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Daily Global Market Summary - August 24, 2020

24 August 2020 Chris Fenske

Equity markets closed higher across the globe today, with European markets outperforming the other regions and the S&P 500 printing another record close. European and US government bonds ended the day modestly lower, while iTraxx and CDX indices were tighter across IG and high yield. The US is preparing for the arrival of two major storms into the southwest coast, while on a positive note the daily rate of growth of new COVID-19 cases in the US continues to decrease.

Americas

  1. US equity markets closed higher across region, with the S&P 500 printing a record close; DJIA +1.4%, S&P 500/Russell 2000 +1.0%, and Nasdaq +0.6%.
  2. Exxon Mobil Corp, Pfizer Inc. and Raytheon Technologies Corp. were taken out of the Dow Jones Industrial Average as part of the stock benchmark's biggest reshuffling in seven years, actions that will boost the influence of technology companies that have dominated the 2020 stock market. Salesforce.com, Amgen Inc. and Honeywell International will enter the 124-year old equity gauge a week from today, its overseers said. The moves were prompted when Apple Inc.'s stock split effectively reduced the sway of computer and software stocks in the price-weighted average. (Bloomberg)
  3. 10yr US govt bonds closed +2bps/0.66% yield.
  4. CDX-NAIG closed -1bp/66bps and CDX-NAHY -7bps/383bps.
  5. IHS Markit AAA Municipal Analytics Curve (MAC) closed unchanged across the curve today after selling off most of last week, with 8yrs and longer maturities +12bps week-over-week.
  6. Gold closed -0.4%/$1,939 per ounce.
  7. Crude oil closed +0.7%/$42.62 per barrel.
  8. China-bound crude cargoes have started to fall, uncovering the physical market's next major challenge. IHS Markit's Commodities at Sea estimates that average China-bound waterborne crude flows in August to date have averaged just 7.6 MMb/d, dramatically lower than highs of 12.5 MMb/d on average in April and May. Final August figures could still move slightly higher over the next week, but the magnitude is unlikely to move the needle materially. The imminent slowdown in Chinese buying is a key risk we highlighted in our recent quarterly outlook for oil markets and a key factor underpinning the modest improvement in physical markets this summer despite still-sizeable OPEC+ cuts. We estimate Chinese crude imports would need to average roughly 9.5-10.0 MMb/d to meet domestic refining needs without stockpiling, with current August volumes in-transit corresponding to the low-end of that range. The task of drawing down surplus global inventories will be much more challenging if Chinese imports remain in the recent range. OPEC+ producers, which make up the majority of China's imports, are keenly aware of these demand trends, and will likely continue to err on the side of caution as a result. (IHS Markit Energy Advisory's Roger Diwan, Karim Fawaz, Justin Jacobs, Edward Moe, and Sean Karst)
  9. According to today's update of IHS Markit's Texas State economics summary, the dual COVID-19 and oil price shock threw Texas into a deep recession over the first half of this year. (IHS Markit Economist Karl Kuykendall)
    • During the second quarter of 2020, employment plunged by 29.4% (annualized) to mark the deepest one-quarter loss in state history.
    • The "good" news is that this was less severe than the 40% decline experienced at the national level and the monthly data show a trend of employment picking back up again. Indeed, the job losses were concentrated in March and April when the state imposed business restrictions aimed at mitigating the virus spread.
    • Reopening efforts in May and June have since led to job gains over those months, but levels still remain well below pre-pandemic totals.
    • Texas was less impacted by virus caseloads early on in the crisis, which led to less severe business restrictions relative to other states and a more aggressive reopening. This mitigated the second quarter-decline relative to the national average.
    • However, caseloads have since spiked in the South over June and July with Texas ranking among the most impacted states.
    • High-technology and service industries play an increasingly important role in Texas' economy as the state diversifies from its energy roots.
      • Austin, the state capital, has been a perennial leader nationwide in job and population growth, benefiting from the growth in high-tech research and development (R&D) and manufacturing.
      • Houston remains dependent on its traditional energy-related industries, but has also seen rapid expansions in health-care and business services.
      • The Dallas and Fort Worth metro areas are leading transportation and telecommunications centers.
      • San Antonio, meanwhile, is attracting business services, and is the site of a Toyota auto manufacturing facility, and an extensive research center of the National Security Agency
  10. Coronavirus cases in the U.S. increased 0.6% as compared with the same time Sunday to 5.72 million, according to data collected by Johns Hopkins University and Bloomberg News. The increase was lower than the average daily gain of 0.8% over the past week. Deaths rose by 0.2% to 176,991. (Blomberg)
  11. Total nonfarm payroll employment increased in 47 states and the District of Columbia in July 2020, gaining a net 1.7 million jobs from the previous month on a seasonally adjusted basis, according to the most recent report from the US Bureau of Labor Statistics (BLS). This was up from a gain of 4.6 million jobs in June 2020, when the impacts of state reopening began to be seen in the data. Employment in July increased in most sectors, with the majority of gains once again concentrated in the food and accommodation services sector as restaurants continue to at least partially reopen. Sectors that were able to reopen earlier or more fully, such as healthcare and retail, also added a significant number of jobs in July. Looking at the percentage change of total jobs from February to July shows which state economies have fared the best or worst since the beginning of the pandemic. States that were hardest hit still include those that were the epicenter of the coronavirus outbreak in the Northeast, such as New York, New Jersey, Massachusetts, New Hampshire, and Vermont. Tourism and travel-reliant states like Hawaii and Nevada, and heavily goods-producing midwestern states such as Michigan, also sustained heavy blows. Employment in all these states declined at least 10% over the five-month period. As we expected, the states that fared the best are smaller with rural geographies that naturally allow for social distancing, such as Utah, Idaho, and Arizona. (IHS Markit Economist Steven Frable)
  12. US chemical production is rebounding, according to the American Chemistry Council's (ACC's) US Chemical Production Regional Index (US CPRI). The figure, a three-month moving average (3MMA), increased 0.8% in July after dropping 2.0% in May and 1.6% in June. Segments contributing to the increase included plastic resins, chlor-alkali, organic chemicals, industrial gases, synthetic dyes and pigments, consumer products, and fertilizers, says ACC. Production continued to decline in adhesives, coatings, other specialty chemicals, crop protection, synthetic rubber, and manufactured fibers. ACC notes that goods manufacturing continued a broad-based recovery in July, with overall factory activity up 4.9% on a 3MMA basis. Year over year (YOY), the US CPRI was down 5.9%, the 14th consecutive month of YOY declines but an improvement over recent months.
  13. The 2020 hurricane season is upon us and meteorologists have gradually increased their prediction for named storms. As of 5 August, forecasters at Colorado State University (CSU) increased their 2020 forecast to 24 named storms for the Atlantic hurricane season. By reviewing the historical impact of prior hurricanes, the characteristics of a storm (intensity, speed) could indicate the potential for petrochemical disruption. The general trends among previous storms were two-fold: the stronger the storm or the slower the storm upon landfall, the greater likelihood for olefins supply disruption. While the level of disruption largely depends on the ultimate location of landfall, if a storm path is predicted to impact petrochemical operations, these two characteristics could be viewed as leading indicators for disruption severity. (IHS Markit Chemical Market Advisory Service's Tracy Cui, Steve Lewandowski, and Lan Pham)
  14. Six US meat and poultry facilities have been added to the list of those authorized to supply the Chinese market, according to information released today (August 24) by China's General Administration for Customs (GACC). (IHS Markit Food and Agricultural Commodities' Max Green)
    • In its latest update on meat and cold storage plant approvals, the GACC adds six new establishments who are able supply the Chinese market from the start of this week. The agency does not state the full names of those approved, but the registration numbers match up to:
      • Cordele Food Holdings, Cordele, Georgia
      • Fort Worth Meat Packers, Fort Worth, Texas
      • Washington Beef, Toppenish, Washington State
      • Yoakum Packing, Yoakum, Texas
      • Lineage Logistics, Sunnyville, Texas
      • Mariah Foods, Columbus, Indiana
    • The latest approvals add to the 15 US meat and poultry plants added to the GACC's approved list in July.
