Most hated bull market ever? Maybe it should be

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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If this is the most-hated bull market ever, as has been suggested, maybe there’s good reason for it.

While the rally this year looks good on paper—as any 15 percent S&P 500 gain by early July would—it has come on the backs of some of the ugliest internals you could imagine.

Just look at the qualities the biggest gainers share: Low price-to-earnings ratios, zero dividend yields, high short interest and lowest analyst ratings.

It’s not exactly a market that would win any beauty contests.

In fact, its best chance would be at a county farmers fair for “ugliest bull.” And it’s hard to love an ugly bull.

Jeffrey D Saut, chief investment strategist at Raymond James, said he is mindful of the old market adage, “When they start running the dogs, it’s time to start looking over your shoulder.”

Saut believes the market is a week or two at most away from the first “meaningful decline of the year to commence.”

While the S&P 500 shed about 5 percent in the immediate aftermath of Federal Reserve Chairman Ben Bernanke’s warning that extreme monetary easing is about to unwind, the stock market index has erased all but 15 points or so of that decline.

The quality of the rally—on low-quality stocks—as well as the weak earnings season prospects and discord in Washington over sequestration spending cuts and the debt ceiling could spell market trouble, Saut said.

Bespoke Investment Group breaks out the S&P 500 in 10 50-stock groups and breaks down their performance by type.

Among its findings:
• The 50 biggest stocks gained 13.3 percent; the 50 smallest stocks surged 21.9 percent.

• The 50 stocks with the lowest P/E ratios rose 26.7 percent; the 250 with the highest P/E ratios were up far less.

• Stocks with no dividend yield gained 19.9 percent, outperforming the high dividend-yielders, particularly as interest rates rose.

• The 50 stocks with the weakest analyst ratings surged 22.7 percent.

Sound bad?

Actually, there might be some love out there for the ugly bulls stampeding through Wall Street.

Jim Paulsen, the chief market strategist at Wells Capital Management, said the high-beta qualities of the best performers are exactly what you would expect of a market getting its mojo back after years of no confidence.

“The stuff you just named coming into leadership is the essence of confidence. When confidence emerges everything you just listed would be at the top of your list to buy,” Paulsen said in a phone interview.

“What this rally’s about—even going back to last fall—is about giving up the Armageddon ghost and accepting that this is a more sustainable recovery,” he added. “If you suddenly developed confidence in sustainability you wouldn’t latch onto low-beta high-dividend stocks. You’d put on a little octane.”

That octane, though, looks like it’s fueling a lot of old junkers.

—By CNBC’s Jeff Cox. Follow him @JeffCoxCNBCcom
on Twitter.

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Could this be the week Aussie breaks below $0.90?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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This could be “a make or break week” for the Australian dollar (Exchange: AUD=) with three major factors – the Federal Open Market Committee (FOMC) minutes, Chinese and Australian economic data – set to determine whether the embattled currency will break below the key USD 0.90 level or reverse its downtrend.

“This is a week when the Australian dollar could break USD 0.90 or squeeze higher,” Kathy Lien, managing director at BK Asset Management wrote in a note late Monday, referring to the three risk events.

“[However] if this week`s event risks give speculators any reason to take profit or reconsider their short positions, the liquidation could drive the Australian dollar above USD 0.92 and most likely USD 0.93,” Lien said, noting that short Australian dollar positions are still near records highs.

The Aussie, which has depreciated 12.5 percent against the US dollar over the past three months, has been hit by a slew of concerns including falling commodity prices, a slowdown in Australia`s top trading partner China and the prospect of the US Federal Reserve scaling back its extraordinary monetary support. The currency is now at its lowest level against the greenback in two and a half years.

On the economic data front, China`s June trade numbers due out on Wednesday, will be critical for the currency, she said.

“If the data meet or beat expectations, the Australian dollar bounce could turn into a stronger recovery. However, if export growth slows or worse, declines which we feel is more likely the Australian dollar could be in big trouble with 90 cents potentially coming under threat,” she said.

