Sunac, Country Garden debt deals bring respite for China’s property sector

US equities were little changed Monday, as investors marked time ahead of the Federal Reserve’s mid-week policy-setting meeting. Fed officials are widely expected to keep interest rates withing the range of 5.25% to 5.5% on Wednesday, and the likelihood of another rate pause in November is placed at 66%. Energy shares were once again one of the market’s strongest performers thanks to an extended rally in crude futures. Regional banks and consumer discretionary shares were among the weakest sectors. In Europe, equity markets closed yesterday’s session with significant losses, as the Euro Stoxx 50 index lost 1.1%, following sharp gains last week.  

Summary for 19.09.2023 

• Asian shares fell today, as investors prepared for pivotal interest rate decisions from major central banks this week. Shares in Australia, Japan, South Korea, Hong Kong and mainland China all declined. 
• European and US shares are on track for a steady open with this week’s rate decisions in focus. 
• Oil prices rose on Tuesday for the fourth consecutive session, as weak shale output in the US spurred further concerns about a supply deficit stemming from extended production cuts by Saudi Arabia and Russia. 
• The Reserve Bank of Australia mulled a 25bps hike in interest rates before eventually deciding to hold the cash rate unchanged at 4.1% for the third straight month, minutes of the central bank’s September meeting showed. The case to raise borrowing costs was based on the expectation that inflation would remain above the bank’s target for a prolonged period if productivity growth does not pick up as anticipated or if high services price inflation persists. Meantime, the case to maintain borrowing costs relied on the observation that interest rates had been increased significantly and its effects were yet to be fully realised. 
• BlackRock yesterday downgraded its outlook on Chinese shares from overweight to neutral, citing concerns over the country’s property sector and limited policy stimulus. The investment firm noted that China’s restart is losing steam and valuations are not compelling enough to maintain an overweight position. It also identified geopolitical fragmentation, such as the strategic competition between the US and China, as a factor likely to rewire global supply chains. 
• Creditors of embattled Chinese developer Sunac China Holdings Ltd have approved its $9 billion offshore debt restructuring plan, the firm said on Monday, making it the first approval of offshore debt restructuring by a major Chinese developer. Creditors holding 98.3% of the total value of the voting scheme have approved Sunac’s restructuring plan proposed earlier this year. Meantime another Chinese developer, Country Garden, has won approval from creditors to extend repayment on another onshore bond, the last in the batch of eight bonds it has been seeking extensions for. The maturity of the bond has been extended by three years. 
• Banco Santander overhauled its corporate structure as CEO Hector Grisi sought to simplify the company’s operations. As part of the changes, the Spanish bank is combining individual countries’ retail and commercial banking businesses under a new global unit and creating a new digital consumer bank area. The moves are aimed at simplifying the business and helping the company reach profitability targets. 
• Societe Generale’s much hyped new strategy plans were given a thumbs down by investors on Monday, underscoring uncertainty over European banks as they face a brittle economy. Against this backdrop, shares in France’s third-largest listed bank tumbled by about 12% after its newly appointed CEO said he expected little if any growth in annual sales over the coming years, as he outlined a plan investors deemed lacklustre. 
• Shares in Swiss life-sciences company Lonza fell sharply on Monday after it announced that CEO Pierre-Alain Ruffieux will leave the company at the end of the month. The company said that Ruffieux is leaving by mutual agreement and that Chairman Albert M. Baehny will step in as interim CEO until a permanent successor is appointed. The CEO’s departure has raised apprehension, especially considering that Ruffieux is leaving at the end of September, and the company has a Capital Markets Day scheduled for 17^th October, analysts at Jefferies said in a note. 
• Apple’s newly launched iPhone 15 Pro and Pro Max smartphones are facing shipping delays, which indicate that demand is outpacing supply, Goldman Sachs said Monday. Goldman said the iPhone 15 Pro is seeing lead times of more than three weeks across all colours in all regions included in its analysis with nearly five-week lead times in China. IPhone 15 Pro Max’s lead times are seen between five and nine weeks globally, with China at nearly 7.5 weeks, according to the note. 
• Arm Holdings shares fell 6% yesterday after Bernstein initiated coverage of the semiconductor design company with an “underperform” rating, saying it’s too early to determine whether Arm will be an artificial intelligence winner. The company’s IPO was last Thursday. 
• Tesla shares fell 3% on Monday after a Goldman Sachs analyst cut his 2023 and 2024 earnings estimates, citing lower average selling prices for the electric vehicle maker. 
• Micron Technology shares rose 0.51% after Deutsche Bank upgraded the share to “buy” from “hold” and raised its price target to $85 from $65, citing factors including demand for AI servers. 
• Moderna shares fell 9% on Monday following reports the pharmaceutical company’s co-founder and board chairman Noubar Afeyan had sold about $1.6 million worth of shares. 
• PayPal shares lost 1.8% yesterday after MoffettNathanson downgraded the share to “market perform” from “outperform,” citing challenges for the new CEO stepping in later this month.