Breakfast briefing: Hong Kong stocks go ballistic

Economy / news

US jobs indicator data good; Japanese sentiment firms; PMI's in Singapore & Australia dive; Hong Kong equity market in crazy frenzy; UST 10yr 3.75%; gold and oil down, NZ$1 = 62.7 USc; TWI = 70.2

3rd Oct 24, 7:19am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand with news Hong Kong is gripped by an unusual stock market frenzy.

But first, US mortgage applications fell slightly last week after the best two consecutive weeks previously. The benchmark mortgage interest rate was unchanged and still at a recent low.

This weekend (NZT) we get the important September non-farm payrolls report and it is expected to show +130,000 more jobs added in the month. Today the precursor ADP Employment Report came out showing a rise of +143,000 which was much more than the +90,000 anticipated. And their August data was revised higher. There was good job creation in both the factory sector (+42,000) and the service sector (+101,000) reported in this ADP data.

Japanese consumer sentiment improved again in September, the fourth straight gain. However it isn't yet back to levels they had at the beginning of 2024.

In Singapore, there was an unusually weak PMI result released overnight. Apart from the pandemic period, it fell to a record low in September, and is now in a deepish contraction.

In Hong Kong, a wild stock market frenzy was underway yesterday, overwhelming brokerages with buying demand. Oddly, it is mainly about the expectation that the Chinese housing market will return to its old self and buyers will emerge to allow that. But that seems to be in the face of troubling demographics, and recent memories of steep losses for buyers. And the latest data shows continuing steep losses for second-hand housing, continuing a 29 month trend. Maybe yesterday's Hong Kong rally was just FOMO.

One thing is for certain, the Beijing government is going to print huge amounts of money to try and make a recovery happen. There will be winners, just not sure property will be one of them. But the price of key construction metals like zinc, iron ore and steel rebar are rising. The focus now turns to the late-October National People's Congress meeting and decisions to see if there really is a workable way out of their structural problems.

In Australia, the widely-watched local PMI by the Australian Industry Group saw its factory PMI dive to its worst level ever at -33 (April 2020 excepted). This was far worse than expected where a much smaller contraction (-13) was forecast. Low order levels while inflation and labour pressures persist are making manufacturing there very tough. This AiG report pretty much mirrors the earlier S&P/Markit version.

The UST 10yr yield is now at just on 3.78% and up +3 bps from yesterday. The key 2-10 yield curve is more positive at +16 bps positive. Their 1-5 curve inversion is now less inverted by -41 bps. And their 3 mth-10yr curve inversion is now much less at -102 bps. The Australian 10 year bond yield starts today at 4.03% and up +8 bps. The China 10 year bond rate is at 2.16% and unchanged. The NZ Government 10 year bond rate is now just on 4.26% and also unchanged from yesterday.

Wall Street is in its Wednesday session on the S&P500 and little-changed. It was similar for European equity markets overnight. Tokyo finished yesterday bouncing down -2.2%. Hong Kong roared again yesterday, up +6.6% on the day in a stimulus frenzy. Shanghai was closed for the public holidays. Singapore was up a minor +0.1%. The ASX200 ended its Wednesday down -0.1%. And the NZX50 slipped the same.

The price of gold will start today at US$2650/oz and down -US$20 from yesterday.

Oil prices are down -US$1 at just on US$70/bbl in the US while the international Brent price is still just over US$73.50/bbl. It turns out American inventories are high so demand from this source won't be strong.

The Kiwi dollar starts today at 62.7 USc and down a minor -10 bps from this time yesterday. Against the Aussie we are -40 bps lower at 91 AUc. Against the euro we are unchanged 56.8 euro cents. That all means our TWI-5 starts today at just under 70.3, and little-changed from yesterday.

The bitcoin price starts today at US$61,919 and down another -0.2% from this time yesterday. Volatility over the past 24 hours has stayed modest at just on +/- 1.9%.

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14 Comments

by bdogg | 3rd Oct 24, 7:38am 1727894326

Gold down $20, all in JNUG for a quick rebound trade 😂

by Advisor | 3rd Oct 24, 7:58am 1727895488

More interesting is that iron ore jumped 16% in a single day after Chinese authorities announced multiple rounds of generous subsidies for their struggling manufacturing sector.

by Foxglove. | 3rd Oct 24, 10:23am 1727904213

Multiple rounds of generous subsidies. Like masking chronic back pane with paracetamol when the spine actually needs surgery. Subsidies divorce functioning from reality, consequently become entirely counterproductive and distortive, soundly self-defeating. The funding inevitably ends up, a whirlpool that disappears down its own vortex. NZ provided proof of exactly that when PM Muldoon in the 1980s introduced the ill-omened agricultural subsidies such as SMPs.

