2024-09-30 07:30
Tourism, as we know it, is changing in the face of rising temperatures and extreme weather events. Particularly in coastal tourism, a stormy future looms as climate impacts, including rising sea levels, put its resilience to the test. We think adaptation measures will play an important role in keeping vulnerable coastal tourism afloat. In this issue of #WhyESGMatters, we discuss the likely impacts of heat stress on global tourism, with a particular focus on coastal tourism. We also look at various adaptation methods that countries can implement to reduce the impacts from climate change. Did you know? Sources: World Travel & Tourism, World Bank, Great Barrier Reef Marine Park Authority, Visit California 1. Heat changing holidays The travel and tourism industry, which contributed nearly 6% of global GDP and employed nearly 290m people in 2021 (as per the World Travel & Tourism Council), faces a myriad of challenges due to extreme temperatures (Figure 1). Relentless heatwaves pose serious health risks, such as dehydration and heatstroke, deterring tourists from venturing outdoors and hampering the industry’s usual vibrant activity. An article published in the journal Science of the Total Environment in 2022 highlights evidence that a 1°C rise in temperature can lead to an 18% increase in direct heat illness morbidity. Further, smaller and less affluent economies may struggle to cope with mounting cooling demand, as travellers seek respite from the scorching heat. The heightened demand for air-conditioned spaces is also likely to cause a sharp increase in energy consumption, putting strain on local energy grids and increasing emissions. Figure 1. Global warming is likely to increase the number of extreme temperature events Source: EM-DAT, CRED / UCLouvain, Brussels, Belgium – www.emdat.be, NOAA. Note: Temperature anomaly are with respect to the 20th century average (1901-2000) On the move Sweltering weather is affecting travel plans. In July last year, the European Travel Commission (ETC) reported a decline in travel intent in Europe compared to previous years. Additionally, the popularity of Mediterranean destinations was found to have declined by 10% compared to the year before. On the other hand, destinations such as Bulgaria and Denmark are becoming increasingly popular due to their milder temperatures. Although there is uncertainty about how tourists will respond to the effects of a changing climate, various popular tourist spots are likely to lose their appeal, paving the way for some lesser-known destinations to shine. This shift in traveller sentiment is likely to have a considerable impact on economies that rely heavily on tourism income. 2. Coastal tourism strains Beaches are popular holiday destinations, accounting for nearly 50% of global tourism. However, coastal tourism is facing an imminent threat due to climate change. The industry is the economic backbone for some of the world’s poorest economies, including the Small Island Developing States (SIDS), which are also among the most vulnerable to climate change. While extreme weather events, such as cyclones and floods, have already posed immediate risks, it’s rising sea levels and ocean acidification that are setting alarm bells ringing. Moreover, secondary impacts, such as water availability and the spread of diseases, are also a growing concern for coastal communities and travellers alike. Sea level rise Many popular tourist spots, such as the Maldives, are at risk of being submerged due to rising sea levels. Indonesia also announced plans in 2019 to relocate its capital from Jakarta in response to the threat posed by rising sea levels. Global sea levels have already risen by 98.5mm since 1993, according to NASA. Furthermore, the average rate of rise is accelerating, tripling from 1.3mm/year between 1901 and 1971 to 3.7mm/year between 2006 and 2018. While the extent of sea level rise depends on emissions and uptake of heat by the oceans, 1bn people could be exposed by 2050. And by 2100, extreme sea level events that previously occurred once per century could strike at least once a year on many coasts. Unfortunately, even under a low CO2 emissions pathway, the world may lose 53% of its sandy beaches, on average, resulting in a loss of 30% of hotel rooms and a 38% decline in tourism revenue by 2100. The imminent risks of shorelines being eroded, tourism infrastructure being inundated, and an increased likelihood of extreme weather events could lessen the recreational value of popular coastal tourist spots, potentially affecting business operators, such as resorts and hotels, water sports and tour operators (snorkelling and diving), ports and airlines. Marine heatwaves and ocean acidification The increased intensity and frequency of marine heatwaves are likely to cause coral reefs to undergo irreversible changes and disrupt marine life, affecting the character of the coastal landscape. For example, a recent marine heatwave that started to emerge in June last year along the coast of Queensland in Australia is raising concerns for the already vulnerable Great Barrier Reef. The World Economic Forum has estimated that 50% of the world’s coral reefs would be under threat by 2035 in the absence of climate risk mitigation. This presents a daunting challenge for coastal tourism as marine exploration activities, such as scuba diving, rely heavily on these vibrant underwater ecosystems. Growing risk Rising temperatures will significantly impact other tourism sub-sectors too: Eco tourism: A study by the European Commission projected increased diversity of land-bird species in higher latitudes and decrease in diversity in mid-latitudes by 2050, based on a moderate-to-high greenhouse gas emission scenario. Climate-induced shifts in species distribution can affect eco-tourism, such as safari operators, whereby declining animal populations make human interaction more difficult. Snow-based tourism: Rising temperatures may result in erratic snowfall patterns and shrinking snowpacks, shortening skiing and snowboarding seasons. Several ski resorts across the Alps closed in 2023/24 due to a lack of snowfall. Resorts at lower elevations are likely to be more severely affected, as they have less snowfall and thus have shorter tourism seasons. Forest-related tourism: Heatwaves and droughts are associated with high risks of wildfires. Between 1979 and 2013, the global burnable area affected by long fire weather seasons experienced a twofold increase, while the average duration of the fire weather season rose by 19%. The increased frequency and intensity of wildfires are likely to negatively affect tourism by limiting recreational opportunities and reducing access to national parks. According to a study conducted by Visit California, wildfires in California in 2018 resulted in an estimated loss of USD20m in tourism revenue in just one month. 3. Rising to the challenge The COVID-19 pandemic exposed the vulnerability of the tourism sector. Poor countries that heavily rely on tourism are poised to face significant challenges, including social unrest, as the flow of tourists slows due to impacts of a warming climate. Adaptation measures, better forecasting and early-warning tools, and disaster risk management will play an important role in the tourism sector’s response to the impending risks. Infrastructure, such as seawalls and breakwater structures, and conservation of natural systems, such as mangroves, are important coastal protection measures. Accommodation strategies, such as elevating key infrastructure and houses, can help reduce the impact of flooding. For instance, elevated houses built 1.5m above ground are subsidised by the government in the Tuamotu Archipelago, which is extremely prone to flooding. Several regions have also been adopting ecosystem-based measures to respond to climate change. Artificial reefs have been increasingly used to support reef restoration in countries such as Antigua and Grenada. In Vanuatu, tourism businesses have been involved in establishing marine-protected areas to address climate-related risks. As the impact of climate change continues to escalate, adaptation measures will become increasingly crucial in safeguarding vulnerable regions. However, we think it’s imperative to acknowledge that long-term resilience relies on a broad-based approach, combining adaptation strategies with global efforts to substantially reduce greenhouse gas emissions. 4. Conclusion Rising emissions and climate change pose additional challenges beyond the immediate heat issues. In this note, we explored a range of other climate change impacts on the tourism sector, with a focus on coastal tourism. We think governments, businesses and investors must plan collaboratively for the long term – assessing exposure and working towards transformational adaptation to safeguard the tourism industry. https://www.hsbc.com.my/wealth/insights/esg/why-esg-matters/2024-03-28/
2024-09-30 07:30
Key takeaways As expected, the FOMC kept rates unchanged at the July meeting. The Fed funds rate remains in the 5.25-5.5% range. We expect the FOMC to begin the monetary policy easing cycle in September by cutting the Fed funds rate 0.25% to a range of 5-5.25%. In 2025, we expect the FOMC to cut rates three times, leaving the Fed funds rate at 4.25-4.5%. The US economy is slowing but growth remains above-trend. Labour markets are cooling as the unemployment rate is drifting higher. Financial markets have shifted of late, reflecting the weakening economy and the better inflation data. The assumption is that the odds of the onset of a Fed monetary policy easing are higher. In addition, small-cap equities have rallied with the increased odds of lower interest rates. In the short term, equity markets will see some continued two-way rotation between sectors and the value and growth styles as they weigh the run-up in valuations, the economy, and the impact of the expected rate cuts. Longer term, continued disinflation, lower interest rates, and strong profit growth (in spite of the slowing economy) will provide a solid backdrop for US equities. We maintain our US equity overweight and our balanced sector stance. Fixed income investors should continue to look for lower policy and market rates, and keep an eye on quality and investment grade as the business cycle slows and balance sheets feel the stress. What happened? As expected, the FOMC kept the Fed funds rate unchanged in the 5.25-5.5% range at its July meeting. We expect the FOMC to begin the monetary