Finance

New York Federal Reserve President John Williams said Friday rate cuts are not a topic of discussion at the moment for the central bank.
“We aren’t really talking about rate cuts right now,” he said on CNBC’s “Squawk Box.” “We’re very focused on the question in front of us, which as chair Powell said… is, have we gotten monetary policy to sufficiently restrictive stance in order to ensure the inflation comes back down to 2%? That’s the question in front of us.”

The Dow Jones Industrial average shot to a record and the 10-year Treasury yield fell below 4.3% this week as traders took the Fed’s Wednesday forecast for three rate cuts next year as a sign the central bank was changing its tough stance and would start cutting rates sooner than expected next year.
Traders are betting that the central bank would cut rates deeper than three times, according to fed funds futures. Futures markets also indicate that the Fed could start cutting rates as soon as March.
Williams is reining in some of that enthusiasm a bit, it appears.
“I just think it’s just premature to be even thinking about that,” Williams said, when asked about futures pricing for a rate cut in March.
Williams said the Fed will remain data dependent, and if the trend of easing inflation were to reverse, it’s ready to tighten policy again.

“It is looking like we are at or near that in terms of sufficiently restrictive, but things can change,” Williams said. “One thing we’ve learned even over the past year is that the data can move and in surprising ways, we need to be ready to move to tighten the policy further, if the progress of inflation were to stall or reverse.”
The Fed projected that its favorite inflation gauge — the core personal consumption expenditures price index — will fall to 2.4% in 2024, and further decline to 2.2% by 2025 and finally reach its 2% target in 2026. The gauge rose 3.5% in October on a year-over-year basis.
“We’re definitely seeing slowing in inflation. Monetary policy is working as intended,” Williams said. “We just got to make sure that … inflation is coming back to 2% on a sustained basis.”Don’t miss these stories from CNBC PRO: More

Median combined 401(k) and IRA balances for 35- to 44-year-olds declined to $50,000 in 2022 from $63,500 in 2019, according to the Center for Retirement Research at Boston College.
401(k) access increased for these workers over those three years.
Stock ownership in nonretirement accounts also jumped.

Valentinrussanov | E+ | Getty Images

Retirement balances for midcareer workers declined between 2019 and 2022, despite gains on financial assets such as stocks during that period, according to new research.
However, the loss isn’t necessarily as bad as it may initially seem, financial experts said.

Median combined 401(k) plans and individual retirement account balances for people ages 35 to 44 declined to $50,000 in 2022 from $63,500 in 2019, according to a recent study by the Center for Retirement Research at Boston College, which analyzed triennial data from the Federal Reserve’s recently issued Survey of Consumer Finances.
Savers in the analysis span two generations: older millennials and younger members of Generation X.

The CRR report analyzed balances among working households with a 401(k) plan. The balances aren’t adjusted for inflation, which touched a 40-year high in 2022 and eroded the buying power of that money.
Meanwhile, retirement balances for older age groups increased during the same period. Savings for 45- to 54-year-olds jumped to $119,000 from $105,800, while those for 55- to 64-year-olds increased to $204,000 from $144,000, the study found.

Automatic enrollment creates many smaller accounts

At first glance, falling balances among younger savers doesn’t make sense. U.S. stocks had a nearly 25% return between 2020 and 2022, according to the study, and younger savers tend to be tilted more heavily toward stocks due to their longer investment time horizon.

Investment-grade U.S. bonds lost 6.5% during that period.
More from Personal Finance:A 401(k) rollover is ‘the single largest transaction’ many investors makeMore retirement savers are borrowing from their 401(k) planHere’s how advisors are using Roth conversions to reduce taxes for inherited IRAs
Falling retirement balances for younger households is partly for a good reason, though. The share of Americans ages 35 to 44 who have access to a 401(k) plan at work increased by more than two percentage points between 2019 and 2022, said Anqi Chen, assistant director of savings research at the CRR and a co-author of the report.
Since new, young savers tend to have small 401(k) balances, they dragged down the median balances for the whole age group, Chen said.
The share of employers that automatically enroll new workers has gradually increased over the years, and some even enroll existing workers. Fifteen states had also created so-called auto-IRA programs as of June 30, according to the Georgetown University Center for Retirement Initiatives. The programs generally require businesses to offer a workplace retirement plan or facilitate automatic enrollment into a state retirement plan.
As more employers adopt retirement plans and auto enrollment, more people “will be scooped up who wouldn’t otherwise actively participate,” said David Blanchett, a certified financial planner and head of retirement research at PGIM, the asset management arm of insurer Prudential Financial.

Still, nearly half of Americans don’t have access to a workplace retirement plan.
The workers who do save in a 401(k) aren’t representative of the average American, Blanchett said. Such savers are in the top 20% of the income distribution, and are much wealthier than the average person, he added.

More investors hold stocks in nonretirement accounts

Another potential explanation for declining balances among 35- to 44-year-olds: The share of these households holding stocks in nonretirement accounts jumped to 20% from 14%, a “pretty substantial” increase, Chen said.
It’s unclear if that increase cannibalized savings in retirement accounts, Chen said.
That wouldn’t necessarily be bad, since nonretirement money is still a bucket of savings, Chen said.
However, retirement savings is generally locked up for the long term, and people saving in nonretirement accounts may be losing money to taxes that they otherwise wouldn’t in tax-preferred retirement accounts, she said.Don’t miss these stories from CNBC PRO: More

KTSDesign | Science Photo Library | Getty Images

It’s arguably the biggest stock story of 2023: a small number of giant technology companies now make up a very large part of big indexes like the S&P 500 and the Nasdaq-100. 
Five companies (Apple, Microsoft, Amazon, Nvidia and Alphabet) make up about 25% of the S&P 500. Six companies (Apple, Microsoft, Amazon, Nvidia, Alphabet and Broadcom) make up about 40% of the Nasdaq-100. 

The S&P 500 and the Nasdaq are rebalancing their respective indexes this Friday. While this is a routine event, some of the changes may reflect the concerns over concentration risk. 
A ton of money is pegged to a few indexes 
Now that the CPI and the Fed meeting are out of the way, these rebalances are the last major “liquidity events” of the year, corresponding with another notable trading event: triple witching, or the quarterly expiration of stock options, index options and index futures. 
This is an opportunity for the trading community to move large blocks of stock for the last gasps of tax loss harvesting or to position for the new year. Trading volume will typically drop 30%-40% in the final two weeks of the year after triple witching, with only the final trading day showing significant volume.
All of this might appear of only academic interest, but the big move to passive index investing in the past 20 years has made these events more important to investors. 
When these indexes are adjusted, either because of additions or deletions, or because share counts change, or because the weightings are changed to reduce the influence of the largest companies, it means a lot of money moves in and out of mutual funds and ETFs that are directly or indirectly tied to the indexes. 

Standard & Poor’s estimates that nearly $13 trillion is directly or indirectly indexed to the S&P 500. The three largest ETFs (SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF) are all directly indexed to the S&P 500 and collectively have nearly $1.2 trillion in assets under management. 
Linked to the Nasdaq-100 — the 100 largest nonfinancial companies listed on Nasdaq — the Invesco QQQ Trust (QQQ) is the fifth-largest ETF, with roughly $220 billion in assets under management. 
S&P 500: Apple and others will be for sale. Uber going in 
For the S&P 500, Standard & Poor’s will adjust the weighting of each stock to account for changes in share count. Share counts typically change because many companies have large buyback programs that reduce share count. 
This quarter, Apple, Alphabet, Comcast, Exxon Mobil, Visa and Marathon Petroleum will all see their share counts reduced, so funds indexed to the S&P will have to reduce their weighting. 
S&P 500: Companies with share count reduction
(% of share count reduction)

Apple        0.5%
Alphabet   1.3%
Comcast    2.4%
Exxon Mobil  1.0%
Visa                0.8%
Marathon Petroleum  2.6%

