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Pramod Shenoi of CreditSights says “all of the Singaporean banks are very comfortable with their China exposure.”
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Tag: Asia Economy
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HSBC beats expectations in first quarter earnings; CEO Noel Quinn to retire
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The HSBC Holding logo is being displayed on a smartphone with HSBC visible in the background in this photo illustration taken in Brussels, Belgium, on February 20, 2024.
Jonathan Raa | Nurphoto | Getty Images
HSBC beat market expectations in its first quarter earnings report on Tuesday, and announced the surprise departure of Group Chief Executive Officer Noel Quinn.
Revenue came in at $20.8 billion, up 3% from the same period a year ago and compared with the median LSEG forecast for about $16.94 billion.
Pretax profit in the January to March period came in at $12.65 billion, falling about 2% from a year ago when profit before tax came in at $12.89 billion. Still, that figure beat the $12.61 billion estimates by analysts’ forecasts compiled by the bank.
Profit after tax income decreased to $10.84 billion — lower than the $11.03 billion seen in the first quarter of 2023.
HSBC, Europe’s largest bank by assets, has approved a first interim dividend of 10 cents per share, as well as a special dividend of 21 cents per share, following the completion of the sale of its banking business in Canada.
Noel Quinn to retire
The company also announced the retirement of Quinn, who has been in that position for nearly five years.
“The Board would like to pay tribute to Noel’s leadership of the Company. Noel has had a long and distinguished 37-year career at the Bank and we are very grateful for his significant contribution to the Group over many years,” said Group Chairman Mark Tucker.
“During his tenure, HSBC has delivered record profits and the strongest returns in over a decade,” said Aileen Taylor, group company secretary and chief governance officer in HSBC.
Quinn will remain as Group CEO as the bank begins the process of searching for his successor. HSBC said he has agreed to remain available through to the end of his 12-month notice period — which ends on April 30, 2025 — to support the transition.
Here are the other highlights of the bank’s first quarter financial report card:
- Net interest margin, a measure of lending profitability, decreased to 1.63% — compared with 1.69% a year ago.
- Common equity tier 1 ratio — which measures the bank’s capital in relation to its assets — was 15.2%, compared with 14.8% in the fourth quarter of 2023.
- Basic earnings per share came in at $0.54, slightly higher than $0.52 in the same period a year ago.
Outlook
HSBC also reiterated its outlook for 2024, saying it remains unchanged from the guidance in February.
The bank continues to target a return on average tangible equity “in the mid-teens” for 2024, with banking net interest income of at least $41 billion, subject to global interest rate conditions.
HSBC said its CET1 capital ratio is expected to be within its medium-term target range of 14% to 14.5%, while its dividend payout ratio is targeted to be 50% for 2024, excluding material notable items and related impacts.
Following the results, shares of HSBC in Hong Kong gained 1.56%, on pace for its seventh straight day of gains.
Correction: This story has been updated to accurately reflect that HSBC’s first quarter revenue for 2024 was 3% higher than a year ago. That figure was misstated due to an editing error.
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‘Chaotic era’ for Asian currencies: Bank of America is not bullish on any of them
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A Japanese 1,000 yen banknote sits on a pile of South Korean won banknotes for an arranged photograph at a Woori Bank Co. branch in Seoul, South Korea.
SeongJoon Cho | Bloomberg via Getty Images
Bank of America is bearish on a slew of Asian currencies and neutral at best on others, as the investment bank says it is the start of a “chaotic era.”
“We are not bullish on any currency in Asia,” Bank of America said in a recent report, with many currencies impacted by a delayed Federal Reserve easing cycle and sustained strength in the U.S. dollar.
The investment bank singled out the Chinese yuan, South Korean won, Taiwan dollar, Thai baht and Vietnamese dong under its bearish category.
Among their “neutral” list of currencies are the Hong Kong dollar, the Indonesian rupiah, the India rupee, the Malaysian ringgit, the Philippine peso and the Singapore dollar.
Chinese yuan
BofA forecasts the Chinese yuan to trade at 7.35 against the dollar this quarter and weaken to 7.45 in the third and fourth quarters.
The bank expects yuan depreciation pressures to sustain into the second half of the year, due to: the delayed Fed easing, China’s disinflationary behavior aggravating yield gap with the U.S. and a weak financial account as a result of a deterioration in foreign direct investment.
Chinese onshore yuan since the start of the year
Hotter-than-expected U.S. inflation in March pushed back market expectations of a rate cut to September, and lowered the outlook this year to two reductions from three.
The onshore CNY is currently trading at 7.24 per U.S. dollar.
South Korean won
The outlook for the Korean won “significantly turned” after the Fed pushed back on the timing of the rate cuts and Middle East geopolitical risks became a major headwind, said BofA.
“Year-to-date, we have seen impressive inflows into Korean equities, but these inflows are beginning to reverse as global equities are turning from the two aforementioned risk,” BofA’s economists wrote.
The South Korean won recently slipped to an 18-month low of 1,389.5 against the dollar. The Bank of Korea chief called the won volatility “excessive” and said the central bank would intervene if needed.
The won was last trading at 1,347.3 against the U.S. dollar. BofA’s economists said the won is currently overvalued compared with fair value of 1,417.
Taiwan dollar
BofA also remains negative on the Taiwan dollar given strong equity outflows and life insurance companies’ additional unwinding of non-deliverable forward hedges. An NDF is a currency derivatives contract that establishes a settlement between the prevailing spot rate and a contracted rate.
The Taiwan dollar is currently trading at 32.6 per U.S. dollar.
Vietnamese dong and Thai baht
The Vietnamese dong is trading at 25,450 per dollar, weakening almost 5% so far this year.
Compounding the impact of delayed Fed cuts are Vietnam’s political instability following the second presidential resignation in two years as well as difficulty in its property sector, said BofA. Those headwinds fuel domestic demand for the U.S. dollar and gold, the bank said.
“We revise our forecasts in anticipation of further modest VND depreciation pressure to 25,600 by end-2Q and ultimately USD/VND at 25,700 by year-end,” the note said.