The Aussie pared some losses against the US dollar on Monday, rising to USD 0.9145 as the latter paused in its rally. However, the commodity currency resumed its downtrend on Tuesday, falling 0.4 percent in the Asian trading session.

Chinese exports are forecast to have climbed 4 percent in June after May`s rise of just 1 percent, according to a Reuters` poll. Imports, meantime, are expected to have risen 8 percent in June after a 0.3 percent contraction in the previous month. However, economists say a rebound in import growth will have been largely driven by a low base in the same month last year.

In Australia, the country`s employment report, set to be published on Thursday, will also play a role in determining the currency`s next move.

“Economists are not looking for any major changes in job growth but the unemployment rate is expected to tick higher which could renew the sell-off in the currency,” she said.

Finally, Wednesday`s FOMC minutes, which may indicate whether the central bank has grown more willing to scale back its bond buying program, also presents another risk for the currency, she said.

Strategists at National Australia Bank expect the Fed`s comments to be an instrumental driver for the currency. The bank expects the currency will remain under pressure as the central bank moves forwards tapering.

According to Michael Judge, corporate forex dealer at OzForex, a global money transfer company, if the Aussie breaches the key support level of USD 0.90 in the coming days, the currency could test USD 0.885.

–By CNBC`s Ansuya Harjani

Copyright 2011 cnbc.com

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Greece may reach surplus by end of 2013: Lagarde

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Greece`s budget could be back in surplus by the end of the year, although a lot of work still needs to be done in terms of reforms, the International Monetary Fund`s (IMF) Managing Director Christine Lagarde told CNBC.

On Monday Greece secured a 6.8 million euro (USD 8.7 billion) lifeline from the euro zone on the condition that Athens cuts public sector jobs and delivers other reforms to generate the required cash. The deal prevents the country from defaulting on debt due in August.

Lagarde told CNBC she was pleased with Greece`s progress and believed it to be on the road to recovery.

“When I look at Greece, I`m very impressed by the efforts that have been undertaken to restore the fiscal situation of the country. It may well be that by the end of 2013, Greece will be in primary surplus, which is an amazing achievement,” said Lagarde.

“A lot needs to be done, whether you`re talking about the tax reform, the tax authority`s reform, the continuation of the privatization program…the management of the public service – all of that is still on the table and work in progress that needs to be continued. But there have been clear achievements,” she added.

As part of the deal agreed on Monday, euro zone finance ministers committed to stagger payments to Greece.

Greece has been dependent on financial support from its lenders for over three years now and has been back in the spotlight in recent weeks as the country`s coalition government struggled to reach agreement on how to meet the demands of the bailout program.

Tough austerity measures, including deep cuts to government spending, raised taxes and structural reforms, have been unpopular with the Greek public.

But a week of talks has led to a promise from the government to reform the public sector, convincing its lenders – the IMF, the European Commission and the European Central Bank – that Greece is on track to rebuilding its economy.

The IMF chief said Greece still has a few more steps to take to improve its financial situation.

“Currently we have a list of actions that have been taken. A few more prior actions before we actually submit the program to the board at the end of July. And then we`ll see… as I`ve said, one step at a time,” she added.

Lagarde said that the IMF remained “extremely attentive” to developments in Egypt, where the military last week ousted Mohamed Morsi as president.

The IMF hoped to continue a dialogue with the Egyptian authorities started in August last year, she added.

“We have had a dialogue with the Egyptian authorities because we believe that it`s critical for that country to harness financing, but also to have a strong political endorsement and people`s support to go into the reforms and the strategy that is needed for that economy to recover,” she said.

“We will continue that dialogue, we will remain extremely attentive to what happens on the ground, but I think for the moment the situation has to settle before we reactivate those discussions,” Lagarde said.

Copyright 2011 cnbc.com

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What China’s battered stock market is telling us

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China`s battered stock market has taken another tumble this week – a sign perhaps that the country`s investors are bracing for a faster-than-anticipated slowdown in the world`s second largest economy.

