Tesla just published its fourth-quarter vehicle production and delivery report for 2022.
Here are the key numbers.
Total deliveries Q4 2022: 405,278 Total production Q4 2022: 439,701 Total annual deliveries 2022: 1.31 million Total annual production 2022: 1.37 million
Deliveries are the closest approximation of sales disclosed by Tesla. These numbers represented a new record for the Elon Musk-led automaker and growth of 40%in deliveries year-over-year.
However, the fourth quarter numbers fell shy of analysts’ expectations.
According to a consensus of analysts’ estimates compiled by FactSet, as of Dec. 31, 2022 Wall Street was expecting Tesla to report deliveries around 427,000 for the final quarter of the year. Estimates updated in December, and included in the FactSet consensus, ranged from 409,000 to 433,000.
Those more recent estimates were in line with a company-compiled consensus distributed by Tesla investor relations Vice President Martin Viecha. That consensus, published by electric vehicle industry researcher @TroyTeslike, said that 24 sell-side analysts expected Tesla deliveries of about 417,957 on average for the quarter (and about 1.33 million deliveries for the full year).
Tesla started production at two new factories this year — in Austin, Texas and Brandenburg, Germany — and ramped up production in Fremont, California and in Shanghai, but it does not disclose production and delivery numbers by region.
In the fourth quarter of 2022, Tesla said deliveries of its entry level Model 3 sedan and Model Y crossover amounted to 325,158, while deliveries of its higher end Model S sedan and Model X SUV amounted to 18,672.
In its third-quarter shareholder presentation, Tesla wrote: “Over a multi-year horizon we expect to achieve 50% average annual growth in vehicle deliveries. The rate of growth will depend on our equipment capacity, factory uptime, operational efficiency and the capacity and stability of the supply chain.”
The period ending Dec. 31, 2022 was marked by challenges for Tesla, including Covid outbreaks in China, which caused the company to temporarily suspend and reduce production at its Shanghai factory.
During the fourth quarter, Tesla also offered steep price cuts and other promotions in the U.S., China and elsewhere in order to spur demand, even though doing so could put pressure on its margins.
In a recent e-mail to Tesla staff, Elon Musk asked employees to “volunteer” to deliver as many cars to customers as possible before the end of 2022. In his e-mail, Musk also encouraged employees not to be “bothered” by what he characterized as “stock market craziness.”
Shares of Tesla plunged by more than 45% over the last six months.
In December, several analysts expressed concern about weakening demand for Tesla electric vehicles, which are relatively expensive compared with an increasing number of hybrid and fully electric products from competitors.
Along with competitors ranging from industry veterans Ford and GM to upstart Rivian, Tesla is poised to reap the benefits of Biden’s Inflation Reduction Act this year, which includes incentives for domestic production and purchases of fully electric cars.
Retail shareholders and analysts alike attributed some of Tesla’s falling share price in 2022 to a so-called “Twitter overhang.”
Musk sold billions of dollars worth of his Tesla holdings last year to finance a leveraged buyout of the social media business Twitter. That deal closed in late October. Musk appointed himself CEO of Twitter and has stirred controversy by making sweeping changes to the company and its social media platform.
Shares of Tesla started to rise again in the final days of December 2022, in anticipation of record fourth-quarter and full-year deliveries.
The price of platinum has soared as high demand meets low supply.
Tomohiro Ohsumi | Bloomberg | Getty Images
Platinum posted its best quarter since 2008, as China has scooped up vast stocks of the precious metal.
Platinum rose almost 2% on Friday to $1,086 per troy ounce, up more than 26% from the start of the quarter.
That move marks the biggest quarterly increase since the first quarter of 2008, when platinum gained a staggering 33.96%.
Platinum is used in the defense and aerospace industries, especially in jet and rocket engines. It also is used in processes for making detergents, fertilizers, plastics and explosives.
China has imported excessive amounts of platinum since 2019, according to the World Platinum Investment Council, which has left a limited above-ground supply for the rest of the world.
“This, in combination with higher prices likely being needed to release Chinese inventories to the domestic market, could have a significant bearing” on the price of platinum, according to the Council’s Platinum Perspectives report in December.
The Council anticipates a platinum deficit in 2023, with demand growing by 19% while supply increasing by just 2%. Despite international economic turbulence, with many countries already in, or expected to tip into, recession, industrial demand for platinum will be up 10% compared to 2022, which exceeds the 10-year average, according to a press release by the WPIC.
Demand for platinum in the automotive industry will also continue to grow next year, while jewelry-based demand for platinum is forecasted to remain constant throughout 2023.
Platinum gained more than 13% in 2022, outpacing other precious metals including gold, silver and palladium.
The platinum market posted a deficit in 2020 after the onset of the coronavirus pandemic brought industry to a standstill. The market saw a period of recovery in February 2021 when the metal touched a six-year high as industrial demand improved and investors weighed up platinum’s importance in the global transition to clean energy.
—CNBC’s Alex Harring and Gina Francolla contributed to this report.
A stock trader looks at his monitors at the stock exchange in Frankfurt, Germany.
Kai Pfaffenbach | Reuters
LONDON — European markets are on course for their worst year since 2018 as Russia’s war in Ukraine, high inflation and tightening monetary policy hammered risk assets around the world.
The pan-European Stoxx 600 index started the last trading day of 2022 down more than 12% since the turn of the year, its worst performance since a 13.24% annual decline in 2018. The European blue chip index enjoyed a bumper 2021, jumping 22.25% on the year.
Morning trade on Friday saw the U.K.’s FTSE 100 slide 0.3%, the CAC 40 down 0.6% and the German DAX lower by 0.5%. The Stoxx 600 was down 0.4%.
Economies around the world began the year still trying to emerge from the Covid-19 pandemic, with persistent lockdowns in China and other lingering supply bottlenecks forming what was now infamously mischaracterized by the U.S. Federal Reserve in 2021 as “transitory” inflationary pressure.
The cost-of-living crisis arising from soaring energy bills for businesses and consumers eventually began to weigh on activity, while the Fed and other major central banks were forced to tighten monetary policy with aggressive hikes to interest rates in order to rein in inflation.
