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As Markets Brace For Beijing Easing, Chinese State Media Unveils 25bps RRR Cut Before Year-End

As Markets Brace For Beijing Easing, Chinese State Media Unveils 25bps RRR Cut Before Year-End

While some in the market are still obsessing over i) when the Fed will end its taper and ii) when it will commence liftoff, or start the rate hikin

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As Markets Brace For Beijing Easing, Chinese State Media Unveils 25bps RRR Cut Before Year-End

While some in the market are still obsessing over i) when the Fed will end its taper and ii) when it will commence liftoff, or start the rate hiking process which according to the latest market-implied odds, will begin in June instead of July (spoiler alert - it won't)...

... the real question traders should be asking is how long after the Fed's attempt to tighten financial policy crashes and burns, because with record duration in the corporate bond market - the same bond market that the Fed already bailed out in March 2020 and so it will never let it crash again - it will take just a few rate hikes for everything to collapse.

So in a preview of things to come to the US, over the weekend, China’s central bank signaled possible easing measures to aid the economy’s recovery after a sharp downturn in recent months fueled by a property slump.

In its latest quarterly monetary policy report published Friday, the People’s Bank of China removed from its policy outlook a few key phrases cited in previous reports, including sticking with “normal monetary policy.” Additionally, as Goldman's Maggie Wei wrote in her PBOC monpol post-mortem, the bank noticed three changes in the Q3 report compared with Q2:

  1. PBOC added monetary policy should be based on domestic economic situation - "monetary policy would give prominence to domestic economic situation";
  2. PBOC stated monetary policy should "give greater priority to serving the real economy and to enhance the stability of broad credit growth";
  3. instead of "to guide lending rates lower" as mentioned in the Q2 report, Q3 report stated PBOC would work on "lowering financing cost for SMEs".

The report also dropped previous phrases to “control the valve on money supply” and vowing not to “flood the economy with stimulus,” signaling more credit support in coming months. These statements and changes, according to banks such as Goldman, Citi and Nomura, suggests a shift in stance toward incrementally more supportive policies, "but mainly through increasing targeted supports to green development and SMEs while policy interest rates would remain unchanged."

Meanwhile, the statement on "giving prominence to domestic economic situation" is an addition compared with the Q2 report, but not a new phrase itself as it was mentioned by PBOC officials recently. This statement is likely a response to market concerns on the divergence of monetary policy between China and major DMs (in particular the US) in the future and, according to Goldman, "leaves the door open for more monetary policy easing despite normalization of monetary policy (tapering and future rate hikes) in the US."

Nomura's Ting Lu echoed Goldman's take, writing that he "expects Beijing to soon significantly step up its monetary easing and fiscal stimulus to counteract the increasing downward pressure."

The PBOC’s more dovish outlook follows growing concerns about the economy flagged by several officials recently. After warning that China faces "downward pressure" at the start of the month, Premier Li Keqiang told a seminar on Friday that China still faces “many challenges” in keeping the economy stable, although this year’s goals will likely be achieved. He also emphasized policymakers would continue using reforms to increase productivity, streamlining administrative burdens for corporates and pushing for major project construction to maintain labor market stability and ensure economic growth within a reasonable range.

Even more ominously, Liu Shijin, who sits on the central bank’s monetary policy committee, echoed a recent downbeat assessment by Citigroup, saying in an online forum Sunday that the economy could enter a period of “quasi-stagflation,” which needs close attention if it happens.

“The concern for growth slowdown is clearly rising among technocrats at different government agencies,” said Macquarie Group Ltd.’s Larry Hu. “But the key is whether the top leaders share such a view.” The Politburo meeting in December and Communist Party’s Central Economic Work Conference due in the same month, will provide more clues, he said.

China finds itself in an unfamiliar place with growth by some estimates set to drop below 5% next year, testing authorities’ resolve to cut the economy’s reliance on the highly-leveraged property sector. In the quarterly report, the PBOC said the economic recovery faces restrictions from “temporary, structural and cyclical factors,” and it’s become more difficult to maintain a stable economy.

Meanwhile, also overnight, China stood pat on its version of Libor, or the benchmark lending rate known as the loan prime rate (LPR), for the 19th straight month at its November fixing, in line with market expectations. But, as the state-controlled Global Times writes today, confirming the rate cut speculation, "some analysts said that China will likely make another Reserve Requirement Ratio (RRR) cut before the end of this year to cope with an economic slowdown, though the benchmark lending rate is unlikely to change this year."

The Global Times quoted Xi Junyang, a professor at the Shanghai University of Finance and Economics, who said that the central bank will likely cut the RRR, the amount of cash that banks and financial institutions must hold as reserves, by 25 basis points before the end of this year.

"The RRR cut is necessary as the government needs to cope with the economic slowdown fueled by a mixture of factors, including the COVID-19 resurgence and real estate controls. Besides, China's capital supply growth is at a relatively low level, providing space for cutting the RRR," he told the Global Times on Monday.

An RRR cut, while unlocking over $100BN in liquidity, however would not be followed by a cut in the benchmark lending rate this year, the Global Times reported.

"The unchanged LPR in November shows that the PBC agrees with the current interest rate level in the credit market, as financial data show that these figures are within a reasonable range. Besides, banks are not motivated to lower the credit rate, while keeping the LPR unchanged will help stabilize market expectations for the property market," Zhou Maohua, a macroeconomics analyst under the financial market division of Everbright Bank, told the Global Times on Monday.

One reason for China's continue caution: soaring wholesale inflation and painful consumer price inflation. Wu Chaoming, chief analyst of Chasing Securities, told the Global Times that "since inflation is still at a relatively high level, the timing of interest rate cuts will likely be delayed, and structural adjustment will remain the mainstream mode for the time being."

Of course, even "only" an RRR cut would be very much welcome and the local market was delighted by the prospect, sending China’s CSI 300 Index higher as much as 0.5% Monday morning on expectations of potential loosening, while the 10-year government bond futures contracts gained as much as 0.3%. As for more cuts? Well, with the Chinese economy continuing to shrink, it is only a matter of time before Beijing - like the Fed - has no choice but to start from easing square one all over again.

Tyler Durden Mon, 11/22/2021 - 15:33

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TV Show Mysteriously Deletes Poll After Vast Majority Oppose Mandatory Vaccination

TV Show Mysteriously Deletes Poll After Vast Majority Oppose Mandatory Vaccination

Authored by Paul Joseph Watson via Summit News,

A major morning television show in the UK deleted a Twitter poll asking if vaccines should be made mandatory..

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TV Show Mysteriously Deletes Poll After Vast Majority Oppose Mandatory Vaccination

Authored by Paul Joseph Watson via Summit News,

A major morning television show in the UK deleted a Twitter poll asking if vaccines should be made mandatory after the results showed that 89% of respondents oppose compulsory shots.

Yes, really.

Good Morning Britain, which often tries to set the news agenda, posted the poll which asked the public, “With Omicron cases doubling every two days, is it time to make vaccines mandatory?”

The last screenshots Twitter users were able to obtain before the poll was wiped showed 89% oppose mandatory vaccinations, with just 11% in favor after a total of over 42,000 votes.

People demanded to know why the poll had been pulled, although it wasn’t exactly hard to guess.

Why did you delete this poll, is it because you were asked? Or because it shows the people don’t support this s**t, this tyrannical future your colleagues seem to want. We see you,” commented one respondent.

“Guess that wasn’t the answer they were looking for,” remarked another.

Good Morning Britain has failed to explain why it removed the poll.

However, it’s unsurprising given that the broadcast has been a vehicle for pushing pro-lockdown messaging since the start of the pandemic.

For most of that time, it was hosted by Piers Morgan, an aggressive proponent of lockdowns, mandatory vaccines and face masks.

The show also regularly features Dr. Hillary Jones, someone who at the start of the pandemic warned that face masks could make the spread of the virus worse, before getting the memo and doing a complete 180.

*  *  *

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Tyler Durden Thu, 12/09/2021 - 03:30

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UK PM announces tougher measures amid more Covid cases

In total, the UK recorded 51,342 new COVID-19 cases in the last 24 hours…
The post UK PM announces tougher measures amid more Covid cases first appeared on Trading and Investment News.

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In total, the UK recorded 51,342 new COVID-19 cases in the last 24 hours on Wednesday and a further 161 people have died within 28 days of testing positive for the novel coronavirus

UK Prime Minister Boris Johnson on Wednesday announced tougher measures such as work from home where possible, expanded face mask rules and use of COVID-19 vaccination certificates for entry to venues, as another 131 cases of the new Omicron variant were recorded, taking the total to 568.

The UK government’s Plan B winter strategy comes in force in stages starting this Friday, in an effort to slow the spread of the highly transmissible variant, which Johnson said shows a doubling time of two or three days.

Addressing a Downing Street media briefing, he said all signs indicate that Omicron transmits more rapidly than the previously dominant Delta variant of COVID-19.

From this Friday, we will further extend the legal requirement to wear face masks in public indoor venues, including theatres and cinemas. We will reintroduce guidance to work from home from Monday work from home if you can, go to work if you must but work from home if you can, said Johnson.

We’ll also make the NHS COVID pass mandatory for entry into nightclubs and venues where large crowds gather, including unseated indoor venues with more than 500 people, and seated outdoor venues with more than 4,000 people and any venue with more than 10,000 people, he said, adding that this will come into effect from next week.

Johnson once again called on everyone to come forward for their COVID vaccinations, including all adults now eligible for a third top-up booster dose.

We must be humbled in the face of this virus. As soon as it becomes clear that the boosters are capable of holding this Omicron variant and we have boosted enough people to do that job of keeping Omicron in equilibrium, we will be able to move forward as before. Please everybody play your part and get boosted, he said.

The government had so far stopped short of enforcing Plan B and issued guidelines for compulsory face masks on transport and some indoor settings, such as shops.

We now have, in the Omicron variant, a variant that is spreading much faster than any that we have seen before. That is why I ask everybody to go to get their booster jab as soon as they are called to come forward, said Johnson, when asked about Plan B in Parliament on Wednesday.

In total, the UK recorded 51,342 new COVID-19 cases in the last 24 hours on Wednesday and a further 161 people have died within 28 days of testing positive for the novel coronavirus.

Since the first jab was delivered one year ago today, our phenomenal vaccine rollout has saved hundreds of thousands of lives and given us the best possible protection against COVID-19, said Johnson.

Our fight against the virus is not over yet, but vaccines remain our first and best line of defence against the virus so the best way to continue to protect yourself and your loved ones is to get behind the vaccine programme and get boosted as soon as you’re eligible, he said.

The post UK PM announces tougher measures amid more Covid cases first appeared on Trading and Investment News.

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Canada’s Top Renewable & Clean Energy Stocks for December 2021

There’s no questioning the fact that as a population we’re moving towards cleaner, greener forms of energy. Fossil fuels will be a thing of the past, and the world will benefit immensely from it.How long will it take before Canadian renewable companies…

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There's no questioning the fact that as a population we're moving towards cleaner, greener forms of energy. Fossil fuels will be a thing of the past, and the world will benefit immensely from it.

How long will it take before Canadian renewable companies dominate the energy scene? It's difficult to say. But if I were to guess, not long at all. That's why you need to have a look at these Canadian stocks before it's too late.

The renewable energy vs fossil fuel debate is a heated one

The effects of fossil fuels on the climate and climate change in general is an extremely touchy subject, and arguments from both sides tend to pack a sizable punch in terms of support. Plus, much like Canadian gold stocks, fossil fuel companies rely heavily on a commodity and can be quite cyclical.

But all while this is happening, green energy companies here in Canada are quietly amassing large asset bases and production capacities. It's an investment gold mine.

Your best bet as an investor is to funnel out the noise and instead take a position in a strong TSX listed renewable energy stock.

Because it's a matter of when, not if these companies take over as the primary method of energy generation

And while people sit on the sidelines, squabbling over if swapping to renewables is worth it, you can be making boatloads of money off of it.

Don't believe me? These clean energy companies have crushed the returns of the TSX Index.

So if you're new to buying stocks here in Canada, you may want to know what exactly these Canadian renewable energy companies do. Lets go over it.

What exactly do Canadian renewable energy companies do?

Renewable energy is defined as such:

"energy from natural resources that can be naturally replenished within a human lifespan." - Natural Resources Canada

Renewable energy companies provide sources of power that are often considered cleaner and more sustainable including but not limited to:

  • Hydroelectric
  • Wind
  • Solar
  • Biomass
  • Hydrogen

Renewable energy provides nearly 20% of Canada's energy supply, with hydroelectricity accounting for over half of that.

A common misconception with Canadian green energy companies? 

Renewable companies aren't the new kids on the block, despite many thinking so.

In fact, they have been around for quite some time now, and as a result clean energy stocks provide stable and reliable cash flows, much like regulated utility giants Fortis, Canadian Utilities and Emera.

The end result?

Clean energy companies are able to provide strong dividends to go along with upside potential in an ever growing industry.

Let’s take a closer look at four renewable energy companies we think are the cream of the crop here in Canada for 2021.

As requested by many readers, we've also added a solar energy company to the list in this most recent update. Solar stocks in Canada have been around for a while, but have remained relatively unknown due to high costs, and investors are starting to gain interest

What are the best Canadian renewable energy stocks?

4. Canadian Solar Inc (NASDAQ:CSIQ)

One of the primary reasons we've never included a Canadian solar company on this list of renewable energy stocks is the fact that the best of the best trades down south on the NASDAQ.

However, due to increasing demand we figure we'd start talking about Canadian Solar Inc (NASDAQ:CSIQ).

Solar stocks in general have surged as of late, but since its lows in March 2020 Canadian Solar has shot up over 81%.

The stock has dipped significantly from all time highs however as renewable energy companies have gone through a significant correction. But, there is still a bullish attitude.

We think investors, and analysts for that matter, are finally starting to see the potential in the once small cap Canadian (but U.S. traded) company.

Canadian Solar benefits from a fairly low cost of production and has a decent amount of projects planned for the future.

Initially, solar power faced a lot of criticism. Production costs were extremely high, and it wasn't looked at as a permanent solution to dirtier forms of power.

But the fact is, we wouldn't even need to capture one-hundredth of a percent of the energy hitting the earth in a year to be able to scrap every other form of energy generation. And as costs of production come down, it's becoming a more feasible clean energy generation method.

Canadian Solar has been a very frustrating stock for those buying it as a value investment.

But interestingly enough, even with a 81% run up, Canadian Solar is still fairly valued considering the future of solar energy.

Trading at only 0.38 times 2021 expected sales and 14.23 times 2021 expected earnings, valuations are not outrageous. The company has been fairly inconsistent with its growth, which is why the market isn't really willing to pay a high earnings multiple. But again, most of its inconsistencies have been as a result of what we've stated above.

Growth is expected to pick back up in 2022 and 2023, and 2023 expected revenue of $7B USD would mark a 100% increase from 2020 revenue of $3.47B. There is promise in the industry, and at current valuations the company is certainly worth a look.

Keep in mind however, this is the only renewable energy stock on this list that doesn't currently pay a dividend, and we would classify this stock as the highest risk of the bunch as well.

CSIQ 5 year performance vs the NASDAQ:

CSIQ Vs NASDAQ 5 Year

3. Northland Power (TSX:NPI)

Northland Power Logo

Northland Power (TSX:NPI) is a pure-play renewable energy company, and one that has been in business for a long period of time. The company was established in 1987, and operates nearly 2.8 GW of electricity, with potential future capacity in excess of 5 GW.

Northland has witnessed some incredible growth in terms of earnings over the last 3 years with a compound annual growth rate (CAGR) in excess of 30%. The company has also managed to more than double revenue since 2015.

The bulk of the company's renewable operations are located in Eastern Canada.

In fact, the farthest the company reaches out west are two facilities in Saskatchewan - its Spy Hill facility with 86 MW of production and its North Battleford facility, with 260 MW of production. Both of these facilities generate power by burning natural gas and full contracts are established until 2036 and 2033 respectively.

The company has a total of 27 assets, 2 of which we've already talked about. With 19 facilities in the province, Northland has a high percentage of its assets in Ontario. Quebec has 2 wind farms, while the Netherlands and Germany have one wind farm each, Netherlands being offshore.

The renewable company closed on its acquisition of EBSA back in September of 2019, a Colombian regulated utility company for around $1.05 billion. EBSA serves nearly half a million customers, and its revenue is highly regulated, thus highly reliable. It also provides Northland Power with strong revenue outside of North America.

In terms of performance, Northland Power, at least over the last year and a half, has not disappointed. Much like other Canadian renewable energy stocks, it was hit hard in the correction at the start of 2021. However, it held on better than most and didn't witness the volatility that many small/micro cap renewable companies did.

The company currently has a yield in the high 2% range and a payout ratio in terms of earnings of 104%. This payout ratio looks high, however the dividend is well covered by cash flow at 16.09%.

Northland Power's lack of dividend growth is one of the primary reasons it falls short on this list. Especially considering the company has ample room to grow it.

But, don't let that fool you, this is still a very strong renewable energy stock, one that has actually faced some recent weakness due to seasonal and temporary issues with its windfarms.

NPI.TO 5 year performance vs the TSX:

TSE:NPI vs TSX Index

2. Brookfield Renewable Energy Partners (TSX:BEP.UN)

Brookfield Renewable Partners

Brookfield Renewable Energy Partners (TSX:BEP.UN) is another pure-play renewable company and is one of the fastest growing by a landslide. The company is expected to grow earnings at a rate of nearly 40% over the next 5 years.

To add to this, the company is already the fastest growing pure-play renewable energy company in the country with a compound annual growth rate of 10.71%.

The company has over 20,000 MW of capacity and just shy of 6000 facilities in North America, Europe, Asia and South America.

The company's goal is to deliver shareholders annual returns in the 12-15% range. Thus far, it has more than accomplished its objective.

The company's portfolio consists of wind, solar, storage facilities and distributed generation and most importantly, hydroelectric, which makes up over 62% of its portfolio. An interesting note, this is down from the 75% that was noted last time we updated this article, a sign the company is diversifying its asset base.

Back in March of 2020, the company entered an agreement to buy Terraform Energy in an all stock deal. Why are we still mentioning this year later? Well, this purchase made Brookfield Renewable Partners the biggest pure-play renewable energy company in the world.

The company pays a generous dividend, north of 3%, and the dividend accounts for only 80%~ of funds from operations.

Management has stated they want its dividend to grow by 5-9% annually over the next 5 years. This would be an increase over its past results, so it will be interesting to see how the company performs.

Renewable companies faced a significant correction in 2021, which will be evident in the performance chart below. In our eyes, all this did was make Brookfield Renewables more attractive.

In our last update of this piece, we had stated that valuation was one of the main reasons it was number 3 on this list. Well, we've bumped it up to number 2 now due to its recent correction.

The company also set up a Canadian corporation, BEPC, to be the "equivalent" to the partnership BEP.UN. This is primarily a tax consideration, one that you'll need to figure out on your own which one is best for you.

Brookfield Renewables 5 year performance vs the TSX:

TSE:BEP.UN Vs TSX Index

1. Algonquin Power (TSX:AQN)

Algonquin

Algonquin Power & Utilities (TSX:AQN) is a diversified generation, transmission and distribution utility company. The company provides rate regulated natural gas, water, and electricity generation, transmission, and distribution utility services to over 1 million customers in the United States and Canada.

The company is engaged in the generation of clean energy through its portfolio of long term contracted wind, solar and hydroelectric generating facilities representing more than 1,600 megawatts (MW) of installed capacity.

There are a few things we really like about the company, but there's one thing that stands out with Algonquin, and that is its growth rates.

Algonquin is one of the fastest growing utility companies on the TSX Index. In fact, the company grew earnings by 33% in 2020, and prior to a very unfortunate one-off event in Texas that ended up costing the company $55 million, analysts expected strong growth in 2021 as well.

They've changed their tune now, and overall it will be a flat or even shrinking year for Algonquin. But, it's important to understand that this is very temporary, and we'd expect the company to get back to growth in 2022. In fact, the company expects to inject $9.4B USD into capital projects through 2025, adding more than 1.6 GW of capacity.

2021 aside, you're not going to find many utility companies on the index that provide this kind of growth, especially one that offers a rock solid dividend to go along with it.

Algonquin, at the time of writing, yields north of 4%. In terms of earnings this works out to be a payout ratio of around 40%.

With a dividend growth streak of 10 years, the company has proven to be capable of consistently raising its dividend. In fact, Algonquin is one of the few Canadian Dividend Aristocrats that raised the dividend during the COVID-19 pandemic.

Algonquin is a top 5 holding in one of Canada's biggest utility ETFs, and pays its dividend in US dollars, providing an even more attractive proposition to Canadian investors.

AQN.TO 5 year performance vs the TSX

TSE:AQN vs TSX Index


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