Vehicles (foreground) wait in a traffic jam to enter the Cross-Harbour Tunnel, which connects Hong Kong island and Kowloon (background), in Hong Kong on December 17, 2024. (Photo by Mladen ANTONOV/ AFP)
FROM China’s stock rout to the unwind of the yen-funded carry trade, whose participants, according to some, “eat like a bird and poop like a cow”, 2024 was full of surprises.
No one expects 2025 to be less exciting. Here are some unlikely-but-not-improbable events that you might want to consider.
Luckin Coffee’s return
After admitting to accounting fraud and being kicked out of the Nasdaq in 2020, Luckin is roaring back, emerging as China’s biggest coffee chain. Starbucks Corp is reportedly exploring strategic options in the country, including an outright sale, while Luckin readies itself for an entry into the United States.
Will the company re-list in New York? Its senior management certainly would like to if capital markets are willing to listen to a redemption story.
An initial public offering will revive US investors’ interest in Chinese consumer firms. But more importantly, it will ignite discussions on how competitive America’s restaurant chains and retailers are, as China’s most disruptive businesses, such as eCommerce marketplace Temu and Luckin, look to make money in the world’s biggest consumer society.
Century of fiscal consolidation
More than 100 years into its existence, the Communist Party believes it will be around for at least another century. To stimulate the economy, the central government has been relying on ultra-long treasury bond issues to circumvent a self-imposed debt ceiling. In June, Beijing issued 35 billion yuan or about US$4.8bil worth of 50-year bonds at an interest rate of 2.53%.
How about offering century bonds? Those borrowings were trendy when deflationary pressures persisted in the eurozone.
In 2020, Austria managed to raise US$2.1bil paying only 0.85% coupon, a sign of how desperate investors were to buy high-quality notes that yield something.
Macro backdrops in China are eerily similar now. The benchmark 10-year government bond yield keeps on testing new lows as sluggish economic data and central bank rate cuts push investors further out along the yield curve. The appetite for Chinese century bonds is certainly here. And there’s no chance of a default.
The Great State of Vietnam
President-elect Donald Trump has been going after Canada lately, asking why the United States provides its northern neighbour with subsidies. He even suggested it should become the 51st state, dismissively calling the sovereign nation “The Great State of Canada”.
As takes office in January, he might punish Vietnam, which now ranks third on trade surpluses with the United States, behind only China and Mexico.
Since Trump started his trade war in 2018, global manufacturers – including many from China – have been diversifying their supply chains to northern Vietnam.
Money has been going to the capital Hanoi and the eastern port of Haiphong. Quang Ninh, the north-east coastal province where the tourist hotspot of Halong Bay is located, was the largest recipient of foreign direct investment last year.
What will happen if Trump starts accusing China of using Vietnam as its 24th province? Last year, Vietnam’s trade surplus with the United States hit US$104bil, up from US$38bil in 2017.
European luxury is cool again
China, the world’s largest luxury market, has not been kind to European fashion houses this year. A prolonged property downturn as well as consumers’ value-for-money and mix-and-match mentality have contributed to weaker sales at the likes of LVMH Moet Hennessy Louis Vuitton SE and Gucci parent Kering SA.
But make no mistake: There are millions of millionaires; they just choose not to spend yet. Next year, the wealth effect and the currency may align, prompting them to favour European luxury items again. — Bloomberg
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. The views expressed here are the writer’s own.
