Visitors on Central Street of the Taipa Village in Macau, China, on Wednesday, Jan. 25, 2023. Tourism and spending are reviving in Macau as the Lunar New Year holiday spurred a jump in visitors after pandemic travel restrictions were eased between the territory and mainland China.
Bloomberg | Bloomberg | Getty Images
Stocks in the Asia-Pacific traded mixed on Monday as mainland Chinese markets jumped on resuming trade after a week-long New Year break.
Chinese onshore equities are headed for a bull market — the CSI 300, which tracks the largest mainland-listed stocks, have gained more than 20% from its recent lows seen at the end of October last year.
The Shenzhen Component rose more than 2%, leading gains in the wider region. The Shanghai Composite rose 1.36% in its first hour of trade. Hong Kong’s Hang Seng index traded 0.6% lower.
In Japan, the Nikkei 225 rose 0.12% while the Topix also gained 0.03%. South Korea’s Kospi fell 0.24% while the Kosdaq rose 0.28%.
The S&P/ASX 200 in Australia shed 0.12%. Investors also digested trade data from New Zealand.
Stocks on Wall Street ended the week last Friday higher, fueled by gains in Tesla shares and a better-than-expected GDP report on Thursday. All major averages posted a positive week and are on pace for a month of gains.
— CNBC’s Samantha Subin, Carmen Reinicke contributed to this report
Adani shares plunge further for second straight day of losses
Shares of Adani Group companies continued to see sharp losses for a second consecutive trading session in India after short seller firm Hindenburg announced its short position in the conglomerate’s firms earlier this week.
Adani refuted the claims in two separate statements, adding that the group is “evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hidenburg Research,” Adani Group’s head of legal Jatin Jalundhwala said in a statement.
Mumbai-listed shares of Adani Enterprises fell more than 5% in India’s trading session on Friday. Adani Transmission fell 16.8%, Adani Green Energy shed 14.9% and Adani Power lost 8.4%. Adani Port’s share price also dropped 8.4%.
Hindenberg doubled down on its initial stance, emphasizing that Adani has not answered any of the questions raised in their claims.
“We fully stand by our report and believe any legal action taken against us would be meritless,” it said,” it said.
— Jihye Lee
Tokyo’s inflation stays above Bank of Japan’s target
Consumer prices in Japan’s capital Tokyo rose by 4.3% in January, higher than expected by economists polled by Reuters.
The reading also maintained levels higher than the Bank of Japan’s target of 2% inflation for an eighth consecutive month after rising 2.1% in June 2022.
The Japanese yen strengthened 0.3% after the data release and last traded at 129.82 against the US dollar.
CNBC Pro: These 6 global ETFs are the only ones to have posted gains every year for the past five years
Only six global stock ETFs have consistently posted yearly gains over the past five years, according to new analysis by CNBC Pro.
They are the only funds among 7,000 equities ETFs trading worldwide to:
Not have a single year of negative returns between Jan. 1, 2018, and Dec. 31, 2022;
And be in positive territory this year so far.
CNBC Pro subscribers can find out which ETFs they are here.
— Ganesh Rao
Singapore home prices rose less in final quarter of 2022
Private residential property prices in Singapore rose by 0.4% in the final quarter of 2022, a release by the Urban Redevelopment Authority showed.
The reading showed home prices rose less than the previous period’s increase of 3.8% and the slowest growth since the second quarter of 2020.
Home prices rose 8.6% in the full year of 2022, the release said, also less than then 10.6% increase seen in the full year of 2021.
— Jihye Lee
Australia producer price index rises 5.8% from year ago
The producer price index in Australia rose 5.8% for the final quarter of 2022 on an annualized basis, data from the Australian Bureau of Statistics showed.
The reading was slightly lower than the previous quarter’s print of 6.4%, a signal inflation may be easing in the nation.
On a quarterly basis, the index rose 0.7%, also slower than the previous period’s reading of 1.9%.
The Australian dollar strengthened slightly during Asia’s morning session and last traded at 0.7123 against the U.S. dollar.
— Jihye Lee
GDP, other fourth-quarter data shows economic challenges are ‘beginning to clear,’ economist says
Thursday’s GDP data adds to a broadening picture of economic growth in the fourth quarter, according to Curt Long, chief economist at the National Association of Federally-Insured Credit Unions. And that signals to him the economic outlook is improving.
“The big picture view of economic growth in the fourth quarter is a positive one. Much of that growth was concentrated in inventory build, which is unlikely to grow at a similar pace in 2023,” Long said. “Nevertheless, with resilient consumer spending, low unemployment claims, and receding inflation, some of the clouds that were forming over the economy several months ago are beginning to clear.”
— Alex Harring
CNBC Pro: Buy the dip? Top Morningstar strategist names 3 stocks trading at a steep discount
U.S. stocks are around 15% undervalued, according to Dave Sekera, chief U.S. market strategist for Morningstar, who says the extent of this undervalued territory is rare.
Since the end of 2010, the market has traded at or below the current discount only 5% of the time, he said.
He picks three stocks that he says are trading at steep discounts.
CNBC Pro subscribers can read more here.
— Weizhen Tan
Tesla’s strong orders and weak margins have Wall Street analysts conflicted
Wall Street analysts are divided on Tesla after the electric car company’s latest quarterly results.
Tesla reported a beat on both earnings and revenue for the fourth quarter, and assuaged investor fears of weaker growth at the company after recently issuing a round of price cuts. While the move triggered a drop in used Tesla prices, they also supported demand for the vehicles.
“Thus far in January we’ve seen the strongest orders year to date than ever in our history. We’re currently seeing orders of almost twice the rate of production,” Musk said during a call with analysts.
For Goldman Sachs’ Mark Delaney, that was the “most important takeaway from the call.”
“Importantly, Tesla commented that since it lowered prices it has seen the strongest orders year-to-date in its history, with orders running about 2X production. While we believe this rate of orders may not be sustained in light of the weak macroeconomic environment, it would suggest the company is tracking well to our 1.8 mn delivery estimate,” Delaney wrote.
Other analysts were more negative on the stock outlook, however, saying that Tesla’s automotive gross margins, which was the lowest figure in the last five quarters, spelled trouble ahead.
