Major International Business Headlines Brief::: 27 January 2022

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Major International Business Headlines Brief::: 27 January 2022 

 


 

 


 <https://www.nedbank.co.zw/> 

 


 

 


ü  Tesla expects 50% growth despite supply chain woes

ü  LG Energy Solution: Battery giant jumps in market debut

ü  US Federal Reserve says rate rise 'appropriate' soon

ü  Cost of living: New Zealand inflation tops three-decade high

ü  Car production falls to lowest level for 65 years

ü  IMF urges El Salvador to remove Bitcoin as legal tender

ü  Road to net zero will cost trillions a year, report says

ü  Bentley pledges £2.5bn for Crewe plant in electric cars move

ü  U.S. economy likely regained steam in Q4, 2021 growth seen best in 37
years

ü  U.S. yields rise, Asian shares and European futures tumble as Powell
warns on inflation

ü  Analysis: Investors look to prune portfolio risk as Fed hawkishness rules
markets

ü  Facebook's cryptocurrency venture to wind down and sell tech assets - WSJ

ü  China property shares slump as planned U.S. rate hike adds to woes

ü  Samsung Elec targets smartphone growth in 2022, sees solid chip demand

ü  Nomura forecasts 50 bp Fed hike in March

ü  Deutsche Bank makes biggest annual profit in a decade

 

 

 

 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

Tesla expects 50% growth despite supply chain woes

Tesla sales will grow by more than 50% in 2022 compared with last year
despite supply chain problems, chief executive Elon Musk has said.

 

The electric carmaker recorded a record $5.5bn (£4bn) earnings last year.

 

Sales at the firm rocketed 71% to $53.8bn in 2021, as it delivered more than
936,000 vehicles to customers.

 

But the firm warned growth would slow, as supply chain issues affecting
carmakers continue to limit its manufacturing capacity.

 

Mr Musk said that 2021 was "a breakthrough year for Tesla, and for electric
vehicles in general".

 

"While we battled, and everyone did, with supply chain challenges through
the year, we managed to grow our volumes by nearly 90% last year," he said.

 

The company said its supply chain was "the main limiting factor" to growth,
"which is likely to continue through 2022".

 

He said he expected growth "comfortably above 50%" in 2022.

 

Carmakers around the world are grappling with a shortage of microchips,
among other production and supply chain snarls, though Tesla had been seen
as faring better than most.

 

It uses chips that are less scarce and quickly re-writes software, while
competitors slow production.

 

The firm, which started in California, now has factories in China and Texas,
with another under construction in Berlin.

 

The plants are expected to help Tesla dramatically expand its production,
even as it faces new competition from established carmakers turning their
attention to electric vehicles.

 

It has the challenge of opening two factories this year with chips and other
parts in short supply and new batteries and technologies to be introduced.

 

But Mr Musk said the firm was looking at building new factories in new
locations in the future.

 

Looking ahead, Mr Musk said he expected fully self-driving cars "will become
the most important source of profitability for Tesla".

 

"The cars in the fleet essentially becoming self-driving via a software
update might end up being the biggest increase in asset value of any asset
class in history, we shall see," Mr Musk added.

 

He has downplayed concerns that other firms might pose a threat, noting on
Twitter that companies like GM have "some room for improvement".

 

Dan Ives, analyst at Wedbush Securities, said he thought Tesla would have
been able to deliver 10% to 20% more cars in the last three months of the
year without the supply issues.

 

But despite that cloud he said, "these delivery numbers combined with this
'impressive earnings beat' speaks to an EV demand trajectory that looks
quite robust for Tesla heading into 2022".-BBC

 

 

 

LG Energy Solution: Battery giant jumps in market debut

South Korean battery maker LG Energy Solution has jumped in its stock market
debut after becoming the country's biggest ever share offering.

 

The shares briefly doubled from their initial public offering (IPO) price
before settling at around 60% higher.

 

The company raised 12.8tn won (£7.9bn; $10.6bn) in the IPO earlier this
month.

 

Thursday's strong performance made LG Energy Solution one of the most
valuable companies on Seoul's benchmark Kospi stock index.

 

The IPO is Asia's biggest equity fund raising since China's Alibaba Group
raised $12.9bn in its Hong Kong secondary listing in 2019.

 

The LG Energy Solution listing attracted heavy demand from individual and
institutional investors, indicating continued appetite for South Korean
companies and businesses associated with the electric vehicles industry.

 

 

What is LG Energy Solution?

The company, which has more than 20,000 employees, was spun off from South
Korea's biggest chemical company LG Chem.

 

LG Chem's parent company, LG Corporation, also owns the electronics giant
which also bears the LG name.

 

LG Energy Solution accounts for more than 20% of the global electric vehicle
(EV) battery market and supplies car making giants including Tesla, General
Motors and Volkswagen.

 

It also makes batteries for drones and ships as well as supplying
battery-powered spacesuits to Nasa.

 

Earlier this week, it announced plans to build a $2.6bn battery factory in
the US with General Motors.

 

The companies said they expect the plant to open in late 2024.

 

"We will have the products, the battery cell capacity and the vehicle
assembly capacity to be the EV leader by mid-decade," General Motors chair
and chief executive Mary Barra said.

 

General Motors CEO Mary Barra poses for a photo with Dong Myung Kim, LG
Energy Solution Head of Advanced Automotive Battery Division at an event.

 

 

Why are batteries hot property?

As governments and companies around the world set net zero targets,
businesses are looking for ways to cut emissions of greenhouse gases, like
carbon dioxide, which are released when we burn oil, gas and coal for our
homes, factories and transport.

 

Net zero means not adding to the amount of greenhouse gases in the
atmosphere.

