World
China’s bad first half gets investors hopeful and interested
July 19 (Reuters) – China’s disappointing first half has the economy ripe for some help, and investors are preparing to ride an expected short-term wave of stimulus, even if structural problems look to hold back a sustainable rally.
The latest data this week showed an economy struggling for momentum in the second quarter. A post-COVID recovery is quickly faltering, with exports declining due to cooling demand abroad and a prolonged property market downturn sapping confidence.
The grim readings raised the spectre of China missing its modest 5% growth target for 2023, and spurred hopes of stronger stimulus measures after the upcoming July Politburo meeting of top Chinese officials.
“For China, it is ‘bad news is good news’ at the moment,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney.
Liu expects to see increased stimulus targeting cyclical sectors, such as housing, and is more interested in the services sector in the belief that post-pandemic demand will eventually rise.
“I think the reopening trade remains intact, though slower than before. China is not an ‘avoid’. (A) recovery is coming, albeit taking longer,” said Liu.
Even before the latest disappointing growth data, a slew of soft economic indicators had shown China’s recovery was falling short, slamming the brakes on nascent stock market rallies. The benchmark CSI 300 index (.CSI300) is now down 0.5% for the year, in stark contrast to the 16% rise in world stocks (.MIWD00000PUS).
Foreign money has been leaving, with worries over China’s cyber-security crackdowns and Sino-U.S. flaps over chips and rare metals adding to growth concerns.
Foreign investors sold 2.7 billion yuan ($374.47 million) of Chinese shares in the second quarter, many making an exit after having pumped in a historical 186 billion yuan a quarter before.
The promise of big-bang stimulus, which has hitherto been a stop-go mix of one rate cut and some loan relaxations for the property and state sectors, is now drawing some investors in.
“The weak growth prospects and lack of policy stimulus have already been fully priced in, and any marginal improvement in growth and policy conditions should trigger a turnaround in market sentiment,” said Marcella Chow, global market strategist at J.P. Morgan Asset Management.
“In the near term, cyclical sectors, such as consumer discretionary, materials and property, may be the major beneficiaries.”
REVIEWING CHINA
Goldman Sachs analysts led by Kinger Lau also believe a ‘tactical market recovery’ thesis is compelling, and project a 15% 12-month return for the CSI300.
“In fact, ‘China is a trade’ was a dominant theme in the majority of our meetings across investor types, regardless of their level of cautiousness and pessimism on the long-term growth and geopolitical outlooks”, they said in a note.
JPMorgan cut China’s 2023 growth forecast to 5% from 5.5%. read more , while forecasting a deeper contraction of 20% this year in new construction.
The bank says possible steps the government could take to boost economic growth include another policy rate cut and nationwide housing policy easing, including a relaxation of down-payment requirements.
“Everyone is looking for a big bang Politburo meeting at the end of July, it’s a bit like Fed watching,” said Mike Kelly, head of multi-asset at PineBridge Investments.
But the strength of the policy package is expected to be constrained and targeted, according to some analysts, citing growing debt risks and officials’ recent speeches.
“We are conservative about the extent of the policy support down the road,” said Alicia Garcia Herrero, chief economist, Asia Pacific at Natixis. “Fiscal policies may not be easily implemented, given the already high public debt and the reduced efficiency of these policies.”
Eugenia Victorino, head of Asia strategy at SEB, also reckons Beijing’s emphasis on patience will mean fresh support will be targeted, but is hopeful that recent policy support measures such as June’s rate cuts will begin to make themselves felt in coming months.
Beijing’s recent comments on doing more to support private enterprises, and the apparent end of a years-long regulatory crackdown on the tech sector could also be supportive factors for markets, Victorino added.
Nomura analysts led by Ting Lu say the stimulus “may not turn things around, due to weak confidence, negative sentiment.”
“We believe markets should curb their expectations for a fast, cure-all package and instead embrace expectations of a growth slowdown to below 4.0% in 2024,” they wrote.
($1 = 7.2101 Chinese yuan)
Reporting by Jason Xue in Shanghai and Tom Westbrook; Editing by Kim Coghill
Our Standards: The Thomson Reuters Trust Principles.
World
Jon Hamm’s Your Friends & Neighbors Renewed at Apple TV+ Ahead of Series Premiere — Get Release Date
ad
World
Israel keeping its ‘eyes open’ for Iranian attacks during Trump transition period, ambassador says
Israel’s U.N. Ambassador Danny Danon tells Fox News Digital that his country is keeping its “eyes open” for any potential aggression from Iran during the Trump transition period, adding it would be a “mistake” for the Islamic Republic to carry out an attack.
The comments come after Iranian Foreign Minister Abbas Araghchi vowed earlier this week that Iran would retaliate against Israel for the strategic airstrikes it carried out against Tehran on Oct. 26. Araghchi was quoted in Iranian media saying “we have not given up our right to react, and we will react in our time and in the way we see fit.”
“I would advise him not to challenge us. We have already shown our capabilities. We have proved that they are vulnerable. We can actually target any location in Iran. They know that,” Danon told Fox News Digital.
“So I would advise them not to make that mistake. If they think that now, because of the transition period, they can take advantage of it, they are wrong,” he added. “We are keeping our eyes open and we are ready for all scenarios.”
ICC REJECTS ISRAELI APPEALS, ISSUES ARREST WARRANTS FOR BENJAMIN NETANYAHU, YOAV GALLANT
Danon says he believes one of the most important challenges for the incoming Trump administration will be the way the U.S. deals with Iran.
“Regarding the new administration, I think the most important challenge will be the way you challenge Iran, the aggression, the threat of the Iranian regime. I believe that the U.S. will have to go back to a leading position on this issue,” he told Fox News Digital.
“We are fighting the same enemies, the enemies of the United States of America. When you look at the Iranians, the Houthis, Hezbollah, Hamas, all those bad actors that are coming against Israel… that is the enemy of the United States. So I think every American should support us and understand what we are doing now,” Danon also said.
IRAN HIDING MISSILE, DRONE PROGRAMS UNDER GUISE OF COMMERCIAL FRONT TO EVADE SANCTIONS
Danon spoke as the U.S. vetoed a draft resolution against Israel at the U.N. Security Council on Wednesday.
The resolution, which was overseen by Algeria, sought an “immediate, unconditional and permanent cease-fire” to be imposed on Israel. The resolution did not guarantee the release of the hostages still being held by Hamas within Gaza.
“It was a shameful resolution because… it didn’t have the linkage between the cease-fire and the call [for] the release of the hostages. And I want to thank the United States for taking a strong position and vetoing this resolution,” Danon said. “I think it sent a very clear message that the U.S. stands with its strongest ally with Israel. And, you know, it was shameful, too, to hear the voices of so many ambassadors speaking about a cease-fire but abandoning the 101 hostages. We will not forget them. We will never abandon them. We will continue to fight until we bring all of them back home.”
Fox News’ Benjamin Weinthal contributed to this report.
World
Fact-check: What do we know about Russia’s nuclear arsenal?
Moscow has lowered the bar for using nuclear weapons and fired a missile capable of carrying a nuclear warhead into Ukraine, heightening tensions with the West.
Russia’s nuclear arsenal is under fresh scrutiny after an intermediate-range ballistic missile capable of carrying an atomic warhead was fired into Ukrainian territory.
President Vladimir Putin says the unprecedented attack using the so-called “Oreshnik” missile is a direct response to Ukraine’s use of US and UK-made missiles to strike targets deep in Russian territory.
He has also warned that the military facilities of Western countries allowing Ukraine to use their weapons to strike Russia could become targets.
The escalation comes days after the Russian President approved small but significant changes to his country’s nuclear doctrine, which would allow a nuclear response to a conventional, non-nuclear attack on Russian territory.
While Western officials, including US defence secretary Lloyd Austin, have dismissed the notion that Moscow’s use of nuclear weapons is imminent, experts warn that recent developments could increase the possibility of nuclear weapons use.
