Raphael Stevens

For a certain type of investor, last year came as a relief. True, the losses were grim. But at least markets were starting to make sense. Over the previous decade, central banks had pumped out floods of new money to buy bonds. Interest rates were kept unnaturally low, or even negative. The result was an “everything bubble”, a speculative mania in which valuations surged everywhere from stocks to housing to baffling crypto assets. It was never going to end well, and in 2022 it didn’t: inflation killed off cheap money; the everything bubble popped; asset prices plunged. Some were even approaching rationality. A return to reassuringly dull investing—based on fundamentals, not hype—beckoned.If this sounds familiar, and you were one of these relieved investors, you may have found yourself wrongfooted by developments over the past few months. It is not just stockmarkets, though both in America and globally they have risen to within striking distance of all-time highs. It is that risky assets across the board have proved astonishingly resilient to seemingly disastrous news. An index of American high-yield (or “junk”) bonds compiled by Bank of America suffered a peak-to-trough loss of 15% in 2022. It has since recovered half that loss. So has a similar index for junk bonds in Europe. The housing slump already shows signs of petering out, even though global prices have fallen by just 3% from their peak, or 8-10% adjusting for inflation, after a boom in which they rose at their fastest rate ever.The biggest surprise is how well even more speculative assets have held up. Bitcoin—once an emblem of the cheap-money era, seen by many as a digital token with no intrinsic value—has proved indestructible. Anyone who bought it before 2021 and held on is once again sitting on a profit, albeit just a fraction of that which they could have booked two years ago. Even sales of non-fungible tokens, records that represent pieces of digital media, were 70 times higher in 2022 than in 2020, at $1.5bn. In other words, the everything bubble in risky assets seems to have survived the return of inflation, rising interest rates, war in Europe and the threat of recession. Could anything pop it?One oft-mentioned candidate is liquidity, which is draining from the financial system. The main exit pipes run to the Federal Reserve and America’s Treasury department. The Fed is sucking out $95bn a month by allowing some of its portfolio of Treasuries and mortgage-backed securities to mature without reinvesting the proceeds. The Treasury, by one estimate, must sell $1trn of new debt during the summer to rebuild its cash buffers after Washington’s debt-ceiling stand-off.Most obviously, this depresses Treasury prices by increasing supply and removing the Fed as a monthly buyer. (Tellingly, government bonds are the one asset class to have barely recovered from last year’s shellacking.) By raising “safe” Treasury yields, this makes riskier assets relatively less attractive. It also means that investors, in aggregate, end up holding more Treasuries and less cash. As a result, they are less able to buy riskier assets even if their prices fall. The likelihood of a crash, and of it being a severe one, is therefore creeping up.Such a crash is certainly not what markets are betting on. In fact, the vix, a measure of expected stock-price volatility, often dubbed Wall Street’s “fear gauge”, has this year fallen to its lowest since before the covid-19 pandemic. Yet analysts at ubs, a Swiss bank, point out that this is less reassuring than it might appear at first glance. They find that the vix has fallen mainly because correlations between stocks are unusually low, meaning their movements cancel each other out. Should they start moving in lockstep, volatility could suddenly jump, which is what has tended to happen after past spells of low correlation.Meanwhile, as in any bubble, asset valuations have become maddeningly difficult to justify. America’s stockmarket, where the earnings yield of the s&p 500 index of major firms is now roughly level with the Fed’s risk-free rate, is the most audacious example. But it is not alone. The ubs team analysed prices across credit, commodities, stocks and currencies, backing out an implicit assumption that the world economy would grow at 3.6% per year. That is a little more than its long-term growth rate, and double its present one. Time to bet on a correction? Tempting, but perhaps more foolish than brave. Based on recent experience, everything bubbles can survive for an awfully long time.■ More

Fireworks caused $59 million in direct property damage in 2021, according to the National Fire Protection Association.
Homeowners and renters insurance pay claims for property damage and liability.
There are exceptions to coverage, though. For example, a policy may have exclusions that deny claims for illegal fireworks.

Renphoto | E+ | Getty Images

What homeowners and renters insurance likely cover

The typical homeowners insurance policy has two coverage areas.
One is for property: your home and the things in it. The second is for liability; this covers you if you’re liable for injury or property damage to another person, perhaps a friend or neighbor harmed by an errant firework. The latter coverage is generally available anywhere your liability occurs in the U.S.
A renters policy is similar but wouldn’t cover the physical structure of the home — only the things in it.

