Latest news with #economicSlowdown
South China Morning Post
a day ago
- Business
- South China Morning Post
Chinese stocks need earnings kick to fuel more market upside, JPMorgan says
Chinese equities are not as cheap as they seem because the nation's economic slowdown has weakened corporate earnings, making it imperative for investors to screen stocks and sectors carefully to pick winners, according to JPMorgan Asset Management. Advertisement While they traded at 14 times historic earnings in line with the average valuation over the past decade, investors were getting less oomph from the current scenario because the return on equity was faltering due to weaker profitability trend, said Mark Davids, co-head of Asia-Pacific equities. 'It's very difficult to argue that Chinese equities are particularly cheap,' he said in an interview on Friday. 'You could argue that the average of the past 10 years should not be reflective of where the market should trade as fair value. For there to be a re-rating, you need an improvement in the profitability of Chinese companies and that's difficult to come by if the economy is very weak.' Chinese stocks under the US money manager's coverage have an aggregate annual expected return of about 10 per cent, which is not as compelling as the historic average of around 20 per cent, or the superior returns offered by companies in South Korea, he added. 'It's very difficult to argue that Chinese equities are particularly cheap,' says Mark Davids, co-head of Asia-Pacific equities at JPMorgan Asset Management. Photo: Elson Li The appeal may not be that great now since Chinese stocks have rallied this year. The MSCI China Index, the broadest measure tracking more than 700 Chinese companies listed at home and abroad, has returned 14.7 per cent, according to Bloomberg data, while the S&P 500 has gained 2 per cent over the same period. Advertisement Global investors remained underweight on Chinese stocks, Morgan Stanley said in a report over the weekend. Their allocation was about 26.6 per cent, versus the 29 per cent weight of Chinese stocks in the MSCI Emerging Market Index, the widest gap on record, the US investment bank said.
CBC
6 days ago
- Business
- CBC
As Bank of Canada holds rates, experts say a cut alone won't stop an economic slowdown
The Bank of Canada held interest rates at 2.75 per cent on Wednesday, pointing to a mixed bag of unexpectedly strong data and the uncertainty of U.S. tariffs as reason for the hold — and some experts say, going forward, rate cuts alone won't be enough to stop an economic slowdown. In his opening remarks to reporters, governor Tiff Macklem characterized the Canadian economy as "softer but not sharply weaker" and said the central bank's governing council was in agreement about today's rate decision. The decision marks the second consecutive hold since March. Economists had largely pivoted from initial expectations the central bank would cut the interest rate by 25 basis points after the first-quarter GDP came in at an annualized rate of 2.2 per cent last week, which was stronger than anticipated. That strength was largely due to a surge in exports, with businesses stocking up on inventory before U.S. President Donald Trump's initial round of tariffs went into effect in the spring. But Macklem was quick to curb any enthusiasm around the latest GDP reading, saying that "the first quarter borrows economic strength from the future, so the second quarter is expected to be much weaker." Likewise, recent headline inflation showed that price growth had slowed to 1.7 per cent in April, largely due to the end of the consumer carbon tax. However, core inflation — the Bank of Canada's preferred measure of price growth, because it strips out sector volatility and one-time tax changes — crept up above three per cent, well beyond the Bank of Canada's target of two per cent. "That has got our attention," Macklem told reporters, saying the uptick "does make you think that underlying inflation could be a little firmer than we thought." Rate cut alone won't buoy housing market, says broker Even if the central bank had cut rates by 25 basis points, it wouldn't have much of an effect on housing, said Toronto real estate broker John Pasalis in an interview with CBC News. "The housing market right now is stalling largely because of all of the economic uncertainty," Pasalis said. "Lower rates are not going to push people back into buying a home if they're worried they're going to lose their jobs." The central bank noted Wednesday that national housing activity had declined in the first quarter, mostly because of a drop in the resale market. National prices are down slightly on a year-to-year basis, too. Pasalis said he doesn't expect activity to pick up this summer, though that could change by the fall, should the Bank of Canada opt to cut rates to two per cent over the next several meetings. Still, lower interest rates need to be matched with "more clarity on the economy, on the trade war," he said, to stimulate the housing market. "I don't think it's