AllianceBernstein’s Toni Sacconaghi reiterated an underperform rating on Tesla, saying the automaker’s latest results and earnings call had “something for bulls and bears,” adding he remains “torn” on the company. While the strong orders are promising, the analyst said the auto gross margins were too weak to overlook.
“Despite raising our energy storage forecast materially, our FY EPS declines from $3.80 to $3.54 amid lower margins. Moreover, while no one (including Tesla) knows what demand elasticity is, we believe it is uncertain whether surging demand will be sustained, particularly in China, where we believe more price cuts will likely be needed before year end,” Sacconaghi wrote.
CNBC Pro subscribers can read the full story here.
— Sarah Min
CNBC Pro: Morgan Stanley has a ‘simple’ tech playbook, names TSMC and others as stocks to buy right now
A recession may be coming, and the semiconductor sector — widely seen as cyclical and volatile — could be an unlikely safe refuge for investors.
Morgan Stanley says chip stocks have historically done well in past recessions. The bank named its top Asia chip stocks — giving one 40% upside.
Pro subscribers can read more here.
— Zavier Ong
U.S. GDP rose slightly more than expected in the fourth quarter
The U.S. economy expanded at an annualized pace of 2.9% in the fourth quarter, slightly outperforming a Dow Jones estimate of 2.8%. The Commerce Department’s report comes even as inflation persists and the Federal Reserve continues to raise rates.
Consumer spending rose 2.1% for the period, down slightly from 2.3% in the previous period but still positive.
— Jeff Cox
Bitcoin heading toward best month since 2020
Bitcoin’s remains in rally mode despite pulling back the past two days and the cryptocurrency is on pace for its best month since 2020. Some investors see crypto prices as a leading indicator of investors’ risk appetite.
So far this month and year, bitcoin has risen almost 40% and is poised to post its best monthly performance since December 2020, when it gained 49.47% for the month.
Meanwhile, the S&P 500 has risen about 5% this month.
BEIJING — Travelers from mainland China stuck close to home in Asia during the Lunar New Year, the first holiday after Beijing relaxed its Covid-related border controls.
Hong Kong and Macao were the most popular spots, said Trip.com, citing flight bookings on its platform for the first four days of the Lunar New Year. The seven-day holiday kicked off on Saturday.
Here are the next three most popular overseas destinations for mainland travelers, according to Trip.com:
3. Bangkok
4. Singapore
5. Phuket, Thailand
Flight bookings for travel from the mainland to overseas destinations during the first four days of the holiday quadrupled from a year ago, Trip.com said.
In late December, Beijing announced that beginning Jan. 8 travelers would no longer need to quarantine upon arrival on the mainland, and that Chinese citizens could start to resume leisure travel abroad. The change ended nearly three years of border controls.
However, Japan and South Korea — both popular among Chinese tourists — subsequently imposed temporary restrictions on travelers from China, including limits on visas and quarantining Covid-positive individuals.
Singapore has not announced any changes, while Thailand scrapped its plan to require international visitors to show proof of Covid vaccination, just days after announcing it.
China has seen a wave of Covid infections after Beijing ended most domestic Covid controls in early December. A negative Covid test is still required for travel to the mainland.
In 2019, Chinese outbound tourists spent $54.7 billion on shopping, according to Euromonitor International.
New Zealand’s Auckland airport passenger volumes hit 74% of pre-pandemic levels in November
New Zealand’s Auckland Airport saw its total passenger volumes for November reach 74% of levels seen in the financial year to June 2019, or the last full-year not impacted by the pandemic, according to the airport’s monthly traffic update.
International passengers were at 67% of pre-pandemic levels, the release said, adding that a majority of the recovered overseas travel was short-haul flights from Australia and the Pacific Islands.
The demand for routes between New Zealand and North American regions has recovered to 86% of pre-pandemic levels, including two added destinations in Texas (Dallas/Fort Worth) and New York.
— Jihye Lee
CNBC Pro: These 6 low-debt global stocks are set to outperform, Bernstein says
Rising interest rates have major implications for companies with large amounts of debt, as they will likely experience higher costs from increased borrowing.
As interest rates continue to rise, analysts at Bernstein think that stocks with low debt exposure and a higher quality of debt should outperform.
The investment bank named a handful of global low-debt stocks with an investment-grade credit rating there likely to outperform.
CNBC Pro subscribers can read more here.
— Ganesh Rao
Shares of Zip reverses after initial rally
Australian “buy now, pay later” company Zip fell by more than 10% after a short-lived rally following its quarterly results.
Zip traded 15% lower, a sharp turnaround from its earlier gains of more than 10% after posting 12% revenue growth.
The company said underlying “monthly cash burn has continued to decrease and expected to further improve.” It said currently available cash and liquidity position is “sufficient to see the company through to generating positive cash flow” and expects to deliver positive cash EBITDA by the first half of fiscal 2024.
Week ahead: PMIs, Australia and Singapore inflation reports, South Korea GDP
Here are some of the major economic events in the Asia-Pacific that investors will be closely watching this week.
Stock markets in mainland China and Taiwan will remain closed until they resume trade on Jan. 30.
On Tuesday, regional purchasing managers’ index readings for Japan and Australia will be in focus while most markets remain closed to observe the Lunar New Year — with the exception of Australia, Japan and Indonesia.
Inflation reports will be in focus on Wednesday as Australia and New Zealand release their consumer price index readings for the final quarter of 2022. Singapore will publish its inflation print for December.
Hong Kong’s market is scheduled to resume trade on Thursday.
Fourth-quarter gross domestic product for South Korea and Philippines will be published Thursday, while the Bank of Japan will release its summary of opinions from its latest monetary policy meeting in January. Japan also reports its services producer price index on Thursday.
Japan’s core CPI readings for capital Tokyo will be a barometer for where monetary policy is headed.
Australia’s producer price index and trade data will also be closely monitored indicators ahead of the Reserve Bank of Australia’s meeting in the first week of February.
— Jihye Lee
Australia’s business conditions worsened last month: NAB survey
National Australia Bank’s monthly business survey showed worsened business conditions for December with a reading of 12 points, a decline from November’s print of 20 points.
The survey reflects deteriorated trading conditions, profitability, and employment, NAB said.
“The main message from the December monthly survey is that the growth momentum has slowed significantly in late 2022 while price and purchase cost pressures have probably peaked,” NAB chief economist Alan Oster said.
Meanwhile, business confidence in December rose by 3 points to -1, an improved reading from -4 points seen in November.
— Jihye Lee
Japan’s headline factory data shows second month of contraction
The au Jibun Bank Flash Japan manufacturing purchasing managers’ index in January was unchanged for a second-straight month at 48.9, below the 50-mark that separates contraction and growth from the previous month.
The reading “signaled the joint-strongest deterioration in the health [of] the Japanese manufacturing sector since October 2020,” S&P Global said.
The au Jibun Bank flash composite output index rose to 50.8 in January, slightly higher than the reading of 49.7 seen in December.
Flash services business activity rose further with a print of 52.4, higher than December’s reading of 51.1.
— Jihye Lee
CNBC Pro: Wall Street is excited about Chinese tech — and loves one mega-cap stock
After more than 2 years of regulatory crackdowns and a pandemic-induced slump, Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as a top pick for many.
Pro subscribers can read more here.
— Zavier Ong
Fed likely to discuss next week when to halt hikes, Journal report says
Federal Reserve officials next week are almost certain to approve another deceleration in interest rate hikes while also discussing when to stop the increases altogether, according to a Wall Street Journal report.
The rate-setting Federal Open Market Committee is set to convene Jan. 31-Feb. 1, with markets pricing in almost a 100% chance of a quarter-point increase in the central bank’s benchmark rate. Most prominently, Fed Governor Christopher Waller said Friday he sees a 0.25 percentage point increase as the preferred move for the upcoming meeting.
However, Waller said he doesn’t think the Fed is done tightening yet, and several other central bankers in recent days have backed up that notion.
The Journal report, citing public statements from policymakers, said slowing the pace of hikes could provide the chance to assess what impact the increases so far are having on the economy. A series of rate hikes begun in March 2022 has resulted in increases of 4.25 percentage points.
Market pricing is currently indicating quarter-point hikes at the next two meetings, a period of no action, and then up to a half-point reduction by the end of 2023, according to CME Group data.
However, several officials, including Governor Lael Brainard and New York Fed President John Williams, have used the expression “stay the course” to describe the future policy path.
— Jeff Cox
Nasdaq on pace for back-to-back gains as tech shares rise
The Nasdaq Composite rallied more than 2.2% during midday trading Monday, lifted by shares of beaten-up technology stocks.
The move put the tech-heavy index on pace for a consecutive day of gains exceeding 2%. The index finished 2.66% higher on Friday.
Rising semiconductor stocks helped pushed the index higher. Tesla and Apple, meanwhile, surged 7.7% and 3.2%, respectively, as China reopening lifted hopes of a boost to their businesses. Western Digital and Advanced Micro Devices rose about 8% each, while Qualcomm and Nvidia jumped about 7%.
Information technology was the best-performing S&P 500 sector, gaining 2.7%. That was in part due to gains within chip sector. Communication services added 1.9%, boosted by the likes of Netflix, Meta Platforms, Alphabet and Match Group.
— Samantha Subin
El-Erian says Fed should hike by 50 basis points, calls smaller increase a ‘mistake’
Surging inflation may appear largely in the past, but a shift to a 25 basis point hike at the next Federal Reserve policy meeting is a “mistake,” according to Allianz Chief Economic Adviser Mohamed El-Erian.
“‘I’m in a very, very small camp who thinks that they should not downshift to 25 basis points, they should do 50,” he told CNBC’s “Squawk Box” on Monday. “They should take advantage of this growth window we’re in, they should take advantage of where the market is, and they should try to tighten financial conditions because I do think that we still have an inflation issue.”
Inflation, he said, has shifted from the goods to the services sector, but could very well resurge if energy prices rise as China reopens.
El-Erian expects inflation to plateau around 4%. This, he said, will put the Fed in a difficult position as to whether they should continue crushing the economy to reach 2%, or promise that level in the future and hope investors can tolerate a steady 3% to 4% nearer term.
“That’s probably the best outcome,” he said of the latter.
— Samantha Subin
An earnings recession is imminent, according to Morgan Stanley
An earnings recession is imminent this year, according to Morgan Stanley equity strategist Michael Wilson.
“Our view has not changed as we expect the path of earnings in the US to disappoint both consensus expectations and current valuations,” he said in a note to clients Sunday.
Some positive developments have unfolded recent weeks — such as China’s ongoing reopening and falling natural gas prices in Europe — and contributed to some investors viewing market prospects more optimistically.
However, Wilson advises investors to remain bearish on equities, citing price action as the main influence for this year’s rally.
“The rally this year has been led by low-quality and heavily shorted stocks,” he said. “It’s also witnessed a strong move in cyclical stocks relative to defensives.”
Wilson has based his forecasts on margin disappointment, and he believes the case for this is growing. Many industries are already facing revenue slowdowns, as well as inventory bloating, less productive headcount.
“It’s simply a matter of timing and magnitude,” said Wilson. “We advise investors to stay focused on fundamentals and ignore the false signals and misleading reflections in this bear market hall of mirrors.”
The Bund in Shanghai, China, on Oct. 17, 2022. China’s gross domestic product grew 3% in 2022, less than half of 2021’s rate.
Qilai Shen | Bloomberg | Getty Images
China’s economy looks poised for a rebound in 2023, but a lot depends on one variable — the consumer, said investment management firm KraneShares.
“As external demand falls due to an impending recession in the West, China’s economy must rely more heavily on the consumer,” said KraneShares’ international head, Xiaolin Chen.
“We believe the reopening may lead to a V-shaped recovery in the share prices of China’s consumer brands in early 2023. The recovery could be driven by pent-up demand, high savings, and a wealth effect as real estate prices recover,” said Chen.
China’s gross domestic product grew 3% in 2022, less than half of 2021’s rate. The country’s zero-Covid policy, worsening relations with the U.S., as well as the real estate “taper tantrum” in 2022 dampened growth, KraneShares said in a report released last week.
In December, China pledged to make domestic demand an economic priority.
“The fallout from regulatory changes affecting the real estate development industry lingered longer than expected despite a commitment from the government to stabilize the sector,” Chen said.
China’s real estate market slowed down sharply in 2022 as the government tightened restrictions on borrowing by developers.
Read more about tech and crypto from CNBC Pro
“Fortunately, reopening and a fresh infusion of capital in China’s real estate development industry have the potential to boost consumer confidence significantly, which would be a catalyst for China markets in 2023,” said Chen.
Consumer categories
She noted that internet companies such as Alibaba and Meituan were hit by the tech crackdown, while consumer categories fared better.
“While offshore stocks (predominantly internet companies) suffered from industry regulations and geopolitical risks, the A-Shares market (predominantly consumer staples, healthcare, and clean technology) benefited from the stimulus and supportive policies,” she said.
Chen added that emerging sectors such as cloud services and semiconductors, though promising, may take years to contribute significantly to China’s economy.
“In 2023, we encourage investors to take a holistic view of China’s capital markets, incorporating into any allocation both onshore and offshore stocks and bonds to both manage risks and ensure exposure to the greatest possible opportunity set,” said Chen.
“We also encourage investors to take a long-term view,” she added.
Morning commuters in front of the Bank of Japan (BOJ) headquarters in Tokyo, Japan, on Monday, Jan. 16, 2023. The Bank of Japan made no changes to its yield curve control policy on Wednesday.
Bloomberg | Bloomberg | Getty Images
The Japanese currency weakened against the U.S. dollar after the Bank of Japan surprised markets by keeping its yield curve tolerance band unchanged.
The Japanese yen weakened 2.6% against the U.S. dollar after the decision was announced and last stood at 131.47, hovering at its strongest levels since June, 2022.
“Japan’s economy is projected to continue growing at a pace above its potential growth rate,” the Bank of Japan said in a statement. The central bank left its interest rate unchanged at an ultra-dovish -0.1% – in line with expectations and maintaining the same rate it’s kept since 2016.
The decision to make no changes to its monetary policies comes after the central bank caught global markets off guard in its previous meeting by widening its tolerance range for the yield on its 10-year government bond from 25 basis points to 50 basis points in December.
Since the move last month, 10-year JGB yields have exceeded the upper ceiling several times.
The yield on the 10-year JGB exceeded the upper ceiling of its band for a fifth straight session on Wednesday morning before dropping to 0.385%.
‘Knee-jerk’ reaction
Nomura head of FX strategy Yujiro Goto said while the move would be a disappointing one for traders bullish on the Japanese yen, the weakening of the currency may be temporary.
“I think the initial reaction [for the yen reaching] 130 to 131, or potentially 132 is a knee-jerk reaction after the ‘no change’ today,” he said on CNBC’s “Street Signs Asia.”
“In the medium term, over the next 2-3 months, I think the trend for the yen should be still on the downside towards 125, even after the disappointment today,” he said,
Goto said the currency will strengthen on hopes of a policy shift in the near-term future, highlighting the nearing end of BOJ Governor Haruhiko Kuroda’s term.
“Markets should keep expecting [the BOJ] to tweak or change [its] monetary policy after some point, especially after Kuroda’s retirement,” he said.
Shigeto Nagai of Oxford Economics said the BOJ’s move to widen its band “fueled” expectations for more changes ahead.
“Today, the BOJ really wanted to calm down that speculation and anticipation for normalization,” he said, adding the central bank will continue to be pressed for change.
More pressure ahead
As inflation continues to rise in Japan, the central bank will face further pressure ahead of its leadership change.
“Inflation in Japan is doing something that it hasn’t done for 40 years,” Viraj Patel of Vanda Research said in a tweet, adding that the Bank of Japan risks “falling into” the same trap as the U.S. Federal Reserve in labeling inflation as “transitory.”
The Bank of Japan used wording that was similar to the Fed’s description of inflation before the U.S. central bank began continuously hiking rates to tame rising prices, describing it as “pass-through.”
“The year-on-year rate of increase in the consumer price index is likely to be relatively high in the short run due to the effects of a pass-through to consumer prices of cost increases led by a rise in import prices,” the central bank said in its latest statement.
The Bank of Japan revised its forecasts for 2023’s core inflation nationwide from 2.9% to 3%. Nationwide inflation data is expected Friday.
Goldman Sachs: China’s ‘exit wave’ on reopening is taking a toll on economy
China’s “exit wave” during its reopening process has dragged down the economy significantly, Goldman Sachs economists said in a report.
“The ongoing ‘exit wave’ on the back of China’s faster-than-expected reopening has taken a heavy toll on economic activity in recent months, due to surging infections, a temporary labor shortage and supply chain disruptions,” it said in a report.
“It is very surprising in our view that the reported numbers for December were not worse,” the economists said.
– Jihye Lee
Credit Suisse says iron ore prices to peak at around $130 to $140 this year
Iron ore prices are forecast to be around $130 to $140 as traders keep China’s reopening in focus, said Credit Suisse’s Head of Energy and Resources Research, Saul Kavonic.
“We are expecting that $130 to $140 mark to be where prices kind of end up and top out this year,” he said.
While the last few weeks of iron ore demand strength is buoyed by speculative buying and holiday period purchases, he said the markets are currently watching how China’s reopening plays out and the rolling out of any infrastructure stimulus.
He said these measures will “sustain that demand for iron ore throughout the course of this year well into next year.”
Australia’s mining giant Rio Tinto posted their fourth quarter production results which slightly beat estimates.
“The real focus [of] Rio has been on iron ore, which is supportive the whole sector over the last few months which has been a call that’s finally come good at the end of last year and early this year,” he said.
Rio Tinto‘s shares last traded down 1.11%.
—Lee Ying Shan
China’s retail sales beat estimates, economy expands more than expected
China’s December retail sales beat estimates, falling only 1.8% on an annualized basis, significantly better than the decline of 8.6% projected in a Reuters poll.
Industrial output also grew 1.3% in December, higher than expectations for an increase of 0.2%.