Fireworks caused $59 million in direct property damage in 2021, according to the most recent data from the National Fire Protection Association.

Fireworks-related damage would most likely result from a fire started by the pyrotechnics, said Robert Passmore, vice president of personal lines at the American Property Casualty Insurance Association, a trade group.
Fireworks started 12,264 reported fires in the U.S. in 2021, according to NFPA. Twenty-eight percent of fires during 2014-18 were reported on July 4.
Homeowners policies generally cover fire damage, whether to the house, patio furniture or other property, Passmore said. Policies generally have deductibles; policyholders are often on the hook for the first $500 to $1,000 of damage.
This is true whether the policyholder lights the fireworks or someone else, such as a neighbor or friend, does so, Passmore said.

“It happens every year, and people need to be aware it can cause a lot of problems, particularly if they live in a wildfire-prone area,” Passmore said of fires from fireworks.
Policies may also cover other damage, such as a broken window from an errant projectile, he added.
Fireworks-related injuries have also “increased significantly” in the past 15 years, with 10,200 fireworks-related injuries reported in 2022, NFPA said. Liability insurance may cover a policyholder if they’re legally liable for such an injury, experts said.

Illegal fireworks may not be covered

However, as is often the case with insurance policies, there are exceptions.
Insurance policies generally carry exclusions. The fine print outlines instances in which the insurer would not pay a claim.
Insurers have been using exclusions more frequently, and the details vary from policy to policy, Kochenburger said.
For one, a policy likely wouldn’t cover intentional behavior, such as damage from purposefully firing a bottle rocket at someone’s house, experts said.
In rare instances, a policy may also explicitly exclude coverage for fireworks, experts said.

You want to make sure the fireworks you’re purchasing are legal in your state.

Peter Kochenburger
executive director of the insurance law program at the University of Connecticut

A more likely scenario: Your policy may not cover “wrongful or criminal acts” — meaning the insurance wouldn’t pay a claim for damage or injury resulting from illegal fireworks, Kochenburger said.
Coverage in a fireworks-related scenario will depend on the circumstances, type of fireworks, how they were used and how policy exclusions have been interpreted by state courts, he added. The exclusion also generally applies more often to liability claims and less frequently with personal property, Kochenburger said.
However, you avoid the risk and uncertainty by using legal fireworks.
“You don’t want to get tripped up by exclusions for wrongful or criminal acts,” Kochenburger said. “You want to make sure the fireworks you’re purchasing are legal in your state.” More

Chinese President Xi Jinping said Tuesday that Beijing opposes “decoupling and breaking links,” according to a CNBC translation of a Chinese-language state media readout.
Xi was speaking at a virtual summit of the Shanghai Cooperation Organization.
His remarks come ahead of U.S. Treasury Secretary Janet Yellen’s scheduled visit to China this coming Thursday to Sunday.

Chinese President Xi Jinping waves after his speech as the new Politburo Standing Committee members meet the media following the 20th National Congress of the Communist Party of China, at the Great Hall of the People in Beijing, China October 23, 2022.
Tingshu Wang | Reuters

BEIJING — Chinese President Xi Jinping said Tuesday that Beijing opposes “decoupling and breaking links,” according to a CNBC translation of a Chinese-language state media readout.
Promoting economic growth is the shared responsibility of countries in the region, Xi said, per the report of his remarks at a virtual summit of the Shanghai Cooperation Organization.

The SCO is a political, security and trade alliance whose members are China, India, Russia, Kazakhstan, Kyrgyzstan, Pakistan, Iran, Tajikistan and Uzbekistan. The group also has “observer states” and “dialogue partners,” which Saudi Arabia was promoted to in March.
China is willing to work with all parties to implement the Global Development Initiative, and make the “cake” bigger so that people in different countries can benefit, the state media report of Xi’s remarks said. Xi proposed the Global Development Initiative to the United Nations in 2021. It claims to include efforts to support U.N. goals for sustainable development.
The country opposes protectionism, unilateral sanctions and generalizing the concept of national security, the report also said Tuesday.

