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Asia-Pacific markets trade mixed following a quiet Wall Street

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Asia-Pacific markets trade mixed following a quiet Wall Street

Hong Kong economy on the mend but headwinds abound: AMRO

Hong Kong’s economy is recovering after being dealt the heavy blow of a fifth wave of Covid-19 and a two-year recession, according to the international organization ASEAN+3 Macroeconomic Research Office.

“The Hong Kong economy is expected to grow modestly by 0.3% in 2022 before expanding strongly by 3.9% in 2023,” AMRO director Jae Young Lee said on Friday.

“In the near term, there are multiple headwinds from the global growth slowdown, the US interest rate hikes, and heightened geopolitical tensions. Hong Kong also faces several long-term structural challenges which require bold policies and fiscal resources to address.”

Economic growth in the second half of the year and in 2023 will be boosted by the reopening of Hong Kong’s borders, internationally and with mainland China. But a wider global slowdown — including that of China will retreat recovery, said AMRO.

There will be a limited pass-through of imported inflation, it added.

AMRO said Hong Kong’s role as a “super-connector” between mainland China and the rest of the world was key to its economy and financial system.

“In this context, Hong Kong’s application to join the Regional Comprehensive Economic Partnership is an important move,” it said.

—Su-Lin Tan

Slowdown in global semiconductor sector underway: ANZ analyst

A slowdown in the global semiconductor cycle is underway, ANZ Research said in a note.

“The electronics manufacturing PMI suggests that while activity is still in expansionary mode, it is past its peak and will slow down further,” ANZ Research Bansi Madhavani said in the note on Friday.

“Asia’s electronic-oriented economies are signaling weakness in activity.”

The big players Taiwan and South Korea have softened Purchasing Managers Index or manufacturing sentiment, and companies expect the industry to enter an “inventory-rebalancing phase over the coming months”, Madhavani noted.

“Headwinds to Asia’s electronics trade are rising in the coming months, but some segments will be more affected than others. This is likely to bring about a soft landing for Asia’s overall electronics trade,” Madhavani said in the note.

— Su-Lin Tan

Sri Lanka’s central bank governor sees country’s inflation peaking around 60%

Inflation in Sri Lanka will peak at just above 60% in September, central bank governor Nandalal Weerasinghe told CNBC’s “Squawk Box Asia” — a shift from his previous forecast last month.

The central bank held rates steady Thursday on cautious optimism on the defaulted economy, which the governor said “was based on revised inflation expectation that’s improved a lot compared to earlier.”

“It will not be reaching 70%, in fact, it will be reaching a peak just above 60% and it will be trending down from September onwards towards next year,” he said.

He reiterated a “wait-and-see” approach for the damaged economy, saying markets have shown an upward trend compared to the last cycle.

On the crippled economy’s supply shortage, he claims the situation has gotten much better.

“Right now, the situation has improved a lot. There are no more queues for petrol, diesel, gas,” he said.

NGOs such as Human Rights Watch recently expressed concerns that the country’s dire situation is driving millions of people into poverty. The International Monetary Fund is expected to restart bailout talks with the country later this month in hopes of securing a $3 billion funding.

— Jihye Lee

Manufacturers like those making refrigerators could offer value in the weak China market

Manufacturing companies, including those making white goods such as aircon and refrigerators, may offer investment value in a weak Chinese market, according to William Ma, Grow Investment Group, chief investment officer.

“These companies will benefit from tax reduction, tax cuts … they have the highest possibility for an earnings upgrade especially if commodity prices come down,” Ma told CNBC’s “Street Signs Asia” on Friday.

Those making white goods will benefit from more retail spending driven by government-issued spending coupons. Many of them are trading at a reasonable valuation, he added.

“I believe white goods and refrigerators will benefit from this round of stimulus,” Ma said.

As for the tech sector, Ma noted many stocks will be re-rated, as the “high growth era is gone” and it won’t be until 2023 or 2024 that they will again be re-rated in a “high way”.

— Su-Lin Tan

China GDP growth lethargy in motion, says economist

On Thursday, both Goldman Sachs and Nomura downgraded their forecasts for China’s GDP growth citing weaker demand, uncertainties stemming from zero-Covid policy and an energy crunch.

Capital Economics senior China economist Julian Evans-Pritchard also said in a note on Thursday that prospects of a post-Omicron rebound for China were poor, especially against a backdrop of a spiraling housing market and slow credit appetite despite policy easing.

“More support is on its way but it will probably be too late too little to prevent output from stagnating this year. And once the economy does return to growth, it will be at a slower pace than in the past,” he said.

China’s current economic problems would worsen if not for exports that have boomed recently, Evans-Pritchard said.

But there are signs that demand is now dropping due to a global economic slowdown and a reversal in the pandemic-induced shift towards goods consumption, he added.

The Chinese central bank surprised this week with a 10 basis point cut to its key interest rate on Monday.

“We now expect two more 10 basis points cuts over the remainder of this year and continue to forecast a RRR cut next quarter. These moves will be largely symbolic, however,” Evans-Pritchard said.

“The PBOC wants to reassure market participants and its political bosses in Zhongnanhai that it is taking action to shore up the economy. But in practice, the central bank still appears reluctant to slash rates on the scale needed to make a meaningful difference to loan demand ” he added.

— Su-Lin Tan

CNBC Pro: Investment pro says ‘don’t be a hero’ in markets

Market veteran Nancy Tengler says talk of a new bull market is premature, as she names the “reliable” stocks she likes right now.

“I think this rally has been excellent,” Tengler, who is CEO and chief investment officer of Laffer Tengler Investments, told CNBC “Squawk Box Asia” last week. “But I don’t think we’re off and running in a new bull market.”

She named several tech stocks that she thinks are “more reliable growers” — companies with a proven track record of growing earnings and dividends.

Pro subscribers can read the story here.

— Zavier Ong

CNBC Pro: Veteran strategist David Roche shares his views on the market rally

US markets have picked up from their mid-June lows in recent weeks, but strategist David Roche believes current support for the market is set to run out.

Speaking to CNBC earlier this week, Roche, head of research firm Independent Strategy, said he thought the rally was “probably 75% over now.”

Pro subscribers can read more here.

— Jenny Reid

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