May 25 China, Hong Kong, What type of recovery? Citi expects offices to remain but adapt and more


Markets in Asia mixed
Japan opened higher and traded sideway through the day.
S Korea opened around flat but worked higher through the day
Taiwan had a weak open and saw further initial selling but then has worked higher.
Hong Kong saw a weak open but rallied back to flat but then sold off during the morning. PM has seen it working back towards flat on good volume considering that US and UK are closed today.
China has seen very choppy trading I would image that Team China is trying to provide some stability to the markets.

China hits back at audit plan that imperils listings on US exchanges. Beijing says the Senate bill will weaken confidence in US markets, although many think it will actually enhance their standing, especially after the recent collapse by Luckin Coffee. The key is that the US is continuing to weaponise the USD. It is the ultimate weapon because despite China’s high savings rate it does still need foreign investment.

Hong Kong protesters take to streets. Demonstrators cite threat to liberty, prosperity and territory’s hub status. Looks at Sunday’s protests when many Hong Kong citizens took to the streets to express their anger at the local government and Beijing. Many fear that the latest move by Beijing dies undermine Hong Kong’s high degree of autonomy and will undermine its financial hub status. The key concern I think is that Beijing is saying it can do what it wants to Hong Kong and that it can circumvent the essences and spirit of the Basic Law that it signed up to if it wants. For the investment community that removes the security that comes with investing in Hong Kong and the established legal framework that underlies that.

Xi seeks to distract from his failings with an attack on democracy. Sets out that the the move to impose a national security law on Hong Kong will help President Xi deflect a lot of the criticism that could be coming as a result of China’s mis handling of the the initial stages of the covid-19 outbreak. It notes that this is just the latest in a number of events over the years that have gradually reduced Hong Kong’s freedoms. President Xi is, it sets out playing his nationalistic card, saying to the people of China ‘ “Are you with me or are you with Hong Kong’s protesters and Mr Trump?”’ The fact that the people of China don’t actually have a say is irrelevant he’s making a statement; knowing the it will not be questioned. Equally the people of China cannot question what this act might do to China’s economic prospects if the international investment community starts to withdraw funding from China. It notes 'unintentional but most enduring image this year will be of the president, sitting without a mask, surrounded by thousands of delegates with their mouths covered.’


Recession and recovery Strategists knock their economic projections into shape. Looks at the various options for the recovery and as ever there are a number of differing options and supporting arguments. I think the reality is that at the moment we just don’t know because we have never had an experience like this before. Furthermore we haven’t yet go the virus under control and we don’t fully understand it. Add to that the breakdown in US/China relations and you quickly realise that the recovery is unlikely to be a straightforward V,U, W, L, Swoosh or any other shaped recovery currently being discussed. Read also Penny-pinching consumers could spell trouble for recovery Notes that in this crisis there has been a increase in savings and that consumers are likely to be more cautious in terms of spending going forward, another influence that will make a difference to whatever type of recovery we eventually get.

Citi investment bank boss predicts resurgence of offices alongside continued remote working An interview with Pac Ybarra Citi’s investment banking boss looks at how offices might work in the future with more flexible working conditions. It notes that there will be changes but the office is likely to remain the focal point. Short term working from home has worked but much of that due to the goodwill that people have built up over time which involved face to face meetings etc. That good will it notes will be eroded over time.
Interesting to note that Citi grew its trading revenues faster than other Wall Street firms as it boosted its equities business and is seeking to pick up market share from weaker rivals.

Airlines set for gruelling post-pandemic journey A very different flying experience awaits passengers as sector warns of rising fares and painfully long airport queues. Looks at the problems facing the airline industry and notes that at present there are no clear guidelines for how the industry should adapt in the short term. Notes there are likely to be bottlenecks like boarding and leaving aircraft. Currently passengers would like to see more social distancing on planes which in some cases may possible. The key is that until we get a vaccine a lot of people are going to be cautious about flying. Business in the short term is adapting to video conference calls but a lot of people prefer face to face business. For the airlines and for the retail and other services associated with them, until a vaccine is found business will be very tough.

Editorial The modern era of globalisation is in danger. International trade and co-operation makes economies more resilient. Sets out that globalisation has brought many benefits and that to turn our backs on that and revert to isolationism would be a big negative. Some decoupling is to be expected but it suggest that should be listed to sensitive high tech and military sectors. 'Complete bifurcation, as in the US-Soviet cold war, would be disastrous. While the US administration wants to roll back globalisation, China wishes to shape it. Isolationism in Washington would allow Beijing that opportunity. Whether this relationship can be saved will, above all, determine whether today’s era of globalisation will go the same way as the first.’

Beijing is pitting EU countries against each other. Looks at how China’s influence has grown in some of the EU countries. An interesting read that reveals some the short comings within the EU.