The Thai baht similarly remains vulnerable to geopolitical tensions via higher oil prices and freight costs, BofA said. It revised its forecast for the currency to 37 against the greenback by the end of the year.
The investment bank did not mention the Japanese yen, which has hovered around 34-year lows against the U.S. dollar. The currency has struggled, slipping past 150, since the Bank of Japan raised rates in March.
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Asset quality of Indian banks ‘one of the cleanest’ in Asia-Pacific, says JPMorgan
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Harsh Modi of the investment bank discusses the opportunities in India's banking sector.
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What’s your single best tip for traveling in Japan? Here’s what frequent visitors said
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Japan has long captivated travelers.
But many of its most famous qualities — from the cuisine to the country’s nationwide culture of civility — can initially be befuddling for outsiders too.
To help travelers bridge the cultural gap, CNBC Travel asked frequent visitors for their single best piece of advice when visiting Japan.
1. Speak softly and carry your trash
“Japanese culture is about respecting your environment and the people around you. Don’t talk on your phone on public transit and in confined areas around other people.
Also, savoring your food is an important show of respect, so don’t eat while walking. Instead, sit down and enjoy each bite.
And be prepared to hold onto your trash around the city while traveling and sightseeing — chances of finding a trash can are slim to none! Locals generally bring a small bag to carry the day’s trash until they get home. Japan is very clean, and you’ll find public bathrooms to be spotless compared to other countries. Basically, try to leave no trace.”
— Tyler Monahan, New Jersey-based assistant golf caddie manager married to a Japanese citizen. He has made three trips to Japan totaling 155 days.
2. Punctuality is key (as are jazz clubs)
“Trains are exceedingly punctual, so two minutes is a big deal — if it’s not arriving at the exact time, it’s a different train! If you miss a train in a big city like Osaka or Tokyo, another will be there in minutes, so don’t sweat it. In the countryside though, it could be hours, or tomorrow!
Unlike trains in many cities that pull up and allow plenty of time for boarding, trains in Japan arrive and depart quickly. “Two minutes is a big deal,” said architect Henry Rose.
Source: Oliver Horovitz
Also, know the concept of “last train.” The whole train scene, both public and private, shuts down roughly between midnight and 5 a.m., which can seem a little early in big cities, so be warned. In rural areas, it can be much earlier. Be prepared to take a cab, or if you’re into it, explore this nocturnal world — perhaps at a jazz club that stays open until the first train starts — which in big cities is an entire economy unto itself.”
— Henry Rose, Seattle-based architect, who has made more than 10 trips to Japan.
3. To meet people, get Japanese business cards
“Exchanging ‘meishi’ is a glorious, and serious, tradition in Japan. Cards are presented with both hands and a deep bow. It is also one of the most unexpected and fun icebreakers you can use to meet new people.
The author, Oliver Horovitz (right), standing next to a man inspecting Horovitz’s meishi, or business card.
Source: Oliver Horovitz
Get cards printed entirely in Japanese — you can use Google Translate for the translation. The staff at Kinkos — located in all major cities in Japan — will walk you through the whole process. After this, locals will be shocked, and absolutely delighted, that you have meishi for them. During my last trip to Japan, I had 100 cards printed in Kyoto. I handed them out during the rest of the trip, always to smiles.”
— Oliver Horovitz, New York City-based travel writer who has visited Japan three times.
4. Bring fun socks
“Bare feet in Japan is a big no-no. Travelers should expect to remove their shoes often in Japan and should always have socks on when they do so. The removal of shoes might even happen in places that are unexpected, like a restaurant.
Travelers can consider tabi socks, a split-toe Japanese sock dating to the 1400s, that are worn with thonged shoes.
Tina Horne | Istock | Getty Images
Also, it is common to have slippers at the entrance to public bathrooms, with the expectation that restroom visitors use these slippers and return them promptly. Be sure to only pack and wear your best (clean and hole-free) socks while in Japan. If you have a collection of fun or interesting socks, wear them in Japan where they can actually be seen and admired!”
— Jolaine Pfeifer, Aspen, Colorado-based school administrator. She has made nine trips to Japan, on top of spending her middle and high school years in Yokosuka.
5. Don’t knock convenience stores
“Rest assured, the only resemblance these little oases have to their U.S. counterparts is in the name! Stores like 7-Eleven and Lawson are immaculately clean and have just about anything you might need, including a few go-to items that I seek out each time:
- A great selection of onigiri, which are sandwich-sized rice triangles wrapped in seaweed and filled with things like salmon, tuna, eggs and pickled plum.
Participants taste onigiri at a product meeting for 7-Eleven Japan in Tokyo on Jan. 23, 2024. Staff and suppliers gathered to discuss flavors, textures and fillings for the Japanese riceballs, one of 7-Eleven’s most important products, with more than 2 billion sold each year.
Noriko Hayashi | Bloomberg | Getty Images
- The coffee — especially at 7-Eleven. The automated state-of-the-art machines grind the beans and brew some of the best coffee I’ve had, with lots of preference options like temperature, brew strength, milk, sweeteners and flavors.
- These little bottles of flavored vitamin C shots called You-C1000, which I greatly appreciated in the winter on Hokkaido backcountry ski adventures. They come in tasty flavors like apple, orange or lemon and are a handy way to get vitamin C daily.”
— Jeffrey Cole, Colorado-based leadership coach, who has made four trips to Japan, spanning the northern island of Hokkaido to the southern island of Miyakojima.
6. Hire a guide – even if you think you don’t need one
“The language and culture barrier is real, and a local will show you things in places you’d never get to see on your own.
I did this at Tsukiji Fish Market. I’d been there maybe five times before, but finally took a guide with my grandfather, and it was a whole new world. I’ve also done this at Akihabara Electric Town and for lots of culinary tours.”
— Miles Ashton, a Chicago-based entrepreneur who has made more than 10 trips to Japan, including a nine-month stint living in Tokyo.
