Asia-Pacific markets were mixed as BHP and Chinese real estate stocks rose

Fitch rating downgrades Country Garden

Fitch’s ratings have downgraded Chinese homebuilder Country Garden Holdings’ rating to ‘BB+’ from ‘BBB-‘.

“The downgrade reflects a weakening in Country Garden’s financial flexibility due to challenges in China’s real estate sector,” Fitch said in a note.

“Fitch believes Country Garden’s liquidity buffer, while adequate, is under pressure as declining sales coupled with working capital commitments put pressure on cash flow, while worsening capital market conditions have reduced the company’s funding sources.”

– Su-Lin Tan

Chinese real estate stocks make surprising jump after Beijing bond guarantee promise

Chinese real estate stocks rose unexpectedly after Beijing announced the state-owned China Bond Insurance Co. Ltd. had told it to provide guarantees for the issuance of onshore bonds by “model private developers”, including the Hong Kong-listed Longfor Group.

Although the Hang Seng index fell 1.73% as major stocks across the exchange – including Tencent, Ping An and Petrochina – fell, there were green shoots among Chinese developers like Longfor.

Shares of Longfor rose 11%, while top developer Country Garden rose 9%. The rally is also strong in Chine Res Land up 3.2%, R&F Properties up 1.26% and China Vanke up 1.72%.

To reinvigorate the beleaguered Chinese (residential) real estate market, regulators are planning to provide liquidity support to the selected private developers by accepting new local bonds, financial information provider, REDD, said.

However, Jessica Tea, Asia and Greater China investment specialist at BNP Paribas Asset Management, said investors will remain skeptical until they see evidence that these private developers are benefiting from government funding support.

“That said, we believe the recent mortgage boycott is unlikely to cause any systemic risk unless the situation gets out of hand,” Tea said.

“The figures are that Beijing’s policy response to this problem has been swift, with authorities trying to find a number of solutions, including allowing mortgage payments for the affected homeowners and mobilizing banking, SoE and local government resources to support the to reinvigorate suspended projects and developers’ funding shortfalls.”

More expected easing in macroeconomic policy should reduce real estate market risks to economic growth, Tea added.

– Su-Lin Tan

Despite rate cuts, more growth policies are deemed necessary for the Chinese economy

China still needs more growth policies to stabilize its economy after the central bank unexpectedly cut key interest rates, China’s central bank-backed Financial News said Tuesday.

The People’s Bank of China cut the interest rate on its 1-year policy bonds by 10 basis points to 2.75% and the 7-day reverse repo rate from 2.1% on Monday from 2.1% to 2%. It defied economists’ expectations that the central bank would respond to rate cuts.

Citing Wen Bin, chief economist of China Minsheng Bank, Financial News said that for the economy to recover further, the pace of infrastructure investment growth needs to accelerate, especially as recovery momentum has slowed.

Wen also said that weak domestic demand was a problem for the economy and that Beijing should adopt policies that would support economic growth.

Wang Qing, chief macro analyst at Dongfang Jincheng, was also quoted as saying Beijing is likely to boost fiscal and industrial policies to boost the recovery.

Luo Huanjie, senior macro researcher at the Zhixin Investment Research Institute, said Beijing should prioritize macro-policy adjustment in a bid to further improve the economy in the face of potential future pandemic outbreaks.

– Su-Lin Tan

Chinese rate cuts are a modest first step, says professor

The surprise of the People’s Bank of China rate cuts on medium-term policy borrowing costs are a modest first step, said Eswar Prasad, a senior professor of international trade policy at Cornell University.

“The rate cut we’ve seen is very modest. Ten basis points isn’t much, although it does unleash some liquidity,” he told CNBC’s Squawk Box Asia on Tuesday.

According to an announcement on the central bank’s website, the PBOC cut its medium-term one-year credit facility on 400 billion yuan ($59.3 billion) in loans to some financial institutions by 10 basis points to 2.75%. It also cut its seven-day reverse repo rate by 10 basis points to 2%.

“It seems like a very small step. But the PBOC is trying to give a very calibrated signal here that it is ready to intervene if the conditions are justified,” added the professor.

“I think it’s very cautious about unleashing any significant monetary stimulus because they know it’s going to involve medium-term financial risk.”

— Sumathi Bala

Australia investigates competition, consumer issues for social media services

The Australia Competition & Consumer Commission said it will look into competition and consumer issues with social media services such as Facebook, Instagram, Twitter, TikTok and Snapchat.

