Traders brace for a stock selloff. Asia's richest are jumping on the SPAC bandwagon. Everything you need to know about China's biggest meeting of the year. Here's what people in markets are talking about today.
Asia traders brace for a r
enewed bout of stock and bond volatility after a surge in Treasury yields once more dragged down U.S. shares. The dollar strengthened. Futures in Japan, Hong Kong and Australia pointed lower after the Nasdaq 100 slumped to a two-month low and the S&P 500 extended its slide into a second day. A selloff in high-flying giants such as Apple and Amazon outweighed gains in banks and energy producers. Australian bonds slumped after benchmark Treasury yields approached 1.5%, and a market gauge of inflation expectations over the next five years hit its highest level since 2008. Oil surged.Asia's richest are jumping on the SPAC bandwagon, investing in the blank-check companies that have made a name for themselves across global markets. Family offices are piling into special purpose acquisition companies to generate better returns as near-zero interest rates prompt them to seek alternative channels of investment. SPAC bosses, from Softbank's Masayoshi Son to Silicon Valley investor Vinod Khosla, are pushing for tougher deal terms as the craze takes off. SPACs raise money from investors and then look to acquire another business, usually a private one, within two years. If they fail to find a target, investors may choose to get their stake back at the IPO price by exercising their redemption right. Here's why they're one of Wall Street's hottest products right now.
China kicks off its biggest political meeting of the year Friday, laying out plans that could propel the economy to become the world’s biggest this decade. After powering its way out of the pandemic last year, policy makers must engineer an exit from the monetary and fiscal stimulus that fueled that recovery, without destabilizing growth and spooking investors already wary of corporate defaults. It's growth target, focus on tech and overhaul of Hong Kong's election rules are just three things under the microscope. Here's what to watch for in the week-long meeting. And here's more on China's move toward global economic dominance.
Outbreaks of African Swine Fever in China's pig herds have fueled a surge in U.S. hog prices, amid fears China will encounter meat-supply problems. China's hog herd, the biggest globally, has been struggling to eradicate the disease since the 2018 outbreak. The country claimed herd numbers would be fully restored by mid 2021, but this now looks unlikely, amid fears the disease may continue to spread. Scientists have found new strains of the virus that are further threatening China's target.
Users of unlicensed streaming websites or viewers who download their shows and movies from illegal file-sharing apps are proving to be a very expensive headache for Netflix, Disney+, and Chinese streaming giants Tencent and IQiyi, which are waging an intense contest for subscribers in Southeast Asia. Thousands of illegal websites cribbing content from legitimate services cater to viewers from Vietnam to the Philippines, while other operators sell cheap hardware that allows access to pirated content. Piracy will cost TV and movie providers almost $52 billion in revenue worldwide in 2022, but it’s the rising demand in Southeast Asia, home to more than twice the population of the U.S., that’s raising warning flags.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours:
And finally, here's what Cormac's interested in today
Don’t tell the vicar, but betting on bad is proving a much better investment strategy than voting with your conscience so far this year. A strong performance in February has catapulted a gauge of “vice” shares including casinos, distillers and cigarette makers into a commanding lead over a worldwide index of environmental-related stocks. The ISE SINdex Index is now up 17% year-to-date, compared to just a 1% rise in the FTSE Environmental Opportunities All-Share Index which itself is lagging the global stocks benchmark by over 2 percentage points. As my colleague Moxy Ying points out, fears of higher interest rates have turned environmental shares from investor darlings into has-beens in recent weeks. Their outperformance last year and nosebleed valuations for many prominent ESG shares has left them vulnerable to the period of underperformance in growth shares that many strategists are calling for.
Conversely, the alcohol, tobacco, and gaming brigade are getting a boost from reopening economies and the ongoing vaccine rollout. The sin stocks underperformed their environmental peers for much of last year, and socially-conscious investors will hope that trend can soon reassert itself. But while key sections of the ESG universe are primed to benefit from the stimulus-driven boost to green technologies, for the time being at least, the most successful investors are breaking bad.
Cormac Mullen is a Cross-Asset reporter and editor for Bloomberg News in Tokyo.
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