Xi’s remarks come ahead of U.S. Treasury Secretary Janet Yellen’s scheduled visit to China this coming Thursday to Sunday. Yellen’s visit follows U.S. Secretary of State Antony Blinken’s high-stakes trip to Beijing last month.
Tensions between the U.S. and China, the world’s two largest economies, have escalated in recent years. Recent measures by both governments have centered on technology.

China’s Ministry of Commerce said late Monday it is restricting the exports of two metals used for semiconductor manufacturing.
The U.S. announced export controls in October that sought to limit China’s development of advanced semiconductors. More

The merger between India’s HDFC Bank and HDFC will provide more opportunities for cross-selling, according to HDFC Bank’s non-executive director.
HDFC Bank is now able to offer a “bouquet of other products” to home loan customers, the bank’s non-executive director Keki Mistry said.
He added that no “insurmountable challenges” will come from this merger, and that current and new customers will not face any problems when interfacing with the merged entity. 

The merger between HDFC Bank and HDFC now makes the entity the world’s fourth largest bank.
Nurphoto | Nurphoto | Getty Images

The merger between India’s HDFC Bank and the Housing Development Finance Corporation (HDFC) will increase the entity’s customer base and provide more opportunities for cross-selling, the non-executive director of HDFC Bank told CNBC. 
HDFC, India’s largest mortgage lender, merged with HDFC Bank, the country’s biggest private lender, in a $40 billion deal which took effect on July 1.

“A merger between the two entities has always made an immense rationale,” Keki Mistry said, adding that the move will improve the bank’s mortgage portfolio and attract more customers with a range of financial services.
“Customers will now have the opportunity to receive customized products catering to their needs which only banks in India could offer,” Mistry said in an email to CNBC. “From the Bank’s point of view, it offers a massive opportunity to cross sell.”

Mortgage penetration

“One of the critical drivers of this merger is maximizing growth potential. The potential to deepen credit markets and mortgages in particular, in India is immense,” Mistry said.
HDFC Bank has around 83 million customers but only 2% have a housing loan with HDFC. An additional 5% of the bank’s customers have a housing loan from other lenders, he said explaining that it means 93% of HDFC Bank’s customers do not have a home loan.
This presents a “significant opportunity to cross sell and a potential to tap into the customer base that have not taken a housing loan at all,” the director said, adding that HDFC Bank will now be able to offer mortgage services. 

Mortgage penetration in India is “extremely low” and only accounts for approximately 11% of its GDP.
That’s much lower than 26% in China, and between 20% to 40% in South East Asia, HDFC said. Most developed markets have more than 50% mortgage penetration, the company added.
“Combining HDFC’s specialization in housing finance and leveraging HDFC Bank’s vast distribution and customer base will, in the long-term, aid in the deeper penetration of mortgage in India,” Mistry said. 

Other synergies

On the significance of the merger, Mistry said: “The scale of the merger is huge be in terms of total assets, total deposits or market capitalization.”
The combined entity is now the world’s fourth largest bank by market cap in the world — behind JPMorgan Chase, Industrial and Commercial Bank of China and Bank of America. HDFC Bank is currently India’s second most valued company by market cap after Reliance Industries. 
HDFC Bank will also have the advantage of access to low-cost current and time deposits, as well as “a much wider distribution platform and the ability to offer more customized products,” Mistry said. 
HDFC Bank will now be able to offer more products to home loan customers, he said, explaining that someone taking a housing loan will be able to receive bundled offers from HDFC Bank — such as a savings account and a loan to procure large electrical goods like refrigerators and washing machines. 

Additionally, Mistry noted that customers with a mortgage loan will maintain a much higher bank balance than other account holders, giving HDFC Bank an opportunity to increase its low-cost savings account deposits.
“The merger will be EPS accretive for HDFC Bank,” the non-executive director said, implying it will add to the company’s earnings growth.
“Over time, the synergies between HDFC Bank and other group companies will only deepen,” he said adding he was confident there were no “insurmountable challenges.”
— CNBC’s Naman Tandon contributed to this report. More

Augmented reality (AR) glasses company Xreal, which rebranded from Nreal, claims its shipments will soon reach 200,000 units.
Xreal’s Air glasses cost $379, about a tenth of the $3,500 that Apple plans to charge for its Vision Pro headset when it’s set to reach consumers next year.
Worldwide shipments of VR headsets and augmented reality devices dropped by more than 12% to 9.6 million in 2022, according to CCS Insight.