The Shanghai Composite stock index tumbled more than 2 percent on Monday and extended that fall on Tuesday to its lowest level in more than a week before recovering a touch. Chinese shares are down almost 14 percent so far this year, making Shanghai Asia`s worst performing major equity market.

“If you look purely at the Shanghai Composite, it has a massive retail component so it`s very much driven by sentiment rather than the earnings growth that professional traders look at,” said Chris Weston, chief market strategist at trading firm IG.

“So I would look at the Shanghai Composite as a good gauge of sentiment in China. And what we`re looking at in China right now are clear risks to growth – whether that turns into a hard landing or a more manageable slowdown remains to be seen,” he added.

Weak data in recent months have prompted economists to cut their gross domestic product (GDP) growth forecasts for China, while Beijing`s tolerance of a credit squeeze last month and its determination to push ahead with structural reforms have added to the jitters about China`s growth outlook.

The Chinese government said on Friday that it would cut off credit to those industries beset by overcapacity as it tries to end the economy`s dependence on investment funded by cheap debt. The statement fueled the sell-off in Chinese shares on Monday.

Helen Zhu, chief China equity strategist at Goldman Sachs, said that while the reforms had long-term benefits for the economy, investors were likely to remain nervous about the short-term consequences for growth.

“I haven`t found any investors who have been very bullish on Chinese stocks in the next few quarters,” she told CNBC Asia`s “Cash Flow.”

“Generally there are worries about the direction of reforms, which people think is a good thing. But there are likely to be cyclical costs and the liquidity crunch last month really scared people into thinking that there could be significant volatility to the cyclical picture during this reform process,” she added.

Goldman still sees Chinese shares heading higher this year but has significantly cut the targets it had for stocks at the start of the year.

“We think there could be some gains by the end of the 2013 but over the next few months, people are still waiting to see how much cyclical tightening we have and how much the economy slows down,” Zhu said.

Chi Lo, senior strategist, Greater China at BNP Paribas Investment Partners said he did not expect significant improvement in the outlook for Chinese corporate profits in the months ahead.

“The peak in profits was reached earlier this year and given the slowing growth momentum there`s not much pricing power from the CPI [consumer price index] side, so corporate profits are unlikely to see a significant improvement,” he told CNBC Asia`s “Squawk Box.”

Data on Tuesday showed China`s CPI rose 2.7 percent in June from a year earlier, higher than a consensus forecast by Reuters of 2.5 percent. China`s producer price index fell 2.7 percent in June from a year earlier.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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The risk that mkts aren’t fully bracing for

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Economists may have lowered forecasts for China’s economic growth, but markets are still not fully factoring in what weakness in the world’s second largest economy means for the rest of the globe, analysts say.

“The problem in Europe, if there is one, is going to come through Germany, and is one that people really aren’t focusing on right now,” Mark Matthews, head of research for Asia at Bank Julius Baer, said on CNBC late last week.

“Over half of Germany’s GDP [gross domestic product] is from exports and I think the slowdown in China has not been embedded into most forecasts around the world,” he said. China is the biggest non-European Union market for German exports after the United States.

China’s economic numbers have proved mostly weak lately, prompting a number of banks to revise down their 2013 growth forecasts. HSBC and Goldman Sachs now expect China’s economy to grow 7.4 percent this year – which would mean falling below Beijing’s target of 7.5 percent.

Concerns over China’s slowdown are already being felt in Australia’s markets. Weaker-than-expected data from China have contributed a fall in the Australian dollar this month to a three-year low against the US dollar. China is Australia’s main trading partner and Aussie markets are, to some extent, seen as a proxy to what is happening in China.

But the broader risks to global growth from a slowing Chinese economy, which Beijing appears happy to tolerate for now, are not fully appreciated, say analysts.

Apart from its close economic ties to Europe, China is also one of the US’s biggest trading partners and the main trading partner for most Latin American countries as well as big Asian economies such as Japan and South Korea.