The ACCC said the report will also consider YouTube, Reddit and Discord.

“We hope to examine trends in user preferences and engagement over time and how users choose social media services,” the statement said. The body plans to investigate “whether newcomers like TikTok have changed the competitive landscape.”

China released a list of algorithms on Friday that are fueling the success of its tech giants, including those of Alibaba and Tencent. The submission also mentions how Douyin, the Chinese version of TikTok, uses such data to recommend content to users.

Jihye Lee

Gas prices continue to rise in the north while Japanese industry lags

Energy prices will continue to climb north amid strong consumption, Skylar Capital Management chief trader and CEO Bill Perkins told Street Signs Asia.

Rising gas prices have caused countries in the northern hemisphere, including Asian countries such as Japan, to rush to import liquefied natural gas. The Asian benchmark spot price is on an upward trajectory, while Japanese industrial stocks are in the red on Tuesday.

“I think it’s backtracking with traders taking profits and worrying in China about the recession and real estate conditions there. They’re concerns, but they’re exaggerated relative to the macro trends going on in this cycle,” he said.

Perkins said rising oil prices are not holding up much, and he expects WPI oil prices to climb north of $100 a barrel and Brent beyond $120 a barrel.

– Su-Lin Tan

Anglo-Australian miner BHP soars after posting second-biggest profit in history

Anglo-Australian mining BHP shares rose 3.80% after posting the second-largest gain in history and a record dividend of $16.3 billion.

The annual results ended June 30 have exceeded expectations.

BHP Chief Executive Mike Henry said BHP is entering fiscal year 2023 “in excellent shape strategically, operationally and financially.”

He also expects China to “emerge as a source of stability for commodity demand in the coming year, with policy support gradually taking hold.”

“At the same time, we expect a slowdown in advanced economies as monetary policy tightens, as well as lingering geopolitical uncertainty and inflationary pressures,” he said in a press release.

“The direct and indirect impacts of the European energy crisis are of particular concern. Tight labor markets will continue to challenge global and local supply chains.”

The situation has reversed for colleagues Rio Tinto and Fortescue Metals who have recorded declines.

– Su-Lin Tan

US, Japan and South Korea complete missile search and tracking exercise

The Pentagon said the US Navy, the Japanese Maritime Self-Defense Force and the Navy of the Republic of Korea (ROK) have completed a missile alert and ballistic missile search and tracking exercise off the coast of the Pacific Missile Range Facility (PMRF) in Hawaii.

The US, Japanese and ROK participants shared tactical data link information in accordance with a trilateral information sharing agreement.

“Following the trilateral ministerial meeting of the US, ROK and Japan on June 11 in Singapore, this missile warning and the ballistic missile search and tracking demonstrated the commitment of the US, ROK and Japan to promote trilateral cooperation to respond to protect the DPRK’s challenges and shared security and prosperity, and strengthen the rules-based international order,” the Pentagon said in a note.

– Su-Lin Tan

Chinese fast food operator Yum goes for HK . primary listing

Chinese fast food operator Yum China Holdings announced Monday that it has applied for the conversion of its secondary listing to a primary listing in Hong Kong. It is currently dual-listed on the New York Stock Exchange.

“Since our secondary listing in Hong Kong in 2020, we have improved access to our shareholders in Asia, diversified our investor base and tapped additional capital pools,” Yum China CEO Joey Wat said in a press release.

“Double primary listing would bring us even closer to our employees, customers and other stakeholders. This strategic move would further broaden our shareholder universe, increase liquidity and reduce the risk of delisting from the NYSE,” he added.

Yum has the exclusive rights to operate fast food brands such as KFC, Pizza Hut and Taco Bell in China.

– Su-Lin Tan

CNBC Pro: Strategist Names Global Stocks to Buy Despite Slowing Growth

There are pockets of “compelling value” in three sectors — even amid an economic slowdown, said Patrick Armstrong, chief investment officer at Plurimi Group.

These sectors are “incredibly cheap,” he told CNBC’s “Squawk Box Europe,” naming his favorite stocks and explaining why he likes them.

Pro subscribers can read the story here.

— Weizhen Tan

CNBC Pro: Tesla’s valuation makes no sense until it reaches this level, says fund manager

Tesla may be one of the best-known manufacturers of electric vehicles, but fund manager and tech investor Paul Meeks still thinks the stock is too expensive.

Meeks revealed to CNBC Pro Talks the rating where he will find Tesla “more interesting”.

Pro subscribers can read the story here.

Zavier Ongo

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