Chief Investment Office 24 Sep 2021


US stocks rallied for a second day as investors embraced the Federal Reserve’s bullish economic outlook while downplaying the risk of contagion from turmoil in Chinese debt markets. Yields jumped worldwide after the Bank of England (BOE) moved closer to raising rates and the dollar weakened.

The S&P 500 Index registered its biggest two-day gain since July, closing 1.21% higher at 4,448.98, with the Fed signalling on Wednesday (22 September) that it is on track to start scaling back asset purchases this year as the recovery takes hold. Yields climbed globally led by the UK market, where the 10Y gilt yield topped 0.90% for the first time since May after the BOE opened the door to a 2021 rate increase to contain a surge in inflation. Treasury yields surged, led by the 30Y, which rose about 12 bps in the biggest increase in more than a year.

Even with Thursday’s jump in yields, confidence is building that markets can ride out a pullback in Fed stimulus, unlike 2013 when the so-called taper tantrum triggered large losses in bonds and equities. Investors are betting that the economic and profit recovery will be strong enough to outweigh a reduction in asset purchases, while ultra-low rates will continue to support riskier assets even as concerns linger about contagion from China’s real estate woes. – Bloomberg News.

The Dow Jones Industrial Average climbed 1.48% to 34,764.82 and the Nasdaq Composite Index added 1.04% to 15,052.24.



Europe equities advanced for the third day as investors were reassured that the scaling back of stimulus measures by the Federal Reserve will be commensurate to the pace of economic recovery.

The Stoxx 600 Europe Index closed 0.93% higher at 467.50. Banks and technology sectors led the gains, while travel and leisure and personal care stocks underperformed. UK’s FTSE 100 Index underperformed other major markets, closing little changed as the pound jumped on the Bank of England’s comments on a stronger case for tightening.

With valuations stretched following a rally that pushed gauges to successive records, concerns that global growth is now past its peak, and supply chain bottlenecks have clouded the outlook in recent weeks. The Fed brought relief to equity investors after saying on Wednesday that it is on track to start scaling back asset purchases this year, but left the door open to extend stimulus if the economy needs it.

And even though surveys of purchasing managers by IHS Markit showed that business activity in the Euro Area “markedly” lost momentum in September, markets were unfazed.


Earlier, stocks pared gains after a report that Chinese authorities signalled reluctance to bail out Evergrande, even as Beijing injected more cash into the financial system and regulators instructed the embattled property developer to avoid a near-term default.

Faurecia SE cut its projected revenue and profitability for this year, as semiconductor shortages roil the auto industry by constraining production. Yet, the French part makers’ stock rallied as much as 6.7%, as investors welcomed clarity on the outlook. Valeo also advanced 8.4%, the biggest jump since early November.

Among other individual movers, Electricite de France SA shares rose the most since early July after the government said it would not force the utility to sell more power to rivals at a regulated price. Universal Music Group dropped 3.7%, after Barclays initiated coverage of the stock with a recommendation of underweight.

Investor attention will soon turn to the earnings season, when European companies’ robust profit recovery will be put to test. – Bloomberg News.



Japan’s central bank chief has weighed into the debate over the potential impact of China Evergrande Group’s debt crisis, predicting that the fallout will remain limited for now.

There are “nervous” movements in global financial markets because of the Evergrande issue and the Bank of Japan will continue to monitor the situation closely, Governor Haruhiko Kuroda said Wednesday (22 September) at a news briefing after keeping monetary stimulus unchanged.

“China’s real estate sector has grown significantly over a long time, and this particular firm’s debts appear to have become quite large,” Kuroda said when asked about the matter. “For now I see this as this particular firm’s issue, and even if there are similar cases, that’s a problem within the Chinese real estate sector.”

There is no need to expect a large slowdown in the Chinese or US economies, Kuroda added. – Bloomberg News.

The Nikkei 225 Index opened 1.90% higher at 30,203.00 on Friday, after declining 0.67% to 29,639.40 the previous session.



Power rationing and forced cuts to factory production in China are widening amid electricity supply issues and a push to enforce environmental regulations.

The curbs have expanded to more than 10 provinces, including economic powerhouses Jiangsu, Zhejiang, and Guangdong, the 21st Century Business Herald reported Friday (24 September). Several companies have reported the impacts of power curbs in filings on mainland stock exchanges.

Local governments are ordering the power cuts as they try to avoid missing targets for reducing energy and emissions intensity source. The country’s top economic planner last month flagged nine provinces for increasing intensity over the first half of the year amid a strong economic rebound from the pandemic.

Meanwhile, record high coal prices are making it unprofitable for many power plants to operate, creating supply gaps in some provinces, the Business Herald reported. If those gaps expand the impact could be worse than power curtailments that hit parts of the country during the summer.


In Zhejiang, about 160 energy-intensive companies in the textile, dyeing, and chemical fibre industries have been ordered to halt production to meet energy consumption targets, Caixin reported. About 80% of the companies are in Ma’an, where a production halt order was issued from 21-30 September, the report said, citing an unnamed official.

Yunnan province is cancelling electricity price discounts for aluminium smelters that made power costs about 16%-22% cheaper than industry average, according to a separate Caixin report. Yunnan Aluminium last week (ended 17 September) said its production through the rest of the year will be significantly reduced because of provincial energy consumption controls.

The widening power curbs are also impacting agriculture, forcing the shutdown of several plants in Jiangsu and the northern port city of Tianjin that crush soybeans into oils used in salad dressings and margarine and meal used for animal feed, AgriCensus reported. – Bloomberg News.

On Thursday, the Shanghai Composite Index rose 0.38% to 3,642.22 while the Hang Seng Index upped 1.19% to 24,510.98.



Trade reliant Thailand plans to launch a national shipping company next year to bolster its trade capabilities, reduce transport costs and become a bigger player in global logistics as the Malacca bypass opens.

“With Covid, we’re facing container shortages, so a lot of our goods can’t be shipped and some products will perish. Losses are incalculable,” Transport Minister Saksayam Chidchob said in an interview. “The shipping line can increase security and support the country’s ambition to become a logistics hub.”

Thailand’s commercial vessels contribute to less than 10% of its international freight. The country earned THB57.4b (USD1.7b) from shipping in 2020, but it had to spend almost 10 times that.

A reliance on foreign vessels increases costs, hurts trade competitiveness, and exacerbates disruptions in times of crisis, as seen now during the Covid pandemic with global shipping beleaguered by delays and backlogs at ports.


Thailand had a state-owned maritime navigation company from 1940 to 2011, but the government would not be reviving it. The new firm – for now dubbed Thai National Shipping Line – will instead be run as a private company to allow more flexibility, with the government owning 49% through the Port Authority of Thailand, Saksayam said.

The company will rent vessels and have units ranging from transport to maintenance, the minister said. Apart from minimising reliance on foreign ships, goals include increasing tonnage to support trade growth and handling strategic goods and energy products to ensure economic and national security.

Its first services, expected in June 2022, will be domestic freight routes linking Bangkok and the highly industrialised eastern coast to the southern region via the Gulf of Thailand, according to Saksayam. Regional and international routes will be added later and should benefit from the planned Strait of Malacca bypass that is expected to be completed as early as 2027.


The THB300b passageway through the narrowest part of Thailand will link the Indian and Pacific Oceans and bypass one of the world’s busiest shipping lanes between Indonesia, Malaysia, and Singapore. The project involves building seaports on the Gulf of Thailand and the Andaman Sea and linking them via a 90-kilometre highway and railway.

It will become the shortest route linking the Asia Pacific region with India and the Middle East, cutting shipping time by more than two days. The so-called Land Bridge will also serve as one of the national shipping line’s hubs for logistics, said Saksayam, who expects 20% of traffic to divert to the new Thai route when it opens.

The shipping company and the Malacca bypass are expected to boost Thailand’s exports, which expanded 16.2% in the first seven months from a year earlier, helped by a weakening baht and growing global demand for products such as cars and rubber. Exports have been a rare bright spot for the Thai economy, with tourism and consumption hit by Covid outbreaks and travel restrictions. – Bloomberg News.

Australia’s S&P/ASX 200 Index slipped 0.04% to 7,367.40 on Friday morning, after gaining 1.00% to 7,370.20 the previous session.

South Korea’s Kospi Index upped 0.48% to 3,142.54 in early-Friday trading, reversing its 0.41% loss to 3,127.58 on Thursday.

The Taiwan Stock Exchange Weighted Index climbed 0.90% to 17,078.22.



Brent crude futures settled at the highest level in almost three years as supplies shrink at a time when a global energy crunch makes it increasingly likely oil will be tapped for power generation.

The global benchmark crude rose 1.39% to USD77.25 on Thursday (23 September) to close at the highest level since October 2018, while US crude futures advanced 1.5%. US equities rallied and the dollar weakened, boosting the appeal of commodities priced in the currency.

Oil inventories are rapidly tightening. Supplies in the US are at the lowest since 2018 with output levels weaker after recent US Gulf Coast storms, while stockpiles at a key hub in Europe remain below average levels for the time of year. Some of the world’s largest oil traders and banks are predicting crude prices to surge even higher this year.

Crude futures have steadily climbed higher this month as traders weigh the impact of a tightening natural gas market on the broader energy complex over winter. The focus has led to cross-commodity flows across the oil and gas markets, some of which have been unwound in recent days, which had helped to push crude higher.

Currently, technical indicators show oil’s rally may be due for a pullback in the near-term. West Texas Intermediate (WTI) crude is flirting with the upper Bollinger band, a technical signal indicating the commodity is overbought. – Bloomberg News.

WTI crude for November delivery climbed 1.48% to USD73.30 a barrel in New York.



Most emerging-Asian currencies weakened against the greenback, with the Thai baht hitting the lowest level in four years, as the dollar advanced after the Federal Reserve said taper could start “soon”.

Asian currencies have been weighed down by the hawkish tilt from Fed Chair Jerome Powell, who on Wednesday (22 September) signalled the bond tapering is expected to start in November and would be completed by mid-2022, which is slightly faster than the previous tapering cycle in 2014 which lasted for 10 months.

The Korean won led losses in Asia as it fell as much as 0.9% against the dollar, partially playing a catch-up as onshore markets return from a three-day holiday, while the Philippine peso and baht were also among underperformers, with the Thai currency falling to a four-year low.

In addition to signalling the start of taper, the Fed’s median dot plot projections now show officials are evenly split on whether to raise the federal funds rate as soon as the next year, while in June, the median forecast indicated no rate increases until 2023. – Bloomberg News.

On Thursday (23 September), the US Dollar Index fell 0.40% to 93.085, the euro gained 0.44% to USD1.1739, the pound upped 0.72% to USD1.3720, and the yen weakened 0.50% to 110.33 per dollar.