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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we will discuss whether better days are ahead for China's markets and economy. TD Asset Management's Haining Zha joins us. MoneyTalk's Anthony Okolie is going to have a look at what the latest Toronto home sales data is telling us about the strength of that market. In today's WebBroker education segment, Bryan Rogers will show us how you can test out trading ideas are on the platform.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start her at home with the TSX Composite Index.
We are seeing oil prices up about a percent, gold prices are firming a little.
And we have some green on the screen for the TSX Composite Index, we are up 66 points, a modest third of a percent of the upside. Among the most actively traded names at this hour included Baytex energy.
At $4.11, it has been a choppy riot of for energy names in recent days but it's an update for Baytex. Barrick Gold is down about 1%. South of the border, as traders try to wrap your head around what might come next from the Fed and when they might get an interest rate cut, Jerome Powell beating the drum on that. Today, you're basically flat on the market. Down four points on the S&P 500, a little less than 1/10 of a percent.
The tech heavy NASDAQ, let's see how those tech stocks are faring today. Pretty much in line with the broader market, down 14 points, a little less than 1/10 of a percent. Palantir is taking a big jump today, at 2082 per share, you got Palantir up almost 25%. And that's your market update.
After trading close to five year lows recently, stocks in China are bouncing back amid optimism that Beijing may make more moose to help the markets.
Joining us now to discuss his Haining Zha, VP and Dir. of asset allocation research at TD Asset Management.
>> Thanks for having me.
>> China has been an interesting space and the markets have been interesting as well.
What are we seeing?
>> Right now, the Chinese equity market has a clear lack of confidence. Just give you an idea, MSCI China right now is trading at around 12, 12.5% earnings yield and right now the Chinese 10 year government bond is trading at 2.4% so if you subtract the two, which should give you a sense of the equity risk premium that investors require, that a close to 10%, so when you compare this number to Japan or Europe, those numbers are at around 6%. They are a full four percentage points higher.
That 10% equity risk premium is actually broadly in line with Russia, i.e.
investors right now are treating China as Russia. They are not pricing in any growth in their pricing a lot of potential policy risk.
>> We are seeing a bit of a bounce today.
It just one session. It seems to be on speculation that Beijing may step in and say, this is a situation that we are not going to tolerate much longer.
Speculation is key here. Who knows what the markets will do the next day. What could Beijing or the country due to turn things around?
>> Actually, there is a lot that they can do, it's just at the moment, they have been holding back in terms of all of their policy at the moment kind of in a piecemeal fashion. It is not enough to turn around investor expectation.
So in order to restore market confidence, they definitely need to do a lot more than that.
>> Let's start breaking down some of the moves. You said it has been piecemeal. I think for a while now, investors have been waiting for moves out of China.
They lowered this rater they tweaked this rate. What could the big moves look like?
>> First of all, just step back, what they have done recently at the end of last year and also in January as at the end of last year, they actually increase the central bank PSL, which is pledged supplementary lending, which is a way to expand the balance sheet. They expanded it by around 500 million R and B. That is not a small amount.
In January, they wanted to hold back a little bit. When it comes to reset medium turn lending rate, they actually hold it unchanged. All of a sudden, the equity market does not interpret that signal well and the market just go straight down from there.
And then, in the next opportunity, when they do reserve requirement ratio cut, they cut by 50 basis points, which is a bit larger than the 25 basis points that investors are expecting. But all of these measures, when they translate into economies or the equity market, they are pretty slow.
They have some big headwinds coming. For example, in real estate and potentially even on the trade front.
This is a US election year. We could have some negative headline news on that front as well which can change investor expectation and perception about the Chinese equity market.
In order to turn that around, they should come up with something that directly supports equity markets. So that's why the national team is coming into the market, buying some amount from the market but the problem with that is if you don't give very clear expectation of what you are going to do in the future, it's not enough to give investors confidence. So they have to establish a consistent expectation similar to what… Did back in 2012, essentially, China needs to have its own whatever it takes moment.
>> Whatever it takes moment, whatever it takes policy. It's often said the stock market isn't the economy. If you look at China, they have both underwhelmed for quite some time. It feels like they are both stuck in the same kind of holding pattern. What you expect out of China's economy? If they get the economy going, will the markets follow or vice versa?
>> This year, there could still be quite a bit of headwind.
If you break down the economy into different parts, consumption, investment and export, on the consumption, the latest retail sales data although on the surface is pointing to 7.4% year-over-year growth in December, but that's because of low rates in 2022. If you take a two-year annualized growth, that number has only come down to 2.7%. So before pandemic, their trend growth is anywhere between 5 to 8%, so there is still quite a bit of distance. In terms of investment, if you break down the investment, broadly speaking, there are three parts: real estate, manufacturing and infrastructure.
So infrastructure, the government will hand out more support. So there will be enough credit. So that part will probably be growing at 67%. Not something to be worried about.
But given that they are a very large space, it's hard to get a high gross number. On the manufacturing part, as we noticed, right now in the economy, there is a deflation pressure. In this kind of environment, it's very hard for the manufacturer to further invest because this kind of environment doesn't give them enough confidence.
And as to the real estate investment trust, last year, it is down 10% year-over-year. And this year, the best we can hope for is flat. So as you can see, there still a lot of headwind on the investment component. With respect to exports, right now, the developed economy is going through spending slump.
That's why last year year-over-year export actually decreased.
But this year, given that the US stimulus is on the way down and also consumers worry about consumer balance sheet is on the way up, there could also be had with this well.
>> Now, when it comes to politicians, policymakers stepping into try to fix things, there is always the risk that they are going to make a mistake that could make it worse. In terms of potential policy errors in China, what concerns you?
What could happen?
>> Our biggest concern is China could repeat Japan's mistake.
If you look at China, there is a lot of similarity to Japan in the 1990s.
The demographic trends, the real estate situation, they also have trouble in real estate, and even the hostile trade environment. Back in the 90s, the US was quite hostile to Japanese because they have large export as well. On all these fronts, you see the similarity. The biggest mistake, in hindsight, is Japanese government did too little, too late and we worry that this could be the Chinese case as well.
So that's why it's important for government to really step out and change that conventional thinking and hit it out of the park.
>> It will be a very interesting year for China. Interesting show ahead for us. We will get to your questions about the Chinese economy and markets for Haining Zha in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories 102in the world of business and take a look at how the markets are trading.
