Gaps in the great firewall

Five Things - Asia

Singapore faces deep economic scarring, China suspends Australian coal purchases, and Beijing runs a quiet experiment in opening up the internet. Here are some of the things people in markets are talking about today.

Singapore Scarred

Singapore's central bank chief said as much as 20% of the city-state's economy faces "deep scarring" from the coronavirus pandemic. Aviation and tourism industries are a worry, especially with an expected slow recovery in travel, Ravi Menon, managing director of the Monetary Authority of Singapore, said. Singapore's trade-reliant economy, already in recession, is facing its worst contraction on record — about 5% to 7% this year. The government has allocated about S$100 billion ($74 billion) in stimulus to cushion the blow for businesses and help save jobs. MAS is likely to keep monetary policy unchanged today as it allows fiscal measures to do the heavy lifting in getting the city-state's economy back on track.

Markets Lift

Asian stocks are poised for a firmer open Tuesday after a surge in technology stocks led U.S. gains. The Chinese yuan extended its decline following steps to curtail its rally. Futures indicated more modest gains in Japan, Australia and Hong Kong than on Wall Street where technology leaders including, Apple and Twitter fueled the rally. The S&P 500 extended gains into a fourth day and the Nasdaq 100 posted its biggest advance since April after surging as much as 4.1%. The yen advanced as the dollar put in a mixed performance against its Group-of-10 peers. The Treasury market was closed for a U.S. holiday. Elsewhere, oil slumped with workers in the U.S. Gulf heading back following Hurricane Delta's landfall and Libya taking a major step toward reopening its biggest field.


SoftBank's Vision Fund will outline plans for a blank-check company in the next two weeks, seeking to capitalize on the investor frenzy surrounding the unusual fundraising vehicle. Rajeev Misra, the head of the Vision Fund, teased the effort in an interview with Bloomberg but didn't provide details. Misra separately addressed reports from last month that SoftBank was the "Nasdaq whale" and downplayed its influence in stirring froth in the market for tech stocks. The target size of the Vision Fund's blank-check company has yet to be determined, according to a person familiar with the plans. SoftBank is expected to seek outside funds and may contribute some of its own capital.

On Hot Coals

China has suspended purchases of Australian coal, according to people familiar with the order, as Beijing continues to tightly control imports of the fuel amid soured political relations with Canberra. Chinese power stations and steel mills have been verbally told to immediately stop using Australian coal and ports have also been told not to offload the fuel. China's customs administration wasn't immediately available to comment. The ban marks an escalation in tensions that have already jolted agricultural exports from China's biggest supplier of commodities. The Aussie slid amid the reports.

World Wide Web

In a quiet experiment of just two weeks, China provided millions of people access to long-forbidden foreign websites like YouTube and Instagram. The trial appears to signal the Communist government is moving toward giving the country's citizens greater access to the global internet — while still attempting to control who sees what. The Tuber browser app, backed by government-linked 360 Security Technology, appeared without fanfare late September and offered for the first time in years a way to view long-banned websites from Facebook to Google and the New York Times — albeit sanitized versions. 

What We've Been Reading

This is what's caught our eye over the past 24 hours:

And finally, here's what Tracy's interested in today

Behold! The mighty VIX curve, laid low by the unexpected events of 2020. Once upon a time this curve — which shows the price of VIX futures contracts of different maturities — was upward sloping, meaning market participants were generally willing to pay more for volatility protection over the long term than in the short term. But for the past eight months, the VIX curve has been downwards-sloping or heavily kinked, meaning market participants are paying more for near-term volatility protection. You can see the evolution of the curve in the below chart. Back in February (the light blue line), the curve sloped upwards. But the big market selloff in March (the purple line) flipped it into what's known as backwardation.



Standard & Poor's points out that backwardation of this magnitude has happened only four or five times since 2005, usually coinciding with periods of intense uncertainty like the 2008 financial crisis or when the U.S. lost its triple-A credit rating in 2011. The upshot of a backwardated VIX curve is that it means markets are generally so well-hedged over the next couple of months that it would be difficult to generate an unexpected spike in volatility even if something weird were to happen in, say, the U.S. election or the unfurling of the coronavirus crisis. The strange and surprising events of 2020 have basically guaranteed that investors will demand insurance for the possibility of multiplying tail risks. The only question is if and when the VIX curve will right itself and return to its normal upward-facing shape.

You can follow Tracy Alloway on Twitter at @tracyalloway.


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