With new developments arising over the respective regions, here are our market highlights for last week.
China
Ant’s Mega IPO about to be afloat.
Digital finance behemoth Ant Group is set to raise about US$34.5 billion from its initial public offering in Hong Kong and Shanghai, paving the way for a record-breaking deal and a valuation topping the world’s biggest bank, JP Morgan Chase.
The most valuable unicorn on the planet is likely to make its hotly anticipated debut on Shanghai’s Nasdaq-styled Star Market and Hong Kong’s stock market on November 5, two days after the US election.
Hangzhou-headquartered Ant priced its 1.67 billion A shares at 68.80 yuan (US$10.27) and the Hong Kong stock at HK$80 (US$10.32) apiece.
Co-hosting the world’s biggest IPO is a badge of honour for the fledgeling Star Market, which was launched only in July last year as part of Chinese President Xi Jinping’s plan to fund the growth of mainland Chinese technology firms.
For Hong Kong, Ant’s IPO helps it keep pace with the swift development of financial hubs in mainland China. Beijing is steadily opening its domestic financial markets to foreign investors and nurturing neighbouring Shenzhen as a technology and financial hub.
Ant’s coming out parade also illustrates China’s lead in digital finance. The number of monthly active users of its super-slick mobile payment app, Alipay, hit 731 million on September 30, dwarfing Palo Alto-based PayPal’s user base, the largest digital payments platform outside China.
Ant’s payments network is just the gateway, funnelling small businesses and consumers into a broad financial ecosystem spanning lending, investment products and insurance services. The system’s cogs are oiled by a trove of data gathered in China, the world’s most populous country, which makes pricing more accurate and efficient than at lumbering state-owned traditional banks in the world’s second-largest economy.
UK
Brexit talks back on track
The UK economic recovery have begun to show signs of softening as latest economic data reported a weaker figure compared to the previous month. October services PMI fell to 52.3 from 56.1 in September, the lowest since June. This comes after the expiration of the furlough scheme which drove unemployment numbers up and is likely that the figure will go higher in the months to come. Manufacturing PMI declined more than expected to 53.3 from 54.1 in the previous month. In contrast, retail sales was up nearly 5%, bolstered by furniture and gardening tool purchases. However, we think that the improvement is unlikely to sustain in the months to come due to worsening covid situation and labour conditions in the UK. Consequently, consumer confidence fell to 6% to -31, the lowest reading since May which was the peak of the first virus wave. The sharp drop is indicative of the public’s perception of the current situation at hand which is that things are going to deteriorate going forward.
On the Covid front, Manchester and Wales were moved up to the highest tier of restrictions as new daily infections in the country rose to 21,242 on Thursday. Given the current rate in which numbers are increasing, it is likely that tighter restrictions on a national level could be impose in order to contain the spread.
EU
On the brink of a double dip recession
Rising infection cases in Europe is pushing countries to re-introduce movement restriction measures. Germany, France, the UK, Italy, Spain, the Netherlands, Belgium and Switzerland have all announced measures in the past 2 weeks to fight the second wave.
Research, using Google Community data, is showing that consumer demand is decreasing again, after a period of steady recovery. It was shown that footfall in cafes, restaurants, retail and leisure venues have started declining again. Concurrently, economic indicators are also showing signs of a second recession. Eurozone PMI fell to 49.4 in October, down from 50.4 in September, and is at its lowest since June.
As such, economists are managing their expectations for Q4 forecasts, some even cutting them into the negative territory. With the second round of the negative economic outlook, it seems like a double-dip recession in Europe is very possible. As the ECB has, just last month, forecasted a 3% economic growth in the 4th Quarter, the pressure is on them to revisit their €750bn recovery fund plan to manage this potential second dip.
United States
Economic Standoff
The White House and congressional Democrats showed progress in talks on a new fiscal stimulus package, however, chances of a pre-election agreement remain slim.
This agreement, expected to be worth up to $2tn, includes new rounds of direct payments to US families, up to $1,200 an adult, and additional funding for jobless benefits and small business relief. If no deal is reached before the November 3 election, the push for a deal may lose momentum, depending on the outcome of the presidential race. The US labour market has recovered, but millions of Americans remain out of work. The Trump administration and Democrats remain in political deadlock over a broad package of economic aid, under two weeks before the presidential election.
In other economic news on Thursday, the US labour department reported a drop in applications for unemployment benefits, down to 787,000, compared to 842,000 the week before, and lower than economists’ forecast of 860,000 claims which when looked at a glance shows the economy is moving in a positive direction.
However, Lael Brainard, a Federal Reserve official, has indicated that more financial support and loose monetary policy is needed to ensure economic disparities do not undermine the US recovery. Brainard added that recovery is highly uncertain and uneven with certain sectors and communities experiencing significant hardship, requiring further targeted fiscal support to replace lost incomes.
Meanwhile, US equity markets have rebounded strongly from the initial pandemic shock, but millions of Americans have not regained their jobs. Also another concern is surrounding Covid-19 as Illinois, Indiana and Ohio have reported the biggest one-day rises since the start of the pandemic. On Thursday, Chicago mayor Lori Lightfoot indicated the city of Chicago is in the second wave. Chicago will impose a curfew on non-essential businesses and has ordered bars without food licences to cease indoor service from Friday. In the midwest, restrictions have been reimposed on certain economic activities in an effort to slow the spread of coronavirus. Overall, the US reported 76,560 coronavirus cases and 1,173 deaths.
The M Word 