Source: AP

Source: Poundsterlinglive

The Korean stock market is expected to continue wallowing in the doldrums until the end of the year due to political and economic uncertainties both at home and abroad.

In contrast to major stock markets like those in the United States, which have shown upward trends, key indicators in the domestic market — including monthly index performance and consecutive months of decline — are expected to reach their worst levels in over two decades.

This has dampened expectations of a so-called “Santa rally,” a phenomenon where stock prices typically experience a bullish trend at the end of the year, which had been more common in the past.

Experts noted that the depreciating Korean won against the U.S. dollar and elevated interest rates continue to be significant burdens on the domestic stock market. They cautioned that the outlook for next year also remains bleak.

However, as most of the negative factors have already been priced in, experts suggested that increasing the proportion of domestic stocks in portfolios is a better strategy than liquidating holdings, pointing to potential bargain hunting opportunities.

According to the Korea Exchange, Monday, the benchmark KOSPI is expected to end with negative monthly returns for nine out of the 12 months this year, excluding February, March and June.

With just four trading days remaining in the year, and the market closing on Dec. 31 for the annual break, the chances of a rebound this month seem slim, largely due to the continued impact of the weak won against the U.S. dollar.

This performance is even worse than during the 1997 Asian financial crisis, when Korea sought a $58 billion bailout from the International Monetary Fund. At that time, the KOSPI posted negative returns for eight months. During the 2008 global financial crisis, the index experienced negative returns for seven months.

If the KOSPI fails to rebound this month, it will mark nine months of negative returns for the first time since the collapse of the dot-com bubble 24 years ago.

“With key monetary policy events in major countries having concluded, there are no indicators or drivers for a rebound, making it difficult to anticipate a year-end rally,” KB Securities analyst Kim Ji-won said.

The underperformance of the domestic stock market is particularly pronounced when compared to the U.S. and Japan.

As of Friday, the KOSPI has fallen 9.42 percent this year, while the Nasdaq in New York surged 30.4 percent. The S&P 500 and the Dow Jones Industrial Average have also risen 24.3 percent and 13.7 percent, respectively.

Japan’s Nikkei index climbed 15.7 percent during the same period.

U.S. President-elect Donald Trump arrives to speak at Turning Point's annual AmericaFest 2024 in Arizona, Sunday. AFP-Yonhap

Analysts underscored that an upward trend in the domestic stock market cannot be guaranteed even in the first quarter of next year. Factors such as the inauguration of Donald Trump as U.S. president in January, his anticipated high-tariff policies, and ongoing domestic political uncertainties surrounding the impeachment crisis of President Yoon Suk Yeol are expected to weigh on the Korean financial markets.

"The Korean stock market is currently in a phase burdened by high interest rates, high exchange rates, political and policy uncertainties in the U.S. and a slump in the semiconductor industry,” NH Investment & Securities analyst Kim Young-hwan said.

SK Securities analyst Jo Joon-ki noted that for the KOSPI to maintain a consistent upward trend, a prolonged period of declining interest rates and a strengthening won are essential.

But he added that the current market conditions present bargain hunting opportunities.

“Given the much more favorable risk-reward ratio, this is a good time to increase positions rather than sell off and flee, especially for investors with a longer investment horizon,” he said.

On Monday, the KOSPI closed up 37.86 points, or 1.57 percent, from the previous session, finishing at 2,442.01.

Source: Koreatimes

(Dec 23): Chinese automakers captured their smallest share of Europe’s electric-vehicle (EV) market in eight months, after new tariffs added as much as 35% to the cost of importing cars to the region.

Manufacturers such as BYD Co and SAIC Motor Corp’s MG accounted for 7.4% of EV registrations across the European Union (EU) in November, down from 8.2% in October, according to automotive researcher Dataforce. That’s the lowest level since March.

The EU imposed the added tariffs at the end of October, after an investigation found that state aid had provided China’s EV industry with an unfair advantage. Months of talks failed to resolve the trade dispute, leading Brussels to tack the new fees onto an existing 10% import duty. 

