Chinese stocks rose amid strong economic data
Market Summary
Last week, investors focused on the movement of U.S. Treasury yields and recovery of activity in China.
In the United States, stocks recovered from their worst weekly decline in two months, with the Institute for Supply Management's PMI showing an increase in February for the first time since May. The yield on the benchmark 10-year US Treasury note pulled back from a new three-month intraday high of 4.09%. European shares rose, with the STOXX Europe 600 Index gaining 1.43%. Inflation in the Eurozone eased to an annual rate of 8.5% in February, although core inflation ticked up to 5.6%. The Eurozone unemployment rate remained steady at 6.7%. Bank of England Governor Andrew Bailey warned that policymakers may raise interest rates above 4%.
In Asia, Japanese stocks rose while the yield on the 10-year Japanese government bond crossed the BoJ’s ceiling due to pressure from US Treasury yields. Core consumer price inflation in the Tokyo slowed in February to 3.3% year on year from an over 41-year high of 4.3% in January. Chinese stocks rose. The Shanghai Stock Exchange Index increased 1.87%, and the blue-chip CSI 300 gained 1.71%. China’s official manufacturing PMI data rose to 52.6 in February from January’s 50.1, marking the highest reading since April 2012.
Major News
An avalanche of hot inflation data over the past month has lifted US borrowing costs to the highest point in a decade and a half.
Washington has put 28 Chinese groups on a trade blacklist for allegedly breaching US sanctions.
Ukraine has appealed to the EU to send Kyiv 250,000 artillery shells a month to ease a critical shortage that it warns is limiting its progress on the battlefield.
Hong Kong ends Covid mask mandate after 945 days to focus on economy.
What Caught Our Attention
"Altasia" refers to the alternative Asian supply chain that is gradually emerging due to the geopolitical tensions between the US and China, forcing manufacturers to look beyond China for new production sites.
In terms of exports, Altasia and China are evenly matched. However, China's exports are more heavily weighted towards electronics, a vital category in which Altasia's exporters do not all excel.
Additionally, labour costs in China have surged with the country's increasing prosperity, making it less attractive to lower-cost manufacturers. While Chinese production capabilities will be difficult to replicate, the diverse economies of Altasia do not work together as a single entity the way China does, making infrastructure and logistics a huge challenge for manufacturers. Despite this, many companies are likely to continue exploring opportunities in Altasia as an alternative to China.
Source: Kredens Capital, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia
