Jack Ma's Empire is under investigation by Beijing's SAMR.

Anbang(安邦) Insurance and HNA Group, which were disliked by the Communist Party, ended up with the worst result in the past. This time, Jack Ma’s Alibaba empire has crossed a line that the party would not allow. It is not sure whether the blade will stop at Alibaba or not. There might be possibility that Beijing’s State Administration for Market Regulation(国家市场监督管理总局) will continue to regulate further on other Internet giant companies such as Tencent. Creating an atmosphere of excessive fear can reduce the vitality and motivation of the firms, so the regulators might control the degree; however, we should bear in mind that there is nothing as important as the authority of the party.

State Administration for Market Regulation (SAMR) has reported to investigate on the antitrust over the practice called “二选一”, which means “choose one out of two (platforms)”. The practice is to force sellers who has been operating on Alibaba platforms such as T-mall and Taobao to stop a business relationship with a competitor, namely, Pinduoduo or JD.com. This is to head off the rise of the competitors and keep its dominance of e-commerce market.

SAMR has stated the word ‘etc(等)' to suggest that the charges are not limited to one. It means that other charges have already been detected or that the charges will rise further in the future investigation process. Alibaba said it would comply with the investigation.

In addition, the People's Bank of China and other financial regulators have decided to summon Alibaba's financial affiliate, Ant Group. 

The People`s Bank of China said in a statement that it will soon call in Ant Group for investigation. The statement included that the regulator would supervise Ant Group in accordance with market principles and laws to implement fair competition, protect consumers' legal rights, and regulate the operation and development of financial services." China Banking and Insurance Regulatory Commission (CBIRC) and China Securities Regulatory Commission (CSRC) will participate in the investigation. In a statement posted on WeChat, Ant Group pledged to strictly abide by the authorities' regulations.

CBRIC and CSRC are the state agencies that the firms and financial companies do not want to confront; meaning that issue should be regarded very seriously.

The Communist Party proposed "strengthening anti-trust regulations and preventing reckless expansion of capital" as one of the eight major projects in the economy meeting. They also stressed that "anti-trust and unfair competition prevention are basic conditions for improving the socialist market economy system and promoting quality development."

Thriving to end monopoly

The number of commercial transactions through Alibaba is astronomical. The annual transaction history of customers is an extremely useful big data. Based on this, Ant and Alibaba established DB and sold joint loans with banks. Ant has collected commissions by providing credit information to local banks with weak CB (Credit Bureau) functions. In the case of joint loans, if Ant is responsible for about 2-5 of the loan, the local banks partnered with Ant will pay the remaining 95-98. Ant Group can play big money with a small amount of money. As such, local banks may lose their customer base and their loan margins decrease by paying commissions to Ant Group, but it is difficult to give up Ant's platform to increase customers and remain their business.

Although Alibaba has been revered as an icon of innovation, without help of Great Firewall policy, Alibaba would not be this giant figure. In other words, Alibaba, Tencent, and JD.COM were able to succeed thanks to the authorities' establishment of ecosystems that are difficult for U.S. or European competitors to reach on Chinese market.

Anyways, with the money raised, IT giants began to dominate mainland’s startup market in the last five years. Alibaba has been raising funds through various ways to the Chinese startups for further tech innovations. It was big chance for startups to accept the investment from the biggest Chinese e-commerce company. That is how the first generation of IT giants have manipulated the ecosystem of startup companies.

Well, many will say this would not be a big issue. If it is legal, then the funds to the startups will be the energy for innovation.

However, the Party was not pleased with what Alibaba was doing. IT giants like Alibaba are growing into "Big Brothers" that are increasingly hard to control. In China, "big brothers" should be the only one, Communist Party.

Other IT giant companies could be punished along with the investigation. A fine can be an example of the penalty but the style of the Party is traditionally beating ‘the one example’ which can show how the Party is a strong governor. Jack Ma’s empire will likely get hurt this time. The world biggest IPO was suspended, so it would not be surprising to see any disposition.

As the People's Daily, the party's official newspaper, commented, "The strengthening of anti-trust in giant companies has a noble concept of easing the monopolistic structure and protecting the profits of small and medium-sized businesses (SMEs). The e-commerce ecosystem, which is dominated by a few dinosaurs, is disadvantageous to traditional (offline) retailers and small sellers.

Source: Nikkei Asia, WSJ, Global Monitor

https://asia.nikkei.com/Opinion/Jack-Ma-punishment-a-lesson-for-China-s-other-tech-bad-boys

https://www.wsj.com/articles/beijing-sends-alibaba-an-unwelcome-christmas-present-11608806388?mod=searchresults_pos1&page=1

https://www.globalmonitor.co.kr/view.php?ud=202012241734505431daadac7a4c_41

Why was Rupiah the most depreciated currency in the world during COVID-19?

 Bank of Indonesia

Indonesia’s central bank has cut its benchmark interest rate (targeting seven-day repurchase rate) at 3.75 percent for two consecutive months. Indonesian bank has reduced its policy rate by 125bp in just 2020 after pandemic hits. Indonesia has chosen untraditional way of monetary policy in the use of tactics of directly financing the government’s fiscal deficit. This is unlike other central banks since they buy the bonds form secondary markets such as commercial banks or financial institutions (for example: Blackrock or PIMCO in U.S.) The direct government bond buying from central bank was possible after a panel of people in parliament recommended a revision to the central bank law.

Investors concern whether the government will have a larger role in the central bank’s policy decision. In the 1999 Central Bank Act, BI have mandates to maintain currency stability and manage inflation by supporting economic growths and jobs. However, as government takes most of the part in central bank’s decision-making, central bank won’t have full right in setting interest rates and issuing new monetary policy.

Rupiah

The rupiah has declined almost two percent this month and more than 6.5 percent in just 2020. The performance of Rupiah was the worst in Asia. I can think of two factors that make Indonesian currency weaken this year: fear of pandemic and BI’s super-dovish stance.

A surge in pandemic in Jakarta has added pressure on depreciation. As foreign investors worry about the fundamental of Indonesian market, they had to cash their assets and exit from there. In the process of exit, investors need to exchange Indonesian Rupiah to their native currency. If demand falls, then the value falls which made Rupiah into devaluation. BI is prompting intervention in the currency market to prevent the outflow of their own currency.

