Breakfast FM-Radio: News Roundup Oct 14, 2024

Market Overview

On Friday, the U.S. September PPI inflation remained unchanged month-on-month, indicating further cooling of inflation, alleviating anxieties brought by CPI, and supporting the Federal Reserve's rate cut next month. The S&P and Dow Jones hit new highs, with the S&P closing above 5,800 points for the first time, and the Dow Jones rising nearly 1%. After the opening of the U.S. earnings season, the bank index rose by 3%, and all U.S. stock indices rose by more than 1% for the week, with the S&P recording five consecutive weeks of gains. Tesla fell nearly 9% and dropped nearly 13% for the week, while Nvidia turned down on Friday but still rose nearly 8% for the week.

Chinese concept stocks opened low and closed high, with the index falling 1.9% before closing up nearly 1%, but still down nearly 7% for the week. The FTSE A50 futures rose more than 3% at night. "NIO, XPeng, and Li Auto" fell more than 3% before turning up. Tiger Brokers rose more than 18% before closing up more than 6%. The Chinese yuan appreciated by 260 points for the week.

The 10-year U.S. Treasury yield rose by 10 basis points for the week. The U.S. dollar index slightly fell on Friday, detaching from an eight-week high, but still accumulated a 0.3% increase for the week.

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Oil prices slightly fell on Friday but still rose for two consecutive weeks. Gold surged by more than 1%, rising for two days in a row, and slightly turned up for the week. Bitcoin broke through $63,000, rebounding by $4,000 from Thursday's low.

In the Asian session, the three major A-share indices all closed lower, with the ChiNext index falling by 5%. Cross-border payment concept stocks performed strongly against the trend, while semiconductor stocks led the decline.

News Highlights

China's Ministry of Finance: Plans to increase the debt limit on a one-time basis to a larger scale, which is the strongest measure to support debt reduction in recent years; the central finance still has a large space for borrowing and increasing the deficit. Huatai Securities: There has been a directional shift in fiscal thinking. CITIC Construction Investment: This meeting marks the central government's leverage increase and monetary policy easing, which is a liquidity feast for the market. Hua Chuang Securities: The incremental fiscal policy may have 2 trillion yuan in the short term, and the medium-term debt reduction scale may reach 6 trillion yuan.China's CPI in September rose by 0.4% year-on-year, remained unchanged month-on-month, while the PPI year-on-year decline expanded to 2.8%.

Hong Kong stock market heavyweight: Chief Executive of Hong Kong, John Lee, will deliver his third policy address during his tenure.

Chinese car market picks up, with passenger car sales in September increasing by 4.5% year-on-year, ending a five-month consecutive decline trend, and the new energy penetration rate breaking through 50% for three consecutive months.

US banking industry financial reports point to a "no landing" scenario!

SpaceX posts: Confirmation of splashdown, congratulations to the entire team for completing the fifth test launch of "Starship".

Market closing report

US stocks: Dow Jones Industrial Average up 0.97%, S&P 500 Index up 0.61%, Nasdaq up 0.33%.

European stocks: The Euro STOXX 600 Index closed up 0.55%, with a weekly increase of 0.66%. The German DAX 30 Index closed up 0.85%. The French CAC 40 Index closed up 0.48%. The UK FTSE 100 Index closed up 0.19%.

A-shares: Shanghai Composite Index down 2.55%, Shenzhen Component Index down 3.92%, ChiNext Index down 5.06%.Bond Market: The U.S. 10-year benchmark Treasury yield rose by 2.57 basis points to 4.0865%, with a weekly increase of 12.52 basis points. The two-year U.S. Treasury yield fell by 0.82 basis points to 3.9491%, with a weekly increase of 2.73 basis points.

Commodities: WTI November crude oil futures closed down by $0.29, a decrease of 0.38%, at $75.56 per barrel. Brent December crude oil futures closed down by $0.36, a decrease of 0.45%, at $79.04 per barrel. COMEX gold futures rose by 1.31%, to $2673.90 per ounce, with a weekly increase of 0.21%. COMEX silver futures rose by 1.24%, to $31.755 per ounce, with a weekly decrease of 2.03%. London zinc closed up by 2.2% on Friday, while London lead fell by more than 2.4% for the week, and London copper and tin fell by more than 1%.