 

Achieving it means reducing emissions as much as possible, as well as
balancing out any that remain by removing an equivalent amount.

 

Reaching net zero will involve moving from fossil fuels to renewable energy
for our power, and abandoning vehicles run on petrol and diesel, in favour
of those powered by electricity and hydrogen.

 

That transition will involve a lot of batteries, especially for vehicles.

 

On Wednesday, Elon Musk, the chief executive of Tesla, said he expects the
electric carmaker's sales to grow by more than 50% this year compared with
2021.

 

That came as it recorded a record $5.5bn earnings for last year as sales
rocketed by 71%.

 

Also this week, the mining giant founded by Australia's richest man is
buying the battery and technology arm of the Williams Formula One racing
team for $222.2m.

 

Fortescue Metals is purchasing UK-based Williams Advanced Engineering from
private equity firm EMK Capital and Williams Grand Prix Engineering.

 

The deal is aimed to help the iron ore producer achieve its target to be
carbon neutral by 2030.

 

Last week, a firm planning mass production of electric car batteries in the
UK secured government funding for its proposed factory in Northumberland.

 

Britishvolt announced plans for the so-called gigafactory in Cambois two
years ago, saying it would create 3,000 jobs.-BBC

 

 

 

US Federal Reserve says rate rise 'appropriate' soon

The US central bank is poised to raise interest rates as it unwinds the
support it has provided the world's largest economy since the start of the
pandemic.

 

The Federal Reserve did not raise interest rates on Wednesday, but said such
a move "will soon be appropriate".

 

The bank is under pressure to rein in inflation as prices in the US rise at
the fastest rate in almost 40 years.

 

Analysts expect a rate hike in March, which would be the first since 2018.

 

At a press conference following Wednesday's meeting of Fed officials,
Federal Reserve chair Jerome Powell did not say how fast or how high US
interest rates would rise.

 

But Mr Powell said officials were "of a mind" to raise the bank's key rate
in March, adding that he was confident the bank could take action without
hurting the recovery.

 

He also suggested that officials are willing to move faster than they did
the last time the Fed was raising rates, noting that the economy is "much
stronger" than it was in 2015 - as is inflation.

 

"We're well aware that this is a different economy than existed during the
last tightening cycle," he said. "Our policy is going to reflect those
differences."

 

Higher borrowing costs help combat price rises by reducing demand for items
such as cars and homes - key drivers of US inflation, which has persisted
far longer than Fed officials initially expected.

 

But the Fed risks chilling economic activity more than intended. Investors
in the stock market are also worried about how share prices will respond to
the Fed's moves, as higher interest rates make other investments more
attractive.

 

Jittery markets in the US have seen three consecutive weeks of declines.

 

The three major US stock indexes pared gains during Mr Powell's remarks.

 

Beth Ann Bovino, chief US economist at S&P Global Ratings said, the Fed's
statement confirmed that the bank will rise interest rates in March.

 

"It's not just a question of 'lift off' in interest rates, it's now more a
question of how high they want to fly their monetary tool - how fast and how
many they launch," she said. "Our reading of their statement suggests that
the Fed is aiming for the stars in this cycle of monetary tightening."

 

Having done his bit to support faltering growth during the pandemic, Jerome
Powell, head of the Federal Reserve, began the arguably harder task:
telegraphing to Main Street and Wall Street how the US central bank intends
to tame inflation, currently at levels not seen since the 1980s.

 

There are already grumblings that the Fed is behind the curve. That it
should be acting faster to curb rising prices.

 

By signalling the bank's intention to raise interest rates gradually
starting in March, the message from officials is that they don't see any
urgency to play catch up.

 

They are sticking to their guns: that higher prices will begin to fade later
this year.

 

Still there are plenty who wonder whether waiting until March to raise rates
is risking the Fed's credibility.

 

The Fed is not alone in its plans to raise interest rates from their current
levels near zero. The Bank of England raised interest rates for the first
time in more than three years in December and is expected to do so again in
February.

 

Forecasters say the Fed could raise rates at least three times this year.
The bank is also scaling back other programmes it put in place to support
the economy at the start of the pandemic.

 

It said it would end the pandemic-era bond purchases in March, as planned,
and is moving forward with plans for "significantly reducing" the assets
that it holds, which have ballooned since 2020.

 

But Mr Powell said the bank would look to interest rates first, not
shrinking its balance sheet, in its fight against inflation.

 

Mr Powell said making policy required "humility" and pledged to be nimble in
responding to economic conditions, noting uncertainty, including new virus
variants and military tensions over Ukraine.

 

"There's plenty of risk out there," he said.-BBC

 

 

 

Cost of living: New Zealand inflation tops three-decade high

New Zealand's annual inflation rate topped a three-decade high at the end of
last year, official figures show.

 

The consumers price index (CPI) rose by 5.9% for the last three months of
2021, the fastest rate since mid-1990.

 

That was higher than expected and makes it almost certain that the Reserve
Bank of New Zealand (RBNZ) will take further steps to curb rising living
costs.

 

In October, New Zealand became one of the first developed economies to raise
rates since the start of the pandemic.

 

"New Zealand is not alone, with many other OECD [Organisation for Economic
Co-operation and Development] countries experiencing higher inflation than
in recent decades," Aaron Beck from Stats NZ said.

 

Prices for construction and rentals for housing jumped, while petrol prices
also increased by 30% in the year to the last quarter of 2021, Stats NZ
said.

 

 

The RBNZ has raised rates twice at its last two meetings and signalled that
it is ready to take further action to tackle inflation and soaring property
prices.

 

Policy makers are scheduled to make their next interest rate decision on 23
February.

 

It comes as the central banks of major economies around the world are taking
steps to clamp down on the rising cost of living.