“China’s neighbors are watching closely. In recent years, it was demand from the mainland, much more than the gradually recovering United States, that sustained growth in Asia. Take Korea. It now exports more to China than to Europe and the US combined,” said Frederic Neumann, the co-head of Asian economics research at HSBC, in a note on Monday about how developments in China and not the US could be more crucial for Asian markets.

According to Tim Condon, the head of research for Asia at ING Financial Markets, there is a danger of reading too much into the weakness in China’s economy.

“Consensus forecasts at the start of year were for Chinese GDP growth just above 8 percent and now it’s below 8, so that’s not a huge change,” he said.
“The worry for China is that the cuts continue and that growth ends up being lower than authorities expect. But that is a risk case, not the central case,” he added.

Still, investors might be right to pay closer attention to developments in China compared with the focus on when US monetary easing may be unwound, analysts said.

“What matters for financial health is not the level of interest rates but the degree of confidence in future returns. A Fed that embarks on a gradual withdrawal of monetary stimulus is not a risk-off event. It’s just about re-pricing. But a storm on the Mainland [China] would undoubtedly prompt financial caution across emerging Asia,” said HSBC’s Neumann.

-By CNBC’s Dhara Ranasinghe; Follow her on Twitter:
@DharaCNBC

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Bond yields getting closer to pain threshold

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The scale of the sell-off in US government bonds has taken market watchers by surprise and yields are now fast approaching a pain threshold for the US Federal Reserve, some analysts say.

Yields on benchmark 10-year US Treasuries soared after Friday`s stronger-than-expected US non-farm payrolls data heightened fears among bond investors that an unwinding of the Fed`s monetary stimulus could come sooner rather than later.

“I think 3 percent is the key threshold, but if you`d asked me a few weeks ago, I would have said 2.5 percent – it keeps moving higher and yet there doesn`t seem to be an imminent impact on the US economy,” Frederic Neumann, co-head of Asian Economics Research at HSBC Bank told CNBC Asia`s “Squawk Box.”

“But 3 percent is likely to be, not just a material threshold, but a psychological line in the sand for [Fed Chairman Ben] Bernanke at the moment,” he added.

The 10-year Treasury yield rose to about 2.76 percent on Monday in Asia, its highest level since August 2011 and within 25 basis points of that key 3 percent level.

It has jumped more than a 100 basis points since early May as investors start to anticipate an easing in the Fed`s USD 85-billion-a-month bond-purchase plan that has helped keep Treasury yields down.

According to the tweets from one Reuters correspondent, US investment bank Goldman Sachs now expects the 10-year Treasury yield to rise to 4 percent by 2016.

Too Fast, Too Soon

The problem with yields rising too high, too soon is that they could derail a recovery in the housing market, and in turn the economy, since yields on Treasurys affect the interest rates on fixed-rate mortgages, analysts say.

“The rise in bond yields is going to have implications especially since the housing recovery is still nascent,” said Nizam Idris, the head of strategy for fixed income and currencies at Macquarie.

“If I were the Fed I would err on the side of caution and try and talk this rise in yields down,” he said, adding: “Bernanke is speaking on Wednesday and he could try and tone the expectations on Fed tapering.”

Wall Street expects the Fed to start easing its quantitative easing program in November, one month earlier than previously forecast, according to a CNBC survey conducted after Friday`s US payrolls report showed the economy generated a stronger-than-forecast 195,000 new jobs last month.

“If yields go up too quickly that could put a break on the housing market and that`s more important at the moment than earnings season for Fed policy,” said HSBC`s Neumann, with reference to the US earnings season that kicks off this week.

Even with the sharp sell-off in Treasurys that has hurt high profile bond investors, some long-term funds remained upbeat.

Here`s a tweet from Pimco head Bill Gross over the weekend.

Bill Gross tweeted “One-to-two month performance numbers are a blip on a 40-year performance history. Pimco marches on a long-term path.”

