There is a 30% probability that China reopens earlier than expected: Goldman Sachs
China is most likely to reopen around April next year after the National People’s Congress takes place, but there’s a chance that authorities reopen earlier due to difficulties in keeping Covid cases under control, according to Goldman Sachs.
Chief China Economist Hui Shan said there’s a 60% chance of the former scenario taking place.
“There is also a 30% probability of earlier reopening precisely because of the difficulty in keeping Covid under control, and the lack of medical preparation suggests it could be quite a messy process,” she said.
“Medical preparation is not ready yet, whereas the virus has evolved in such a way [that] it’s getting very costly to continue to implement that dynamic zero-Covid policy,” she said.
She said that policymakers need to weigh out the costs and benefits of the stringent Covid restrictions as protests take place across the country.
“This is not something they had experienced before [or] had a lot of experience in dealing with in prior cycles,” she said.
— Su-Lin Tan
Oil futures extend losses, U.S. crude touches lowest levels for the year
Both U.S. crude futures and Brent crude futures shed more than 2% each in Asia’s morning trade as fears on demand from China faltering came into focus.
WTI was last down 2.58% at $74.31 per barrel, while Brent crude last traded 2.37% lower at $81.65 per barrel.
— Abigail Ng
Hong Kong movers: Tech, EV and property stocks fall; casinos rise
Consumption will surge on pent-up demand if China ends lockdowns: BofA
China’s household confidence will revive once China reopens, thanks to excess in savings and pent-up demand, BofA Securities chief greater China economist Helen Qiao said.
“We have seen household savings accumulatively year-to-date at end of October going all the way up to about 5 trillion renminbi, compared to a regular year, about only 2 trillion,” she told CNBC’s “Squawk Box Asia.”
“People are reducing their loans but actually increasing their household deposits, because they have nowhere to spend,” she said.
— Su-Lin Tan
China’s reserve requirement cut won’t make big difference with Covid rules still in place, analyst says
China’s latest move to cut the reserve requirement ratio for banks by 25 basis points won’t have much significance on its economy without a drastic shift from its stringent Covid restrictions, according to Economist Corporate Network.
“Consumer and investor sentiment has been so damaged by these policies that you’re not going to see any recovery in any meaningful sense until there’s a shift,” Mattie Bekink, the China director at the organization, said on CNBC’s “Squawk Box Asia.”
Bekink emphasized how sensitive investor sentiment has affected markets previously.
“We’ve already seen markets move quite significantly based on basically rumors that Beijing was going to relax — that was just a few weeks ago,” she said.
“The lockdowns seem to be endless and relentless,” Bekink said.
— Jihye Lee
Other currencies also at risk due to China unrest: Standard Chartered
Global currencies will also be at risk of weakening along with the offshore Chinese yuan amid unrest in China on its zero-Covid policies because of how supply chains may be affected, according to Standard Chartered.
“The key question for how the world reacts is how the Chinese supply chain responds,” Steven Englander, Standard Chartered Bank’s managing director said on CNBC’s “Squawk Box Asia.”
“If it gets further disrupted, I think it’s a risk-off thing,” he said. “Not just CNH, but other currencies will be at risk.”
Englander added that traders may be looking to reduce their exposure to further risk.
— Jihye Lee
CNBC Pro: Asset manager picks three global retailers to short amid a fall in consumer spending
Shares in mass market retailers will fall as profit margins are squeezed, and consumers curtail spending next year, according to Plurimi Wealth’s chief investment officer.
Patrick Armstrong told CNBC’s Pro Talks that he was betting against a Japanese retailer, multinational clothing company, and a Canadian e-commerce platform by selling their shares short.
Armstrong believes consumers will hold back spending next year amid rising interest rates and household bills.
— Ganesh Rao
Oil prices slip as China’s Covid protests continue
Crude oil futures slipped early in Asia as high Covid cases, virus restrictions and unrest in China raise fears about demand from the world’s second-largest oil consumer.
Oil prices saw sharp falls last week as “mounting lockdowns in China raised concerns over demand,” ANZ Research’s Brian Martin and Daniel Hynes wrote in a Monday note.
“This remains a headwind for oil demand,” they said, adding that the impact of rising Covid cases was reflected in China’s mobility data as well.
— Abigail Ng
CNBC Pro: Buy this Big Tech stock which is at an ‘attractive’ entry point now, says portfolio manager
One Big Tech stock is at an “attractive” price point to buy right now, according to Foord Asset Management’s Brian Arcese.
Arcese, a portfolio manager at the firm, expects growth in the “mid-teens” despite cyclical headwinds in its industry.
— Weizhen Tan
Offshore Chinese yuan weakens in Asia morning as Covid protests persist
The offshore Chinese yuan sharply weakened against the U.S. dollar amid negative sentiment over unrest in China over Covid restrictions.
The currency weakened around 0.8% against the U.S. dollar to 7.2529 in Asia’s morning trade.
The dollar index rose 0.32% to 106.29, with investors likely seeing the greenback as a safe haven asset as concern over China grows.
— Jihye Lee