BI has pledged to buy $27 billion of government bonds in the primary market in the condition of relinquishing interest payments as one-off purchase in the reason of $40 billion fiscal expenditure for countermeasure against pandemic in 2020. The yield on 10-year Indonesian government bonds was 7.2%, but BI promised to buy it in higher price exempting interest payment to 0%. This means central bank is printing more money than its actual value. This will lead to more liquidity environment which is vulnerable to their currency value.

Slow Recovery

Recent economic indicators are sending risk signals on the pace of recovery in Southeast Asia's largest economy. Manufacturing and consumer confidence and retail sales data were falling, and exports and imports declined more than expected in August. Dis-inflationary circumstances were caused by sluggish domestic demand in both July and August. Inflation rate has shown a little uptick from last year which is 1.32%. (BI’s target is 2%-4%)

“Finance Minister Sri Mulyani Indrawati said Tuesday the economy could suffer a more severe contraction in the third quarter than previously forecast due to the renewed social curbs in the capital. For the full year, she expects economic growth at the lower end of the government’s outlook, which ranges from 0.2% growth to a 1.1% contraction”, Bloomberg reports.

Central banks in emerging market

Covid-19 has hit worldwide economy; global trade has begun slowing, great lockdowns interfered outdoor travels, corporates had no choice but to furlough workers which led to the rise of unemployment rate. Financial market has also been in a fearful strike as investors worry about their plunging assets. At least, expectation of strong economic growth from advanced countries is good news as many believed that the worst had passed. Their stock market quickly recovered from the bottom point recorded in March.

However, emerging market has different story with the advanced countries. Countries like Indonesia, Philippines, India, Russia, Brazil, and Turkey are in economic crisis as pandemic has been spreading rapidly. Central banks like India, Indonesia, or Philippines have eased their monetary policy which can lead to downwards on their credit ratings. For example, Bangko Sentral ng Pilipinas, the central bank of the Philippines announced that it would implement 300 billion Philippine peso (about $6.2 billion) government bond repurchase agreement with the country's Treasury Bureau for six months at most. Excessive stimulus programs like sovereign debt purchases in response of pandemic recession, can damage central bank’s future cuts and tapering and monetary authorities can lose credibility.

S&P Global concerned that the purchase program does not only result to an inflation problem but also lead to debt issuance surge and currency depreciation. "Sovereigns with less credible public institutions and less monetary, exchange rate and fiscal flexibility have less capacity to monetise fiscal deficits without running the risk of higher inflation”, says the analysts. "This may trigger large capital outflows, devaluing the currency and prompting domestic interest rates to rise, as seen in Argentina over parts of the past decade." S&P has downgraded more than 50 government ratings as level of debt is are set to continue of spiral.

Source: Bank of Indonesia, Bloomberg, The Economist

https://www.bloombergquint.com/onweb/bank-indonesia-seen-on-hold-as-rupiah-pressured-decision-guide

https://www.bi.go.id/

Global Monitor

Jumia: rise, fall and opportunity. (Africa)

As we think of e-commerce firms or platforms, we may think Amazon and Alibaba are the most influential companies in the world. In U.S, Amazon is the most dominant company in terms of e-commerce platforms, operating 1p (first party) and 3p (third party) which compete each other. In China, Alibaba dominates the online retail market providing best service to the consumers regarding delivery, price, and its identical entertainment-based marketing. However, there are valuable companies other than the two I mentioned above. One of example of prospering e-commerce company, Mercado Libre, is based in Argentina which dominates South American retail market. Other example is the e-commerce platform called Jumia Technologies which is operated in African market. I personally found this company very attractive as online shopping market in Africa has great potential to grow more than what we think.

What is Jumia

Jumia is considered as “Amazon of Africa”, founded in 2012 by Jeremy Hodara and Sacha Poignonnec, previous McKinsey consultants. It is the largest African e-commerce platform which has wide variety of products and categories such as electronics and fashions. Jumia also provides logistics and payment services which make user-friendly environment to African consumers. They have about 50,000 local partners, 81,000 sellers, 6.8 million active users (previous year was 4.8 million), and more than 5,000 employees all over Africa (which is mostly furloughed or fired recently). 

Rise and fall

Moreover, Jumia is the first African tech companies listed in New York Stock Exchange in April 12th 2019. The IPO of the company was a great hope for African firms enough to have a dream to be traded in America. The share rose about 75% on its first day of listings and reached the market capital of 3.9 billion dollars. However, in May of 2019, Jumia had suffered from the short-seller Andrew Left of Citron Research who claimed Jumia as “securities fraud”. The share price plunged half in a week after the report of high possibility of fraud. In April 2020, Rocket Internet, German investment firm, which owned 28% of Jumia, announced to sell the shares. 

Opportunity

As a rise of COVID-19, more demand through online has increased. The worldwide e-commerce platform was in boom as consumers started to stay at home. Africa was not exceptional. Africa is the continent where online retail market is growing. They have 52 different countries which consist of potential 1.3 billion consumers and 17 million SMEs/merchants for online shopping business. Mobile market in Africa is expected to half-double in leading countries over the next five years which means over 300 million smartphones will be added to the market. 

“There is enormous opportunity. In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050.”   - Patrick Collison

Source

https://ecommerceiq.asia/africa-ecommerce-jumia/

https://www.iafrikan.com/2020/04/03/jumia-rocket-internet-new-york-stock-exchange-wall-street-sale-african-startup/

How will Biden Administration affect global trade?

Joe Biden (Democratic Party) was selected as US president in November 2020. U.S economy has been stagnant since the emergence of COVID-19, which diminished purchase power of overseas supplies. However, if the US economy recovers as economic stimulus measures reach agreement, the demand from U.S. consumers will increase, which is good news for global economy and trade. Nevertheless, due to the increase in monetary base and the velocity of dollar supply, it is highly likely that Biden's major pledges will act as a pressure to appreciate other currencies (only Turkish Lira is depreciating its value). There is also high possibility that Biden will maintain a strong policy toward China to protect U.S. industries, which is in need for other countries to monitor and prepare.

Dealing with China

Similar to the previous Trump administration's trade policy, Biden administration will also show strong stance towards China in terms of trade through strengthening solidarity with the alliance. It is expected to respond strongly to unfair trade practices in China in collaboration with allies and expand to areas such as human rights, labor, and the environment (climate change).

Protective Trade Measures

The possibility of withdrawing tariffs against China and Article 232 measures imposed by the Trump administration is expected to be low, and import regulatory measures such as anti-dumping and countervailing duties are expected to continue to protect domestic industries.

Trade Agreement 

It is a position that it will not proceed with a new trade agreement immediately after election, and even if a trade agreement is promoted, there is a high possibility that the Democratic Party will demand strengthening of requirements such as labor and environment provisions traditionally emphasized.

These three factors are the position that the United States will lead the world trade order and rebuild the leadership of the United States through multilateralism and restoration of trust with allies.

How will these affect to the global trade? The recovery of the US economy through expansion of stimulus package and rules-based trade policy are expected to have a positive effect on global trade, but there is a need for continuous monitoring of disputes between the US and China and fluctuations in exchange rates and oil prices, and protective trade measures (Buy American). 

To conclude the existing concept of US-China conflict remain unchanged. Unlike Trump's unpredictable and extreme tariff wars, trade policy with China is likely to become an imprisonment for China through coalitions with allies. Therefore, the trade dependent country like Japan, Korea and Taiwan should pay close attention to Biden's economic pledges and the process of industrial protection policies.

How should we prepare for rapidly changing labor market?

What would be the keyword that describes the incident in 2020? A few might answer Presidential Election in U.S. is the most significant issue in this year, others will answer the conflict between U.S. and China. But majority will indicate COVID-19 as the biggest issue in 2020 that happened world-widely. In the first half of 2020, the major concerns that investors had was about how to respond to the pandemic; the second half was more of preparing post-pandemic life. 

Pandemic is just a trigger 

Pandemic has accelerated the structural shift that were already been planned throughout 2010s. Globalization on service sector especially on information technology, finance or investment has been speeding up whereas international transfer of goods and people has diminished. As lock-down was implemented to countermeasure against the pandemic, people started to stay at home. The demand on in-house service surged as indoor time spending increased. Consumers started to shop online through e-commerce platforms, food delivery was in high demand, and needs for stay-at-home device such as laptops, projector screens and home training equipment were inevitable. The change does not only apply to the lifestyle, but also the frame of education and work.

Working trend now

The article "After the Pandemic, a Revolution in Education and Work Awaits" written by Thomas Friedman shows how much the education and work trend will change according to the spread of COVID-19. The border between employers and employee will blur. Why? Video conference platform, Zoom has been one of the issue during 2010. In fact, Zoom was the only major company which has profit among the firms which were listed public in 2019. This is the sign that remote workers have increased significantly due to the great lockdown. In New York Times, staffs in 1990s had to work at office, where as they are now working at home. They are both full-time workers but the working environment has shifted significantly! Unwanted job status shift to freelancer was inevitable as furloughs were progressed from their own companies.  The place we work is not a considerable issue now. The frame has changed more than we think!

In the future

Many job-seekers are young generations worry about gradual job decrease due to development of artificial intelligence and automated robot systems. It is true that AI can replace the jobs which had less productivity to save more time. As shareholders require more earnings to the corporate, employers may lay-off more staff in need to secure cash and invest on something more profitable which can be seemed to lead more of unemployment rate. However it is not true. AI would not take the job, instead will create more of work. 

Luddite fallacy

Do you remember the incident in the 19th when industrial revolution was on the movement? To explain the background, The Luddites were a group of English textile workers. It is found that they were violently destroyed as new machines were supplied. People started to worry that the rise of new machines will take over the power of labor market. However, the new technology did not lead to overall unemployment in the economy. Somehow, it destroyed the existing jobs with low skill, however, the new demand surged as technology enhanced. This is called the Luddite fallacy that new technology creates new field of jobs. 

Future talents

As mentioned above, AI and automated machines will replace the job with low skills. This means that jobs with low barrier will gradually replaced by automation. The new jobs will emerge as technology develops. Competent workers will be in the demand to operate the firm efficiently. The trend of staff working permanently in only one company will slowly fade away as need of new ability rise. Workers or job applicants might change the work frequently. In order to be suitable for the company, people need to adapt to new technology and learn frequently. Learn-and-work is not applicable in the recent jobs; each applicant should have learning ability by themselves in using their private time. 

The future education in university or college will also change its position. As technology and demand of consumers are  constantly developing, university should be the place for nurturing students to be ready-workers in any environment. The studies in university should be more practical and useful in their future career and jobs. The workplace is not for learning or studying. It is to prove themselves how competent they are to accomplish their mission. The trend is rapidly changing and demand for adaption in new technology is skyrocketing. Employers will change employees more often, and employees will change the jobs very frequently by demand in new skills. That is what I think the labor market will be in the future. 

Source: NYT

https://www.nytimes.com/2020/10/20/opinion/covid-education-work.html?searchResultPosition=1

Source: Luddite Fallacy

https://www.economicshelp.org/blog/6717/economics/the-luddite-fallacy/

Market scenario when Democratic Party sweeps [Blue Wave].

As the US president, one third of the Senate and the entire House of Representatives comes to a close (November 3^rd, 2020), a survey found that Democratic Party candidate Joe Biden continues to lead the race against Republican candidate Donald Trump by big difference according to CNN. Reportedly, in a poll of voters who are willing to vote, Biden was leading Trump 54% to 42%. It was analyzed that the gap between the two had been the largest for 20 years. However, we do not know whether the poll is exact or not due to many reasons as some insist CNN is part of Democratic Party supporter. Forecasting which party will take over White House and Congress is fairly impossible. But the guesses of market direction are emerging as polls indicate that Democratic Party is about to sweep.

Bond Market

The scenario that can cause the greatest volatility in the bond market in the short and long term is when Democrats occupy both the White House and the U.S. Congress. If this scenario is comes to reality, the US 10 year Treasury is expected to surge creating bear steepening yield curve. In order to cover the 2 trillion +a stimulus plan, more fiscal budget is needed. Therefore, the government will likely to raise tax and issue additional treasury. Therefore, as supply of government bond increases, the more interest rate is needed to raise the fund for stimulus package.

Stock Market

Meanwhile, a steep rise in Treasury yield is expected to have a negative impact on the US stock market. If tax hikes and new taxation are implemented as Democratic Party's pledge, it will lead to ‘crowding-out effect’ with investors in risk-off stance and a decline in corporate investment. However, there is possibility that stock market would not fall very sharply due to hope in support of policy mix; combination of monetary and fiscal policy. Since the liquidity environment is being floated, the risk of the crowd out effect is not very big deal. The outlook for the stock market is quite mixed due to many possibilities.