A woman tries out augmented reality (AR) glasses at Xreal’s booth at Mobile World Congress (MWC) Shanghai 2023.
Vcg | Visual China Group | Getty Images

BEIJING — Less than a year since augmented reality glasses startup Xreal started sales, the Alibaba-backed company is claiming shipments will soon reach 200,000 units.
Augmented reality (AR) technology allows digital images to be imposed over the real world.

It took the Chinese startup about four months to ship 100,000 units worldwide after a mass launch in late August 2022, co-founder Peng Jin told CNBC Thursday on the sidelines of Shanghai MWC.
“So you can do the math, how long it takes to do 200,000 units? It won’t take that long,” he said, without specifying a date.
It’s unclear whether the pace of sales has changed. In late May, Xreal said it had sold 150,000 products globally.

“Right now, 200%, 300% [growth], it should be the norm, it doesn’t really mean much,” Jin said. “But I think it’s very encouraging that people are accepting this new form factor, they are accepting this new experience.”
Xreal’s Air glasses cost $379, about a tenth of the $3,500 that Apple plans to charge for its Vision Pro headset when it’s set to reach consumers next year.

The two products operate on different technology and their capabilities vary.
But both attempt to replicate the physical screen time experience with a large, virtual screen. That kind of digital replication falls under the category of spatial computing.
“We do see spatial computing as the major technological trend in the next maybe two, three decades,” Jin said.
“I don’t think the trick is in creating a whole bunch of original content so people can forget what they’re doing and evolve into that. … For us, the content is already there.”

What’s the demand for Apple?

The Financial Times on Monday reported, citing sources, that Vision Pro suppliers were only projecting a few hundred thousand units for the first year, down from Apple’s internal sales target of 1 million. The report attributed the lowered forecast to the headset’s complexity, and production difficulties.
Apple did not respond to a request for comment.
Worldwide shipments of VR headsets and augmented reality devices dropped by more than 12% to 9.6 million in 2022, according to CCS Insight.
Meta in June revealed its latest virtual reality headset, the Quest 3, with a $499 price tag. The company said further details would come in September.
Last week, analytics firm Canalys said it expects Vision Pro and related devices would have a user base of 20 million — five years out from the planned 2024 launch.
For Vision Pro to be successful, it needs to replace personal computers, said Nicole Peng, senior vice president, mobility, at Canalys. She said that’s the value proposition Vision Pro has set up, which is different from what Xreal or Meta offer.
Xreal rebranded from Nreal in late May.
“Nreal, Xreal glasses still need to connect with a PC or a phone,” Peng said. “That means when you’re using it it’s likely to [need] a wire to connect with either of the devices.”
Right now, the company’s primary product — Xreal Air — allows wearers of the headsets to see an enlarged version of a computer, gaming device or smartphone screen via a connected cord.
A forthcoming accessory called Xreal Beam, priced at $109, allows Xreal Air users to connect wirelessly to a device. Deliveries are set to begin in the second half of July, according to the official website.
People in 85 countries signed up to be notified about the Xreal Beam, Jin said. He said the company primarily sells to the U.S., Japan and South Korea, with China accounting for less than a third of sales.
In August, Xreal plans to expand online shipping to parts of Europe, Jin told CNBC. Currently customers in the region can only pay for international shipping via Amazon.com in the U.S.

Light-weight glasses

Xreal Air resembles a pair of ordinary sunglasses, and claims to weigh just 79 grams (less than 3 ounces).
Apple has not released such figures for Vision Pro. CNBC’s Steve Kovach described the headset as “a bit heavy and uncomfortable” after 30 minutes. The device is strapped to the head, like goggles.
However, Vision Pro includes tech meant to give the user a digitally simulated immersive experience, while Xreal glasses project a screen in front of the wearer — who can also see the real world, Jin pointed out.
He said the company’s research and development is looking for ways to make the glasses smaller, allow users to have a broader field of view and consume less power.