Job demand for weight loss and diabetes drugs are powering a big quarterly be for Eli Lilly.
The farm agenda supporting a 20% jump in revenue, hitting a 9.35 billion in sales for its fourth quarter. Eli Lilly's weight loss drug was approved in November and had a strong launch.
It's diabetes drug which also result in weight loss enjoyed strong demand.
It has slid slightly into negative territory. At 695 bucks per share, you're down under 2%.
Data analytics firm Palantir says demand is surging for artificial intelligence platforms across a wide range of industries.
The company is known for its defence and intelligence work for Washington. It's reporting a 20% jump in sales compared to the same period last year.
CEO Alex Karp says the demand for AI large language models is "Unrelenting." The stock is up more than 25%.
Closer to home, let's talk about Precision Drilling, it's among the biggest gainers on the TSX composite index today. The stock is up 9%. The oil and gas services company says it will reduce its debt by another $100 million by the end of 2026 and plans to return more of its free cash flow to investors. The news comes as Precision Drilling ends in a big jump in net income in its latest quarter.
A quick check on the market, we will start on Bay Street with the TSX Composite Index. We are up 60 points, a little shy of 1/3 of a percent.
Sales of the border, as traders try to get some sense of the path forward when it comes to the Fed and a lot of other issues, it's a bit of a down day.
Down four points, about 1/10 of a percent.
We are back with Haining Zha, take your questions about China's economy and markets. Plenty coming in, let's get to them.
Now that the Taiwan election is over, how do you see relations?
>> Actually, the situation moderated a little bit. As we know, the DPP, the incumbent party, won the presidential election, but they lost 11 seats in the legislative body election.
Right now, the opposition party will have a larger say with respect to the legislative framework. So that is certainly positive news.
The Taiwan office understate counsel within Chinese government observing this and they actually within their statement mentioned that this is a sign that Taiwanese people are not in full agreement with where DPP is going.
So this whole situation moderated a little bit.
>> Moderation in an area that's quite complicated is probably welcomed by markets.
Thoughts on Evergrande liquidation and state of the wider real estate market in China?
>> The Hong Kong listed Evergrande subsidiary was ordered to go through a liquidation process. That inevitably has an impact on its mainland parent operation as well.
Aside from that, within the real estate sector, it is certainly still going through a lot of headwind. For example, in some survey, when asked about their purchasing willingness within the next six months, that percentage of people expressed willingness actually on a margin month over month dropped. Also in terms of transactions, what you are looking at is tier 1 cities, for example Shanghai, measured on 1/4 over quarter basis or a year-over-year basis, they both had a pretty large sequential decline. That tells me that right now, there's not a lot of demand for real estate purchasing and investor or consumer confidence is pretty weak right now.
>> We talked off the top the show in Beijing could do to start getting investor confidence back into the markets, perhaps what they could do for the economy, what could they do for the housing sector at this point if people are feeling sort of skittish about getting into real estate?
>> Again, my view is that they gotta go bigger and go home.
For example, within the real estate space, they really should set up a program like troubled asset purchase program which basically collects troubled assets under 1 Central Pl. so that the rest of the real estate sector can operate as normal and also restore investor confidence.
>> Evergrande, the world's largest property developer, it's in Hong Kong, a subsidiary, not favourable, ordering liquidation. I feel like things are not shaking markets like they used to. It feels like a big event but the markets are not so interested.
>> Part of the reason why is it's already reflected in the market price, in the Evergrande stock price and bond. It's trading probably cents on the dollar, several cents on the dollar.
Most of the stories already played out in the market.
Another big part is the real estate activity because the government still wants to guarantee some of the delivery of housing units.
So the construction activity is impacted less then the operation of the Evergrande entity.
So that's why you see muted movement in the equity or in the commodity space purely driven by this piece of news.
>> Interesting step.
Let's get to another fraught geopolitical issue. Will Red Sea issues have a major impact on China's exports?
>> Yeah, we noticed that since the Red Sea incident, the shipping price going from China to US or going from China to Europe essentially compared to long-term average has doubled.
But nonetheless, when comparing to the peak of the pandemic, it is still only one third of that peak price.
And right now, the situation has lasted only a month, so it is something that we are watching but at the moment hasn't transpired or translated into risk in other areas, for example risk on export or risk on inflationary pressure. But if this lasts for a long time, then we definitely need to pay attention.
>> There are other global trade routes, they are just not as effective in terms of being cost-effective as the Red Sea.
If longer term, you said you have to be concerned of the situation doesn't resolve itself, in the end China presumably still gets his goods out to the world but it will just cost more and that feels inflationary.
>> Yes, and not to mention, typically manufacturing goods, shipping cost is only 10% of the overall production cost, not to mention the consumer typically the seller would mark a big margin on top of the production cost, therefore the impact would be even smaller.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions at home.
We will get back to your question for Haining Zha in the Chinese economy and markets in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
If you are looking to test out potential trading ideas, WebBroker has tools which can help.
Bryan Rogers, Senior client education instructor with TD Direct Investing has more.
>> Today, I wanted to take our audience through a useful tool in the WebBroker platform, specifically in the watch lists.
Many of you have probably heard of the watchlist before and know how to create a basic watchlist. We will take a quick look at that but also there is a feature in there that I find really handy or be able to track a paper trading or mock portfolio. Let's go into WebBroker and I will show everyone how that's done.
Go into WebBroker, I'm on the research tab. You can go to the top right and you will see these buttons.
You can go directly to a watchlist from here.
Or you can go to the research tab right here and you can see under tools you will see watchlist.
WebBroker has the ability to have roughly about 100 particular positions or symbols.
You can create 10 different lists with 10 different stocks on each list.
I have quite a few created, you can see here. I have a few that haven't been created.
Normally they will say list one or list five or six or whatever it may be. That typically indicates that you haven't added any symbols there.
If we go to this other list and I want to add symbols, you just have to click on the list and start adding names.
If we add random stocks like TD, Toronto Dominion. We can add some US stocks as well. If you want to combine them, that's okay also.
Apple, I'll put on maybe Microsoft. Just random stocks here, no type of recommendation.
But let's say you were trying to test a strategy.
I'm not quite ready to buy the stock, but I want to see what would happen if I did in my hunch, basically looking at a chart or analyst reports or the analyst Centre, you can go to this tab on the far right that says tracker, and you can enter as if you were buying the stocks today.
If you had a previous price you are looking at it and he wanted to see what happened there.