Pimco`s Total Return Fund, the world`s largest bond fund run by Gross, had outflows of USD 9.6 billion in June, the biggest on record , data from Morningstar showed last week.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Oil looks ‘overbought’ as Brent bears USD 110

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Benchmark Brent crude oil prices may test USD 110 a barrel this week, extending last week`s rally to fresh multi-month highs amid lingering fears of Middle East supply disruptions and expectations of improving US demand after forecast-beating jobs data, according to CNBC`s latest survey of oil market sentiment.

Still, the risk of a correction lower in oil prices is getting stronger. A minority of respondents in this week`s survey warned last week`s 5 percent rally in Brent and 6.7 percent jump in US crude futures seems over-extended and doesn`t reflect still subdued fundamentals of only modestly improving demand. The US fuel stockpiles – although in seasonal decline – are also above the upper limit of the average range for this time of year, they added.

Almost three-quarters of respondents polled, or eight out of 11 (about 73 percent), said prices will rise this week while the remaining three, or about 27 percent, said a correction is due.

“I expect that the run-up is almost over,” said Mark Waggoner, President of Excel Futures, Inc. in Bend, Oregon. “Look for WTI (West Texas Intermediate, the crude grade underlying US futures) to break back below USD 100 next week. Demand is still not as high as it could be. The push to fill retail outlets should be done now (ahead of the high-demand US summer driving season, which runs from runs from around late May to early September).”

Gasoline is likely to lead the broader energy complex lower, Waggoner added, on expectations “stockpiles will jump because utilization is so high. Look for a major drop in next 30 days.”

Others believe an improvement in US consumer confidence generated by the housing market recovery will boost gasoline demand this summer.

“Historically, the summer months see an average gain of about USD 10, calculated by looking at average returns using data from 1983,” said Dhiren Sarin, Chief Technical Strategist for Asia-Pacific at Barclays Capital in Singapore. “The seasonal backdrop is also favorable. We prefer buying the dips and would look for the USD 103-103.50 area to come under threat” for WTI.

Commodity market reaction to Friday`s stronger-than-expected US jobs report diverged sharply. Copper and gold declined after the US dollar Index hit a three-year high on expectations that the payrolls beat would build the case for the Federal Reserve to scale back stimulus later this year. Oil, however, managed to shrug off tapering fears, taking the jobs numbers at face value as evidence of traction in the US recovery.

“Both WTI and Brent traded in tight ranges prior to the US NFP (Non-Farm Payrolls) and rallied sharply on the better-than-expected numbers,” ANZ analysts noted in their `Commodity Research` daily on Monday.

“The NFP numbers provided the fireworks but the news flows emanating from Egypt also added an early boost as protests against the ousting of the former president and protests near the Suez Canal raised alarm bells.”

While Friday`s forecast-beating US jobs report no doubt helped generate more momentum for the oil bulls, sentiment data from IG Markets provided to CNBC on Friday ahead of the payrolls release showed IG clients were covering short positions, or bearish bets, in anticipation of a strong jobs print though overall they were positioning for a short-term correction.

Exactly 100 percent of IG clients bought in the past hour to cover short positions in Brent and 88 percent in the past hour to cover short positions in WTI ahead of the June jobs report, according to the IG data, received Friday just before midday Singapore time.

However, 57 percent of IG clients with open positions in Brent crude, and 75 percent in US crude futures, expect prices to fall. That picture was little changed Monday, with latest IG client positioning showing 73 percent short WTI and 57 bearish on Brent.

Sean Hyman, editor, Moneynews at the Ultimate Wealth Report admitted that there will be “pullbacks along the way” though is forecasting USD 120-$125 for Brent crude and USD 120 for WTI in the coming months.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

A busy week for Asia’s central banks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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It’s the turn of Asia’s central banks to take center stage this week after central banks in Europe hogged the market spotlight last week.

The Bank of Japan (BOJ) concludes a two-day meeting on Thursday – the same day that central banks in South Korea, Indonesia and Malaysia are all expected to meet. The Bank of Thailand is scheduled to meet on Wednesday.