by redcows1 | 3rd Oct 24, 10:00am 1727902834

A closer proof would be Accomodation supplement. Especially the distortion of the payment passing straight though to others giving a thoroughly false return on investment.

by DIYman | 3rd Oct 24, 10:18am 1727903919

This needs work now, more important than capital gains tax, which won't be an issue if you sort out the source of the problem, capital gains can go off the table for many years to come

it's pushing up rents, indirectly holding up house prices. It's also a tax on everyday workers, out of their PAYE and GST contributions to benefit property investors.

by Pa1nter | 3rd Oct 24, 11:29am 1727908153

This won't work, just as if you stopped giving poors money for food, your price for a loaf of bread won't magically come down.

The supplement exists because people without incomes can't compete with those with incomes - who are the ones that set rents. If you stop giving the supplement, you're up for sleeping in cars, or the state building houses, and a higher tax bill for you.

by murray86 | 3rd Oct 24, 1:11pm 1727914268

Disagree on your reasoning as to why the supplement exists. I know a number of people who work and cannot afford the rents charged.

The supplement exists to help those at the low end of income, what ever the source, to make rent payments.

the real issue is the lack of control and limits to what landlords can charge. In the last 15 - 20 years they have been making appalling business decisions around the purchase price of their assets (Houses) and expect to be able to charge ludicrous, unaffordable rents to make their profit. The net result is trapping people into renting.

It is a broad failure of government to properly regulate a market.

by The Person | 3rd Oct 24, 2:38pm 1727919492

The real issue is nanny state planners saying we all have to live in expensive greenfields suburban sprawl causing a housing shortage. If there wasn't a housing shortage then low income people wouldn't be competing with high income people for housing. They'd rent the cheap places that the high income people wouldn't touch.

by kiwikidsnz | 3rd Oct 24, 10:00am 1727902847

I also remember Muldoons 1970s sheep retention scheme: millions of additional sheep appeared from nowhere

https://www.stuff.co.nz/dominion-post/comment/columnists/richard-long/7…

https://natlib.govt.nz/records/30629739

by solardb | 3rd Oct 24, 11:36am 1727908567

Counting sheep in their sleep???

The days of farmers using Jaguars to feed out hay.. (huge tax cut as a farm vehicle)

by J.C. | 3rd Oct 24, 1:16pm 1727914584

More interesting is that iron ore jumped 16% in a single day after Chinese authorities announced multiple rounds of generous subsidies for their struggling manufacturing sector.

Where did you source this information? It looks closer to 16% over 5 days.

https://www.tradingview.com/symbols/TSI/?exchange=CAPITALCOM

by solardb | 3rd Oct 24, 11:43am 1727908982

Join the dots time.

Lpg capacity in Nz is underused in summer , usage peaks in winter, generally at the same time as gas need for power generation. We have surplus lpg production available in summer.

https://www.mbie.govt.nz/dmsdocument/27262-lng-import-and-options-to-in…

Hyundai makes LPG tankers at its shipyard the irex ferries were going to be made. The above report says using lpg tankers to store lpg could be feasible, then using it at peak times instead of coal and natural gas.

So instead of the terrible LNG import option ,w e could use our own or imported LPG. and possibly use our $ 500 million non refundable deposit as part payment.

Presuming the irex ferries are actually cancelled , some doubt there.

by kiwikidsnz | 3rd Oct 24, 12:25pm 1727911520

Technical Econ Note: Does the "Gross" in Gross Domestic Product (GDP) explain the degradation of NZ's assets?

"...the "Gross" in Gross Domestic Product refers to the fact that depreciation is not deducted from the total."

"Successive NZ governments have tricked people into thinking that because GDP has been (weakly) increasing most years, we're not doing too badly. But they've not been investing in our future. They have not been doing the necessary investments to keep the productive capacity of the nation intact. They've allowed depreciation to diminish tens of billions of value from our hospitals, schools, water supplies and more, and the public have, in a sense, been conned into thinking all was okay, since the depreciation on those assets never appeared in our national accounts. Essentially, our politicians have done the equivalent of running a business whilst falsely inflating profits, pretending the firm was doing well, until it reached the point where everything broke, and then gone and blamed the previous managers (who had done the same thing)."

Technical Econ Note: Does the "Gross" in Gross Domestic Product (GDP) explain the degradation of NZ's assets? (downtoearth.kiwi)

by mark_a | 3rd Oct 24, 8:47pm 1727941675

Kind of feel someone wlll be left holding the bag in China - just not sure who it is yet!