Asia Tea Time - Cup 41 ☕
This week I talk falling China stock markets, booking flight redemption tickets early and a government corruption scandal in Singapore.
Macro in Asia
Hong Kong and China stock markets plummet to new lows
Stock markets in Hong Kong and China fell sharply this week as investors continued to sell, with the Hang Seng Index down nearly 9% so far in 2024.
Markets were also freaked out by any lack of potential new government stimulus during a speech by Chinese Premier Li Qiang at the World Economic Forum (WEF) at Davos.
Why it’s happening
- Remember that China’s economy is slowing and if the government isn’t going to help out, that spells trouble for stock markets.
- China’s Premier – Li Qiang – is basically the second top dog in government (very, very far behind President Xi) but his lack of commitment on stimulus for the economy spooked investors.
Why it matters
- China’s economy is the second-largest in the world and China previously was a big part of the landscape for global investors. With the ongoing market sell-off, it’s fast becoming a “no-go” zone.
- That big Ds – debt and deflation – are weighing down on sentiment for anything China-related as the country battles falling prices and an indebted property sector.
- Visiting the stock market lows of October 2022, when the economy was being strangled by pandemic lockdowns, highlights just how dire the situation is perceived to be in China right now.
What’s next?
- Watch out for how much further Chinese stocks can fall – particularly in Hong Kong, which has open capital markets and is prone to more selling from foreign investors.
Tim’s Take
It’s been a traumatic time for anyone holding Hong Kong or China shares and that’s not even talking about the past year or two. Over the past five years, Hong Kong’s Hang Seng Index has fallen by nearly 45%.
A variety of things have been weighing on sentiment for stocks related to China – a slowing economy, a massive regulatory crackdown on tech companies, geopolitical tensions with the US, and draconian Covid-19 pandemic lockdowns.
Indeed, foreign investors in Hong Kong have sold around RMB 33 billion (US$4.6 billion) worth of Chinese shares so far this year, according to an analysis by the Financial Times.
What’s going to turn it around? Most people say a massive “bazooka” of fiscal and monetary stimulus from China’s authorities and central bank.
However, those hopes were dashed by the comments from Premier Li Qiang earlier this week.
And even if they did unleash stimulus, it’s no guarantee that investors would have the confidence to return en masse to China’s markets given the regulatory uncertainty and general direction towards a more “state-directed” economy.
Investors can think of it as the “China discount”. For most investors, the potential benefits of trying to catch a falling knife aren’t all that appealing.
Tim's Money Tip of the Week
When you’re trying to redeem flights with your air miles, it can be a massive pain. First off, you have to save up a huge amount of miles to even redeem a ticket.
And then when you finally want to go and book, there aren’t any redemption seats available at the date and route you want to go on.
So, how can you deal with those pesky problems? The best starting point is just to get ahead of the curve and plan our your holidays as best you can.
Check the public holidays in 2024 and see which long weekends are the best getaway dates and attempt to book at least 6-12 months in advance.
If you’re looking at popular European or US destinations from Asia (in business or economy), the best thing to do is try to book as early as humanly possible.
For example, Singapore Airlines opens their redemption bookings 355 days before the departure date, i.e. you can pretty much book a year in advance.
Another tip would be to try to find redemption tickets on less popular routes and connect (if you have the time).
For example, the Singapore-London route is immensely popular. You could try your chances of a redemption ticket return on a less popular European route to, say, Istanbul, Frankfurt or Zurich, and then get a connecting flight to London.
An added bonus is that you’d save on airport taxes on your redemption ticket as flying out of key hubs, like London Heathrow, can be pricey.
Story of the Week
Big news in the world of Singaporean politics this week at former Transport Minister S Iswaran was charged with 27 offenses, including corruption.
It relates to various gifts from property tycoon Ong Beng Seng, who helped bring the F1 Grand Prix to Singapore. These “incentives” included some premium tickets to the Singapore F1 as well as numerous flights and hotel stays.
Iswaran resigned from his post on Tuesday and was officially charged on Thursday in court. It’s the last thing that the People’s Action Party (PAP) needs as it heads into a likely general election in 2025.