Currency Market

The dollar has been weakened mainly due to three reasons: relatively strong Chinese GDP growth has made Chinese currency attractive, investors are buying Chinese corporate bonds (yields are higher than U.S) as Chinese government is steadily in progress in opening their financial market, and expectation of Democratic Sweep (Blue Wave). This can be quite controversial as many investors think that treasury yield increase, the value of currency rise together. However, the yield only applies to market interest rate (usually 10 year). Since Fed is targeting call money rate (short term interest rate), low chance of strong dollar will likely to appear. Fed will continue increase money supply as more stimulus package is needed, therefore, more chance of inflation will emerge, which means real yields will fall more than nominal yields grow. Please check my blog below.

https://techongstudy.blogspot.com/2020/09/real-yield-is-reason-for-market-mover.html

Global Trade

Candidate Biden and Democratic Party's trade pledge does not differ much from the current Trump administration's trade policy. Candidate Biden pledged to promote trade policy that benefits Americans such as labor market. The policy is to recover domestic unemployment rate deteriorated by COVID-19 and strengthens domestic manufacturing industry in the slogan of 'Made in America' and 'Buy American'. “Economic security is national security”. Biden announced to correct China's unfair trade practices and reform China's structure, which undermines the multilateral trade order. The strong policy toward China is expected to continue regardless of the election results.

Source: Saint Luis Fed 

https://fred.stlouisfed.org/series/T10YIE#:~:text=The%20breakeven%20inflation%20rate%20represents,Constant%20Maturity%20Securities%20(TC_10YEAR).

Source: U.S. DEPARTMENT OF THE TREASURY

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield

Rise and fall of the leaders [reformers] in emerging countries.

The regime has changed when the country was in the middle of economic crisis. French former President Charles de Gaulle pointed out that the great leader emerges through the encounter of exceptional periods in history. From mid 1990s to the early 2000s was known for the crisis in the emerging countries due to their fundamental economic deterioration mostly because of foreign debts. Numerous reformers emerged amidst economic crisis to convert the downturn position into opportunity of gaining popularity. However, there was rise and fall in their regime. Below leaders are the examples of it. 

Vladimir Putin [since 1999, Russia]

While Russia was struggling to escape from the severe financial crisis of 1998, Vladimir Putin was appointed as the Prime Minister of Russia, endeavoring relentless reform efforts, including reducing Russia's debt. With help from Herman Gref (Minister of Economics and Trade of Russia), and Alexei Kudrin (Minister of Finance), Putin led reform and growth of Russian economy, saving budgets from their crude oil exports or investing in new industries. Promoting tax reform along with financial efforts to prepare for recession was also one of the improvements. To reduce corruption, tax types were reduced from 200 to 16 types, and all officials who were involved in tax corruption were fired. However, rise and fall always come. Over the time, politics and policy using populism declines the productivity and the leader tends to become arrogant when he or she takes the power for long time. These factors have a fatal impact on the economy of one’s country, halting reform, and the leader concentrates on his or her power dominance. Putin has fired Kudrin leading to the economic slowdown as commodity price drops.

Luiz Inácio Lula da Silva [2003-2010, Brazil]

Luiz Inácio Lula da Silva, former president of Brazil, took over the regime from Fernando Henrique Cardoso and reformed one’s economy. He was the first president from Worker’s Party. During the times of South American economic crisis of 2002, Brazil economy suffered with a plunge in the Real (Brazilian currency) value and Ibovespa index (stock market) due to hyperinflation. As Luiz da Silver’s election victory in 2002 motivated the early reforms. He appointed Henrique Meirelles (former FleetBoston Financial Bank Chairman) as the president of Banco Central do Brasil (Central Bank of Brazil). The chairman rose the benchmark interest rate by 25% to fight inflation. With economic help from surging price of steel and other products, Brazilian economy has improved tremendously. However, the former president was found guilty of corruption and money laundering in his regime and was sentenced to 12 years of prison on January 25th. 

Recep Tayyip Erdoğan [2003–2014, Turkey]

During the time Turkey was suffering from serious financial crash in 2001, large quantities of Turkish lira were facing massive outflow into U.S. dollars or Euros. This was chance for Recep Tayyip Erdoğan to gain his popularity. He has served as Prime Minister of Turkey from 2003 and contributed to the economic reform by appointing competent economic advisors such as Finance Minister Ali Babacan. The Prime Minister has contributed in reforming pension system, passing laws to privatize state-owned banks, liquidating bankrupt companies more smoothly, maintaining a surplus budget and strengthening the state finances. As a result, the average per capita income will rise by more than $10,000. But it has changed from pragmatic reform to its political power and corruption. In his third term of regime, the practices to create the atmosphere of the Ottoman Empire has led to the corruption and scandal. 

Deng Xiaoping [1989-2002, China]

Amid China had difficulty in economic growth in 1980s, Deng Xiaoping came to power in 1989 and visited New York and Singapore to benchmark their economy which later influenced China’s pragmatic improvement. The Communist Party authorities implemented the market reforms by de-collectivization of agriculture, the opening up foreign investment, and encouragement for entrepreneurs to start businesses. Privatization and contracting out of much state-owned industry was carried out since a large percentage of industries remained state-owned. Lifting of price controls was a major reform in following free market economy. Later In 2001, China joined the World Trade Organization. However, the political repression, including the 1989 Tiananmen Square protests, increased public demand for political freedom that corresponds to the economic freedom he promised to give. 

Others

Colombian President, Alvaro Uribe Velez, elected after two financial crises in 1990. He put effort in the economic growth by restructuring the country's finances and quelling the guerrilla rebellion, which were regarded as an obstacle to national growth. However, his beautiful days did not last long, He has lost the public's trust and failed to succeed in three consecutive terms. Suharto was in regime for 31 years in Indonesia. He has made high growth in 1970, 1980, escaping from poor countries. However, corruption of family and school relations delays were discovered and made riots in Jakarta. General Augusto Pinochet, former Chilean dictator, controlled over hyperinflation, fiscal spending and debt when Chile had struggled with the economy. However, It has been revealed that Pinochet embezzled public money from 1973 to 1990 and took $26 million through arms smuggling. Former President of Argentina, Nestor Kirchner struggled to get out from economic downturn. He has tightened the economic belt in 2005 and the economy slowly recovered. However, in his regime, the details of bribery received from construction and energy companies were released, which made the president in bribery scandal. 

[Columbia, Indonesia, Chile, Argentina]

It is not only emerging country.

Advanced countries such as U.S also have rise and fall of the leader. Ronald Reagan, former president of United States was a symbol of a reformer with economic victory against the Soviet Union, Japan, and Germany. Even though he has suppressed hyperinflation, he could not avoid scandal issue. 

Exception 

Not every leader has rise and fall. There are exceptions. Venezuelan former radical populist President Hugo Chávez Chavez promoted experimental socialism but has laid more economic downturn. However, Lee Kuan Yew ruled Singapore for over 30 years, but his energy for reform has never cooled down. Singapore economy has never been in serious downturn during his regime. Mahathir Mohamad has years achieved economic miracles when he was taking role as Prime Minister of Malaysia. There was no corruption or scandal during his era. 

[Venezuela, Malaysia, Singapore]

Source: Rise and Fall of the Nation [Ruchir Sharma]

Which party is better for the stock market?

Two of presidential debates have been proceeded; the two candidates are preparing for the presidential election on Tuesday, November 3rd. The dollar has been weakened mainly due to three reasons: relatively strong Chinese GDP growth has made Chinese currency attractive, investors are buying Chinese corporate bonds (yields are higher than U.S) as Chinese government is steadily in progress in opening their financial market, and expectation of Democratic Sweep (Blue Wave). As Democratic Party has less philosophy on fiscal soundness (stability), the more hopes on stimulus measures and government expenditures are putting dollar on pressure. However, investors often misunderstands that Democratic Party or Republican Party will help the stock price rise.  However, the direction of stock market is not determined by particular party from either bipartisan. The history explains the reason. 

The S&P 500 index originally began in 1926 including only about 90 shares, so called ‘composite index’. Since the appearance of S&P 500, average annual increase rate of Republican Party was 9.3% while Democratic Party was 14.5%. This may look good for Democratic Party. However, The Great Depression and Financial Crisis was a big factor for stock market deterioration during Republican president. As S&P index started, the Great Depression came in three years as president was Republicans (Coolidge and Hoover). Right after the depression started to fade away the stock market skyrocketed 53% during the first year of Democratic president (Roosevelt). It applies similarly to President Obama as stock market surged about 27% during his first year of president right after President Bush, whose stock performance was -37% in the fourth year. 

Excluding these huge fluctuations, the average annual return rate was close to 11.1% for Republicans and 13.6% for Democrats (In fact, except for Hoover and Roosevelt, the Republican Party has been higher than the Democrats.)

Annual yields during the presidential term

The first year has been 8.1%, 9% for second year, 19.4% for third, and 10.9% for the last year. An interesting pattern is that in year 3, stock prices never had low returns except in 1931. And in the fourth year, the negative rate of return was four times including the financial crisis, but often recorded double digits except for that. 

In the first half (first and second year) presidential term, the rate of return is highly volatile. The negative returns is higher than in years of three and four. Investor’s avoiding legislative risks in the first half is the main reason. The legislative risk gives big impact on the stock market. The legislation contains redistribution or regulatory change in property rights. Politicians push for legislation, saying it can bring about amazing social development such as antitrust law and rules based on populism. The coercive policies are implemented in the first and second year which raises more of risk on stock market. Later, legislation risk decreases in the second half of presidential term.

Why is it divided into the first half and the second half? First of all, the meaning of the word politics is ‘poli’ (many Latin words) + ‘tics’ (blood-sucking ticks). Every president thrives to achieve only goal which is to be re-elected. So, most of legislation should pass the congress in the first or second year. That's why midterm elections haven't always had good results (except George W Bush). Most pass legislation within two years of taking office. After that, they passed less than before, and political risk aversion fell to a low level. On third year, the stock market starts to rise. In the fourth year, the average return is good because of some political activities ahead of the election. C the side effect takes place for extreme situation, but the stock market usually outperforms because strong legislation is not passed.

For example, in the first year of Obama, Health Care Reform was promoted, and in the second year, the Dodd Frank Act was passed. However, in the third year, there were no critical legislation except for raising the limit of government debt.

So what do investors or entrepreneurs think? Usually, they support Republicans since they execute business-friendly campaign as many think Democrats are less business-friendly and stock market-oriented. When the Republican president is likely to be elected in the fourth year, the stock price rose 15.6% per year whereas 6.7% rose when Democratic Party is likely to be president. Meanwhile, in the inaugural year of the Democratic president, the stock market rose 14.9% whereas, Republican President rose only 0.8%. Investors commonly think The Democratic Party condemns Wall Street however, they later change into moderate stance regarding stock market in the election year. Don't make Wall Street rich people angry. In other words, just because the Republican Party is in power does not mean that the stock price will rise significantly or that the Democratic Party will significantly decrease. When it comes to dollar, the dollar weakens on election year when Blue Wave is on expectation as Democratic party prefer more government expenditures. Later, the dollar gains its value. Otherwise, when Republican sweep is anticipated, the dollar strengthen expecting of firm fiscal soundness. However, Republican has fiscal deficit later on especially on the Reagan times. Meanwhile, Clinton times had the record fiscal stability. 

Presidents who were not re-elected

Regarding S&P 500 so far, 14 of the presidents have been re-elected, while Ford, Carter, and George H.W. Bush were the ones who failed. In the case of Ford, except for the election of congress member, he has never won any election. The reason that Ford became a president was because President Nixon resigned attributing to Watergate Scandal. Ford, who was vice president that time, became president. Carter defeated Ford and became president. He was lucky to compete for election with the weakest president. But Carter's misfortune, the misery index (calculated by adding the seasonally adjusted unemployment rate to the annual inflation rate) due to oil shock, and the strongest candidate in the Republican Party's history (Reagan, the greatest communicator), failed Carter's tenure. Father Bush had to fight with a slight recession in the fourth year. He was unlucky because he inherited huge budget deficit from Reagan, the former president. FED hiked interest rates to responded to negative impact of previous president's economic policy. As soon as the term ended, the downturn ended, but the best debater in history, Clinton, appeared in the election race. “It's the economy, stupid,” said Clinton who was elected after the campaign of attributing the fourth-year stock market single-digit growth to economic recession. During the Bush era, the economy was not very bad and even though he won the war, he gave the regime to Clinton. .

Source 1: Stocks for the Long Run [Jeremy Siegel]

Source 2:  Markets Never Forget [Ken Fisher]

Source 3: https://www.macrotrends.net/2482/sp500-performance-by-president

Stock price disparity of A- and H- shares in Chinese and Hongkong stock exchange.