Here’s what we know about Russia’s inventory of atomic weapons.
How big is Russia’s nuclear arsenal?
Russia holds more nuclear warheads than any other nation at an estimated 5,580, which amounts to 47% of global stockpiles, according to data from the Federation of American Scientists (FAS).
But only an estimated 1,710 of those weapons are deployed, a fraction more than the 1,670 deployed by the US.
Both nations have the necessary nuclear might to destroy each other several times over, and considerably more atomic warheads than the world’s seven other nuclear nations: China, France, India, Israel, North Korea, Pakistan and the United Kingdom.
Of Moscow’s deployed weapons, an estimated 870 are on land-based ballistic missiles, 640 on submarine-launched ballistic missiles, and potentially 200 at heavy bomber bases.
According to FAS, there are no signs Russia is significantly scaling up its nuclear arsenal, but the federation does warn of a potential surge in the future as the country replaces single-warhead missiles with those capable of carrying multiple warheads.
Russia is also steadily modernising its nuclear arsenal.
What could trigger a Russian nuclear response?
Moscow’s previous 2020 doctrine stated that its nuclear weapons could be used in response to an attack using nuclear or other weapons of mass destruction “when the very existence of the state is put under threat.”
Now, the conditions under which a nuclear response could be launched have changed in three crucial ways:
- Russia will consider using nuclear weapons in the case of a strike on its territory using conventional weapons, such as cruise missiles, drones and tactical aircraft.
- It could launch a nuclear attack in response to an aggression by a non-nuclear state acting “with the participation or support of a nuclear state”, as is the case for Ukraine.
- Moscow will also apply the same conditions to an attack on Belarus’ territory, in agreement with President Lukashenko.
Is there a rising nuclear threat?
The size of the world’s nuclear stockpiles has rapidly decreased amid the post-Cold War détente. The Soviet Union had some 40,000 warheads, and the US around 30,000, when stockpiles peaked during the 1960s and 70s.
But FAS warns that while the overall number is still in decline, operational warheads are on the rise once again. More countries are also upgrading their missiles to deploy multiple warheads.
“In nearly all of the nuclear-armed states there are either plans or a significant push to increase nuclear forces,” Hans M. Kristensen, Director of the Nuclear Information Project at the Federation of American Scientists (FAS), said in June this year.
Is the West reacting?
When Putin approved the updated nuclear protocol last week, many Western leaders dismissed it as sabre rattling.
German Foreign Minister Annalena Baerbock said Germany and its partners would “not be intimidated” and accused Putin of “playing with our fear.”
But since Russia used a hypersonic ballistic missile capable of carrying a nuclear warhead in an attack on Dnipro, European leaders have raised the alarm.
“The last few dozen hours have shown that the threat is serious and real when it comes to global conflict,” Polish Prime Minister Donald Tusk said on Friday.
According to Dutch media reports, NATO’s secretary-general Mark Rutte is in Florida to urgently meet President-elect Donald Trump, potentially to discuss the recent escalation.
NATO and Ukraine will hold an extraordinary meeting in Brussels next Tuesday to discuss the situation and the possible allied reaction, according to Euronews sources.
-
Business1 week ago
Column: OpenAI just scored a huge victory in a copyright case … or did it?
-
Health1 week ago
Bird flu leaves teen in critical condition after country's first reported case
-
Business6 days ago
Column: Molly White's message for journalists going freelance — be ready for the pitfalls
-
World1 week ago
Sarah Palin, NY Times Have Explored Settlement, as Judge Sets Defamation Retrial
-
Science3 days ago
Trump nominates Dr. Oz to head Medicare and Medicaid and help take on 'illness industrial complex'
-
Politics5 days ago
Trump taps FCC member Brendan Carr to lead agency: 'Warrior for Free Speech'
-
Technology4 days ago
Inside Elon Musk’s messy breakup with OpenAI
-
Lifestyle5 days ago
Some in the U.S. farm industry are alarmed by Trump's embrace of RFK Jr. and tariffs