Japan PM Kishida steps down | PBOC steps in on China bond rally | Japanese stocks recover
China’s bond rally has been making the headlines this week as investors seek refuge from a slowing economy and volatile markets, driving yields to record lows. The People’s Bank of China (PBOC) has stepped in with several measures to control the rally, including restricting the duration of new bond funds. Meanwhile, foreign investment in China is on the decline as investors withdrew a record amount from China last quarter.?
In Japan, Prime Minister Fumio Kishida has announced that he will step down as president of the country’s ruling Liberal Democratic Party, and not seek re-election. He has refrained from endorsing any successor. In the wake of last week’s sell-off, investors have returned their attention to Japanese stock market fundamentals, with the Nikkei 225 jumping to levels seen before the benchmark plunged.?
Meanwhile, Middle Eastern sovereign wealth funds continue to assert their influence on Wall Street fund managers looking to build relationships with them, reshaping fee structures and investment strategies to meet their diversification needs.??
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Japanese Prime Minister Fumio Kishida says he will step down?
Japan’s Prime Minister Fumio Kishida has announced that he will not seek re-election as president of Japan's ruling Liberal Democratic Party (LDP), citing the need for the party to present a fresh image. His decision, driven by ongoing public criticism and a steep decline in cabinet approval ratings, follows scandals involving the Unification Church and political funding. Kishida, who has served as prime minister since October 2021, will remain in office until a new LDP leader is elected next month. Kishida has refrained from endorsing any successor but emphasizes the need for continued reform.?
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Japanese stocks recover to levels seen before last week’s rout?
Japan’s Nikkei 225 Stock Average surged 3.4% to 36,232.51, rebounding to pre-crash levels after last week’s sharpest decline since October 1987. The Topix also rose 2.8%, buoyed by a weaker yen, which declined to 147.65 per dollar, benefiting exporters. Technology firms like Tokyo Electron gained, driven by Nvidia’s performance, while Rakuten Group saw significant gains due to improved results in its mobile business. Despite the recent rally, both indices remain about 8% lower since late July, following the Bank of Japan’s interest rate hike and bond purchase reduction.?
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Middle East trillions force new concessions from Wall Street?
In the Middle East, sovereign wealth funds are asserting their influence, shifting the power dynamics in high finance. With nearly $4 trillion in assets, these funds now demand more from asset managers, including setting up local offices and increasing regional presence. Firms like Apollo and Blackstone are adapting, holding events and establishing deeper ties in the Gulf. This evolving relationship is reshaping fee structures and investment strategies, as Middle Eastern funds focus on partnerships that support economic diversification and strategic growth, particularly in sectors like AI and renewable energy.?
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How China is trying to cool a runaway bond rally?
China's long-dated sovereign bonds are rallying as investors seek refuge from a slowing economy and volatile markets, driving yields to record lows. In response, authorities are taking steps to cool the market. The PBOC has issued warnings about market risks, particularly when 30-year treasury yields dip below 2.5%. State banks have sold bonds, regulators have restricted the duration of new bond funds, and the PBOC has initiated stress tests and increased reporting requirements. Despite these measures, yields remain near record lows amid economic uncertainty.?
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Foreign investors pull record amount of money from China??
Foreign investors withdrew a record amount from China last quarter, reflecting pessimism about the economy. China's direct investment liabilities fell by nearly $15 billion from April to June, the second time this figure turned negative. Foreign investment, which peaked at $344 billion in 2021, has declined due to the economic slowdown, rising geopolitical tensions, and the rapid shift to electric vehicles, which surprised foreign car firms and led some to scale back or withdraw investments.?
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