Written by Justin CHUNG Lok Yin, 29/01/2025
On 20 January 2025, Donald Trump returned to the White House. The perceived arrogant leader signed over 20 executive orders and actions on his Inauguration Day ‒ more than any previous US president. Trump has announced many changes so far. Many keywords and aspects can ring the bell of investors’ minds – Tariffs, AI, crypto, Staff, Greenland, Panama Canel, China, wars, taxes, expenditures, immigrants, and more. These all added complexities to the current global markets. Due to space and word limitations, this weekly update will focus on two of the most-discussed areas of the Trump administration: Trade Policy and AI.
Trump has been known for his aggressiveness in imposing tariffs. In the election period, he claimed to increase tariffs on China heavily upon his presidency. Trump's tariffs externally act as bargaining chips with nations and internally offset the cost incurred by the tax-cut policy. The market has been concerned about the consequent deterioration of international relationships resulting in trade wars and potential re-inflation as import products become more expensive upon the tariff rise.
Instead of aiming at China as in the campaign last year, Trump began by pivoting to Canada, Mexico and Colombia, which was a pretty surprising approach. Trump first announced plans for 25% tariffs on Canada and Mexico. As for China, on 22 January, Trump proposed a 10% tariff on Chinese goods. China and Hong Kong stock markets fell sharply. The Hong Kong market ended six consecutive rallies, and the Hang Seng Index (HSI) fell below 20,000 points. However, this tariff is significantly lower than the 60% suggested in his election campaign. Trump’s claim two days later confirmed his “temporary leniency” over China, as he said he “would rather not raise tariffs in China”. This brought HSI back up to 20,000 points. On the other hand, weaker than expected, a 2.5% tariff on goods from the Eurozone was also mentioned. European luxury goods stocks performed strongly. For instance, since 20 January, LVMH advanced 10% and Hermès climbed 6.5%. Unexpected tariff leniency resulted in the correction of The Dollar Index by up to 1% since his Inauguration Day. Some suggested that Trump may have switched to a more gradual approach in handling tariffs.
To Trump, tariffs are now viewed as bargaining chips. The aforementioned 10% tariff threat was indeed in response to China's role as a major supplier of fentanyl raw materials, as well as to push China to approve a potential US deal with TikTok. Trump also coerced Colombia to accept deportees using the same tariff tactic. As concerns evolve and change across time, Trump’s claims – but not concrete actions – on tariffs could show little implication for the medium- to long-term economy. PIMCO’s head of US public policy Libby Cantrill opined that the market should not "extrapolate too much” from the initial delays on Trump tariffs. Given that Trump’s style is often more ideological and exaggerated, investors are already prudently observing the new administration’s moves and distinguishing factors from noises.
On 21 January, Trump announced a $500 billion (€480 billion) investment in artificial intelligence infrastructure in the US. Unsurprisingly, many tech giants saw impressive gains on 22 January. Nvidia surged more than 4%, pushing its market capitalisation to $3.6 trillion, surpassing Apple once again. Microsoft also saw a rise of around 4%, while Arm experienced a jump of nearly 16%. Foreign players also rose. Siemens Energy shares soared more than 10% this week following the announcement. The German energy company anticipates a “massive tailwind” as it manufactures equipment ranging from gas and wind turbines to power network components. On top of the technology sector, Trump urged banks to loosen regulations and collaborate with tech giants to invest billions in developing AI technology. The Financial Select Sector Index rose 6.32% YTD as of 29 January.
Although the technology sector was significantly suppressed as the Chinese AI model Deepseek advanced in the final week of January, Trump affirmed that the US is in a position to compete and regarded Deepseek as a “wake-up call”. Market views his response as the beginning of a competitive yet flourishing AI era, expecting strong demand in the technology sector in the medium to long horizons.
Source:
Written by Hong Yee Ching Robin, 26/01/2025
Gold notched its best annual performance in over a decade last year. The prices rose about 26% in 2024, driven by central bank as well as retail investor purchases. Gold has always been the yellow metal that act as a hedge against risk. JPMorgan analysts also expect gold prices to rise, especially if U.S. policies become “more disruptive” in the form of increased tariffs, elevated trade tensions and higher risks to economic growth. Besides the geopolitical uncertainty that will occur in the foreseeable future, the high interest rates that central banks in most of the countries are maintaining.