To make it more realistic, click on the quantity, let's say you were thinking of buying 100 shares.
You enter in that quantity.
And then you tab over and you want to put in the average cost and you want to make it realistic based on today's price.
You can see there is $80.20.
I'm going to enter that in and put that in here is the price want to go with that.
And then hit save. What happens is you notice it puts in a market value, but cost which is the same right now. Over time, they will start to change and you can see what kind of decision it was over several days or weeks and it will continue to formulate or calculate the profit and loss on this mock portfolio.
So that's basically it. It's a great way to use the watchlist tool. Almost like fake trading essentially and then you can test out your theories.
>> That was Bryan Rogers, Senior client education instructor with TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Before we get back your questions about China's markets and economy for Haining Zha, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Haining Zha, taking your questions about China's markets and economy. This one just came in.
10 send offers the greatest value of MorningStar's foreign five-star coverage.
Is this stock going to start reflecting that value? This is from Paul in Toronto.
Thanks for that question. What are your thoughts on 1010?
>> Tencent is also subject to the broader macroeconomic pressure, but Tencent has been doing all the right things. For example, is cutting its operating costs, it is rightsizing's R and D, it's doing share buybacks although not a huge amount.
And you can see its biggest revenue source, gaming, is growing. High single-digit or low double-digit. So this has been pretty stable.
And also on the video front, they are monetizing their short form videos which was also quite successful. But unfortunately, due to the macroeconomic environment, right now they are trading at very low valuation and investor sentiment is very depressed as to when it will, this trend will reverse. It is hard to tell. It really depends on what the Chinese government does and what the central bank will do.
My sense is that if they turn out not to be of value trap and you hold it for the long run, something quality like this could be a pretty good investment. Right now, I know everybody is talking about AI but very few people actually realize that AI is actually very favourable for future gaming trends because when we play all types of video games, everything is mechanical and written into the code.
There is not a lot of variation when different players playing the game.
But with AI, you can imagine any of the nonplaying, nonplayer characters in the game will be something intelligent.
>> Start speaking for itself. That would be a wild videogame.
>> In the future, it will certainly be a whole new, entirely different experience.
So I'm treating that as a long-term investment. The big if it is China needs to do something on the macro front for the investor to gain confidence.
>> Interesting stuff. It sounds like they are using the same big playbook as the big American tech companies. They wanted to cut costs, rein in expenses and then those socks got rewarded but Tencent is being dragged down with the broader picture like everyone else.
I can't even win modern video games. I can't imagine playing against an AI. Let's get to another question from the audience.
Outlook for China's EV sector?
>> There is two big problems for the EV sector. Number one is in the upstream, they have a supply problem.
They have a glut of supply. That is why if you had this price that the peak of the market, they were trading at around 600,000 are and be time in but they have come down significantly.
It's a huge profit shock for the upstream of the sector.
And now the middle stream and downstream won't be able to kind of profit from that although that as an input cost is lower but they have to pass on this cost to the downstream. In the downstream, there is a lot of competition. The number one or number two are clear, Tesla, but they are having fierce competition.
The competition is fierce. With a lot of supply and branding competition, their margin get squeezed.
Everybody is fighting for survival. Thus problem number one. The second problem is on the demand side.
I know the EV penetration in China is high, more than 30%, and in the future it might further increase but nonetheless, China is having a lot of macroeconomic pressure and, as you know, buying a car is a big ticket spending item. So the consumer would be a lot more cautious about it. For the same money, they want more value.
And also what you look at the overall global environment because the global oil market is much bigger than the Chinese oil market, the trading environment is not very friendly to the Chinese automakers because Elon Musk made a comment… >> I was going to mention, didn't Elon Musk say if we didn't put tariffs up against the Chinese EV sector, they are going to wipe us out?
>> Exactly.
For some of the counterpart models coming out of PYD compared to Tesla's model three, were roughly the same functionality and value, you get 50% cheaper. If you imagine there was no trade barrier, that's going to be a big problem for the authorities and the developed market.
Therefore, the people's consensus is the trade barriers coming or at least it's a big potential risk.
>> Not alarmist at all. Maybe something on the horizon. Let's get another question from the audience. Outlook for China semiconductor sector after the recent US trade restrictions? More trade.
>> Right.
Since the fourth quarter of last year, US, Netherlands and Japan, all of them are super important in semiconductor equipment value chain. They all tighten up export control on China.
Take a lithography machine for example coming out of ASM L. Before, only the very advanced EUV machine was unsanctioned for export. But the DOE machine which is one generation behind, also pretty advanced but one generation behind, they are now subject to sanction.
But in the last year is latest release, some of the DOE machines, for example the NXE 2050 or NXE 2100, they are also on the sanction list so the overall environment is getting tougher and tougher so if China is looking for that breakthrough in semiconductor, I know AI has been very hot. Nvidia's accelerator chip is very popular, GPU chip is very popular. But at the moment, China it's not something they need to worry about.
Probably their next best competitor is AMD. As we know, starting somewhere in the first or second quarter, the age 20 chip, i.e. the chip that Nvidia customized for China under the US regulation, will be able to ship to China.
>> What about China's domestic industry?
China might be thinking the Americans don't want us to have the advantage in AI processing so throttling that we can buy from the likes of Nvidia and others, did they start to do domestic production or are they too far behind?
>> At the moment, they are at least two generations behind.
That's why age 20, when compared to age 100 chip, in terms of computational power, it's only 1/6 of the original chip but nonetheless they will be able to roll out in China and probably will have high demand.
>> Interesting stuff. Let's stay on tech.
We have of you are wondering what's happening with China's big tech firms? We started with Tencent. What's happening across the tax base?
>> It's actually, the regulation is getting a lot more friendlier for the big tech names. Just one quick example, last year in December, the Chinese authority rolled out some new draft rules on gaming, essentially aiming to contain the amount of induce of reward that the big online gaming company can give to the users, but that will have a huge change in terms of how those gaming company monetize their daily operations. So they receive a lot of negative feedback.
And if you look at a stock back then, Tencent had more than 10% pullback in one day because of that regulation. Since then, the regulator really listened to the feedback and tried to walk back and remove some of those very damaging terms within that draft rule and also in January we already see two batches of gaming approval. So this shows that the Chinese government wants to be a lot more friendly to the business.
>> When we started getting those tensions between Beijing and some of the big tech leaders several years back, what were the chances of it, that some of the tech leaders were getting too much power in society?
