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Global equity markets closed higher across every region today,
with a particularly strong performance out of Europe. A better than
expected US non-farm payroll report led to a much higher open in
the US, which gradually faded on news of more closures in
California and parts of the US south and southwest due to the rapid
increase in COVID-19 cases. iTraxx and CDX indices tighter higher
across IG/high yield, as well as oil and US/European government
bonds rallying on the day.
Americas
US equity markets closed modestly higher, but near session
lows; Nasdaq/S&P 500 +0.5%, DJIA +0.4%, and Russell 2000 +0.3%.
The S&P 500 closed +4.0% on the week.
10yr US govt bonds closed -1bp/0.67% yield.
CDX-NAIG closed -1bp/74bps and CDX-NAHY -7bps/505bps, which is
-7bps and -22bps on the week, respectively.
Crude oil closed +2.1%/$40.65 per barrel, which is +5.6% on the
week.
US nonfarm payroll employment rose 4.8 million in June, beating
our expectation as well as the Bloomberg consensus by fairly wide
margins. The unemployment rate fell 2.2 percentage points to 11.1%,
also better than expected. (IHS Markit Economists Ben Herzon and
Michael Konidaris)
The broad tone of the report was one of a robustly recovering
labor market, a least through mid-June. However, an alarming surge
in new COVID-19 cases over the last couple of weeks has led some
states to pause their reopening plans and others to begin reversing
them. Combined with the likelihood of rising caution on the part of
consumers, this threatens to slow payroll gains as early as this
month or even reverse a portion of recent gains.
Indeed, leisure and hospitality accounted for 38% of job losses
over March and April (8.3 million out of 22.2 million) and 47% of
job gains over May and June (3.5 million out of 7.5 million). The
fate of these jobs is linked closely to the progression of the
pandemic.
For now, IHS Markit is assuming a slowing in payroll gains in
coming months, but not a reversal.
Outside of leisure and hospitality, gains in employment in June
were smaller but broad-based.
Private payroll employment also rose 4.8 million in June, and
the index of aggregate weekly hours rose 3.6%. For the second
quarter, though, the hours index declined at a 41.6% annual rate,
as hours plummeted in April.
Seasonally adjusted US initial claims for unemployment
insurance, at 1,427,000 in the week ended 27 June, remained at
historically high levels, although well below the all-time high of
6,867,000 in the week ended 28 March. Initial claims have been
trending downward since 28 March; however, the recent spike in
COVID-19 cases could reverse this trajectory. (IHS Markit Economist
Akshat Goel)
The seasonally adjusted number of continuing claims (in regular
state programs), which lag initial claims by a week, rose by 59,000
to 19,290,000 in the week ended 20 June. Although the latest count
is marginally higher than the previous week, it is well below the
all-time high of 24,912,000 in the week ended 9 May and indicates
that as businesses reopen, furloughed workers are cautiously
getting recalled. The insured unemployment rate in the week ended
20 June stood at 13.2%.
There were 839,563 unadjusted initial claims for Pandemic
Unemployment Assistance (PUA) in the week ended 27 June. In the
week ended 13 June, continuing claims for PUA rose by 1,785,816 to
12,853,163.
In the week ended 13 June, 749,703 individuals were receiving
Pandemic Emergency Unemployment Compensation (PEUC) benefits with
39 states accepting claims for PEUC so far.
The Department of Labor provides the total number of people
claiming benefits under all its programs with a two-week lag. The
unadjusted total for the week ended 13 June was 31,491,627, an
increase of 916,722 from the previous week. 56% percent of this
total is from regular state programs and 41% from the PUA
program.
American Airlines will have more than 20,000 front-line
employees this autumn than it needs to operate its reduced flying
schedule, executives said on Thursday. Doug Parker, chief
executive, and Robert Isom, president, said in a memo to employees
that, given reduced customer traffic, the Fort Worth, Texas,
airline anticipated that it would have 20-30% more pilots, flight
attendants, airport agents, mechanics and baggage handlers than it
needs. On Wednesday the airline decided to abandon 19 international
routes from six hubs. (FT)
The nominal US trade deficit widened in May by $4.8 billion to
$54.6 billion, somewhat more of a widening than both we and the
Bloomberg consensus had expected. (IHS Markit Economist Kathleen
Navin)
Underlying the headline number, nominal exports fell 4.4% and
nominal imports eased 0.9% in May. This marked the third
consecutive monthly decline in exports and the fifth in imports. We
look for exports to turn up in June and for imports to post another
decline.