7. Shop at Tokyu Hands
“Not only is the layout a blast, with a different department on every level — but the merchandise is extensive and unique. There are 60 stores around the country, and they focus on hobby, home improvement and lifestyle products.
It’s a great place to find affordable, non-touristy gifts. They have the best pens, papers, and organizers, as well as camping supplies — if it’s small, efficient, and practical, they have it!
Tokyu Hands, which has been rebranded to Hands, is famous for selling themed household and beauty novelty items.
Source: Oliver Horovitz
Two of the coolest things I’ve purchased are a collapsible Shoji lamp, and a circular cooler carry case that holds a flower-shaped ice pack for under your hat plus a freezable U-shaped neck ring.”
— Kris Beyer, New York-based owner of Destroyer Park Golf Course. She has made over 20 trips to Japan and lived there as a child and teenager. Kris’ father, Dick “The Destroyer” Beyer, was a famous wrestler in Japan.
Editor’s note: Responses have been edited for length and clarity.
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Nvidia plans to build a $200 million AI center in Indonesia amid push into Southeast Asia
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The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California, on Feb. 11, 2015.
Robert Galbraith | Reuters
Nvidia is planning to build a $200 million artificial intelligence center in Indonesia in partnership with local telco giant Indosat Ooredoo Hutchison, as the U.S. tech darling continues its push into Southeast Asia.
According to Indonesia’s Communication and Information Technology Minister, Budi Arie Setiadi, the new facility will be based in the city of Surakarta in the Central Java province and will bolster local telecommunications infrastructure, human resources, and digital talent.
Indosat did not respond to a request for comment, while Nvidia declined to comment on the matter.
Last month, Indosat announced that it was ready to integrate Nvidia’s next-generation chip architecture, Blackwell, into its infrastructure, with “the goal of propelling Indonesia into a new era of sovereign AI and technological advancement.”
Indosat Ooredoo Hutchison is Indonesia’s second-largest mobile telco after a 2022 merger between Qatar’s Ooredoo and Hong Kong’s CK Hutchison.
Nvidia’s increased presence in Indonesia represents a broader push into Southeast Asia this year as data demand in the region booms on the back of the growing digital economy.
In January, Singapore telco provider Singtel announced its partnership with Nvidia to deploy artificial intelligence capabilities in its data centers across Southeast Asia.
Singtel said in March that the initiative would provide businesses in the region with access to Nvidia’s cutting-edge AI computing power by this year, without the need for clients to invest in and manage their own expensive data center infrastructure.
Southeast Asia has proved to be a major revenue driver for Nvidia. A U.S. Securities and Exchange Commission filing last year showed that about 15% or $2.7 billion of the company’s revenue for the quarter ended October came from Singapore.
Singapore trailed the U.S., which generated 34.77% of Nvidia revenue, Taiwan with 23.91%, and China and Hong Kong, at 22.24% in sales rankings that quarter.
Revenue from the small nation-state that quarter represented a 404.1% increase from the $562 million recorded in the same period the previous year, outpacing Nvidia’s overall revenue growth and putting it as the company’s fourth largest market.
According to Nvidia’s latest blowout quarterly earnings report, data centers comprised the majority of its revenue, generating $18.40 billion on the back of global AI euphoria.
— CNBC’s Sheila Chiang contributed to the report.
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KKR says China’s real estate correction may only be halfway done
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High-rise buildings are illuminated at night in the West Coast New Area of Qingdao, East China’s Shandong province, on March 22, 2024.
Nurphoto | Nurphoto | Getty Images
BEIJING — China’s real estate troubles are likely far from over and industry problems need to be addressed quickly if overall GDP growth is to pick up significantly, according to a report released Thursday by global investment firm KKR.
That’s one of the two key takeaways from a recent trip to China by the firm’s head of global and macro asset allocation, Henry H. McVey. It was his fourth visit in just over a year.
“A fundamentally overbuilt real estate industry needs to be addressed — and quickly,” he said in the report, which counts Changchun Hua, KKR’s chief economist for Greater China, among the co-authors.
“Second, confidence must be restored to drive savings back down,” McVey said, noting that would spur consumers and businesses to spend on upgrading to higher quality products, as Chinese authorities have promoted.
Real estate and related sectors once accounted for about one fifth or more of China’s economy, depending on the breadth of analysts’ calculations. The property industry has slumped in the last few years after Beijing’s crackdown on developers’ high reliance on debt for growth.
Based on comparisons to housing corrections in the U.S., Japan and Spain, China’s “housing market correction may be just halfway complete” in terms of its depth, the KKR report said.
“Both price and volume must come under pressure to finish the cleansing cycle,” the report said. “To date, though, it has largely been a contraction in volume.”
While KKR’s report didn’t provide much detail on expectations for specific real estate policy, the authors said more action by Beijing to improve China’s real estate sector “could materially shift investor perception.”
Amid geopolitical tensions, the country’s property market slump and drop in stocks have given many foreign institutional investors pause about China investing.
“According to some of our proprietary survey work, many allocators have considered reducing China exposure to 5-6%, down from 10-12% today at a time that we think fundamentals in the economy are likely bottoming,” the KKR report said.
Much of official Chinese data to start the year beat analysts’ expectations.
Chinese officials have said the real estate sector remains in a period of adjustment, while Beijing shifts its emphasis toward manufacturing and what it considers “high-quality development.”
Authorities have also released policies to promote financial support for select property developers, while many local governments — though not necessarily the largest cities — have significantly relaxed home purchase restrictions.
Real estate’s drag to moderate
KKR expects a modest slowdown in China’s GDP growth to 4.7% this year, and 4.5% next year, with real estate and Covid-related factors halving their drag on the economy from 1.4 percentage points in 2024 to a 0.7 percentage point drag in 2025.
“Our bottom line is that: with the ongoing [property] correction as well as some potential further policy support, we think the drag to [the] overall economy should moderate a bit over the next few years,” McVey said in a separate statement. He is also chief investment officer of KKR Balance Sheet.
Catering, accommodation and wholesale are set to modestly increase their contribution to growth in the next two years, while digitalization and the shift toward more carbon-neutral, green industry are expected to remain the largest drivers of growth, according to the report.