Weakness in regional powerhouse China and concerns about an outflow of funds from the region amid expectations for an unwinding of US monetary policy mean this week`s monetary policy decisions could attract more attention than usual.

Last week, the European Central Bank and Bank of England took markets by surprise by departing from usual practice by giving financial markets a clear steer on its intentions or what is being described as forward guidance.

“The BOJ is unlikely to take any concrete steps. Another three central bank meetings in Asia, namely Korea, Malaysia and Indonesia, are lined up on Thursday,” analysts at Mizuho Corporate Bank said in a note. “South Korea and Malaysia will probably stand pat though the former has scope to ease.”

The BOJ, which kicks off its two-day meeting on Wednesday, is not expected to make any significant changes to its monetary policy.

“The BOJ is pretty much on hold now. JGBs are stable so there`s no pressure to change policy,” Ray Attrill, co-head of currency strategy at National Australia Bank told CNBC Asia`s “Squawk Box” on Monday, referring to trade in Japanese government bonds that has been volatile since April when the BOJ unveiled an aggressive monetary stimulus program.

BOJ Governor Haruhiko Kuroda last week said the economy was on track for a steady recovery with signs of inflation expectations picking up.

China releases June consumer price inflation (CPI) inflation data on Tuesday. Inflation in China rose 2.1 percent in May from a year earlier.

“CPI inflation is likely to have rebounded to 2.5 percent year-on-year, but it should not trigger worries of potential policy rate hikes amid the downside risk to growth,” analysts at Credit Agricole said in a note.

Singapore releases second quarter gross domestic product data on Friday, with analysts polled by Reuters forecasting a 2 percent annual rise in growth compared with 0.2 percent rise in the first quarter.

In Australia, jobs data for June due this week is expected to be watched closely by the market as it tries to assess whether or not the country`s central bank will lower interest rates next month.

“If the data paints a picture of rising unemployment, rate-cut expectations will come back on to the table,” said Attrill.

The Reserve Bank of Australia kept its key rate steady in July at 2.75 percent earlier this month.

U.S. Federal Reserve Chairman is scheduled to speak this Wednesday and his comments are likely to be closely followed by markets globally as investors try to work out the timing of when the Fed will start to take back its monetary stimulus.

Data on Friday showing the U.S. economy created a stronger-than-expected 195,000 new jobs in June has reinforced expectations that Fed tapering could begin later this year.

“Tapering is coming a bit closer and the rise in [government] bond yields suggests markets are anticipating it coming sooner than thought,” said Frederic Neumann, co-head of Asian economics research HSBC.

-By CNBC`s Dhara Ranasinghe; Follow her on Twitter: @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Ex-US presidential candidate: Snowden is no hero

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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US politician and former presidential candidate Jon Huntsman has rubbished claims that fugitive Edward Snowden could be considered a `patriot` or a `hero.`

“When you sign on working for an intelligence agency to protect your state`s secrets and you divulge them as recklessly as he has, I don`t call that patriotic,” Huntsman told CNBC on Asia Squawk Box on Monday.

Snowden, who previously worked for the US National Security Agency, fled US soil last month after leaking top-secret details of US surveillance programs and has been charged with espionage.

He is currently residing in the transit zone of Moscow`s Sheremetyevo Airport, where he submitted a number of asylum applications. He has since been offered asylum in Venezuela, Bolivia and Nicaragua.

Many observers view the whistleblower as a hero and a champion of the freedom of speech, while others see him as a traitor.

“When you compromise a lot of information that many brave men and women have spent a lot of time over the years building… to have signed on and promised to protect them, I don`t see that as heroic,” added Huntsman.

The situation has increased tensions between the US government and China.

Snowden had first fled to Hong Kong, where authorities refused to agree to a request by Washington to arrest the fugitive and hand him over to the United States.