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Despite being the number one best seller in smart glasses on Amazon, Xreal’s AR glasses are still far from offering the perfect user experience.
Lack of content within Xreal’s operating system and difficulties of connecting with an existing device were among the downsides highlighted in a Mashable review last week.
But the reviewer said that “despite some major hiccups and shortcomings, I still use this device almost daily, and it’s become a major staple in my gaming experience.”
Xreal raised $100 million in 2021, valuing the company at $700 million, CNBC reported. That was followed by a $60 million raise led by Alibaba last year.
Xreal has also partnered with Chinese electric car brand Nio for AR glasses that let people watch movies on a virtual large screen from inside the vehicle.
Jin said last week the company is looking to raise more capital, ideally at least a couple of hundred million dollars or more. He declined to say how much — or at what valuation — and noted he is not directly involved with those discussions.
— CNBC’s Arjun Kharpal, Steve Kovach and Jonathan Vanian contributed to this report. More

BYD’s Denza brand revealed Monday its new N7 electric SUV comes with features and a price that rival Tesla’s Model Y.
A livestream of the launch event had nearly 2 million views on Weibo alone, the Chinese Twitter-like platform.
The Denza N7 is set to begin deliveries in just two weeks, according to the company.

BYD Vice President Yang Dongsheng speaks at a launch event for the Denza N7 electric SUV on July 3, 2023, in Beijing.
Bloomberg | Bloomberg | Getty Images

BEIJING — Chinese electric car giant BYD is launching a new electric SUV, its most direct competitor yet to Tesla’s Model Y.
BYD’s Denza brand said Monday evening it received more than 20,000 pre-orders for its N7 all-electric SUV, and announced a price range of 301,800 yuan to 379,800 yuan ($41,680 to $52,452).

That rivals Tesla’s Model Y, whose latest prices range from 263,900 yuan to 363,900 yuan, according to the company’s China website.
The Denza N7 is set to begin deliveries in about two weeks, according to the company.
“The Denza N7 is aimed squarely at the premium midsize crossover segment whose competition includes the Tesla Model Y and the Nio ES6,” said Tu Le, founder of Beijing-based advisory firm Sino Auto Insights.

“Denza has really been under the radar for a few years but BYD is ready to show off its rejuvenated brand and the media blitz points to their confidence in the product and their desire to keep pressure on the incumbents,” he said.
During Monday’s hour-plus launch event, BYD showed clips of local car media’s positive reviews while doing test drives.

A livestream of the event had nearly 2 million views on Weibo alone, the Chinese Twitter-like platform. That’s far above the 200,000 views that a Nio car launch livestream drew in late 2021.
In another page from Nio’s playbook, the Denza N7 launch in Beijing was followed by a live music performance.
Mercedes-Benz Group has a 10% stake in the Denza brand. Its prior electric model, the D9 multi-purpose vehicle, claims more than 10,000 sales a month since since March. That car is available in Thailand, and is set for release in Hong Kong, Macao and Europe, a brand representative said Monday, without sharing dates.

Tech features

From fast battery charging and in-house driving assist tech, to an array of in-car entertainment, the Denza N7 launch showed off features in stiff competition with what Nio, Tesla and other leading players in China’s electric car market offer.
“Denza N7 is the first luxury SUV to penetrate the market of BBA,” a slide at the launch event read in English, referring to the trio of high-end German brands Benz, BMW and Audi.
In an in-person presentation Monday, Denza’s general manager of sales, Zhao Changjiang noted the N7’s data privacy features like independent chip storage and the ability to turn off cameras.
The Denza N7 also claimed to come with an augmented reality head-up display — which uses AR tech to project information digitally over the road in front of the driver. Certain models include BYD’s new shock absorption technology for smoother rides, which domestic rivals have yet to sell.
Yang Dongsheng, vice president of BYD, touted driver-assist technology using Qualcomm chips and Nvidia Orin, which is commonly used in assisted driving systems. Orin isn’t affected by the U.S. bans on Nvidia’s sales of more advanced chips to China.
The car cockpit also connect with the Android smartphone operating system, Yang said.