 

On Wednesday, the US central bank said it was poised to raise interest rates
as it unwinds the support it has provided the world's largest economy since
the start of the pandemic.

 

The Federal Reserve, like its counterparts in around the world, is under
pressure to rein in inflation after figures showed that prices in the US had
risen at the fastest rate in almost 40 years.

 

In December, the Bank of England raised interest rates for the first time in
more than three years and is expected to do so again in February.-BBC

 

 

 

Car production falls to lowest level for 65 years

Car production in the UK last year fell to its lowest level since 1956,
according to figures from the Society of Motor Manufacturers and Traders.

 

The SMMT said the figures were dismal, largely thanks to disruption caused
by the Covid pandemic.

 

It said there was optimism for the future, with the announcement of new
investment worth nearly £5bn.

 

But it warned that rising energy costs were likely to be a major challenge
for the industry over the coming year.

 

Hopes that car production would recover in 2021 were firmly dashed.
According to the SMMT's figures, just under 860,000 new cars left UK
factories last year.

 

That was even fewer than in 2020, when the first wave of Covid and the
associated lockdowns forced several factories to close.

 

Production last year was 6.7% lower than in 2020 - and a full 34% below its
pre-pandemic level.

 

Chip shortage

The main reason for the decline, the SMMT said, was a severe shortage of
semiconductors, or computer chips.

 

A modern car has complex electronics can use between 1,500 and 3,000 chips
to operate engine management systems, emissions controls, safety devices,
navigation systems and so on.

 

But there were other factors too, among them widespread staff absences as
workers were forced to go into isolation, and the impact of the closure of
Honda's factory in Swindon.

 

The SMMT's chief executive Mike Hawes admitted it had been "a dismal year,
there's no hiding it".

 

But he suggested that "despite this miserable year there is optimism",
largely because of the announcement of £4.9bn in planned new investments,
many of them in electric vehicles or technology.

 

These, he said, had been triggered by the signing of a Brexit deal with the
EU, which had provided "a real shot in the arm", following five years of
declining investment.

 

But he added the UK was "still playing catch-up" after a long period of
Brexit-related uncertainty.

 

For the UK motor industry, the pandemic came at just the wrong time.

 

Car production was already falling, and Brexit uncertainty was making
manufacturers reluctant to invest in Britain - at a time when they were
making big plans for a new generation of electric vehicles.

 

The trade deal with the EU solved that problem - but it came in the middle
of a Covid outbreak which triggered a wave of new issues.

 

The shortage of computer chips is global and manufacturers around the world
have been struggling to deal with it.

 

But at a time when the UK car industry should have been focusing on making
up lost ground, it was left managing a crisis. The past year has been truly
miserable for the sector.

 

Nevertheless, new investment is now coming in, and that momentum now has to
be sustained if the UK is truly to become a force in the new market for
electric vehicles.

 

Despite the general malaise in the industry, meanwhile, production of
electric and hybrid cars rose by nearly 30% - and accounted for nearly a
quarter of all the cars built.

 

Van production, which is becoming an increasingly important part of the UK
motor industry, was also strong, with output recovering to just 3% below its
pre-pandemic level.

 

Demand for these vehicles has been soaring due to the popularity of online
shopping and home deliveries.

 

Independent forecasts produced for the SMMT suggest that production will
rise by nearly 20% next year, to more than one million vehicles.

 

But the organisation said that unless new players come into the market, the
industry is unlikely to return to the output levels seen five years ago,
when some 1.7m cars left UK factories.

 

That is due to the closure of Honda's Swindon plant, and the decision to
make vans instead of cars at Vauxhall's factory in Ellesmere Port.

 

The chip shortage, meanwhile, is expected to remain a factor in the first
part of this year - but become easier after that.

 

But the industry is likely to face another, very significant challenge:
rapidly rising energy costs.

 

"Escalating energy costs threaten the viability of vehicle plants, but also
our competitive position," Mr Hawes said.

 

"We already pay more in energy costs here in the UK than in competitor
countries across Europe and beyond.

 

"So we need to make sure we can try and mitigate those price rises to ensure
we can remain competitive."-BBC

 

 

 

IMF urges El Salvador to remove Bitcoin as legal tender

The International Monetary Fund (IMF) has urged El Salvador to reverse its
decision to make Bitcoin legal tender.

 

In September, El Salvador became the first country to allow consumers to use
the cryptocurrency in all transactions, alongside the US dollar.

 

The decision led to large-scale protests over fears it would bring
instability and inflation to the impoverished Latin American country.

 

Bitcoin has lost about half its value since November.

 

The IMF has warned President Nayib Bukele of the risks the cryptocurrency
poses to the country, stressing that it would be difficult to get a loan
from the institution.

 

The board's directors have now "urged the authorities to narrow the scope of
the Bitcoin law by removing Bitcoin's legal tender status", according to a
statement.

 

 

They highlighted the "large risks associated with the use of Bitcoin on
financial stability, financial integrity and consumer protection" and with
issuing Bitcoin-backed bonds.

 

When El Salvador introduced the virtual currency as a legal tender, the
government released a new digital wallet app, giving away $30 (£22) in
Bitcoin to every citizen. More than 200 new cash machines were also
installed across the country.

 

It presented the measure as a way to boost economic development and jobs,
but El Salvador has been divided by the move.

 

It means that businesses, wherever possible, are now obliged to accept the
digital coins as payment.

 

Bitcoin is a controversial currency in part because its value can fluctuate
significantly - it has risen and fallen dramatically over the past year.

 

Bitcoin was trading at about $37,000 on Tuesday, having lost about half its
value compared to the record of $67,734 hit in November.

 

President Bukele announced in November plans to build a Bitcoin city at the
base of a volcano in El Salvador, with the cryptocurrency used to fund the
project.-BBC

 

 

 

Road to net zero will cost trillions a year, report says

Trillions of dollars need to be spent every year for almost three decades to
hit net zero targets, according to consultancy McKinsey.

 

On top of current spending, the equivalent of half of all corporate profits
will have to be invested to tackle global warming, it says.

 

McKinsey highlights that gaining acceptance will be tough, especially from
those paying energy bills.

 

But the alternative is more extreme weather, experts have warned.

 

The McKinsey report estimated that the annual cost of getting to net zero -
when carbon dioxide emissions are completely reduced or offset - will be
$9.2tn (£6.8tn).

 

The world is already spending $5.7tn a year to lower the impact of fossil
fuels and use alternatives.

 

However, an extra $3.5tn, every year from 2021 to 2050, will need to be put
towards alternative energy sources and land use including agriculture to
limit global warming to 1.5 degrees, it said.

 

That is the equivalent of half of all corporate profits in 2020. It is the
equivalent of one quarter of all tax revenue, or 7% of household spending.

 

This money will be used on "the deployment of new physical assets and to the
decarbonisation of existing assets", McKinsey said.

 

"It does not include spending to support other adjustments - for example, to
reskill and redeploy workers, compensate for stranded assets, or account for
the loss of value pools in specific parts of the economy."

 

The consultancy added it has accounted for the cost of keeping supply chains
stable during the energy transition, as well as broad energy investment.

 

It said its calculation was much higher than most other estimates by
economists but stressed such investments could be lucrative and the
long-term costs of not doing enough to tackle climate change would be
greater.

 

More than 130 countries have pledged net zero emissions by 2050.

 

While the numbers encouraging, large carbon dioxide emitters such as China
and India aren't part of the group.

 

There are also concerns that countries may shut down their energy-intensive
industries, and import these goods from other countries.

 

That means even if they get to net-zero, the world's emissions will not be
reduced in the process.

 

You may also be interested in:

 

Gernot Wagner, a climate economist at New York University not involved with
the report, welcomed its attempt to come up with a comprehensive view of the
investments needed.

 

"Climate policy means massive investment, and a massive rejigging of market
forces from the current high-carbon and low-efficiency path onto a
low-carbon and high-efficiency one," Mr Wagner said.

 

"We just spent trillions of dollars because of Covid relief. So, would it be
feasible? Yes. Would it involve massive changes? Of course, that too."

 

"Where is the money coming from? Ratepayers, taxpayers or shareholders?"-BBC

 

 

 

Bentley pledges £2.5bn for Crewe plant in electric cars move

Luxury car manufacturer Bentley will invest £2.5bn as it moves towards
making electric vehicles.

 

It aims to produce its first electric car within the next three years, with
exclusively electric models by 2030.

 

The new models will be developed at the company's plant in Crewe, Cheshire,
which will also see investment to become carbon neutral, the firm said.

 

Bentley's CEO Adrian Hallmark said the plans were bold and ambitious and a
"milestone moment" for the brand.

 

"Our aim is to become the benchmark not just for luxury cars or sustainable
credentials but the entire scope of our operations," he said.

 

"Securing production of our first BEV [battery-powered electric vehicle] in
Crewe is a milestone moment for Bentley, and the UK, as we plan for a
long-term sustainable future in Crewe."

 

 

Sales of new cars and vans powered wholly by petrol and diesel are set to be
banned in the UK from 2030.

 

About 4,000 people are employed at Bentley's factory in Crewe and the firm
said it plans to make the plant itself carbon neutral.

 

Changes will include becoming net-zero with waste and water-use.

 

Peter Bosch, from the company, said the announcement marked arguably the
most important day in Bentley's modern history.

 

"[It] is a testament to the hard work and skill of our colleagues in Crewe,"
he said. "The journey really does start now."

 

Kieran Mullan, the Conservative MP for Crewe and Nantwich MP said the
announcement was a vote of confidence in the area and future proofs jobs at
the plant.

 

"I can imagine if you're working in the car industry, there's a lot of
uncertainty, a lot of change, and today's news means the workers at Bentley
know that their future is secure," he said.

 

Business Secretary Kwasi Kwarteng said the announcement was excellent news
and put Crewe at the cutting edge of Britain's green industrial
revolution.-BBC

 

 

 

U.S. economy likely regained steam in Q4, 2021 growth seen best in 37 years

(Reuters) - U.S. economic growth likely accelerated in the fourth quarter as
businesses replenished depleted inventories to meet strong demand for goods,
helping the nation to log its best performance in nearly four decades in
2021.

 

Growth last year was fueled by massive fiscal stimulus as well as very low
interest rates. The momentum, however, appears to have faded by December
amid an onslaught of COVID-19 infections, fueled by the Omicron variant,
which contributed to undercutting spending as well as disrupting activity at
factories and services businesses.

 

The Commerce Department's advance fourth-quarter gross domestic product
report on Thursday would support the Federal Reserve's pivot toward raising
interest rates in March, and diminish prospects of more spending by
President Joe Biden's government.

 

Fed Chair Jerome Powell told reporters on Wednesday after a two-day policy
meeting that "the economy no longer needs sustained high levels of monetary
policy support," and that "it will soon be appropriate to raise" rates. read
more

 

"We had a strong tailwind from inventory accumulation, and that boosted
growth," said Sung Won Sohn, finance and economics professor at Loyola
Marymount University in Los Angeles. "We spent so much money in the past.
The Biden administration has over-stimulated the economy and the Fed
supported that effort."

 

According to a Reuters survey of economists, GDP growth likely increased at
a 5.5% annualized rate last quarter. That would be a jump from the 2.3% pace
in the third quarter.

