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On March 4th, Daiwa Research reported that it expects Baidus (09888.HK) Kunlun Chip IPO valuation to be higher than its peers due to its larger revenue scale and better profitability. Currently, Kunlun Chip derives most of its revenue from external demand, with major clients including Tencent and a large telecommunications operator. Management stated that chip production capacity constraints are not a short-term concern for the company, as Kunlun Chip has secured sufficient supply to support development over the next two years. The bank reiterated its "Buy" rating on Baidu with a target price of HK$175 and maintained its earnings forecasts for this year and next. Recent catalysts include the Kunlun Chip listing and details of the 2026 dividend plan.Bank of Japan Governor Kazuo Ueda: It is crucial for the government to ensure market confidence in long-term fiscal sustainability.On March 4th, Jefferies Group released a report estimating that memory chip costs will surge 3.6 times this year for the vast majority of smartphone OEMs. Therefore, the bank estimates that Xiaomi-W (01810.HK) smartphone sales will plummet by 55%, partially offset by a 31% increase in average selling price. The main cuts are concentrated in mid-to-low-end phones, and approximately 60% of Xiaomis shipments have an average selling price below US$150. The bank forecasts that Xiaomis smartphone gross margin will drop by 7 percentage points this year to a record low of 4%. Coupled with a downward revision of its gross margin forecast for Xiaomis automotive business, the banks revenue and EBIT forecasts for Xiaomi this year are 16% and 34% lower than its market peers, respectively. Using a sum-of-the-parts estimation method, the bank drastically cut its target price for Xiaomi from HK$43.36 to HK$30.45, a reduction of nearly 30%, maintaining a "hold" rating, citing overly high market expectations for the company and the downside risk to earnings from persistently high memory costs.March 4th - Magdalene Teo, a fixed-income analyst at Julius Baer, stated that risk premiums, as measured by credit default swap (CDS) spreads, have widened due to increased uncertainty regarding the trajectory and duration of the Middle East conflict. CDS spreads in Asia are rising because prolonged disruptions to global shipping routes could exacerbate inflation and other problems, leading to tighter financial conditions. Teo stated, "The combination of rising oil prices and a stronger dollar is not an ideal situation for many Asian economies."Bank of Japan Governor Kazuo Ueda: Compared to the past, companies are more actively passing on costs affected by exchange rate fluctuations, and we remain highly vigilant about this when formulating policies.

Despite growing demand, the price per barrel of crude oil remains below $90

Haiden Holmes

Sep 08, 2022 11:32

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Oil prices rose on Thursday as a U.S. energy watchdog anticipated a minor increase in demand and a decrease in supply until 2023. Fears of an economic slowdown, however, kept prices near eight-month lows.


Prior to a meeting of the European Central Bank, the dollar fell from 20-year highs, easing pricing pressures somewhat.


Brent oil prices, the international benchmark traded in London, rose 1.1% to $88.47 per barrel by 20:56 ET, while U.S. West Texas Intermediate crude oil futures rose 0.8% to $82.59 per barrel (00:56 GMT).


Weak Chinese economic data, interest rate hikes, and an unexpected surge in U.S. inventories fueled fears of a demand slowdown on Wednesday, when both contracts dropped to their lowest levels since January.


In its monthly Short-Term Energy Outlook report, the U.S. Energy Information Administration (EIA) forecasts that global crude demand will increase in the fourth quarter of 2022 and the first quarter of 2023, as rising natural gas prices prompt countries to switch to heating oil during the winter months. This year, the watchdog also forecasts a drop in U.S. oil production, a trend that is expected to be supportive of prices.


As Europe confronts an energy crisis triggered by Russia's suspension of a crucial natural gas pipeline to the bloc, demand may increase.


The EIA expects Brent oil to average approximately $98 per barrel during the fourth quarter. It also forecasts a decline in global petroleum demand between 2022 and 2023.


Numerous indicators of weak demand exert near-term pressure on oil prices. As economic growth in the world's top oil importer slowed to a crawl in August, China's crude imports decreased by about 10%, according to figures released on Wednesday.


In addition, the markets worried about a rise in global interest rates, which tends to reduce spending and reduce petroleum demand. On Wednesday, Canada raised rates to their highest level in 14 years, while the ECB will increase rates for the first time in 11 years.


In addition, the American Institute of Petroleum reported last week's unexpected increase in U.S. crude stockpiles, heightening concerns about a slowdown in global oil consumption. However, the drop in fuel stocks indicated that consumer demand remained healthy.


Traders anticipated that rising interest rates and weak economic growth would weigh on petroleum use, resulting in a fall in oil prices from earlier this year's highs.


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