>> That was the rationale.
At the boom, some of those tech companies do have a lot of power. For example, they force the small merchant to pick between the two. For example, that essentially limits the freedom of the small merchant.
If you pick Alibaba, you cannot pick JD which is not fair.
The correct this kind of unfair practice, the government has some reasonable ground.
But unfortunately, if you carry it too far, it will hurt the overall sentiment and people will have other interpretations as to where it leads to.
>> Very interesting. We are going to get back your questions for Haining Zha on China's economy and markets in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
The country's largest real estate market, that would be right here in Toronto, is starting to heat up. Home sales surging almost 40%, suggesting better than anticipated momentum at the end of last year continued into this year.
Anthony Okolie joins us now with TD Economics take on all this and also the provincial housing outlook for the year.
What do you see that?
>> Thanks very much. As you mentioned, the Toronto real estate market is getting competitive based on figures from the Toronto Regional Real Estate Board. 37% more homes were sold in January across the GTA versus a year ago.
There was a nearly 23% month over month jump from December. Sales were up across all housing categories in the region on an annual basis and those were led by townhomes which were up nearly 55% in January.
Followed by semi detached homes at 43%.
Meanwhile, average home prices across the region came in at just over $1 million.
Down slightly about 1% year-over-year.
That continues a downward trend that we saw start back in June of last year when the benchmark average price was at about $1.1 million. The number of new listings also saw a year-over-year rise at a more modest rate of 6%.
Now, there were's stronger sales growth then new listings growth in January, an indication of the market tightening for the first time in a while. Based on TD Economics updated forecast, they are calling for a gain in Canadian home sales in the first quarter of 2024. This increase essentially reflects a downwardly revised near-term profile for borrowing rates, a more resilient job market and the release of pent-up demand.
Regarding pent-up demand, TD Economics estimates that sales had undershot levels consistent with fundamentals like income, population growth and supply by roughly 50% in the fourth quarter.
Now TD Economics also believes that Canadian home sales should get big assist from the Bank of Canada rate cuts this year supporting rising sales activity throughout the year. Improving sales activity will likely not be enough to stem a first-quarter decline in Canadian average home prices due to the loose supply and demand conditions that are likely to prevail on balance.
TD Economics predicts that national prices should flatten out in the second quarter before rising through the rest of this year and into 2025.
The pace of increase will be restrained by challenging affordability conditions and several of those markets.
TD Economics also points out that the regional disparities that were highlighted in markets in recent quarters is expected to persist in over the next few years, TD Economics's price growth performing in prairies, supported by solid affordability conditions there, also a tight market and economic performance.
Meanwhile in Alberta, they believe that the market there should continue to benefit from the fastest population growth in the country. Finally, by contrast, TD Economics says that the loose conditions here in Ontario and in British Colombia, the housing markets will prompt price discounting in both of these provinces over the next few months before seeing second-half gains.
>> Interesting forecasts from TD Economics on the housing market.
What's the biggest risk to some of those projections?
>> TD Economics says that the key downside risk is that economic growth could be weaker than expected or that the Bank of Canada may be forced to hold the policy rate higher for longer than TD Economics anticipated, should inflation remain higher-than-expected.
Now, they also list some upside risks as well.
For one, the Bank of Canada rate cuts and signalling that proceeds them will likely jolt the market and could cause sales and prices to rise by more than anticipated in the quarter and perhaps even before that.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets. We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
This is the heat map function which gives us a view of the market movers.
We will start with the TSX 60 and screened by Price and volume. A very different picture today than yesterday at this time.
It was hard to find green on the screen in yesterday's session. Different story today.
We can start with energy space. The price American benchmark crude studying today, up about a percent. A bit of flow into that and some of the other big energy names in the country, Suncor up 1 1/3%, Cenovus keeping pace with those gains and Imperial Oil up a little more than 2%.
In the financial space, we were out some of the big banks making modest moves higher. The two life cos, Manulife and Sun Life also making gains of about 1 1/3 and 1/2%.
Let's check in on the S&P 100. It's a bit of a mixed session.
Strengthen traditional automakers, Ford up almost 4%, General Motors up about 2%.
Seeing some moves in the healthcare space, including from Pfizer but we've got some big blocks of red on the screen indicating price action to the downside. It's actually to the big chipmakers that have had pretty good runs over the past year.
Nvidia is down about 3 1/2% and AMD is down a little more than 4%, taking some points off the table.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Haining Zha from TD Asset Management, talking about China's stock market and economy.
Another question here. Here's a big one.
Impact of the US election on China relations and what it could all mean for investors?
>> It is definitely a big overhang for the potential investor in Chinese market. We have already seen the headline that Trump is talking to his advisors, considering about 60% tariff on Chinese imports. That is just talk. It might be the starting point of a negotiation but just imagine even if you get that number down to say 10, 20%, given the amount of trading volume between the two countries, which on annualized is around $400 billion, is still a big deal. Foreign investor, it is not hard to go through what has been going on back in 2018 when Trump initiated the trade war, right? So that painful memory is still there.
So no question, it is still a big overhang for the Chinese equity market.
That's why the policymakers need to come out more and directly support the market.
>> I wanted to go back, before we let you go, take us back to the top of the conversation. He said that China's policymakers at this point with the state of the market and the economy have to go big or go home. What he watching for in coming days in terms of them going big?
>> More concrete measures.
For example, right now, they've got sporadic buying activity.
Is there a mechanism for them, is there enough evidence that they are establishing a more regular mechanism to directly intervene in the market and potentially similar to what the DOJ did, the Bank of Japan did. That would remarkably change the investor confidence. To be honest, they don't need to invent the law because they already got some of the national institution out there that can carry out such activity. For example, back in 2015, they got the Chinese securities finance corporations do the buying and the central bank providing the liquidity.
And they also have another entity under the Chinese investor corporation that could potentially intervene in the Asian market, just like today.
They just need to go bigger or go home.
>> Interesting stuff. Always a fascinating conversation. Thanks for joining us.
>> Thank you very much.
>> Our thanks to Haining Zha, VP and Dir.
of asset allocation research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Damian Fernandes, Managing Director and portfolio manager at TD Asset Management will be our Guest taking your questions about global stocks. We will start the show was a discussion about earnings season and whether the stocks are showing us the goods.
You can get a Headstart with your questions.
Just email MoneyTalkLive@TD.com.