As air travel was all but shut down for much of March and
April, exports and imports of transport and travel services
declined sharply during those months. While air travel in May was
up from its lows in March and April, the recovery remained slow,
and trade in both transport and travel services remained depressed
in May.
In addition to the continued weakness in services, today's
report included further declines in both exports and imports of
goods. Over the three months ending in May, real goods exports have
declined at a 75.4% annual rate while real goods imports have
declined at a 40.4% annual rate.
US manufacturers' orders rose 8.0% in May, while shipments rose
3.1%. This followed cumulative declines over March and April of
about 23% for orders and 19% for shipments; the levels of orders
and shipments remain well below pre-pandemic levels. Manufacturers'
inventories rose 0.2% in May. (IHS Markit Economists Ben Herzon and
Lawrence Nelson)
Most of the increase in orders in May was in durable goods,
and, in particular, in transportation equipment. Orders for
nondefense aircraft and parts rose sharply and are not far below
pre-pandemic levels.
About two-thirds of the increase in shipments was in durable
goods and largely in transportation equipment, mainly reflecting
rising shipments of motor vehicles and parts.
Manufacturers' inventories were revised lower for April but
rose somewhat more than expected in May.
FeedKind is currently being produced solely at Calysta's pilot
facility in the UK, which has been running for two years. However,
the company expects to open its first aquafeed facility in China
during 2022 through a partnership with French firm Adisseo. This
facility - located in Changshou, Chongquing - will mark a major
milestone on the path to the global commercialization of FeedKind.
FeedKind is an alternative feed ingredient for pets, livestock and
fish. It is made through the fermentation of natural gas and can be
used in either dry pellet or powdered forms. The production process
uses no arable land or water. According to Calysta, the Changshou
plant reflects the firm's commitment to increasing its investment
in China and pursuing aquafeed opportunities across Asia. The
company said the Asian aquafeed sector is worth $28 billion and
represents 70% of the global market. The development of the Chinese
facility will be fully financed by the $30 million investment
Calysta received from BP Ventures last year. The new site is
expected to produce 20,000 metric tons of FeedKind per year once
operational. However, the company's co-founder and chief executive
Alan Shaw told IHS Markit Animal Health this is only the first
phase in cementing Calysta's international presence and addressing
a global protein deficit. He explained: "There is a substantial
protein gap worldwide and aquaculture is touted quite loudly to be
one of the best ways to plug the gap for humans. This is because it
is one of the most efficient forms of food-rearing in the world.
The problem with expanding aquaculture is a lack of feed, as the
protein gap for humans translates into a protein gap in feed. You
can't keep using more soy and keep burning down more rainforests.
(IHS Markit Animal Health's Daniel Willis)
Light-vehicle sales in the United States dropped 26.4% year on
year (y/y) to 1,111,311 units in June. Nevertheless, US
light-vehicle demand continued to improve in June from the
depressed level in April as online sales and reopening of
activities - especially by auto dealerships - supported sales.
However, over the first half of the year, the market has declined
23.6% y/y to 6,447,864 units. With the rising number of COVID-19
cases in some US states, it will be important to track auto sales
developments over the next few months. Several automakers have
moved to quarterly reporting of US sales. Along with the three
Detroit automakers, Audi, BMW, Daimler, Nissan, Porsche, and
Volkswagen (VW) have shifted to quarterly reporting of US sales.
