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Pacific Rim Stock Markets

Pacific Rim Stock Markets

Source: Bloomberg
Chinese stocks rose on aggressive Chinese stimulus, positive signs for US/China trade negotiations, and an increase of Chinese A shares in the MSCI EM index.

Pacific Rim Markets

• On January 8 SoftBank Group Corp. – one of the world’s biggest startup and tech investors– dealt a blow to coworking space rental company WeWork as Softbank backed out of a $16 billion investment deal. WeWork offers working, living, and even educational facilities to a community largely consisting of entrepreneurs. SoftBank had planned to spend $10 billion on buying out WeWork’s other investors and to pump a further $6 billion into the company, thereby becoming the majority owner. After the market maelstrom and a disappointing initial public offering of its mobile phone unit, SoftBank had second thoughts. SoftBank stock jumped 5.7 percent on the day.

• On February 4 shares of Japanese tech company Sony Corporation fell 8.1 percent after Sony reported a weaker-than-forecast quarterly update. Sony spent years shifting business away from selling televisions, aiming to become a more profitable entertainment company. Indeed, Sony’s purchase of EMI Music Publishing Ltd. in 2018 made Sony the world’s largest music publisher. However, slow hardware sales left Sony feeling the pinch once again, missing investors’ profit expectations for Fourth Quarter 2018.

• On February 5 the share price of Anglo-Australian mining giant Rio Tinto hit a ten-year high on the back of a jump in iron ore prices as supply was threatened following a deadly mining disaster in late January at the world’s largest iron ore

miner, Vale S.A., in Brazil. Following the accident the price of iron ore rose to close to the highest level in two years and took the share prices of mining companies, such as Rio Tinto, higher.

• On March 1 Japan’s biggest bank, Mitsubishi UFJ Financial Group (MUFG), announced plans to buy German DZ Bank’s AG aviation finance business for $6 billion. This wasn’t MUFG’s first international spending splurge: The company splashed $3 billion in October 2018 to acquire the Commonwealth Bank of Australia’s global investment management business. Japanese firms have set acquisition records as they look overseas for growth. The triple-threat of an aging workforce, a shrinking population, and stubbornly low inflation make economic growth – and therefore earnings growth – hard to come by at home. MUFG’s shares rose 0.3 percent on the day.

• On March 5 China lowered the economic growth target for 2019 from around 6.5 percent to between 6.0 percent and 6.5 percent. Chinese officials blamed the cut to their expectations on the country’s ongoing trade war with the US reducing demand for its products and services. They also predicted that even more Chinese companies would fail to repay their high debts, putting the country’s banks at risk of greater losses. Investors seemingly shrugged off China’s lower growth outlook and bought Chinese stocks. The Shanghai Composite Index rose 0.8 percent on the day.