—— China Property Bonds Rebound Sharply; UK Outlook Drags Down Pound; Chinese Households Set Savings Record; Lazard Launches Venture Advisory Arm; Eli Lilly’s Weight-Loss Drug in High Demand; NYSE Sees Mysterious Selloff; Michelin Chef Moves Into Former Sony HQ
1. China Property Bonds Rebound Sharply
Over the past two months, the prices of bonds issued by Chinese property developers have rebounded significantly, showing that government support measures are working.
China’s high-yield dollar bond index has recovered nearly 50% from its November lows. Bonds from top developers such as Country Garden have exited “distressed” territory and returned close to par. As the macroeconomic outlook improves, many foreign investors are gradually returning to the Chinese property bond market.
In recent months, the Chinese government has loosened restrictions on developer loans, and strict COVID policies have ended. External confidence in the recovery of Chinese developers has been rising.
This month, property developer Dalian Wanda successfully issued a $400 million dollar-settled bond—the first in over a year—and used the proceeds to repay previous debt.
A clearer macro outlook is highly favorable to Chinese developers.
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2. UK Outlook Drags Down Pound
Recently, the UK economy has begun to show increasing signs of recession, raising concerns that the Bank of England’s rate hikes may soon lose their effectiveness.
Meanwhile, many British companies report that production is falling at the fastest pace since the pandemic began, painting a bleak picture for the economy. As a result, the pound fell as much as 0.6% against the dollar today, leading declines among the world’s top 10 currencies.
Roberto Garcia, Head of FX Strategy at BBVA, said the UK faces labor strikes, worker shortages, a soaring cost of living, and fiscal tightening. His firm remains bearish on the pound.
The Bank of England is scheduled to meet again on February 2 and is expected to raise rates by another 0.5%.
The UK’s latest economic data came in worse than expected, prompting capital outflows and a sharp depreciation in the pound.
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3. Chinese Households Set Savings Record
According to the latest data from the People’s Bank of China (PBOC), Chinese households may have saved a record $2.6 trillion (RMB 17.8 trillion) in 2022, significantly higher than RMB 9.9 trillion in 2021.
Many believe that following China’s reopening, consumer spending will rise and help revive both the domestic and global economy. Last week, the IMF announced it would raise its outlook for China’s growth.
However, analysts at CICC believe that part of the increase in savings is due to investors selling poorly performing products. Additionally, RMB 1 trillion in savings came from natural wage inflation rather than deliberate saving behavior.
This suggests that even though the total savings hit a record high, the potential “revenge spending” by Chinese consumers may amount to only RMB 1.5 trillion.
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4. Lazard Launches Venture Advisory Arm
According to the Financial Times, boutique investment bank Lazard is forming a six-person team to advise fast-growing startups, aiming to expand into the private capital space.
In recent years, the venture capital market has cooled significantly, with tech valuations collapsing due to rising interest rates and economic uncertainty. As a result, venture firms have become more cautious and selective.
Lazard executives believe offering services to startups provides a way to diversify beyond traditional M&A and IPO advisory and generate new revenue streams.
Boutique firms like Lazard often rely heavily on deal fees from M&A activity, with some deals bringing in tens of millions of dollars. To broaden its revenue base, Lazard also launched a geopolitical risk advisory service for corporate leaders last year.
In 2022, Lazard’s asset management arm FNZ raised $1.4 billion at a $20 billion valuation.
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5. Eli Lilly’s Weight-Loss Drug in High Demand
Pharmaceutical company Eli Lilly announced today that it plans to invest $450 million to expand its manufacturing plant in North Carolina and double production of its weight-loss drug Mounjaro by the end of the year.
Mounjaro works by mimicking incretin hormones to create a sensation of fullness. It has been approved for treating both diabetes and obesity.
The drug can reportedly help users lose up to 15% of their body weight. Analysts at Cowen estimate that Mounjaro could generate $30 billion in annual sales by 2030.
With three-quarters of American adults considered overweight, Mounjaro and rival drug Wegovy have repeatedly sold out, indicating surging demand.
Driven by strong sales of Mounjaro, Eli Lilly plans to expand capacity at its North Carolina facility.
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6. NYSE Sees Mysterious Selloff
At the opening bell this morning, a wave of sell orders hit the U.S. stock market, causing stocks such as Wells Fargo and Morgan Stanley to plummet.
Wells Fargo’s stock dropped from $45.03 to $38.10, while Morgan Stanley’s fell from $97.13 to $84.93. Both later rebounded to prior levels.
The New York Stock Exchange (NYSE) has not offered an official explanation, but the unusual price swings suggest possible trader error during order placement.
Other affected stocks included Walmart and McDonald’s, which all fell by at least 12% before being temporarily halted.
The NYSE gave no official explanation, but price action suggests the sell-off may have been caused by input errors.
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7. Michelin Chef Moves Into Former Sony HQ
According to the New York Times, Simon Kim, owner of Michelin-starred Korean BBQ restaurant Cote, plans to open a new three-star Michelin restaurant at 550 Madison Avenue, the former Sony headquarters.
The yet-to-be-named restaurant will occupy 15,000 square feet on the building’s ground floor.
In 2016, the Olayan Group purchased the 850,000-square-foot office tower for $1.4 billion. The current occupancy rate is about 50%.
Olayan is overseeing a $300 million renovation of the building, which includes upgrades to retail space, the ground-floor façade, and a public garden.
In 2017, Kim opened Cote in Manhattan’s Flatiron District. The steakhouse–Korean BBQ fusion concept quickly gained popularity and earned a Michelin star.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.