Geopolitical uncertainty: Flows of cash are expected to remain the same and buy Gold as the alternative assets for Central Banks and retail investors. This is due to the unstable border between Russia and Ukraine, Israel and Palestine, and the economic and political tension between the US and China. Tom Mulqueen, metals strategist at Citi Global Markets also stated that they consider “the gold bull market has taken a pause following U.S. presidential elections but should resume in 2025 underpinned by further deterioration in the U.S. labor market, still-high interest rates weighing on growth, and higher ETF demand”.
Central Banks: Central banks, which slowed gold purchases in late 2024, might also return as buyers if prices correct significantly. The World Gold Council survey also revealed in the second half of 2024 that Central Banks are likely to purchase more Gold in the next 12 months. This should further bolster demand for the precious metal. Interest rates are also expected to cut at a slow pace, where lower interest rates is another factor expected to bolster gold prices next year. This should reduce the opportunity cost of holding gold, which is non-interest-bearing.
It is possible that there will be a slightly deeper correction before the price actually breaches the current all time high resting around the 2790 handle. Despite short-term challenges, UBS remains bullish on gold for the next 12 months, projecting prices to reach $2,900/oz by the end of 2025.
Source: https://www.cnbc.com/2025/01/06/gold-copper-oil-price-outlook-2025.html
Written by Erika Lau, 8/11/2024
Donald Trump has proposed increasing tariffs on imports, suggesting rates of up to 60% for China and 10% for other countries. Higher tariffs could lead to increased costs for consumers, potentially exacerbating trade deficits and contributing to inflation and deglobalization trends.
Trump plans to boost the production of U.S. fossil fuels, emphasizing increased drilling activities from day one. He aims to open new areas for oil exploration, arguing that this would lower energy costs. However, analysts express skepticism about the feasibility and long-term impact of these measures.
Electric Vehicle Tariffs: Increased tariffs could affect electric vehicle (EV) exports from China. Domestic automakers like General Motors (GM), Ford (F), and Stellantis (STLAM) may benefit from reduced competition, with shares of GM and Ford recently rising by 2.5% and 5.6%, respectively. Regulatory Changes: Companies like Toyota could gain if EV regulations are reduced or eliminated, given their focus on hybrid vehicles over all-electric models. Tesla's Market Performance: Shares of Tesla soared by 15%, reaching a new 52-week high, partly influenced by CEO Elon Musk's active engagement in key markets.
Trump's policies may lead to reduced investment in renewable energy within the U.S. Companies like Plug Power (PLUG) and Sunrun (RUN) experienced significant stock declines of 22% and 30%, respectively. In Europe, renewable energy firms such as Orsted (ORSTED) and Nordex (NDX1) also saw their shares fall by 13% and 8%.
There is debate over whether Trump would continue supporting the "Chips and Science Act," which he previously criticized. Experts believe he may uphold the act due to bipartisan support for domestic semiconductor manufacturing. The legislation, launched in 2022, has already facilitated significant investments from companies like TSMC and Samsung, offering them $6.6 billion and $6.4 billion, respectively, to build factories in the U.S. Past policies have affected companies like Huawei, ZTE (000063.SZ), and SMIC (0981.HK), which faced challenges due to trade restrictions. Continued policies could impact China's ability to hire overseas talent and acquire semiconductor equipment, as evidenced by a one-third increase in China's imports of semiconductor equipment to $24.12 billion in the first nine months of this year.
Trump Media & Technology Group (TMTG): The stock hit a two-week low after initial excitement faded. It peaked at $51 on October 29 but retracted to $27 by November 8, as investors reassessed its fundamentals. Bitcoin: Bitcoin reached new highs at $76,167, up 10% over the past five days, amid speculation about potential crypto-friendly regulations.
The market is expected to experience increased volatility in response to these policy proposals. Investors should pay close attention to news and potential headwinds arising from new policies and statements, adjusting their strategies accordingly.
Source:
Written by Kevin Xia, 19/3/2024
On the secondary market, Nvidia has been making significant strides in the tech industry, particularly in the realm of artificial intelligence (AI). The company's GPU Technology Conference (GTC) 2024 has begun, and investors are anticipating details on the GPUs based on its next-generation architecture, Blackwell. The stock's recent performance has made this year's GTC even more anticipated among investors. Analysts predict a moderate buy rating for Nvidia with an average twelve-month price prediction of $829.66.