深港通 and 扈港通

When trading Chinese stocks through 深港通(Shenzhen-Hongkong Stock Connect) or 扈港通 (Shanghai-Hongkong Stock Connect), we often find companies listed simultaneously on ‘Shanghai and Hong Kong’ or ‘Shenzhen and Hong Kong’ exchanges. Generally, ‘law of one price’ indicates the same product must have the same price applied in any market. However even though the company has the same business structure and performance, the prices of stocks listed on the Shanghai or Shenzhen stocks tend to be overvalued compared to the prices of stocks listed on the Hong Kong Stock Exchange. Why does this happen?

A-Share and H-Share

In order to understand the question, investors need to understand the concept of H-shares and A-shares. H-shares the stocks of Hongkong or Chinese corporates that are listed in Hongkong stock market. Chinese and non-Chinese can trade freely. Meanwhile, A-shares are stocks of Chinese companies that are listed in Chinese market such as Shanghai and Shenzhen stock exchanges, mostly for Chinese investors. Foreign-only stocks are called B-shares. They can be traded by foreigners through the 扈港通 and 深港通 system. However, B-shares are very limited to specific firms. 

The A-H premium index is an indicator that needs to be checked in order to determine the relative price level of companies listed in both markets. The AH Premium Index is an indicator of the relative price gap between Shanghai or Shenzhen A shares and Hong Kong H shares for the same company.

Since A-shares are traded in RMB and H-shares are traded in Hong Kong dollar, AH premium index is calculated at the exchange rate of the day in order to compare in the same currency. If the index exceeds 100, it means that A is relatively overvalued, and if it is less than 100, it means that H is overvalued. 

In the modern financial market, when a price difference occurs due to a temporary market imbalance for the same target, it is a common phenomenon to close the gap through arbitrage trading. The price gap is resolved because transactions are constantly attempted to obtain profits by buying undervalued objects and selling overvalued objects.

Based on this theory, the prospect that the AH premium will almost disappear from the market was prevailing with system of 扈港通 in November 2014. This is because both Chinese and foreigners in China can buy and sell A and H shares.

However, as the mainland stock market continues to fluctuate, the AH premium index has also been volatile, and the price gap has continued to arise during the fluctuation. In the last decade, the AH premium index has moved between in the range of 90-150. 

Why does the price gap between share-A and H occur?

First, capital movement is not completely free due to differences in investment applied to mainland China and Hong Kong markets. In order to be able to trade arbitrage, foreigners must be able to short sell A and buy H shares, but short selling of A-shares is prohibited. In addition, Chinese may have to buy H shares without restrictions through 港股通(Southbound), but individual investors must have 500,000 yuan cash in their stock accounts, and there are limitations in accessibility to investment like such as credit transactions.

Second, the difference in the liquidity environment between the two markets is also causing the price gap. The continued efforts of the Chinese government to open the stock market for foreign capital, such as the implementation of the 扈港通 and 深港通 systems and the expansion of the QFII investment limit, created a favorable environment for the liquidity reinforcement of the mainland stock market. The policy to expand A-share investment opportunities for foreigners is expected to continue.

Third, the difference in the share of major industries between the two markets can be said to be a factor of the price gap. H shares have a high portion of the financial sector at 72%, while A shares have a relatively high share of consumer goods, information technology, and industrial goods that are expected to benefit from the Chinese government's policies. In addition, the willingness to foster mainland Chinese stock markets compared to Hong Kong should be seen as having an impact on price gap.

Finally, degree of perception by investor in both markets such as the direction of the currency rate, and the level of risk-required return can be seen as factors affecting the A-H premium and the gap between the two markets.

According to the Hang Seng Stock Connect AH Premium Index, as of September 2020, companies that were simultaneously listed in China's A-shares and Hong Kong's H-shares are trading at 43% lower levels in Hong Kong's H-shares.

Source: Investopedia

https://www.investopedia.com/ask/answers/062315/what-are-differences-between-hshares-and-ashares-chinese-and-hong-kong-stock-exchanges.asp

Difference between traditional IPO and direct listing.

Spotify and Slack Technology were listed in a slightly unusual way called ‘Direct Listing’. Airbnb, a vocational rental online marketplace company is also set to be listed directly no later than year, is also considering listing directly. Investors may heard of IPO a lot, but the concept would be quite unfamiliar. What are the advantages and disadvantages of direct listing? What made Spotify and Slack to choose untraditional way of ‘Initial Public Offering’?

Traditional IPO

IPO means that the company's shares officially begin selling on the Stock Exchange. Being a listed company means that it has become one of the large and reliable companies whose shares are quoted on a stock, so many companies strive for it. The usual method of listing is to raise funds by issuing new shares and selling them on the market. The process is called IPO, Ant-financial raised $34.4 billion recently.

Advantage of direct listing

If listed directly, the process of raising funds through the issuance of new shares will be omitted, and only the listing process will be carried out only to sell the shares held by existing shareholders on stock exchange. New investments will not be raised, but it has the effect of officially trading process as normal listing companies do. The advantages are below:

Firstly, direct Listing saves the cost. IPO process costs a lot of money. Seven percent of the funds secured by the IPO are usually paid as commission to the security companies that handled the process. Price of stocks exchanged during IPO is usually measured higher than normal, which likely to have more commission fee to the security firms. For example, if a company raises one billion dollars by IPO, the fee costs over 200 million dollars.

Second, existing investors can sell their shares right after listing. For traditional IPO, there is usually a 180-day limit on the sale of shares that are held by existing investors to protect prices. So existing investors or executives and employees with stock options can't make a profit no matter how much the price goes up for six months. However, in the case of direct listing, there is no such restriction, so the existing shares can be traded right away.

Furthermore, additional financing is also available. Unlike IPO, it is not possible to raise funds once it is listed, but further fund raising is possible through the issuance of new shares. Furthermore, the cost of it is much cheaper. According to Spotify CFO, additional financing was available at a 1% discount on transaction fees and a 4% discount on sales.

Finally, it has effect on rewards to existing investors. As startups grow, the employers promise their employees a share reward, such as a 'stock option', but if they don't go public, they'll be useless. Of course, there is alternatives if the company is acquired by another company, but it's hard for a fairly large company to do so. A listing is required to compensate employees and investors who worked for a startup. Unlike the IPO, there is no issue of new shares, so the value of the existing shares is not diluted.

Disadvantage of direct listing

There are many advantages of direct listing, but there are limitations and disadvantages as well. Above all, direct listing is only possible for companies that are well-known and whose business models are widely known. To do IPO, companies need to attract investors. So, the companies have to be often mentioned in the media, like Spotify and Slack.