In the fourth quarter, China’s economy expanded by 2.9% on an annualized basis, better than the expected 1.8% growth. While quarterly growth was flat, it still beat expectations for a 0.8% contraction.
Despite better-than-expected data, the Chinese offshore yuan weakened sharply from 6.7403 to 6.7563 against the U.S. dollar shortly after the release.
Alibaba stock inches up after Ryan Cohen reportedly takes stake in company
Shares of Alibaba rose after the Wall Street Journal reported that Ryan Cohen built a stake in the company “worth hundreds of millions of dollars.”
Cohen, who founded online pet retailer Chewy and is also chairman of GameStop, is privately pushing Alibaba to accelerate and further boost its share-repurchase program, the Journal report said.
Hong Kong-listed shares of Alibaba rose 2% in the first hour of trade. The stock has since pared its gains to trade roughly flat.
– Jihye Lee
China’s Liu He to meet with U.S. Treasury Secretary Janet Yellen
U.S. Treasury Secretary Janet Yellen is scheduled to hold a meeting with Chinese Vice Premier Liu He on the sidelines of the World Economic Forum, China’s commerce ministry said in a statement.
The two will hold a meeting to “strengthen macroeconomic and financial policy coordination,” the ministry said.
The meeting will take place in Zurich on Jan. 18, according to the statement, adding that the two will discuss the implementation of the agreements reached between U.S. President Joe Biden and Chinese President Xi Jinping late last year in Bali, Indonesia.
The sit-down will mark the first face-to-face meeting between Yellen and Liu.
Separately, Politico reported U.S. Secretary of State Antony Blinken will meet newly appointed Chinese foreign minister Qin Gang in Beijing on Feb. 5-6, citing Washington-based diplomats familiar with the matter.
– Jihye Lee
Singapore’s non-oil domestic exports fall by more than 20% in December
Singapore’s non-oil domestic exports fell 20.6% in December on an annualized basis, a further drop from a decline of 14.7% seen in November.
The steep decline was driven mainly by exports to China, Indonesia and Hong Kong, according to the government release. Exports to South Korea and Japan rose, it said.
The nation’s total trade declined 7.7% in the month of December compared with a year ago – with exports dropping 7.1% and imports also dropping 8.2%.
– Jihye Lee
CNBC Pro: This under-the-radar global carbon capture stock could soar by 65%, investment banks say
Shares of an under-the-radar carbon capture company are expected to rise by 65% due to increasing global demand for emissions reduction technology, according to investment banks analyzing the stock.
The company’s latest innovation, revealed last week, could cut the energy needed to capture carbon and improve the company’s profitability in the future, according to analysts at a German investment bank.
CNBC Pro subscribers can read more here.
— Ganesh Rao
Where the major indexes stand coming off the first two weeks of 2023 trading
With the first two weeks of 2023 trading done, the three major indexes are up so far for the year.
The Nasdaq Composite is leading the way, adding 5.9% as investors bought beaten-down technology stocks on rising hopes of an improving landscape for growth holdings. The S&P 500 and Dow followed, gaining 4.2% and 3.5%, respectively.
— Alex Harring
Stock futures open lower
Stock futures were lower despite the market coming off a winning week.
Futures tied to the Dow dipped 0.1%. S&P 500 and Nasdaq-100 futures fell 0.2% and 0.4%, respectively.
Travel restrictions launched in the wake of China’s border reopening may beaffecting where people there are booking trips.
But it’s not out of spite, said several Chinese travelers who spoke to CNBC.
It’s because some countries aren’t letting them in easily, they said.
‘I think it’s unfair’
Reactions from Chinese travelers who spoke to CNBC were varied, ranging from indifference to confusion to anger.
“Of course, I think it’s unfair,” said one citizen, who asked to be called Bonnie. “But at the same time, we understand what’s going on.”
So far, more than a dozen countries have announced new rules for travelers departing from China. Last week, the European Union recommended that its members require Chinese travelers to take Covid tests before entering.
But Covid tests aren’t the problem, Shaun Rein, managing director of China Market Research Group, told “Squawk Box Asia” on Monday. It’s that “these policies are directed only towards mainland Chinese,” he said.
South African Mansoor Mohamed, who lives in China, agreed. “It is relatively easy and cheap to do a Covid test in China, so it will not affect my travel planning,” he said.
“However, I know that many patriotic Chinese colleagues and friends will avoid those countries for now because the practice of only testing passengers arriving from China is discriminatory,” he said.
Of course, China requires travelers to test negative before entering China, and has for three years.
The difference, Mohamed said, is that “every arrival [to China], including Chinese nationals … [is] subjected to the same rules.”
Where the Chinese are going
Gao Dan told CNBC she is planning to travel out of the province of Qinghai for the first time in more than two years. But she said she’s staying in China, adding that she “hasn’t looked into what other countries’ travel policies are,” according to a CNBC translation.
Others are booking trips abroad, but some not to their first-choice destinations — namely Japan and South Korea.
One traveler, named Bonnie, told CNBC her friends in China are going to Thailand rather than South Korea, even though “they wouldn’t have considered Thailand” before.
Tuul & Bruno Morandi | The Image Bank | Getty Images
“When China said they were opening the borders in January, all my friends said they’re going to Japan and Korea,” said Bonnie.
But they couldn’t get visas, she said. “So they are now going to Thailand.”
Rein said Chinese travelers are now headed to Singapore and Thailand because “both countries are welcoming us.”
Of the top destinations Chinese nationals searched after the border reopening announcement, those are the only two that haven’t imposed new restrictions on incoming Chinese travelers.
Data shows search interest for outbound flights from mainland China rose by 83% in the 11 days after the announcement, compared with the 14 days before it, according to data from Trip.com Group.
During this period, search interest for Thailand and Singapore grew by 176% and 93%, respectively, according to the company.
Angrier at some more than others
Chinese officials called the rules from South Korea and others “excessive” and “discriminatory.”
But South Korea refutes claims of discrimination. Seung-ho Choi, a deputy director at the Korea Disease Control and Prevention Agency, pointed out to CNBC that the country’s rules apply to “Korean nationals and non-Korean nationals coming from China. … There is no discrimination for nationality in this measure.”
