David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Hong Kong Imports of Gold Coins From China Jump on Haven Demand

    This article by Ranjeetha Pakiam for Bloomberg may be of interest to subscribers. Here is a section:

    Hong Kong’s purchases of gold coins from China surged last month as demand for haven assets soared amid the ongoing social unrest.

    Imports of coins jumped to 3,246.5 kilograms in November from 14 kilograms a month earlier, according to data from the city’s Census and Statistics Department obtained by email.

    “The import of gold coins by Hong Kong shows that its citizens are worried about the situation in Hong Kong and prefer to have gold coins as safe haven,” said Georgette Boele, senior FX and precious metals strategist at ABN Amro Bank NV.

    The increasingly violent pro-democracy protests have undermined Hong Kong’s economy, discouraging tourists from visiting and slashing retail sales. Gold demand typically strengthens ahead of the Lunar New Year, which will fall in late January.

    Data from the department also showed that total exports of gold from Hong Kong to China continued their decline from a peak in 2013. Figures for November showed shipments dropped to 5,717 kilograms from 14,896 kilograms in October. Hong Kong’s total imports from China were 5,824.5 kilograms, bolstered by the surge in gold coin purchases, which meant Hong Kong had net imports of gold from China for the first time since January 2011.

    This section continues in the Subscriber's Area.

    China to Scrap Benchmark as Rates Shift Toward Market-Led System

    This article from Bloomberg News may be of interest to subscribers. Here is a section:  

    Most central banks govern the price of money in an economy via the rate that banks are charged to borrow cash over short time periods. In China, that approach had been divided into two steps. First, the PBOC guided prices for funding in the inter-bank market via its reverse repurchase agreements and medium-term lending facility. Then, it set the benchmark rates that were used to price mortgages, business loans and other commercial lending -- the one-year and five-year lending rates.

    While the interest rate of home mortgages should also be converted to the LPR, the new borrowing cost must be the same as the current charges to “reflect the request to regulate the property market,” the central bank said in the statement. Home mortgages could be repriced in the future, based on the LPR, it

    The PBOC’s latest efforts show its commitment to making the interest-rate system more market-driven, though controls on deposits remain for now. The step-by-step approach appears to be trying to open up the system without shrinking interest margins too rapidly and adding more pressure to smaller lenders.

    This section continues in the Subscriber's Area.

    Korean Won Surges to Become Asia's Best-Performing Currency

    This article by  David Finnerty for Bloomberg may be of interest to subscribers. Here is a section:

    South Korea’s won has surged through the pack to become the best-performing Asian currency for December after being the outright worst over the previous 11 months.

    The catalysts behind its revival: the agreement of an initial trade deal between the U.S. and China -- South Korea’s two largest trading partners -- and improving local data that suggest that economy is turning the corner following a series of interest-rate cuts.

    The won has jumped 1.7% this month after President Donald Trump said Dec. 13 the U.S. and China had reached a phase-one trade deal, helping to limit any further escalation of the dispute that has pummeled emerging-market assets this year.

    This section continues in the Subscriber's Area.

    Putin's Hypersonic Nuclear Missile Stirs Fears of Arms Race

    This article by Henry Meyer and Jake Rudnitsky for Bloomberg may be of interest to subscribers. Here is a section:

    “This is an unprecedented situation in which we see that Russia is technologically ahead of the U.S. and the Pentagon is playing catch-up,” said Nikolai Sokov, a senior fellow at the Vienna Center for Disarmament and Nonproliferation. “The U.S. only woke up this year to this technology and has started to throw money at it.”

    Russia successfully tested Avangard in December last year, firing it from a military base in the southern Urals 6,000 kilometers (3,700 miles) to the Kamchatka peninsula. After a ballistic launch, the Avangard glides toward its target with a high degree of manoeuvrability.

    The difference between the hypersonic weapon and a traditional ballistic missile is that it “disappears and we don’t see it until the effect is delivered,” Hyten said in testimony before the Senate Armed Services Committee.

    Claims the Avangard can evade any defenses are overblown since it can be shot down in the early ballistic phase of its trajectory, said Golts, the defense analyst. The real breakthrough will come when Russia implements the same technology in another weapon class, like cruise missiles, according to Sokov, the disarmament expert.

    Abandoning New START at this juncture would be a major mistake, Democratic Senator Jeff Merkley warned this month. There’s bipartisan support in the U.S. Congress for extending the agreement, which “has successfully kept the U.S. and Russia out of a modern-day nuclear arms race,” he said on Twitter. “We cannot risk unleashing a new Cold War.”

    This section continues in the Subscriber's Area.

    Wheat Could Be Surprise Winner of the U.S.-China Trade Deal -

    This article by Isis Almeida and Michael Hirtzer for Bloomberg may be of interest to subscribers. Here is a section:

    “The potential that China could secure an additional 5 to 6 million tons of world wheat annually is underpinning Chicago Board of Trade wheat,” Chicago-based consultant AgResource Co. said in a report Thursday.

    Wheat traders expect China will soon release the quota, according to AgResource, and prices are already reacting. On Friday, futures for March delivery rose as much as 2.2% to $5.61 a bushel in Chicago, the highest for a most-active contract since August 2018. Futures traded in Paris reached the highest since June.

    If Chinese purchases were to reach the quota mark of 9.6-million metric tons, that would represent a big jump in demand. In the six years through 2017, buying has averaged less than 50% of the allotment.

    This section continues in the Subscriber's Area.

    Japan's Topix Advances, Set for Best Quarterly Gain Since 2016

    This article by Min Jeong Lee and Shingo Kawamoto for Bloomberg may be of interest to subscribers. Here is a section:

    Japan’s Topix index advanced, set for its best quarterly gain since 2016, after the latest economic data out of the U.S. indicated the labor market is solid.

    Banks contributed most to the benchmark measure’s Friday gains. The Nikkei 225 Stock Average slipped 0.4% to 23,837.72, as 30 of its components traded without rights to receive the next dividend, including Canon Inc. and Japan Tobacco Inc. Next Monday will be the last trading day of the year.

    The Topix extended its gain for the quarter to 9.2%, the biggest such increase in three years. Japanese equities have rallied since September, bolstered by signs of easing tensions between the U.S. and China.

    U.S. jobless claims fell to a three-week low of 222,000 in the week ended Dec. 21, in another sign of health in the U.S. economy. Major U.S. equity indexes climbed to fresh records Thursday in holiday-thinned trading.

    This section continues in the Subscriber's Area.