Chief Investment Office13 Oct 2021


Stocks fell as traders awaited the start of the earnings season amid concern about inflation and supply disruptions that have wreaked havoc on industries around the globe.

In late trading, the USD184b exchange-traded fund tracking the Nasdaq 100 dropped as Bloomberg News reported that Apple is likely to cut its projected iPhone 13 production goals for 2021 due to chip shortages. Federal Reserve Bank of Atlanta President Raphael Bostic said the inflation surge is lasting longer than officials expected, while Vice Chair Richard Clarida noted that the conditions required to begin tapering the bond-buying programme have “all but been met”.


A key test of market confidence will be the start of the earnings season Wednesday (13 October). Quarterly guidance, which improved in the runup to the past four reporting periods, is now deteriorating. Analysts project profits at S&P 500 firms to climb 28% to USD49.00 a share, according to data compiled by Bloomberg Intelligence. That is down from an eye-popping clip of 94% in the previous quarter, marking the onset of a slowdown that has historically signalled weakening returns for stocks.

The S&P 500 Index dropped for a third day, by 0.24% to 4,350.65, the Dow Jones Industrial Average shed 0.34% to 34,378.34, and the Nasdaq Composite index slipped 0.14% to 14,465.92. West Texas Intermediate held above USD80.00 a barrel on speculation that a global energy crunch will continue to boost demand. Treasury 10-year yields dropped, while the dollar was little changed.


The International Monetary Fund warned of the risk of sudden and steep declines in global equity prices and home values as global central banks withdraw the support they have provided during the pandemic. – Bloomberg News.


French President Emmanuel Macron unveiled a EUR30b (USD35b) plan to create the high-tech champions of the future and reverse years of industrial decline in the Euro Area’s second largest economy.

The plan, dubbed “France 2030”, foresees investing the funds over five years in sectors including nuclear and renewable energy sources, electric cars, semiconductors, and robotics.


“I want us to look ahead and see our weaknesses and strengths,” Macron said in a speech at the Elysee Palace on Tuesday (12 October). “We need the country to produce more.”

France 2030 is the latest in the country’s long history of pumping public money into a hoped-for industrial renaissance. After the Global Financial Crisis, then President Nicolas Sarkozy launched a EUR35b future investment programme, which has been replenished three times. Macron said this plan is different because it will take greater risks and not rely on well-established industrial firms.

Despite the various efforts by successive governments, the share of industry in the French economy has declined almost without interruption and France has not recorded a goods trade surplus since 2002. Six months before the presidential election, Macron is under pressure to show he can reverse those fortunes, particularly in former industrial heartlands, where he struggled to win votes in 2017. 


Macron said he wants to create “a virtuous cycle – innovate, produce, export – to finance our social model”.

The initiative comes only a year after the EUR100b “France Relaunch” programme, which also aimed to go beyond crisis spending to address the country’s longer-term problems of low investment and hiring. By the government’s own expectations, there will still be around a third of that programme unspent at the end of this year.

The investment plans are in keeping with French industrial policy, but increasingly put Macron out on a limb in Europe, where other countries have begun talking about the need to return to some form of fiscal discipline after crisis spending inflated deficits during Covid. Macron’s move is all the more surprising given that when his government first mooted the France 2030, it said European partnerships would be a necessary condition for success.

Half of the money will go to small companies, with a pledge to be green. If projects fail, the funds will quickly be reallocated, Macron said. – Bloomberg News.

On Tuesday, the Stoxx Europe 600 Index slipped 0.07% to 457.21.



Japan’s new prime minister, Fumio Kishida, wants to succeed where Abenomics fell short, by boosting worker wages and creating a new type of capitalism that distributes wealth more widely.

Speaking on TV Tokyo late Monday (11 October), Kishida said he will raise pay for public workers and strengthen an income tax break for companies that boost wages, although he put off an idea floated earlier to raise capital gains taxes.

“We should prioritise policy measures that raise people’s incomes,” Kishida said.

Kishida faces a national election later this month. Whether or not his plans qualify as strong economic medicine, he may have a good diagnosis of what ails Japan, where the middle class has foundered while stocks soared under the policies of former Prime Minister Shinzo Abe.


Better corporate profits were supposed to trigger a virtuous cycle that fed into higher wages, inflation, and faster growth. But the benefits of higher company incomes accrued mostly to shareholders without filtering down to workers.

