Asset bubbles are forming in Internet and social media stocks, as well as in the housing markets of London and China, according to the latest Bloomberg Global Poll.
Eighty-two percent of the responding investors, analysts and traders who are Bloomberg subscribers, said Internet and social media shares are either at or near unsustainable levels. Seventy-three percent said the same of Chinese house prices and 69 percent identified London homes as already or almost frothy. They were less concerned about US housing, with 31 percent seeing prices approaching or at excessive levels.
“Liquidity is still plentiful and central banks are reflating,” said London-based Societe Generale SA strategist Kenneth Broux, a poll participant. “Property is the obvious bubble candidate.”
The survey sounds the alert that five years since a credit- driven financial crisis, investors are spotting speculative excesses in a potential challenge to their portfolios and policy makers. Exuberance is more muted elsewhere as those surveyed tempered their optimism about the outlook for the world economy, equities and US assets since the last survey in September.
In the same month that Twitter Inc’s stock almost doubled from its market debut, 49 percent of those responding said Internet and social networking stocks are already in a bubble and 33 percent said they are on the verge of one. The Solactive Social Media Index has soared 57 percent in the last year.
As for property prices, those in China are viewed as unsustainable by 46 percent, and another 27 percent said they are close to being so. In London’s housing market, bubble conditions are seen by 41 percent and approaching them by 28 percent.
New home prices in China’s four major cities rose last month by the most since January 2011, while housing sales jumped 33 percent in the first 10 months of this year. In the UK capital, luxury homes will rise 23.1 percent through 2018, according to a report this month by broker Savills PLC.
Almost one-third of those contacted said US Treasuries are in a bubble and 27 percent said credit markets are at unsustainable levels. Record-low interest rates and asset-buying by the US Federal Reserve have helped restrain the 10-year US Treasury bond yield, with its high of the year barely at 3 percent and at 2.8 percent yesterday.
While only 20 percent said global stocks are in bubble territory, another 45 percent said they are close to being there. The MSCI World Index is up 26 percent from a year ago and this week reached its highest since 2007.
There is less concern shown toward emerging markets, where only 11 percent see stretched valuations and 58 percent said no bubble is forming.
Commentary about possible bubbles is mounting after monetary policymakers injected a wave of liquidity into the world economy to battle the 2009 recession and then drive the recovery. A sluggish rebound in economic growth has led to suggestions the easy money is instead finding its way into asset prices. McKinsey & Co’s research division calculated in a report published last week that major central banks have injected almost US$5 trillion to fight the financial crisis and its after-effects.
Seventeen percent said the world economy is deteriorating, the most since May, although about half maintain it is stable. US investors were the most pessimistic: more than one in five said the world economy is getting worse, compared with 15 percent of Europeans and 13 percent of Asians.
Thirteen percent of investors said the US economy is weakening, the most since January, while about a third called it stable and 54 percent said it is improving. US investors were again more downbeat.
The Organisation for Economic Co-operation and Development (OECD) this week cut its global growth forecasts for this year and next as emerging-market economies cool. The world economy will probably expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said.
‘BIG LOSS’: This year might see the last generation of Huawei’s Kirin chips, as their production would stop next month because they are made using US technology Chinese tech giant Huawei Technologies Co (華為) is running out of processor chips to make smartphones due to US sanctions and would be forced to stop production of its own most advanced chips, a company executive has said, in a sign of growing damage to Huawei’s business from US pressure. Huawei, one of the biggest producers of smartphones and network equipment, is at the center of US-Chinese tension over technology and security. Washington last year cut off Huawei’s access to US components and technology, and those penalties were tightened in May, when the White House barred vendors worldwide from using US
’WHITE BOX’: The open platform would give local firms access to Cisco’s cloud-based mobile network to develop 5G telecom equipment and tap into the global market The Ministry of Economic Affairs (MOEA) yesterday introduced a new 5G “open lab” in collaboration with US-based information technology and networking giant Cisco Systems Inc to address the rapidly growing “white box” 5G networking equipment market. The open lab will be a platform where Taiwanese manufacturers can access Cisco’s cloud-based mobile network to develop their own 5G telecom equipment, such as small-cell base stations, network switches, modems and Internet of things (IoT) devices, a ministry statement said. The open platform would allow Taiwanese manufacturers to tap into the lucrative 5G telecom equipment market, which was previously monopolized by Nokia Oyj, Ericsson AB
Nintendo Co is raising its target for Switch production to about 25 million units this fiscal year, people familiar with the matter said, as the ongoing COVID-19 pandemic keeps lifting demand and component shortages ease. The Kyoto, Japan-based company, which in April hiked orders to 22 million units by March next year, is asking partners to tack on another few million units, said the people, who did not want to be identified discussing internal goals. Assembly partners plan to work at maximum capacity through December. The new production target suggests that Nintendo is likely to outperform its Switch sales forecast of 19 million
CORPORATE SCANDAL: Cathay Life has invested NT$13.3 billion in Bank Mayapada since 2015, but the latest loss of NT$8.8 billion has completely written off its investment Cathay Life Insurance Co (國泰人壽) yesterday said it would recognize an investment loss of NT$8.8 billion (US$298.1 million) in Indonesia’s Bank Mayapada Internasional Tbk PT due to concerns about the lender’s operations amid a corporate scandal. The company said it would revise its earnings result for June, from a net profit of NT$6.52 billion to a net loss of NT$520 million, its first monthly loss over the past 17 months. After booking an investment loss of NT$5.2 billion in Bank Mayapada earlier this year, Cathay Life has so far recognized total investment losses of NT$14 billion in the lender, executive vice president