Read more about electric vehicles from CNBC Pro

For young people who are used to mobile phones, in-car connectivity systems are more attractive than driver-assist technology, Craig Zeng, CFO of online car information and shopping site Autohome, said in an interview last month. That’s according to a CNBC translation of his Mandarin language remarks.
At the time Zeng said he expected competition in China’s new energy vehicle market would move into the 400,000 yuan to 500,000 yuan price range and above. The 100,000 yuan to 200,000 yuan price range has been the primary price range for cars in China, Zeng said.
New energy vehicles include hybrid-powered cars.

Electric car market grows

The Denza N7 SUV launch comes as major electric car startups saw a jump in June deliveries after recent softness. Nio climbed back above 10,000 monthly deliveries, while Xpeng topped 8,000.
Li Auto, whose cars come with a fuel tank to charge the battery and extend its driving range, reported more than 32,000 vehicle deliveries for June.
For context, Tesla sold about 42,500 cars in China in May, according to the latest figures available from the China Passenger Car Association.
BYD remains the giant in the market and said it sold 128,196 battery-powered passenger cars in June, up 84% from a year ago. More

Southeast Asia’s second largest bank announced Monday that it will be unifying its brand across its core markets in Greater China — which includes Hong Kong and Macao — as well as Southeast Asia.
“If you look at macro trends, Greater China and ASEAN together is going to continue to contribute more to the world’s GDP growth,” CEO Helen Wong told CNBC.

Singapore’s Oversea-Chinese Banking Corporation has set its sights on “longer term opportunities” in Greater China and Southeast Asia and expects the strategy to bring an additional revenue of $2.2 billion by 2025, CEO Helen Wong told CNBC on Monday.
Southeast Asia’s second largest bank announced Monday that it will be unifying its brand across its core markets in Greater China — which includes Hong Kong and Macao — as well as Southeast Asia.

“If you look at macro trends, Greater China and ASEAN together is going to continue to contribute more to the world’s GDP growth,” Wong told CNBC, referring to the 10-nation Association of South East Asian Nations bloc.
“If you look at the trade numbers for the last four years, China and ASEAN — they’re growing at a CAGR of 13%,” she added. Compound annual growth rate is a measure of annualized returns for an investment over a period of time, assuming profits are reinvested at the end of each year. 
In a media release, Wong said “the effects of China’s reopening post-pandemic, the rise of ASEAN for the China plus one strategy and other geopolitical factors” have amplified the potential business flows between the two regions.
As such, while the OCBC has seen slowing economic growth in some countries in the region, Wong said she’s confident it will be able to capture growth as it “puts our act together.”

The signage of Oversea-Chinese Banking Corp. (OCBC) at OCBC Centre in Singapore, on Wednesday, Aug. 3, 2022.
Edwin Koo | Bloomberg | Getty Images

This will be done by improving how it deals with customers digitally, as well as improving the way the bank captures customers and businesses, she said without offering more details.

She also pointed out that OCBC and its subsidiaries service the top seven markets in ASEAN, and can rely on a presence in 17 cities in the Greater China region, including Hong Kong, Macao and Taiwan, as well as its partnership with the Bank of Ningbo.

Outlook for 2023

Asked about the bank’s outlook for the next half of 2023, Wong said it will “probably will be quite stable.”
She said the high interest rate environment has helped its interest income, even as income from fees has fallen as investors hold back on investing due to the uncertain economic environment.
But OCBC has other revenue streams that could contribute to growth, such as insurance income, Wong said.
However, she also acknowledged there may be uncertainty as interest rates could potentially remain at current levels or be “a little bit higher.”
As a result, OCBC will have to pay attention to whether its credit portfolio may be impacted by prolonged high interest rates. Also, if rates continue to be high, customers are likely to be “a little bit on the sidelines as to their investment activities,” Wong pointed out.

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As a regional bank — Southeast Asia’s second largest — OCBC also saw some money come in from the collapse of regional banks in the U.S. earlier this year.
“Whenever there are some changes, some weakness in certain parts of the industry, there is a flight to quality. So being a highly rated bank, sitting in Asia, we do see some of that new money coming in,” she said.
However, the objective is not only to have the money come in, but keeping the money with OCBC.
To that, Wong highlighted that the bank has to ask itself: “Is there any lesson learned? How does that actually impact customers? Are we equipped to serve the customers as money comes in as well?”
OCBC shares are higher by nearly 9% in the last 12 months, and closed at 12.30 Singapore dollars on Monday. More