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[music]
[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we will discuss whether better days are ahead for China's markets and economy. TD Asset Management's Haining Zha joins us. MoneyTalk's Anthony Okolie is going to have a look at what the latest Toronto home sales data is telling us about the strength of that market. In today's WebBroker education segment, Bryan Rogers will show us how you can test out trading ideas are on the platform.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start her at home with the TSX Composite Index.
We are seeing oil prices up about a percent, gold prices are firming a little.
And we have some green on the screen for the TSX Composite Index, we are up 66 points, a modest third of a percent of the upside. Among the most actively traded names at this hour included Baytex energy.
At $4.11, it has been a choppy riot of for energy names in recent days but it's an update for Baytex. Barrick Gold is down about 1%. South of the border, as traders try to wrap your head around what might come next from the Fed and when they might get an interest rate cut, Jerome Powell beating the drum on that. Today, you're basically flat on the market. Down four points on the S&P 500, a little less than 1/10 of a percent.
The tech heavy NASDAQ, let's see how those tech stocks are faring today. Pretty much in line with the broader market, down 14 points, a little less than 1/10 of a percent. Palantir is taking a big jump today, at 2082 per share, you got Palantir up almost 25%. And that's your market update.
After trading close to five year lows recently, stocks in China are bouncing back amid optimism that Beijing may make more moose to help the markets.
Joining us now to discuss his Haining Zha, VP and Dir. of asset allocation research at TD Asset Management.
>> Thanks for having me.
>> China has been an interesting space and the markets have been interesting as well.
What are we seeing?
>> Right now, the Chinese equity market has a clear lack of confidence. Just give you an idea, MSCI China right now is trading at around 12, 12.5% earnings yield and right now the Chinese 10 year government bond is trading at 2.4% so if you subtract the two, which should give you a sense of the equity risk premium that investors require, that a close to 10%, so when you compare this number to Japan or Europe, those numbers are at around 6%. They are a full four percentage points higher.
That 10% equity risk premium is actually broadly in line with Russia, i.e.
investors right now are treating China as Russia. They are not pricing in any growth in their pricing a lot of potential policy risk.
>> We are seeing a bit of a bounce today.
It just one session. It seems to be on speculation that Beijing may step in and say, this is a situation that we are not going to tolerate much longer.
Speculation is key here. Who knows what the markets will do the next day. What could Beijing or the country due to turn things around?
>> Actually, there is a lot that they can do, it's just at the moment, they have been holding back in terms of all of their policy at the moment kind of in a piecemeal fashion. It is not enough to turn around investor expectation.
So in order to restore market confidence, they definitely need to do a lot more than that.
>> Let's start breaking down some of the moves. You said it has been piecemeal. I think for a while now, investors have been waiting for moves out of China.
They lowered this rater they tweaked this rate. What could the big moves look like?
>> First of all, just step back, what they have done recently at the end of last year and also in January as at the end of last year, they actually increase the central bank PSL, which is pledged supplementary lending, which is a way to expand the balance sheet. They expanded it by around 500 million R and B. That is not a small amount.
In January, they wanted to hold back a little bit. When it comes to reset medium turn lending rate, they actually hold it unchanged. All of a sudden, the equity market does not interpret that signal well and the market just go straight down from there.
And then, in the next opportunity, when they do reserve requirement ratio cut, they cut by 50 basis points, which is a bit larger than the 25 basis points that investors are expecting. But all of these measures, when they translate into economies or the equity market, they are pretty slow.
They have some big headwinds coming. For example, in real estate and potentially even on the trade front.
This is a US election year. We could have some negative headline news on that front as well which can change investor expectation and perception about the Chinese equity market.
In order to turn that around, they should come up with something that directly supports equity markets. So that's why the national team is coming into the market, buying some amount from the market but the problem with that is if you don't give very clear expectation of what you are going to do in the future, it's not enough to give investors confidence. So they have to establish a consistent expectation similar to what… Did back in 2012, essentially, China needs to have its own whatever it takes moment.
>> Whatever it takes moment, whatever it takes policy. It's often said the stock market isn't the economy. If you look at China, they have both underwhelmed for quite some time. It feels like they are both stuck in the same kind of holding pattern. What you expect out of China's economy? If they get the economy going, will the markets follow or vice versa?
>> This year, there could still be quite a bit of headwind.
If you break down the economy into different parts, consumption, investment and export, on the consumption, the latest retail sales data although on the surface is pointing to 7.4% year-over-year growth in December, but that's because of low rates in 2022. If you take a two-year annualized growth, that number has only come down to 2.7%. So before pandemic, their trend growth is anywhere between 5 to 8%, so there is still quite a bit of distance. In terms of investment, if you break down the investment, broadly speaking, there are three parts: real estate, manufacturing and infrastructure.
So infrastructure, the government will hand out more support. So there will be enough credit. So that part will probably be growing at 67%. Not something to be worried about.
But given that they are a very large space, it's hard to get a high gross number. On the manufacturing part, as we noticed, right now in the economy, there is a deflation pressure. In this kind of environment, it's very hard for the manufacturer to further invest because this kind of environment doesn't give them enough confidence.
And as to the real estate investment trust, last year, it is down 10% year-over-year. And this year, the best we can hope for is flat. So as you can see, there still a lot of headwind on the investment component. With respect to exports, right now, the developed economy is going through spending slump.
That's why last year year-over-year export actually decreased.
But this year, given that the US stimulus is on the way down and also consumers worry about consumer balance sheet is on the way up, there could also be had with this well.
>> Now, when it comes to politicians, policymakers stepping into try to fix things, there is always the risk that they are going to make a mistake that could make it worse. In terms of potential policy errors in China, what concerns you?
What could happen?
>> Our biggest concern is China could repeat Japan's mistake.
If you look at China, there is a lot of similarity to Japan in the 1990s.
The demographic trends, the real estate situation, they also have trouble in real estate, and even the hostile trade environment. Back in the 90s, the US was quite hostile to Japanese because they have large export as well. On all these fronts, you see the similarity. The biggest mistake, in hindsight, is Japanese government did too little, too late and we worry that this could be the Chinese case as well.
So that's why it's important for government to really step out and change that conventional thinking and hit it out of the park.
>> It will be a very interesting year for China. Interesting show ahead for us. We will get to your questions about the Chinese economy and markets for Haining Zha in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories 102in the world of business and take a look at how the markets are trading.
Job demand for weight loss and diabetes drugs are powering a big quarterly be for Eli Lilly.
The farm agenda supporting a 20% jump in revenue, hitting a 9.35 billion in sales for its fourth quarter. Eli Lilly's weight loss drug was approved in November and had a strong launch.
It's diabetes drug which also result in weight loss enjoyed strong demand.
It has slid slightly into negative territory. At 695 bucks per share, you're down under 2%.
Data analytics firm Palantir says demand is surging for artificial intelligence platforms across a wide range of industries.
The company is known for its defence and intelligence work for Washington. It's reporting a 20% jump in sales compared to the same period last year.
CEO Alex Karp says the demand for AI large language models is "Unrelenting." The stock is up more than 25%.
Closer to home, let's talk about Precision Drilling, it's among the biggest gainers on the TSX composite index today. The stock is up 9%. The oil and gas services company says it will reduce its debt by another $100 million by the end of 2026 and plans to return more of its free cash flow to investors. The news comes as Precision Drilling ends in a big jump in net income in its latest quarter.
A quick check on the market, we will start on Bay Street with the TSX Composite Index. We are up 60 points, a little shy of 1/3 of a percent.
Sales of the border, as traders try to get some sense of the path forward when it comes to the Fed and a lot of other issues, it's a bit of a down day.
Down four points, about 1/10 of a percent.
We are back with Haining Zha, take your questions about China's economy and markets. Plenty coming in, let's get to them.
Now that the Taiwan election is over, how do you see relations?
>> Actually, the situation moderated a little bit. As we know, the DPP, the incumbent party, won the presidential election, but they lost 11 seats in the legislative body election.
Right now, the opposition party will have a larger say with respect to the legislative framework. So that is certainly positive news.
The Taiwan office understate counsel within Chinese government observing this and they actually within their statement mentioned that this is a sign that Taiwanese people are not in full agreement with where DPP is going.
So this whole situation moderated a little bit.
>> Moderation in an area that's quite complicated is probably welcomed by markets.
Thoughts on Evergrande liquidation and state of the wider real estate market in China?
>> The Hong Kong listed Evergrande subsidiary was ordered to go through a liquidation process. That inevitably has an impact on its mainland parent operation as well.
Aside from that, within the real estate sector, it is certainly still going through a lot of headwind. For example, in some survey, when asked about their purchasing willingness within the next six months, that percentage of people expressed willingness actually on a margin month over month dropped. Also in terms of transactions, what you are looking at is tier 1 cities, for example Shanghai, measured on 1/4 over quarter basis or a year-over-year basis, they both had a pretty large sequential decline. That tells me that right now, there's not a lot of demand for real estate purchasing and investor or consumer confidence is pretty weak right now.
>> We talked off the top the show in Beijing could do to start getting investor confidence back into the markets, perhaps what they could do for the economy, what could they do for the housing sector at this point if people are feeling sort of skittish about getting into real estate?
>> Again, my view is that they gotta go bigger and go home.
For example, within the real estate space, they really should set up a program like troubled asset purchase program which basically collects troubled assets under 1 Central Pl. so that the rest of the real estate sector can operate as normal and also restore investor confidence.
>> Evergrande, the world's largest property developer, it's in Hong Kong, a subsidiary, not favourable, ordering liquidation. I feel like things are not shaking markets like they used to. It feels like a big event but the markets are not so interested.
>> Part of the reason why is it's already reflected in the market price, in the Evergrande stock price and bond. It's trading probably cents on the dollar, several cents on the dollar.
Most of the stories already played out in the market.
Another big part is the real estate activity because the government still wants to guarantee some of the delivery of housing units.
So the construction activity is impacted less then the operation of the Evergrande entity.
So that's why you see muted movement in the equity or in the commodity space purely driven by this piece of news.
>> Interesting step.
Let's get to another fraught geopolitical issue. Will Red Sea issues have a major impact on China's exports?
>> Yeah, we noticed that since the Red Sea incident, the shipping price going from China to US or going from China to Europe essentially compared to long-term average has doubled.
But nonetheless, when comparing to the peak of the pandemic, it is still only one third of that peak price.
And right now, the situation has lasted only a month, so it is something that we are watching but at the moment hasn't transpired or translated into risk in other areas, for example risk on export or risk on inflationary pressure. But if this lasts for a long time, then we definitely need to pay attention.
>> There are other global trade routes, they are just not as effective in terms of being cost-effective as the Red Sea.
If longer term, you said you have to be concerned of the situation doesn't resolve itself, in the end China presumably still gets his goods out to the world but it will just cost more and that feels inflationary.
>> Yes, and not to mention, typically manufacturing goods, shipping cost is only 10% of the overall production cost, not to mention the consumer typically the seller would mark a big margin on top of the production cost, therefore the impact would be even smaller.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions at home.
We will get back to your question for Haining Zha in the Chinese economy and markets in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
If you are looking to test out potential trading ideas, WebBroker has tools which can help.
Bryan Rogers, Senior client education instructor with TD Direct Investing has more.
>> Today, I wanted to take our audience through a useful tool in the WebBroker platform, specifically in the watch lists.
Many of you have probably heard of the watchlist before and know how to create a basic watchlist. We will take a quick look at that but also there is a feature in there that I find really handy or be able to track a paper trading or mock portfolio. Let's go into WebBroker and I will show everyone how that's done.
Go into WebBroker, I'm on the research tab. You can go to the top right and you will see these buttons.
You can go directly to a watchlist from here.
Or you can go to the research tab right here and you can see under tools you will see watchlist.
WebBroker has the ability to have roughly about 100 particular positions or symbols.
You can create 10 different lists with 10 different stocks on each list.
I have quite a few created, you can see here. I have a few that haven't been created.
Normally they will say list one or list five or six or whatever it may be. That typically indicates that you haven't added any symbols there.
If we go to this other list and I want to add symbols, you just have to click on the list and start adding names.
If we add random stocks like TD, Toronto Dominion. We can add some US stocks as well. If you want to combine them, that's okay also.
Apple, I'll put on maybe Microsoft. Just random stocks here, no type of recommendation.
But let's say you were trying to test a strategy.
I'm not quite ready to buy the stock, but I want to see what would happen if I did in my hunch, basically looking at a chart or analyst reports or the analyst Centre, you can go to this tab on the far right that says tracker, and you can enter as if you were buying the stocks today.
If you had a previous price you are looking at it and he wanted to see what happened there.