Apart from Nvidia, there are two upcoming IPOs that also caught a lot of attention. SHEIN, the fast-fashion giant, has confidentially filed to go public in the U.S. The company was last valued at $66 billion and could be ready to start trading on the public markets as soon as 2024 Q2. However, SHEIN faces challenges related to labor practices and its environmental impact.
On the other hand, Reddit is closing in on a stock offering that could rank among the biggest U.S. IPOs so far this year. The social media company has set a price range of $31 to $34 a share. Despite revenue growth, Reddit faces profitability challenges and aims to boost ads. Disclaimer: Investors should consider these factors and their own risk tolerance when evaluating these investment opportunities. As always, it's recommended to conduct thorough research or consult with a financial advisor before making investment decisions.
Sources:
Written by Erika Lau, 12/3/2024
Founded in 2017, Yatsen Holding Limited (NYSE: YSG) is a leading China-based beauty group. It operates various skincare and color cosmetics brands, including Galénic, DR.WU, Eve Lom, and Perfect Diary. Yatsen focuses on providing high-quality beauty products to consumers in China and internationally.
As of March 7th, 6:52 pm GMT, the stock price of YSG is $0.51 USD, reflecting a month-on-month decline of 18.9% and a year-on-year decline of 31.8%. Yatsen has experienced both growth and challenges in its financial performance. In the fourth quarter of 2023, the company reported a 6.7% increase in total net revenues compared to the prior year period.
However, the company’s total net revenues for the full year of 2023 decreased by 7.9% compared to the previous year, indicating a potential slowdown in growth. Yatsen also reported a net loss of RMB 750.2 million (US$105.7 million) for the full year of 2023, which decreased by 8.7% compared to the prior year period. This was primarily due to significantly increased marketing expenses while sales volume remained weak. Additionally, in the fourth quarter of 2023, the company recorded a goodwill impairment, indicating that the carrying value of the Eve Lom reporting unit exceeded its fair value. This impairment was primarily attributed to weaker operating results than expected at the time of acquisition. Such impairments can negatively impact investor confidence and lead to a decline in the stock price.
In terms of past deals, Yatsen has focused on brand acquisition and geographical expansion. In 2020, the company acquired the beauty brand Little Ondine and the French skincare player Galenic. In 2021, it acquired the British premium skincare brand Eve Lom. In 2023, Yatsen’s jointly built factory with Cosmax Inc., a major cosmetics manufacturer in South Korea, began operations in Guangzhou, China. Looking ahead, Yatsen aims to pursue sustainable growth through ongoing innovation across its brands. The company’s strategic plan includes brand repositioning, new product launches, and a focus on enhancing research and development capabilities. With the newly built factory, Yatsen is transitioning from an OEM to an ODM business model, which is expected to improve quality control and potentially lead to an increase in sales volume in future reporting periods.
Source:
Written by Jonathan Chen, 14/6/2024
U.S. Equities and AI: The technology sector, particularly companies involved in artificial intelligence (AI), remains a strong investment theme. The market has shown robust earnings growth expectations, with the tech sector expected to account for a significant portion of this growth. Companies like Nvidia, which has seen significant gains, are at the forefront. This trend is expected to continue as AI adoption broadens across various sectors
Consumer Staples: In an environment of persistent inflation, consumer staples stocks are seen as relatively resilient. These companies, which sell essential goods like food and basic consumer products, tend to perform well even when consumers cut back on non-essential purchases. Some of the top-performing consumer staples stocks include Costco, Walmart, and Procter & Gamble
Interest Rates and Fixed Income: Central banks, including the Federal Reserve, have signaled potential rate cuts in the near future. This pivot could provide a favorable environment for bonds, particularly short-term bonds, as interest rates gradually decline. Investors may want to consider diversifying their fixed-income portfolios to include a mix of short- and intermediate-term bonds to mitigate reinvestment risk and capitalize on the potential for lower yields
Geographical Diversification: Beyond the U.S., Japan's stock market is gaining attention due to solid corporate earnings, favorable monetary policy, and economic reforms. Emerging markets like India and Mexico also present opportunities due to their growth potential and strategic positioning in global supply chains
Source:
