Shanghai: Stocks close down 3.23% on economy fears

Shanghai stocks dropped 3.23 per cent by the close on Thursday, as worries persisted over the slowing domestic economy and its impact on global growth. 

PHOTO: REUTERS

JAN 21, 20163:47 PM

[SHANGHAI] Shanghai stocks dropped 3.23 per cent by the close on Thursday, as worries persisted over the slowing domestic economy and its impact on global growth.

The benchmark Shanghai Composite Index tumbled 96.21 points to 2,880.48 on turnover of 203.6 billion yuan (S$44.6 billion).

The Shenzhen Composite Index, which tracks stocks on China's second exchange, slumped 4.01 per cent, or 75.32 points, to 1,800.99 on turnover of 332.6 billion yuan.

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US: Wall St flat at open

JAN 21, 201610:44 PM

[NEW YORK] US stocks opened little changed on Thursday as crude oil prices pared their losses and ECB President Mario Draghi's comments boosted prospects of continued stimulus.

The Dow Jones industrial average was down 3.28 points, or 0.02 per cent, at 15,763.46.

The S&P 500 was up 1.96 points, or 0.11 per cent, at 1,861.29.

The Nasdaq Composite index was up 5.34 points, or 0.12 per cent, at 4,477.03.

REUTERS

Honda to launch hydrogen fuel-cell car in California this year

Honda Motor Co Ltd said on Thursday its hydrogen fuel cell car, dubbed Clarity Fuel Cell, will be launched in California before the end of 2016.

PHOTO: BLOOMBERG

JAN 21, 201611:10 PM

[LOS ANGELES] Honda Motor Co Ltd said on Thursday its hydrogen fuel cell car, dubbed Clarity Fuel Cell, will be launched in California before the end of 2016.

The new 5-passenger sedan is expected to be priced at around US$60,000 with a monthly lease of under US$500, Honda said in a statement released at the DC Auto show.

Honda said it expected limited volumes in the early stages of production. Deliveries will begin through certified fuel cell vehicle dealers in Los Angeles and Orange counties as well as in the San Francisco Bay area and Sacramento, the company said.

REUTERS

Alibaba said to invest in Tencent's chinese food startup

China's Ele.me, a food-delivery startup backed by Tencent Holdings Ltd, plans to close a funding round of at least US$1.25 billion by as early as mid-February in a deal led by competitor Alibaba Group Holding Ltd, according to people with direct knowledge of the matter. 

PHOTO: REUTERS

JAN 21, 20167:08 PM

[CHINA] China's Ele.me, a food-delivery startup backed by Tencent Holdings Ltd, plans to close a funding round of at least US$1.25 billion by as early as mid-February in a deal led by competitor Alibaba Group Holding Ltd, according to people with direct knowledge of the matter.

Alibaba will be Ele.me's controlling shareholder after the funding, which values the service at about US$4.5 billion, the people said, asking not to be identified because the information is private. The deal could be announced by the Lunar New Year holiday that starts Feb 8. Ele.me was in merger talks with group-buying site Meituan.com, but those fell apart, the people said.

Tencent, Alibaba and Baidu Inc are competing for supremacy in a local-services industry primed for growth as more people turn to their smartphones or the Web to order food, schedule beauty treatments or hire domestic helpers. Users of those services could rise 29 per cent to 400 million by next year, with sales expected to reach 7.28 trillion yuan (US$1.1 trillion).

Chinese companies have been involved in US$91.6 billion of acquisitions and investments in the Internet industry in the past 12 months, according to data compiled by Bloomberg.

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Tencent fell 1.7 per cent in Hong Kong to HK$133.10, its lowest in almost four months.

Alibaba, Baidu The funding for Ele.me is another sign that venture-capital flow in China is resilient even with the nation's economic slowdown and market turmoil. Meituan Dianping, created last year through a merger, just closed a US$3.3 billion round that was the largest-ever single investment in a VC-backed company, according to London consultancy Preqin Ltd. Caixin previously reported Ele.me was in discussions with Alibaba to raise funds.

Venture capitalists poured a record US$37 billion into China last year, though concerns grew in recent months that too many startups may have gotten funding in certain sectors. That led to money-losing battles waged with promotions and subsidies, and eventually spurred a series of mergers.

Alibaba and its financial affiliate, Zhejiang Ant Small & Micro Financial Services Group Co, formed a joint venture called Koubei, with each agreeing to invest 3 billion yuan to help the company expand into neighborhood services. Baidu, the nation's biggest search company, said last year it would invest US$3.2 billion over three years in its own provider of local services, called Nuomi.

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US 30-year mortgage rate declines to lowest in three months

JAN 21, 201611:57 PM

[WASHINGTON] US mortgage rates fell, with the 30-year average dropping to a three-month low, as investors exited stocks and commodities for the safety of government bonds.

The average rate for a 30-year fixed mortgage was 3.81 per cent, down from from 3.92 per cent last week, Freddie Mac said in a statement Thursday. It was the lowest since late October. The average 15-year rate fell to 3.1 per cent from 3.19 per cent, according to the McLean, Virginia-based mortgage-finance company.

The collapse of oil prices, which are at a 12-year low, and anxieties over falling stocks drove down yields for the government bonds that guide mortgage costs. Yields on the benchmark 10-year note declined to their lowest level since October.

The housing recovery lost momentum toward the end of 2015. New-home construction in the US unexpectedly fell in December, dropping 2.5 per cent to a 1.15 million annualized rate, according to a Commerce Department report Wednesday. Contracts to purchase previously owned US homes slumped in November, declining 0.9 per cent after a revised 0.4 per cent gain the prior month, the National Association of Realtors said.

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'WORSE THAN 2007': Top banker warns of looming wave of worldwide bankruptcies

• David Scutt, Business Insider Australia
 

• Jan. 19, 2016, 11:17 PM
• 48,421
 
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THE EURO: A Machine Of Perpetual Destruction

The world's financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, according to a leading global banker.

William White, chairman of the OECD's review committee and former chief economist of the Bank for International Settlements, suggests the stresses in the financial system are "worse than it was in 2007."

Speaking with the UK Telegraph's Ambrose Evans-Pritchard before the start of the World Economic Forum in Davos, Switzerland, White warned that macroeconomic ammunition to fight further economic downturns was essentially "all used up."

"Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief," he told The Telegraph.

"It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something."

Instead of pondering whether bankruptcies will occur, White suggests the only question that needs to be answered is "whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly."

White suggests that the US Federal Reserve, fresh from raising interest rates for the first time in nearly a decade in December, is in a "horrible quandary," carrying the unenviable task of trying to foster an economic recovery while moving away from ultra-easy monetary-policy settings.

He believes that easy money-policy settings from the Fed, and others such as the European Central Bank and the Bank of Japan, simply brought spending forward from the future, creating a dangerous cycle that is losing its potency to spur demand.

"By definition, this means you cannot spend the money tomorrow," he told The Telegraph.

Aside from being demand forward in developed economies, another consequence was to exacerbate asset bubbles in emerging markets such as Asia, pushing asset prices higher on the back of what was — at the time — cheap US-dollar-denominated debt.

According to Evans-Pritchard, this saw combined public and private debt in emerging markets surge to 185% of gross domestic product, up an alarming 35 percentage points since the peak of the previous credit cycle in 2007.

In OECD nations a debt boom of a similar scale also occurred, taking the overall debt-to-GDP ratio for the 34-member group to 265%.

China, at the epicenter of market concerns in recent months, has seen its debt loading climb from 158% of GDP to over 282% over the same period, according to analysis from Bank of America-Merrill Lynch.

The chart below reveals the alarming acceleration in the nation’s debt loading.

BAML

It's little wonder that White, and others, are concerned.

Debt has ballooned while global growth has slowed to a crawl — all at a time when many central banks are already pushing the limits of what stimulus monetary policy can deliver.

If monetary policy, after creating the issue, is no longer in a position to solve it, what can be done to address the situation?

White believes governments hold the key, telling The Telegraph: "They should return to fiscal primacy — call it Keynesian, if you wish — and launch an investment blitz on infrastructure that pays for itself through higher growth."

It's a controversial call, particularly as it would almost certainly require governments to take on even greater amounts of debt.

You can read more from Evans-Pritchard's excellent piece here.

Read the original article on Business Insider Australia. Copyright 2016.

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Asian markets fell apart in late trade

• David Scutt, Business Insider Australia
 

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Risk assets across Asia fell heavily for a second consecutive session on Thursday, following a dramatic reversal midway through the session.

Initially risk assets jumped out of the blocks, buoyed by a late recovery on Wall Street and a continued rebound in crude prices.

Stocks in most major centres were up by more than 1.0%. The Nikkei 225 and the Hang Seng in Hong Kong, after suffering huge declines of more than 3% on Wednesday, were the standout performers, trading up about 2% within the first hour of trade.

Other risk assets were also climbing. The Australian and New Zealand dollars were each up by more than 0.5%, while crude futures, after staging a dramatic bounce off multidecade lows in US trade, were up close to 2%.

Even an early decline in Chinese stocks, plunging close to 2%, wasn't enough to derail the rally. It looked as if confidence were finally returning.

And then it all fell apart.

Despite a late rally in Chinese stocks into the mid-session break — something that would normally boost sentiment across the region — risk assets began to roll over upon the resumption of trade in Japan.

What started as a modest retracement ended up snowballing into yet another ugly, confidence-sapping rout.

The ASX200 in Australia was one of the few markets to finish higher, closing up 0.46%. If not for its earlier close compared with other markets, it too could have finished lower, as it sank in late trade.

The Nikkei 225 in Japan was perhaps the story of the day, moving from a gain of 2% to a fall of 2.43% in just a few hours of trade. It was a savage, China-like sell-off that resonated across the region.

The intraday chart doesn't make for pleasant viewing, nor will it fill European traders with confidence as they head toward their offices Thursday morning.

Business Insider Australia

Markets in Hong Kong, Taiwan, South Korea, and Singapore also staged dramatic turnarounds, moving from a sea of green to red in under two hours.

Chinese stocks, like the broader region, also finished heavily in the red. After being up 0.5% at lunch, the benchmark Shanghai Composite closed down a whopping 3.22%, finishing the session on absolute lows. The falls on the Composite were replicated in other markets on the mainland, with losses of 2.30% to 4.10% recorded for the session.

The losses in China came despite a sizeable liquidity injection from the People's Bank of China. Through seven and 28-day repos, the bank injected 400 billion yuan into the nation's financial system, the largest seen in three years.

Like stocks, commodities and higher-yielding currencies also gave back their early-session gains, with most closing the session flat to lower.

Reflective of the sharp risk reversal, safe-haven plays such as the Japanese yen and gold — down earlier in the day — finished higher.

While it would be easy to pin the dramatic turnaround in risk assets on the performance of Chinese stocks, or a slight weakening in the offshore traded yuan, it was most likely more than that.

It started from seemingly nothing, when Chinese stocks were closed.

Perhaps that's the most concerning thing — investors could point to no one factor to explain the rout.

It will be more than interesting to see how European markets perform, after an equally ugly performance on Wednesday.

Here's the final Asia market scoreboard as of 6 p.m. AEDT.

Stocks

• ASX 200 4864.00 , 22.48 , 0.46%
• Nikkei 225 16017.26 , -398.93 , -2.43%
• Shanghai Composite 2880.80 , -95.89 , -3.22%
• Hang Seng 18615.87 , -270.43 , -1.43%
• KOSPI 1840.53 , -4.92 , -0.27%
• Straits Times 2534.56 , -25.21 , -0.98%
• S&P 500 Futures 1846.00 , -9.00 , -0.49%

Forex

• USD/JPY 116.68 , -0.23 , -0.20%
• USD/CNH 6.6094 , 0.0082 , 0.12%
• AUD/USD 0.6893 , -0.0013 , -0.19%
• NZD/USD 0.6435 , 0.0006 , 0.09%
• AUD/JPY 80.43 , -0.31 , -0.38%
• EUR/USD 1.0899 , 0.0010 , 0.09%
• GBP/USD 1.4173 , -0.0017 , -0.12%
• USD INDEX 99.004 , -0.0870 , -0.09%

Commodities

• Gold $1,102.86 , $2.24 , 0.20%
• Silver $14.15 , -$0.02 , -0.11%
• WTI Futures $28.13 , -$0.22 , -0.78%
• Copper Futures ¥34,840 , -¥270 -0.77%
• Iron Ore Futures ¥316.00 , -¥3.00 , -0.94%

10-Year Bond Yields

• Australia 2.686%
• New Zealand 3.260%
• Japan 0.223%
• Germany 0.496%
• UK 1.617%
• US 1.986%

Read the original article on Business Insider Australia. Copyright 2016.