“What happened this year was driven by the Fed. Quantitative tightening, higher interest rates, they were pushed by inflation, and anything that was liquidity driven sold off — if you were equities and bond investors, came into the year getting less than a percent on a ten-year treasury which makes no sense,” Patrick Armstrong, chief investment officer at Plurimi Wealth LLP, told CNBC’s “Squawk Box Europe” on Friday.
“Next year I think it’s not going to be the Fed determining the market, I think it’s going to be companies, fundamentals, companies that can grow earnings, defend their margins, probably move higher,” he said.
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—CNBC’s Natasha Turak contributed to this article.
“2023 is probably going to be a pretty decent year for venture capital in Singapore,” Hsien-Hui Tong, executive director of investments at SGInnovate, told CNBC’s “Squawk Box Asia” Wednesday.
Unlike global markets more generally, the venture capital scene in Singapore is “still very active,” Tong said. That’s because companies in the country tend be at the earlier, nascent stages of development, and “in the seed and Series A stages, there’s still lots of liquidity. There’s lots of capital there,” he added.
Global markets, on the other hand, tend to be at the “more mature” stages of Series B and C, where venture capital has “dried up a little bit.”
A seed funding round — also known as the initial investment — is followed by various rounds, known as Series A, B, C and so on.
Venture funding for the first nine months of 2022 totaled $369 billion, down 25% year on year, according to Crunchbase.
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“2022 has been a good year for us, quite unlike some other investment categories. It was a good year for emerging tech startups where a lot of breakthroughs have happened,” Tong said.
For example, Singapore-headquartered biotech company MiRXESlaunched a “T10 ultra-high throughput sequencing platform” — which it says would help with the early detection of diseases and precision medicine — in Asia-Pacific last month.
And clean-tech company SunGreenH2, which raised $2 million led by SGInnovate in August, is conducting trials of its materials with global electrolyzer manufacturers.
Tong added that Singapore has been “sheltered from a lot of the effects” of global macro economic headwinds. As a result, Singapore has been able to “build up its infrastructure probably a little bit better.”
He also named energy as a sector to watch in 2023 in light of breakthroughs in nuclear fusion and hydrogen.
“Quantum technology is another area where I think there are going to be some significant announcements and breakthroughs,” he added.
Correction: This report has been updated to accurately reflect global venture funding for the first nine months of 2022. An earlier version misstated the figure.
For more than two years, overseas travelers have had to quarantine upon arrival in China because of Covid restrictions. Pictured here at Beijing International Airport on June 18, 2022, are passengers waiting to be taken to quarantine-designated destinations.
Leo Ramirez | Afp | Getty Images
The U.S. government is considering imposing new Covid rules for travelers from China, officials said, citing concerns over virus-related data released by the Chinese government.
“There are mounting concerns in the international community on the ongoing COVID-19 surges in China and the lack of transparent data, including viral genomic sequence data, being reported from the PRC,” officials said in a statement late Tuesday.
“Without this data, it is becoming increasingly difficult for public health officials to ensure that they will be able to identify any potential new variants and take prompt measures to reduce the spread,” the officials said.
The officials pointed to Japan’s recent measures which require a negative Covid test for travelers arriving from mainland China from Dec. 30 – as China faces a sharp surge in infections nationwide following an abrupt reopening.
Travelers from China without a valid vaccination certificate will also be required to take a pre-departure test, the notice from Japan’s health ministry added. The measures will not apply to those traveling from Hong Kong and Macao, according to the notice.
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When asked for comment on Japan’s measures, the Chinese Ministry of Foreign Affairs emphasized a need for a “science-based” measures, without elaborating further.
“The current COVID situation in the world continues to call for a science-based response approach and joint effort to ensure safe cross-border travel, keep global industrial and supply chains stable, and restore world economic growth,” deputy director-general Wang Wenbin told reporters in a Tuesday briefing.
The U.S. officials mentioned Malaysia is also taking measures while India and the World Health Organization have expressed their concern about the situation in China.
“The U.S. is following the science and advice of public health experts, consulting with partners, and considering taking similar steps we can take to protect the American people,” the officials said.
Travelers check in at Shanghai’s Hongqiao International Airport in on Dec. 12, 2022, after China relaxed domestic travel restrictions.
Qilai Shen | Bloomberg | Getty Images
BEIJING — Now that China is set to reopen its borders, locals are rushing to plan overseas travel for the Lunar New Year in late January, according to Trip.com Group.
Within half an hour of China’s announced policy change, searches for travel abroad surged to a three-year high, the travel booking company said.
Japan, Thailand, South Korea, the U.S., Singapore, Malaysia, Australia and the U.K. made the list of top 10 destinations outside the mainland with the fastest-growing search volume, the company said. Macao and Hong Kong also made the list, which did not include any countries on the European continent.
China’s National Health Commission announced late Monday that starting Jan. 8, inbound travelers would no longer need to quarantine upon arrival on the mainland, ending a policy of nearly three years.
Authorities also said they would allow Chinese citizens to resume travel, without providing details on timing or process.
During the pandemic, Beijing prevented Chinese citizens from getting passports or leaving the country unless they had a clear reason, typically for business.
The Lunar New Year, also known as the Spring Festival, is one of the biggest public holidays in China. In 2023, the holiday runs from Jan. 21 to 27.
The “microfinance” industry — long touted as a way to help poor, rural communities in developing countries — is pushing tens of thousands of farming families into debt traps as they attempt to adapt to a changing climate, according to a report.
The study, conducted by researchers at a group of U.K. universities, looked at a range of case studies in Cambodia, where it found easy-access loans had caused an “overindebtedness emergency” that was undermining borrowers’ long-term ability to cope with their new environment.
Modern microfinance institutions (MFIs), which are generally small, locally run organizations with a variety of funding sources such as international investors, banks and development agencies, emerged in the 1970s and grew rapidly in the early 2000s. They were promoted as a way to provide financial services, typically small working capital loans but also savings accounts and insurance, to the traditionally unbanked — such as women and people on very low incomes.
In Cambodia, around 61% of people live in rural areas, and 77% of rural households rely on agriculture, fisheries, and forestry for their livelihoods, according to development agency USAID.
Many have seen these traditional livelihoods affected by a mix of climate change, over-development and illegal logging and fishing, with increasing droughts, wildfires and unpredictable rainfall patterns causing crop losses and damage to the ecosystem of Cambodia’s vital Tonle Sap lake.