News Details

Global Highlights

China's Ministry of Finance: Plans to increase the debt limit by a significant amount in one go, which is the strongest measure to support debt reduction in recent years; there is still a large space for central government debt issuance and deficit increase.

The Ministry of Finance stated that there is still a large space for central government debt issuance and deficit increase, and plans to increase the debt limit by a significant amount in one go, which is the strongest measure to support debt reduction in recent years. Issuing special government bonds to support large state-owned commercial banks in replenishing their core tier-one capital; in conjunction with the use of local governments and other tools, to support and promote the stabilization of the real estate market. Making full use of all types of debt funds will effectively supplement local government comprehensive financial strength by 400 billion yuan.

Huatai Securities indicated that there has been a directional shift in fiscal thinking. In terms of usage, it is no longer infrastructure, mainly including four aspects: debt reduction + bank capital injection + real estate + livelihood. The next step is to pay attention to the Standing Committee of the National People's Congress meeting, which may provide further answers on the amount, and to pay attention to the difference in expectations.

CITIC Construction Investment stated that this meeting marks the central government's leverage increase, repairing the balance sheets of local governments and the real estate sector, which is also the long-awaited "central government's entry" by the market. The joint easing of central finance and currency is essentially an expansion of the central government's credit, and for the market, it is a liquidity feast.

Shenwan Hongyuan stated that the press conference positively responded to the fiscal pressure within the year, proposing that there is a large space for central government debt issuance. A new round of debt replacement and replenishment of core tier-one capital of state-owned banks is on the way. Policies related to adjusting the debt budget increment need to be approved by the Standing Committee of the National People's Congress, and specific deployments may require close attention to the Standing Committee meeting in October.Hua Chuang Securities believes that in the short term, to balance the budget deficit for the current fiscal year and to replenish the capital of state-owned large banks, there may be 2 trillion yuan; in the medium term of 1-3 years, there may be 6 trillion yuan to address debt restructuring. Subsequent attention should be focused on the Standing Committee of the National People's Congress at the end of October, the Political Bureau in December, and the Two Sessions around March next year.

What is the scale of the three rounds of debt restructuring in history? The first round of debt restructuring (2015-2018) issued a total of about 12.2 trillion yuan in replacement bonds to replace existing government debt; the second round (2019) issued 157.9 billion yuan in replacement bonds to replace implicit debt; the third round (December 2020-June 2022) issued a cumulative total of 1.13 trillion yuan in special refinancing bonds.

China's CPI in September rose by 0.4% year-on-year and remained unchanged month-on-month. The PPI year-on-year decline expanded to 2.8%. Affected by factors such as the start of the school season and the Mid-Autumn Festival, the prices of fresh vegetables, eggs, fresh fruits, and pork rose by 4.3%, 2.5%, 2.1%, and 0.4% respectively; influenced by fluctuations in international commodity prices and insufficient effective demand in the domestic market, the PPI month-on-month decline narrowed, and the year-on-year decline expanded.

Guotai Junan believes that the September price data still shows the interweaving of insufficient domestic demand and the deleveraging of the private sector, with core CPI year-on-year approaching negative territory. Looking ahead, in the next phase, the repair of micro-entity confidence and the systematic alleviation of debt burdens are of great significance for stabilizing domestic demand. It can be said that we have taken an important step in repairing the balance sheet.

Hong Kong stock market highlight: Hong Kong Chief Executive Li Jiacheng will deliver his third policy report in office. There are reports that Li Jiacheng will announce a series of measures to consolidate Hong Kong's position as a global financial center when delivering the "Policy Report."