  15. Lucid has announced its Air sedan will have a 900v-plus electrical architecture and a charging rate of up to 20 miles per minute. According to the company, this will enable charging up to 300 miles in 20 minutes. Lucid says its electrical architecture, custom lithium-ion battery cells, highly sophisticated battery and thermal management system and exceptional powertrain efficiency have enabled the speedy charging. Lucid says that its onboard charging unit, which it calls Wunderbox and says is "unique and innovative", efficiently combines several functionalities in one package and enables the vehicle to be fully compatible with public charging stations, including the growing 350kW fast-charging network. Erich Bach, vice-president of hardware engineering, said in the statement, "With our ultra-high voltage 900V+ electrical architecture and the proprietary Wunderbox, we have significantly increased the speed of energy getting into, around, and even out of the vehicle, delivering the world's fastest charging EV packed with future-ready charging features." The Lucid Air takes combined charging systems (CCS) standards to be compatible with any DC fast-charging station; the system will automatically boost voltage to charge at the quickest possible rate at any location. Lucid also notes that Air buyers in the US will get three years of complimentary charging through the Electrify America network, and the car's navigation system will also communicate charger availability in real time along with locations. For home charging, Lucid will make a Connected Home Charging Station available; the system is bidirectional, and can provide power to the home as well as taking power to charge the battery. Lucid earlier announced a partnership with Qmerit on the home-charging station installation. The speedy charging time announcement follows Lucid's results of third-party testing demonstrating 517 miles of range from the new vehicle. Although the fast-charging figure is impressive, it is somewhat limited by the network availability of a fast enough charger. Going with the higher voltage, however, means Lucid will be able to grow into the network. (IHS Markit AutoIntelligence's Stephanie Brinley)

Europe/Middle East/ Africa

  1. European equity markets closed sharply higher; Germany +2.4%, France +2.3%, Italy +2.1%, Spain +1.8%, and UK +1.7%
  2. Most 10yr European govt bonds closed lower on the day; Spain/Germany +2bps, UK+1bp, and Italy/France flat.
  3. iTraxx-Europe closed -1bp/54bps and iTraxx-Xover -6bps/327bps.
  4. Brent crude closed +1.8%/$45.13 per barrel.
  5. The Spanish Agency for Medicines and Health Products (Agencia Española de Medicamentos y Productos Sanitarios: AEMPS) informed on Sunday 23 August that the country's supply of the COVID-19 drug treatment Veklury (remdesivir; Gilead Sciences, US) would be temporarily exhausted "in the next few hours". Remdesivir is the first and only medicine authorised for the treatment of COVID-19 patients in the European Union. The Spanish drug agency said that at the time of the authorization in July, Spain received guarantees from the manufacturer for the supply of "sufficient" stock of Veklury until it is able to scale up production, based on the epidemiological situation at the time. However, the recent increase in Spain's infection rate and the resulting surge in demand means that the available stock has run out sooner than anticipated. Spain is currently battling a second wave of the pandemic, with a cumulative 14-day incidence at 152 cases per 100,000 inhabitants - the highest in the EU - according to the European Centre for Disease Protection and Control (ECDC). The country is currently awaiting the delivery of a second batch of Veklury under the supply contract signed between the European Commission and Gilead Sciences to cover the treatment of a total of 30,000 patients in the EU. In order to meet current demand until a new instalment of the drug is received, the AEMPS is going to repurpose an unspecified amount of remdesivir left over from clinical trials in participating Spanish hospitals. However, it is unclear whether this is expected to be sufficient to cover demand until the next delivery under the EU advanced purchase contract, which is expected next week. (IHS Markit Life Sciences' Ewa Oliveira da Silva)
  6. The Norges Bank's Monetary Policy and Financial Stability Committee voted unanimously to keep its policy rate at 0% on 21 August. (IHS Markit Economist Raj Badiani)
    • In two extraordinary meetings held on 12 and 20 March and a scheduled event on 7 May, the Norwegian central bank (Norges Bank) cut its policy rate from 1.5% in early March to 0%. The aim is primarily to address the implications of the COVID-19 virus on Norwegian economic activity.
    • The central bank reports the "Norwegian economy is in the midst of a deep downturn. Activity has picked up in recent months but remains lower than prior to the pandemic." In addition, it notes unemployment is falling but remains high.
    • In its assessment of the balance of risks, the Committee stated continued uncertainty surrounding the further economic recovery.
    • Worryingly, it notes rising COVID-19 infections, triggering the reintroduction of some containment measures, representing a risk to the recovery. Meanwhile, a persistent concern is "high house price inflation may result in accumulating financial imbalances."
    • The central bank acknowledges underlying inflation has risen to stand above the inflation target. Consumer price inflation stood at 1.3% in July, but at a notably higher 3.5% when adjusted for tax changes and excluding energy products (CPI-ATE).
    • The CPI-ATE rate has risen steadily between March and July, primarily owing to higher imported goods inflation. The central bank expects the CPI-ATE rate to average 3.0% in 2020, 2.6% in 2021, and 1.8% in 2022. The operational target of monetary policy is keep annual consumer price inflation close to 2% over time.
    • Clearly, the Norges Bank has put aside inflation concerns, with COVID-19 virus fears and collapsing crude oil prices dominating the narrative. Furthermore, the Norges bank believes "krone appreciation and prospects for low wage growth suggest that inflation will moderate further out."
    • On the growth front, the central bank's short-term growth assessment is expectedly gloomy. Specifically, the mainland economy is likely to shrink by 3.5% in 2020 before expanding by 3.7% in 2021.
    • IHS Markit's assessment is more downbeat, with mainland GDP expected to contract by 7.3% in 2020 and then grow by 3.2% in 2021. We anticipate a bigger hit from the COVID-19 lockdown measures on private consumption, while collapsing global oil demand and prices could leave a larger footprint on the Norwegian economy.
    • Manufacturing output was boosted in July by the furniture, computer and electronic products, wood products, electrical equipment, rubber and plastic products, and chemicals branches. In contrast, output declined in coke and refined petroleum products, machinery and equipment, metals, and construction materials.
    • In a sign of rising household demand, production of durable consumer goods surged 22.9% y/y in July, marking the second straight month of double-digit growth. Meanwhile, the continued weakness of investment was demonstrated by a drop in capital goods production (down 3.3% y/y), although the decline was much slower than in March to June.
    • Another sign of poor July investment results came from the construction sector, with output plunging by 10.9% y/y, pulled downwards mainly by civil engineering. In seasonally adjusted terms, construction activity fell by 3.6% m/m and 8.5% y/y.
    • Retail trade, including the automotive sector, rose by 3.0% y/y in real terms and 2.7% y/y in nominal terms in July, driven by surging sales of furniture and household appliances. After steep declines in March to June, nominal sales of motor vehicles were nearly flat in July (down just 0.2% y/y).
    • The latest data indicate that Poland's labor market is improving, with enterprise employment falling by 2.3% y/y in July, after a 3.3% drop in June. Nominal enterprise wages increased by 3.8% y/y in July, the fastest rate since March.Poland's unadjusted industrial output rose by 1.1% year on year (y/y) in July. In seasonally adjusted terms, output increased by 6.2% month on month (m/m) and 0.2% y/y. (IHS Markit Economist Sharon Fisher)
    • This followed a contraction of 1.7% q/q (6.8% q/q SAAR) in the first quarter of 2020, which was revised from -7.1% q/q SAAR initially estimated.
    • This was the largest decline on record since at least 1991. Since 2004, there have been only five quarters of q/q contractions: in 2006, 2008, 2012, and now in 2020.
      On a year-on-year (y/y) basis, real GDP contracted 7.8% y/y, following positive growth of 0.6% y/y in the first quarter 2020. This was only the second y/y decline since 2003, with the other in 2009 being minor.
    • Private consumption contributed the largest decline, plummeting 13.3% q/q (43.4% q/q SAAR). The most resilient categories were housing, the growth rate of which was relatively unchanged at +0.5% q/q, and food at -1.7% q/q. Fuel, electricity, and water consumption fell 10.3% q/q.
    • Fixed investment also contracted sharply by 9.1% q/q (31.6% q/q SAAR), led by residential building.
    • Government consumption expanded strongly at 5.8% q/q (25.2% q/q SAAR) due to healthcare spending and stimulus measures to support the economy and population, such as unemployment benefits.
    • Imports fell by 12.6% q/q (41.7% annualized), versus an export decline of 8.3% q/q (29.2% annualized). This resulted in a large trade surplus, with net trade surging 64.6% q/q in real terms.
    • IHS Markit expects GDP to decline 6.1% this year, before rebounding 5.9% in 2021. Growth is expected to turn positive starting in the third quarter. As a result of the second quarter data, the outlook will likely be maintained, although it will depend in part on the Bank of Israel (BOI)'s guidance at its upcoming policy meeting on 24 August.Israel's Central Bureau of Statistics (CBS) released on 16 August its first estimate of the country's GDP in the second quarter. Real GDP plunged by 8.1% quarter on quarter (q/q) seasonally adjusted, or at a 28.7% q/q seasonally adjusted annualized rate (q/q SAAR). This was slightly better than IHS Markit expectations of a 31% contraction. (IHS Markit Economist Ana Melica)
  7. In August 2020 it was reported that BP terminated its charter of drillship Valaris DS-7 for work offshore Mauritania and Senegal. The rig was going to drill exploration wells in Mauritania and/or Gambia and four development wells on the GTA floating LNG development. The one-year delay on the GTA development due to the COVID-19 crisis is likely the reason for the termination. In Mid-February 2020 it was reported that BP awarded a five well and three options contract for the Valaris DS-7 to drill in Senegal and Mauritania. Operations were to begin in September 2020 and included also an exploration well in Gambia. The contract provided also for testing operations on one well. As of early October 2019, BP was looking for a rig to carry out a drilling campaign in Gambia, Mauritania and Senegal starting in the fourth quarter of 2020. The company was considering six firm wells and two one well options. There will be one exploration well in Gambia and at least four development wells on the GTA floating LNG project. Bids were due by 10 October 2019. At the time, BP was drilling the Orca 1 exploration well, bock C-8, in Mauritania with the "Valaris DS-12" ex-"Ensco DS-12" drillship. The well made a large gas discovery which could be appraised in the planned drilling program. (IHS Markit Plays and Basins' Eric Schmid)

Asia-Pacific

  1. APAC equity markets closed higher across the region; Hong Kong +1.7%, South Korea +1.1%, India +1.0%, Japan/Australia +0.3%, and Mainland China +0.2%.
  2. Blackstone Group Inc. is buying the consumer health-care business of Japan's Takeda Pharmaceutical Co. for ¥242 billion ($2.29 billion), one of the larger private-equity acquisitions in a country where such deals are slowly expanding. Takeda has been pushing ahead with a plan to divest $10 billion of assets to pay down debt it incurred from the $58 billion acquisition of Shire PLC last year. The drugmaker has said it wants to focus on prescription drugs. (WSJ)
  3. Wuthelam Group (Singapore) will acquire a majority stake in Nippon Paint by spending ¥1.28 trillion ($12.1 billion) to raise its stake to 60% from the current 39%. Under the agreement, Nippon Paint will use the funds to acquire full ownership of joint ventures (JVs) in China, India, Malaysia, Singapore, South Korea, and Thailand for around $10 billion. Nippon Paint will also purchase Wuthelam's business in Indonesia for about $2 billion. Nippon Paint projects the transaction to be completed in January 2021, subject to customary clearance.
  4. As per IHS Markit's Commodities at Sea, the first 18-days of August 2020, Japanese coal and iron ore arrivals are calculated at 7.7 metric tons(mt) (30-Day PACE of 12.8mt) and 3mt (4.9mt on the 30-day basis). The arrival PACE in Aug 2020 for both coal as well as iron ore arrivals is quite below previous year levels. During Aug 2019, coal and iron ore arrival 30-Day PACE was 14.9mt and 7.6mt, respectively. During the first seven months of 2020, total coal imports at the Japanese ports are calculated at 104.1mt, down 4.6mt y-o-y. In terms of cargo grade, imports of thermal and metallurgical coal during the specified period were calculated at 76.4mt (down 0.4mt y-o-y) and 27.7mt (down 4.2mt y-o-y). In terms of Japanese regions, where on one hand during the first seven months of 2020 there was an increase in thermal coal imports into Tohoku (14.4mt, up 1.6mt y-o-y) and Kanto (10.6mt, up 2.2mt y-o-y); imports declined at Kinki (6.8mt, down 0.7mt y-o-y) and Kyushu-Okinawa (11.6mt, down 1.3mt y-o-y). For metallurgical coal there was a decline in imports from mostly all the regions with a significant decline in imports at Kanto 6.5mt, down 1mt y-o-y), Chugoku (7.4mt, down 0.6mt) and Kinki (3.6mt, down 1.1mt). Total iron ore imports during the seven months of this year are calculated at 48.4mt (down 9.4mt y-o-y). The major decline was from its major trade partner Australia and Brazil where imports were calculated at 33.8mt (down 5.6mt y-o-y) and 7.1mt (down 1.5mt), respectively. A significant decline in iron ore usage is on the back of a slump in Japan's crude steel production. Overall, during 2020, total coal and iron ore are forecasted at 177mt (down 9.6mt or 5% y-o-y) and 83.9mt (down 13.6mt or 14% y-o-y), respectively. In terms of coal grade- Thermal and Metallurgical coal imports are forecasted at 130.8mt (down 2.8mt or 2% y-o-y) and 46.2mt (down 6.8mt or 13% y-o-y), respectively. (IHS Markit Maritime and Trade's Rahul Kapoor and Pranay Shukla)
  5. Australia is poised to block the acquisition of Lion Dairy & Drinks by China's dairy giant Mengniu over souring relations between the countries over the last few months. (IHS Markit Food and Agricultural Commodities' Jana Sutenko)
    • The decision comes just a few days after China initiated an anti-dumping inquiry into Australian wine. Josh Frydenberg, Australia's treasurer, has told state-owned China Mengniu his preliminary view is that the takeover of the Lion Dairy brands should not proceed, the FT writes.
    • Frydenberg has written to the Chinese company to inform it of the decision and to give it an opportunity to provide remedies or reasons why he should change his mind.
    • In November 2019, China's Mengniu Dairy signed off an AUD600 million (USD407 million) deal with Japanese Kirin, for the sale of Lion Dairy and Drinks' 11 processing operations, as well as a half share in the Canberra Milk business, Capitol Chilled Foods, with Bega Cheese.
    • This is the latest development is a series of ongoing trade war between Canberra and Beijing, that started when the Australian authorities called for an independent inquiry into the origins of the Covid-19 outbreak in Wuhan in April. Since then, Beijing has slapped punitive tariffs on Australian barley, restricted some beef imports and, more recently on August 18, begun an anti-dumping inquiry into wine imports.
    • Australia announced the biggest shake-up of its foreign investment laws in June, giving the treasurer last-resort powers to vary or impose conditions on a deal or force a divestment after it has been approved by the country's Foreign Investment Review Board (FIRB).
  6. After filling its initial public offering (IPO) on the New York Stock Exchange on 8 August, Chinese electric vehicle (EV) manufacturer XPeng updated its IPO target on 21 August, saying it aims to raise up to USD1.11 billion in the IPO and intends to sell 85 million American depositary shares (ADS), each representing two class A ordinary shares. Its price will be between USD11 and USD13 per share. The IPO will place Xpeng on a par with its Chinese rival Li Auto, which raised USD1.09 billion in its US IPO in July, according to Reuters. Li Auto priced its IPO on Nasdaq at USD11.5 per ADS, above its proposed price range of USD8 to USD10. According to Bloomberg, Xpeng's valuation could reach USD9.17 billion, at the top end of the share price range. The offering is being led by Credit Suisse Group AG, JPMorgan Chase & Co and Bank of America Corp. The Chinese EV-maker said existing investors Alibaba Group, Coatue, and Qatar Investment Authority had indicated interest in buying up to USD200 million, USD100 million and USD50 million, respectively, of the ADS being offered. Chinese tech company Xiaomi Corp. had also indicated interest in buying up to USD50 million of the ADS, according to Xpeng. Alibaba will own all of XPeng's class C ordinary shares, representing 14.9% of the voting power of its total shares immediately after the completion of the offering, XPeng said. Prior to the planned US IPO, Xpeng had raised USD500 million in its latest funding round backed by Aspec, Coatue, Hillhouse Capital and Sequoia Capital. (IHS Markit AutoIntelligence's Abby Chun Tu)
  7. GAC Group plans to pilot Level 4 autonomous-car operation in designated regions in 2023, its president Feng Xingya said, reports Gasgoo. Feng announced this at the 2020 Global Intelligent Vehicle Summit and said the automaker will explore software development and support vehicle-to-everything (V2X) communication for intelligent vehicles. There is growing investment and interest in autonomous and connected vehicles, and software will play an important role in their development. The Chongqing authority has issued permits to GAC Group to test its autonomous cars on a stretch of 9.6 km of public roads in Lian Jiang new area. GAC and Shaoguan in Guangdong province have also jointly constructed a 573-hectare zone to test new energy, intelligent network, and driverless. Autonomous vehicle (AV) startup Pony.ai has sourced cars from GAC to integrate its AV technology to pilot a mobility service project. (IHS Automotive Mobility's Surabhi Rajpal)
  8. Baidu has opened the 'Apollo Go Robotaxi' service for the public in the Chinese city of Cangzhou, Hebei province. The launch marks the first time robotaxis have operated in the downtown area of a city in China. Users can hail a free robotaxi ride through Baidu Maps and the service covers 55 pick-up and drop-off stations across the city. This launch follows the expansion of the autonomous vehicle (AV) testing area from the economic development zone to the main urban areas in Cangzhou. In October 2019, the Cangzhou city authorities issued a permit to Baidu allowing it to conduct AV tests with passengers. The company is also offering robotaxi rides to the public for free in the Chinese city Changsha, a service that was previously limited to verified volunteers. (IHS Automotive Mobility's Surabhi Rajpal)
  9. According to various newspapers in China, the People's Bank of China (PBoC)'s Deposit Insurance Company has purchased the majority of Huishang Bank's A-stock issuance. In total, out of the CNY9.9 billion (USD1.4 billion) of funds raised, the Deposit Insurance Company has purchased the largest amount of shares at CNY8.9 billion, which means that it now has a 11.2% stake in the bank. The funds raised are reportedly to be used to replenish tier-1 capital. (IHS Markit Banking Risk's Angus Lam)
    • Following this A-stock issuance, the share held by mainland Chinese has increased to nearly 75%, while the share held by Hong Kong SAR has fallen to around 25%. According to Huishang Bank's press release, Deposit Insurance Company is now the bank's largest shareholder, followed by China Soong Ching Ling Foundation with around 9% share, and Anhui Province Energy Company with 7.3% share.
    • Huishang Bank is a small bank with only 0.4% of total sector assets at the end of 2019; however, it played an important role during one of mainland China's recent high profile failures. It purchased four branches of Baoshang Bank before the latter filed for bankruptcy and formed Mengshang Bank.
    • Mengshang Bank is about one-quarter owned by the Deposit Insurance Company as well, and the PBoC's involvement in that bank and Huishang Bank's timely involvement in Baoshang Bank are likely to have played into Huishang Bank's share purchase by the Deposit Insurance Company.
    • As of the end of 2019, Huishang Bank's tier-1 capital ratio remained healthy at 10.9%, while its capital adequacy ratio was at 13.2%; asset quality was also lower than the sector average, by only 1.1%.

Posted 24 August 2020 by Chris Fenske, Head of Fixed Income Research, Americas, IHS Markit

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.


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