Date Issued – 18th November 2024

Preview

Global markets experienced mixed performance as U.S. stocks slumped, with the S&P 500 and Nasdaq falling sharply due to concerns over President-elect Donald Trump’s policies. Asian shares saw varying results, with Japan’s Nikkei 225 dropping 1% while South Korea’s Kospi surged 2%. Indian bonds faced the largest outflows since their inclusion in JPMorgan’s emerging-market bond index, driven by rising U.S. Treasury yields. Samsung Electronics shares soared up to 7.5% following a surprise $7.2 billion buyback plan. Options traders are unwinding bullish bets on U.S. stocks amid concerns over slower interest rate cuts. Goldman Sachs predicts gold will hit a record $3,000 an ounce by December 2025, citing central bank buying and expected U.S. interest rate cuts. Investors are advised to consider defensive positions, diversify portfolios across global regions, and increase exposure to precious metals to hedge against potential risks.

Global Markets Struggle Amid U.S. Stock Slump

Asian shares kicked off the week with mixed results following Wall Street’s worst loss since Election Day. Japan’s Nikkei 225 dropped 1%, pressured by a stronger yen after Bank of Japan Governor Kazuo Ueda signaled continued interest rate hikes. South Korea’s Kospi surged 2%, driven by a 6% jump in Samsung Electronics after announcing a share buyback plan. Chinese markets also advanced, buoyed by retail data suggesting government stimulus is aiding economic recovery. Meanwhile, U.S. stocks saw sharp declines, with the S&P 500 down 1.3% and the Nasdaq falling 2.2%, as concerns over President-elect Donald Trump’s policy impact on vaccine manufacturers and biotech firms weighed on sentiment.

Investment Insight: Market volatility remains high, particularly in sectors sensitive to political developments. Investors should consider defensive positions and diversify portfolios across global regions to hedge against potential U.S. policy risks.
Market price: Nikkei 225: JPY 38,220.50

Indian Bonds Hit by Largest Outflows Since Index Inclusion

Foreign investors are pulling out of Indian bonds at the fastest rate since June, driven by rising U.S. Treasury yields that have reduced the relative appeal of Indian fixed-income securities. Data from the Clearing Corporation of India shows a net sale of 49.6 billion rupees ($588 million) of Fully Accessible Route bonds last week, marking the largest weekly outflow since their inclusion in JPMorgan’s emerging-market bond index. The shrinking yield gap between U.S. and Indian bonds, along with the Reserve Bank of India’s cautious stance on rate cuts, has further pressured Indian debt markets. However, upcoming index changes may mitigate the selloff, as JPMorgan plans to boost India’s bond weighting by the end of November.

Investment Insight: The narrowing yield spread between Indian and U.S. bonds signals a more challenging environment for Indian fixed-income assets. Investors should assess the impact of global interest rate trends and consider rotating into markets with more favorable yield differentials.
Market price: Nifty 50: INR 23,490.50

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.