China: Back with a bang?

Insight:  China celebrated its return from holiday this week with the stock market hitting a 2-year high on Monday, as Beijing promised more support for the economy. While share prices have lost ground again as no big fiscal spending package has yet followed September’s monetary stimulus, they are still up by more than 20% in two weeks. 

Impact:  The government is confident it will hit its 5% economic growth target for the year, and it has probably done enough in terms of interest rate cuts, boosts to bank liquidity and stock market support to ensure that. Another stimulus package is still under discussion but is likely to produce diminishing returns. Beijing could benefit from using the time it has bought itself to enact structural reforms, above all stabilizing the housing market which is key to restoring consumer confidence. 

1.8 million

The number of American expats in Asia, according to US State department estimates, and part of the roughly 9 million US citizens living outside of their home country. All of them could benefit from Donald Trump’s proposal to end ‘double taxation’ of their overseas income if he is re-elected President.

Insight: “Corporate governance reform has only just begun,” Hiromi Yamaji, the CEO of Japan Exchange Group, which owns the Tokyo Stock Exchange (TSE), told a conference this week. This will be music to the ears of investors who have already seen Japanese stocks jump by more than 40% over the past two years -- in large part on hopes that the country’s listed companies will improve returns, hand back more cash and become more open to being acquired. 

Impact: The TSE has not been the only driver of rising valuations in Japan, but it deserves a lot of the credit by forcing listed firms to come up with plans to unwind cross-shareholdings and boost valuations or face demotion, potentially even delisting. While this has done wonders for share prices, one third of the Nikkei 225 index still trades below book value, compared to just 3% for the S&P 500, and M&A remains relatively rare. It looks like Yamaji-san has a point.

Insight: The wacky and unpredictable consequences of Japan’s tourism boom are in the news again. First, it was overtourism of Mt. Fuji views prompting the government to erect huge black screens to dissuade crowds, which led to tourists defiantly poking holes in said screens. Now, the tourism behemoth is gorging itself on Japan’s supply of wood, of all things. Demand for things like traditional wooden sushi rice containers and wooden “ema” plaques, designed for whispering one’s most earnest wishes into the ears of the gods at Japan’s many shrines, has exploded in line with Japan’s record-setting tourism surge. 

Impact: Despite the very traditional nature of ema plaques and sushi containers, a lot of the wood Japan uses for these items comes from North America. In essence, tourists are inadvertently propping up the wood industry half a world away from their vacation destination. The twisty, turny, often unpredictable course of the supply chain can lead certain industries to suddenly see a spike in sales, and keeping a close eye on market movements can put marketing and PR professionals in the right place at the right time to appeal to audiences in the most unexpected of places.

Asia will continue to hold the keys to the kingdom in the chip market, says the CEO of ASML

Insight: Christopher Fouquet, CEO of semiconductor manufacturing equipment maker ASML, says in an exclusive interview with Nikkei Asia that despite the West’s push to take control of the semiconductor market, Asia will continue to dominate: "If Europe and the U.S. want to be successful, the economic model of semiconductor [manufacturing] has to improve…You cannot produce things at a higher cost for a very long time. It just doesn't work,” Fouquet tells the paper. Fouquet says Asia’s semiconductor growth will continue to outperform despite Western incentives and industrial policy designed to give it an edge.

Impact: Asia accounted for 84% of ASML’s revenue in 2023, with most of that coming from Taiwan, China, South Korea, Japan and Singapore. Unsurprisingly, spending on equipment has long been a key barometer for the health of the chipmaking industry, so the huge spending on equipment in Asia hammers home that Asia has no intention of relinquishing its stranglehold on chips. With the rise of AI, and the steady march of technological progress from computers to smartphones to the burgeoning AR glasses industry, Asia’s demonstrated ability to produce semiconductors quickly and affordably will only increase its influence in the global marketplace as time goes on. 

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