Source: S&P Global
Other companies (Nasdaq, EQT, and Amazon among them) will see their share counts increased, so funds indexed to the S&P 500 will have to increase their weighting. 
In addition, three companies are being added to the S&P 500: Uber, Jabil, and Builders FirstSource.  I wrote about the effect that being added to the S&P was having on Uber’s stock price last week.  
Three other companies are being deleted and will go from the S&P 500 to the S&P SmallCap 600 index: Sealed Air, Alaska Air and SolarEdge Technologies. 
Nasdaq-100 changes: DoorDash, MongoDB, Splunk are in 
The Nasdaq-100 is rebalanced four times a year; however, the annual reconstitution, where stocks are added or deleted, happens only in December. 
Last Friday, Nasdaq announced that six companies would be added to the Nasdaq-100: CDW Corporation (CDW), Coca-Cola Europacific Partners (CCEP), DoorDash (DASH), MongoDB (MDB), Roper Technologies (ROP), and Splunk (SPLK). 
Six others will be deleted: Align Technology (ALGN), eBay (EBAY), Enphase Energy (ENPH), JD.com (JD), Lucid Group (LCID), and Zoom Video Communications (ZM).
Concentration risk: The rules
Under federal law, a diversified investment fund (mutual funds, exchange-traded funds), even if it just mimics an index like the S&P 500, has to satisfy certain diversification requirements. This includes requirements that: 1) no single issuer can account for more than 25% of the total assets of the portfolio, and 2) securities that represent more than 5% of the total assets cannot exceed 50% of the total portfolio. 
Most of the major indexes have similar requirements in their rules. 
For example, there are 11 S&P sector indexes that are the underlying indexes for widely traded ETFs such as the Technology Select SPDR ETF (XLK). The rules for these sector indexes are similar to the rules on diversification requirements for investment funds discussed above. For example, the S&P sector indexes say that a single stock cannot exceed 24% of the float-adjusted market capitalization of that sector index and that the sum of the companies with weights greater than 4.8% cannot exceed 50% of the total index weight. 
At the end of last week, three companies had weights greater than 4.8% in the Technology Select Sector (Microsoft at 23.5%, Apple at 22.8%, and Broadcom at 4.9%) and their combined market weight was 51.2%, so if those same prices hold at the close on Friday, there should be a small reduction in Apple and Microsoft in that index. 
S&P will announce if there are changes in the sector indexes after the close on Friday. 
The Nasdaq-100 also uses a “modified” market-capitalization weighting scheme, which can constrain the size of the weighting for any given stock to address overconcentration risk. This rebalancing may reduce the weighting in some of the largest stocks, including Apple, Microsoft, Amazon, Nvidia and Alphabet. 
The move up in these large tech stocks was so rapid in the first half of the year that Nasdaq took the unusual step of initiating a special rebalance in the Nasdaq-100 in July to address the overconcentration of the biggest names. As a result, Microsoft, Apple, Nvidia, Amazon and Tesla all saw their weightings reduced. 
Market concentration is nothing new
Whether the rules around market concentration should be tightened is open for debate, but the issue has been around for decades.
For example, Phil Mackintosh and Robert Jankiewicz from Nasdaq recently noted that the weight of the five largest companies in the S&P 500 was also around 25% back in the 1970s.
Disclosure: Comcast is the corporate parent of NBCUniversal and CNBC. More

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European Central Bank President Christine Lagarde is due to give a press conference following the bank’s latest monetary policy decision.

The ECB on Thursday held interest rates steady for the second meeting in a row, as it revised its growth forecasts lower.
The bank was widely expected to leave policy unchanged in light of the sharp fall in euro zone inflation, as investors instead chase signals on when the first rate cut may come and assess the ECB’s plans to shrink its balance sheet.
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The Monetary Policy Committee voted 6-3 in favor of holding rates steady for a third consecutive meeting. The three dissenting members favored a further 25 basis point hike to 5.5%.
“As illustrated by the November Monetary Policy Report projections, the Committee continues to judge that monetary policy is likely to need to be restrictive for an extended period of time,” the MPC said.
The MPC noted in Thursday’s report that “key indicators of U.K. inflation persistence remain elevated,” although tighter monetary policy is leading to a looser labor market and weighing on activity in the real economy.

Buses pass in the City of London financial district outside the Royal Exchange near the Bank of England on 2nd July 2021 in London, United Kingdom.
Mike Kemp | In Pictures | Getty Images

LONDON — The Bank of England on Thursday kept its main interest rate unchanged at 5.25% and said monetary policy is “likely to need to be restrictive for an extended period of time.”
The Monetary Policy Committee voted 6-3 in favor of holding rates steady for a third consecutive meeting. The three dissenting members favored a further 25 basis point hike to 5.5%.