According to Huntsman, who served as the US Ambassador for China from 2009 to 2011, cyber security – a sticking point between U.S. and Chinese relations – will take center stage at the at the annual US-China Strategic and Economic Dialogue (SandED) taking place in Washington this week.

“The American business community really needs to get some action from China on intellectual property theft. It`s a real issue and it costs the US economy USD 300 billion a year,” he said.

In recent months US politicians have publicly accused China of using teams of hackers to steal technologies, negotiating strategies and other sensitive information from US companies. However, the Snowden revelations revealed details of the US government hacking Chinese institutions, including universities in Beijing and Hong Kong, weakening Washington`s case somewhat.

But Huntsman saw little progress being made at the talks, due to a mismatch between the responsibilities of high end government officials in China and the United States.

He gave the example of US Secretary of the Treasury Jack Lew and his equivalent in China, Vice Premier Wang Chang, saying the two officials had extremely different roles.

“It`s still an unknown if Wang Yang really does control the finance portfolio. He has international trade, rural economic development and poverty alleviation, so it would appear as though his portfolio is not perfectly matched with that US Secretary of the Treasury Jack Lew,” he said.

Lew`s responsibilities include running domestic financial policy, collecting federal taxes and managing public debt.

“Is there a perfect match that we`ve had in years past? I`m not so sure there is and that will affect the outcome on the table,” he said.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Hong Kong sees no shelter from housing storm

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A combination of slowing demand from mainland Chinese buyers, higher interest rates and tight property restrictions could present a perfect storm for Hong Kong`s real estate market, according to an economist at HSBC.

Housing prices in the Asian financial capital, which have skyrocketed in recent years, could correct 10-20 percent as a result, said Frederic Neumann, Co-head of Asian Economics at the bank.

“I think the [cooling] measures that we`ve seen imposed certainly put a dampener on the market. But if you look ahead there are also other headwinds coming in, a China slowdown is certainly going to weigh on property prices,” Neumann told CNBC Asia`s “Squawk Box” on Monday.

“And we have higher U.S. dollar interest rates [which] directly feed into Hong Kong as well,” he added. Hong Kong`s monetary policy mirrors that of the U.S. given its currency peg to the greenback.

If transaction volumes, which have fallen sharply in the recent months, continue to remain under pressure, property prices could follow suit, Neumann said. Residential transaction volumes totaled 4,276 units in May, down 49 percent from 8,349 in the year ago period, according to Hong Kong`s Land Registry.

“Usually prices follow transactions, so if transactions remained as depressed as they have been, a 10 to 20 percent correction in some segments of the market cannot be ruled out, especially in the top end of the market,” he said, noting that this decline would take place over the next one to two years.

Hong Kong has seen an unprecedented rise in residential property prices in the recent years, soaring 120 percent since 2008, supported by record low interest rates and demand across the border in China. Given its sky-high property prices, the city is ranked as the 10th most expensive city for expatriates in Asia, according to expatriate management firm ECA International.

Mainland buyers have been a key source of demand in the city`s luxury housing market, accounting for almost 35 percent of the segment`s purchases in 2012, according to HSBC. However, their share in the high-end property market declined to over 15 percent in the first quarter of the year driven by a raft of tightening measures.

In February, the government doubled the stamp duty or sales tax on all property transactions over $2 million Hong Kong dollars ($257,894) to 8.5 percent from 4.25 percent to deter speculative investments and stabilize prices.

Over the weekend, thousands of real estate agents in the city protested against the government`s cooling measures, saying property curbs are threatening their business.

Hong Kong property developers have been under pressure this year, with Sun Hung Kai Properties and Cheung Kong Holdings down 16.2 percent and 13.9 percent, respectively, since the start of 2013.

“Property has supported up to 40 percent of Hong Kong`s economic momentum since 2008, and a meaningful share of equity market performance too…downside risks facing Hong Kong`s domestic economy are on the rise,” HSBC wrote in a recent note.

-By CNBC`s Ansuya Harjani

Copyright 2011 cnbc.com

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow