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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 are going to discuss the risk posed by a potential decoupling of the United States and Chinese economies with Haining Zha, VP and managing director at TD Asset Management. MoneyTalk's Anthony Okolie is going to have a look at a new report from TD Economics on the state of household wealth in Canada. And in today's WebBroker education segment,Nugwa Haruna is going to shows how you can find information about preferred shares using the platform.
So 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 our guest of the day, let's get you an update on the markets. We will start you on Bay Street with the TSX Composite Index.
You've got West Texas intermediate crude, the American benchmark, just shy of 90 bucks per barrel right now but it was above 90 at 10 month highs a little earlier in this section. That's putting money towards energy names, lifting the topline. 220 point to the upside on the TSX, good for a whole percent and then some.
Among the most actively traded names on the TSX, top 10, it's a list of different energy plays. Athabasca Oil among them. At four bucks and two cents per share, up 3.6%. Pipeline giant Enbridge as well getting a bit of a bid today but a bit more modest for the pipelines.
4722, you got Enbridge up 1.6%.
South of the border, we are getting more reads on the state of US inflation. We've got the big CPI print yesterday but we are also getting producer prices which is stripping things away from gasoline which has been moving inflation higher here in Canada and the states, the markets are fine with what they are seeing and core measurements. The S&P 500 up 33 points will call it or three quarters of a percent. The tech heavy NASDAQ, how is it bearing against the broader market? Right now, it's liking a little bit still got some upside.
80 points were little more than half a percent.
Let's check in on AT&T, it's on the move today. The company says it expects to deliver the free cash flow of up to $5 billion to the current quarter.
The market seems to like the sound of it. The stock is up two and half percent. And that's your market update.
increasing tensions between the United States and China is spoken concerns that theworld's two largest economies might decouple in our guest today says that this poses a major risk to the markets. Joining us now to discuss is Haining Zha, VP and Dir. at TD Asset Management. Great to have you back.
>> Thanks for having me.
>> The word decoupling became part of our vocabulary this year, US China rising tensions, what is actually needed to see these, the world's two largest one in the way?
>> to put it in perspective, if you think about the last decade, it's basically the biggest two countries generally they get along really welland that created two forms of dividend. Number one is economic dividend because, for US corporations, they find a cheaper source of labour, they find a cheaper source of product and they find a vast market. And for the Chinese, they were able to attract more capital, build their manufacturing base and they were able to find the end market for their product as well. So that is generally a win-win situation.
The second form of dividend is the peace dividend. So although there are always some kind of conflict here in the air in the world, but generally, they don't threaten the major economic interests for extended periods of time.
So if we look at the past fantastic return, these two forms of dividend, they are actually the major sources.
So it would be complacent to think we can kind of repeat history and repeat that fantastic return.
>> It seems to be a lot of tensions are on the technology front. He talked about the United States being wary about having technology go to China in terms of AI and chips.
In the real world, we have seen some headlines recently where it's right down to, can I take an iPhone to work in China?
In some cases, no.
>> That's exactly the case in point. Many people don't feel the tangible impact of geopolitical tension but Apple is one great example. Right before they roll out their new phone, the Chinese government guided government employees not to use iPhones for security reasons and that actually coincided with Huawei rolling out their new phone as well.
That caused a hit to Apple share price, about 17%.
>> We are talking about IP in the end.
Both countries having their intellectual property in the markets. How far could that battle go in terms of people pulling back?
>> It certainly could go for a very long time. Right now, we are not seeing the geopolitical tension in the technology area really alleviate anytime soon.
>> If we do have another situation or the situation doesn't get better, he talked about the impact, there were dividends to be paid from the world's two largest powers and economies playing nice to get there.
If they are not going to play nice going forward, what does it mean for investors? What should they be looking for?
>> They have to be prepared to accept a much lower return and they have to be really nimble and watch for Black swans. This will be an arrow for many, many Black swans down the road.
>> Okay. Thinking about the Black Swan, you don't really see it until it is on your doorstep. Interesting dynamics there. We know that the Chinese economy has been faltering.
At the beginning of this year, the idea was okay, they have dropped the COVID restrictions, game on for everybody.
it hasn't played out that way.
I think they made further moves even today in terms of trying to shore up the economy. Is what they are doing enough?
>> Right. Generally speaking, so there are different areas. For example, monetary policy, the fiscal policy, the policy around… But so far none of the policies have been enough to give investors the confidence was they need, that is why the market is still kind of lacklustre.
And we can talk about each different area. For example, in the monetary policy area,for example, the central government cut reserve reverse repo rate twice, cut twice about together total about 20 to 25 basis points, and also they usually how the monetary policy works is once you cut the key rate, it will naturally spread to the low pride parade which is directly linked to mortgage rates and corporate lending rates. But when they cut the LPR, they only caught on a one-year tenor and not a five-year tenor and this is because they want to protect the banking at profit.
on the monetary policy front so far,it has been below investor expectations and in the future, they might need to do more.
>> What about the fiscal policy side? If you are trying to stoke an economy, traditionally the monetary policy plays a role within the fiscal stimulus gets more money into people's hands to hope that it goes back into the economy.
>> On the fiscal front, we heard even less news because there have been some whispers of the Chinese government might do a special Treasury issuance to support spending. That didn't happen and also investors, like you said, expect the government to directly hand money to households to support consumption. That didn't happen either.
So in the only real progress happening on the fiscal front is to the physical vehicle and now they will try to consolidate that debt into provincial debt.
The reason why they want to do that isfor those local government funding vehicles, the interest rate financing costs is higher, about 1% higher than provincial. By doing that, they can save the 1% interest rate cost but for many of those provinces, their debt load is also very high so by consolidating into an entity where an existing debt load is high is really not confidence boosting.
>> Given the fact that they have taken these moves, you said it really hasn't been confidence boosting, is there a sense that they will do more on the physical or the monetary side?
Where are we at this point?
China has to know that the economy is in a bit of trouble here.
>> Right.
I think we are, and all of the investors, are in wait and see mode.
Typically, the government wants to maintain some kind of stability and even the policy stabilities so it will be very unusual for them to all of a sudden exceed market expectations.
Usually it's the economic situation getting worse and worse and that presses them to do something and then they will respond. So right now, we are seeing is they are in the reactive mode rather than in the proactive mode.
>> Interesting stuff indeed. We are going to get back to your questions for Haining Zha in just a moment's time.
A reminder of course that you can get in touch with us at 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 in the world of business and take a look at how the markets are trading.
We have shares of Laurentian Bank in the spotlight today. The Québec-based lender says it has ended its strategic review without a deal to sell the bank. In a release, Laurentian says it will continue its current plan to focus on efficiencies and the simple vacation of its business.
Of course, you can look at the chart here.
The shares jumped in the summer on the needs of a possible sale. It's been rolling off.
On today's news, you're down about 11% on the name.