U.K. headline inflation fell to an annual 4.6% in October, its lowest point in two years, while wage growth has also undershot expectations of late but at over 7% still remains uncomfortably high for the central bank, as it looks to bring inflation down towards its 2% target sustainably.
The MPC noted in Thursday’s report that “key indicators of U.K. inflation persistence remain elevated,” although tighter monetary policy is leading to a looser labor market and weighing on activity in the real economy.
Real U.K. GDP was flat in the third quarter, in line with the Monetary Policy Committee’s projections, but the economy unexpectedly shrank by 0.3% month-on-month in October.
The central bank ended a run of 14 straight hikes in September, after lifting its benchmark rate from 0.1% to a 15-year high of 5.25% between December 2021 and August 2023.
The U.S. Federal Reserve on Wednesday revealed that policymakers were penciling in at least three interest rate cuts in 2024, offering a dovish surprise that sent global stock markets surging.

However, the MPC once again pushed back against market expectations, reiterating that rates will need to stay in restrictive territory for an extended period of time in order to return inflation to target over the medium term.

“As illustrated by the November Monetary Policy Report projections, the Committee continues to judge that monetary policy is likely to need to be restrictive for an extended period of time,” the MPC said.
“Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”
The November report projected that the consumer price index will average around 4.75% in the fourth quarter of 2023, before dropping to around 4.5% in the first quarter of next year and 3.75% in the second quarter.
At the same time, GDP is expected to grow by just 0.1% in the fourth quarter after flatlining in the third.
The Bank last week warned that although household finances are faring better than expected, higher borrowing costs have yet to fully feed through to the economy.
‘Unnecessarily damaging’
Suren Thiru, economics director at ICAEW, said the Thursday decision was further confirmation that interest rates have peaked, but suggested that the Bank was at risk of keeping monetary policy too tight for too long, given the fragile economic backdrop.
“The Bank’s rhetoric on rates is unnecessarily hawkish given slowing wage growth and a deteriorating economy, raising fears that it will keep rates high for too long, unnecessarily damaging an already struggling economy,” Thiru said.
“With inflation trending downwards and the economy at risk of recession, the case for interest rate cuts is likely to grow over the coming months. Against this backdrop, the Monetary Policy Committee could well start loosening policy by next summer.”

Hetal Mehta, head of economic research at St James’s Place, said that the Bank’s decision to communicate a hawkish message sets it “markedly apart from the Fed.”
“Underlying inflation is still uncomfortably high and the recent pricing of multiple rate cuts from early next year was clearly an easing of financial conditions that the BoE felt the need to push back against,” she said.
“The fall in wage inflation so far is not enough to be consistent with the 2% inflation target.”
Despite concerns about persistently tight monetary policy tipping the economy into recession, a Treasury spokesperson said by email that the U.K. had “turned a corner” in the fight against inflation. The spokesperson noted that real wages are rising, but said the country must “keep driving inflation out of the economy to reach our 2% target.” More