Subaru announced on 30 June that it will shift to quarterly
reporting as well, beginning in July. (IHS Markit
AutoIntelligence's Stephanie Brinley)
Autonomous trucking startup TuSimple plans to create the first
autonomous freight network (AFN) in the United States by partnering
with private package delivery company UPS, transportation company
Penske, and trucking companies US Xpress and McLane. TuSimple
announced the framework agreement and partners on 1 July. According
to TuSimple, the AFN is an ecosystem consisting of "autonomous
trucks, digital mapped routes, strategically placed terminals, and
TuSimple Connect, a proprietary autonomous operations monitoring
system". The company added that the collective system is the safest
and most efficient way for bringing autonomous freight trucks to
the market. TuSimple president Cheng Lu said in a statement, "Our
ultimate goal is to have a nationwide transportation network
consisting of mapped routes connecting hundreds of terminals to
enable efficient, low-cost long-haul autonomous freight operations.
By launching the AFN with our strategic partners, we will be able
to quickly scale operations and expand autonomous shipping lanes to
provide users access to autonomous capacity anywhere and 24/7
on-demand." The company plans to roll out the project in phases.
The first phase will be developed in 2020 and 2021 and offer
services between cities in the US states of Arizona and Texas,
including Phoenix, Tucson, El Paso, Dallas, Houston, and San
Antonia. The second phase will be developed in 2022 to 2023 and
will expand the network with a service from Los Angeles,
California, to Jacksonville, Florida, and connect the country's
west coast with the east coast. TuSimple sees a nationwide roll-out
of the AFN beginning in 2023 and 2024, adding major routes
throughout the lower US 48 states. (IHS Markit AutoIntelligence's
Stephanie Brinley)
Chile on 1 July reported 282,043 cases of confirmed COVID-19
and has emerged as one of the countries with the highest total
number of cases in the world, despite its capital Santiago having
been under total obligatory lockdown since 15 May. (IHS Markit
Economists Carla Selman and Ellie Vorhaben)
COVID-19-virus-related restrictions are likely to remain in
place in Chile through July, further contracting the economy.
Additional fiscal relief and stimulus packages provide some
relief, with Chile's solid fiscal position and access to credit
likely to facilitate an economic recovery in 2021.
Prolonged unemployment is likely to undermine recovery. The
National Statistics Institute of Chile (Instituto Nacional de
Estadisticas: INE) reported on 30 June that unemployment had
reached 11.5% in March-May (since the implementation of confinement
measures), the highest rate in 10 years. In May alone, the Chilean
economy lost 0.8 million jobs, bringing total losses for the year
to 1.64 million (18% of the employed population). The worst-hit
sectors have been retail (22% of job losses), agriculture (13.5%),
and construction (12.3%).
Protests are likely towards year-end, increasing looting and
property damage risks. Protests are likely to re-emerge towards
year-end if the pandemic abates and to coincide with a referendum
on a new constitution scheduled to take place on 25 October.
As per IHS Markit's Commodities at Sea, copper concentrates
shipments from Chile and Peru during June 2020 were calculated at
900kt (down 235kt y-o-y) and 355kt (down 77kt y-o-y), resp. Both
the countries are battling from surging cases of Covid-19. As per
Federation of Copper Workers Union, out of Corporation Nacional del
Cobre de Chile's (Codelco) 71,000 workforce around 1,951 workers
have been infected with coronavirus. As per Federation data, El
Teniente mine (in central Chile) and Chuquicamata (in north Chile)
have been hardest hit with 664 and 473 cases reported until 25 June
2020. Overall Codelco's companywide infection rate has surged to
2.7pc vs Chile's average industry wide rate at 1pc. During week-26,
Codelco in order to maintain social distancing implemented
14-days-on-14 days-off roster at El Teniente mine. At the
Chuquicamata mine the company has reduced workforce leading to
halting of smelting and reducing refining plans. And from this mine
Codelco is focusing on production and concentrator areas. Unions is
asking the company to shut down Chuquicamata operations for two
weeks in order to sanitize the complex thoroughly. Reduced copper
concentrates supply from Chile and Peru but strong demand from
China is providing strength to copper prices with bids at LME on 01
July 2020 at $ 6016.50 for cash and $ 6023.50/t (3-MO). In the cash
market copper prices have surged 30pc in the last three months.