China's car market is warming up, with passenger car sales increasing by 4.5% year-on-year in September, ending a five-month consecutive decline trend, and the new energy penetration rate has broken through 50% for three consecutive months. Cui Dongshu, Secretary-General of the Passenger Car Association, said that from the current situation, he is optimistic about the car market in the fourth quarter of this year. The Automobile Association suggests that policies such as the continuation of trade-ins and other related policies should continue next year, and relevant implementation details should be released as soon as possible to stabilize market expectations.

The US banking industry's financial report points to a "no landing" scenario! Consumer spending remains robust, credit conditions are moderately relaxed, and the expected alleviation of inflation and interest rate declines all provide support for the US economy to "avoid a hard landing." In today's global market, forget about a hard landing, trade in reflation, and be vigilant about Trump. The reflation trend is beneficial for risk assets and the US dollar, but not for long-term bonds. As the US election approaches, political factors are gradually becoming an important variable affecting the market.

SpaceX posted: Confirmed splashdown, congratulations to the entire team for completing the fifth test launch of "Starship." According to Global Times, on October 13, SpaceX posted on social media platform X: "Confirmed splashdown, congratulations to the entire SpaceX team for completing the exciting fifth test launch of 'Starship.'" According to previous reports by CNN, the first stage of the "Starship," the "Super Heavy" booster, completed a "historic landing" on the launch pad. The live broadcast showed that the booster was suspended between two huge metal arms (also known as "chopsticks"). At the same time, the "Starship" spacecraft is still navigating in space. About half an hour later, the spacecraft will attempt to re-enter the atmosphere and plans to splash down in the Indian Ocean.

Domestic macro

How does the broad fiscal policy drive ROE? GF Securities Strategy stated that historically, when fiscal policy is implemented, the broad deficit ratio rises, PPI is likely to rise, and A-share ROE will also significantly increase, thus providing a driving force for the index and economic cycle assets. According to past experience, the time to confirm the strength of broad fiscal policy (risk resolution + demand stimulation) is around mid-December.Is the bond bull still around? CICC believes the key lies in social financing. How to determine whether policy stimulus will lead to a rebound in interest rates? The main factor is whether it can bring about a stepwise increase in social financing increments.

The social security fund achieved an investment return rate of 0.96% in 2023, seizing the AI opportunity overseas, and achieved good returns on foreign stock investments. The average annual investment return rate of the social security fund since its establishment is 7.36%, with a total investment profit of 1682.576 billion yuan. The pension fund achieved an investment return rate of 2.42% in 2023, and after entering the third and fourth quarters, when the A-share market continued to be sluggish and valuation advantages gradually highlighted, it actively increased its position at a low level, anchoring the annual tactical goal.

Saudi Arabia announced the establishment of a 4-square-kilometer China-Saudi special economic zone, jointly developed by King Salman International Airport and Yida Capital.

Domestic companies/industries

The price of Feitian Moutai original box in 2024 fell to 2300 yuan. The price of Feitian Moutai loose bottle in 2024 was reported to be 2240 yuan/bottle, unchanged from the previous day; the price of Feitian Moutai original box was reported to be 2300 yuan/bottle, down 20 yuan from the previous day.

Overseas companies

Goldman Sachs talks about the "four stages of AI trading" again: the second stage "AI infrastructure" is almost mature, and the third stage should not look at applications. As the most clear beneficiary of AI, NVIDIA belongs to the "first stage", the "second stage" includes companies focused on AI infrastructure, the "third stage" focuses on companies with potential to monetize AI through generating incremental revenue, and the "fourth stage" mainly refers to companies with the greatest potential for profit increase in the widespread adoption of AI and productivity improvement.

AI reasoning ability has a big "accident", and Apple's latest paper: LLM is just a complex pattern matching, not real logical reasoning. Can large language models really reason? Are LLMs all "parameter matching masters"? Apple researchers question the reasoning ability of LLMs, calling them "vulnerable"!

Samsung Electronics fell more than 20% in 23 trading days, with a market value of nearly 90 trillion won. Data released by the Korea Stock Exchange shows that from the 3rd of last month to the 11th of this month, foreign capital sold Samsung Electronics for 23 consecutive trading days, selling a total of 10.6593 trillion won (about 55.8 billion yuan).