policy easing cycle in September by cutting the Fed funds rate 0.25% to 5-5.25%. In 2025, we expect the FOMC to cut rates three times, leaving the Fed funds rate at 4.25-4.5%. There were only a few changes to the statement this time, but they were dovish in nature, leaving the door open to a possible rate cut in September. Fed Chair Jerome Powell stated, “We’re maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures.” -- indicating that the Fed needs to see further disinflation to ease. Second-quarter inflation readings were heading back toward the 2% target. However, the Fed doesn’t want markets to fully price in rate cuts now as Powell said, “We’ve made no decisions about future meetings and that includes the September meeting.” US growth has been easing, but the move from very strong to more normal growth rates is healthy. The 2Q24 growth was +2.8% and consumer spending was 2.3%. Labour markets are cooling as the unemployment rate is drifting higher. The unemployment rate has risen to 4.1% in June but remains near 60-year lows. Payroll employment rose +177,000 in the last three months vs 267,000 in the first three months of the year. In June, the US PCE deflator pierced the Fed’s 2% symmetric target range of 1.5-2.5%. Powell has often said that the FOMC wants to see inflation “on a clear path” towards 2%. Wages have slowed to 3.9% from a peak of 5.9% in 2022. Will the most aggressive Fed tightening cycle ever result in aggressive easing as well? Source: Bloomberg, HSBC Global Private Banking and Wealth as at 31 July 2024. Investment implications Financial markets have shifted of late, reflecting the weakening economy and the better inflation data. The assumption is that the odds of the onset of a Fed monetary policy easing are higher. In addition, small-cap equities have rallied with the increased odds of lower interest rates. Historically, Fed easing cycles have helped lower the cost of capital, which has been a positive factor for markets, especially in the US. We believe that in the short term, equity markets will see some continued two-way rotation between sectors and the value and growth styles as they weigh the run-up in valuations, the economy, and the impact of the expected rate cuts. Longer term, continued disinflation, lower interest rates, and strong profit growth (in spite of the slowing economy) will provide a solid backdrop for US equities. It remains an earnings-driven equity market. S&P 500 earnings are forecast to rise 10.9% in 2024 and 14.8% in 2025. Lower rates should help boost M&A and investment activity. Therefore, we maintain our US equity overweight and our balanced sector stance. Fixed income investors should continue to look for lower policy and market rates. They should also keep an eye on quality and investment grade as the business cycle slows and balanced sheets feel the stress. We continue to put our cash to work in bonds and multi-asset strategies. US economic resilience, relatively high yields, monetary easing elsewhere, and sometimes underwhelming activity data outside of the US can still contribute to a firm USD, particularly with so much Fed easing already assumed. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/2024-08-01/
2024-09-30 07:30
Key takeaways On 24 September, China unveiled an outsized easing package… …but this may just be the start, in our economists’ view. USD-RMB performance hinges on any improvement in Chinese asset inflows and US election risks amongst others. On 24 September, China’s regulators, including the People’s Bank of China (PBoC), the National Financial Regulatory Administration (NFRA), and the China Securities Regulatory Commission (CSRC), held a joint press conference, announcing a slew of easing policies, covering three main areas: monetary policy, property policy, and capital market policy. The measures are summarised in the table below: Source: Xinhua, Bloomberg, HSBC The stimulus package, beating market expectations, is more cyclical in nature, but is a good starting point for further easing to shore up growth, in our economists’ view. More will have to be done in terms of housing stabilisation, but it may take longer to be rolled out. As there is a need to support liquidity and market sentiment, facilitate credit issuance and boost growth, our economists now expect a further 10bp cut to interest rates, another 50bp of RRR cut, and another RMB1trn of special government bonds to come before the end of 2024. As for the RMB, the offshore RMB (known as “CNH”) strengthened briefly past 7 per USD for the first time since May 2023, as markets are digesting these stimulus measures this morning (Bloomberg, 25 September 2024). In our view, if the new measures offer fresh expectations of a comeback of equity inflows into China or a potential revival of risk appetite, the RMB may see more support. But the question remains whether the inflows will be strong enough to offset other potential drags on the RMB. For example, with the PBoC’s monetary easing, China’s yield gap against the USD may widen again, especially considering that markets pricing for US rate cuts have been more dovish than the Federal Reserve’s latest dot plot (i.e., 80bp of rate cuts vs 50bp by end-2024, Bloomberg, 25 September 2024). Uncertainties over the upcoming US elections may support the USD, and by extension, weigh on the RMB. It is also worth noting that the PBoC shifts to a neutral FX policy stance, with the governor, Pan Gongsheng, reiterating the central bank will prevent onesided expectations and overshooting risks. As such, the PBoC is likely to maintain two-way fluctuation of the RMB exchange rate. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/flash-2024-09-25/