The parent company of Sobeys has beaten earnings expectations for its most recent quarter. Empire Co.
sayssame-store sales, key metric for the industry, roughly percent compared to the same period last year.
In the profit line got a boost from the sale of 56 Gas Stations in Western Canada to shell Canada. It's up to percent. The return of the summer traveller is helping the bottom line at Transat A.T. The travel company is reporting a profit of $57 million for its third quarter, compared to a loss of more than $100 million in the same period last year. Transat is also raising its adjusted earnings for the forecast of the year.
Let's check in on the main benchmark indices, starting here, Bay Street with the TSX Composite Index. Got a triple digit gain of 218 points, more than a full percent. We are seeing crude prices on the move higher again and they were above 90 bucks earlier in the session. 10 month highs. Lifting the energy space.
South of the border, American investors got a careful eye on any wind of inflation. If you strip away the effects of gasoline which has been pressuring inflation to the upside in this country and south of the border recently, the market seems fine with what they are seeing in court. You're up about 33 points or three quarters of a percent on the S&P 500.
All right, we are back now with Haining Zha, take your questions about China's economy and the markets. Plenty of questions coming in. We will start getting to them.
Here's a big one. What's the help of the big property developers in China?
>> Right.
In the news a couple of days ago, they narrowly escaped a default case by paying $22 million interest so it's a sigh of relief. Definitely avoided a worse situation.
But if you are looking forward to the next 12 months, they still have 15 billion worth of debt maturing which is still will be an overhang for the real estate sector in general.
>> So obviously you get a bit of relief and you see the side that comes with it.
Okay, they made their payment.
Structurally, what is happening with companies like country garden and others that have ended up in the situation? What happened to China's property market?
>> The bottom line is they borrowed too much hand right now, sales are declining. The fundamental supply and demand balance in the real estate market has changed.
After the explosion of building in the last 10, 20 years, right now, the supply is probably matches demand or maybe even a little oversupply and also given the covert shock, people right now are struggling to find jobs and grow their income.
So naturally, you will see falling real estate sales.
So far this year, real estate sales has been down 30% year-over-year, which is not an inspiring number and for a real estate company, if they cannot get the money from the sales, then of course they need to plug the hole somewhere in terms of their funding.
>> When you have homes available on the market and supply exceeds demand, basically a middle class that wants to buy homes, but think about young people too.
Household formation, they get into the labour market. I know you've been on both this program and the program with Kim lately talking about the fact that youth unemployment has been high.
>> Right, youth unemployment rate was very high, about 20% recently. The government agency just stopped publishing that statistic altogether which is not very confidence boosting or transparent either. So going forward, I think you will have a long way to go in terms of finding strength in the labour market and once that turns, then the consumption will turn in the rest of the economy will find stability.
>> Another question here, this one is about… I don't want to jump ahead too far. Can we get Haining's outlook for the big Chinese Internet firms?
>> Right. So you know the overall economic growth is in a malaise. But the Chinese Internet companies, they are actually going on very diverging paths.
On the good side, some of the companies, for example Tencent, they were able to generate decent topline and bottom-line growth.
the reason is that for such companies, typically they have idiosyncratic drivers.
For Tencent, a big part of their revenue coming from the overseas gaming business and this year they have high single-digit growth which is very robust.
And also they are in the process of monetizing their short video platform which is similar to TikTok here which is also very popular and therefore they can expand their advertising revenue.
Another company that is also in the headlines and is also performing very well as PDD. It's the discount e-commerce platform in China and it is expanding very fast overseas.
In a recent quarterly earnings release, their topline was growing at 66%, operating profit growing more than 40%, so they are still growing very fast. One of its main output, you might've heard of it, Temu,is experiencing very explosive growth in the US and in Canada.
so is continuing to grow very fast. But on the other side of the sheet, you will see Alibaba. It's core online retail sales, it is still being challenged because the problem is their size is getting too big.
Therefore, it's very correlated with the overall economic retail sales which is still lacklustre and also their cloud business, they have to compete with state owned telecom companies so therefore their cloud business, they also find it hard to gain momentum and right now they are still in a restructuring process.
>> We were talking about decoupling off the top of the show.
In the headlines, government workers being told not to bring the iPhone device to work for security reasons.
You mentioned that Huawei happens to have a new phone as well. I think some of the technology and there is making some headlines.
What's the nature of this phone?
>> Right. Right around the US commerce secretary is in China while he quietly.
.
.
This was the first major release since 2020 when Huawei was sanctioned by the US. It is a big deal or you can call it a breakthrough because Huawei is supposed to be cut off from access to advanced chips but when some specialist firm do the teardown of this phone and they find out that this phone, the key 5G chip was actually made using the so-called M +27 nm technology which is done by a Chinese chipmaking company, it means Huawei can actually get relative independence with very little US content in the face of you a sanction, and that's a big deal. So if you think about from the moment, from the time that US imposed sanctions, it's only three years.
>> And now they have figured out how to do it themselves.
>> They've gone from 0 to 1 and going forward, there will be many iterations and they could even further refined the production process.
But of course at this moment, it is not clear what the production yield is which matters to commercial profitability.
but right now, they have an order size of about 15 to 17 millio.
If they were to successfully able to meet that order size, that means that production yield cannot be too low.
>> That's fascinating stuff.
Here's another question coming in.
So much time in the headlines recently. The viewers says, they have read the changes made toChina stamp duty which might be good for the markets, can you explain what this is, what the impact was?
> The stamp duty is when you are buying and selling stocks, the government takes a small cut, a very small amount, so all those retail traders transaction costs was lower.
So economically, it's not a big deal. It's not going to impact economic growth.
The reason why people treat it as a big deal is because in the last two decades, on four occasions when the Chinese government cut stamp duty tax, it was met with market enthusiasm because everything in China, although it is not economically significant, everything in China is driven by government policy and the fact that the government is willing to cut stamp duty tax means the government want to support the economy more, therefore it turned out to be a good economic leading indicator, if you can call it.
Particularly in 2008 when the Chinese government cut the stamp duty tax in face of the economic pressure, the markets stayed rebounded by almost 10%, it ended up.
But this time around, the market went up by about 5% and then traded all the way down and only closed up 1%.
So for anyone who pays attention to technical trading patterns, you know this is a very bearish pattern, a very bare signal.
If you trace the origin of it, it's basically right now, they don't see enough policy support to gain the confidence back.
> Interesting. We are talking about the fact that it went up to five and came back down.
Overall, if we look at the Chinese market, valuation, where are we sitting?
>> Of course, right now, given everyone is so pessimistic, of course valuation is low.
But that is not the focal point. I think the focal point is for professional investors, they really worry about their stepping into some kind of trap.
So for them, the policy stimulus is the number one thing that they focus on.
If they see enough actions, then they can start making decisions and get into the market.
>> Great insights.
As always at home, make sure you do your own research before making any investment decisions.
we going to get back to your questions 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.
Let's go to the educational segment of the day.