(IHS Markit Maritime & Trade's Rahul Kapoor and Pranay
Shukla)
S&P Global Ratings (S&P)'s downgrade for Belize follows
the government's announcement seeking a debt exchange for US-dollar
denominated public-sector bonds maturing in 2034; moreover, the
government is seeking a grace period until February 2021, which
could imply missing a coupon payment in August 2020 if an agreement
with bondholders is not reached by then. The downgrade reflects the
agency's perception that the possible changes in the bond's terms
would fall in the distressed debt-exchange category. In addition,
the short time frame to finalize an agreement along with the
critically diminished fiscal resources because of the
COVID-19-virus pandemic could result in the country missing
scheduled debt service. The rating agency has noted that the global
spread of the COVID-19 virus will hamper the tourism-dependent
Belizean economy, as the industry brings in more than 50% of the
country's foreign-exchange receipts. (IHS Markit Economist Paula
Diosquez-Rice)
Europe/Middle East/ Africa
Most European equity markets closed sharply higher; Spain
+3.8%, Italy +2.9%, Germany +2.8%, France +2.5%, and UK +1.3%.
10yr European govt bonds closed higher across the region; Italy
-6bps, Spain/France -5bps, Germany -4bps, and UK -2bps.
iTraxx-Europe closed -2bps/64bps and iTraxx-Xover
-4bps/368bps.
Brent crude closed +2.6%/$43.12 per barrel.
The UK retail and aviation sectors have announced a wave of job
redundancies, with thousands of jobs to be shed by some of the
country's most prestigious companies. In total, some 12,000 job
cuts have been announced in the past 48 hours. (IHS Markit
Economist Raj Badiani)
Major retailers Harrods and the Arcadia Group have announced
significant redundancies, while John Lewis intends to close stores,
with job losses to follow.
Travel food retailer SSP Group, owner of the Upper Crust bakery
chain, announced up to 5,000 job losses as it has been hit by the
fact that passenger numbers at rail stations are 85% lower than a
year ago.
The aviation sector has announced a flurry of job cuts, with
the global lockdown measures and travel restrictions imposed in
response to the COVID-19 virus outbreak decimating demand for air
travel, which fell by 90% year on year in April and May.
Specifically, Airbus and EasyJet have warned of possible job cuts,
following on from announcements from Ryanair and British
Airways.
The Financial Times (1 July) calculates that more than 100,000
redundancies have been announced by large companies during the
COVID-19 virus pandemic.
The national statistical office confirmed that the Spanish
economic upturn ended abruptly in the first quarter of 2020.
Specifically, real GDP shrunk by a record 5.2% quarter on quarter
(q/q) in the first quarter, the first drop since the second half of
2013. (IHS Markit Economist Raj Badiani)
In annual terms, the economy was down by 4.1% year on year
(y/y) in the first quarter, down dramatically from a 2.0% y/y gain
in 2019.
Consumer spending fell more aggressively in the first quarter.
The fall in consumer spending in the first quarter was well aligned
with awful retail sales in March. Indeed, the volume of retail
sales contracted by 15.3% between February and March. It was down
14.1% y/y, which was the sharpest fall since the series began in
2001, with spending on household and personal equipment most
affected.
Fixed investment contracted aggressively during the first
quarter. A breakdown by asset reveals falling dwellings and other
buildings and structures construction alongside lower spending on
machinery and equipment. The industrial climate was notably more
challenging, partly due to a collapse in corporate financials and
plunging manufacturing activity.
Net exports were a drag on activity, with exports and imports
falling by 8.2% q/q and 6.6% q/q, respectively.
The collapse of tourist activity and the national lockdown in
Spain entailed further damage to Spain's major service sectors in
the second quarter of 2020. The most exposed sector was restaurants
and hotels, which accounted for 16.6% of GDP in 2018, dwarfing a
comparable value of 4.8% for the eurozone as whole.
The Italian and Spanish passenger car markets have struggled
again during June following their emergence from COVID-19 virus
pandemic lockdowns. (IHS Markit AutoIntelligence's Ian Fletcher)
The passenger car market in Italy fell by 23.1% year on year
(y/y) during June, according to the latest data published by the
National Association of Foreign Vehicle Makers' Representatives
(Unione Nazionale Rappresentanti Autoveicoli Esteri: UNRAE). Demand
fell from 172,312 units in May 2019 to 132,457 units. As a result
of the declines since the beginning of the year, registrations at
the end of the first half of 2020 are now down by 46.1% y/y to
583,960 units.
