Best and worst performers
The best-performing sector is Materials, up 1.18 per cent. The worst-performing sector is Information Technology, down 1.08 per cent.
The best-performing stock in the S&P/ASX 200 is Lake Resources (ASX:LKE), trading 19.35 per cent higher at $1.11. It is followed by shares in Pilbara Minerals (ASX:PLS) and Mineral Resources (ASX:MIN).
Shares in the Asia-Pacific are mixed ahead of major central bank meetings this week.
South Korea’s Kospi opened higher before falling 0.45 per cent. The Kosdaq is 0.74 per cent lower.
Japan’s market is closed for Old Age Day.
Biden warns Xi of consequences to foreign investment if Beijing aids Moscow
While last week’s meeting between China President Xi and Russian President Putin was mostly uneventful, US President Biden said he called Xi afterward to reiterate consequences for China if it is found violating sanctions imposed on Russia (Bloomberg). US officials stressed no evidence so far China has provided material support to Russia, though Biden warned American investment in China would be at risk if Beijing is found aiding Moscow. Comes as US takes steps to shore up domestic supply chains and improve its industrial competitiveness. Recent reports noted Washington is moving to tighten curbs on exports of advanced technology to China while Biden is preparing to sign executive order strengthening national security reviews of foreign investments in US (Bloomberg). Another Bloomberg article discussed how ramp in US-China tensions are having a dampening effect on shares of China’s key manufacturers.
China increased US Treasury holdings in July
Reuters cited official data showing China increased holdings of US Treasuries to $970B in July, from $967.8B in June, which was the lowest since May 2010. Contrasts with mild decline in Japan’s holdings to $1.234T from $1.236T, which was generally in line with FX market movements. Foreign reserves coming back into focus amid discussions about the potential scope for major Asian economies to curb currency depreciation against the dollar. Markets on the lookout for Japan direct intervention, though seen as unlikely. PBOC’s efforts have focused on guidance via relatively firmer yuan fixings. According to more timely data, China’s FX reserves shrank for a second straight month to $3.0549T at the end of August. SAFE continues to attribute fluctuations to valuation effects. Japan’s foreign reserves increased in July, though fell back to $1.292T (lowest since March 2019).
Greater China hedge funds see notable outflows
Reuters, citing Eurekahedge/With Intelligence data, reported hedged funds that invest in Greater China are showing their biggest net fund outflows in at least 15 years as investors cut exposure to Chinese assets and await greater policy clarity. Net outflow of $3.6B in Jan-Jul is larger than any full-year amount on record going back to 2008. Follows net inflows of $1.8B in 2021 and $8.7B in 2020. Across strategies, managers pursuing fixed income and long short equities strategies recorded the largest outflows amid the challenging macroeconomic environment, while arbitrage funds continued to attract flows in 2022. Going forward, BofA survey found 53 per cent of the nearly 120 Hong Kong-based investors surveyed said they plan to “do nothing” from now until the mid-October congress. Only 42 per cent said they plan to add China to positioning.
Chengdu lifts lockdown
Bloomberg reported Chengdu city exits lockdown Monday with most residents allowed to leave their homes and resume most aspects of normal life for the first time since 1 September. Story noted Chengdu lockdown was implemented sooner than in Shanghai and appears to have largely avoided various shortages and supply chain disruptions. Suggested this will likely embolden President Xi to continue with Covid Zero as he is set to secure a third term at next month’s congress. China watchers once expected the hardline strategy to be dialled back following the meeting, projections are now being pushed well into next year. Article recalled Chengdu lockdown added to hardships in Sichuan province this summer, highlighted by record-breaking heat waves that led to droughts and forest fires, with the government introducing rolling power cuts to conserve electricity.
Australian hi-tech company Micro-X (ASX:MX1) a leader in x-ray technology for health and security markets globally, has announced a strategic collaboration with Varex Imaging, the world’s largest independent manufacturer of x-ray technology components. The collaboration comprises an exclusive global licence for a non-refundable fee of $7.5M, which enables Varex to use Micro-X’s NEX technology in the field of multi-beam x-ray tubes, and an equity subscription to achieve a 9.9 per cent shareholding in Micro-X totalling $7.5M at a 10 per cent premium to the 15-day volume weighted average price. Shares are trading 25.9 per cent higher at 17 cents.
Following the completion of the Ovato transaction, IVE Group (ASX:IGL) today announced a capital raise. The company intends to raise $20 million by an institutional placement and a share purchase plan. The purpose of the raise is to preserve the company’s ability to pursue growth initiatives and acquisitions, and to strengthen IVE’s institutional shareholder base. Shares under the placement and SPP will be issued at $2.25, and the placement will result in about 8 million new shares.
Origin Energy (ASX:ORG) has announced it will divest its 77.5 per cent interest in the exploration assets it currently holds in the Beetaloo Basin, having executed agreements with a consortium led by Tamboran Resources (ASX:TBN). The sale is part of Origin’s broader strategy to exit all exploration activities over time. Tamboran (ASX:TBN) is in a trading halt pending the completion of a capital raising, which is understood to involve overseas investors — likely to be Tamboran’s existing strategic shareholders. The deal is indicated to involve a payment of $60M to Origin as well as ongoing 5.5 per cent royalty payments. Importantly, Origin has also executed a gas sales agreement with Tamboran for up to 36.5 Petajoules per annum over 10 years — an important indicator of the potential commerciality of the Beetaloo Basin. Shares are trading 0.2 per cent lower at $5.80.
Commodities and the dollar
Gold is trading at US$1672.81 an ounce.
Iron ore is 2.6 per cent lower at US$98.45 a tonne.
Iron ore futures are pointing to a rise of 1.25 per cent.
One Australian dollar is buying 67.24 US cents.