Preferred shares are one asset class that investors may consider for income and if you are interested in the space, WebBroker has tools which can help you do your research. Joining us now to discuss, Nugwa Haruna, Senior client education instructor with TD Direct Investing. Nugwa, always great to see you. Let's get a refresher to start things off on preferred shares and how they work.
>> Yeah, so, for an investor who is looking for the best of both worlds, they may consider things like preferred shares.
That's because they are considered sort of a hybrid security.
as they are shares, an investor holds them is considered an owner of the company but at the same time, preferred shares may have things like hard value which might be something like a bond. Preferred share dividend payments may actually be floating so you have different kinds of preferred shares where there is floating-rate preferred shares were the dividend rates are dependent on what the prevailing interest rates are at the time.
There is rate reset preferred shares were those dividend payments are reset depending on the prevailing rates.
There is retractable preferred shares where investors and the issuer has the opportunity to call though shares and say, we want to buy it back to you at fair value were slightly higher or the investor has the opportunity to return those preferred shares.
Depending on the kind of preferred share feature and investor likes, they might be able to find something that works for them.
So let's happen to WebBroker and take a look at how you may be able to discover preferred shares.
So once in WebBroker, I'm going to click on research.
Underinvestment, I'm going to go stocks. So right now, I have a regular stop on the screen. You will see this is the common share of this stock and you may ask, how do I know that?
That's because when you pull it up, there is no additional letters behind the name of the security. One thing I will highlight it is and you just want to take note is the specific stock has sold over 1.3 million securities today and we will just see if this stock has a preferred share type.
when you click on here and type in the name of this company and once you do that, you'll see right off the bat that the TD stock is pulled up but the three other securities are pulled up beneath that and you can see.PF,.A,.PF .be, these will show you that these are preferred shares for TD Bank stock. You can go ahead and click on any of them. I will click on the first one.
Then you can see the price of that security. This is where we will talk about some of the risks and benefits of holding preferred shares. One of the risks is liquidity. You saw that with the regular TV stock, over million securities have traded today, wears for this preferred share, under 200,000.
But then one of the benefits would be those dividend payments if investors are looking for them where this does pay a dividend and the dividend yield is at 5.
43%. So just different considerations for investors who decide to utilize preferred shares.
>> Okay so now the reviewers have a better understanding of preferred shares and what they are, what if they want to see a list of preferred shares available in WebBroker? What happens if they go searching through individual company names?
>> Right, so there's a couple of places investors can find this information. In WebBroker, I will show us those two places. In WebBroker, the first place are going to go is I will click on research, I'm going to go indices. Investors who want to pull up a list real quick can do this by actually pulling up one of the sector indices that we have in Canada called the TSX preferred shares. When I click on this, I will simply click members and this will pull up a list of securities that trade on the Toronto Stock exchange that are the preferred share versions of common shares.
So you can scroll down and see a list.
You can see bema has six different preferred shares here.
So this is one way investors can find a list of preferred shares.
The downside to this is you have no control over what shows up on your list.
So when investor who wants to look a little bit more controlled, movie be they just want to see preferred shares for one specific industry, this is where you can use our very popular tool called screeners.
I'm going to click on research.
Under tools, I'm going to go screeners and we will create a screen real quick so under screeners and under stock screeners, I'm going to go screening. I will clear the screen this in the system and we will create one together real quick. We'll go more criteria and to choose a preferred share, under company basics, you want share type, go to the drop down, select preferred shares. Right now, there's over 800, that's still a very long list. Maybe I just want to filter down to the Canadian exchange.
to change this to Canada. Now we have about 300 and something.
Now I actually want to add a specific industry.
I will go more criteria.
I will go sector industry. I'm going to clear all and maybe I just want preferred shares that trade in the financial services industry.
Some just went to check that often once I do that, I now have 186. There are still a few more things investors can do in there.
I'm not gonna make this too complicated. You can go over more criteria if you want. Otherwise, you can scroll down and it starts to filter by the different preferred shares that are on here or you can add criteria like dividend payments or the price of that security, anything that an investor wants but this is the way that investors can utilize WebBroker to actually find a list of different preferred shares.
>> Great stuff as always. Thanks for that.
>> Thanks for having me.
> Nugwa Haruna, Senior client education instructor at 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.
Now before we get back to your questions about China's economy and markets for Haining Zha, a reminder of how you can get touchless. 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.
We are back with Haining Zha, taking your questions oh China's economy and the markets. Lots coming in in the past couple of moments, including this one. A viewer wants to now what Canadian sectors are most exposed to weakness in China?
>> Within the Canadian space, the biggest weighted index our financial and energy and material.
Financial is mainly, they have a presence, they have a global presence but mainly focus on the markets in Canada and the US. The impact there is more in direct but the energy and material, they are directly linked to commodity prices and commodity prices as we know is driven by what's happening in China.
So I would say the sectors are most directly impacted by the dynamics in China.
>> Are we getting a sense of what China's appetite is looking like right now, whether it's for oil or critical minerals? Have they picked up at all?
>> Right. I think your today, demand looks pretty solid, so if you had the crude oil import, your today, it has increased about 15% year-over-year and if you look at natural gas, it increased 9% year-over-year.
If you look at energy products, demand is pretty solid, even with the economy still having a lacklustre performance.
And on the agricultural side, for example, soybeans, it has increased a lot.
So I would say generally across the board, the commodity demand from China is very robust.
>> Interesting stuff.
I thought perhaps was some of that economic weakness they could be impacted. That's a good insight to have.
What's your view on potential tensions around Taiwan's election?
>> Right.
The next Taiwan election will be in January 2024.
Right now, based on the situation on the ground, it looks like the Independence party is highly likely to win the election because the other opposition party, KMT, their votes are kind of diluted across different candidates, for example the TPP candidate and also another independent candidate, the billionaire tycoon.
So when that happens, if the DPP wins the election, we could see geopolitical tensions further escalate because they are pro-Taiwan independence.
>> In terms of that, what do we need to be aware of in Canada and the United States?
>> Well, so when that happens, it depends on if there will be imminent war or the situation escalates to the point that there is some kind of military movement.
Then, of course, the investor would require a high risk premium which will get reflected in the lower multiple in the equity market across the world.
>> Something to keep an eye on for sure, we are aware of geopolitical risk.
we have a viewer asking about the outlook for commodity demand in China. I was surprised when he said it has held up quite well.
What do you see going forward?
> Going forward, to the current state of economic growth is already pretty bad and given, if this current situation continues, what I imagine is, going forward, there will be more and more stimulus coming from either the Chinese central bank for the Chinese government.
And actually, within the real estate sector, the reason why current real estate sales is so poor is partly because of economic reasons but partly because people are anticipating the easing move from the government.
So there are a lot of house viewings but there are not a lot of purchases because people are waiting for those policies to cascade all the way down.
Now, given some of the policy moves that have happened, we can see in real estate transactions in Q3 and Q4 actually improve on the margins so course that will boost the investors confidence and bring upward pressure for some of the commodity prices.
>> Interesting stuff.
Here's an interesting one as well because people don't think about the size and scope of China's EV market.
They would like an update.
We have talked about this on the program before.
There are a lot of players giving Tesla run now for their money in that market too.
>> In the Chinese EV space, its progress saying it really fast. That year today, the general auto sales is very lacklustre, pretty much stay stagnant in terms of year-over-year growth. But the EV penetration still remains above 30% and EV growth is actually more than 30% year-over-year so far, you're today.
And if you look at the market, it is further consolidating, so the top three players roughly take about 50% of the market share so number one is PYD, number two is Tesla and number three is GAC Island.
So if you look YG sales, the latest months figure, is almost 3 times the amount of cars and Tesla.
And recently, there is a German auto show and the Chinese automaker actually shocked the visitors in terms of the numbers of models on show and the functionality and the price point.
There are some independent studies out there.
Someone tear down WYD's car and compared it with European automakers product and also a Tesla's car.
They find out that the PYD's product is actually about 25% cheaper.
>> In terms of what's going inside that vehicle?
>> In terms of production costs.
And also in terms of the battery mileage, the range in terms of the functionality, in terms of the electrical system.
It's, for consumer, you definitely get maximum value for your buck.
So that's why you see the headline that the EU are actually launching another anti-subsidy probe into Chinese EVs because they sense the danger, the competitive pressure.
>> Yeah, I want to ask. I think about the domestic market for EVs in China.
Are they getting aggressive about exporting those EVs to the world?
> They are.
Actually, if you look at the EV, Europeans EV input from China year to date it is growing more than 100%.
>> Wow.
Interesting stuff indeed.
We are going to get back to questions for Haining Zha on China's economy and the 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.
Well, Canadian household net worth climbed in the second quarter, marking the third straight increase.
These latest gains, as we Canadians navigate higher interest rates and rising debt loads.
Interesting stuff. Anthony Coley has been digging into a TD Economics report on these numbers. What do they have to say about it?
>> Thanks very much. Canadian household wealth rose more than 250 billion in the second quarter alone to nearly 16 trillion as the value of our assets grew faster than our liabilities. The rising net worth was really driven by two key factors.
One was a strong gain in our financial assets.
So we saw a rise in assets actually rose for the fourth straight quarter off the back of solid equity market gains. More specifically, foreign equity markets, specifically the US outperformed the Canadian market.
When you look in the second quarter, the S&P 500 Index was up more than 8%. That outpaced the .3% uptick we saw in the S&P TSX composition in the second quarter.
Now, the second big factor of course, our nonfinancial assets, specifically real estate, we sawthe value of our real estate climb higher in the second quarter but it did grow at a slower pace from the first quarter.
But of course, real estate home prices rose in what is traditionally a strong spring, summer season which extended strong rebound we saw in the first quarter but we did see the activity slowing down as the summer ended. Now on the other side of the ledger, households borrowed less in light of higher interest rates as the first chart illustrates. Weaker growth was driven by a slowdown in mortgage credit demand. That's the dark blue bar. Of course, that accounts for about three quarters of the total outstanding debt, so a big portion there. In contrast, nonmortgage debt, that's things like credit cards, that's the red bar, that accelerated in the second quarter. Now, there was more good news for many households as well.
When we look at income versus growth, incomeactually outpaced the growth of debt and the debt to equity ratio fell to just over 180% from the upwardly revised184% in the first quarter. This was due to the growth in household disposable income which comfortably outpaced credit market debt.
Now, household disposable income rose at more than twice the pace of household consumption expenditure in the second quarter.
Finally, household debt service ratio, this is the total household debt payments relative to disposable income. That inched lower in the second quarter and we saw that the pandemic record low interest rates was a trigger for many people to opt in for things like variable-rate mortgages and other borrowing and that resulted in an increasing in the debt service ratio in prior quarters.
Overall, TD Economics says that this is good news about the state of Canadian households.
Despite the financial headwinds hitting household finances, households appear to be navigating the financial capacity to service debt with a strong help, with the help of strong disposable income growth in the second quarter. Greg? That is pretty fascinating dynamics in play but we still are talking about elevated interest rates. Central bank saying even if this might be the end, we are going to stay here for a while, and people just trying to work through the effects of inflation.
What does TD Economics think household looks like going forward?
>> TD Economics says that the rise in debt servicing costs at a time when inflation remained sticky, that's going to occur… They also acknowledge that higher borrowing costs have already resulted in credit deterioration.
The EquiTalks Canada second quarter 2023 consumer report indicated that delinquency rates have either reached or are near pre-pandemic levels for most consumer credit products and so they warned that the Bank of Canada needs to maintain a close watch on household credit performance going forward as higher rates continue to weigh on Canadian households this year.
Greg?
> Interesting stuff. Thanks, Anthony. That's my pleasure.
>> MoneyTalk's Anthony Okolie.
Right. Let's get 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. A view of the market movers.
We are going to take a look at the TSX 60 by price and volume.
we see a lot of green on the screen, triple digit gain on the top line TSX number. The price of American benchmark crude above 90 bucks on my screen, benefiting the energy space. A lot of gainers there.
There is also strength in the material names including the financials, the big three. South of the border, want to check out the S&P 100.
A lot of eyes on Wall Street focused on any read they can get on inflation. Producer prices today, when you stripped away some of the effects of gasoline, the markets found what they were looking for. A bit of a mixed picture on the S&P 100.
AT&T expected to deliver a $5 billion in free cash flow for the current quarter.
You can get more information by visiting TD.com/Advanced Dashboard.
We are back with Haining Zha, taking your questions.
Here's an intriguing one.
closer ties among the BRICS nations, any impact from an investing perspective?
>> Well, we live in a world that the geopolitical tensions are escalating so in this kind of environment, everyone is looking for a friend circle, want to have more friends and the BRICS is such a forum where you can potentially find partners for collaboration opportunities.
But we investors care about not just what's said in the statement but care about what policy gets rolled out and what actually gets done and from that perspective, it it doesn't look to me that we will have much impact.
For example, back in 2009, the BRICS nations agreed on a few initiatives. Number one,a bank to lend out money just like the World Bank does. The second initiative is the emergency reserve arrangement so that they can lend each other money during crisis. The third one is submarine Vibra cables.
So on the new development bank, it turned out they didn't lend out much money and on the second one, the emergency exchange reserve arrangement, it wasn't getting much use even during crisis. And the third one, the submarine cable didn't happen altogether.
So we really need to see more evidence that is, things are getting done to have an economic impact on the market.
>> Always a pleasure to have you. Always great insights. Look forward to the next time.
>> Thanks having me. Our thanks to a finding job, VP and Dir. at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned. We will react tomorrow with an update on the markets and highlights of our shows from the week.
And then on Monday, Mike MacBain, CEO and CIO at East Coast Fund Management will be our guest take your questions about fixed income.
A reminder that you get a head start 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.
[music]
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 are going to discuss the risk posed by a potential decoupling of the United States and Chinese economies with Haining Zha, VP and managing director at TD Asset Management. MoneyTalk's Anthony Okolie is going to have a look at a new report from TD Economics on the state of household wealth in Canada. And in today's WebBroker education segment,Nugwa Haruna is going to shows how you can find information about preferred shares using the platform.
So 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 our guest of the day, let's get you an update on the markets. We will start you on Bay Street with the TSX Composite Index.
You've got West Texas intermediate crude, the American benchmark, just shy of 90 bucks per barrel right now but it was above 90 at 10 month highs a little earlier in this section. That's putting money towards energy names, lifting the topline. 220 point to the upside on the TSX, good for a whole percent and then some.
Among the most actively traded names on the TSX, top 10, it's a list of different energy plays. Athabasca Oil among them. At four bucks and two cents per share, up 3.6%. Pipeline giant Enbridge as well getting a bit of a bid today but a bit more modest for the pipelines.
4722, you got Enbridge up 1.6%.
South of the border, we are getting more reads on the state of US inflation. We've got the big CPI print yesterday but we are also getting producer prices which is stripping things away from gasoline which has been moving inflation higher here in Canada and the states, the markets are fine with what they are seeing and core measurements. The S&P 500 up 33 points will call it or three quarters of a percent. The tech heavy NASDAQ, how is it bearing against the broader market? Right now, it's liking a little bit still got some upside.
80 points were little more than half a percent.
Let's check in on AT&T, it's on the move today. The company says it expects to deliver the free cash flow of up to $5 billion to the current quarter.
The market seems to like the sound of it. The stock is up two and half percent. And that's your market update.
increasing tensions between the United States and China is spoken concerns that theworld's two largest economies might decouple in our guest today says that this poses a major risk to the markets. Joining us now to discuss is Haining Zha, VP and Dir. at TD Asset Management. Great to have you back.
>> Thanks for having me.
>> The word decoupling became part of our vocabulary this year, US China rising tensions, what is actually needed to see these, the world's two largest one in the way?
>> to put it in perspective, if you think about the last decade, it's basically the biggest two countries generally they get along really welland that created two forms of dividend. Number one is economic dividend because, for US corporations, they find a cheaper source of labour, they find a cheaper source of product and they find a vast market. And for the Chinese, they were able to attract more capital, build their manufacturing base and they were able to find the end market for their product as well. So that is generally a win-win situation.
The second form of dividend is the peace dividend. So although there are always some kind of conflict here in the air in the world, but generally, they don't threaten the major economic interests for extended periods of time.
So if we look at the past fantastic return, these two forms of dividend, they are actually the major sources.
So it would be complacent to think we can kind of repeat history and repeat that fantastic return.
>> It seems to be a lot of tensions are on the technology front. He talked about the United States being wary about having technology go to China in terms of AI and chips.
In the real world, we have seen some headlines recently where it's right down to, can I take an iPhone to work in China?
In some cases, no.
>> That's exactly the case in point. Many people don't feel the tangible impact of geopolitical tension but Apple is one great example. Right before they roll out their new phone, the Chinese government guided government employees not to use iPhones for security reasons and that actually coincided with Huawei rolling out their new phone as well.
That caused a hit to Apple share price, about 17%.
>> We are talking about IP in the end.
Both countries having their intellectual property in the markets. How far could that battle go in terms of people pulling back?
>> It certainly could go for a very long time. Right now, we are not seeing the geopolitical tension in the technology area really alleviate anytime soon.
>> If we do have another situation or the situation doesn't get better, he talked about the impact, there were dividends to be paid from the world's two largest powers and economies playing nice to get there.
If they are not going to play nice going forward, what does it mean for investors? What should they be looking for?
>> They have to be prepared to accept a much lower return and they have to be really nimble and watch for Black swans. This will be an arrow for many, many Black swans down the road.
>> Okay. Thinking about the Black Swan, you don't really see it until it is on your doorstep. Interesting dynamics there. We know that the Chinese economy has been faltering.
At the beginning of this year, the idea was okay, they have dropped the COVID restrictions, game on for everybody.
it hasn't played out that way.
I think they made further moves even today in terms of trying to shore up the economy. Is what they are doing enough?
>> Right. Generally speaking, so there are different areas. For example, monetary policy, the fiscal policy, the policy around… But so far none of the policies have been enough to give investors the confidence was they need, that is why the market is still kind of lacklustre.
And we can talk about each different area. For example, in the monetary policy area,for example, the central government cut reserve reverse repo rate twice, cut twice about together total about 20 to 25 basis points, and also they usually how the monetary policy works is once you cut the key rate, it will naturally spread to the low pride parade which is directly linked to mortgage rates and corporate lending rates. But when they cut the LPR, they only caught on a one-year tenor and not a five-year tenor and this is because they want to protect the banking at profit.
on the monetary policy front so far,it has been below investor expectations and in the future, they might need to do more.
>> What about the fiscal policy side? If you are trying to stoke an economy, traditionally the monetary policy plays a role within the fiscal stimulus gets more money into people's hands to hope that it goes back into the economy.
>> On the fiscal front, we heard even less news because there have been some whispers of the Chinese government might do a special Treasury issuance to support spending. That didn't happen and also investors, like you said, expect the government to directly hand money to households to support consumption. That didn't happen either.
So in the only real progress happening on the fiscal front is to the physical vehicle and now they will try to consolidate that debt into provincial debt.
The reason why they want to do that isfor those local government funding vehicles, the interest rate financing costs is higher, about 1% higher than provincial. By doing that, they can save the 1% interest rate cost but for many of those provinces, their debt load is also very high so by consolidating into an entity where an existing debt load is high is really not confidence boosting.
>> Given the fact that they have taken these moves, you said it really hasn't been confidence boosting, is there a sense that they will do more on the physical or the monetary side?
Where are we at this point?
China has to know that the economy is in a bit of trouble here.
>> Right.
I think we are, and all of the investors, are in wait and see mode.
Typically, the government wants to maintain some kind of stability and even the policy stabilities so it will be very unusual for them to all of a sudden exceed market expectations.
Usually it's the economic situation getting worse and worse and that presses them to do something and then they will respond. So right now, we are seeing is they are in the reactive mode rather than in the proactive mode.
>> Interesting stuff indeed. We are going to get back to your questions for Haining Zha in just a moment's time.
A reminder of course that you can get in touch with us at 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 in the world of business and take a look at how the markets are trading.
We have shares of Laurentian Bank in the spotlight today. The Québec-based lender says it has ended its strategic review without a deal to sell the bank. In a release, Laurentian says it will continue its current plan to focus on efficiencies and the simple vacation of its business.
Of course, you can look at the chart here.
The shares jumped in the summer on the needs of a possible sale. It's been rolling off.
On today's news, you're down about 11% on the name.
The parent company of Sobeys has beaten earnings expectations for its most recent quarter. Empire Co.
sayssame-store sales, key metric for the industry, roughly percent compared to the same period last year.
In the profit line got a boost from the sale of 56 Gas Stations in Western Canada to shell Canada. It's up to percent. The return of the summer traveller is helping the bottom line at Transat A.T. The travel company is reporting a profit of $57 million for its third quarter, compared to a loss of more than $100 million in the same period last year. Transat is also raising its adjusted earnings for the forecast of the year.
Let's check in on the main benchmark indices, starting here, Bay Street with the TSX Composite Index. Got a triple digit gain of 218 points, more than a full percent. We are seeing crude prices on the move higher again and they were above 90 bucks earlier in the session. 10 month highs. Lifting the energy space.
South of the border, American investors got a careful eye on any wind of inflation. If you strip away the effects of gasoline which has been pressuring inflation to the upside in this country and south of the border recently, the market seems fine with what they are seeing in court. You're up about 33 points or three quarters of a percent on the S&P 500.
All right, we are back now with Haining Zha, take your questions about China's economy and the markets. Plenty of questions coming in. We will start getting to them.
Here's a big one. What's the help of the big property developers in China?
>> Right.
In the news a couple of days ago, they narrowly escaped a default case by paying $22 million interest so it's a sigh of relief. Definitely avoided a worse situation.
But if you are looking forward to the next 12 months, they still have 15 billion worth of debt maturing which is still will be an overhang for the real estate sector in general.
>> So obviously you get a bit of relief and you see the side that comes with it.
Okay, they made their payment.
Structurally, what is happening with companies like country garden and others that have ended up in the situation? What happened to China's property market?
>> The bottom line is they borrowed too much hand right now, sales are declining. The fundamental supply and demand balance in the real estate market has changed.
After the explosion of building in the last 10, 20 years, right now, the supply is probably matches demand or maybe even a little oversupply and also given the covert shock, people right now are struggling to find jobs and grow their income.
So naturally, you will see falling real estate sales.
So far this year, real estate sales has been down 30% year-over-year, which is not an inspiring number and for a real estate company, if they cannot get the money from the sales, then of course they need to plug the hole somewhere in terms of their funding.
>> When you have homes available on the market and supply exceeds demand, basically a middle class that wants to buy homes, but think about young people too.
Household formation, they get into the labour market. I know you've been on both this program and the program with Kim lately talking about the fact that youth unemployment has been high.
>> Right, youth unemployment rate was very high, about 20% recently. The government agency just stopped publishing that statistic altogether which is not very confidence boosting or transparent either. So going forward, I think you will have a long way to go in terms of finding strength in the labour market and once that turns, then the consumption will turn in the rest of the economy will find stability.
>> Another question here, this one is about… I don't want to jump ahead too far. Can we get Haining's outlook for the big Chinese Internet firms?
>> Right. So you know the overall economic growth is in a malaise. But the Chinese Internet companies, they are actually going on very diverging paths.
On the good side, some of the companies, for example Tencent, they were able to generate decent topline and bottom-line growth.
the reason is that for such companies, typically they have idiosyncratic drivers.
For Tencent, a big part of their revenue coming from the overseas gaming business and this year they have high single-digit growth which is very robust.
And also they are in the process of monetizing their short video platform which is similar to TikTok here which is also very popular and therefore they can expand their advertising revenue.
Another company that is also in the headlines and is also performing very well as PDD. It's the discount e-commerce platform in China and it is expanding very fast overseas.
In a recent quarterly earnings release, their topline was growing at 66%, operating profit growing more than 40%, so they are still growing very fast. One of its main output, you might've heard of it, Temu,is experiencing very explosive growth in the US and in Canada.
so is continuing to grow very fast. But on the other side of the sheet, you will see Alibaba. It's core online retail sales, it is still being challenged because the problem is their size is getting too big.
Therefore, it's very correlated with the overall economic retail sales which is still lacklustre and also their cloud business, they have to compete with state owned telecom companies so therefore their cloud business, they also find it hard to gain momentum and right now they are still in a restructuring process.
>> We were talking about decoupling off the top of the show.
In the headlines, government workers being told not to bring the iPhone device to work for security reasons.
You mentioned that Huawei happens to have a new phone as well. I think some of the technology and there is making some headlines.
What's the nature of this phone?
>> Right. Right around the US commerce secretary is in China while he quietly.
.
.
This was the first major release since 2020 when Huawei was sanctioned by the US. It is a big deal or you can call it a breakthrough because Huawei is supposed to be cut off from access to advanced chips but when some specialist firm do the teardown of this phone and they find out that this phone, the key 5G chip was actually made using the so-called M +27 nm technology which is done by a Chinese chipmaking company, it means Huawei can actually get relative independence with very little US content in the face of you a sanction, and that's a big deal. So if you think about from the moment, from the time that US imposed sanctions, it's only three years.
>> And now they have figured out how to do it themselves.
>> They've gone from 0 to 1 and going forward, there will be many iterations and they could even further refined the production process.
But of course at this moment, it is not clear what the production yield is which matters to commercial profitability.
but right now, they have an order size of about 15 to 17 millio.
If they were to successfully able to meet that order size, that means that production yield cannot be too low.
>> That's fascinating stuff.
Here's another question coming in.
So much time in the headlines recently. The viewers says, they have read the changes made toChina stamp duty which might be good for the markets, can you explain what this is, what the impact was?
> The stamp duty is when you are buying and selling stocks, the government takes a small cut, a very small amount, so all those retail traders transaction costs was lower.
So economically, it's not a big deal. It's not going to impact economic growth.
The reason why people treat it as a big deal is because in the last two decades, on four occasions when the Chinese government cut stamp duty tax, it was met with market enthusiasm because everything in China, although it is not economically significant, everything in China is driven by government policy and the fact that the government is willing to cut stamp duty tax means the government want to support the economy more, therefore it turned out to be a good economic leading indicator, if you can call it.
Particularly in 2008 when the Chinese government cut the stamp duty tax in face of the economic pressure, the markets stayed rebounded by almost 10%, it ended up.
But this time around, the market went up by about 5% and then traded all the way down and only closed up 1%.
So for anyone who pays attention to technical trading patterns, you know this is a very bearish pattern, a very bare signal.
If you trace the origin of it, it's basically right now, they don't see enough policy support to gain the confidence back.
> Interesting. We are talking about the fact that it went up to five and came back down.
Overall, if we look at the Chinese market, valuation, where are we sitting?
>> Of course, right now, given everyone is so pessimistic, of course valuation is low.
But that is not the focal point. I think the focal point is for professional investors, they really worry about their stepping into some kind of trap.
So for them, the policy stimulus is the number one thing that they focus on.
If they see enough actions, then they can start making decisions and get into the market.
>> Great insights.
As always at home, make sure you do your own research before making any investment decisions.
we going to get back to your questions 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.
Let's go to the educational segment of the day.