 

Estimates ranged from as low as a 3.4% rate to as high as a 7.0% rate. But
the survey was conducted before the release on Wednesday of data showing a
record goods trade deficit in December and a surge in retail inventories.

 

The strong retail inventory accumulation led economists, including those at
JPMorgan, to raise their GDP growth estimates to as high as to a 7.5% rate.

 

For all of 2021, growth is estimated at 5.6%, which would be the strongest
since 1984. The economy contracted 3.4% in 2020, the biggest drop in 74
years.

 

The sharp rebound in growth last year could offer some cheer for President
Biden whose popularity is falling amid a stalled domestic economic agenda
after the U.S. Congress failed to pass his signature $1.75 trillion Build
Back Better legislation.

 

ALL ABOUT INVENTORIES

 

Inventory investment is expected to have accounted for the bulk of the
increase in GDP growth in the fourth quarter. Businesses had been drawing
down inventories since the first quarter of 2021. Spending shifted during
the pandemic to goods from services, a demand boom that pressured supply
chains.

 

JPMorgan estimated that inventories grew at a $167 billion rate last quarter
after adjusting for inflation.

 

Excluding inventories, GDP growth likely increased at a rate of about 2.5%.

 

Growth last quarter was also seen lifted by a jump in consumer spending in
October before it retreated considerably as Omicron spread across the
country. Consumer spending, which accounts for more than two-thirds of
economic activity, has been hampered by shortages of motor vehicles and
other goods. A global chip shortage is hurting production.

 

Reduced households purchasing power, with inflation way above the Fed's 2%
target, also hindered consumer spending at the tail end of the fourth
quarter.

 

"It appears that Omicron is doing meaningful damage to the economy this
quarter," said Ryan Sweet, a senior economist at Moody's Analytics in West
Chester, Pennsylvania. "The good news is that daily confirmed COVID-19 cases
in the U.S. are declining, and if this is sustained, the worst of this
wave's hit to growth could be behind us."

 

The Omicron-driven outbreak in infections has also impacted the labor
market, with first-time applications for unemployment benefits vaulting to a
three-month high in mid-January.

 

Data from the Labor Department on Thursday is likely to show initial claims
for jobless benefits dropped 26,000 to a seasonally adjusted 260,000 during
the week ended Jan. 22, according to a Reuters survey.

 

Support to GDP growth last quarter also likely came from business spending
on equipment, which is expected to have rebounded after being held back in
the July-September period by shortages of trucks.

 

Trade was probably a drag on GDP growth for a sixth straight quarter, while
the housing market likely regained its footing after contracting for two
consecutive quarters. Still, the sector remains constrained by expensive
building materials, which has resulted in a record backlog of homes yet to
be built.

 

Despite the anticipated soft patch in the first quarter because of
challenges from the never-ending pandemic, the worst inflation in decades,
supply chain bottlenecks and upcoming interest rate increases, the economy
is expected to soldier on this year, with growth estimates as high as 3.9%.

 

"We see the economy continuing to grow above its natural speed limit through
this year amid still-solid demand, a need to replenish severely depleted
inventory levels and manufacturers' obligation to meet record levels of
backlogged orders," said Sam Bullard, a senior economist at Wells Fargo in
Charlotte, North Carolina.

 

The Thomson Reuters Trust Principles.

 

 

 

U.S. yields rise, Asian shares and European futures tumble as Powell warns
on inflation

(Reuters) - Asian shares plunged to their lowest in nearly 15 months,
short-term U.S. yields hit 23-month highs and the dollar strengthened on
Thursday after the Federal Reserve's chairman signalled plans to steadily
tighten policy.

 

The share rout looked set to continue into European and U.S. trading.
Pan-region Euro Stoxx 50 futures tumbled 2.88%, FTSE futures lost 1.98%,
Nasdaq futures dropped 1.73% and S&P 500 e-minis shed 1.56%.

 

At the same time, rising investor concerns over political tensions between
Russia and Ukraine exacerbated worries over tight energy market supply,
keeping oil prices elevated at multi-year highs despite some profit-taking.

 

In its latest policy update on Wednesday, the Fed indicated it is likely to
raise U.S. interest rates in March, as has been widely expected, and
reaffirmed plans to end its bond purchases that month before launching a
significant reduction in its asset holdings.

 

But in the follow-up press conference, Powell warned that inflation remains
above the Fed's long-run goal and supply chain issues may be more persistent
than previously thought. read more

 

"There was a marked shift in terms of a relatively dovish statement and then
a relatively hawkish press conference," said David Chao, global market
strategist, Asia Pacific (ex-Japan) at Invesco.

 

"Powell (is) not committing to the size or the frequency of rate hikes and
also the timing of the balance sheet reduction. I think that buys him a bit
of wiggle room as to how quickly and with what velocity he wants to
normalise monetary policy in the U.S." said Chao, adding that moves would
depend on upcoming economic data.

 

Fed funds futures showed traders pricing in as many as five hikes by
December, after previously fully pricing for four increases. FEDWATCH

 

Concerns that the Fed will increasingly prioritise fighting inflation
walloped share markets. MSCI's broad gauge of regional markets outside Japan
(.MIAPJ0000PUS) fell 2.2% on Thursday to its lowest level since Nov. 5,
2020, and is on track for its worst week since Feb. 2021.

 

Hong Kong's Hang Seng index (.HSI) fell 2.4%, Australian shares (.AXJO) lost
1.77% and Chinese blue-chips (.CSI300) dropped to their lowest level since
Sept. 30, 2020 as Refinitiv flows data pointed to heavy selling by foreign
investors through the country's Stock Connect scheme. (.NQUOTA.SH),
(.NQUOTA.ZK)

 

In Tokyo, the Nikkei fell more than 3%, touching its lowest point since Nov.
2020.

