Displaying items by tag: China

China’s new tariffs on U.S. energy imports are expected to hit the metallurgical coal market the hardest, given its role in steel production. While crude oil and LNG trade between the two countries is small, with minimal global disruption anticipated, U.S. coking coal made up nearly 12% of China’s seaborne imports in 2024. 

If these tariffs make American coal uncompetitive, China’s steelmakers will need to turn to other suppliers, most likely Australia and Canada. This shift could force China to pay a premium, as these countries already have strong demand from India, the largest global importer of coking coal. 

A reshuffling of trade routes might occur, with China buying more Australian coal and India offsetting that by sourcing more from the U.S., though not without some initial price volatility. As coking coal prices have been falling, Australian exports could gain a pricing edge if Chinese buyers pivot, while U.S. producers might face challenges securing alternative markets.

Finsum: Pay attention to the commodities circuit, as tariffs start to take hold, retaliatory efforts could spawn ways to generate alpha. 

Emerging markets have faced a challenging year, but they remain essential for achieving greater portfolio diversification. According to insights from the Natixis 2025 Institutional Outlook Survey, many institutional investors anticipate robust growth in these markets next year, with monetary policy shifts expected to play a significant role in driving expansion. 

However, China’s economic struggles, including a weak real estate market and reduced consumer spending, have tempered enthusiasm, leading investors to focus on other opportunities. India is gaining traction as a standout emerging market, with many predicting it will surpass China as a top investment destination, while regions like Asia ex-China and Latin America are also drawing attention. 

Though uncertainties persist, adopting a long-term approach to investing in emerging markets can yield strong growth potential as global economic conditions evolve. This strategy allows investors to tap into the transformative opportunities these markets continue to offer.

Finsum: With high risk and growth opportunities, its important to caution clients on the risks and that term is baked into the picture. 

Recent movements in some of the most sensitive global assets suggest that the Federal Reserve’s decision to lower interest rates may have come too soon or might not be sustainable. Since the Fed’s rate cut in mid-September, emerging-market assets have acted as if borrowing costs will stay elevated, leaving them vulnerable. 

New risks, including rising U.S. Treasury yields and a stronger dollar, have overshadowed any benefits from the rate cut, with concerns over China’s lackluster stimulus and the potential return of Donald Trump to the presidency adding to market uncertainty. 

Investors in emerging markets are now positioning themselves defensively in the face of a stronger U.S. economy and a weakening Chinese one. While there was initial optimism, strong U.S. data and political tensions have reignited fears of persistent inflation. 

Finsum: This could have traders reassessing their strategies, unsure of how much more support they can expect from central banks.

The U.S. is close to finalizing rules that will restrict certain American investments in China’s artificial intelligence sector, with a focus on national security. These regulations, currently under review by the Office of Management and Budget, are expected to be released soon and stem from an executive order issued by President Biden in August 2023. 

The new rules will require U.S. investors to notify the Treasury Department about AI-related investments and limit funding for technologies like semiconductors, quantum computing, and microelectronics that could benefit China's military. 

Some exceptions, such as investments in publicly traded securities and certain limited partnerships, have been proposed. Experts expect further clarification in the final rules, particularly regarding AI's scope and the conditions for limited partners. 

Finsum: There seems to be broader efforts to safeguard U.S. technological from China and this trend is worth monitoring. 

Oil prices dropped over 2% earlier this week, erasing last week's gains as OPEC revised down its 2024 and 2025 global demand forecasts. China's crude oil imports have now declined for the fifth consecutive month, further weighing on prices. 

Despite China's efforts at economic stimulus, investors remain unconvinced, adding to concerns over demand. Brent crude fell by $1.72 to $77.34 per barrel, while U.S. West Texas Intermediate dropped to $73.82. 

OPEC attributed much of the demand reduction to China's sluggish economic growth and rising electric vehicle adoption. Geopolitical tensions between Israel and Iran also linger as potential risks to oil markets.

Finsum: Oil price declines and yet inflation still remains slightly elevated, investors should monitor this trend in case inflation takes off again.