Preferred shares are one asset class that investors may consider for income and if you are interested in the space, WebBroker has tools which can help you do your research. Joining us now to discuss, Nugwa Haruna, Senior client education instructor with TD Direct Investing. Nugwa, always great to see you. Let's get a refresher to start things off on preferred shares and how they work.
>> Yeah, so, for an investor who is looking for the best of both worlds, they may consider things like preferred shares.
That's because they are considered sort of a hybrid security.
as they are shares, an investor holds them is considered an owner of the company but at the same time, preferred shares may have things like hard value which might be something like a bond. Preferred share dividend payments may actually be floating so you have different kinds of preferred shares where there is floating-rate preferred shares were the dividend rates are dependent on what the prevailing interest rates are at the time.
There is rate reset preferred shares were those dividend payments are reset depending on the prevailing rates.
There is retractable preferred shares where investors and the issuer has the opportunity to call though shares and say, we want to buy it back to you at fair value were slightly higher or the investor has the opportunity to return those preferred shares.
Depending on the kind of preferred share feature and investor likes, they might be able to find something that works for them.
So let's happen to WebBroker and take a look at how you may be able to discover preferred shares.
So once in WebBroker, I'm going to click on research.
Underinvestment, I'm going to go stocks. So right now, I have a regular stop on the screen. You will see this is the common share of this stock and you may ask, how do I know that?
That's because when you pull it up, there is no additional letters behind the name of the security. One thing I will highlight it is and you just want to take note is the specific stock has sold over 1.3 million securities today and we will just see if this stock has a preferred share type.
when you click on here and type in the name of this company and once you do that, you'll see right off the bat that the TD stock is pulled up but the three other securities are pulled up beneath that and you can see.PF,.A,.PF .be, these will show you that these are preferred shares for TD Bank stock. You can go ahead and click on any of them. I will click on the first one.
Then you can see the price of that security. This is where we will talk about some of the risks and benefits of holding preferred shares. One of the risks is liquidity. You saw that with the regular TV stock, over million securities have traded today, wears for this preferred share, under 200,000.
But then one of the benefits would be those dividend payments if investors are looking for them where this does pay a dividend and the dividend yield is at 5.
43%. So just different considerations for investors who decide to utilize preferred shares.
>> Okay so now the reviewers have a better understanding of preferred shares and what they are, what if they want to see a list of preferred shares available in WebBroker? What happens if they go searching through individual company names?
>> Right, so there's a couple of places investors can find this information. In WebBroker, I will show us those two places. In WebBroker, the first place are going to go is I will click on research, I'm going to go indices. Investors who want to pull up a list real quick can do this by actually pulling up one of the sector indices that we have in Canada called the TSX preferred shares. When I click on this, I will simply click members and this will pull up a list of securities that trade on the Toronto Stock exchange that are the preferred share versions of common shares.
So you can scroll down and see a list.
You can see bema has six different preferred shares here.
So this is one way investors can find a list of preferred shares.
The downside to this is you have no control over what shows up on your list.
So when investor who wants to look a little bit more controlled, movie be they just want to see preferred shares for one specific industry, this is where you can use our very popular tool called screeners.
I'm going to click on research.
Under tools, I'm going to go screeners and we will create a screen real quick so under screeners and under stock screeners, I'm going to go screening. I will clear the screen this in the system and we will create one together real quick. We'll go more criteria and to choose a preferred share, under company basics, you want share type, go to the drop down, select preferred shares. Right now, there's over 800, that's still a very long list. Maybe I just want to filter down to the Canadian exchange.
to change this to Canada. Now we have about 300 and something.
Now I actually want to add a specific industry.
I will go more criteria.
I will go sector industry. I'm going to clear all and maybe I just want preferred shares that trade in the financial services industry.
Some just went to check that often once I do that, I now have 186. There are still a few more things investors can do in there.
I'm not gonna make this too complicated. You can go over more criteria if you want. Otherwise, you can scroll down and it starts to filter by the different preferred shares that are on here or you can add criteria like dividend payments or the price of that security, anything that an investor wants but this is the way that investors can utilize WebBroker to actually find a list of different preferred shares.
>> Great stuff as always. Thanks for that.
>> Thanks for having me.
> Nugwa Haruna, Senior client education instructor at 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.
Now before we get back to your questions about China's economy and markets for Haining Zha, a reminder of how you can get touchless. 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.
We are back with Haining Zha, taking your questions oh China's economy and the markets. Lots coming in in the past couple of moments, including this one. A viewer wants to now what Canadian sectors are most exposed to weakness in China?
>> Within the Canadian space, the biggest weighted index our financial and energy and material.
Financial is mainly, they have a presence, they have a global presence but mainly focus on the markets in Canada and the US. The impact there is more in direct but the energy and material, they are directly linked to commodity prices and commodity prices as we know is driven by what's happening in China.
So I would say the sectors are most directly impacted by the dynamics in China.
>> Are we getting a sense of what China's appetite is looking like right now, whether it's for oil or critical minerals? Have they picked up at all?
>> Right. I think your today, demand looks pretty solid, so if you had the crude oil import, your today, it has increased about 15% year-over-year and if you look at natural gas, it increased 9% year-over-year.
If you look at energy products, demand is pretty solid, even with the economy still having a lacklustre performance.
And on the agricultural side, for example, soybeans, it has increased a lot.
So I would say generally across the board, the commodity demand from China is very robust.
>> Interesting stuff.
I thought perhaps was some of that economic weakness they could be impacted. That's a good insight to have.
What's your view on potential tensions around Taiwan's election?
>> Right.
The next Taiwan election will be in January 2024.
Right now, based on the situation on the ground, it looks like the Independence party is highly likely to win the election because the other opposition party, KMT, their votes are kind of diluted across different candidates, for example the TPP candidate and also another independent candidate, the billionaire tycoon.
So when that happens, if the DPP wins the election, we could see geopolitical tensions further escalate because they are pro-Taiwan independence.
>> In terms of that, what do we need to be aware of in Canada and the United States?
>> Well, so when that happens, it depends on if there will be imminent war or the situation escalates to the point that there is some kind of military movement.
Then, of course, the investor would require a high risk premium which will get reflected in the lower multiple in the equity market across the world.
>> Something to keep an eye on for sure, we are aware of geopolitical risk.
we have a viewer asking about the outlook for commodity demand in China. I was surprised when he said it has held up quite well.
What do you see going forward?
> Going forward, to the current state of economic growth is already pretty bad and given, if this current situation continues, what I imagine is, going forward, there will be more and more stimulus coming from either the Chinese central bank for the Chinese government.
And actually, within the real estate sector, the reason why current real estate sales is so poor is partly because of economic reasons but partly because people are anticipating the easing move from the government.
So there are a lot of house viewings but there are not a lot of purchases because people are waiting for those policies to cascade all the way down.
Now, given some of the policy moves that have happened, we can see in real estate transactions in Q3 and Q4 actually improve on the margins so course that will boost the investors confidence and bring upward pressure for some of the commodity prices.