Weak wages have been a multi-decade issue in Japan. In recent years, companies have been hoarding cash because they have been so shell shocked by crisis after crisis. To unlock that cash, Kishida says he wants to strengthen tax incentives for firms that raise wages, a policy introduced by Abe, although there are no new numbers on Kishida’s plan.

Kishida has also pledged to raise pay for nurses, caregivers, and other public workers, an area where the government can show leadership and also push change in the labour market.


Asked how he would pay for the wage boost, Kishida said better economic growth would provide the funds, not an increase in the sales tax.

Although Japan’s wealth inequality is still not as extreme as in the US or Europe, Kishida is responding to a widespread feeling in the country that living standards for the middle class have eroded. Japan has a ballooning underclass of part-time, contract, and temporary workers that now make up about 40% of the workforce and are paid about one-third less than permanent employees. That is another area that Kishida wants to address, with cash handouts to non-regular workers as a part of an economic stimulus package he says he will unveil after the 31 October election.

Still, poor poll numbers show voters have yet to be convinced and economists have also been lukewarm on the policies so far. – Bloomberg News.

The Nikkei 225 Index opened 0.62% lower at 28,055.50 on Wednesday, extending the previous session’s -0.94% fall to 28,230.61.



China is inspecting the nation’s financial regulators, biggest state-run banks, insurers, and bad-debt managers for the first time in six years to root out corruption in its USD54t financial system.

A team led by the Central Commission for Discipline Inspection will start a two-month anti-graft check of the China Banking and Insurance Regulatory Commission (CBIRC), and accept complaint reports from whistle blowers until 15 December, according to a statement late Monday (11 October).

CBIRC Chairman Guo Shuqing said the move is a reflection of the Communist Party’s focus on financial regulation and told his staff that cooperation with inspectors will be their top priority for now.


The banking regulator is among the 25 financial organisations being scrutinised in the eighth round of checks by the ruling Communist Party since 2017. While previous tours covered other central and local government agencies and state-owned companies, the latest zeros in on entities including the People’s Bank of China (PBOC), the China Securities Regulatory Commission, the Shanghai and Shenzhen stock exchanges, the biggest state-owned banks, as well as bad-debt managers including China Huarong Asset Management.

The move underscores the party’s increasingly tough stance on corruption among cadres and corporate executives. More than 1.5m government officials have been punished in the years-long campaign, most recently including the execution of Lai Xiaomin, the former chairman of Huarong, and life imprisonment of Hu Huaibang, the former chairman of the nation’s biggest policy bank.


The PBOC, the State Administration of Foreign Exchange, sovereign wealth fund China Investment Corporation, and Huarong issued similar statements Tuesday announcing the start of their inspections. The inspection team heads stressed the need to prevent “systematic financial risks,” while the top officials of the inspected agencies vowed full cooperation.

Chinese financial stocks were mixed at the close Tuesday in Shanghai, with Agricultural Bank of China slipping 0.3% and Industrial & Commercial Bank of China adding 0.2%. Bank of China was little changed.

It also comes as authorities are cracking down on everything from fintech platforms to property developers to limit financial risks. Global investors have been unnerved by the regulatory onslaught from Beijing targeting its biggest technology companies and other industries as well as a push by President Xi Jinping to create “common prosperity”, a campaign to narrow the wealth divide. – Bloomberg News.

On Tuesday, the Shanghai Composite Index closed 1.25% lower at 3,546.94. The Hang Seng Index slipped 1.43% to 24,962.59.



Samsung Electronics’s price target was cut by several analysts this week (ending 15 October), as China’s power crisis is seen worsening supply chain disruptions and weighing on the company’s profits. Shares slumped to their lowest since December.

The persistent supply chain bottlenecks, which stemmed from the spread of the coronavirus in Southeast Asia and now from China’s limited electricity supply, will likely undermine the memory chip industry during the fourth quarter, wrote an analyst in a report Tuesday (12 October).

Samsung’s shares plunged as much as 3.5% amid a broad selloff in Asia’s tech sector as South Korea markets reopened after a holiday. The nation’s largest stock has lost about 15% so far this year, compared with the benchmark Kospi’s gain of nearly 1.5%.


