Shares of blacklisted Chinese tech companies are falling
Shares of Chinese tech companies listed on mainland exchanges fell in Asian trading after the US government released a list of companies that will face restrictions over their efforts to help modernize China’s military.
Shanghai-listed shares of Chinese artificial intelligence developer Cambricon Technologies fell more than 4% during the afternoon session in Asia after falling 6% in the morning.
China Electronics Technology Group also fell more than 2%.
Shenzhen-listed shares of Hangzhou Hikvision, the world’s largest surveillance camera manufacturer, fell 0.7%.
In the meantime, WuXi Biologics, a company that makes ingredients for the AstraZeneca Covid vaccine, was taken off the list. The company’s Hong Kong-listed shares rose more than 5% in Asia on the afternoon.
— Jihye Lee
Talks to lift Bank of Japan yield cap could gain momentum, Reuters reports
Discussions to scrap the Bank of Japan’s yield curve control program, which limits 10-year bond yields to around 0%, could pick up next year, Reuters reported, citing people familiar with the central’s thinking Bank.
Senior officials increasingly see a reason to scrap the YCC program, introduced in 2016, as the country’s wages rise and economic risks remain contained, the people reported, according to Reuters.
While the report said there are currently no talks of a policy change, it said there is a preference within the central bank for the cap to be removed altogether.
The Bank of Japan will hold a monetary policy meeting later this week.
— Jihye Lee
Singapore’s economy is likely to contract in the first quarter of 2023, Nomura says
Singapore’s economy is likely to contract in early 2023 before recovering in the second quarter, according to Euben Paracuelles, senior ASEAN economist at Nomura.
The city-state will not “go into a technical recession, but in the first quarter of next year, we will probably see a contraction in the GDP figure,” Paracuelles told CNBC’s “Squawk Box Asia” on Friday.
“Singapore, being so open, is very exposed to weakness in foreign demand,” Paracuelles said.
Singapore will report its fourth-quarter GDP by January 13.
— Charmaine Jacob
UBS raises 2023 growth outlook for China, lowers 2022 forecast
UBS raised its outlook for China’s gross domestic product in 2023 to 4.9% from 4.5% previously, according to its Chinese chief economist Wang Tao, citing an earlier and faster reopening in the country.
Wang said the company expects weaker fourth-quarter GDP for 2022, lowering its full-year forecast from 3.1% to 2.7%, pointing to weakened growth in November with a recent rise in the number of Covid cases.
The company added that the Central Economic Work Conference is likely to prioritize stabilizing growth and supportive macro policies for the year ahead.
“We expect fiscal policy to remain proactive with a small increase in the headline deficit and a new special LG [local government] bonds, monetary and credit policy to remain supportive with continued ample liquidity, but further policy rate cuts are unlikely,” Wang said in the note.
— Jihye Lee
Real estate stocks rise after Liu He’s comments
Singapore’s export figures show that things are even worse, says Oxford Economics
Singapore’s latest trade data suggests exports could face headwinds in the near term, according to Oxford Economics.
“The bad news is that worse is to come,” read a note dated Friday. “We expect foreign demand to decline further in the first half of 2023 as the US and the eurozone slide into a superficial recession,” the report said.
Oxford Economics added that the sharp drop in Singapore’s non-oil exports in November shows that the external sector “has gone from a slowdown to a slump”.
It added that a rebound in growth due to China’s early reopening will not be enough to fully offset weakened global demand.
— Jihye Lee
Citi is phasing out its Chinese consumer banking business
Citi has announced it will end its consumer banking business in China, a move that will affect approximately 1,200 employees in the country.
The departure will also affect consumer products and channels, including deposits, insurance, mortgages, investments, loans and cards, Citi said. However, it said the exit does not cover China’s institutional business.
The company said it will begin winding down its consumer banking in consultation with regulators.
The bank first announced its plan to exit China in April 2021 as part of a broader plan to withdraw from a range of markets in Asia, Europe, the Middle East and Africa, and Mexico.
— Jihye Lee
Singapore’s non-oil exports for November miss estimates
Singapore’s non-oil exports fell 9.2% compared to a month ago, a significantly larger drop than the expected 3%, according to a Reuters poll.
This comes after the month-on-month figure fell 3.7% in October.
On a yearly basis, non-oil exports fell 14.6% for November, also larger than expected for a 7.4% drop in a Reuters survey. The year-on-year value fell 5.6% in October.
— Jihye Lee
Japanese factory activity in December is the lowest since October 2020
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index fell to a seasonally adjusted 48.8 in December from a record 49.0 in November, its lowest level since October 2020.
“Manufacturing companies continued to struggle with weak demand and severe inflationary pressures,” S&P Global said in its latest release.
A reading below 50 indicates contraction compared to the previous month and above 50 indicates expansion.
Stronger growth in service sector output in December was reflected in the services business activity index, which rose to 51.7 in December from a final reading of 50.3 in November.
— Jihye Lee
CNBC Pro: Morgan Stanley Doubles Down on Big Tech Stocks – Says It Could Rise Up to 65% More
Big Tech stocks have been hit hard by the sell-off this year, but Morgan Stanley thinks the current one-stock share price weakness presents an “opportunity to own one of the best tech platforms.”
Pro subscribers can read more here.
— Zavier Ong
Retail sales in November are weaker than expected
Retail and food service sales fell 0.6% in November, after rising 1.3% in the previous month, according to the US Department of Commerce. That was below Dow Jones’ estimates of a 0.3% decline.
Excluding cars, retail sales fell 0.2%, below Dow Jones’ estimates for a 0.2% increase in spending.
— Sarah Min
Concerns about the recession are mounting on Wall Street
Concern among investors that the Federal Reserve’s aggressive rate hike campaign will push the economy into recession is growing on Wall Street.
“The Fed has been very consistent all year. They have to fight inflation, they have to get it down, and they are going to tighten financial conditions to do that,” said Huw Roberts, chief of analysis at Quant Insight.
However, he said US stock markets become more sensitive to real economic data, rather than financial conditions, as the next calendar year progresses.
“Increasingly, the main story of 2023 will be about the real economy. In other words, no matter how hard a recession we’re going to get, can the Fed deliver a soft landing? Or are we going to have an utterly ugly, hard recession? Robert added.
— Sarah Min
Earnings recession will surprise investors and bring the market down in 2023, says Mike Wilson
Next year’s story for the stock market is all about earnings, which will fall significantly, said Morgan Stanley’s Mike Wilson. That rapidly slowing growth has not yet been priced into the market, he said in an interview with “Squawk Box” on Thursday.
“People assume earnings will fall, but what matters is the size of that decline and how fast it goes — we think that’s where the surprise is,” said Wilson, the company’s U.S. equity strategist. “That negative operating leverage that we’re seeing from falling inflation… is what’s going to hurt margins, and that’s regardless of whether there’s an economic recession.”
He predicts an 11% drop in annual growth S&P 500 companies next year. While his year-end target for the index is 3,900, he expects it to fall to between 3,000 and 3,300 in the first quarter.
The earnings recession will be caused by a slew of reasons, including an economy that is overstimulated, demand destruction from higher prices and the Federal Reserve’s interest rate hikes this year, Wilson said. There will also be reactions from corporations.
“At some point, trust just fails and the companies stop steering because they say, ‘We need to close the shutters a little bit,'” he said.
— Michelle Fox