For investors, the report said a more important development than China’s GDP increase would be whether authorities could make it easier for businesses and households to tap capital markets.
“Repairing soft spots in [the] economy, especially around housing, will ultimately improve the cost of capital, and will also allow new consumer companies to access the capital markets likely at better prices if real estate and confidence are doing better,” McVey said in the statement.
Beijing in March announced a GDP target of around 5% for this year. Minister of Housing and Urban-Rural Development Ni Hong said last month that developers should go bankrupt if necessary and that authorities would promote the development of affordable housing.
Recent data have pointed to some stabilization in the property sector slowdown. The seven-day-moving average of new home sales in 21 major cities fell by 34.5% year-on-year as of Monday, better than the 45.3% drop recorded a week earlier, according to Nomura, citing Wind Information.
Compared with the same period in 2019, that sales average was only down by 27.8% as of Monday, versus a 47% drop a week earlier, Nomura said, noting most of the improvement was in China’s biggest cities.
Consumer outlook
KKR said most of its local portfolio is in consumer and services companies, whose business reflect how Chinese people in the middle to higher income range are spending modestly to upgrade their lifestyles.
“Top line growth is solid, margins are holding, and consumers are spending on less conspicuous items such as ‘smart homes,’ pets, and recreational activities,” the report said. “Domestic travel is also strong.”
Retail sales rose by a better-than-expected 5.5% year-on-year in January and February, boosted by significant growth in Lunar New Year holiday spending.
Longer term, KKR still expects that China can follow historical precedent in changing policy to be “more investor friendly.”
“While our message is not an all-clear signal to lean in,” the report said, “it is a reminder – using history as our guide – that, if China does adjust its domestic policies to be more investor friendly (especially as it relates to supply side reforms), this market could rebound significantly from current levels.”
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U.S. stocks have ‘limited upside’ from here, says Goldman Sachs Asset Management
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The floor of the New York Stock Exchange.
Brendan McDermid | Reuters
U.S. stocks have “limited upside” from here, given the macroeconomic backdrop — and investors should be looking for better opportunities elsewhere, according to Goldman Sachs Asset Management.
The U.S. economy has been surprisingly resilient in the face of the Federal Reserve‘s aggressive monetary policy tightening over the last two years, defying expectations of a 2023 recession.
Though GSAM’s base case is for the Fed to engineer a soft landing and for the U.S. economy to avoid recession, James Ashley, head of international market strategy, told CNBC on Wednesday that if a recession were to come, it would be this year.
“The Fed only began to hike in March of ’22, so when we’re talking about recession risks in 2023, that would have assumed a very rapid passthrough from the transmission of monetary policy into the real economy. In other words, it was premature,” Ashley said.
“Monetary policy typically operates with a lag of about two years so if you’re going to see that recession — and it is an ‘if’ statement, the base case is we don’t get a recession — but if you were ever going to get a recession, it would be ’24, not ’23.”
The Fed held interest rates steady at a target range of 5.25-5.5% at its March meeting, and markets are pricing a first 25 basis point cut in June as the central bank begins to unwind its restrictive monetary policy in light of falling inflation a slowing economy.
Ashley noted that for stock markets, “a little bit of weakness is your friend” as the associated disinflationary pressure gives the Fed the capacity to begin cutting rates, but with the market having priced in a lot of the expected policy loosening, GSAM still believes the recent bull run may be running out of road.
“We do tend to think that U.S. equities right now are fairly valued but there’s limited upside at these valuations. The better opportunities might be in other markets,” he concluded.
India
Where emerging markets are concerned, the Wall Street giant’s asset management arm sees India as a “strategic long-term growth story,” Ashley said.
“Where we see many other economies beginning to slow for both secular and indeed cyclical reasons, in India’s case, we see the start of a very significant upswing,” he added.
“We’re looking at an economy here that could be growing at double-digit nominal GDP rates for the foreseeable future.”
Given the rally already enjoyed in Indian markets of late, Ashley acknowledged that one could not argue that the country’s stocks are “cheap” right now, but insisted there was still “significant upside based on that growth story.”
“How do you play that? I think there’s an across-the-board story. It’s not about one particular sector, and if you look at the small and mid-caps in particular, there’s a huge opportunity to generate alpha in that market,” he added.
Japan
In contrast to most central banks across major economies, which are deciding when to begin cutting rates, the Bank of Japan last week hiked them for the first time in 17 years, finally ending its experiment with negative rates and unconventional easing tools that were aimed at reflating the world’s fourth-largest economy.
Japanese stocks were a strong performer in 2023 and into this year, but Ashley argued that this significant monetary policy shift means they have more room to run.
“Japan is the one major economy where inflation is not a problem, it’s a solution. It’s a solution to a 30-year-old problem,” he said, adding that the central bank’s goal now is “not choking off inflationary pressures” but “embracing them.”
“What that means from an equity perspective is that firms suddenly have more pricing power. So when we look at developed markets right now, in our view, Japan is the most attractive both on the short-term and indeed the long-term, so there’s significantly further to go, we think,” he concluded.
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China faces ‘fork in the road,’ IMF chief says, urging Beijing to embark on pro-market reforms
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Kristalina Georgieva, Director of the International Monetary Fund (IMF), speaks during the China Development Forum 2024 at the Diaoyutai State Guesthouse on March 24, 2024 in Beijing, China.
China News Service | China News Service | Getty Images
China has two choices right now: return to its old economic policies, or choose reforms to spur growth, according to the International Monetary Fund’s Managing Director Kristalina Georgieva.
“China is poised to face a fork in the road — rely on the policies that have worked in the past, or update its policies for a new era of high-quality growth,” Georgieva said Sunday at the China Development Forum in Beijing.
“With a comprehensive package of pro-market reforms, China could grow considerably faster than a status quo scenario,” she said, according to prepared remarks by the IMF.
This could unleash growth that would “amount to a 20% expansion of the real economy over the next 15 years — in today’s terms, that is like adding US$3.5 trillion to the Chinese economy,” she added.
