Gains in the dollar yield reduced earnings for US companies

Corporate earnings are expected to be negatively impacted by a soaring dollar in the third quarter of 2022, which could reportedly pose yet another challenge for stocks in an already difficult year with declining markets. Reports indicate that the Federal Reserve and unrest in the financial markets have helped the Dollar Index (DXY), which gauges the performance of the dollar against peers, trade 16.7% higher on average in the quarter that ended on 30 September than it did in the same period a year earlier. As corporate earnings are underway this month, a number of companies expect that the strong dollar may negatively impact their bottom lines. US multinational corporations are struggling as a result of having to convert their foreign earnings into dollars, making US exporters' goods overseas less competitive with the strong dollar.

According to Erik Knutzen, Chief Investment Officer, Neuberger Berman's multi-asset class portfolios, a strong dollar is one of the factors that contributes to earnings expectations for the S&P 500 needing to be reduced even further, adding increased concern about investing in stocks. Ohsung Kwon, a US equity strategist, Bank of America Securities, forecasts that the S&P 500 companies' earnings will be reduced by 5% to 6% as a result of the strengthening dollar, up from a 2% hit in the previous quarter. According to estimates from BofA, the S&P 500 has a 30% foreign exposure, with both the technology and materials sectors among the most susceptible.

Reports show that a surging dollar may make dollar-denominated assets more appealing to foreign investors by allaying their concerns about potential currency losses when they convert the assets back into their home currencies. However, analysts warned that high dollar signs could potentially persuade investors into currencies they anticipate will strengthen as the dollar declines. Analysts at UBS Global Wealth Management commented that the dollar is expected to remain high due to a strong US economy and aggressive Fed, as well as subpar growth in Europe.

HSBC and CGI alliance unveils HSBC Trade Solutions

HSBC has introduced HSBC Trade Solutions (HTS), a tool to streamline and accelerate trade transactions in a secure manner across various platforms, in two of its largest markets, the United Kingdom and Hong Kong. With the new platform, developed in collaboration with Canadian-based technology firm, CGI, clients can expect to initiate and manage all of their trade finance activities online. HTS uses an API-native, modular design and versatile technology system, which will reportedly support US $800 billion in annual global trades initiated through HSBC’s trade offering. With HTS, HSBC says banks can expect to adapt to future change quickly and effectively against a backdrop of ongoing transformation brought on by new technologies, enhanced supply chain resiliency, and ESG requirements.

HTS reportedly provides clients with intuitive, self-service digital interfaces as well as increased automation and straight-through processing functionalities. Reports indicate that the clients will be able to monitor their risk management activities effectively through highly integrated AML and credit risk controls. HTS's converged data model is said to accelerate digital decisioning and provide more in-depth information about customers. As trade finance assets become more investable, the platform's automated distribution system will reportedly assist in scaling distribution. Reports indicate that the HSBC network plans to introduce HTS to additional markets after the core platform is developed and deployed in the UK and Hong Kong.

MENA cryptocurrency markets expand rapidly compared to other regions

The cryptocurrency markets, based on the most recent report from Chainalysis, are quickly expanding in the Middle East and North Africa (MENA). Chainalysis’s 2022 Geography of Cryptocurrency Report examines how cryptocurrencies are performing around the world. A specific chapter of the report discusses the complete findings pertaining to the MENA region.

Between July 2021 and June 2022, individuals in this region garnered US $566 billion in cryptocurrency, representing a 48% increase over the previous year. According to the report, MENA's contribution to global cryptocurrency transactions has increased by 2.2%. During the reporting year, MENA accounted for 9.2 percent of all global crypto transactions, making the region the fastest-growing crypto market globally, said reports.

Kim Grauer, Director of Research, Chainalysis, stated that the UAE government has recently implemented trailblazing regulations that are accelerating the adoption and use of cryptocurrencies in the nation. Reports have also indicated that Dubai has developed into a hub for cryptocurrency businesses that cater to clients not only in the Middle East, but also in Asia and Africa.

The study discovered that the volume of cryptocurrency transactions within the UAE has also increased significantly, rising from $28 billion in 2021 to $38 billion during the last year, a 36% increase. The UAE has reportedly become one of the top five countries with the largest cryptocurrency markets, trailing only Turkey, Lebanon, Saudi Arabia and Egypt. Additionally, in the Arab World, Egypt's crypto transaction volume tripled over the previous year, while Saudi Arabia's increased by 195%. Akos Erzse, Head of Public Policy, BitOasis, a Dubai-based crypto exchange, stated that financial institutions' perceptions of cryptocurrency may be shifting as they are starting to collaborate more with companies in the crypto ecosystem.

RBI releases "concept note" on the e-Rupee CBDC, with privacy as a key component

The Reserve Bank of India (RBI) has stated that the central bank's digital currency, designated as the e-rupee, should grant some level of privacy, similar to that of physical currency. The RBI said in a concept note on digital currency released last Friday that it preferred the use of the e-rupee for both retail and wholesale transactions, signalling a shift in its stance ahead of the CBDC's proposed launch later this year.

The digital currency is expected to be available in two forms: the CBDC-R for general public retail transactions and the CBDC-W for wholesale transactions such as inter-bank transfers.

The RBI plans to begin limited pilot launches of the e-rupee for specific applications shortly. It is expected to coexist with the current fiat currency and other digital payment methods. Furthermore, the RBI stated that since CBDCs are an electronic form of sovereign currency, they should have all of the characteristics of physical currency.

The concept note proposed an indirect model for issuing CBDC. The model is reportedly comparable to the current physical currency management system, in which banks oversee tasks like note distribution to the general public, account maintenance and compliance with KYC regulations. The note, as stated in the report, recommended a token-based CBDC, as it would be more analogous to actual cash, while an account-based CBDC might be taken into consideration for CBDC-W.

Chinese chip stocks plummet after US calls for new restrictions on high-end technology

China's tech stocks are reportedly declining following the United States' latest offensive in the chip wars. The US government has tightened its export regulations, among them a prohibition on China using a specific type of semiconductor chip produced anywhere in the world with US machinery. Given the challenges China has encountered in trying to develop its domestic semiconductor industry, this development is said to further impede the development of the Chinese tech sector.

Reports stated that it is likely to continue to be a burden for chip manufacturers Nvidia and AMD, who were adversely affected by the tightening of restrictions last Friday. Nvidia has reportedly already experienced a very difficult time due to supply chain issues and a weakening demand for gaming consoles, making it an even more challenging time for the company. Its expertise in artificial intelligence is thought to be the company's future growth engine, but these stringent new regulations are a serious setback, reports added.