Spain recorded even steeper declines in June, although it still
performed better than recent months. The latest data published by
the Spanish Association of Passenger Car and Truck Manufacturers
(Asociación Española de Fabricantes de Automóviles Turismos y
Camiones: ANFAC), show that registrations contracted by 36.7% y/y
to 82,651 units. The YTD figures now stand at 339,853 units, a
decline of 50.9% y/y.
According to the Swiss Federal Statistical Office (SFSO), Swiss
consumer prices remained flat month on month (m/m) in June,
matching the long-term average for this month. The rebound in oil
prices since mid-May has been supportive, albeit to a lesser degree
than expected. The annual rate of consumer price index (CPI)
inflation therefore stabilized at May's four-year low of -1.3% year
on year (y/y). The EU-harmonized measure, with its somewhat
different composition, was softer in m/m terms (-0.1%), its y/y
rate falling from -1.0% to -1.3% and thus dovetailing with the
national measure. (IHS Markit Economist Timo Klein)
According to the Austrian Labor Market Service (AMS), there
were 414,766 unemployed people in Austria at the end of June, down
59,000 from May and up 150,000 (56.8%) versus June 2019. (IHS
Markit Economist Timo Klein)
The annual gap narrowed compared with May (69.7% year on year;
y/y).
The unadjusted unemployment rate declined anew from 11.5% to
10.1%. Some of this was purely seasonal, but the gap with the rate
a year earlier (6.5%) is now only 3.6 percentage points, down from
4.7 percentage points in May and even 5.5 percentage points at its
peak in April.
The unemployment rate on a harmonized, seasonally adjusted
basis, as calculated according to European Union and thus
International Labor Organization (ILO) criteria, which is only
available until May, has now increased to 5.4%. This is up from
April's 5.2%, which has been revised up sharply from 4.8%
initially.
May's rate of 5.4% was 0.9 percentage point higher than a year
earlier. The ILO data are survey-based and therefore do not react
as rapidly to changes in economic activity as the national numbers,
which reflect registrations for unemployment benefits.
Vacancies, which had still exceeded their year-earlier level
until February, were down 25.2% y/y in June (absolute level:
63,194). Vacancies are also rebounding, albeit only gradually as
firms aim to hold onto their existing workforces first.
Dependent employment declined by 125,000 (or 3.3%) y/y in June,
demonstrating waning downward momentum - in April, the annual drop
had been 200,000.
According to the first quarterly balance of payments results of
2020, the Finnish current account registered a deficit of EUR1.6
billion (USD1.8 billion) in January-March. This marks a sharp
deterioration compared with the virtually balanced current account
in the first quarter of 2019. (IHS Markit Economist Venla Sipilä)
A fall of 5% year on year (y/y) in goods imports was no match
to the significantly faster decline of about 12% y/y in exports,
which resulted in the goods trade surplus being eliminated. Service
exports also decreased faster than imports, and the service trade
deficit widened by 25 y/y.
On the primary income account, outflows increased by nearly 15%
y/y, dwarfing the 2.4% gain in inflows, and the surplus dwindled by
two-thirds as a result. Property income supported both outflows and
inflows, being mostly related to interests and dividends on related
portfolio investments in the case of outflows, and to foreign
direct investment (FDI)-related income in the case of inflows.
There was a net capital inflow of EUR2.9 billion. In
particular, net capital inflows of other investments totaled EUR5.0
billion, but net outflows of portfolio investments reached EUR2.3
billion.
At the end of the first quarter, Finland's total gross foreign
assets stood at EUR836.7 billion, while liabilities amounted to
EUR836.8 billion, leaving the net international investment position
at -EUR0.1 billion. Portfolio investment assets decreased markedly
from the previous quarter, mostly because of the changes in
valuation, while price changes also explain a large part of the
fall in portfolio investment liabilities.
Social security funds, which include employment pension
schemes, continued to hold the largest assets. However, social
security fund's net assets weakened owing to price changes in
equity and mutual fund shares.
