Money Talk on RTHK Radio 3 - Friday 4 January 2019

A series of flash crashes in the currency markets have followed some sharp moves in global stocks and bonds and shredded investors’ already frayed nerves on just the second day of trading in 2019. The yen surged by the most in almost 10 years at one stage against the US dollar. The Aussie dollar, regarded as a proxy for regional trade volumes, flash crashed to its lowest since early 2009 before rebounding. The British pound also plunged, in moves that have not been seen since the global financial crisis.

The sudden drops, which occurred in thin trading after the close of US markets, came after Apple lowered guidance for its first quarter earnings. The 10% drop in its Q1 revenue forecast was blamed on “significantly greater weakness” in emerging markets, particularly in China. Fears over a sharp slowdown in growth and consumer sentiment on the mainland also hit Asian and US stocks on Wednesday and sent investors rushing for the haven of highly rated government bonds. Apple shares fell more than 7.5% in after-hours trading on the news.

The fallout reverberated across Asia on Thursday morning, with the Hang Seng dropping below the 25,000 level. Apple suppliers AAC Technologies fell 2% and Sunny Optical was down 1.5%. In Taiwan, Apple assembler Foxconn dropped as much as 1.6% and chipmaker Taiwan Semiconductor Manufacturing declined 2.3%. SK Hynix in South Korea tumbled as much as 4.3% and Samsung Electronics was down almost 2%.

Also weighing on markets are fears of a prolonged government shutdown in the US. A meeting at the White House between President Trump and Congressional Democratic leaders failed to yield a breakthrough in the stalemate over funding for a US border wall with Mexico. Mr. Trump declared that the shutdown would last as “long as it takes” to address border security concerns. The Democrats retake control of the House of Representatives later Thursday and incoming speaker Nancy Pelosi vowed to immediately pass legislation reopening the government with no funding for the wall.

Qatar Airways said on Wednesday it had acquired a 5% stake in the mainland’s regional airline China Southern. The Gulf state airline is looking to become a global player and has already built stakes in IAG, the owner of British Airways and Iberia, along with Cathay Pacific and Chile’s Latam Airlines. The US government is being urged by three American airlines to take action against Qatar Airways over what they allege are unfair state subsidies.

On Friday’s Money Talk we have with us Francis Lun, CEO of GEO Securities and Jack Siu, Director & Senior Investment Strategist for Asia Pacific at Credit Suisse. With his regular weekly view from Australia is Toby Lawson, Head of Global Markets at Societe Generale Australia.