sources revealed that if the restructuring is not successful, OpenAI will need to renegotiate its valuation with investors, at which point their shares may be converted at a lower price. In addition, OpenAI is also discussing with lawyers the possibility of transforming its non-profit structure into a for-profit benefit corporation, similar to the model adopted by its competitors Anthropic and xAI. Profit cap abolition remains a challenge However, analysts have pointed out that it is not yet clear whether this fundamental change in corporate structure can be achieved. Removing the profit cap would bring greater returns to early investors, but it could also raise questions about OpenAI governance and deviation from its non-profit mission. At the same time, this change also requires approval from the OpenAI non-profit organization's board of directors, which includes CEO Sam Altman, entrepreneur Bret Taylor, and seven other members. OpenAI has stated that the profit cap is set to "incentivize them to research, develop, and deploy AGI in a balanced way between commercial, safety, and sustainability, rather than purely pursuing profit maximization." Existing investors are limited by the investment return cap, with any additional returns being redirected to the non-profit organization. In OpenAI's first round of financing, investors had a cap of 100 times their investment amount. The company stated in 2019 that "we expect the multiples of future rounds to be lower." In recent years, OpenAI has raised over 10 billion dollars using this model, with most of the funding coming from Microsoft. In addition, the company was valued at $80 billion in a financing round in February, led by Thrive Capital. Super Financing Not Just "Tech Giants" This large-scale financing round has also seen strong demand from investors, with reports stating, "Given the rapid growth of OpenAI's revenue, the financing could be completed within the next two weeks." Existing investors such as Thrive Capital, Khosla Ventures, and Microsoft are expected to participate. New investors including Nvidia and Apple are also planning to join the investment. Sequoia Capital is also in talks to return. This article is sourced from "Wall Street Seen", author: Huang Wenwen; GMTEight editor: Yan Wencai.

16/09/2024

Bank of England's cautious tone is questioned, calls for aggressive interest rate cuts are growing louder.

The Bank of England is set to announce its rate decision on September 19 (Thursday), and despite seeming to ignore doubts and sticking to its tentative rate cut policy, more and more investors believe they need to take more aggressive action. Currently, the market widely expects Bank of England Governor Bailey and his colleagues to delay another rate cut on Thursday. However, fund managers from Abrdn Investment Management Ltd., Aviva Investors, and Allianz Global Investors are betting that this caution will not last for long amid slowing economic growth and budget tax hikes. Strategists from investment banks such as Goldman Sachs, HSBC, and UBS also agree with this view, believing that with the backdrop of continuing weakening economic growth in the UK, officials will soon be forced to increase their response. However, due to economists expecting data this week to show a resurgence in service sector inflation, cautious policymakers are unlikely to change their stance - even after the European Central Bank cut borrowing costs for the second time last week, while the Fed is expected to cut borrowing costs for the first time on Wednesday. The market currently expects the Bank of England to keep rates unchanged on September 19 and cut rates by 25 basis points in November and December respectively. Bhanu Baweja, chief strategist at UBS in London, believes it is just a matter of time before UK officials stop hesitating and make a more urgent response to the economic challenges facing them. "I think at this juncture, a contractionary monetary policy will have a faster impact than in Europe, and certainly in other places like the US," he said. The Bank of England did signal further rate cuts in August when it announced its first rate cut in over four years, bringing rates down to 5%. However, it insisted that it would not rush to cut rates as there was no threat of economic recession or soaring unemployment. On the contrary, the Monetary Policy Committee stated that, in the face of persistent inflation pressure, it would act cautiously and make decisions on a "meeting by meeting" basis. Dan Hanson and Ana Andrade of Bloomberg Economics stated, "The Bank of England is likely to keep rates unchanged at the September meeting, indicating that it is not yet convinced that inflation has been beaten and is intending to adopt a cautious easing policy." The market expects the Bank of England to cut rates seven times by early 2026, reaching a final rate of 3.25%. The consensus in the market is that the Bank of England's action will be slower than that of the Fed and the ECB, which has already resulted in higher borrowing costs for the UK compared to other countries. George Buckley, chief European economist at Nomura Securities, believes the Bank of England will cut rates only once per quarter, with the next rate cut likely to occur in November. He, along with many peers, believes officials will not change their guidance this week. The cautious reason for this is the unstable outlook for consumer price growth. Economists predict that data released on Wednesday will show that service sector inflation in August jumped to 5.6%. The Bank of England estimates that the current overall indicator of 2.2% will rise to 2.7% by December. The wage growth rate in the UK is still above the 2% inflation target at 5.1%, with data released last week indicating a strengthening labor market. However, the view that continued consumer price increases in the UK will ultimately hinder monetary easing does not convince Daniela Russell, head of UK rate strategy at HSBC. "We would query that explanation," she wrote in a report. "If the labor market continues to be as loose as before, the Bank of England may tolerate inflation slowly returning to target levels, hence cutting rates by more than expected." GDP data released last week may support this view. The data showed economic stagnation in July, meaning that the UK did not grow for three months out of the past four. Harriet Ballard, multi-asset investment manager at Aviva, said, "If the Bank of England delays easing policy, the economy will clearly slow down, indicating that further and faster rate cuts are to come. We still see risks for the UK economy as household consumption is still weak, mortgage costs may rise, and the labor market is cooling down." Analysts at Goldman Sachs, including the chief European economist Sven Jari Stehn, said in a report last week that they expect the Bank of England to cut rates continuously starting in November, rather than cutting every other meeting, eventually bringing the benchmark rate down to 3%. Baweja from UBS also has a similar final rate prediction. More and more investors are beginning to think this way. UK government bonds rose this month, outperforming their eurozone counterparts, as the market sees a higher likelihood of the Bank of England cutting rates twice more this year. The yield on two-year UK government bonds, sensitive to policy changes, fell by more than 30 basis points to 3.80%. The market has fully priced in a 25 basis point rate cut in November, with the likelihood of another rate cut in December increasing from 50% earlier this month to over 90% now. UBS stated that its bullish forecast for two-year UK government bonds has been one of the hottest trades in recent months. Abrdn stated last month that due to the inaccurate expectations of the money market regarding UK monetary policy, it has significantly increased its holdings of UK government bonds relative to European and US government bonds. Aviva stated a bullish view, while companies like Federated Hermes are also considering increasing their holdings. In addition to the deteriorating economic backdrop, investors have been encouraged by the prospect of UK Chancellor Rishi Sunak potentially raising taxes in the budget on October 30 as he tries to fill a 220 billion ($289 billion) public finance black hole. This would imply fiscal austerity. Orla Garvey, senior fixed income portfolio manager at Federated Hermes, said, "We will get what is effectively a tightening budget at the end of October. We have not fully priced in what we think will be a slowdown we will face."