To make it more realistic, click on the quantity, let's say you were thinking of buying 100 shares.
You enter in that quantity.
And then you tab over and you want to put in the average cost and you want to make it realistic based on today's price.
You can see there is $80.20.
I'm going to enter that in and put that in here is the price want to go with that.
And then hit save. What happens is you notice it puts in a market value, but cost which is the same right now. Over time, they will start to change and you can see what kind of decision it was over several days or weeks and it will continue to formulate or calculate the profit and loss on this mock portfolio.
So that's basically it. It's a great way to use the watchlist tool. Almost like fake trading essentially and then you can test out your theories.
>> That was Bryan Rogers, Senior client education instructor with TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Before we get back your questions about China's markets and economy for Haining Zha, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Haining Zha, taking your questions about China's markets and economy. This one just came in.
10 send offers the greatest value of MorningStar's foreign five-star coverage.
Is this stock going to start reflecting that value? This is from Paul in Toronto.
Thanks for that question. What are your thoughts on 1010?
>> Tencent is also subject to the broader macroeconomic pressure, but Tencent has been doing all the right things. For example, is cutting its operating costs, it is rightsizing's R and D, it's doing share buybacks although not a huge amount.
And you can see its biggest revenue source, gaming, is growing. High single-digit or low double-digit. So this has been pretty stable.
And also on the video front, they are monetizing their short form videos which was also quite successful. But unfortunately, due to the macroeconomic environment, right now they are trading at very low valuation and investor sentiment is very depressed as to when it will, this trend will reverse. It is hard to tell. It really depends on what the Chinese government does and what the central bank will do.
My sense is that if they turn out not to be of value trap and you hold it for the long run, something quality like this could be a pretty good investment. Right now, I know everybody is talking about AI but very few people actually realize that AI is actually very favourable for future gaming trends because when we play all types of video games, everything is mechanical and written into the code.
There is not a lot of variation when different players playing the game.
But with AI, you can imagine any of the nonplaying, nonplayer characters in the game will be something intelligent.
>> Start speaking for itself. That would be a wild videogame.
>> In the future, it will certainly be a whole new, entirely different experience.
So I'm treating that as a long-term investment. The big if it is China needs to do something on the macro front for the investor to gain confidence.
>> Interesting stuff. It sounds like they are using the same big playbook as the big American tech companies. They wanted to cut costs, rein in expenses and then those socks got rewarded but Tencent is being dragged down with the broader picture like everyone else.
I can't even win modern video games. I can't imagine playing against an AI. Let's get to another question from the audience.
Outlook for China's EV sector?
>> There is two big problems for the EV sector. Number one is in the upstream, they have a supply problem.
They have a glut of supply. That is why if you had this price that the peak of the market, they were trading at around 600,000 are and be time in but they have come down significantly.
It's a huge profit shock for the upstream of the sector.
And now the middle stream and downstream won't be able to kind of profit from that although that as an input cost is lower but they have to pass on this cost to the downstream. In the downstream, there is a lot of competition. The number one or number two are clear, Tesla, but they are having fierce competition.
The competition is fierce. With a lot of supply and branding competition, their margin get squeezed.
Everybody is fighting for survival. Thus problem number one. The second problem is on the demand side.
I know the EV penetration in China is high, more than 30%, and in the future it might further increase but nonetheless, China is having a lot of macroeconomic pressure and, as you know, buying a car is a big ticket spending item. So the consumer would be a lot more cautious about it. For the same money, they want more value.
And also what you look at the overall global environment because the global oil market is much bigger than the Chinese oil market, the trading environment is not very friendly to the Chinese automakers because Elon Musk made a comment… >> I was going to mention, didn't Elon Musk say if we didn't put tariffs up against the Chinese EV sector, they are going to wipe us out?
>> Exactly.
For some of the counterpart models coming out of PYD compared to Tesla's model three, were roughly the same functionality and value, you get 50% cheaper. If you imagine there was no trade barrier, that's going to be a big problem for the authorities and the developed market.
Therefore, the people's consensus is the trade barriers coming or at least it's a big potential risk.
>> Not alarmist at all. Maybe something on the horizon. Let's get another question from the audience. Outlook for China semiconductor sector after the recent US trade restrictions? More trade.
>> Right.
Since the fourth quarter of last year, US, Netherlands and Japan, all of them are super important in semiconductor equipment value chain. They all tighten up export control on China.
Take a lithography machine for example coming out of ASM L. Before, only the very advanced EUV machine was unsanctioned for export. But the DOE machine which is one generation behind, also pretty advanced but one generation behind, they are now subject to sanction.
But in the last year is latest release, some of the DOE machines, for example the NXE 2050 or NXE 2100, they are also on the sanction list so the overall environment is getting tougher and tougher so if China is looking for that breakthrough in semiconductor, I know AI has been very hot. Nvidia's accelerator chip is very popular, GPU chip is very popular. But at the moment, China it's not something they need to worry about.
Probably their next best competitor is AMD. As we know, starting somewhere in the first or second quarter, the age 20 chip, i.e. the chip that Nvidia customized for China under the US regulation, will be able to ship to China.
>> What about China's domestic industry?
China might be thinking the Americans don't want us to have the advantage in AI processing so throttling that we can buy from the likes of Nvidia and others, did they start to do domestic production or are they too far behind?
>> At the moment, they are at least two generations behind.
That's why age 20, when compared to age 100 chip, in terms of computational power, it's only 1/6 of the original chip but nonetheless they will be able to roll out in China and probably will have high demand.
>> Interesting stuff. Let's stay on tech.
We have of you are wondering what's happening with China's big tech firms? We started with Tencent. What's happening across the tax base?
>> It's actually, the regulation is getting a lot more friendlier for the big tech names. Just one quick example, last year in December, the Chinese authority rolled out some new draft rules on gaming, essentially aiming to contain the amount of induce of reward that the big online gaming company can give to the users, but that will have a huge change in terms of how those gaming company monetize their daily operations. So they receive a lot of negative feedback.
And if you look at a stock back then, Tencent had more than 10% pullback in one day because of that regulation. Since then, the regulator really listened to the feedback and tried to walk back and remove some of those very damaging terms within that draft rule and also in January we already see two batches of gaming approval. So this shows that the Chinese government wants to be a lot more friendly to the business.
>> When we started getting those tensions between Beijing and some of the big tech leaders several years back, what were the chances of it, that some of the tech leaders were getting too much power in society?