 

U.S. YIELDS JUMP

 

Expectations of Fed tightening sent the policy-sensitive U.S. 2-year yield
to a top of 1.1920% in Asian trade, a level last reached in February 2020.
The benchmark 10-year yield was steady at 1.8495% having hit a high of 1.88%
on Wednesday.

 

These in turn helped the dollar, lifting the dollar index, which measures
the greenback against major peers, to 96.604, near five-week highs. .

 

The greenback rested against the yen on Thursday at 114.6 yen per dollar,
having gained 0.67% the day before, while the euro was at a six-week low of
$1.2301

 

"The interesting play seems to be that yield differentials matter again, so
we've got a decent set-up on dollar-yen. If you look at the yield
differential between the 2-year on the U.S. and the Japanese, it's just shot
up," said Matt Simpson, senior market analyst at City Index in Sydney.

 

The spread between the U.S. and Japanese 2-year yield widened to 124.22
basis points on Thursday, its highest since late February 2020.

 

In commodities markets, oil prices eased but remained elevated near $90 per
barrel, a level last seen in October 2014, on festering tensions between
Russia and Ukraine.

 

The United States said on Wednesday it had set out a diplomatic path to
address sweeping Russian demands in eastern Europe, as Moscow held security
talks with Western countries and intensified its military build-up near
Ukraine with new drills. read more

 

On Thursday, global benchmark Brent crude fell 0.8% on profit taking to
$89.15 per barrel. U.S. West Texas Intermediate crude was down 0.94% at
$86.53.

 

U.S. officials say they are in talks with major energy-producing countries
and companies worldwide over a potential diversion of supplies to Europe if
Russia invades Ukraine, although the White House said it faces challenges
finding alternative sources of energy supplies. read more

 

Spot gold slipped 0.3% to $1,813 an ounce, having been as high as $1,853.6
earlier in the week.

 

"When you see gold falling with stocks it's usually a signal that things
aren't so well, but you can really tie everything back to the Fed raising
rates, the dollar screaming higher with the yields, everything else is going
the opposite way," said Simpson at City Index.

 

The Thomson Reuters Trust Principles.

 

 

 

Analysis: Investors look to prune portfolio risk as Fed hawkishness rules
markets

(Reuters) - The Federal Reserve’s hawkish shift is bolstering the case for
investors looking to trim risk from their portfolios, as the U.S. central
bank trains its guns on surging inflation while giving little indication
that it will be swayed by the latest weakness in stocks.

 

After the Fed's easy-money policies helped the S&P 500 soar from its March
2020 lows, investors must now contend with uncertainty on multiple fronts as
the Fed gears up to raise interest rates and shrink its nearly $9 trillion
balance sheet. read more

 

“I continue to believe you have to be really conservative in your portfolio
today,” said Rick Rieder, BlackRock's chief investment officer of global
fixed income. “The Fed is going to have to see a few more cards on inflation
and the economy, and the uncertainty is high.”

 

At the conclusion of its latest monetary policy meeting on Wednesday, the
Fed said it is likely to hike rates in March and reaffirmed plans to end its
bond purchases that month in what Fed chief Jerome Powell pledged will be a
sustained battle to tame inflation, which by some measures is at its highest
levels since 1982. read more

 

Fed funds futures, which track short-term rate expectations, are now pricing
in a total of 4.4 rate increases this year, up from four expected hikes
before Powell's press conference. read more

 

Markets had been jittery ahead of the meeting, with the S&P 500 down 8.6%
for the year-to-date. That threatened to put the index on the path for its
worst January performance in history, ahead of the 8.57% decline registered
in January 2009, according to Ned Davis Research.

 

For some investors, the uncertainty means that January’s market swings could
be a preview of how asset prices will behave in coming months – a stark
contrast from the becalmed markets many had grown used to since the Fed
unleashed its massive stimulus programs nearly two years ago.

 

In addition, questions over how the Fed will act appeared to have made
investors more skittish about buying dips in the U.S. stock market, a
strategy that proved lucrative over the last two years. read more

 

"The Fed has really been the backstop for the market and now the Fed is
starting to give the market a lot more rope," said Andy Kapyrin, co-chief
investment officer at wealth manager RegentAtlantic, who has been shifting
more of his firm's assets into value stocks -- shares of economically
sensitive companies that would benefit from rising rates and shortening
durations in his bond portfolios.

 

RJ Gallo, senior portfolio manager at Federated Hermes, believes the Fed
will raise rates in 25 basis point increments for the remainder of the year
starting at its March meeting. His firm has shortened the durations in its
portfolios in anticipation that the yield of the 10-year Treasury bond will
top 2% by the middle of the year, up from the current 1.77%.

 

"The Fed and inflation are going to be the dominant forces for markets for
the entire year of 2022," Gallo said. “Nothing has suggested this year that
inflation will unwind, and the only way they have to address it is rate
hikes and to shrink the balance sheet."

 

Powell's remarks on Wednesday sent yields on U.S. Treasuries higher and
flattened the yield curve. Some investors have been nervous about the
potential for the Fed to tighten so aggressively that it risks a sharp
growth slowdown and have been focusing on the flattening yield curve as a
potential warning. read more

 

"I think what you end up with is more persistent volatility, which shouldn't
be a surprise - that tends to happen at the dawn of tightening cycles - and
a flatter yield curve," said Steve Bartolini, portfolio manager of T. Rowe
Price’s New Income Fund, who said their portfolios were "relatively
conservative to begin with."

 

Among the worst-hit assets in recent weeks have been tech stocks, with the
Nasdaq Composite Index down 13.4% for the year. Cryptocurrencies have
plunged, taking bitcoin down around 20% year-to-date.