While the country has seen a post-Covid rebound — with growth exceeding 5% in 2023 — it faces factors such as low productivity growth and an aging population, according to the Bulgarian economist.
Still, she added: “In the medium term, China will continue to be a key contributor to global economic growth.”
At the this year’s two-day China Development Forum, which started Sunday, Chinese officials are expecting more than 100 foreign participants, including CEOs of major overseas firms as well as leaders of the IMF and World Bank.
During a keynote speech at the forum, Chinese Premier Li Qiang pledged efforts to promote “high-quality development,” “intensify macro-policy adjustments,” and expand domestic demand, according to state media reports. He also vowed a “higher level of openness” while addressing challenges.
Separately, officials reportedly pledged further protection to foreign-funded firms as overseas investment flows to China dry up.
The measures coincide with other moves Beijing has made in recent weeks to boost confidence among foreign investors and businesses as it pursues a growth target of about 5% this year.
The Chinese government previously admitted the 2023 target “will not be easy,” particularly since the country continues to face overcapacity and faltering price pressures amid a property and debt crisis.
At the World Economic Forum in Davos earlier this year, Georgieva had outlined some short- and long-term challenges facing the world’s second-largest economy, warning that China needed structural reforms in order to ramp up growth and move toward boosting domestic consumption and confidence.
Separately, the IMF said in November that it expected China’s economy to grow 4.6% in 2024, warning of continued real estate struggles.
On Sunday, Georgieva highlighted the “most-pressing near-term challenges” for China, which include “transitioning the property sector to a more sustainable footing and reducing local government debt risks.”
In order to avoid this scenario, China will need to take “decisive steps” to complete unfinished housing stranded by bankrupt developers and to reduce risks from local government debt, the IMF chief said Sunday.
That way, the country could “accelerate the solution to the current property sector problems and lift up consumer and investor confidence,” she added.
“A key feature of high-quality growth will need to be higher reliance on domestic consumption,” Georgieva, said, adding that doing so “depends on boosting the spending power of individuals and families.”
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Moody’s Ratings: We’re positive on India’s banking system
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Sally Yim of Moody's Ratings explains its negative outlook on China's banking system.
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Fitch Ratings says revenue of Chinese banks will face ‘double whammy’ pressures
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Grace Wu of Fitch Ratings says the “reduction in net interest margin will continue to pressure revenue growth for Chinese banks this year.”
04:21
2 hours ago
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China’s central bank governor says there’s room to cut banks’ reserve requirements
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China’s central bank governor said there was room to further cut banks’ reserve requirements, and pledged to utilize monetary policy to prop up consumer prices.
Bloomberg | Bloomberg | Getty Images
BEIJING — China’s central bank governor said there was room to further cut banks’ reserve requirements, and pledged to utilize monetary policy to “mildly” prop up consumer prices.
This is part of Beijing’s broader economic policy “adjustments” so the economy can hit its growth target of around 5% for the year, while adhering to a 3% fiscal deficit. Plans to issue “ultra-long” special bonds for major projects will also help meet that target.
Pan Gongsheng, governor of the People’s Bank of China, made these comments on Wednesday as part of a joint press conference with other key leaders of the country’s economy and financial sector on the sidelines of this year’s annual parliamentary meetings.
China’s growth target and economic plans for the year, released Tuesday in an annual government work report, fell short of many analysts’ expectations for further stimulus and raised questions about how China would be able to achieve another year of growth that’s around 5%. National GDP rose by 5.2% in 2023, up from a low base in 2022.
For investors in the near term, the primary concern remains how much China’s policymakers are focused on ensuring growth.
“In order to achieve this [target of around 5%], the government work report proposed many major policies,” Huang Shouhong, head of the report’s drafting team and director of the State Council’s research office, told reporters on Tuesday in Mandarin, translated by CNBC.
This is a developing story. Please check back for more updates.
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Fortune REIT CEO discusses Hong Kong’s property measures
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Justina Chiu, CEO of Fortune REIT, discusses Hong Kong’s property measures, saying the company is excited to see an effort to “foster the growth of the REIT market in Hong Kong.”
02:48
Tue, Mar 5 202411:42 PM EST
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Debate heats up as Singapore prime minister says exclusive Taylor Swift deal isn’t ‘unfriendly’
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Singapore Prime Minister Lee Hsien Loong said Tuesday that a closed-door deal for Taylor Swift to perform in the city-state ensured she would not perform in other Southeast Asian countries during her Eras tour.
“(Our) agencies negotiated an arrangement with her to come to Singapore and perform and to make Singapore her only stop in Southeast Asia,” he said at a press conference at a regional summit in Melbourne, according to Reuters.
The statement is the first confirmation from the city-state that the agreement for Swift to perform in Singapore contained exclusivity terms preventing her from performing in other countries.
On Monday, Edwin Tong, Singapore’s minister for culture, community and youth, declined to answer this question twice during a parliamentary session.
He also did not reveal the size of the grant to Swift, but stated the amount is “not anywhere as high as speculated.”
“Due to business confidentiality reasons, we cannot reveal the specific size of the grant or the conditions of the grant,” he said.
The issue gained prominence on Feb. 16 when Thai Prime Minister Srettha Thavisin alleged Singapore gave Swift’s team between $2 million and $3 million per show, in exchange for not performing in other regional cities, according to The Bangkok Post.
A diplomatic thorn
The payment of a grant to Swift’s promoters has become a diplomatic thorn for Singapore, prompting criticism from neighboring countries for brokering a deal that shut them out from the highest-grossing tour of all time.
Member of the Philippine House of Representatives Joey Salceda said this “isn’t what good neighbors do” and added that such agreements are contrary to ASEAN principles, according to local media.
Lee on Tuesday disputed this characterization, saying, “It has turned out to be a very successful arrangement. I don’t see that as being unfriendly.”
Taylor Swift performs at Singapore’s National Stadium on March 2, 2024. Singapore and Tokyo are the only stops Swift is making in Asia during her global Eras tour.
Ashok Kumar/tas24 | Getty Images Entertainment | Getty Images
Swift’s six concerts in Singapore are expected to pump between $260 million and $372 million into the island’s economy, assuming 70% of concertgoers come from overseas.
During her first three concerts in Singapore, Swift asked her audience to applaud — first the locals, then those who had traveled from overseas to come to the show. In every instance, the applause of travelers was far louder.
Average daily rates at hotels in Singapore rose from $256 to $400 this week, with bookings up 92% from travelers coming from Malaysia, 111% from Thailand and 189% from Indonesia, according to the travel software company RateGain.
Swift’s tour prior to Eras, her Reputation Stadium Tour in 2018, included only one stop in Asia — Tokyo.
But her previous tours — Speak Now, Red and 1989 tours — included stops in Shanghai, Hong Kong, Indonesia, Philippines and Malaysia.
Shrewd or selfish?
Singapore’s agreement has sparked a debate on whether this is just smart dealmaking or greed.
“It certainly was a bold, shrewd strategic move for Singapore,” said Selena Oh, a Singapore-based communications director.
But others say a winner-takes-all mentality harms regional tourism industries, which are still recovering from the pandemic, as well as fans who can’t afford the steep travel prices to see Swift in person.
“Slightly selfish with ONLY Singapore in mind and not the wider region. Clearly [Singapore authorities] aren’t very caring for anyone other [than] themselves,” said Christian de Boer, a Cambodia-based hotel managing director.
You have to make your calculations and work out what’s in Singapore and Singaporeans’ best interest.”
Edwin Tong
Singapore Minister for Culture, Community and Youth
Some liken the deal to how cities vie to host major sports events, such as the Olympics, the Super Bowl and the World Cup.
“Did anyone protest when F1 decided to come to Singapore? Is anyone pretending that there were no monetary or other material considerations?” said Irene Hoe, a Singapore-based editorial consultant.
Concerts — which see artists traveling from city to city to reach their fans — haven’t always been this competitive.
But that may be changing as experience-led tourism pushes concerts into money-making juggernauts, with fans willing to travel across continents to see their favorite artists.
A ‘mean’ deal?
During Monday’s Parliamentary session, Singaporean politician Gerald Giam asked Tong whether the Singapore government negotiated to make the island Taylor Swift’s only “blank space” in Southeast Asia, referencing her smash hit of the same name.
“And did it realize that this may be perceived by some of our neighbors as being mean?” he asked.
Tong replied, “You have to make your calculations and work out what’s in Singapore and Singaporeans‘ best interest.”
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China breaks with tradition at annual ‘Two Sessions’ meeting by scrapping premier’s press conference
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A Chinese flag flutters on top of the Great Hall of the People ahead of the opening ceremony of the Belt and Road Forum (BRF), to mark 10th anniversary of the Belt and Road Initiative, in Beijing, China October 18, 2023.
Edgar Su | Reuters
BEIJING — China kicks off its annual parliamentary meetings this week, which investors are watching closely for signals on economic stimulus.
Beijing has already broken with tradition, with an announcement Monday that Premier Li Qiang would not hold the usual press conference at this year’s parliamentary meeting, and that such press meetings are canceled for the rest of the current congressional term, which would typically run for another three years.
The announcement noted there would be more ministry-level press conferences on the economy and foreign affairs, but did not say whether the foreign minister would hold a press conference as has been the case in past years. The premier’s press conference was seen as a rare chance to ask questions of high-level leadership and has reportedly not been canceled since 1993.
The country’s gross domestic product grew by 5.2% in 2023, but overall recovery from the Covid-19 pandemic was slower than many had expected. A prolonged slump in the massive real estate market and falling global demand for Chinese exports have contributed to low levels of consumer and business sentiment.
That’s all led to questions over whether Beijing will step in with large-scale support. So far, authorities have been relatively reserved.
Beijing signaled in December that any new policy support would be “appropriate,” said Wang Jun, chief economist at Huatai Asset Management, adding “there’s no way” that stimulus would be as large as it was in 2008. That’s according to a CNBC translation of his Mandarin-language remarks.
China’s economic policy is typically set at an annual meeting in December by leaders within the ruling Communist Party of China.
The meetings this month, known as the “Two Sessions,” are at the government, instead of party, level and typically release more details on policy plans, such as the GDP target for the year.
Wang said he is watching for comments on authorities’ plans for the real estate sector, capital markets and local government finances.
Back in 2008, when the world was reeling from the financial crisis, China unleashed a massive stimulus package to sustain growth with greater demand. While the economy rebounded, the measures drew criticism for a resulting surge in local government debt.
Beijing in recent years has emphasized the need to stem financial risks and clamped down on real estate developers’ high reliance on debt for growth, an issue tied to local government finances. This time around, China’s monetary policy also faces constraints on how far it can deviate from the U.S. Federal Reserve’s interest rate path.
GDP and other economic targets
The Chinese People’s Political Consultative Conference, an advisory body, is set to kick off its annual meeting on Monday.
The following day the National People’s Congress legislature is due to begin its meeting. Tuesday is also when the country’s premier is expected to share the year’s targets for GDP, employment and other economic indicators in what’s called the “Government Work Report.”
“The target will likely remain relatively high,” said Bank of China’s chief researcher Zong Liang, noting GDP grew by 5.2% last year. That’s according to a CNBC translation of his Mandarin-language remarks.
He expects the target for the fiscal deficit will be around 3.5% and that monetary policy will also be relatively loose.
China in October made a rare announcement that it was raising the fiscal deficit to 3.8%, from 3%.
“We expect the on-budget deficit – which excludes special bonds, policy bank bonds, and local government financing vehicle (LGFV) debt – to be set at 3.0%-3.5% of GDP, narrowing from last year’s 3.8% of GDP,” Louise Loo, lead economist at Oxford Economics, said in a report Thursday.
“We expect a modest step-up in the local government special bonds (LGSB) quota, to RMB4.0tn from RMB3.8tn last year,” Loo said. “Authorities may also finally put pen to paper on the reported RMB1tn in planned central government special bonds (CGSBs), reflecting the increasing role of central coffers amid a continued debt cleanup process among local government entities this year.”
“On balance, the additional fiscal impulse this year, assuming a bazooka-like fiscal package is not forthcoming, is unlikely to be particularly large.”
Watching for comments on real estate and tech
The Two Sessions is also a period for releasing the budget and for delegates to discuss needed policy changes and plans.
“Speeches by top policymakers will be key to watch, including interviews of key ministers, such as Minister of Industry and Information Technology, Minister of Science and Technology, and Minister of Housing and Urban-Rural Development. These key ministers will discuss various policies in more detail,” Goldman Sachs analysts said in a report.
During the parliamentary meetings, Chinese officials will likely also discuss plans to bolster tech and innovation, in line with a recent high-level call to bolster “new productive forces.”
The advisory body is set to conclude its annual meeting on Sunday, March 10, according to an official announcement. The National People’s Congress is set to end the afternoon of the following day, Monday, March 11.
Bank of China’s Zong expects that policymakers will send signals on opening up borders or other business opportunities to foreigners, as well as improving the environment for non-state-owned enterprises.
However, specific implementation details are typically left to individual ministries to announce, following high-level directives from Beijing.
Any direct support for consumption is unlikely, but broader moves to improve the social safety net would be of note.
“On the demand side, the delayed Third Plenum [of the Chinese Communist Party’s Central Committee] (originally set for December) suggests that longer term demand policies – including on fiscal, tax, and pensions reforms – may still be in initial stages of discussion, but could still warrant a mention here,” Loo said.
The macro context
This year’s Two Sessions follow regular leadership reshuffles that have strengthened the ruling Communist Party of China’s control of the government.
At the parliamentary meeting last year, Beijing announced an overhaul of finance and tech regulation by establishing party-led commissions to oversee the two sectors. Chinese President Xi Jinping, who is also the party’s general secretary, gained an unprecedented third term as president.
No major Chinese government or party leadership positions are scheduled to change this year, while the U.S. is set to hold its presidential election in November.
Since last summer, Chinese authorities have already announced a slew of policies to bolster growth and acknowledged the need to increase confidence. Critics say the measures are relatively piecemeal.
Recent economic data releases point to a mixed picture for growth, with some improvement in manufacturing but real estate at best only stabilizing.
Huatai’s Wang expects the economy will recover gradually this year, and that in contrast to last year, nominal GDP will be better than real GDP. That means the perceived improvement this year will be more tangible for consumers and businesses.
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How China’s property bubble burst
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China’s top real estate developers, Evergrande and Country Garden, have defaulted on their debts. But the issues in China’s property market have much deeper roots.
Desperate property developers in China have resorted to gifts like new cars, free parking spaces, phones and other consumer goods to attract homebuyers and boost flagging sales.
These incentives are just the tip of the iceberg in a crisis involving hundreds of billions of dollars in home builder debt, trillions in local government debt and at least a billion empty apartments.
But it wasn’t always the case. Since China’s economic liberalization in the 1970s and housing reforms in the late 1980s, locals have flocked to properties as the investment vehicle of choice over alternatives such as the stock market.
The property and construction boom helped fuel China’s – and the world’s – economic growth for 30 years. By some estimates, property in China was worth $60 trillion at its peak, making it the biggest asset class in the world.
Developers like Evergrande and Country Garden got extremely rich in the process.
As property values soared and Chinese households piled on more debt, Beijing attempted to cool its housing market and rein in risky business behavior. Spooked, Chinese consumers soured on property purchases.
But the country’s property crisis has deeper roots than speculation and uncontrollable debt. Watch the video to find out how China’s property bubble burst.
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HSBC posts record annual profit but misses estimates on China write-down, shares tumble 7%
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Customers use automated teller machines (ATM) at an HSBC Holdings Plc bank branch at night in Hong Kong, China, on Saturday, Feb 16, 2019.
Anthony Kwan | Bloomberg | Getty Images
HSBC‘s full-year 2023 pretax profit missed analysts’ estimates on Wednesday, hit by impairment costs linked to the lender’s stake in a Chinese bank, sinking its London-listed shares as much as 7%.
Europe’s largest bank by assets saw its pre-tax profit climb about 78% to a record $30.3 billion in 2023 from a year ago, according to its statement released Wednesday during the mid-day trading break in Hong Kong. That missed median estimates of $34.06 billion from analysts tracked by LSEG.
Chief Executive Noel Quinn also announced an additional share buyback of up to $2 billion to be completed ahead of the bank’s next quarterly earnings report. HSBC also said it would consider offering a special dividend of 21 cents per share in the first half of 2024 after it completes the sale of its Canada business.
With the highest full-year dividend per share since 2008 and three share buy-backs in 2023 totaling $7 billion, Quinn said the bank returned $19 billion to shareholders last year.
Quinn’s remuneration doubled to $10.6 million in 2023 from $5.6 million the year before, boosted in part by variable long-term incentives since his appointment in 2020.
HSBC suffered a “valuation adjustment” of $3 billion on its 19% stake in China’s Bank of Communications, Quinn said. In an interview with CNBC following the earnings release, he said this is “a technical accounting adjustment” and “not a reflection” on BoComm.
This write-down was among the items that plunged the bank’s fourth-quarter pretax profit by 80% to $1 billion from a year earlier.
HSBC’s Hong Kong shares reversed gains of about 1% after trading resumed, falling as much as 5%. The benchmark Hang Seng Index was up about 2%. Shares in London were down around 7% in early deals, set for their biggest one-day drop since 2020, according to Reuters.
HSBC shares
Here are the other highlights of the bank’s full year 2023 financial report card:
- Revenue for 2023 increased by 30% to $66.1 billion, compared with the median LSEG forecast for about $66 billion.
- Net interest margin, a measure of lending profitability, was 1.66% â compared with 1.48% in 2022.
- Common equity tier 1 ratio â which measures the bank’s capital in relation to its assets â was 14.8%, compared with 14.2% in 2022.
