Note: I will be travelling for the next several weeks, impacting frequency and depth.
Lenders get stricter
The Fed’s quarterly survey of bank senior loan officers shows bankers have toughened requirements for credit cards, auto loans and mortgages, Axios’ Matt Phillips writes. Consumer lending standards haven’t been this stringent since banks slammed the brakes on lending when COVID hit.
Data: Federal Reserve Bank of St. Louis. Chart: Axios Visuals
The rejection rate for auto loans hit a new high in June, according to a New York Fed survey, Emily Peck writes. With both car prices and interest rates still so high, affordability is falling and delinquencies are rising.
Data: New York Fed SCE Credit Access Survey of 1,300 households. Chart: Axios Visuals
TSMC Cuts 2023 Outlook Ahead of Delay to Marquee US Project Taiwan Semiconductor Manufacturing Co. cut its annual outlook for revenue and postponed the start of production at its signature Arizona project to 2025, twin setbacks for a chipmaking linchpin struggling with geopolitical tensions and a deep market slump.
TSMC’s surprise cut in 2023 revenue projections sent a warning to investors that the global electronics slump may persist for some time despite a boom in AI development. And the delay in the US — a consequence of both a lack of skilled American workers and ballooning costs — underscores the difficulties in making chips there despite Washington’s insistence to reduce a global reliance on Asian facilities.
The main chipmaker for Apple Inc. and Nvidia Corp. projected a 10% fall in sales this year, versus previous guidance for a single-digit decline. Executives also warned investors to temper their expectations for a boom in chips for training AI models, saying it was uncertain whether the surge in demand in the wake of ChatGPT was long-term or sustainable.
“The short-term frenzy about AI demand definitely cannot be extrapolated for the long term,” Chairman Mark Liu told analysts on a conference call. “Neither can we predict for next year how the sudden demand will continue or flatten out.” (…)
It reported a 23% slide in net income to NT$181.8 billion ($5.85 billion). Executives said capital intensity — a measure of the pace at which TSMC buys or invests in capital equipment — to slow in coming years. (…)
To mitigate concerns from customers over geopolitical uncertainties in the Taiwan Strait, TSMC has been diversifying its manufacturing footprint. It is investing $40 billion to create two fabs in Arizona and constructing a $8.6 billion facility in Japan with financial support from the government. The company remains in discussions with Tokyo over subsidies for a second facility, which might be located alongside its current plant in Kumamoto.
The hiccups in Arizona however call into question whether TSMC can make chips abroad as efficiently as back home.
“We are working on improving this by sending skilled technical workers from Taiwan to the US,” Liu said. (…)
TSMC projected sales of $16.7 billion to $17.5 billion this quarter, weaker versus expectations. Executives said the Chinese post-Covid economic recovery has been slower and soften than anticipated. And the company reaffirmed that 2023 capital expenditure should come in toward the lower end of a previously forecast range of $32 billion to $36 billion.
Samsung Electronics Co. this month reported its worst decline in quarterly revenue since at least 2009. Global smartphone shipments plunged 11% in the April to June period, the sixth successive quarterly decline, research firm Canalys estimates. (…)
Xi’s Big Private-Sector Push Runs Into Wall of Skepticism
China’s latest pledges to rebuild a shattered private sector fell flat with investors, underscoring the damage two years of crackdowns and pandemic controls have had on confidence in the world’s second-largest economy.
The Communist Party and the government issued a rare joint statement late Wednesday, with 31 measures to improve conditions for businesses, including pledges to treat private companies the same as state-owned enterprises and to consult more with entrepreneurs before drafting policies. (…)
An official from China’s top economic planning agency said Thursday authorities will issue specific measures “very soon” to boost the private economy and promote private investment. (…)
While Beijing appears ready to lift at least some of the plethora of private-sector restrictions, it will be hard to repair investor confidence and recoup corporate losses.
The private sector produces more than 60% of gross domestic product and accounts for more than 80% of urban jobs. Investment by private firms contracted 0.2% in the first half of the year, official data showed this week, compared with an 8.1% expansion by state-owned businesses. (…)
“Meaningful change comes through implementation, not pledges,” the European Union Chamber of Commerce in China said in an emailed response to questions. “European businesses operating in China have grown accustomed to sweeping pro-business statements being made with little concrete action being taken.” (…)
The EU chamber said European businesses want the same market access in China that Chinese companies have in Europe, a level playing field, and a business environment “free of politics.” This would “restore the predictability, reliability and efficiency of the China market,” it said. (…)
The government will boost support for private companies in share listings, bond sales and overseas expansion, according to the official statement Wednesday. It will also continue to cut market entry barriers for private firms and urged public institutions not to refuse or delay paying outstanding bills to businesses arbitrarily, vowing to expose cases of malicious delay. (…)
(…) Regulators are weighing scrapping rules that disqualify people who’ve ever had a mortgage – even if fully repaid – from being considered a first-time homebuyer in major cities, said the people, asking not to be identified discussing a private matter. Currently homebuyers with a mortgage record who don’t own a property are still subject to the higher down-payment and more restrictive borrowing limits applied to those buying a second home. (…)
In the capital of Beijing, a second-time buyer needs to come up with a down payment of as much as 80% of the property’s value. The down payment is just 40% for first-time buyers. (…)
More easing measures are needed, such as reducing mortgage rates which are much higher in top cities, he added. (…)
FYI:
RISK ASSESSMENT AND MANAGEMENT:
Professional investors see risk everywhere with more fear last 2 years than during the GFC.
Source: @MikeZaccardi (via Barry Ritholtz)
But individual investors are very optimistic:
Ditto newsletter writers:
Charts from Ed Yardeni