It is hard to get a man to understand something, wrote Upton Sinclair, an American novelist, when his salary depends on not understanding it. Hard, but not impossible: just look at those paid to promote Britain’s stockmarket. Bankers and stock-exchange bosses have an interest in declaring it an excellent place to list new, exciting businesses, as do politicians. Yet deep down they seem keenly aware that it is doomed.Government ministers once spoke of “Big Bang 2.0”, a mixture of policies aiming to rejuvenate the City of London and, especially, attract initial public offerings (IPOs). But if anyone ever thought an explosive, Thatcherite wave of deregulation was on its way, they do not any more. The new rules are now known as the more squib-like “Edinburgh reforms”. On December 8th the chair of the parliamentary committee overseeing their implementation chastised the responsible minister for a “lack of progress or economic impact”.In any case, says the boss of one bank’s European IPO business, he is unaware of any company choosing an IPO venue based on its listing rules. Instead, clients ask how much money their shares will fetch and how readily local investors will support their business. These are fronts on which the City has long been found wanting. Even those running Britain’s bourse seem to doubt its chances of revival. Its parent company recently ran an advertising campaign insisting that its name is pronounced “L-SEG” rather than “London Stock Exchange Group”; that it operates far beyond London; and that running a stock exchange is “just part” of what it does.London’s future as a global-equity hub seems increasingly certain. It will be drearier. If everyone agrees London is a bad place to list, international firms will go elsewhere. But what about those already listed there? Their persistent low valuation is a big part of what is off-putting for others. And it is much harder to explain than a self-fulfilling consensus that exciting firms do not list in London.The canonical justification for London-listed stocks being cheap is simple. British pension funds have spent decades swapping shares for bonds and British securities for foreign ones, which has left less domestic capital on offer for companies listing in London. Combined with a reputation for fusty investors who prefer established business models to new ones, that led to disruptive tech companies with the potential for rapid growth listing elsewhere. London’s stock exchange was left looking like a museum: stuffed with banks, energy firms, insurers and miners. Their shares deserve to be cheap because their earnings are unlikely to rise much.All of this is true, but it cannot explain the sheer scale of British underperformance. The market’s flagship FTSE 100 index now trades at around ten times the value of its underlying firms’ annual earnings—barely higher than the nadir reached during March 2020, as the shutters came down at the start of the covid-19 pandemic. In the meantime, America’s S&P 500 index has recovered strongly: it is worth more than 21 times its firms’ annual earnings. The implication is that investors expect much faster profit growth from American shares, and they are probably right. Yet virtually every conversation with equity investors these days revolves around how eye-wateringly expensive American stocks are. Should earnings growth disappoint even a little, large losses loom.Britain’s FTSE 100 firms, meanwhile, are already making profits worth 10% of their value each year. Even if their earnings do not grow at all, that is well above the 4% available on ten-year Treasury bonds and more than double the equivalent yield on the S&P 500. At the same time, higher interest rates ought to have made the immediate cashflows available from British stocks more valuable than the promise of profits in the distant future. Why haven’t they?No explanation is particularly compelling. British pension funds might no longer be buying domestic stocks, but international investors are perfectly capable of stepping in. Some sectors represented in the FTSE—tobacco, for instance—may see profits dwindle, but most will not. Britain’s economy has hardly boomed, but it has so far avoided the recession that seemed a sure thing a year ago. Global investors seem content to ignore Britain’s market, despite its unusually high yield and their own angst about low yields elsewhere. Yet spotting such things is what their salaries depend on. There is something Sinclair might have found hard to understand.■Read more from Buttonwood, our columnist on financial markets: Why it might be time to buy banks (Dec 7th)Short-sellers are endangered. That is bad news for markets (Nov 30th)Investors are going loco for CoCos (Nov 23rd)Also: How the Buttonwood column got its name More

China’s current-account surplus was once one of the most controversial statistics in economics. The figure, which peaked at almost 10% of gdp in 2007, measures the gap between China’s earning and its spending, driven largely by its trade surplus and the income it receives from its foreign assets. For much of the past two decades, China’s surpluses have left it open to the charge of mercantilism—of stealing jobs by unfairly boosting its exports. Some trading partners now worry about a similar shock if the country’s output of electric vehicles grows too quickly.But China’s current-account surplus is now modest: $312bn or 1.5% of GDP over the past year, according to the country’s State Administration of Foreign Exchange (SAFE). That is below the 3% threshold that America’s Treasury deems excessive.Is the figure reliable? Some, such as Brad Setser of the Council on Foreign Relations and Matthew Klein, a financial commentator, believe that the official numbers are dramatically understated. China’s true surplus, Mr Klein reckons, is now “about as large as it has ever been, relative to the size of the world economy”. They offer two arguments. First, China may be understating income from its foreign assets. Second, it may be understating exports.According to SAFE, the income China earns on its stock of foreign assets plunged from mid-2021 to mid-2022. This seems odd given rising global interest rates. Mr Setser’s alternative estimate, based on assumptions about China’s assets, would add about $200bn to the surplus.China’s goods surplus also appears smaller in SAFE’s figures than it does in China’s own customs data. The gap was $230bn over the past year. “That is real money, even for China,” says Mr Setser.China might take some comfort from a bigger surplus. But it has an unsettling implication. What is happening to the additional dollars China is earning? Since they are not showing up on the books of China’s central bank or its state-owned banks, they must be offset by a hidden capital outflow. Such outflows typically end up in a residual category of the ledger. Mr Setser believes this residual should be about 2% of GDP, not the official figure of near zero.image: The EconomistSAFE has a different explanation. It attributes the export gap largely to China’s free-trade zones and similar enclaves. These lie inside China’s territory but outside its official tariff border (see diagram). Goods leaving these enclaves for the rest of the world are counted as exports by customs but not by SAFE. Adam Wolfe of Absolute Strategy Research points out that these zones account for a growing share of China’s exports. That may explain why the gap has emerged only in the past two years.Mr Setser is unconvinced. If China’s free-trade zones have enjoyed a dramatic export boom, it should produce ripples elsewhere. Wages earned by workers, for example, should appear as increased remittances. In fact, they have risen only a little. And as Mr Wolfe points out, even if the official current-account surplus is correctly calculated, it may be of little comfort to China’s trading partners. After all, if the country’s domestic demand remains weak, goods made in its free-trade zones may flood foreign markets. The rest of the world will count them, and experience them, as Chinese imports, even if SAFE does not count them as Chinese exports. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