>> That was the rationale.
At the boom, some of those tech companies do have a lot of power. For example, they force the small merchant to pick between the two. For example, that essentially limits the freedom of the small merchant.
If you pick Alibaba, you cannot pick JD which is not fair.
The correct this kind of unfair practice, the government has some reasonable ground.
But unfortunately, if you carry it too far, it will hurt the overall sentiment and people will have other interpretations as to where it leads to.
>> Very interesting. We are going to get back your questions for Haining Zha on China's economy and markets in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
The country's largest real estate market, that would be right here in Toronto, is starting to heat up. Home sales surging almost 40%, suggesting better than anticipated momentum at the end of last year continued into this year.
Anthony Okolie joins us now with TD Economics take on all this and also the provincial housing outlook for the year.
What do you see that?
>> Thanks very much. As you mentioned, the Toronto real estate market is getting competitive based on figures from the Toronto Regional Real Estate Board. 37% more homes were sold in January across the GTA versus a year ago.
There was a nearly 23% month over month jump from December. Sales were up across all housing categories in the region on an annual basis and those were led by townhomes which were up nearly 55% in January.
Followed by semi detached homes at 43%.
Meanwhile, average home prices across the region came in at just over $1 million.
Down slightly about 1% year-over-year.
That continues a downward trend that we saw start back in June of last year when the benchmark average price was at about $1.1 million. The number of new listings also saw a year-over-year rise at a more modest rate of 6%.
Now, there were's stronger sales growth then new listings growth in January, an indication of the market tightening for the first time in a while. Based on TD Economics updated forecast, they are calling for a gain in Canadian home sales in the first quarter of 2024. This increase essentially reflects a downwardly revised near-term profile for borrowing rates, a more resilient job market and the release of pent-up demand.
Regarding pent-up demand, TD Economics estimates that sales had undershot levels consistent with fundamentals like income, population growth and supply by roughly 50% in the fourth quarter.
Now TD Economics also believes that Canadian home sales should get big assist from the Bank of Canada rate cuts this year supporting rising sales activity throughout the year. Improving sales activity will likely not be enough to stem a first-quarter decline in Canadian average home prices due to the loose supply and demand conditions that are likely to prevail on balance.
TD Economics predicts that national prices should flatten out in the second quarter before rising through the rest of this year and into 2025.
The pace of increase will be restrained by challenging affordability conditions and several of those markets.
TD Economics also points out that the regional disparities that were highlighted in markets in recent quarters is expected to persist in over the next few years, TD Economics's price growth performing in prairies, supported by solid affordability conditions there, also a tight market and economic performance.
Meanwhile in Alberta, they believe that the market there should continue to benefit from the fastest population growth in the country. Finally, by contrast, TD Economics says that the loose conditions here in Ontario and in British Colombia, the housing markets will prompt price discounting in both of these provinces over the next few months before seeing second-half gains.
>> Interesting forecasts from TD Economics on the housing market.
What's the biggest risk to some of those projections?
>> TD Economics says that the key downside risk is that economic growth could be weaker than expected or that the Bank of Canada may be forced to hold the policy rate higher for longer than TD Economics anticipated, should inflation remain higher-than-expected.
Now, they also list some upside risks as well.
For one, the Bank of Canada rate cuts and signalling that proceeds them will likely jolt the market and could cause sales and prices to rise by more than anticipated in the quarter and perhaps even before that.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets. We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
This is the heat map function which gives us a view of the market movers.
We will start with the TSX 60 and screened by Price and volume. A very different picture today than yesterday at this time.
It was hard to find green on the screen in yesterday's session. Different story today.
We can start with energy space. The price American benchmark crude studying today, up about a percent. A bit of flow into that and some of the other big energy names in the country, Suncor up 1 1/3%, Cenovus keeping pace with those gains and Imperial Oil up a little more than 2%.
In the financial space, we were out some of the big banks making modest moves higher. The two life cos, Manulife and Sun Life also making gains of about 1 1/3 and 1/2%.
Let's check in on the S&P 100. It's a bit of a mixed session.
Strengthen traditional automakers, Ford up almost 4%, General Motors up about 2%.
Seeing some moves in the healthcare space, including from Pfizer but we've got some big blocks of red on the screen indicating price action to the downside. It's actually to the big chipmakers that have had pretty good runs over the past year.
Nvidia is down about 3 1/2% and AMD is down a little more than 4%, taking some points off the table.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Haining Zha from TD Asset Management, talking about China's stock market and economy.
Another question here. Here's a big one.
Impact of the US election on China relations and what it could all mean for investors?
>> It is definitely a big overhang for the potential investor in Chinese market. We have already seen the headline that Trump is talking to his advisors, considering about 60% tariff on Chinese imports. That is just talk. It might be the starting point of a negotiation but just imagine even if you get that number down to say 10, 20%, given the amount of trading volume between the two countries, which on annualized is around $400 billion, is still a big deal. Foreign investor, it is not hard to go through what has been going on back in 2018 when Trump initiated the trade war, right? So that painful memory is still there.
So no question, it is still a big overhang for the Chinese equity market.
That's why the policymakers need to come out more and directly support the market.
>> I wanted to go back, before we let you go, take us back to the top of the conversation. He said that China's policymakers at this point with the state of the market and the economy have to go big or go home. What he watching for in coming days in terms of them going big?
>> More concrete measures.
For example, right now, they've got sporadic buying activity.
Is there a mechanism for them, is there enough evidence that they are establishing a more regular mechanism to directly intervene in the market and potentially similar to what the DOJ did, the Bank of Japan did. That would remarkably change the investor confidence. To be honest, they don't need to invent the law because they already got some of the national institution out there that can carry out such activity. For example, back in 2015, they got the Chinese securities finance corporations do the buying and the central bank providing the liquidity.
And they also have another entity under the Chinese investor corporation that could potentially intervene in the Asian market, just like today.
They just need to go bigger or go home.
>> Interesting stuff. Always a fascinating conversation. Thanks for joining us.
>> Thank you very much.
>> Our thanks to Haining Zha, VP and Dir.
of asset allocation research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Damian Fernandes, Managing Director and portfolio manager at TD Asset Management will be our Guest taking your questions about global stocks. We will start the show was a discussion about earnings season and whether the stocks are showing us the goods.
You can get a Headstart with your questions.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today.
Thanks for watching. We will see you tomorrow.
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