HC-AM Morning Report - Tuesday Morning Update

Good Morning,

Here are this morning's headlines:

Conflict in Ukraine- This morning, Naftali Bennett is expected to mediate back-to-back calls with Vladimir Putin and Volodymyr Zelenskyy, respectively, as the Israeli PM tries to mediate between the two leaders at war with one another. While Putin and Zelenskyy will not directly speak with one another, Bennett will look for ways to negotiate a meaningful ceasefire as such talks enter their second day.

While the market has seen an easing off of risk-off sentiments given Bennett’s negotiations, the situation in Ukraine remains desperate with Mariupol under siege and Kyiv subject to Russian air strikes and shelling.

Oil- Both Brent and Crude have seen around a 6% drop in the last day with the latter dropping below $100dpb for the first time since 1st?March. This follows he news on the possibility of these ceasefire talks and areas of China going into new Covid related lockdowns as cases surge. Given that China is the world’s largest importer of Crude oil, fresh lockdowns raise the possibility of a decline in demand with for example 17.5m people in Shenzhen now under tight restrictions.

Additionally, Boris Johnson will today speak with Saudi Arabia in an effort to get Riyadh to ramp up oil production and alleviate the dent left by the loss of Russia’s supplies. Saudi Arabia is of course one of the worlds key players when it comes to oil with the country exporting some 6.6m barrels per day (the highest in the world and accounting for 11.5% of global oil exports). Hence, Johnson will have to try to persuade Saudi Arabia’s Crown Prince Mohammed bin Salman who has thus far stayed committed to Opec+ status quo, despite Joe Biden’s best efforts to influence the Saudis to increase supply.

The fall in oil prices yesterday and into today follows the prospect of additional supplies coming out of Iran being slashed as Tehran suspended diplomatic talks last Friday and subsequently launched a missile attack in Erbil, northern Iraq. Hence, global oil supplies remain in a precarious situation and are continuing to concern analysts on the prospect of hindering growth and rising inflation.?

US Listed Chinese Stocks Tumble-US listed Chinese stocks saw a considerable sell off yesterday following concerns over the relationship between Moscow and Beijing and the possible implications of the latter providing military assistance to the former. For example, The Nasdaq Golden Dragon China Index declined 12% while American depositary receipts for Alibaba and Pinduoduo Inc (an agriculture-focused technology platform) fell 10% and 21% respectively. This sell off is the largest seen since 2008 and?represents a sharp difference to where we were a year ago when Chinese stocks in the US were undergoing an unprecedented boom. However, owing to the CCP’s clampdown on tech firms and the Ukrainian crisis – in addition to the prevailing risk-off sentiment which has hit tech stocks – the last year has seen the Golden Index drop 72%. Indeed, the Golden Index is increasingly resemblant of the 2000 dot-com crash where the Nasdaq noise dived 78%.??

Similarly, in Hong Kong, the Hang Seng Tech Index fell 11% yesterday. This selloff was the largest seen since the gauge was established in 2020 and was indicative of prevailing investor sentiment over the last few months with the index having lost $2.1tn since its peak around a year ago. Hence, all eyes will now be focused on any developments around Sino-Russian relations vis-à-vis Ukraine and the prospects of any sanctions being placed on China as the diplomatic heat rises in Eastern Europe. Moreover, given the recent news that Beijing is enacting new lockdowns on industrial areas which are vital to the tech industry, this will no doubt play into investors’ sentiment on Chinese tech moving forward.?

Have a great day.

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