16/09/2024

Hong Kong Monetary Authority CMU and Macau Monetary Authority's Central Securities Depository System will be directly interconnected.

The Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Macao jointly announced today that the Central Money Market Unit (CMU) of the HKMA and the Central Securities Settlement Company of Macau (a wholly-owned subsidiary of the Monetary Authority of Macau) will establish a direct connection between their respective securities settlement systems. The official launch date and specific arrangements for the direct connection will be announced in due course. Under the direct connection arrangement, Hong Kong investors will be able to settle, clear, and hold bonds deposited in the Macau Central Securities Depository System through their accounts at the CMU, while Macau investors will be able to settle, clear, and hold bonds deposited in the CMU through their accounts at the Macau Central Securities Depository System. This arrangement will mark a new milestone in financial cooperation between Hong Kong and Macau and will have significant and far-reaching implications for the coordinated development of the core cities in the Greater Bay Area. Eddie Yue, Chief Executive of the HKMA, stated that in recent years, the HKMA has progressively established mutual connectivity with multiple neighboring financial markets, strengthening regional cooperation, introducing more opportunities for various financial services, especially RMB business, providing domestic and foreign investors with a more diversified range of investment products, and further enhancing Hong Kong's competitiveness as an international financial center. Building on this foundation, promoting the interconnection of the bond market infrastructures in Hong Kong and Macau is an important manifestation of the coordinated development of the financial markets in the Greater Bay Area and can leverage the CMU's role as a super connector to develop into an international central securities depository platform in Asia. Chen Sau Sin, Chairman of the Monetary Authority of Macau, stated that the bond market is a key entry point for the Macau SAR government to develop new financial formats and promote moderately diversified economic development, providing another financing channel for important national strategic deployments such as the construction of the Greater Bay Area. Furthermore, based on the historical ties between Macau and Portuguese-speaking countries, by connecting with the bond market infrastructure in Hong Kong, Macau will be able to further play a bridging role between China and Portuguese-speaking countries, consolidate the function of Macau as a "Sino-Portuguese financial service platform," and achieve mutual connectivity between the financial markets and financial infrastructures in the Greater Bay Area.

16/09/2024

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