Still, Samsung’s consensus 12-month price target of KRW98,944 based on contributions from 36 analysts implies a potential return about 43% from current levels, data compiled by Bloomberg show. – Bloomberg News.

South Korea’s Kospi Index added 0.73% to 2,937.73 Wednesday morning, reversing its previous loss of 1.35% to 2,916.38.

Australia’s S&P/ASX 200 Index opened 0.10% higher at 7,288.00 on Wednesday after losing 0.26% to 7,280.70 on Tuesday.

The Taiwan Stock Exchange Weighted Index lost 1.07% to 16,462.84.



Oil futures in New York rose for the fourth straight day in choppy trade as investors assessed how a global power crisis will affect demand this winter.

Futures in New York rose 0.2% on Tuesday (12 October). Shortages of natural gas and coal ahead of winter in the Northern Hemisphere have prompted some switching fuels such as diesel and fuel oil in the power sector. Meanwhile, rising costs for food and fuel were among the reasons the International Monetary Fund (IMF) cited as it expressed concern the global economic recovery has lost momentum.

Tuesday’s volatility comes as oil prices stabilise in the USD80.00 a barrel range. Caution from the Organization of Petroleum Exporting Countries and its allies in restoring supply has pushed prices higher along with fuel switching.


However, the IMF warned threats to growth have increased, pointing to the delta variant, strained supply chains, accelerating inflation, and rising costs for food and fuel.

“There’s real damage that’s potentially lurking from the supply chain issues,” said a partner at a financial firm. “It’s a real potential negative for the global economy.”

West Texas Intermediate crude for November delivery rose 0.15% to settle at USD80.64 a barrel in New York. Brent for December settlement fell 0.27% to settle at USD83.42 a barrel.

Demand for fuel oil is rising in parts of Asia as soaring natural gas prices prompt switching to one of the most polluting forms of energy, according to TotalEnergies SE.


“What’s going on with gas may worry some Asian countries with emerging economies,” TotalEnergies Chief Executive Officer Patrick Pouyanne said Tuesday during the Evolen conference in Paris. “Some Asian countries are currently coming back to fuel oil, which may have an impact on the oil market.”

Still, the pace of oil’s surge, combined with rising prices of other energy commodities and metals is bringing on inflation and threatening to hit economies reviving from the pandemic slump. Industries in Europe are being forced to crimp or shut operations. That, in turn, could weigh on oil demand. – Bloomberg News.



Thailand’s baht rallied the most since August as an easing of travel requirements for vaccinated visitors brightened the outlook for the tourist-reliant economy.

The baht jumped as much as 1.4% to 33.426, the biggest gain since 24 August. Visitors from 10 low risk countries will not be required to undergo isolation on arrival from 1 November, Prime Minister Prayuth Chan-Ocha said Monday (11 October). Thai stocks were poised for their highest close since 6 September.

Analysts are ramping up bullish bets on the baht after it fell to the bottom of Asia’s currency rankings with a loss of nearly 11% this year.


Thailand is pushing ahead with a “living with Covid-19” strategy after foreign tourist arrivals plunged to 73,932 in the first eight months of this year, from almost 40m visitors who generated more than USD60b in revenue in 2019.

The benchmark SET Index climbed 0.7% to 1,644.93 as of 10:15 am in Bangkok. Asia Aviation Pcl, which controls the nation’s biggest budget airline, surged 9.8%. Airports of Thailand Pcl, the state-controlled airport operator, climbed 3.9%. Bumrungrad Hospital Pcl, which earned most of revenue from overseas patients before the Covid outbreak, jumped 5%.

With the nation opening up for tourists and a pick-up in vaccination rates, the economy will start to rebound in the last three months of the year, Bank of Thailand Assistant Governor Titanun Mallikamas said late last month. At least 70% of the country’s population will receive two doses of vaccines by the end of December, according to the government.


The baht is forecast to rally to 32.6 per dollar by year end, according to a Bloomberg survey, a gain of more than 2% from current levels. In comparison, the Philippine peso and Malaysian ringgit are forecast to rise 1% and 0.5%, respectively, while the rupiah is seen declining 0.6% from current levels. – Bloomberg News.

On Tuesday, the US Dollar Index added 0.21% to 94.516, the euro slipped 0.19% to USD1.1530, the pound fell 0.05% to USD1.3588, and the yen weakened 0.26% to 113.61 per dollar.