>> Interesting stuff.
Here's an interesting one as well because people don't think about the size and scope of China's EV market.
They would like an update.
We have talked about this on the program before.
There are a lot of players giving Tesla run now for their money in that market too.
>> In the Chinese EV space, its progress saying it really fast. That year today, the general auto sales is very lacklustre, pretty much stay stagnant in terms of year-over-year growth. But the EV penetration still remains above 30% and EV growth is actually more than 30% year-over-year so far, you're today.
And if you look at the market, it is further consolidating, so the top three players roughly take about 50% of the market share so number one is PYD, number two is Tesla and number three is GAC Island.
So if you look YG sales, the latest months figure, is almost 3 times the amount of cars and Tesla.
And recently, there is a German auto show and the Chinese automaker actually shocked the visitors in terms of the numbers of models on show and the functionality and the price point.
There are some independent studies out there.
Someone tear down WYD's car and compared it with European automakers product and also a Tesla's car.
They find out that the PYD's product is actually about 25% cheaper.
>> In terms of what's going inside that vehicle?
>> In terms of production costs.
And also in terms of the battery mileage, the range in terms of the functionality, in terms of the electrical system.
It's, for consumer, you definitely get maximum value for your buck.
So that's why you see the headline that the EU are actually launching another anti-subsidy probe into Chinese EVs because they sense the danger, the competitive pressure.
>> Yeah, I want to ask. I think about the domestic market for EVs in China.
Are they getting aggressive about exporting those EVs to the world?
> They are.
Actually, if you look at the EV, Europeans EV input from China year to date it is growing more than 100%.
>> Wow.
Interesting stuff indeed.
We are going to get back to questions for Haining Zha on China's economy and the 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.
Well, Canadian household net worth climbed in the second quarter, marking the third straight increase.
These latest gains, as we Canadians navigate higher interest rates and rising debt loads.
Interesting stuff. Anthony Coley has been digging into a TD Economics report on these numbers. What do they have to say about it?
>> Thanks very much. Canadian household wealth rose more than 250 billion in the second quarter alone to nearly 16 trillion as the value of our assets grew faster than our liabilities. The rising net worth was really driven by two key factors.
One was a strong gain in our financial assets.
So we saw a rise in assets actually rose for the fourth straight quarter off the back of solid equity market gains. More specifically, foreign equity markets, specifically the US outperformed the Canadian market.
When you look in the second quarter, the S&P 500 Index was up more than 8%. That outpaced the .3% uptick we saw in the S&P TSX composition in the second quarter.
Now, the second big factor of course, our nonfinancial assets, specifically real estate, we sawthe value of our real estate climb higher in the second quarter but it did grow at a slower pace from the first quarter.
But of course, real estate home prices rose in what is traditionally a strong spring, summer season which extended strong rebound we saw in the first quarter but we did see the activity slowing down as the summer ended. Now on the other side of the ledger, households borrowed less in light of higher interest rates as the first chart illustrates. Weaker growth was driven by a slowdown in mortgage credit demand. That's the dark blue bar. Of course, that accounts for about three quarters of the total outstanding debt, so a big portion there. In contrast, nonmortgage debt, that's things like credit cards, that's the red bar, that accelerated in the second quarter. Now, there was more good news for many households as well.
When we look at income versus growth, incomeactually outpaced the growth of debt and the debt to equity ratio fell to just over 180% from the upwardly revised184% in the first quarter. This was due to the growth in household disposable income which comfortably outpaced credit market debt.
Now, household disposable income rose at more than twice the pace of household consumption expenditure in the second quarter.
Finally, household debt service ratio, this is the total household debt payments relative to disposable income. That inched lower in the second quarter and we saw that the pandemic record low interest rates was a trigger for many people to opt in for things like variable-rate mortgages and other borrowing and that resulted in an increasing in the debt service ratio in prior quarters.
Overall, TD Economics says that this is good news about the state of Canadian households.
Despite the financial headwinds hitting household finances, households appear to be navigating the financial capacity to service debt with a strong help, with the help of strong disposable income growth in the second quarter. Greg? That is pretty fascinating dynamics in play but we still are talking about elevated interest rates. Central bank saying even if this might be the end, we are going to stay here for a while, and people just trying to work through the effects of inflation.
What does TD Economics think household looks like going forward?
>> TD Economics says that the rise in debt servicing costs at a time when inflation remained sticky, that's going to occur… They also acknowledge that higher borrowing costs have already resulted in credit deterioration.
The EquiTalks Canada second quarter 2023 consumer report indicated that delinquency rates have either reached or are near pre-pandemic levels for most consumer credit products and so they warned that the Bank of Canada needs to maintain a close watch on household credit performance going forward as higher rates continue to weigh on Canadian households this year.
Greg?
> Interesting stuff. Thanks, Anthony. That's my pleasure.
>> MoneyTalk's Anthony Okolie.
Right. Let's get 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. A view of the market movers.
We are going to take a look at the TSX 60 by price and volume.
we see a lot of green on the screen, triple digit gain on the top line TSX number. The price of American benchmark crude above 90 bucks on my screen, benefiting the energy space. A lot of gainers there.
There is also strength in the material names including the financials, the big three. South of the border, want to check out the S&P 100.
A lot of eyes on Wall Street focused on any read they can get on inflation. Producer prices today, when you stripped away some of the effects of gasoline, the markets found what they were looking for. A bit of a mixed picture on the S&P 100.
AT&T expected to deliver a $5 billion in free cash flow for the current quarter.
You can get more information by visiting TD.com/Advanced Dashboard.
We are back with Haining Zha, taking your questions.
Here's an intriguing one.
closer ties among the BRICS nations, any impact from an investing perspective?
>> Well, we live in a world that the geopolitical tensions are escalating so in this kind of environment, everyone is looking for a friend circle, want to have more friends and the BRICS is such a forum where you can potentially find partners for collaboration opportunities.
But we investors care about not just what's said in the statement but care about what policy gets rolled out and what actually gets done and from that perspective, it it doesn't look to me that we will have much impact.
For example, back in 2009, the BRICS nations agreed on a few initiatives. Number one,a bank to lend out money just like the World Bank does. The second initiative is the emergency reserve arrangement so that they can lend each other money during crisis. The third one is submarine Vibra cables.
So on the new development bank, it turned out they didn't lend out much money and on the second one, the emergency exchange reserve arrangement, it wasn't getting much use even during crisis. And the third one, the submarine cable didn't happen altogether.
So we really need to see more evidence that is, things are getting done to have an economic impact on the market.
>> Always a pleasure to have you. Always great insights. Look forward to the next time.
>> Thanks having me. Our thanks to a finding job, VP and Dir. at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned. We will react tomorrow with an update on the markets and highlights of our shows from the week.
And then on Monday, Mike MacBain, CEO and CIO at East Coast Fund Management will be our guest take your questions about fixed income.
A reminder that you get a head start 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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