2024-09-30 07:30
Rate cuts and broadening earnings growth support our optimism despite slowing growth and rising uncertainties Last quarter proved to be an eventful period for investors, as more central banks embarked on their policy easing journeys, while rising US recession fears and the sharp strengthening of the Japanese Yen triggered a global equity market sell-off. However, markets regained the lost ground very quickly, which is a good sign that fundamentals such as earnings momentum remain intact. Looking ahead, investors shouldn’t be surprised if market volatility lingers, especially as key central bank meetings and elections are approaching in the US. Yet, we remain positive, as there are still plenty of opportunities across regions and sectors to put money to work. What does this mean for investors? So far this year, equities are up strongly while bonds have been benefitting from rate cut expectations. Although the US economy is cooling, it’s still far from a recession, with Q2 earnings growth accelerating to 10.8%, which marks the highest growth rate since Q4 2021. And comfortingly, rising unemployment was caused mainly by an increase in labour supply rather than elevated layoffs. As fundamentals remain broadly positive, the August correction is seen as a buying opportunity as valuations are now more attractive. The US remains our biggest equity overweight due to its broadening earnings growth and long-term structural opportunities. While the Magnificent 7 tech stocks continue to lead earnings growth, other companies are also benefitting from falling costs and the power of AI, which helps to expand revenue sources and improve productivity. The global rate cut cycle should also help investment and consumption outside of the US. So, the key message for investors is to widen the opportunity set, by looking beyond the US and the technology sector. Geographically, the UK, Japan, India and South Korea stand out for their positive outlook. From a sector perspective, earnings hold the key, and we see promising opportunities in healthcare in Europe, high-end manufacturing in Asia and industrials in the US, to name a few. Balancing risk and opportunity to manage rising market uncertainties Undoubtedly, all eyes will be on the Fed’s policy decision and the upcoming US election, with polls currently suggesting a very close race. Historically, markets tend to rally once the election result is known, but uncertainty is surely building up. Diversification is key to balancing risk and opportunity, and we look to quality bonds, particularly investment grade credit, as another way to diversify exposure and generate a stable income stream. Rate cuts will make it less attractive to hold cash, while bonds continue to offer a chance to lock in current yields near multi-year highs. Finally, we continue to see opportunities in the global transition to a more sustainable, low-carbon future. Renewable energy is a bright spot amid a global effort to triple clean energy capacity by 2030. The growing focus on biodiversity can also be a differentiator, offering investors a way to access potential growth while supporting long-term change. As improving quality of life for our customers is at the centre of our values, we’re pleased to share our views in a special article on how financial planning can improve financial fitness, based on the findings of our Quality of Life Report 2024. We hope our investment themes and insights can help you better position your portfolios in times of rising uncertainties and take your investment to new heights. As always, our investment team is here to share our view and provide you with the support you need. Best wishes for a successful investment journey. https://www.hsbc.com.my/wealth/insights/market-outlook/investment-outlook/2024-09/
2024-09-30 07:30
Important Risk Warning AUD Support / Resistance vs USD 0.6534 / 0.6705 ⬆ AUD slipped against USD yesterday as mixed labor data tempered risk appetite; with RBA on hold and inflation high, quiet flows left AUD under modest pressure. AUDUSD fell 0.14% yesterday while AUDHKD ended at 5.15 level. EUR Support / Resistance vs USD 1.1598 / 1.1848 ⬆ EUR edged lower against USD yesterday amid softer risk tone and consolidation ahead of Euroarea updates; rates dynamics slightly favored the dollar. EURUSD fell 0.05% yesterday while EURHKD ended at 9.13 level. GBP Support / Resistance vs USD 1.3246 / 1.3525 ⬆ GBP advanced against the U.S. dollar yesterday supported by stable gilts ahead of domestic data. Market now focus attention on incoming releases and BoE communications. GBPUSD rose 0.35% yesterday while GBPHKD ended at 10.44 level. NZD Support / Resistance vs USD 0.5707 / 0.5842 ⬆ NZD remained flat against USD yesterday as a light local calendar and steady U.S. backdrop kept direction limited, with traders awaiting new U.S. data. NZDUSD rose 0.00% yesterday while NZDHKD ended at 4.49 level. RMB Support / Resistance vs USD 7.0157 / 7.0675 ⬆ CNH firmed against USD yesterday, helped by a cautious dollar and supportive regional sentiment; year-end flows and policy cues continue to guide price action. USDCNH fell 0.10% yesterday while CNHHKD ended at 1.10 level. CAD Support / Resistance vs USD 1.3638 / 1.3961 ⬆ CAD strengthened against USD yesterday as the dollar softened and risk appetite held up; steady energy prices supported CAD. USDCAD fell 0.10% yesterday while CADHKD ended at 5.65 level. JPY Support / Resistance vs USD 153.70 / 156.33 ➡ JPY appreciated against USD yesterday as BoJ normalization speculation persisted while U.S. yields stayed stable, market focus on the upcoming policy meeting. USDJPY fell 0.33% yesterday while JPYHKD ended at 5.02 level. SGD Support / Resistance vs USD 1.2840 / 1.2962 ⬆ SGD edged slightly up against USD yesterday, reflecting resilient regional FX and a cautious dollar tone. With a quiet local calendar, traders looked to upcoming U.S. releases. USDSGD fell 0.02% yesterday while SGDHKD ended at 6.03 level. MYR Support / Resistance vs USD 4.0647 / 4.1217 ⬆ Yesterday, USDMYR started at 4.09 levels and climbing up gradually but the better USD selling interests on rally kept the pair below 4.10 levels. The pair eventually slide lower and even traded at new Year-to-date low at 4.08 levels. Towards lunch, the downward pressure continues, but the USD buying demand kept the downside supported and the pair eventually close around the opening levels of 4.09. On local political news, Malaysian Prime Minister Anwar Ibrahim named Johari Abdul Ghani, the new Investment, Trade and Industry Minister, as part of a broad revamp to address some monthslong vacancies in his government. Liew Chin Tong is also appointed to be the new deputy finance minister. They will be sworn in later today by Malaysia’s Sultan. ⬆ Consolidation, indicates that the currency's movement against USD has remained sideways ➡ Up Trend, indicates that the currency has been moving higher against the base currency ⬇ Down Trend, indicates that the currency has been moving lower against the base currency https://www.hsbc.com.my/wealth/insights/fx-insights/daily-focus/fx/
2024-09-30 07:30
Key takeaways Federal Reserve rate cuts move closer and US election uncertainty rises. The bulk of global macro data are holding up better than many might think… …but there are still plenty of risks and weak spots out there. Summer 2024 was an eventful one. While many people were on their holidays we had a combination of big market moves, worries about recessions, geopolitical uncertainty, and shifting prospects for the US presidential election race. But, beneath the headlines, the global macro data have, largely, ticked along. Worries are aplenty about the state of the US labour market, but after the August data, which were more sanguine than in July, those concerns may fade slightly. Divergent data The broader suite of US labour market data is less alarming than the rise in the unemployment rate, in any event. Employment growth has slowed but layoffs are low (Chart 1), the spike in initial jobless claims appears to have been seasonal and consumers have kept spending on a range of products. Confidence may be a little subdued, but the world’s largest economy keeps growing steadily (Chart 2). Source: Macrobond Source: Macrobond The same can’t be said everywhere. Chinese growth data continue to disappoint, particularly on the consumption side, and more policy support is likely to be needed to achieve the 2024 growth target. In Europe, growth remains a problem in Germany (but not in Spain) with the industrial data, in particular, posing a challenge. Labour markets are still tight, though, and real wage growth should continue to prop up consumer spending. Falling inflation The global inflation picture is mixed, but broadly improving. The US has seen a notable drop in inflation over the past three months (Charts 3 and 4), and although we haven’t seen the same moves across the board, many central banks have now seen enough to start, or continue, their easing cycles. For the Federal Reserve, the question is now about the pace of easing – with labour market data set to take on an even greater focus in the coming months. Source: Macrobond Source: Macrobond Poised to cut For most central banks the question is how quickly they will cut rates, which depends on the data. In some economies, like Canada and Sweden, policymakers have already turned much more dovish given lower inflation and weaker growth data. In contrast though there has been a clear warning sign from Brazil, where currency weakness and fiscal concerns have prompted a change in tune, and the next move for rates is likely to be up. And now, the US Presidential election comes into focus. With two months to go until 5 November, the polls suggest a very close race for both the presidency and control of Congress. The outcome of the vote will have an impact on growth and inflation scenarios going into 2025. Source: Bloomberg, HSBC ⬆Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus Source: LSEG Eikon, HSBC https://www.hsbc.com.my/wealth/insights/market-outlook/macro-monthly/2024-09/