 

“We have to be cautious with regards to positioning for risk assets,” said
Brian Quigley, portfolio manager at Vanguard Fixed Income Group. “I would
not be surprised to see more equity weakness, see more widening in spreads
of corporate bonds.”

 

The Thomson Reuters Trust Principles.

 

 

 

Facebook's cryptocurrency venture to wind down and sell tech assets - WSJ

(Reuters) - Meta Platforms Inc's digital currency venture (FB.O) Diem
Association is winding down and selling its technology to California-based
Silvergate Capital Corp (SI.N) for about $200 million, the Wall Street
Journal reported on Wednesday, citing a person familiar with the matter.

 

Meta, formerly Facebook Inc, first unveiled plans for Diem, known as Libra
earlier, in June 2019, as part of an effort to expand beyond social
networking into e-commerce and global payments.

 

The project immediately ran into fierce opposition from policymakers
globally, who worried it could erode their control over the money system,
enable crime, and harm users' privacy.

 

In the quest for regulatory approvals, Facebook then renamed its digital
coin to 'Diem' and scaled down its global ambition to focus on the United
States by announcing the launch of a U.S. dollar stablecoin, which are
cryptocurrencies pegged to a traditional currency. read more

 

A much recent blow came when Facebook's financial technology executive David
Marcus, who was overseeing its efforts to develop Diem, left the company to
start working on something new. read more

 

Meta and Silvergate did not immediately respond to a Reuters' request for
comment outside business hours.

 

The Thomson Reuters Trust Principles.

 

 

 

China property shares slump as planned U.S. rate hike adds to woes

(Reuters) - China Evergrande Group shares slumped on Thursday after the
developer's thinly detailed roadmap for restructuring left investors
dissatisfied and its indebted peers also fell on concerns higher interest
rates would raise financing costs.

 

Regulatory curbs on borrowing have driven China's property sector into
crisis, highlighted by Evergrande (3333.HK), the world's most indebted
property firm. The contagion has engulfed other Chinese developers, roiled
global financial markets in the past year and contributed to a slump in
China's property market, which accounts for a quarter of its economy.

 

Evergrande tumbled as much as 9.6% and were down 4% at HK$1.70 ($0.2182) on
investor scepticism in the developer's plan to have a preliminary
restructuring proposal in place in six months. read more

 

The Hang Seng Mainland Properties Index (.HSMPI) shed 3.2% by noon, compared
to 2.6% decline the benchmark Hang Seng Index (.HSI).

 

The Fed said on Wednesday it is likely to hike interest rates in March and
reaffirmed plans to end its bond purchases. read more

 

"Chinese real estate companies are highly leveraged, with a lot of overseas
debt, so U.S. Fed signalling large room for rate hikes will put even more
pressure on their financing," said Alvin Cheung, associate director of
Prudential Brokerage Ltd.

 

Evergrande's issues stem from a call late on Wednesday where executives told
creditors it hoped to work with them to achieve a risk management solution,
and it would treat all categories of creditors "fairly and follow
international practice". The company also urged creditors not to take any
"aggressive legal actions."

 

But some bondholders were disappointed by the 25-minute call, which included
prepared answers to questions, saying it failed to give any insight on
Evergrande's plans.

 

Evergrande has liabilities of $300 billion including nearly $20 billion of
international bonds all deemed to be in default after a run of missed
payments late last year.

 

Other property companies suffered losses as well.

 

Shares of Times China Holdings (1233.HK) plunged 28.5% to HK$2.93, after the
Guangzhou-based developer said it would raise HK$400.2 million ($51.38
million) by placing shares at HK$3.4 apiece, a 17.1% discount to Wednesday
closing price.

 

The company sold 117.7 million shares, representing 5.6% of enlarged
capital, for debt repayment and working capital, it said in a filing.

 

Shenzhen-based rival Logan Group also said on Thursday it raised HK$1.95
million by 6.95% equity-linked securities due August 2026, to refinance
debt.

 

Its shares lost 16%.

 

($1 = 7.7902 Hong Kong dollars)

 

The Thomson Reuters Trust Principles.

 

 

 

Samsung Elec targets smartphone growth in 2022, sees solid chip demand

(Reuters) - Samsung Electronics Co Ltd (005930.KS) said it aims to win a
bigger share of the smartphone market this year with more 5G-capable models,
and pointed to a possible price rebound for its flagship memory chips as
early as the first half.

 

The world's largest memory chip and smartphone maker forecast a recovery in
global tech device demand on Thursday after reporting its best
fourth-quarter profit in four years, although it cautioned about ongoing
challenges from supply chain issues and COVID-19.

 

Next generation 5G smartphones are set to account for more than half of all
smartphone sales in the market in 2022, Kim Sung-koo, Vice President of
mobile business, told an investor briefing.

 

"Our strategy in the mass tier is to actively capture demand from people
seeking to replace their phones with 5G models," Kim said, adding that the
company would pursue more "global mega-hit models."

 

Analysts said this would pit Samsung, which has around 20% of the global
smartphone market, against low-cost Chinese smartphone rivals like Xiaomi,
OPPO and Vivo in markets outside China.

 

The South Korean tech giant was also cautiously upbeat on the possibility of
a turnaround in the price of DRAM chips, widely used in data centres and
tech devices.

 

"We expect strong fundamental demand centering around servers, and solid
mobile demand from expansion of 5G models," said Han Jin-man, Executive VP
of memory chip business.

 

"Some organisations have forecast DRAM prices could reverse in the first
half. We think this is a possible scenario," he added, although he noted
that supply issues, raw material costs and geopolitical risks remain unknown
variables.

 

The price of DRAM chips dipped 9.5% in the fourth quarter from the previous
quarter, TrendForce data showed, and analysts expect a further drop in the
current quarter. Views are mixed on when they will rebound.