The establishment of hundreds of MFI branches since the early 2010s, which can be seen advertising services along roadsides around the country of 17 million people, has often harmed rather than helped those affected, the report published in September found.
In its survey of around 1,800 borrowers, roughly half cited feeding their family as their primary motivation.
But the authors say the loans are increasingly being taken up to service existing debt from a mix of formal and informal sources, rather than being put toward climate-adaptive investments. The loans arealso seeing farmers put assets including their land up as collateral, even when the loans are high-interest and have short repayment windows.
A Maxima Microfinance branch in Kandal Province, Cambodia, in July 2018. The establishment of hundreds of local MFI branches since the early 2010s has often harmed rather than helped those affected, a report found.
Taylor Weidman | Bloomberg | Getty Images
NGOs estimate around 167,000 Cambodians have sold their land to pay microfinance loans over the last five years.
The level of microfinance indebtedness in Cambodia at the end of 2021 was $4,213 per capita, more than double gross domestic product per capita. Around 2.6 million people have taken out microloans.
“The debt burden created by the nexus between climate change and microfinance creates enormous challenges for many individuals and communities causing physical and emotional stress,” said Ian Fry, United Nations special rapporteur on human rights within climate change, who also acknowledged microfinance had been promoted by the U.N., World Bank and other international agencies.
Some oversight of the industry does exist. MFIs are required to register with the National Bank of Cambodia, the country’s central bank, which in December 2021 stopped issuing new licenses and told institutions to improve the “quality, efficiency and affordability” of their services. In 2017, it capped microloan interest rates at 18% annually.
The Cambodia Microfinance Association, a trade body, maintains that MFI loans have an overall positive impact in increasing income and land ownership, and has issued lending guidelines to “reduce the risk of excessive debt” for consumers. It has also hit back at critiques of the industry by NGOs and in previous reports. The NBC and CMA did not respond to requests for comment.
The issues surrounding microfinancing institutions in Cambodia — and around the world, from South Africa to India to Mexico — have been highlighted by NGOs and journalists for nearly a decade.
Microfinance institutions globally had an estimated gross loan portfolio of $124 billion in 2019.
In some cases it has been found to have positive effects. A 2016 book published by the World Bank argued microfinance loans had reduced poverty and increased incomes in Bangladesh, and banking giant HSBC still promotes its funding of microfinance in the country.
But the World Bank, an early and longstanding advocate of microfinance, has also been warning for years of risks including overindebtedness and the growing commercialization of the industry.
Farmer in rice field. Kep. Cambodia. (Photo by: Pascal Deloche/Godong/Universal Images Group via Getty Images)
Godong | Universal Images Group | Getty Images
In the 30 years of advocacy done by Cambodian human rights NGO Licadho, land-grabbing has been one of the most prolific problems it addresses on the ground, its director, Naly Pilorge, told CNBC by phone.
That’s in part a legacy of the murderous Khmer Rouge regime, which banned private land ownership when it ran the country from 1975 to 1979 and left survivors without land deeds in the tumultuous years that followed.
“We started noticing that in rural communities, workers were losing their land because of another problem even when they had secured their land titles — they were losing it to MFIs,” Pilorge said. “How can a farmer farm without land?”
People were being forced to migrate and look for alternative work, Licadho found, which was difficult in the Cambodian economy, where agriculture makes up around a fifth of GDP, and the biggest employer is the garment factory sector, which has been hit hard by the Covid-19 pandemic and EU sanctions.
Cambodia was badly affected by the pandemic, with revenue from tourism plunging from its all-time high of $4.9 billion in 2019 to just over $184 million in 2021, according to government figures.
Licadho has done four research projects into issues surrounding microfinance to highlight its risks, including one in 2021.
Motorists ride past a Sonatra Microfinance Institution Plc branch in Phnom Penh, Cambodia, on Friday, July 31, 2018.
Bloomberg | Bloomberg | Getty Images
“The numbers didn’t make sense. In a country perceived as developing, that struggled with tourism due to Covid, the MFI sector was still growing at 30% each year, and the average loan went from around $3,000 to $4,000,” Pilorge said.
“Some of the people being offered these amounts have never seen $500 in cash, let alone $4,000, so when someone comes and offers it in exchange for their land as collateral it is tempting.” Cambodia uses both the Cambodian riel and the U.S. dollar.
Loan forms are complicated to the average person, she added, but “a significant portion are given to ethnic minorities who neither write nor read Khmer. People are signing with a thumb print.”
In the capital Phnom Penh, she added, she commonly meets people working seven days a week to pay off spiraling MFI loans.
The 2022 report added its support to prior calls for the establishment of debt relief and interest suspension programs. That should be in tandem with efforts to cancel and restructure the national debt of countries in developing countries,it said.
It also said the international development community should redirect support away from microfinance institutions and into more targeted projects, and argued there needs to be more “robust taxation and regulation of profits, dividends, and capital gains generated by the foreign owners of Cambodian microfinance institutions.”
The U.N.’s Ian Fry called on the international finance community to “take strong heed of the recommendations found in this report and seriously rethink their approach to microfinance.”
Pilorge also took aim at international governments, financing institutions and investors who fail to prevent funds being funneled toward predatory activities.
“All these international investors, Asian, European, Americans and so on, still perceive MFIs as a positive thing because of the initial concept. It looks good, you get a high return, everybody thinks they are helping poor people. But there have been red flags on every level for 15 years and they have been ignored,” she said.
“Investors are happy, they get the interest, the agents get a base salary and commission, and the people who suffer are the poorest.”
Bank of Japan Governor Haruhiko Kuroda on Monday brushed aside the chance of a near-term exit from ultra-loose monetary policy but voiced hope that intensifying labor shortages will prod firms to raise wages.
Kuroda said the BOJ’s decision last week to widen the allowance band around its yield target was aimed at enhancing the effect of its ultra-easy policy, rather than a first step toward withdrawing its massive stimulus program.
“This is definitely not a step toward an exit. The Bank will aim to achieve the price target in a sustainable and stable manner, accompanied by wage increases, by continuing with monetary easing under yield curve control,” Kuroda said in a speech delivered to a meeting of business lobby Keidanren.
He also said Japan’s average consumer inflation will likely slow below the BOJ’s 2% target in the next fiscal year as the effects of soaring import costs dissipate.