IPOs have the effect of forcibly supplying the market with a few dozen percent of all stocks, but there is no guaranteed volume for direct listing. When existing shareholders can supply sufficient quantities, demand including institutional investors can be activated and normal transactions can continue.

And most of all, there should be no need for financing. In the past, large-scale financing was difficult without IPOs, but these days the venture capital market has grown big enough, and startups have been able to raise funds through various methods. 

Source: Investopedia

https://www.investopedia.com/investing/difference-between-ipo-and-direct-listing/#:~:text=Direct%20listings%20are%20also%20known,without%20getting%20help%20from%20intermediaries.

Why does BTC Gas Pipeline (Baku-Ceyhan) pass through Tbilisi.

Georgia is located between Russia and Turkey. The country was formerly called the Republic of Georgia, but in March 2009 it changed its name to Georgia. Georgia is a country located at the southern foot of the Caucasus Mountains and its capital is Tbilisi. Tbilisi is adjacent to Baku, the capital of Azerbaijan, and the pipeline for oil and gas is connected between the two. The pipeline is extended to Turkey, allowing oil to be transported over long distances. 

Why Georgia was selected

The purpose of the pipeline is to transport crude oil easily and safely from one another covering long distance. BTC gas pipeline is connected wide range from oilfield, shipping port, and finally to the destination. The initial cost can be overly high but later will save the cost of long-distance transportation. However, there is not only advantage of it. The transportation range is fixed (more pipeline should be installed to expand more route), management is difficult due to hundreds of kilometer length, and can be the easy target of terrors. As you see the map, the pipeline passes through Georgia instead of taking the shortcuts. The reason can be found by observing the recent history. 

There are many oilfields which is rich in reserves near Caspian Sea. The lake is located inland which makes difficult in transportation to European countries. In 1991, after the collapse of Soviet Union, the countries try to seek new pipelines which can supply the oil which later leads Turkey to construct it. In order to get supplies from Baku, Turkey had to select the countries among Iran, Armenia, and Georgia for the pass-through. During the times, Iran had faced economic sanctions from the United States, which made difficult to deal with it. Turkey did not have good relationship with Armenia as there was a case of massacre of Armenians during Osman period. Armenia claims that it is intentional offense, but Turkey has never admitted. Eventually, Georgia remains the only option. 

Conflict between Azerbaijan and Armenia

There is religious conflict between these two countries. Most of the Azerbaijani people Muslims, and most of the Armenians believe in Christianity. Moreover, these two countries are fighting for Nagorno-Karabakh, which belongs to Azerbaijan but located in part of Armenia. Nagorno-Karabakh was regarded as part of Armenian province during Soviet days. In the late 1980s, the territorial conflict for the land was raised later eventually led to military conflict. Gorbachev issued a statement saying Nagorno-Karabakh would not be part of Armenia, which also prompted Armenia to take a tough stance. In December 1988, Azerbaijan The earthquake in Armenia killed more than 20,000 people and damaged more than 400,000. However, Armenia is said to have discarded most of the rescue supplies sent from Azerbaijan. This was a trigger for the bilateral relations to worsen. The recent clash between two former Soviet republics in September fueled deteriorated relationship.

Georgia's geographical advantage

Due to the historical background of Caspian area, pipelines had to pass through Georgia instead of Armenia. Transit via Georgia is costly in terms of time and construction expenses. However, it is politically safe. Eventually Georgia added its dollar earnings through tolls. Pipeline construction started from 2003 and ended in 2005. After the initials of Baku, Tbilisi, and Ceyhan, the pipeline is called BTC. The total length is 1,768 km and the crude oil transport capacity is 1.2 million barrels. On June 4, 2006, after the first ship departed from Ceyhan, 233 million tons of crude oil had been shipped by late 2013. 

However, it seems that economic growth through the laying of pipelines has not been so smooth. This is because Georgia is facing the issue of segregation and independence between South Ossetia and Abkhazia, and Turkey is also involved in the issue of Kurdish independence. The security issues of the BTC pipeline remains till now.

Source: Understanding Economics: A Geographical Approach

Source: NYT, WSJ 

https://www.wsj.com/articles/armenia-azerbaijan-conflict-11601325097?st=dk81fothh67t9zl&reflink=article_copyURL_share

https://www.nytimes.com/article/armenian-azerbaijan-conflict.html?referringSource=articleShare

Bank of Israel is to increase bond purchase and remains interest rate at 0.1%.

The central bank of Israel announced to hold interest rate at 0.1% with expansion of its government bond-purchase by NIS 35 billion ($10.3 billion) to stimulate economic activity and to stabilize the financial market.  

The central bank assumes the nation's GDP to decrease by 5% in this year, and contract by 6.5% in the following year (2021). The forecast applies when the nation is taking effective countermeasures against the pandemic. However, in the worst case, the economy is expected to shrink by 6.5% in 2020, and grow by 1 % next year.

Central bank’s purchase can help Israeli’s small business

Bond purchasing program will expand to NIS 50 billion in the secondary market to ease credit terms and to stabilize and support financial market and economy. Government bond purchases totaled about NIS 33.6 billion until September, according to central bank. The Monetary Committee, which is part of Bank of Israel for achieving the Bank’s objectives (mostly monetary policy), launched new programs of NIS 10 billion to support small business. The bank will provide fixed interest rate of negative 0.1% for commercial banks to encourage the loans for small and micro business. 

The number of unemployed became 470,000 in the first half of September due to the lockdown. The inflation rate in the past 12months has dropped by 0.7%, which is in need of support of policy mix programs.

Source : The Times of Israel

https://www.timesofisrael.com/bank-of-israel-leaves-interest-rate-unchanged-at-0-1-to-increase-bond-purchases/

China halts Australian coal imports due to political conflict.

China is struggling with Australia over coals and cottons. China is taking a series of 'retaliation measures' against Australia after Australia began seeking support from European leaders for an investigation into China’s response to the pandemic. 

Chinese authorities have recently taken steps to virtually halt imports of Australian beef, wine, barley, and recently coal. Now Chinese government is reportedly targeting Australian cotton as well as the target of retaliation according to South China Morning Post. 

Australia’s economy is now under heavy pressure of lockdowns in the country’s second-largest city with its international border closed. According to WSJ, Australia is experiencing its first recession in 28 years. Australia has experience in avoiding global financial crisis hit a dozen years ago thanks in part to China’s stimulus efforts on its infrastructure expenditures which needed Australian iron ore and other minerals to build bridges and skyscrapers.