Czech car production is set to slip by 20% in 2020 according to
the country's Automotive Industry Association's forecast which was
reported by Reuters. The impact of the coronavirus disease 2019
(COVID-19) virus pandemic has had a marked effect on vehicle
production, as a result of the direct impact of plant shutdowns,
while falling demand across Europe and the rest of the world is
also set to have a massive impact. The Czech car industry employs
around 180,000 people directly, according to the association, and
about half a million when all suppliers are counted. However, while
only a few hundred jobs have been cut officially at this point, the
Association's President Bohdan Wojnar said it was vital that
governmental job support be extended. He added, "At the moment, we
[recognize] the companies' efforts to keep people on board.
However, this situation is very fragile and it is in the state's
utmost interest to help, especially in terms of employment." (IHS
Markit AutoIntelligence's Tim Urquhart)
The Volkswagen (VW) Group has completely abandoned plans to
build a new multi-brand plant in Turkey as a result of falling
global demand after the COVID-19 virus pandemic. According to an
Automotive News Europe (ANE) report, VW has now completely put a
halt to the project after initially delaying the plan to locate a
plant to build Skoda and VW brand cars in Manisa as a result of
Turkish government military action in Syria in 2019. The company
said that the pandemic had pushed market growth expectations far
into the future and that "the construction of additional capacities
is therefore from today's viewpoint not needed." (IHS Markit
AutoIntelligence's Tim Urquhart)
Asia-Pacific
APAC equity markets closed higher across the region; Hong Kong
+2.9%, China +2.1%, Australia +1.7%, South Korea +1.4%, India
+1.2%, and Japan +0.1%.
South Korean automakers posted a 19.0% year-on-year (y/y)
plunge in their combined global vehicle sales to 549,684 units in
June, according to data released by the five major domestic
manufacturers and reported by the Yonhap News Agency, as compiled
by IHS Markit. (IHS Markit AutoIntelligence's Jamal Amir)
The five automakers reported a 41.2% y/y surge in combined
domestic market sales last month to 176,468 units, while their
combined overseas sales nosedived 32.6% y/y to 373,216 units.
South Korea's top-selling automaker, Hyundai, posted global
sales of 291,854 units in June, down 22.7% y/y. Hyundai's domestic
market sales grew by 37.2% y/y to 83,700 units last month, while
its overseas sales declined 34.2% y/y to 208,154 units.
In the domestic market, the Grandeur (Azera) led the
automaker's sales last month with 15,688 units. A strong
performance by its premium Genesis brand, with the all-new G80
sedan and GV80 sport utility vehicle (SUV) models, also helped to
maintain robust sales momentum in South Korea, according to the
automaker.
Global sales of Hyundai's affiliate, Kia, decreased 12.1% y/y
to 207,406 units in June. Kia's domestic sales climbed 41.5% y/y to
60,005 units last month, while its overseas sales fell 23.8% y/y to
147,401 units.
General Motors (GM) Korea reported a 28.7% y/y decrease in its
total sales to 25,983 units last month, with domestic sales up
61.5% y/y to 9,349 units and overseas sales down 45.8% y/y to
16,634 units.
Renault Samsung's sales declined by 23.7% y/y to 14,260 units
in June, its domestic sales surging 80.7% y/y to 13,668 units and
its overseas sales plummeting 94.7% y/y to just 592 units. The
plunge in the automaker's overseas sales was mainly due to the end
of production of the Nissan Rogue at Renault Samsung's plant after
its contract to produce the model expired in September 2019.
SsangYong's global sales inched up by 0.2% y/y to 10,181 units
during June. Last month, the automaker sold 9,746 units in South
Korea, up 18.6% y/y, and just 435 units in its overseas markets, a
decline of 79.8% y/y.
Mercedes-Benz has launched its new electric vehicle (EV), the
EQC 400 4MATIC Premium, in South Korea, reports The Korea Herald.
The latest model follows the first EV model under Mercedes-Benz's
EQ electromobility brand, the EQC 400 4MATIC, launched in South
Korea in October 2019. The new model gets a heads-up display and
ventilated seats, as well as a leather interior and Burmester's
surround sound system. The vehicle is also equipped with the new
Mercedes-Benz User Experience (MBUX) infotainment system, which
allows a driver to control the functions inside the car such as
navigation and temperature using voice commands. The price of the
new EQC 400 4MATIC Premium begins from KRW114 million (USD94,782).