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But Kuroda said wage growth will likely increase gradually due to intensifying labor shortages and structural changes in Japan’s job market, which are leading to higher pay for temporary workers and a rise in the number of permanent workers.
“Labor market conditions in Japan are projected to tighten further, and firms’ price- and wage-setting behavior is also likely to change,” Kuroda said.
“In this sense, Japan is approaching a critical juncture in breaking out of a prolonged period of low inflation and low growth,” he said.
The strength of wage growth is seen as key to how soon the BOJ could raise its yield curve control targets, which are set at -0.1% for short-term interest rates and around 0% for the 10-year bond yield.
The BOJ shocked markets last week with a surprise widening of the band around its 10-year yield target. Kuroda had described the move, which allows long-term rates to rise more, as aimed at easing some of the costs of prolonged stimulus rather than a prelude to a full-fledged policy normalization.
With inflation exceeding its 2% target, however, markets are rife with speculation that the BOJ will raise the yield targets when the dovish governor Kuroda’s term ends in April next year.
While more companies are starting to hike prices to pass on higher costs to households, the BOJ must examine whether such changes in corporate price-setting behavior will take hold as a new norm in Japan, Kuroda said.
The outcome of next year’s spring wage negotiations between big companies and unions will also be key to the outlook for wage growth, he said.
Speaking at the same meeting, Prime Minister Fumio Kishida called for business leaders’ help in achieving wage growth high enough to compensate households for the rising cost of living.
Japan’s core consumer inflation hit a fresh four-decade high of 3.7% in November as companies continued to pass on rising costs to households, a sign that price hikes were broadening.
But wages have barely risen for permanent workers, as companies remained cautious about increasing fixed costs amid an uncertain economic outlook.
Vishnu Varathan of Mizuho Bank says emerging markets in Asia are gauging “whether there will be any unwanted … macro stability risks from the Fed doing more than what markets are betting on.”
The central China city of Taiyuan saw its GDP grow by 10.9% year-on-year in the first three quarters of 2022. Pictured here is a screen displaying details of a new factory in the city.
Vcg | Visual China Group | Getty Images
BEIJING — The Chinese economy of 2023 almost definitely won’t look like the Chinese economy of 2019.
In the last month, Beijing suddenly ceased many of the lockdown measures and Covid testing requirements that had weighed on economic growth over the last 18 months. Analysts warn of a bumpy road to full reopening, but they now expect China’s economy to bounce back sooner than previously forecast.
The elements underpinning that growth will almost certainly look different than they did three years ago, according to economists.
China’s growth model is moving from one highly dependent on real estate and infrastructure to one in which the so-called digital and green economy play greater roles, analysts at leading Chinese investment bank CICC said in their 2023 outlook released last month. They cited the ruling Chinese Communist Party’s 20th National Congress emphasis on innovation.
The digital economy category includes communication equipment, information transmission and software. Green economy refers to industries that need to invest in order to reduce their carbon emissions — electric power, steel and chemicals, among others.
Over the next five years, cumulative investment into the digital economy is expected to grow more than sevenfold to reach 77.9 trillion yuan ($11.13 trillion), according to CICC estimates.
That surpasses anticipated cumulative investment into real estate, traditional infrastructure or the green economy — making digital the largest of the four categories, the report said.
In 2021 and 2022, real estate was the largest category by investment, the report said. But the CICC analysts said that this year, investment into real estate fell by about 22% from last year, while that into the digital and green sectors grew by about 24% and 14%, respectively.
Beijing cracked down on developers’ high reliance on debt in 2020, contributing to defaults and a plunge in housing sales and investment. Authorities this year have eased many of those financing restrictions.
While much of the world struggled to contain Covid-19 in 2020 and 2021, China’s swift control of the virus helped local factories meet surging global demand for health products and electronics.
Now, demand is dropping. China’s exports started to fall year-on-year in October — for the first time since May 2020, according to Wind Information.
Next year, a reduction in net exports is expected to cut growth by 0.5 percentage points, Goldman Sachs Chief China Economist Hui Shan and a team said in a Dec. 16 note. Net exports had supported China’s GDP growth over the last several years, contributing as much as 1.7 percentage points in 2021, the analysts said.
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But China’s exports to the Association of Southeast Asian Nations have picked up, surpassing those to the U.S. and EU on a monthly basis in November, according to customs data.
“Exports to ASEAN countries may serve as a mild buffer to the pressures in EU and US markets,” Citi’s China economist Xiaowen Jin and a team said in a note Wednesday. They expect ASEAN’s GDP growth to rebound in 2023, while the U.S. and EU spend part of next year in recession.
Jin pointed out that China’s car exports, especially of electric cars and related parts, helped support overall exports this year.
Beijing has pushed hard to increase the development of the national electric car industry. Many brands from Nio to BYD have started to sell passenger cars to Europe and other countries.
“The rapid deceleration in exports also means China needs to tap into domestic markets for growth over the foreseeable future,” said Hao Zhou, chief economist at Guotai Junan Securities in a Dec. 15 note. “With the easing of Covid restrictions, consumption is likely to see meaningful and sustainable recovery from next year.”
He expects retail sales to rise by 6.8% next year, and national GDP to grow by 4.8%.
Central government policy announcements this month have prioritized boosting domestic consumption. Retail sales have lagged overall growth since the pandemic, while a record share of people have preferred to save.
Goldman Sachs analysts raised their 2023 GDP forecast from 4.5% to 5.2% on the economy reopening sooner than expected, with consumption as the main driver.
However, they cautioned that income and consumer confidence will take time to heal, meaning any release next year of “pent-up demand” may be limited outside of a few categories such as international travel.
Spending among poorer Chinese isn’t keeping pace with how much wealthy Chinese are spending — a contrast to greater uniformity between the groups prior to the pandemic, according to a McKinsey survey this year.
That trend has showed up in companies’ financial results.
In the quarter ended Sept. 30, budget-focused Pinduoduo said revenue from merchandise sales plunged by 31% from a year ago to 56.4 million yuan.
Alibaba‘s China commerce revenue, which include apparel sales, declined by 1% year-on-year to 135.43 billion yuan during that time.
Sales of more expensive items favored by the middle class, including electronics and home appliances, rose at JD.com, which said revenue from such products increased by about 6% to 197.03 billion yuan in the three months ended Sept. 30.
Longer term, McKinsey expects millions of urban households to become more affluent, while the number in the lower income category declines.
Chinese e-commerce giant Alibaba was one of the 100 over companies that had faced the risk of delisting in the U.S. in 2024 if it did not hand over the audits of their financial statements.
Investors could regain the confidence to put their money in Chinese tech stocks as these companies avoid delisting from U.S. stock exchanges and the Chinese government pledges policy support, according to one investment manager.
Investors often grapple with a lack of transparency into Chinese stocks.
“It will allow institutional investors to come back. Professional investors were very scared about this delisting risk which was why they have stayed on the sidelines,” Brendan Ahern, chief investment officer at U.S.-based investment manager KraneShares, told CNBC’s “Squawk Box Asia” on Wednesday.
As of Sept. 30, there were 262 Chinese companies listed on U.S. exchanges with a total market capitalization of $775 billion, according to the United States-China Economic and Security Review Commission.
“With that risk going away based on the PCAOB announcement, you are going to see investment dollars flow back into these names,” said Ahern.
“These internet giants are really where investors want to invest when it comes to China,” said Ahern.
But he also caveated that it is still “early days, weeks, months to see that capital return back into the space.”
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But he also noted policy support will help to boost growth for these companies. Last week, China pledged to raise domestic consumption next year, as the country moves toward boosting growth after exiting its zero-Covid policy.
“2023 is a year where we are going to have a lot of government policy support such as raising domestic consumption,” said Ahern. “About 25% of all retail sales goes through the companies.”
“The Chinese government actually needs these internet companies, which explains why we have seen a backing off on some of the regulatory scrutiny we experienced in 2021,” said Ahern.
The central bank caught markets off guard by tweaking its yield curve control (YCC) policy to allow the yield on the 10-year Japanese government bond (JGB) to move 50 basis points either side of its 0% target, up from 25 basis points previously, in a move aimed at cushioning the effects of protracted monetary stimulus measures.
In a policy statement, the BOJ said the move was intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions.”
The central bank introduced its yield curve control mechanism in September 2016, with the intention of lifting inflation toward its 2% target after a prolonged period of economic stagnation and ultralow inflation.
The BOJ — an outlier compared with most major central banks — also left its benchmark interest rate unchanged at -0.1% on Tuesday and vowed to significantly increase the rate of its 10-year government bond purchases, retaining its ultra-loose monetary policy stance. In contrast, other central banks around the world are continuing to hike rates and tighten monetary policy aggressively in an effort to rein in sky-high inflation.
The YCC change prompted the yen and bond yields around the world to rise, while stocks in Asia-Pacific tanked. Japan’s Nikkei 225 closed down 2.5% on Tuesday afternoon. The 10-year JGB yield briefly climbed to more than 0.43%, its highest level since 2015.
By midafternoon in Europe, the U.S. dollar was down 3.3% against the surging yen. The yen’s rally saw the currency notch the biggest single-day gain against the U.S. dollar since March 1995 (27 years, eight months, 20 days), according to FactSet currency data.
U.S. Treasury yields spiked, with the 10-year note climbing by around 7 basis points to just below 3.66% and the 30-year bond rising by more than 8 basis points to 3.7078%. Yields move inversely to prices.
Shares in Europe retreated initially, with the pan-European Stoxx 600 shedding 1% in early trade before recovering most of its losses by late morning. European government bonds also sold off, with Germany’s 10-year bund yield up almost 7 basis points to trade at 2.2640%, having slipped from its earlier highs.
“The decision is being read as a sign of testing the water, for a potential withdrawal of the stimulus which has been pumped into the economy to try and prod demand and wake up prices,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“But the Bank is still staying firmly plugged into its bond purchase program, claiming this is just fine tuning, not the start of a reversal of policy.”
That sentiment was echoed by Mizuho Bank, which said in an email Tuesday that the market moves reflect a sudden flurry of bets on a hawkish policy pivot from the BOJ, but argued that the “popular bet does not mean that is the policy reality, or the intended policy perception.”
“Fact is, there is nothing in the fundamental nature of the move or the accompanying communique that challenges our fundamental view that the BoJ will calibrate policy to relieve JPY pressures, but not turn overtly hawkish,” said Vishnu Varathan, head of economics and strategy for the Asia and Oceania Treasury Department at Mizuho.
“For one, there was every effort made to emphasize that policy accommodation is being maintained, whether this was in reference to intended as well as potential step-up in bond purchases or suggesting no further YCC target band expansion (for now).”
The Bank of Japan noted in its statement that since early spring, market volatility around the world had risen, “and this has significantly affected these markets in Japan.”
“The functioning of bond markets has deteriorated, particularly in terms of relative relationships among interest rates of bonds with different maturities and arbitrage relationships between spot and futures markets,” it added.
The central bank said if these market conditions persisted, it could have a “negative impact on financial conditions such as issuance conditions for corporate bonds.”
Luis Costa, head of CEEMEA strategy at Citi, indicated on Tuesday that the market move may be an overreaction, telling CNBC there was “absolutely nothing stunning” about the BOJ’s decision.
“You have to take this BOJ measure in the context of a positioning in dollar-yen that was obviously not expecting this tweak. It’s a tweak,” he said.
Japanese inflation is projected to come in at 3.7% annually in November, according to a Reuters poll last week — a 40-year high, but still well below the levels seen in comparable Western economies.
Costa said the Bank of Japan’s move was not geared toward combating inflation but addressing the “infrastructure and the dynamics of JGB trading” and the gap in volatility between the trade in JGBs and the rest of the market.
Marcos Chan of the real estate services and investment firm says the contraction in demand for office space in the city has largely been driven by economic factors rather than the “so-called story that companies are leaving Hong Kong [for] other countries.”
Macao’s government relies on casinos for over 80% of its income, with most of the population employed directly or indirectly by the casino industry.
Dragon For Real | Moment | Getty Images
With mandatory quarantines lifted, ferry and airline service resuming, and licenses renewed, casinos hope 2023 marks a new beginning for the world’s preeminent gambling destination, Macao.
The Macao government awarded six companies new 10-year concessions to operate their integrated casino resorts. A concession essentially is an operating agreement with the government, which in turn, licenses the operators.
