Date Issued – 6th November 2024
Preview
In today’s newsletter, we delve into significant developments across global markets, including China’s stock market resurgence, emerging market currency fluctuations, Asian stock performance amid U.S. election dynamics, shifts in cobalt demand, Super Micro’s financial hurdles, changes in U.S. Senate control, and movements in precious metals and cryptocurrencies.
China’s Stock Market Sees Record Growth in New Accounts
In October, Chinese investors opened 6.8 million new stock trading accounts, marking the highest monthly increase since June 2015. This surge follows Beijing’s late-September stimulus measures aimed at revitalizing the economy. Retail investors have been pivotal in this uptick, with daily trading turnover reaching 2 trillion yuan in several sessions, tripling the prior average. The Shanghai Composite Index has responded positively, reflecting renewed investor confidence. As the market rebounds from a prolonged slump, attention now turns to forthcoming fiscal policies that could sustain this momentum.
Investment Insight: The influx of retail investors and increased trading volumes suggest a revitalized Chinese stock market. Investors should monitor upcoming fiscal policy announcements, as they may present opportunities in Chinese equities.
Market Price: Shanghai Composite Index: 3,383.85 CNY
Emerging Currencies Drop Amid Trump Victory Prospects
Emerging-market currencies have experienced declines, with the MSCI Emerging Markets Currency Index dropping 0.6%, as traders anticipate a potential Donald Trump victory in the U.S. presidential race. The Mexican peso led the losses, plunging over 3% to a two-year low, while Eastern European currencies, including the Hungarian forint and Polish zloty, also declined. Markets are pricing in a stronger dollar, driven by expectations that Trump’s protectionist policies would bolster the U.S. currency.
Investment Insight: The potential for a stronger U.S. dollar under a Trump administration could impact emerging-market currencies and related investments. Investors should consider currency exposure and potential hedging strategies in their portfolios.
Hong Kong Stocks Lead Asia Lower as Trump Gains Early Lead
Asian stocks, excluding Japan, have declined as Hong Kong-listed Chinese tech shares dropped, with the Hang Seng China Enterprises Index down 3%. These declines followed Donald Trump taking an early lead in the U.S. presidential election, raising concerns over potential trade tensions and policy uncertainty. Meanwhile, mainland Chinese stocks fared better, buoyed by expectations of stimulus measures. Markets are bracing for volatility as vote counts continue.
Investment Insight: The potential for increased trade tensions under a Trump administration may affect Asian markets, particularly in technology sectors. Investors should stay informed on election outcomes and consider diversification to mitigate regional risks.
Market Price: Hang Seng China Enterprises Index: 7,363.47 HKD
World’s Top Cobalt Miner Warns of Declining Demand in EV Batteries
CMOC Group, the world’s largest cobalt miner, predicts a shrinking role for cobalt in electric vehicle (EV) batteries as cheaper, cobalt-free lithium iron phosphate (LFP) batteries gain popularity. The proportion of EV batteries using cobalt in China is expected to drop from 44% in 2022 to 31% in 2024. This shift, coupled with a cobalt supply glut, has driven prices to their lowest since 2016, with a bearish outlook for next year.
Investment Insight: The transition to cobalt-free batteries may impact cobalt demand and prices. Investors with exposure to cobalt or related industries should monitor technological advancements and market trends in battery composition.
Market Price: CMOC Group Ltd (3993.HK): 6.88 HKD
Super Micro Shares Plunge on Weak Sales Forecast and Filing Delays
Super Micro Computer Inc. issued a sales forecast below analysts’ expectations and couldn’t provide a timeline for filing delayed financial statements, causing shares to drop 14% in extended trading. The company faces delisting risks after missing its annual report deadline and losing auditor Ernst & Young due to governance concerns. Revenue for the December quarter is expected to be $5.5 billion to $6.1 billion, below the $6.79 billion projected by analysts.
Investment Insight: Super Micro’s financial uncertainties and potential delisting pose significant risks. Investors should exercise caution and monitor the company’s efforts to address governance and reporting issues.
Market Price: Super Micro Computer Inc. (SMCI): $27.70 USD
Republicans Secure Senate Control, Setting Stage for Policy Shifts
Republicans have won control of the Senate, potentially aiding Donald Trump’s legislative agenda if he wins or complicating Kamala Harris’ presidency if she prevails. The GOP flipped key seats, including in West Virginia and Ohio, with more potential gains in Montana and Wisconsin. Senate Minority Leader Mitch McConnell will step down, and a new Republican majority leader is expected next week. A GOP-controlled Senate would make it harder for Harris to confirm nominees and easier for Trump to advance his picks.
Investment Insight: A Republican-controlled Senate may influence legislative priorities and regulatory policies. Investors should consider potential impacts on sectors such as healthcare, energy, and financial services.
Gold Steady, Bitcoin Hits Record High as Trump Takes Early Election Lead
Gold prices held steady as the U.S. dollar surged by 1.6% in response to Donald Trump’s early lead in the presidential election. While demand for safe-haven assets like gold typically rises during political uncertainty, the strong dollar is tempering potential gains, making gold more expensive for international buyers. Spot gold edged down by 0.1%, reaching $2,741.76 per ounce, as investors consider the possibility of trade policy shifts that could increase market volatility. A victory for Kamala Harris, on the other hand, could trigger a brief gold selloff due to expectations of less confrontational trade policies.
Meanwhile, Bitcoin surged to an all-time high of $75,060, gaining 7% as optimism grows for a crypto-friendly regulatory environment under Trump. Investors are betting on potential shifts in regulation that could encourage growth in the cryptocurrency sector. Smaller cryptocurrencies, such as Ethereum, also saw gains, with Ether up 7.5% as investors position for potential policy changes that may favor digital assets.
Investment Insight: The mixed movements in gold and cryptocurrency reflect the complex impact of political factors on safe-haven and alternative investments. Investors should keep a close eye on election outcomes and potential regulatory shifts, as these could lead to significant price movements in both gold and cryptocurrency markets.
Conclusion:
These developments across global markets highlight the influence of political, economic, and technological factors on investments. Staying informed on evolving fiscal policies, international market shifts, and regulatory changes is crucial for strategic decision-making.
Upcoming Dates to Watch:
- November 7, 2024: U.S. Federal Reserve interest rate decision
- November 13, 2024: U.S. Consumer Price Index (CPI) data release
- November 14, 2024: Eurozone Q3 GDP report 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.