However, it is eligible for a government subsidy and other tax
incentives for alternative-powertrain vehicles, which will lower
its price. (IHS Markit AutoIntelligence's Jamal Amir)
The People's Bank of China (PBOC), the Hong Kong Monetary
Authority (HKMA), and the Monetary Authority of Macao (AMCM) made a
joint announcement on 29 June, introducing the framework of a pilot
scheme that enables individual residents to invest in bank
distributed wealth management products (WMPs) throughout the
Greater Bay Area (GBA). (IHS Markit Economist Lei Yi)
Under this two-way scheme, mainland residents in the GBA will
be allowed to purchase eligible WMPs through designated bank
accounts opened in Hong Kong SAR and Macao SAR; and vice versa.
Caps of such cross-border fund flows will be imposed on both an
aggregate and individual basis, and funds in these accounts cannot
be used for other investment.
Settlement will be carried out in renminbi, with currency
conversion conducted in offshore markets. More details on launch
date and implementation are yet to be announced.
The wealth management connect scheme is the third of such after
the stock and bond connect programs connecting mainland China and
Hong Kong SAR. Different from the previous two, the new scheme is
more regional focused and expanded to Macao SAR for the first time,
as the nation pushes for further financial integration of the
GBA
The scheme could better match the rising wealth management
demand of mainland households with the supply of leading financial
services in Hong Kong SAR.
The Chinese government will allow local governments to use part
of the proceeds raised from the sale of local government bonds to
purchase convertible bonds from small and medium banks. According
to Reuters on 1 July, local governments have been allowed to sell
CNY3.75-trillion (USD531 billion) worth special bonds in 2020, a
75% increase from 2019. (IHS Markit Banking Risk's Angus Lam)
Chinese electric vehicle startup Xpeng Motors is using Nvidia
DRIVE AGX Xavier, an artificial intelligence microchip for
autonomous driving, in its new electric sedan, the P7, reports the
Nikkei. Danny Shapiro, Nvidia senior director, said, "Xpeng is
helping usher in this new era of transportation with the AI-powered
P7." According to the news source, Xpeng Motors is also likely to
use Nvidia's DRIVE AGX Orin in its next-generation electric vehicle
(EV). The Orin chip, according to Nvidia, has a processing
performance seven times higher than that of the Xavier. Nvidia
plans to start shipping Orin samples in 2021, with the earliest
installation possible in vehicles around the end of 2022. He
Xiaopeng, chief executive of the Chinese EV maker, said, "We don't
intend to expand our business by depending [only] on domestic
demand in China." He added, "We will grow in the global market
while contesting head-on with Tesla." (IHS Markit Automotive
Mobility's Tarun Thakur)
FAW Group has released sales results for the Hongqi brand in
June, which show sales of 15,400 units, up 92% year on year. In the
first six months of the year, more than 70,000 Hongqi cars were
sold, up 111% y/y. Sales figures for individual models were not
given by the automaker. FAW has set an ambitious target for Hongqi
in 2020. The automaker expects sales of Hongqi vehicles to reach
200,000 units this year. The sales growth will be supported by
FAW's expansion of Hongqi's line-up of C- to E-segment vehicles.
Hongqi became a standalone brand under FAW in late 2016. The brand
has since become the main focus of FAW's efforts in the passenger
vehicle market. During the past two years, FAW has introduced five
models, including two sedans and three sport utility vehicles
(SUVs), under the Hongqi brand. However, according to IHS Market's
light-vehicle sales data, Hongqi's sales growth was driven mainly
by the HS5, a mid-size SUV, and the H5, a mid-size sedan, while
demand for its compact models remained weak. The two models are
forecasted to account for 85% of Hongqi's sales this year. As a
result, the sales target of 200,000 units in 2020 will be a
challenging one for the brand. (IHS Markit AutoIntelligence's Abby
Chun Tu)
Posted 02 July 2020 by Chris Fenske, Head of Fixed Income Research, Americas, IHS Markit
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