Chief Investment Office14 Sep 2021


US stocks snapped a five-day slide, with energy companies leading the gains as crude oil extended a rally to a six-week high. Bonds yields declined and the dollar was little changed vs its major peers.

The benchmark S&P 500 Index closed up 0.23% to 4,468.73 after fluctuating between gains and losses for much of the trading session. A drop in Moderna helped to keep the Nasdaq 100 Index in negative territory. The Nasdaq Composite Index shed 0.07% to 15,105.58 while the Dow Jones Industrial Average advanced 0.76% to 34,869.63.

“The market is not overvalued, but it is not as undervalued as it once was,” said an economist. “A slowdown in GDP will likely slow profit growth, while rising inflation will eventually lift long term interest rates. Tax hikes are still a threat, as are tougher Covid-related restrictions that limit a service-sector recovery.”


Traders are marking time ahead of critical inflation data that traders will use to assess expectations about the timing of stimulus withdrawal and interest rate hikes. A report on Tuesday (14 September) may show consumer prices in the US moderated in August.

Global stocks have been buoyed this year by robust earnings reports and a rapid recovery from the pandemic-induced recession. With valuations becoming stretched, sentiment soured over the past weeks, amid concerns that economic growth may stall as the delta variant of the coronavirus disrupts the anticipated return to normalcy, while inflation remains sticky. Retail and travel stocks declined.

Meanwhile, US President Joe Biden’s USD3.5t tax and spending plan faces challenges. Democrat Senator Joe Manchin has cast doubt on the timeline for pushing Biden’s economic agenda through Congress, and proposed tax rates may be watered down to boost the chances of the package being passed. – Bloomberg News.



France’s sooner-than-expected economic recovery from the slump during the Covid pandemic is reviving deep problems in the labour market that have long hobbled growth, the country’s central bank said.

While activity in the Euro Area’s second largest economy is nearing normal more quickly than the Bank of France forecast in June, with 6.3% growth now expected this year, companies are reporting a sharp rise in hiring difficulties. There are also persistently low employment rates among the oldest and youngest workers.

France is not alone facing a looming struggle to find or retrain workers in the wake of the Covid pandemic. In Germany, the pandemic aggravated a long-standing shortage of labour in some sectors, while in the UK the difficulties in finding workers are already fuelling an escalation of wages.

What makes France’s situation more concerning is a combination of the problem with a relatively high rate of unemployment.

“It’s a socially unacceptable paradox, and it’s our greatest economic challenge – there are no more urgent and necessary reforms than those that increase the supply of available labour,” Bank of France Governor Francois Villeroy de Galhau said in an interview with French newspaper La Croix.


The government cannot just rely on the effects of the current rebound, Villeroy said. He called on public authorities and companies to improve apprenticeships and training and make work more attractive with a combination of higher salaries and changes to unemployment benefits.

Such wage increases could be an upside risk to already increased inflation forecasts, alongside the possibility of sustained supply difficulties for industry, the Bank of France said in its updated economic outlook. It raised its expectations after raw material and manufactured goods prices were stronger than expected over the summer and as it sees increasing pressure from wages and the service sector in 2022 and 2023. – Bloomberg News.

The Stoxx Europe 600 Index rose 0.29% to 467.69 on Monday (13 September).



Takemitsu Takizaki, the founder of electronic sensor maker Keyence Corporation, has overtaken Uniqlo billionaire Tadashi Yanai to become Japan’s richest person.

Takizaki is worth USD38.2b, according to the Bloomberg Billionaires Index, after his company’s shares almost doubled from the start of last year through Monday’s (13 September) close. Fast Retailing Co Ltd’s Yanai, who’s lost more than a fifth of his wealth in 2021, has a net worth of USD35.5b.

It is an example of how the wealth landscape is shifting amid the Covid pandemic, as a factory automation entrepreneur replaces a retail mogul at the top of the country’s rich list. Keyence has also been boosted by its forthcoming inclusion in Japan’s blue chip equity index, the Nikkei 225 Index.

Takizaki founded Keyence in 1974 and steadily built the company as a maker of sensors, measuring instruments, machine vision systems, and other equipment for industrial automation. The secretive Osaka-based firm is known for its high profit margins and for paying its staff well.


Keyence’s shares have risen 96% since the start of 2020 through Monday’s close, giving the company a market value of about USD167b. By this measure, it is the second largest firm in Japan after auto giant Toyota Motor Corporation.

The pandemic spurred demand for factory automation as governments around the world imposed social distancing measures, according to Bloomberg Intelligence.

Keyence shares jumped last week (ended 10 September) after the company was announced as an addition to the Nikkei 225 in a major shakeup of the famous equity gauge. Nintendo, the maker of the Switch gaming console, was also among the three companies picked to be included from 1 October. – Bloomberg News.

The Nikkei 225 Index was up 0.35% at 30,554.00 in early-Tuesday trading, adding to Monday’s 0.22% rise to 30,447.37.



China has vowed to consolidate the country’s electric vehicle (EV) industry after a decade-long nurturing of the sector led to the emergence of too many players, some of which are barely viable.

“Looking forward, EV companies should grow bigger and stronger. We have too many EV firms on the market right now,” Xiao Yaqing, the minister for industry and information technology, said at a press conference in Beijing on Monday (13 September).

“The firms are mostly small and scattered,” he said. “The role of the market should be fully utilised and we encourage merger and restructuring efforts in the EV sector to further increase market concentration.”

Shares of Chinese EV makers fell Monday. Xpeng declined 2.3% in Hong Kong trading, and Li Auto dropped 1.4%. On mainland exchanges, BYD slid 1.8%, and BAIC BluePark New Energy Technology slumped 4.6%.


China, which built its electric car industry into the world’s biggest, is putting a new focus on consolidating the ranks of EV makers which has ballooned to about 300. The government is drafting measures to rein in overcapacity in the sector and channel resources to a number of key production hubs, Bloomberg News reported last week (ended 10 September), citing people familiar with the matter.

Regulators are considering setting a minimum production capacity utilisation rate for the industry, and provinces that are not meeting it will not be allowed to approve new projects until surplus capacity comes online, Bloomberg reported.

The focus on moving the EV industry to a more sustainable footing comes as China shakes up industries from tutoring to property to big tech in President Xi Jinping’s quest to remodel the nation’s economy and society.

The rapid growth of China’s EV market has been spurred by government subsidies to encourage consumers to switch to cleaner automobiles. Total central government subsidies for new energy vehicle purchases stood at CNY33b (USD5.1b) in the five years through 2020, Ministry for Industry and Information Technology data show. – Bloomberg News.

The Shanghai Composite Index rose 0.33% to 3,715.37 on Monday while the Hang Seng Index fell 1.50% to 25,813.81.



Grab Holdings, Southeast Asia’s ride hailing and delivery giant, slightly lowered its projections for some key metrics for 2021 as the region is battling one of the world’s worst Covid outbreaks due to the fast-spreading delta variant.

The Singapore-based company, which is set to go public in the US through a deal with a blank-cheque company, expects full-year adjusted net sales of USD2.1b to USD2.2b, according to a statement Tuesday (14 September). That compares with USD2.3b it forecast in an investor presentation in April. Grab also expects full-year gross merchandise value of USD15b to USD15.5b, compared with an earlier projection of USD16.7b.

With infections rising as the more contagious delta variant of Covid spreads, many parts of Southeast Asia, home to 650m people, have reimposed curbs on movement that hamper consumer-reliant economies. Lockdowns have devastated businesses and dealt a setback to the region’s middle class. In July, the Asian Development Bank downgraded its Southeast Asian growth forecast to 4% from 4.4%.


During the second quarter, Grab’s net loss widened to USD815m from USD718m a year earlier. Revenue more than doubled to USD180m.

Grab reported its second quarterly financial results as it prepares to merge with Altimeter Growth, the special purpose acquisition company (SPAC) of Brad Gerstner’s Altimeter Capital Management. Grab has postponed the USD40b deal – one of the largest-ever mergers with a SPAC – to the fourth quarter as it works on an audit of the past three years’ accounts.

Grab said Tuesday the planned merger with Altimeter is expected to close in the fourth quarter. – Bloomberg News.

Australia’s S&P/ASX 200 Index lost 0.41% to 7,394.70 on Tuesday morning. The benchmark gained 0.25% to 7,425.20 the previous session.

South Korea’s Kospi Index climbed 0.60% to 3,146.59 in early-Tuesday trading after closing 0.07% higher at 3,127.86 on Monday.

The Taiwan Stock Exchange Weighted Index slipped 0.16% to 17,446.31 on Monday.



Oil closed above USD70.00 a barrel for the first time in nearly six weeks as another heavy storm heads to the US Gulf of Mexico, while producers are still reeling from Hurricane Ida.

Futures in New York settled 1.1% higher. Tropical Storm Nicholas, which may reach hurricane strength before it makes landfall, is expected to bring flooding rains to Houston, as well as parts of Louisiana still recovering from Hurricane Ida two weeks ago. About 44% of oil supply is down in the Gulf and the volume of shut-in output may start growing once again. Shell has already began removing some staff from one of its platforms to prepare for the storm. Refineries and terminals Texas could also see some curtailments, given the storm’s coastal track.

With crude prices steadily climbing higher this month, major Wall Street banks are assessing the crude market. Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) on Monday (13 September) forecast stronger demand for its crude this year and next amid rising global fuel use and output disruptions from the North Sea to the US. The group’s monthly report indicated that the world will continue to face a supply deficit in coming months even as OPEC nations revive idle production.


West Texas Intermediate crude futures rose 1.05% to settle at USD70.45 a barrel in New York time. Brent advanced 0.81% to USD73.51 a barrel, after earlier jumping 1.4%.

Traders are also awaiting additional import quotas for China’s private refiners, which could spur renewed purchases in the physical market in the coming weeks. One company was granted permission to import a set volume of crude last week (ended 10 September), and quotas for other refiners are expected imminently.

Separately, the Energy Information Administration sees more gains in tight oil production from the US. Combined, major shale regions should add 66,000 barrels a day to produce 8.135m barrels a day but remain short of pre-pandemic highs. – Bloomberg News.



Sri Lanka is turning to a veteran central banker as it seeks to bolster depleted foreign exchange reserves and service debt without seeking an international bailout.

Ajith Nivard Cabraal, a former junior minister overseeing capital markets who led the Central Bank of Sri Lanka from 2006 until early 2015, will return as governor. Cabraal, who resigned from parliament earlier on Monday (13 September), confirmed his appointment in a phone interview. “I will be concentrating on stability first, then growth,” Cabraal said.

During his previous governor term, Cabraal steered inflation to low single digits and held down interest rates while foreign exchange reserves grew thanks to a resurgence in tourism and economic growth with the end of the island’s civil war.


He now faces a country virtually stripped of tourism dollars due to the coronavirus, as well as lockdowns to stem the virus that have hurt domestic activity. That has drained the South Asian island’s foreign exchange reserves, a situation that triggered S&P Global Ratings to cut the country’s outlook to negative and now risks spiralling into a crisis.

For now, the central bank has limited the amount of foreign currency that can leave the country, as well as tightened import rules to discourage purchases of items including chocolates, wines, cosmetics, and electronics.

Sri Lanka’s depleted reserves could force more aggressive tightening of monetary policy and even a bailout from the International Monetary Fund (IMF), according to investors of the nation’s dollar bonds. Cabraal has held that IMF help is unappealing, telling the BBC last week (ended 10 September) “there is no need for Sri Lanka to go to the IMF and thereby cause unnecessary pain to its lenders and investors”.


The central bank in August unexpectedly raised its policy rate, citing the role of low credit cost in a sustained increase in imports, which led to a widening trade deficit. The rate action was also to pre-empt the build up of any excessive inflationary pressures, the bank said at the time.

Sri Lanka’s foreign exchange reserves rose 26% to USD3.55b last month, after the nation converted into US dollars the IMF’s special drawing rights, the central bank said Friday.

The country’s forex reserves had dropped to USD2.8b in July after it used a part to repay USD1b of debt. That dragged the import cover to 1.8 months, compared with the desired minimum of three months. – Bloomberg News.

The US Dollar Index gained 0.10% to 92.675 on Monday, the pound was little changed at USD1.3838, the euro slipped 0.03% to USD1.1811, and the yen weakened 0.05% to 109.99 per dollar.