 

For non-memory chips, Samsung said supply was expected to remain tight due
to increased take-up of 5G-capable devices, demand for high performance
computing, increased outsourcing from chip design and manufacturing firms,
and continued inventory demand.

 

The company spent 90% of its 2021 annual capital expenditure of 48.2
trillion won ($40.1 billion) in the chip business, but declined to give
guidance for 2022.

 

CHIP PROFITS

 

Samsung posted a 53% rise in fourth-quarter operating profit to 13.9
trillion won ($11.6 billion). Profits at its chip business, its largest
division, more than doubled from the same quarter a year ago to 8.84
trillion won.

 

Still, analysts said the profits were lower than the market had expected due
to conservative shipments of memory chips, R&D costs and one-off year-end
bonuses.

 

Samsung said it came in below its initial guidance for memory chip shipments
after deciding not to push aggressively to expand sales, signalling a push
to prioritise profits over volume.

 

"Samsung seems to have considered its low inventory of memory chips, lack of
clean room space to expand production in 2022 and the dip in memory chip
prices last quarter, and decided not to sell as much," said Park Sung-soon,
analyst at Cape Investment & Securities.

 

"This lean toward profitability over volume could continue in the first and
second quarters, depending on market conditions."

 

Samsung signaled it is still looking for M&A opportunities.

 

"We need to maintain the capacity to invest in inorganic growth
opportunities," said Ben Suh, Executive VP at Samsung, when asked about
investor returns.

 

Operating profit at Samsung's mobile business rose about 9.9% on-year to
2.66 trillion won in the fourth quarter.

 

On Wednesday, Samsung said it will unveil its latest flagship smartphone
model on Feb. 9, which analysts expect to lift mobile shipments.

 

Net profit rose 64% to 10.8 trillion won. Revenue rose 24% to a record 76.6
trillion won.

 

Samsung shares fell 2.5% in afternoon trade on Thursday, compared with the
wider market's (.KS11) 3.2% drop.

 

($1 = 1,202.8400 won)

 

The Thomson Reuters Trust Principles.

 

 

 

Nomura forecasts 50 bp Fed hike in March

(Reuters) - Analysts at Nomura (8604.T), Japan's biggest brokerage and
investment bank, said they expect the U.S. Federal Reserve to hike its
benchmark rate by 50 basis points (bps) in March.

 

Fed Chair Jerome Powell did not rule out such a move when asked about it
after Wednesday's Fed meeting. read more

 

"He repeatedly appeared to differentiate the upcoming hiking cycle from the
last time the Fed normalised its policy rate at a roughly quarterly pace,"
Nomura's analysts said in a note.

 

"We now expect a 50 bp rate hike at the March (Fed) meeting, followed by
three consecutive 25 bp hikes in May, June and July," they said, adding that
another 25 bp hike was expected in December.

 

The Thomson Reuters Trust Principles.

 

 

Deutsche Bank makes biggest annual profit in a decade

(Reuters) - Deutsche Bank (DBKGn.DE) made its biggest profit since 2011 last
year, after it defied expectations for a loss in the fourth quarter
following revenue gains at its investment bank during a dealmaking boom.

 

The result was the second straight annual profit following years of losses.
The fourth quarter was the sixth consecutive in the black, the bank's
longest such streak since 2012.

 

Thursday's figures are a milestone for Chief Executive Officer Christian
Sewing, who was promoted to the top job in 2018 to turn Deutsche around
after a series of embarrassing and costly regulatory failings, including
over money laundering.

 

"This year we can finally prove to the market that we are sustainably
profitable," Sewing said in a message to employees.

 

The net profit attributable to shareholders was 145 million euros ($163
million) in the three months ended Dec. 31. That compares with a profit of
51 million euros a year earlier, and topped analyst expectations for a loss
of around 130 million euros. read more

 

For the year, Deutsche made a profit of 1.94 billion euros, up sharply from
113 million euros a year earlier.

 

Sewing confirmed the bank was on track to achieve a key profitability target
in 2022, a return on tangible equity of 8% that many analysts have forecast
the bank will miss.

 

Despite the annual profit, the bank has still lost more than 10 billion
euros over the past decade.

 

Analysts expect Deutsche to deliver profits in 2022 and 2023, consensus
forecasts of their estimates shows.

 

Once Deutsche's sore spot, the investment bank has become an important
revenue generator, benefiting from a pandemic-induced trading boom and a
wave of dealmaking that has lifted banks across Wall Street.

 

Revenue at the unit rose 1% to 1.913 billion euros in the fourth quarter
from a year earlier.

 

The investment bank's advisory business stood out amid a dealmaking boom,
with revenue surging 156%.

 

Revenue for fixed-income and currency trading, one of the bank's largest
divisions, fell 14% from a strong period a year earlier as markets calmed
from their pandemic trading frenzy.

 

($1 = 0.8917 euros)

 

The Thomson Reuters Trust Principles.

 

 

 


 


 


Invest Wisely!

Bulls n Bears 

 

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INVESTORS DIARY 2022

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


ART

PPC

 

 


Starafrica

Fidelity

Turnall

 


Medtech

Zimre

Nampak Zimbabwe

 


 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy or
subscribe for any securities. The information contained in this report has
been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
suitable for all investors. Securities of emerging and mid-size growth
companies typically involve a higher degree of risk and more volatility than
the securities of more established companies. Neither Faith Capital nor any
other member of Bulls ‘n Bears nor any other person, accepts any liability
whatsoever for any loss howsoever arising from any use of this report or its
contents or otherwise arising in connection therewith. Recipients of this
report shall be solely responsible for making their own independent
investigation into the business, financial condition and future prospects of
any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

 


 

 


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