an affordability issue right now. I think the big issue is just lack of confidence." Small businesses watching for more than cuts Andreea Bourgeois, director of economics at the Canadian Federation of Independent Business in Moncton, N.B., said she thinks small businesses are probably "OK" with the decision to hold the interest rate. Rate cuts always help small businesses, Bourgeois said. What they're really looking for at this point, however, is "a sign that the bank believes the economy can grow and a bit of a push for businesses to actually invest and to not lay off people," she said. "'We want businesses to spend, we want businesses to invest, we want to stimulate demand. [That's] the sign that would be super important for small businesses." The Bank of Canada noted in its first-quarter business outlook survey, released in April, that businesses had expressed less confidence in the direction of the economy, with the firms surveyed less eager to invest and hire because of the trade conflict with our U.S. neighbours. "They're not looking yet to cut down on their business products. They're not looking to lay off in mass," acknowledged Bourgeois. "But you don't see the other behaviour, either," she said, referring to investment and hiring, which she argued shows a lack of optimism in the economy. 'Less forward-looking than usual' The central bank chose a cautious approach on Wednesday, and its decision to hold off on a rate cut is a risky one, said Royce Mendes, managing director and head of macro strategy at Desjardins. The hold sends the message that there's "a reluctance to support the economy," and could lead businesses and households to make different financial and investment decisions, Mendes said. "They start to pull back because they worry that there's no safety net in sight. Or businesses decide not to invest more because they think, 'Well, no one's here to help us with this trade war.' And I think those are the risks that the Bank of Canada has taken by holding rates steady today." Macklem didn't rule out a rate cut at the central bank's meeting in July, should economic growth slow and inflation pressures ease. But he said the governing council, while in agreement about Wednesday's decision, had so far shared a "diversity of views" when it came to the future. WATCH | Will uncertainty tilt the Bank of Canada toward a future rate cut?: Bank of Canada asked if persistent uncertainty tilts toward future rate cut 3 hours ago Duration 1:49 Bank of Canada governor Tiff Macklem, speaking after again holding a key interest rate steady, was asked whether persistent economic uncertainty suggests a need for further rate cuts. "Faced with unusual uncertainty, [the council] is proceeding carefully, with particular attention to the risks," Macklem said in his remarks. "This means we are being less forward-looking than usual." Leslie Preston, managing director and senior economist at TD Economics, said that the uptick in core inflation — competing with job loss, weaker demand in the domestic economy and a soft housing market — put the Bank of Canada "in a bind." "We expect that barring a trade negotiation miracle with the Trump administration, Canada's economy is likely to tip into recession this year, and more interest rate cuts will be required," Preston wrote.
Zawya
29-05-2025
- Business
- Zawya
Tariff turmoil causes issues for carriers amid global uncertainty
AIRLINES worldwide are grappling with the trade whiplash initiated by the U.S., and operators are preparing for various types of scenarios. The global economy faces much more uncertainty than before the Trump administration's tariff announcements. For those attempting to plan, the range of possibilities is broad. When average tariffs were low and change, when they happened, were only minimal, businesses could work within a more predictable range of possibilities. That world is in the past Businesses must attempt scenario planning for an unprecedented range of future tariff outcomes. These could be positive or negative, but the key point is that the much wider range of uncertainty makes planning for the future challenging. An obvious consequence is that investment decisions will be delayed or even cancelled. For aviation, the outlook is deteriorating. Tariffs and trade wars do not boost economic growth. Risks of an economic slowdown, possibly a recession, are growing. Inflationary pressures and higher borrowing costs add to the uncertainties. These economic concerns are likely to mean lower demand for air travel and for air cargo transport, which is faster but costlier than road, train or maritime options. For aerospace manufacturers, the imposition of increased tariffs will lead to higher costs of production. This will ultimately feed through to higher fares. Aviation supply chains are complex and global, with components arriving from suppliers and subcontractors all over the world, regardless of the location of final assembly. Raised prices and a consequent reconfiguring of global aviation supply chains are likely to lead to even more delivery delays and capacity constraints for airlines. A more fundamental impact is likely to be felt by airlines in the form of weaker demand, both in passenger and cargo traffic. Passenger demand is linked to GDP growth, and the outlook for the global economy has deteriorated. This reflects a number of factors that include reduced trade flows; the impact of falling stock markets on individual wealth; increased bond yields signalling higher government borrowing costs; and concerns about rising inflation. All these can lead to economic downturns. ALSO READ FROM NIGERIAN TRIBUNE: PDP labels Tinubu's two years a 'nightmare' The consequences for flag carriers/long-haul airlines are likely to be more challenging than for LCCs or those with less exposure to the U.S. market. Major U.S. airlines warned in March about weaker domestic demand, both corporate and consumer, because of growing economic uncertainty. Airlines exposed to the North Atlantic market face particular demand uncertainty. There is already evidence that recent actions by the Trump administration are leading people to put off booking travel to the U.S. Tighter border and immigration controls, new tariffs on imports into the U.S., and expansionist territorial claims are unlikely to be seen as positives by non-American visitors. Premium cabins drive long-haul profitability, especially in markets like the North Atlantic, but filling them could become more difficult. Reduced trade flows lead to lower business traffic and falling demand for business class. Demand for premium cabins from private leisure travelers has helped to make up for lower business traffic in the recovery from the pandemic. However, this demand is vulnerable to the falling net worth of individuals resulting from stock market declines. This also typically has a negative impact on consumer spending. In the latest update of its World Economic Outlook, the International Monetary Fund cut its global growth forecasts. The U.S. and Europe are forecast to have weaker GDP growth than any other major world region, which is likely to mean weakening demand for North Atlantic air traffic. Indeed, there was a 17% year-on-year fall in visitors by air from Western Europe to the U.S. in March. Schedules for the 2025 second quarter indicate that airlines are starting to trim North Atlantic capacity. Air cargo traffic growth, closely linked to trade flows, is also correlated to GDP growth. A trade war is bad news for air cargo demand and for those airlines with significant cargo operations. Tariffs, regardless of level, will add to the downward pressure on demand. LCCs, which tend to be more focused on short- or medium-haul, the economy cabin and passenger traffic, are better placed than flag carriers. Nevertheless, a softer economic outlook is not welcomed by any airline. There are two factors that may provide some relief to airlines, particularly those outside the US. One is a weaker dollar, which will lower the cost to non-U.S. airlines of USD-denominated costs, the most significant being aircraft and oil. However, airlines with significant U.S.-originated sales will suffer from a negative revenue impact in their own currency. The second positive factor is the recent fall in oil prices, which leads to lower jet fuel prices. The cost of Brent crude has fallen. For non-U.S. airlines, the fall in the dollar further lowers the cost of jet fuel in their own local currency. However, the fall in crude oil prices is itself a signal of a weaker global economic outlook. In the U.S., there was a hope among some in the airline industry that the second Trump term could be positive for aviation, with the president expected to reduce regulation. Senior airline executives and other U.S. aviation leaders said at the CAPA Airline Leader Summit Americas in Grand Cayman in April that dialogue between the industry and government officials had significantly improved under the new leadership. Now, U.S. airlines arguably find themselves stuck in a psychological tug of war in which they remain optimistic that Trump will initiate positive changes for the industry but are reeling from a whiplash of the trade policies that are upending their financial forecasts. It is a safe bet to assume that airlines are not as concerned about transportation policy as they are about their profitability for 2025 and beyond. There's an argument to be made that if the tariff turmoil continues, there could be fewer airlines. Copyright © 2022 Nigerian Tribune Provided by SyndiGate Media Inc. (
CNA
27-05-2025
- Business
- CNA
CNA938 Rewind - Singapore SMEs could go on life support as Trump tariffs hit
CNA938 Rewind Play Some Singapore companies are shelving expansion plans amid crippling United States tariffs and a global economic slowdown, while others could go on 'life support mode'. What kind of 'rescue' solutions can be drawn up? And could PM Wong's new cabinet and deals signed at the ASEAN Summit provide solutions? Andrea Heng and Susan Ng find out from Ang Yuit, President, Association of Small and Medium Enterprises