“China’s Covid situation is still worsening,” he said. The number of people traveling from China to Korea who tested positive for Covid-19 went up 14 times from November to December, he said.
The Prime Minister’s Office of Japan did not respond to CNBC’s request for comment. A representative at Japan’s Embassy in Singapore told CNBC that Japan is processing Chinese travel visa requests as usual.
Citing a discrepancy in infection information from China, Japan Prime Minister Fumio Kishida told reporters on Dec. 27: “In order to avoid a sharp increase in the influx of new cases into the country, we are focusing efforts on entry inspections and airports,” according to an article published by Nikkei Asia.
Both Japan and South Korea have taken conservative stances toward the Covid pandemic.
Japan, in particular, has been sluggish to bounce back to pre-pandemic life, with residents showing little enthusiasm when its own border fully reopened in October 2022.
‘A political issue’
Rein told “Squawk Box Asia” that the rules are not just about tourism.
“This is a political issue,” he said, adding that he expects Japanese stocks to be affected, singling out two cosmetics names.
Read more about China’s reopening
“I would be cautious on Shiseido. I’d be cautious on Kose, because there are going to be some boycotts,” he said. Shares of Kose were lower on the Tokyo stock exchange on Tuesday, but Shiseido was higher.
Rein said animosity toward South Korea and Japan will be short-lived.
“It’ll take about three months for the anger to dissipate,” he said. “There’s going to be massive revenge travel outside to Korea to Japan — if those two countries treat Chinese properly.”
New Zealander Darren Straker, who lives and works in Shanghai, said he, too, believes the policies are politically motivated, calling them a “last sad gasp [as] the Covid geopolitical door closes.”
Tesla cuts some model prices in China, suppliers rise
Tesla slashed prices for some models in China for the second time in three months, the firm announced in a Weibo post.
The firm said its Model 3 and Model Y vehicles in China are now priced at 229,900 yuan and 259,900 yuan, respectively.
That’s a drop of 6% to 13.5%, a separate calculation by Reuters showed.
Shenzhen-listed shares of Tesla’s Chinese suppliers rallied amid optimism the price cut could boost demand for the electric vehicle maker.
Shares of Anhui Shiny Electronic Technology rose as much as 10% in Asia’s trade and Hengdian Group DMEGC Magnetics gained nearly 9%. Zhejiang Chint Electrics climbed about 10% and Shandong Jinjing Science & Tech rose more than 7%.
— Jihye Lee
More Chinese electronics firms set to take away market share from Taiwanese companies like Foxconn: Investment fund
More Chinese electronic component manufacturing companies are set to take away market share from Taiwanese counterparts such as Foxconn, Kirk Yang, chairman and CEO of Kirkland Capital, told CNBC’s “Squawk Box Asia” Friday.
Apple supplier Foxconn is facing rivalry from Luxshare, which was awarded a contract for iPhone production in China, even as Foxconn posted record revenue and its Zhengzhou plant returned to normalcy following Covid restrictions and labor unrest.
“Chinese companies are getting pretty competitive for iPhone assemblers. China is doing quite well in pretty much everything, aside from semiconductors,” said Yang.
Yang further added that with China-Taiwan geopolitical tensions, Taiwanese companies in China, in the last five years, have seen a lot of pressure. “A lot of them are moving out of China,” said Yang.
This is why Apple has to diversify, he said, adding that the US-China tech war is also causing companies to move even faster out of China to diversify.
– Sheila Chiang
Samsung Electronics could cut production in coming months, says CLSA
Samsung Electronics may follow its competitors Micron Technology and SK Hynix in cutting production in the later part of 2023, Sanjeev Rana, senior analyst at CLSA said.
The company has “no other option but to cut their production because inventories are quickly building up,” Rana said on CNBC’s Squawk Box Asia on Friday.
“If they don’t cut production, inventories could go up even higher,” he said, adding the demand for IT products have plunged in recent months, causing the sale of memory chips to also fall.
Rana said on the demand side, China’s reopening could lead to a double-digit growth in smartphone shipments to China on an annualized basis.
Oil prices to stay around $85 per barrel for the next five years, analyst says
Oil prices are expected to hover around $85 per barrel for the next five years as a result of “underinvestment on the supply side” and likely growing demand, said Pickering Energy Partners’ Dan Pickering.
Once China gets through its Covid wave, “a million to two million barrels a day of incremental demand,” can be expected, Pickering said, adding this will be supportive of the commodity’s prices.
He added further support will also be priced in once the world steps out of the global economic downturn.
Brent crude futures added 1.12% to stand at $79.57 per barrel. Similarly, the U.S. West Texas Intermediate rose 1.15% to $74.74 per barrel.
Overnight in the U.S. also reported lower fuel inventories in the wake of a winter storm, adding on to pressures on supply.
—Lee Ying Shan
China relaxes floor rates on mortgage loans for first home buyers
The People’s Bank of China and the China Banking and Insurance Regulatory Commission announced approval for lower mortgage rates for first-time home buyers if newly constructed house prices drop for three consecutive months, a notice said.
The latest measures show further support from the government for the property sector.
Housing sales in China fell more than 20% on an annualized basis each month last year through November, Factset data showed. Home prices fell for the fourth-straight month in November on a monthly basis, Reuters reported.
Property stocks listed in Hong Kong were mostly up, with Logan group rising 5.48% and Cifi Holdings gaining 0.79%. Country Garden and Longfor Group were flat in Friday’s morning session.
— Jihye Lee
CNBC Pro: Veteran investor sees energy as the biggest winner in 2023 — and names the stocks to play it
After a standout performance in 2022, energy stocks are having a slow start to the year.
But veteran investor Louis Navellier is unfazed. He believes the sector is set for another bumper year in 2023, and has a number of stock picks to play it.
Pro subscribers can read more here.
— Zavier Ong
Japan’s service sector grows for fourth straight month
Japan’s services sector activity showed a fourth-consecutive month of growth in December as the nation’s central bank maintains its ultra-dovish policy, in contrast with its hawkish global peers.
The final au Jibun Bank Japan Services Purchasing Managers’ Index rose to 51.1, compared with the sharp fall in November’s reading of 50.3 from 53.2 in October.
The 50-point mark in PMI readings separates contraction from expansion.
The Japanese yen traded marginally stronger after the report and last stood at 133.38 against the greenback.
Samsung Electronics flagged the worst quarterly profit in nearly 8 years with a roughly 70% decline in its final quarter’s operating profit, according to the company’s latest earnings guidance.
The tech giant estimated its profit slumping to 4.3 trillion won ($3.37 billion) in the period from October to December on weakened global demand, after posting a profit of 13.87 trillion won ($10.92 billion) in its previous quarter.
Shares of the tech giant inched up 0.17% shortly after the guidance release.
— Jihye Lee
CNBC Pro: Citi’s Chronert says a recession is near; shares his ‘top conviction calls’ to tough it out
Citi’s Scott Chronert expects a mild recession in the first half of this year and revealed three strategy calls that could help investors trade the downturn.
He shared three “top conviction calls” with CNBC that could help investors navigate the macro environment.
CNBC Pro subscribers can read more here.
— Weizhen Tan
St. Louis Fed President James Bullard says 2023 is poised to be a disinflationary year
There are a number of factors that could make 2023 a disinflationary year, according to St. Louis Federal Reserve Bank President James Bullard in a Thursday speech.
He noted that GDP growth likely improved in the second half of 2022 and inflation has declined recently, even though it remains too high overall.
He added that while current policy is not yet “sufficiently restrictive” but is moving closer and will reach that level this year. This signaled to markets that he may be backing off the more than 5% terminal rate he sees the central bank reaching before pausing or pivoting rate hikes, bringing stocks off lows of the day.
The labor market strength that has been seen in the midst of a hiking cycle is unprecedented, he said.
—Carmen Reinicke
CNBC Pro: Goldman Sachs reveals 7 under-the-radar global stocks to buy this year
Many under-the-radar stocks are key to a green energy transition, according to Goldman Sachs — and it expects them to take off in 2023.
The Wall Street bank said the decade-long trend of investing in large clean energy stocks would shift this year, with the focus moving to smaller supply chain firms.
The investment bank identified seven stocks in the Europe, Middle East, and Asia regions that will benefit from the new trend.
CNBC Pro subscribers can read more here.
— Ganesh Rao
Big declines for Silvergate, Bed Bath & Beyond highlight midday movers
Here are some of the biggest stock moves during Thursday’s trading session:
Silvergate — Shares of the crypto-focused bank tumbled more than 42% after Silvergate disclosed massive customer withdrawals during the fourth quarter. The bank said it $3.8 billion in assets from digital asset customers at the end of December, down more than 60% from three months earlier. The company also sold off more the $5 billion of debt securities to cover the withdrawals, resulting in a loss on those sales of $718 million.
Bed Bath & Beyond — The home goods retailer plummeted 24% after reporting it’s running out of cash and is considering bankruptcy, citing weaker-than-expected sales. The company said it is exploring financial options including restructuring, seeking additional capital or selling assets, in addition to a potential bankruptcy.
Lamb Weston Holdings — The food processing company jumped 9% after it smashed quarterly earnings and revenue estimates. Lamb Weston also raised its financial guidance for the full year.
Initial jobless claims ticked up slightly to 225,000 in the week ending Dec. 24, according to the Labor Department. But continuing claims – which count those who have been on unemployment for more than one week – dropped.
Continuing claims fell more than 24,000 to 1,569,764 in the previous week. This signals that people are finding new jobs amid a strong labor market.
India’s cement stocks to perform well on government infrastructure spending, says IIFL Securities
India’s domestic cement stocks are set to rise on increased government spending on infrastructure, said Sanjiv Bhasin, director at investment management firm IIFL Securities.
“The government spending on both commercial and real estate, and [developments on] the infrastructure, is going to see cement companies do well,” Bhasin said on CNBC’s “Street Signs Asia” on Tuesday.
He said his firm is positive on companies such as Larsen & Toubro, Ultratech India, and Kotak Mahindra Bank, adding that cement prices in India is expected to rise as the country enters a period of high levels in construction activity.
Australian miners, metal prices fall as China Covid cases rise
Shares of mining companies listed in Australia fell in Tuesday’s afternoon trade as prices of metals fell in Shanghai as Covid infections soared in mainland China.
The February copper contract trading on the Shanghai Futures Exchange fell 0.7% to 65,670 yuan per ton while aluminum fell 2.7% to 18,175 yuan per ton.
Sandfire Resources inched 0.18% lower while Oz Minerals traded 0.25% higher – Rio Tinto fell more than 1% while Yancoal Australia shed more than 4.6% and Whitehaven fell 5.89%. Fortescue Metals lost 0.73% and South32 traded 0.5% lower.
— Jihye Lee
Consumer growth in Asia remains a ‘massive challenge’ for region, says Singapore Exchange
Consumer growth in Asia remains a “massive challenge” for the region, as its economic growth is significantly dependent on trade, Geoff Howie, markets strategist at the Singapore Exchange said.
Howie pointed to South Korea and Taiwan’s declines in exports since May 2021 as well as Singapore’s non-oil exports contracting by 14.6% in November.
There have been “much hinges on trade and tech, and we are expecting moderation in global trade,” he said on CNBC’s “Street Signs Asia” on Tuesday. “Consumer growth is an area that we have to really watch,” Howie said.
– Charmaine Jacob
‘Rough front half, better second half for tech stocks’: Jefferies shares 2023 outlook
The first half of 2023 is going to be a “tough setup” for tech stocks, Brent Thill, managing director and senior analyst of investment firm Jefferies, told CNBC’s “Street Signs Asia” Tuesday.
“You still have the economic overhang that is going to be impacting earnings as we go into the beginning of this year. Companies have to lower numbers and expectations are still coming down,” said Thill.
He projected things to turn around in the second half of 2023, as it “takes time” for effects from macro economic conditions such as rising interest rates to unravel and “investors start to look at 2024 numbers being reset.”
“I think the worst-case scenario is that 2023 could be a total wash,” said Thill, adding that Jefferies is expecting a recession to hit the third quarter, which is later than most expect.
– Sheila Chiang
Oil prices to fall to $70-levels by end of 2023, says analyst
The price of Brent oil will fall to the lower end of $70 a barrel by year’s end, according to Citi’s global head of commodities research, Ed Morse, adding volatility surrounding the oil markets will remain.
“We’re expecting volatility to be about what it was last year,” said Morse. “We’re looking at Brent prices going down by the end of the year to the low 70s,” he estimated.
A number of oil producing countries are facing extreme difficulties, Morse said. He also expects demand for oil to be kept low due to a prolonged recession in China.
Developments on Russia’s war on Ukraine will also add onto volatility in prices, Morse added.
Brent crude dipped 0.43% to $85.57 a barrel. The U.S. West Texas Intermediate crude traded down 0.39% to $79.95.
—Lee Ying Shan
Japanese yen at strongest levels in seven months
The Japanese yen hovered around its strongest levels since early June, Refinitiv data showed.
The currency last traded at 129.7 against the U.S. dollar after strengthening past the key technical level of 130.4 that it last saw in August. Late last year, the yen depreciated significantly and hit its weakest levels in 32 years.
The currency weakened past 151 against the greenback in mid-October as the Bank of Japan maintained its ultra-dovish monetary policy and yield curve control strategy. But the yen has since strengthened after the central bank widened its YCC band last month.
– Jihye Lee
China’s Caixin PMI shows further factory activity decline
China’s factory activity slid further into contraction territory in December, a private sector survey showed.
The Caixin/Markit manufacturing purchasing managers’ index fell further to 49 in December after recording 49.4 in November – remaining below the 50-point mark that separates growth and contraction.
The survey saw improved optimism among businesses, the release said, adding that firms expressed confidence in China’s economic recovery following the relaxation of most of its stringent Covid measures.
Separately, China’s National Bureau of Statistics said the official manufacturing PMI fell to 47 for the month, marking the biggest drop since the start of the Covid outbreak in January 2020.
– Jihye Lee
Singapore economy grew 3.8% in 2022
Singapore’s economy saw full-year growth of 3.8% for 2022, according to data released by the Ministry of Trade and Industry on Tuesday.
The economy grew 2.2% in the fourth quarter compared with a year ago, the slowest pace since mid-2021 but beating expectations of 2.1% from a Reuters poll.
The latest figures reflected continued recovery in the service sector that followed lifting of domestic and border restrictions since April, the ministry said in a statement, adding that the accommodation sector expanded for the first time since mid-2021.
— Jihye Lee
Bank of Japan is reportedly considering hiking its inflation forecasts in January, according to Nikkei
Japan’s central bank is reportedly considering boosting its inflation forecasts in January to reflect price growth that’s closer to its 2% target in the 2024 fiscal year, according to a Dec. 30 report from Nikkei, citing sources familiar.
The move could be laying the groundwork for a shift toward tighter fiscal policy, according to the report.
The report arrives more than a week after the Bank of Japan changed its bond yield controls, allowing long-term interest rates to rise more. The rate on the 10-year bond will be allowed to fluctuate by half a percentage point above and below the nation’s target of 0% – up from a quarter-percentage point range.
Retail sales have also ticked higher in Japan, rising for a ninth consecutive month in November.
—Darla Mercado
Week ahead: PMIs in Asia-Pacific, trade data, inflation readings
Key economic events in the Asia-Pacific next week will be dominated by Purchasing Managers’ Index readings in the region.
China’s National Bureau of Statistics is scheduled to release the official manufacturing and non-manufacturing PMI prints on Saturday. Reuters expects China’s factory activity to show a contraction with a reading of 48.
South Korea is also slated to report its December trade data over the weekend, in which economists polled by Reuters predict will show a drop of 10.1% compared with a year ago.
Singapore is scheduled to release manufacturing PMI readings next week, while S&P Global is scheduled to release its PMI readings for South Korea, Indonesia and India on Monday.
Inflation prints for the Philippines and Indonesia will also be closely watched, with the releases scheduled for Tuesday and Monday, respectively.
Japan’s PMI reading and China’s private survey for services PMI will be released on Wednesday. Singapore will release November’s retail sales on Thursday as well as South Korea’s unemployment rate for December.
– Jihye Lee
CNBC Pro: Wall Street veteran names the stocks that could go to $0 — and his favorites in tech
2022 has marked the end of an era of cheap money, and that’s bad news for companies with a “growth at all costs” approach, said David Trainer, CEO of investment research firm New Constructs.
In the year ahead, investors will need to exercise due diligence in distinguishing between good and bad firms, he told CNBC Pro.
That’s because the U.S. Federal Reserve’s interest rate hikes in 2022 have “ended the era of super easy money,” and exposed many companies with bad business models. He calls those companies “zombie stocks” with heavy cash burn.
He highlights a list of such names to avoid and what to buy instead.
CNBC Pro subscribers can read more here.
— Weizhen Tan
Final market stats for 2022
Friday was the final trading day of the 2022, but also for the quarter, month and year. Here’s how the major market averages fared over those time frames.
The Dow finished:
down 8.78% for the year
up 15.39% for the quarter
down 4.17% for the month
down 0.17% for the week
The S&P 500 finished:
down 19.44% for the year
up 7.08% for the quarter
down 5.90% for the month
down 0.14% for the week
The Nasdaq Composite finished:
down 33.10% for the year
down 1.03% for the quarter
down 8.73% for the month
down 0.30% for the week
The Russell 2000 small caps finished:
down 21.56% for the year
up 5.8% for the quarter
down 6.64% for the month
up 0.02% for the week
— Jesse Pound, Christopher Hayes
CNBC Pro: 2023 looks good for the market — especially for one ‘extremely attractive’ asset class: Fund manager
Markets have bottomed and things are looking up for stocks and bonds, which could rally more than 10% in 2023, according to one portfolio manager.
Jay Hatfield, CEO and portfolio manager at Infrastructure Capital Advisors, also highlighted the “conviction investment themes” he expects will be very attractive in 2023.
That includes one asset he said could beat its peers.