While all EVs produced in China are subject to the tariffs, including ones made by Western brands like BMW AG and Tesla Inc, the amounts vary depending on how much support an automaker received and whether it cooperated with the EU’s probe. 

MG’s state-owned parent SAIC was hit hardest, with tariffs that now total 45%. Long the top-selling Chinese carmaker in Europe, the once-British sports car brand has faltered recently, logging a 58% drop in registrations last month from a year earlier, based on data provided by Jato Dynamics, another research firm. 

Amid MG’s retreat, BYD has pressed ahead, with registrations across Europe more than doubling in November to 4,796 vehicles. 

“BYD is taking over the market while MG is taking major setbacks,” said Julian Litzinger, an analyst with Dataforce. BYD’s growth is healthy, he added, with nearly 80% of its registrations attributed to private and fleet customers. 

Chinese carmakers, eager to expand to major global markets, have hit resistance in Europe after being effectively shut out from the US. 

Lower battery costs have given Chinese firms a price advantage, but the issue has stirred protectionist impulses as officials in the US and EU work to shield local automakers. The industry, which employs hundreds of thousands of workers in Germany, France and Italy, is struggling with the transition away from combustion-powered cars. 

While the EU tariffs have blunted China’s push in the region, their introduction generally led to a smaller-than-expected setback, Litzinger said. 

In Germany and France, however, EV registrations by Chinese manufacturers more than halved in November from a year earlier, he said. By contrast, Chinese EV makers posted a 17% year-on-year gain in the UK, which isn’t a member of the EU and hasn’t adopted the tariffs.  

The shift towards EVs, once seen as inevitable, has slowed in 2024 in many global markets and become more unpredictable, leading automakers to reassess their strategies from model lineups to plant locations and even corporate structures. 

Chinese automakers are taking steps to localise production in Europe, but those efforts will take time to mature. 

Globally, car companies are looking for ways to share costs as they try to keep up on expensive technological change. Last week, it emerged that struggling Nissan Motor Co was exploring a tie-up with fellow Japanese manufacturer Honda Motor Co, partly to strengthen their ability to compete in EVs. 

Source: Theedgemarkets

The USD/CHF pair gains traction to around 0.8935, snapping the two-day losing streak during the early European session on Monday. The hawkish rate cut by the US Federal Reserve (Fed) provides some support to the Greenback. Traders await the US December Consumer Confidence and Chicago Fed National Activity Index reports, which are due later on Monday. 

The Fed cut the interest rates by a quarter point last week and pencilled in only two rate cuts in 2025, down from its original forecast of four. The hawkish signals from the US central bank, which appear newly concerned about persistent inflation in the months ahead, could lift the Greenback against the Swiss Franc (CHF). On the other hand, the Swiss National Bank (SNB) cut its key interest rate by 50 basis points (bps) at its December meeting, exceeding expectations of a smaller reduction amid weaker-than-expected inflation in Switzerland and rising uncertainty about the global economy. A more aggressive rate cut from the SNB than the Fed could undermine the CHF and act as a tailwind for USD/CHF. 

SNB chairman Martin Schlegel left the door open for further interest rate cuts next year but said it was now less likely the Swiss central bank could take rates below 0%. "We will continue to monitor the situation closely and will adjust our monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term,” added Schlegel. Meanwhile, the escalating geopolitical tensions in the Middle East could boost the safe-haven currency like the CHF. Israeli strikes across the Gaza Strip overnight and early Sunday killed at least 50 Palestinians, including at one family's home and at a school building, according to Palestinian medical officials. The Houthis released a statement, claiming responsibility for the attack, saying they had aimed a hypersonic ballistic missile at a military target. 

Swiss Franc FAQs

What key factors drive the Swiss Franc?

The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

Why is the Swiss Franc considered a safe-haven currency?

The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

How do decisions of the Swiss National Bank impact the Swiss Franc?

The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

How does economic data influence the value of the Swiss Franc?

Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

How does the Eurozone monetary policy affect the Swiss Franc?

As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

Source: FXSTREET