Date Issued – 15th November 2024

Preview

China’s economy showed signs of recovery in October, supported by growth-friendly policies, although the real estate sector continues to struggle. Lenovo reported strong earnings, driven by AI investments and growth in PCs and smartphones, but profitability in emerging segments remains a challenge. Japan’s economy grew modestly in Q3, and the central bank is expected to raise interest rates soon. New alumina capacity in 2025 is set to ease supply constraints and potentially end the record price rally. Malaysia’s economy maintained strong growth momentum in Q3 2024, driven by investments and domestic spending, with the government raising its annual growth projection and liberalizing foreign exchange policies to attract investments.

China’s Economy Shows Signs of Recovery Amid Stimulus Efforts

China’s economy displayed signs of improvement in October, supported by recent growth-friendly policies. Industrial production rose by 5.3% year-over-year, and retail sales grew by 4.8%, surpassing expectations. Despite these gains, the real estate sector continues to struggle, and concerns loom as Donald Trump’s re-election could lead to renewed trade tensions with the U.S. Economists suggest further measures, including fiscal stimulus, may be necessary to sustain growth.

Investment Insight: China’s short-term recovery is promising, but potential trade conflicts and a fragile real estate market pose risks. Investors should watch for further policy interventions to support sustained economic growth.
Market price: Shanghai Composite Index: CNY 3,330.73

Japan’s Economy Slows; Central Bank Likely to Raise Rates

Japan’s economy grew by 0.2% in the third quarter, supported by a 0.9% rise in private consumption due to summer bonuses and tax cuts. Despite slowing growth, the Bank of Japan is expected to raise interest rates soon, driven by improved consumer spending and a weaker yen. However, concerns remain about private-sector demand and potential deflation risks, especially with global uncertainties under President-elect Trump.

Investment Insight: Japan’s modest growth and expected rate hikes suggest cautious optimism. Investors should monitor consumer trends and global economic impacts on Japan’s recovery.
Market price: Nikkei 225: JPY 38,642.91

Economic Insights

Lenovo’s AI Momentum Drives Earnings and Outlook

Lenovo reported a strong earnings boost, with net profit for the September quarter rising 44% year-over-year to $359 million, surpassing analyst expectations. Revenue increased by 24% to $17.85 billion, driven by investments in AI and growth in PCs and smartphones. The company’s AI-enabled PCs have fueled a global market recovery, with the intelligent-devices segment showing a 17% revenue gain. Lenovo is diversifying beyond PCs, with non-PC revenue now comprising 46% of total sales. Despite robust growth in its infrastructure solutions, profitability remains a challenge due to low-margin projects aimed at capturing AI server market share.

Investment Insight: Lenovo’s focus on AI and diversification suggests potential for long-term growth. However, the path to profitability in emerging segments may be extended, requiring careful investor consideration.
Market price: Lenovo Group Ltd. (0992.HK): HKD 9.17

New Alumina Supplies in 2025 Set to Curb Price Surge

New alumina capacity coming online in 2025 is expected to ease supply constraints and potentially end the record price rally. Alumina prices surged 70% this year due to supply disruptions in Guinea, Brazil, and Australia. However, new refineries in Indonesia, India, and China are set to boost production. China’s alumina exports rose 33% this year, and analysts predict a market surplus in 2025, leading to lower prices. UBS forecasts a drop to 3,600 yuan per ton, while Antaike estimates 4,000 yuan. A potential supply glut looms, especially if demand growth slows.

Investment Insight: Investors should prepare for potential price declines in alumina as new supply enters the market. Watch for shifts in demand and production rates that could impact profitability in the sector.
Market price: Alumina: $411.16

Malaysia’s Economy Maintains Strong Growth Momentum in Q3 2024

Malaysia’s economy expanded by 5.3% year-on-year in the third quarter of 2024, driven by a surge in investments and increased domestic spending. The growth matched the advance estimate and Bloomberg’s median forecast. Sequentially, the economy grew by 1.8% from the previous quarter.

The Finance Ministry has raised its annual growth projection to 4.8%-5.3% for 2024 and expects further improvement in 2025. The central bank affirmed these revised forecasts, citing domestic spending as the main anchor for sustained growth, along with investments and improved exports.

Malaysia’s resilient economy is well-positioned to withstand potential pressure from financial market volatility following the US election. The central bank is liberalizing its foreign exchange policy to support investments, which is expected to spur the domestic bond and Islamic securities markets.

Investment Insight: Malaysia’s strong economic performance and the government’s proactive measures to attract investments make it an attractive destination for global investors. The country’s diversified economy and trade partnerships provide a stable foundation for growth, while the liberalization of foreign exchange policies further enhances its investment appeal. However, investors should monitor potential risks arising from geopolitical tensions and policy uncertainty following the US election.
Market price: FTSE Bursa Malaysia KLCI: MYR 1,592.44

Conclusion:

Economic developments across Asia and beyond indicate both recovery and potential volatility. China’s growth initiatives, Lenovo’s AI-driven outlook, Japan’s anticipated rate hikes, and Malaysia’s policy measures highlight opportunities across diverse sectors. Additionally, alumina price adjustments provide new perspectives in commodities. Staying attuned to these changes will be essential for navigating complex market dynamics.

Upcoming Dates to Watch:

• November 20, 2024: U.S. Federal Open Market Committee (FOMC) meeting minutes
• November 22, 2024: Japan National CPI release
• November 28, 2024: Eurozone Economic Sentiment Indicator release

Find below some of our Buy/Sell Recommendations. Balfour Capital Group is a distinguished global boutique investment management firm with $400 million AUM and over 1000 Clients.

Disclaimer: This post provides financial insights for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.