text | Caihua News Agency
April has arrived in the blink of an eye. Looking back on the first quarter of 2024, the global political and economic circles have experienced many major events, including the rise of geopolitical tensions, the upcoming U.S. election, and the monetary policies of the United States and the European Central Bank. The countdown to loosening restrictions is also underway, and China’s economic performance is also showing signs of being stronger than expected. So how does the capital market reflect various major events? Below, Caihuashe will take stock of it for you.
The price trend of cocoa beans is the most eye-catching
Let’s first look at the commodity market.
In the first quarter of 2024, the most eye-catching performance in the world was the price of cocoa beans. Since the beginning of this year, it has increased by 134.89%, setting new highs repeatedly, as shown in the figure below.
Mainly due to serious production shortages in Ghana and Cote d'Ivoire, these two West African regions are important cocoa bean producing areas, accounting for more than half of global cocoa bean production.
Due to extreme weather and insect infestations, Ghana's latest cocoa bean harvest may be only half of its initial expectations, falling to a 22-year low. In addition, severe drought in most areas has also hurt production in Côte d'Ivoire's main cocoa-producing areas. The International Cocoa Organization (icco) predicts that global cocoa production will fall by 11% year-on-year this year, leading to a further widening of the gap between supply and demand.
Cocoa prices have skyrocketed, and two major food companies have been affected, including Mondelez (mdlz.us), formerly Kraft Foods, and Nestlé (nesn.six), both leading manufacturers of chocolate snacks. In the past 60 days, Mondelez's stock price has fallen by 4.91%, while Nestlé's stock price listed on the Swiss Exchange has fallen by 3.86% in the past 60 days.
Apart from skyrocketing cocoa beans, gold was the star of the year's first quarter. The price of gold has also hit new highs recently, which is related to geopolitical factors and the strength of the U.S. dollar. Everyone knows the political and economic situation, so I won’t go into details here. In terms of the U.S. dollar, U.S. economic data continues to improve, and the Federal Reserve’s interest rate cut may be delayed, which means that U.S. dollar interest rates will remain high. It may take longer than expected. Funds and central banks are eager for gold to cushion the negative impact of a strong U.S. dollar. Coupled with the good price of gold, it has also attracted individual investors to join in, further pushing up prices.
Since the beginning of this year, the price of gold has increased by 11.00%.
The trend of precious metals is gratifying, but the performance of basic metals is divergent, which somewhat reflects capital's expectations for the prospects of China, the largest consumer of basic metals.
Among them, copper futures prices have risen by 5.30% this year. The main reason is that China's recent economic data has performed better than expected and the manufacturing industry has expanded faster than expected, triggering investors' confidence in the strong economic performance of this largest consumer country.
However, steel prices have fallen by 14.96% this year, which may reflect that the current performance of the mainland property market is still not ideal, affecting the demand for steel.
Let’s look at crude oil prices, which are the most actively traded in the world and support the performance of many economies. Crude oil futures prices rose nearly 20% in the first quarter, mainly because the important oil-producing country OPEC+ maintained production cuts, while the economic activities of major consumer countries China and the United States performed better than expected, making oil prices bullish. WTI crude oil futures and Brent crude oil futures prices have both increased by more than 18% this year, reporting at US$85.184/barrel and US$89.051/barrel respectively.
The impact of potential changes in monetary policies of major central banks
Since this year, central banks in major developed economies have been planning to change monetary policies. The Federal Reserve is watching U.S. economic data to decide when to start cutting interest rates, but due to the strength of the U.S. economy, the timetable for rate cuts may be delayed. The European Central Bank and the Bank of England are also planning for a turn in the interest rate cycle. Inflation rates in these countries have fallen from highs. In order to stimulate the economy, they may be eager to cut interest rates to encourage business activity.
Unlike Western developed economies that switched from raising interest rates to cutting interest rates, the Bank of Japan went in the opposite direction. The newly appointed Governor of the Bank of Japan, Kazuo Ueda, is considered likely to reverse the zero-interest rate monetary policy of his predecessor, Haruhiko Kuroda, in order to turn Japan into a The monetary policy will bring a normalized policy range. Simply put, it means raising interest rates to change the current negative interest rate situation in Japan and create greater room for adjustment of the economy through monetary policy in the future.
Although Ueda Kazuo gave the market hope for a monetary policy shift, the yen exchange rate did not rise but fell. The main reason was that speculative activities increased significantly. Speculative funds bet that Japan would still maintain monetary policy for a period of time, and Japan's domestic Economic data showed that the prosperity index of large manufacturers was lower than expected, and the outlook was not too optimistic, which also put pressure on the yen exchange rate.
The Japanese yen exchange rate against the US dollar has fallen 6.69% this year and is currently at 151.60.
On the other hand, affected by expectations that the Federal Reserve’s interest rate cut cycle may be delayed, the U.S. dollar index has risen by 3.28% this year. At the same time, the expectation that the Federal Reserve will delay cutting interest rates also affects the bond market, the world's largest and most active trading market.
Since the beginning of this year, the 10-year U.S. Treasury yield has risen 49 basis points, breaking through the short-term high of 4.3%. Bond prices and interest rates move inversely, with interest rates rising and bond prices falling.
The macroeconomic data in the United States are improving, and the possibility of the Federal Reserve delaying an interest rate cut has increased, which means that U.S. dollar interest rates will remain at high levels for some time.
As the world's most important settlement currency, U.S. dollar interest rates remain at a high level, which also means high capital costs and higher investment return requirements for these funds. Supported by this, the stock market with higher risk returns has also risen further.
Global stock market performance
US dollar assets continue to rise. The S&P 500 Index and the Dow Jones Industrial Average have reached new highs in recent days, and the Nasdaq Index is also challenging the high levels at the end of 2021.
See the table below. The three major U.S. stock indexes, the S&P 500, the Nasdaq Index (ixic.us), and the Dow Jones Industrial Average (dji.us) have risen by 9.14%, 8.19%, and 3.93% respectively this year.
The German dax index and the French cac index have also hit new highs recently, rising 9.19% and 7.78% respectively this year.
However, the performance of Japanese stocks is even more impressive. Under the leadership of Buffett, Japanese stocks shined in the first quarter of this year. The Nikkei 225 Index has risen by 17.93% this year, outperforming the stock markets of major developed countries.
Back to the U.S. stock market, the seven major technology companies are still the locomotive driving the performance of the U.S. stock market. However, among these seven major technology companies, the rankings have quietly changed. Driven by openai’s investment, Microsoft (msft.us) easily surpassed the troubled ones. Apple (aapl.us) has become the world's most valuable listed company. Since the beginning of this year, its stock price has risen by 12.30%. On the other hand, expectations that market demand for iPhones may decline and antitrust investigations have continued to put pressure on Apple's stock price, which has fallen by 12.20% since the beginning of this year.
ai is still the mainstream investment in the first quarter of this year. In addition to driving the rising market value of Microsoft, NVIDIA (nvda.us), which supplies AI chips, also continues to maintain the speed of market value expansion. Since the beginning of this year, NVIDIA's stock price has increased by 80.65%, and its market value has reached With a value of US$2.24 trillion, it has successfully surpassed Google (goog.us) and become the third largest technology company in the world by market value. The gap with the second-ranked Apple is further narrowing.
Facebook parent company Meta (meta.us), which also invests in artificial intelligence, is also a star stock in the first quarter. It has risen 40.71% since the beginning of this year and its current market value reaches US$1.27 trillion. Similarly, Broadcom (avgo.us), which has entered the AI track, has risen by 20.50% this year, with a market value of US$620.4 billion, and has successfully overtaken Tesla (tsla.us) .
Affected by factors such as the suspension of production at the Berlin factory and the slowdown in delivery growth, Tesla's stock price has continued to decline, falling by 32.94% this year.
In terms of China’s stock market, the Shanghai Stock Exchange, Shenzhen Stock Exchange and FTSE a50 have still recorded gains this year. However, the Science and Technology Innovation 50 and GEM indexes, which reflect the performance of listed science and technology companies, have experienced large fluctuations and are currently down 11.18% and 2.69 respectively. %. The performance of Hong Kong stocks and Chinese concept stocks was unsatisfactory, with the Hang Seng Index and Hang Seng Technology Index falling by 1.89% and 8.06% this year. The Nasdaq Golden Dragon China Index, which reflects the performance of Chinese concept stocks, fell by 3.44%, as shown in the table below.
It is worth noting that although the overall stock index is downward, the major heavyweight stocks of the Hang Seng Index are still generally upward. See the table below. Tencent (00700.hk) has risen by 5.04% this year, and Meituan (03690.hk) is even greater rose 20.82%, but Alibaba (09988.hk), with a weight of 8%, and AIA (01299.hk), with a weight of 7%, fell 6.94% and 22.12% respectively, which may be the main reason for dragging down the index performance.
Global IPO and refinancing market performance
The performance of the secondary market also affects the new stock and refinancing market. In the first quarter of this year, the number of IPOs on the New York Stock Exchange and the Nasdaq exchange was 16 and 34 respectively, high Among the 12 Hong Kong stock exchanges and 11 each on the Shanghai Stock Exchange and Shenzhen Stock Exchange, the slowdown in the pace of A-share IPOs may be related to regulation, while the IPO activities of Hong Kong stocks may be related to market performance.
From the perspective of financing scale, the New York Stock Exchange and Nasdaq exchanges have an advantage in both IPO financing scale and post-listing capital increase scale. Among them, the IPO financing scale of the New York Stock Exchange and the Nasdaq exchange was US$4.2 billion (approximately 30.4 billion yuan) and US$4.3 billion (approximately 31.1 billion yuan) respectively, far exceeding the HK$4.584 billion (approximately HK$4.584 billion) of Hong Kong stocks. A total of RMB 4.2 billion) and A-shares in Shanghai and Shenzhen stock exchanges totaled RMB 21.9 billion.
In terms of post-IPO financing, the refinancing scale of the New York Stock Exchange and the Nasdaq Exchange was US$16.8 billion (approximately RMB 121.5 billion) and US$23.4 billion (approximately RMB 169.2 billion) respectively, which was much higher than that of Hong Kong stocks. The market’s 21.019 billion Hong Kong dollars (approximately 19.4 billion yuan) and the A-share Shanghai and Shenzhen stock markets totaled 66.4 billion yuan.
It is worth noting that in US stock IPOs, Chinese concept stocks are still the main participants. In the first quarter of 2024, including Amer Sports (as.us), which was spun off by Anta (02020.hk), 11 Chinese concept stocks were listed on the U.S. market, with a total net financing amount of US$1.331 billion, approximately 9.629 billion yuan, equivalent to 15.66% of the total financing scale of IPOs of the two major U.S. exchanges during the period.
Among the 11 Chinese concept stocks that will IPO in the first quarter of 2024, except for Haoxi Health Technology (hao.us) and Amer Sports, which rose, the others all plunged after listing, as shown in the table below.
As for the U.S. stocks with IPOs this year, 21 have fallen below the issue price, accounting for about 42%.
Summary
The current flow of global capital is mainly subject to politics and economics, supply and demand fluctuations and the monetary policies of major central banks. Looking ahead, the Federal Reserve may delay cutting interest rates, which has also led many investors to adopt a wait-and-see attitude. Once this policy is clarified, funds may feel more comfortable chasing risky assets. The current valuations of Chinese stocks and Chinese concept stocks are relatively low, which I believe will attract the attention of venture capital.
On the other hand, the current OPEC+ production cuts may push up oil prices, but the U.S.’s just-announced suspension of replenishing strategic oil reserves may bring about some changes. As the world's largest oil consumer, the United States' move may reduce demand in the short term and cushion the rise in oil prices to a certain extent. But in the long run, if OPEC+'s production cuts continue and demand from other countries increases significantly, it should have little effect on oil prices.
In summary, the next changes in the political and economic situation in 2024 will be more decisive and may reverse the current capital market situation and bring about significant changes, which are worth paying attention to.