For the past decade, China has been Australia's largest trading partner and now accounts for 32.6% of its exports. China selected Australia as strategic partner over its rival Brazil for importing Australia's mines such as iron ore, coal and gas which fueled China's growth.  Australia is preferred for their quality and geographic proximity. The deal benefits both nations.

China has already delayed Australia’s iron ore custom clearance in April due to conflict with Australia over the issue of the COVID-19 virus. Commodity experts predict that it will be difficult for China to impose additional import sanctions on Australian iron ore since 60 percent of China’s mining is imported from Australia. There will be sharp rise in iron ore prices if China continues to ban imports of Australian iron ore.

Source

https://www.wsj.com/articles/china-sentences-australian-to-death-as-bilateral-relations-fray-11592045994

https://www.wsj.com/articles/australia-worries-coal-is-chinas-next-target-as-ties-fray-11602665386

https://www.wsj.com/articles/chinas-economic-squeeze-on-australia-extends-to-cotton-11602839413

Increase in global shipment as rebounds on demand surge. [Pandemic restocking]

Idle vessels increased to 2.7 million TEU in May of this year due to the plunge in demand of the onset of the great lockdown but have recently decreased its laid-up vessels to 430,000 TEU, according to Alpha Liner. The container shipping companies reduced supply of shipping services in preparation for deteriorating container transportation demand in 2nd quarter, increasing the proportion of idle ships to 11.6% of total fleets. 

However, as the lockdowns are starting to ease (lifting the blockade), the demand of trade is surging, filling up container ships across the Pacific and operators are restoring cargo-vessel sailings that were cut by as much as a third at the height of the pandemic closures from March to June.

Increased demand is believed to be due to the reason below.

1. Increased demand for medical products as people starts to consider their healthcare.

2. The conversion of some air cargo to maritime cargo. 

3. The conversion of expenditure of the service sector due to Corona 19 into consumable goods.

Moreover, WSJ indicates, shipping executives pin much of the rebound on e-commerce. “The service industries are still paying the price of the lockdowns but there is a surge in online shopping,” said Mikkel Elbek Linnet, a spokesman for Denmark’s A.P. Moller-Maersk A/S, the world’s biggest container operator. “People may not go out for a drink, but they will spend money on a pair of sneakers or to get home appliances.” 

The rebound in demand has pushed up freight rates since U.S is restocking its depleted stocks ahead of holiday season. Please see my blog. 

https://techongstudy.blogspot.com/2020/08/container-shipping-companies-create.html

If demand growth continues in fourth quarter, vessel supply can increase both ocean and air.  The current low fuel price is expected to have a positive impact on shipping firm’s profit.

Source: WSJ, FT

https://www.wsj.com/articles/container-volumes-shipped-to-the-u-s-surge-after-coronavirus-downturn-11599240926

https://www.ft.com/content/4a77fe08-edb4-46b6-a030-f32a404ccdce

Why is economy of Singapore in near crisis.

Singapore's economic is in crisis. The growth in second quarter of 2019 was negative 3.3% which was the lowest in seven years. Non-oil exports shrank 17% compared to the same period last year. Retail sales plunged 8.9% for five consecutive months, car sales shrank 32%, furniture and home appliances fell 15%, computers and technology equipment plummet over 7%, which were the signs of a fall of durable goods. The aftermath of the recession was quickly transmitted to the corporates and led to the cases where the corporate bond transactions have halted. Unprecedented recession has taken over Singapore economy recently.

Singapore is one of the richest countries in Asia. The population of Singapore is about 5.5 million, but it is enough to be the 20th largest economy in the world. Port of Singapore was the world largest trading port (later it was overtaken by Shanghai Port) as a center of transit trade taking advantage of its geological location connecting the Indian Ocean and the Pacific Ocean. And as the world's number one transshipment port, the transshipment volume is responsible about for 20% of the world's transshipment cargo.

Singapore can be regarded to be an economy in which exports and imports are taking over the most part. Singapore's import and export volume exceeds 200% of its gross domestic product. Singapore economy is showing a marked decline in 2019. Since, Singapore's largest trading partner is China, the downturn in China's economy and the outcome of the US-China trade dispute are hurting economy of Singapore directly. Singapore has also served as a financial hub and a gateway to investment in Chinese companies. Indeed, many Chinese real estate developers have raised enormous amounts of financing from Singaporean banks. However, some of which are now in default, which is a factor holding back Singapore's economic growth.

Singapore economy grew through a dictatorship under the leader of Lee Kuan Yew and took advantage of strategic ally of the United States. Also, the economy benefited from globalization for the past 40 years and China’s economic reform. However, while Japan, Korea, and Taiwan have achieved remarkable industrial leaps from automobiles, shipbuilding industry, electronics, and semiconductors. Meanwhile Singapore is mainly focusing on finance, services, and software.

It should be noted that the countermeasures of economic policy makers can create a discriminatory response amid concerns about how the decline in global trade volume due to de-globalization and the US-China trade dispute will have an adverse impact on Singapore's economy.

Source: Big Hit

Signs of recovery in Singapore after the onset of COVID-19.

Singapore economic report, which had recorded the worst economic growth rate ever recorded in the second quarter plunging about 13.4% compared to the same period last year and negative 41.2% compared to the previous quarter. However, economy indicator showed a significant improvement in the third quarter.

According to CNBC on 13^th, the Ministry of Trade and Industry (Singapore) reported that the gross domestic product (GDP) in the third quarter decreased by 7% compared to the same period last year. Compared to the previous quarter, GDP increased by 7.9%. Still, negative growth continued in the third quarter following the second quarter, but the decline was noticeably weakened.

The Ministry of Trade and Industry pointed out, "Better performance of Singapore's economy in the third quarter seems to be the result of the step-by-step reopening of the lockdowns that was partially enforced by the Singaporean government."

In addition, it is interpreted that the 2% increase in GDP of the manufacturing sector compared to the same period last year had a big impact on Singapore's economy rebounding in the third quarter. The manufacturing sector's GDP declined 0.8% in the second quarter.

However, analysts indicated that that it will be difficult until next year for the Singapore economy to enter a recovery phase, with the fear of another pandemic cycle might recur throughout Southeast Asia.

 Source

https://www.straitstimes.com/business/economy/spore-economy-shows-signs-of-recovery-in-q3