- Basic earnings per share was $1.15, compared with the median LSEG forecast for $1.28 in 2023 and 75 cents for 2022.
- Dividend per ordinary share was 61 cents â the highest since 2008 â compared with 32 cents in 2022.
Outlook 2024
HSBC, which has a second home in Hong Kong, said it was focusing on the fastest growing parts of Asia, a continent where the bank makes most of its profits.
In an earnings briefing to investors and analysts, the bank said it has completed the sale of its businesses in France, Oman, Greece and New Zealand, and was in the process of exiting Russia, Canada, Mauritius and Armenia.
The bank flagged two key macroeconomic trends: declining interest rates as inflation ebbs â a development that could eat into its interest income; and a continued reconfiguration of global supply chains and trade.
“International expansion remains a core strategy for corporates and institutions seeking to develop and expand, especially the mid-market corporates that HSBC is very well-positioned to serve. Rather than de-globalizing, we are seeing the world re-globalize, as supply chains change and intraregional trade flows increase,” Quinn said in the earnings statement.
The bank is targeting a mid-teens return on tangible equity for 2024, which was about 14.5% last year.
HSBC said it will be focusing on an expansion of non-interest income revenue sources via its wealth and transaction banking business. It is expecting banking non interest income of at least $41 billion in financial year 2024.
HSBC said it’s cautious about the loan growth outlook for the first half of 2024 amid economic uncertainty, expecting a mid-single digit annual percentage growth over the medium to long term.
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China boosts property funding with first cut in key loan rate since June
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A staff member counts Chinese Yuan at a bank’s personal finance business service area in Haian, East China’s Jiangsu province, Sept 15, 2023.
CFOTO | Future Publishing | Getty Images
China’s lenders cut the country’s benchmark five-year loan prime rate for the first time since June, extending Beijing’s efforts to revive the country’s anemic property market.
The Chinese central bank kept its one-year loan prime rate â the peg for most household and corporate loans in China â unchanged at 3.45%. The benchmark five-year loan rate â the peg for most mortgages â was cut by 25 basis points to 3.95%, according to a statement Tuesday from the People’s Bank of China.
The cut in the five-year rate in the monthly fix for February was larger than expectations for a reduction of between five to 15 basis points in a Reuters poll of economists. It was also the first since it was last trimmed in June by 10 basis points.
“So for potential homebuyers, actually, the funding costs for buying houses and getting mortgage is much, much more lower. I think in terms of market reaction, we need a little bit more time,” William Ma, chief investment officer at GROW Investment Group, told CNBC.
“But at the same time, I think that is also a… good sign that the Chinese government and regulator is showing the market participants that the banks are healthy as well â that is very important,” he added. “So I think this time 25 basis point cut, from my perspective, definitely a very positive sign.”
China calculates its loan prime rates each month after 20 designated commercial lenders submit their proposed rates to the PBOC. These loan prime rates usually move in tandem to its medium-term policy rate, which the PBOC kept unchanged for February on Sunday.
China cut the reserve ratio requirements for its banks by 50 basis points from Feb. 5, providing 1 trillion yuan ($139.8 billion) in long-term capital, while urging banks to support loans for high-quality real estate developers.
The property market slumped after Beijing cracked down on developers’ high reliance on debt for growth in 2020, ensnaring some of its largest real estate developers in bankruptcy and weighing on consumer growth and broader growth in the world’s second-largest economy.
â CNBC’s Lee Ying Shan contributed to this story.
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Jefferies explains why China’s latest property ‘whitelist’ is a bit different
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Shujin Chen, Jefferies’ head of China financial and property research, says it shifts some of the responsibility from the banks to local governments when it comes to the screening of projects.
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The Eastern & Oriental luxury train restarted this week — here’s what a trip costs
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After nearly four years, the Eastern & Oriental Express is back on the rails. Â Â Â
The train, which is operated by the luxury travel company Belmond, this week welcomed its first set of passengers since it stopped running as a result of the Covid-19 pandemic. Â Â
The luxury train has been operating in Southeast Asia since 1993, when it first began shuttling travelers between Singapore and Bangkok. Â
What’s new
Several key elements about the train have changed, however, including its route.
Now Thailand is out, replaced with two new journeys, which start and end in Singapore and explore different sides of Malaysia.
Arnaud Champenois, Belmond’s senior vice president of marketing and brand, told CNBC this is because travelers have changed in the past four years, with more preferring to explore destinations on a deeper level.
“The idea was to focus on one country here and to offer two different routes. So on the West Coast, we go through Singapore to Penang, and then Langkawi. And then on the other one, we go on the national park of Malaysia to really kind of get the jungle and the natural feel.”
The new routes are seasonal, with the “Essence of Malaysia” running from November to February, and “Wild Malaysia” from March to October.
The E&O’s new routes
“Essence of Malaysia” â passes through Kuala Lumpur, before reaching the islands of Langkawi and Penang
“Wild Malaysia” â explores Taman Negara National Park before heading to Penang
As a result of the new route, the train has received a Malay-inspired revamp, from the cabin interiors to the food. Dinner and afternoon tea service were created by Andre Chiang, the celebrated Taiwanese chef behind Singapore’s two-Michelin-starred Restaurant Andre, which closed in 2018.
The cost
Rates for four-day, three-night journeys start from $3,410 per person, which includes meals, beverages and scheduled activities.
This is less expensive than other trains that use versions of the “Orient Express” name, including the Belmond’s Venice Simplon-Orient-Express, which has run routes through Europe since 1982. Prices start from £3,530 ($4,430) per person for a one-night trip in a historic cabin, according to its website. Â
Accor’s “Orient Express La Dolce Vita” trains, which are set to start operating in 2024, are priced at â¬2,500 euros ($2,686) per person per night for a deluxe cabin, according to a press release. Travelers can pre-register for trips that mostly operate in Italy, according to its website.
Rates for Accor’s La Dolce Vita trains have increased since pre-booking first opened in December 2022, with stated rates then priced at 2,000 euros ($2,153) per person per night.
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