To win the permission, the casino companies agreed to invest collectively nearly $15 billion dollars in Macao to achieve government goals of diversifying the local economy beyond gambling and encouraging international tourism.
CNBC has also learned MGM will benefit from the allotment of 200 more gaming tables, though the award comes at the expense of competitors including Wynn’s properties, according to multiple sources.
Las Vegas Sands and Hong Kong-based Galaxy Entertainment have the largest real estate footprints in Macao and have committed to the biggest investments.
Sands’ agreement for a $3.75 billion dollar investment, or 30 billion MOP, will be roughly split between capital expenditures and operating expenses. Most of the investment will go toward non-gaming projects like a new conference facility and a luxury yacht experience that appeal to foreign visitors, according to a company statement.
An executive in the company who asked not to be named characterized the financial commitment as a win, as it entails investments that likely would have been made anyway — as opposed to an operating fee forked over in exchange for a license.
The sentiment is similar at MGM Resorts, which plans to invest its $2.1 billion commitment in three main areas: culture, entertainment and medical tourism.
This month, Macao has seen an increase in tourism from mainland China from visitors trying to get an mRNA Covid vaccine. The BioNTech shots have not been approved in mainland China, but in Macao, a Special Administrative Region, or SAR, the Macau University of Science and Technology (MUST) Hospital offers vaccinations for tourists.
Wynn Resorts‘ commitment to a $2.2 billion investment over the next decade will incorporate plans for state-of-the-art theater and restaurant experiences. It also plans to expand its sales presence around Asia and North America to boost international tourism.
Melco Resorts and Entertainment announced the return of its House of Dancing Water extravaganza, which has been suspended since the beginning of the pandemic. It will also build an indoor water park. The company also plans to focus on medical tourism by building a clinic with MRI and other advanced imaging technology.
Galaxy will build Macao’s first high-tech amusement park. SJM Holdings will renovate its defunct floating casino to offer non-gaming entertainment options.
As the government works to usher in a new era, the days of junkets bringing in high rollers to the island is all but finished. Crackdowns had curtailed that segment of the gaming business, even before the pandemic began. This week, the Macao secretary of finance and the gaming enforcement agency DICJ announced they will increase monitoring and enforcement around even stricter limits.
A rise in Covid infections around China caused November gaming revenue in Macao to fall 23% from October and plummet 99% from November 2019 pre-pandemic levels, according to government data.
Even with the resumption of the e-visa program, where Chinese travelers can apply electronically for travel documents, and the easing of quarantine requirements, the Macao government said it anticipates gross gaming revenue, or GGR, in 2023 to mirror 2022’s GGR of roughly $16 billion, as Macao struggles with continuing Covid overhang.
But Macao’s loss may be Singapore’s gain. Sands reported third-quarter results that showed a stunning jump in visitation and spending after Singapore lifted Covid travel restrictions.
Fitch estimates Singapore will achieve 80% of its pre-pandemic gaming revenue in 2022, and 95% in 2023.
Curtis S. Chin, a former U.S. ambassador to the Asian Development Bank, is managing director of advisory firm RiverPeak Group. Jose B. Collazo is an analyst focusing on the Indo-Pacific region. Follow them on Twitter at @CurtisSChin and @JoseBCollazo.
As the new year approaches, we turn again to our annual look at Asia’s winners and losers. Government and business leaders in every major economy — China now included — may well hope 2023 is the year when draconian pandemic-related lockdowns become a matter of history.
In our 2021 annual review, we awarded “worst year in Asia” to Afghan women and girls — a consequence of the U.S. and its allies’ chaotic withdrawal from Afghanistan and the return of Taliban rule. “Best year” went to Asia’s Cold War warriors, as social media, “wolf warriors” and politicians helped spark a return to Cold War rhetoric amid worsening U.S.-China relations.
Now, with hopes that Covid is in retreat and that inflation will moderate in the year ahead, we take a last look at who had it good and who had it bad in 2022.
Perseverance proved a winner in 2022 as the year ended with Ferdinand “Bongbong” Marcos Jr. of the Philippines and Anwar Ibrahim of Malaysia becoming leaders of their respective countries. One salvaged a family legacy, the other moved from prison to power — storylines befitting a Netflix series.
In the Philippines, Marcos — the namesake son of his authoritarian father — won a landslide election in May for president, despite what detractors see as a family legacy of corruption and impunity. More than 35 years ago, in February 1986, the senior Marcos and his wife Imelda fled to Hawaii in exile, driven out by a People Power Revolution and a loss of U.S. support.
And in Malaysia, Anwar finally proved a winner in November, shedding the long-held descriptor of “prime-minister-in-waiting” to become his nation’s 10th prime minister. That followed decades marked by smear campaigns, imprisonment and backroom intrigue as the onetime deputy prime minister challenged vested interests with his vows to combat corruption.
The two now face the challenge of governing and moving their respective countries forward. Stay tuned for the next episode.
In a year that saw tensions between the U.S and China reach a feverish peak when U.S. Speaker of the House Nancy Pelosi visited Taipei, the island’s sophisticated semiconductor industry ends the year in a good position. Taiwan’s chipmakers are more essential than ever.
Semiconductor chips lie at the heart of everything from computers to cars to smartphones. Underscoring the Taiwanese tech industry’s critical role, a Semiconductor Industry Association (SIA)/Boston Consulting Group 2021 study found that 92% of the world’s most advanced semiconductor manufacturing capacity is located in Taiwan. The other 8% was in South Korea.
TSMC headquarters in Hsinchu, Taiwan. The semiconductor manufacturer’s products lie at the heart of everything from automobiles to smartphones.
Bloomberg | Bloomberg | Getty Images
A rare bipartisan U.S. Congress has taken notice, passing in July 2022 the CHIPS and Science Act, which allocates $52 billion in federal funding to spur further domestic production of semiconductor chips. In December, the world’s dominant chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC), announced plans for a second semiconductor chip plant in Arizona, raising to $40 billion what is already one of the largest foreign investments in U.S. history.
With numbers like those, Taiwan’s semiconductor industry ends the year on the move, still building ties and winning growing support from business and government in the United States and elsewhere.
As in much of the world, investors in Asia — once bedazzled if not bewitched by the crypto industry — end the year in a mixed mood. Industry meltdowns have left many, including in government, wondering if the message of caveat emptor — buyer beware — is sufficient, and new regulations loom.
The crypto exchange FTX’s billions-dollar implosion set off alarm bells throughout the region. Singapore’s Temasek Holdings, which has written off its entire $275 million investment in the now-collapsed FTX cryptocurrency business, has suffered “reputational damage,” Deputy Prime Minister Lawrence Wong said.
FTX founder Sam Bankman-Fried is led by officers of the Royal Bahamas Police force following his arrest.
Even amid food insecurity and economic worries across much of Asia, the images of angry citizens storming the official residence of Sri Lanka’s President Gotabaya Rajapaksa and the Presidential Secretariat stand out in what was most decidedly a bad year for this one-time “pearl of South Asia.”
Sri Lanka continues to face a multidimensional crisis. A broken economy, depleted foreign currency reserves, high inflation — at one point reaching more than 70% — and power, fuel and food shortages made worse by the impact of the war in Ukraine, a growing “brain drain” and meager tourism numbers characterize this south Asian nation today.
Negotiations for an IMF deal remain complicated by large amounts of Sri Lankan debt held so by China, India and Japan.
An IMF deal to restructure Sri Lanka’s debt could provide much needed cash and economic stability, but negotiations remain complicated by large amounts of Sri Lankan debt held so by China, India and Japan.
While China has taken pride in an extraordinarily low number of (officially reported) Covid-related deaths, the nation has also become a showcase for the negative consequences of efforts to contain the virus. In what should have been a good year for Chinese President Xi Jinping, he has seen the year close with a wave of Chinese discontent.
By year-end, anti-lockdown protests were reported in numerous cities, including at the world’s largest iPhone assembly factory in Zhengzhou, as China’s zero-Covid policy took its toll on the economy and everyday people’s mental health.
Chinese citizens can take heart that those protests may well have had an impact. The Chinese government has begun to relax zero-Covid restrictions. Still, the nation continues to lag the world in opening and moving forward, and worries continue about the nation’s rate of vaccination among the elderly.
And so, even as hope has returned for a better year ahead, China’s beleaguered, locked-down citizens take the dubious honors of worst year in Asia 2022.
Employees working on the production line of carbon fiber badminton rackets at a factory in Sihong County, in China’s Jiangsu province. China reported Saturday that factory activity in April contracted at a steeper pace as Covid-19 lockdowns halted industrial production and disrupted supply chains.
Visual China Group | Getty Images
Morgan Stanley raised its outlook for China’s economy in 2023, predicting a rebound in activity will come earlier and be sharper than expected.
The firm raised its forecasts for the country’s gross domestic product in 2023 to 5.4% from its previous outlook of 5%, according to a research note led by the firm’s chief Asia economist Chetan Ahya.
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“We had previously expected a rebound in activity to materialize from late 2Q23. Now we are projecting mobility to improve from early March,” the note said, adding that the firm expects to see a “faster and sharper rise in mobility” to be reflected in the economy starting in the second quarter.
The outlook upgrade comes after the firm raised its recommendation rating for Chinese equities to overweight from equal-weight earlier this month on reopening optimism, marking the end of a stance that it held for nearly two years.
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China’s government is also shifting to prioritizing economic growth, another pillar behind Morgan Stanley’s revised forecast for the country’s economic outlook.
“From our perspective, policymakers are taking concerted action to lift growth across all fronts,” the note said. “This is the first time since 2019 where domestic macro policies and Covid management are aligned in supporting a growth recovery, rather than acting as countervailing forces.”
Reuters separately reported that the nation is working on a stimulus package worth more than $143 billion to support its semiconductor industry, which would be one of its biggest-ever fiscal incentive package.
Morgan Stanley also sees China’s foreign exchange rates as underpriced.
“In FX, we don’t believe that the market is pricing in the reopening trade fully yet,” the note said, adding that forex traders have historically converted their holding of the U.S. dollar into Chinese yuan while the onshore currency was stronger.
“Given the recent appreciation of CNY, they now have more incentive to convert, pushing CNY stronger, especially before the Chinese New Year when they need to pay wages and bonuses,” the economists said in the note.
The onshore Chinese yuan stood at 6.9590 against the U.S. dollar on Wednesday morning – below the key 7.0 level against the greenback, which Morgan Stanley said makes it more attractive for exporters to buy more Chinese yuan with U.S. dollars.
“This is because the economic weakness will be reflected in fewer imports, supporting CNY,” the note said.
One of the risks that Morgan Stanley acknowledged is a potential withdrawal of policy support.
During China’s reopening process, analysts expect a surge in Covid infections. A rapid increase in hospitalizations and strain on the public health care system could possibly lead to officials in China rethinking their policy stance.
“An earlier-than-expected withdrawal of policy support – such as a sharp pullback in infrastructure spending, tightening of monetary policy, or a tightening of regulatory policies – could dampen animal spirits and weaken growth,” it said.
The report said further easing of restrictions will likely lead to a significant rise in Covid cases, though the firm predicted the impact of the surge will be short-lived.
Another area of uncertainty for Morgan Stanley’s growth outlook is geopolitics.
“The reappearance of geopolitical tension much earlier could also trigger a spike in China’s equity risk premium,” the note said.
Inflation has already peaked, but it will remain above pre-Covid levels in 2023, said David Mann, chief economist for Asia-Pacific, Middle East and Africa at the Mastercard Economics Institute.
“Inflation has seen its peak this year, but it will still be above what we had been used to pre-pandemic next year,” Mann told CNBC’s “Squawk Box Asia” on Friday.
It’ll take a few years to return to 2019 levels, he said.
“We do expect that we go back down in the direction of where we were back in 2019 where we were still debating how many countries needed negative interest rates.”
Central banks around the world have been hiking interest rates as recently as November in response to high inflation.
They include central banks from the Group of 10 countries — such as the U.S. Federal Reserve, the Bank of England and the Reserve Bank of Australia — as well those of emerging markets, such as Indonesia, Thailand, Malaysia and the Philippines, Reuters reported.
“Inflation has become that big challenge. It’s been spiking and staying very high,” Mann said. But he warned that it would be risky if central banks end up hiking rates more than they need to.
“The challenge is if you’ve lost orientation of where the sky and the ground is, you’re not quite sure where you need to end up,” Mann said.
It would be a “serious scenario” if central banks “end up going slightly too far and then need to reverse relatively quickly,” he added.
Despite high inflation, Mann said, U.S. consumers are still willing to engage in discretionary spending in areas such as travel.
Travel recovery in the U.S. is strong and people are still choosing to spend on experiences rather than material goods, Mann said.
And they are being frugal about their spending on necessities in order to be able to afford non-essentials, he added.
“There is something in the back of people’s minds that worries them that even though it’s not very likely, it’s still possible that those [Covid] restrictions [will] come back,” he said.
As a bullet train speeds by in the background, a liquid hydrogen tank towers over solar panels and hydrogen fuel cells at Panasonic’s Kusatsu plant in Japan. Combined with a Tesla Megapack storage battery, the hydrogen and solar can deliver enough electricity to power the site’s Ene-Farm fuel cell factory.
Tim Hornyak
As bullet trains whiz by at 285 kilometers per hour, Panasonic’s Norihiko Kawamura looks over Japan’s tallest hydrogen storage tank. The 14-meter structure looms over the Tokaido Shinkansen Line tracks outside the ancient capital of Kyoto, as well as a large array of solar panels, hydrogen fuel cells and Tesla Megapack storage batteries. The power sources can generate enough juice to run part of the manufacturing site using renewable energy only.
“This may be the biggest hydrogen consumption site in Japan,” says Kawamura, a manager at the appliance maker’s Smart Energy System Business Division. “We estimate using 120 tons of hydrogen a year. As Japan produces and imports more and more hydrogen in the future, this will be a very suitable kind of plant.”
Sandwiched between a high-speed railway and highway, Panasonic’s factory in Kusastsu, Shiga Prefecture, is a sprawling 52 hectare site. It was originally built in 1969 to manufacture goods including refrigerators, one of the “three treasures” of household appliances, along with TVs and washing machines, that Japanese coveted as the country rebuilt after the devastation of World War II.
Today, one corner of the plant is the H2 Kibou Field, a demonstration sustainable power facility that started operations in April. It consists of a 78,000-liter hydrogen fuel tank, a 495 kilowatt hydrogen fuel cell array made up of 99 5kW fuel cells, 570kW from 1,820 photovoltaic solar panels arranged in an inverted “V” shape to catch the most sunlight, and 1.1 megawatts of lithium-ion battery storage.
On one side of the H2 Kibou Field, a large display indicates the amount of power being produced in real time from fuel cells and solar panels: 259kW. About 80% of the power generated comes from fuel cells, with solar accounting for the rest. Panasonic says the facility produces enough power to meet the needs of the site’s fuel cell factory — it has peak power of about 680kW and annual usage of some 2.7 gigawatts. Panasonic thinks it can be a template for the next generation of new, sustainable manufacturing.
“This is the first manufacturing site of its kind using 100% renewable energy,” says Hiroshi Kinoshita of Panasonic’s Smart Energy System Business Division. “We want to expand this solution towards the creation of a decarbonized society.”
The 495kilowatt hydrogen fuel cell array is made up of 99 5KW fuel cells. Panasonic says it’s the world’s first site of its kind to use hydrogen fuel cells toward creating a manufacturing plant running on 100% renewable energy.
Tim Hornyak
An artificial intelligence-equipped Energy Management System (EMS) automatically controls on-site power generation, switching between solar and hydrogen, to minimize the amount of electricity purchased from the local grid operator. For example, if it’s a sunny summer day and the fuel cell factory needs 600kW, the EMS might prioritize the solar panels, deciding on a mixture of 300kW solar, 200 kW hydrogen fuel cells, and 100kW storage batteries. On a cloudy day, however, it might minimize the solar component, and boost the hydrogen and storage batteries, which are recharged at night by the fuel cells.
“The most important thing to make manufacturing greener is an integrated energy system including renewable energy such as solar and wind, hydrogen, batteries and so on,” says Takamichi Ochi, a senior manager for climate change and energy at Deloitte Tohmatsu Consulting. “To do that, the Panasonic example is close to an ideal energy system.”
With grey hydrogen, not totally green yet
The H2 Kibou Field is not totally green. It depends on so-called grey hydrogen, which is generated from natural gas in a process that can release a lot of carbon dioxide. Tankers haul 20,000 liters of hydrogen, chilled in liquid form to minus 250 Celsius, from Osaka to Kusatsu, a distance of some 80 km, about once a week. Japan has relied on countries like Australia, which has greater supplies of renewable energy, for hydrogen production. But local supplier Iwatani Corporation, which partnered with Chevron earlier this year to build 30 hydrogen fueling sites in California by 2026, has opened a technology center near Osaka that is focused on producing green hydrogen, which is created without the use of fossil fuels.
Another issue that is slowing adoption is cost. Even though electricity is relatively expensive in Japan, it currently costs much more to power a plant with hydrogen than using power from the grid, but the company expects Japanese government and industry efforts to improve supply and distribution will make the element significantly cheaper.
“Our hope is that hydrogen cost will go down, so we can achieve something like 20 yen per cubic meter of hydrogen, and then we will be able to achieve cost parity with the electrical grid,” Kawamura said.
Panasonic is also anticipating that Japan’s push to become carbon-neutral by 2050 will boost demand for new energy products. Its fuel cell factory at Kusatsu has churned out over 200,000 Ene-Farm natural gas fuel cell for home use. Commercialized in 2009, the cells extract hydrogen from natural gas, generate power by reacting it with oxygen, heat and store hot water, and deliver up to 500 watts of emergency power for eight days in a disaster. Last year, it began selling a pure hydrogen version targeted at commercial users. It wants to sell the fuel cells in the U.S. and Europe because governments there have more aggressive hydrogen cost-cutting measures than Japan. In 2021, the U.S. Department of Energy launched a so-called Hydrogen Shot program that aims to slash the cost of clean hydrogen by 80% to $1 per 1 kilogram over 10 years.
Panasonic doesn’t plan to increase the scale of its H2 Kibou Field for the time being, wanting to see other companies and factories adopt similar energy systems.
It won’t necessarily make economic sense today, Kawamura says, “but we want to start something like this so it will be ready when the cost of hydrogen falls. Our message is: if we want to have 100% renewable energy in 2030, then we must start with something like this now, not in 2030.”