It has been a terrible year to be bullish on China. The CSI 300 index of Chinese stocks has dropped by 13% so far in 2023, to below the level reached during the last of the country’s severe covid-19 lockdowns. Difficulties in the property market are prompting corporate defaults. The lacklustre outlook for economic growth, combined with the need to manage capricious autocratic leadership at home and uncertain relations with big trading partners, makes for a miserable financial climate.This is also a recipe for enormous capital outflows. Foreign investors, who once had boundless enthusiasm for China, are rushing for the exits. So are numerous wealthy Chinese individuals. According to the Institute of International Finance, a think-tank, there have been cross-border outflows from the country’s stocks and bonds for five consecutive quarters, the longest streak on record. Firms are getting itchy feet, too. In the third quarter of this year the net flow of foreign direct investment in China turned negative for the first time since the data began to be collected a quarter of a century ago. In part, this reflects investment by domestic manufacturers in overseas operations, which can lower labour costs and help skirt American tariffs. The size of the overall outflows is up for debate, but some believe up to $500bn-worth is disguised in China’s murky balance-of-payments data.The last surge of capital out of China came in 2015-16. It was set off by a currency devaluation, which was itself sparked by a stockmarket collapse. By one estimate, as much as $1trn escaped the country in 2015 alone. Back then, many countries welcomed Chinese capital with open arms. Now they are suspicious. New destinations for Chinese funds—both legitimate and illicit—are therefore being found.Dodging China’s capital controls is the first task for fretful investors. Some transfers are piecemeal: mainland residents can buy tradable insurance policies in Hong Kong, though they may legally spend only $5,000 at a time. In the first nine months of the year, sales of insurance to mainland visitors hit HK$47bn ($6bn), some 30% more than in the same period in 2019. Other avenues are being closed off. In October China banned domestic brokers from facilitating overseas investment by local residents. For business owners, misinvoicing trade shipments, by overstating the value of goods being transacted, is one way to get money out of the country.Many places are less inviting to Chinese investors than during the last era of capital flight. Dozens of American state legislatures have passed bills blocking foreign citizens residing overseas from buying land and property. Chinese buyers spent $13.6bn on American property in the year to March, less than half the amount spent during the same period in 2016-17. In Canada, another once popular market, non-residents are now banned from buying real estate altogether. Golden visas in Europe, which offer residency rights in exchange for investment, are falling out of favour: schemes in Ireland, the Netherlands and Portugal are being tightened or abolished. Although Hong Kong remains a gateway through which Chinese capital can reach the rest of the world, its appeal as a bolthole for rich families aiming to shield their assets from the Chinese state has dimmed since the territory’s political crackdown.image: The EconomistIt is in this context that Singapore has taken on an increasingly important role. Its success in attracting Chinese cash owes a lot to its relative proximity, low taxes and large Mandarin-speaking population. Direct investment from Hong Kong and the Chinese mainland has risen by 59% since 2021, reaching 19.3bn Singapore dollars ($14.4bn) last year. Suspicious gaps in the trade data between the two countries suggest greater unrecorded capital flight, too, note analysts at Goldman Sachs, a bank.The number of family offices in Singapore rose from 400 in 2020 to 1,100 by the end of 2022, a trend driven by Chinese demand. There is little transparency about what assets ultra-rich investors hold through such vehicles, but Singapore’s modest capital markets suggest that most money will eventually be invested abroad. Nevertheless, Chinese inflows have buoyed Singapore’s banks, helping to lift profits at institutions like DBS and Overseas Chinese Banking Corporation. Other neutral locations are also benefiting from Chinese cash. Although golden visas are in decline elsewhere, issuance in Dubai rose by 52% in the first six months of 2023, compared with the same period in 2022, with lots of recipients thought to be Chinese.image: The EconomistNeutral countries are not the only beneficiaries. Inquiries about Japanese properties from clients in China and Hong Kong have roughly tripled in the past year, says Glass Wu of Japan Hana, an estate agency. The trend has been accelerated by a weak Japanese yen, which has fallen by a fifth in the past three years against the Chinese yuan. Around 70% of the buyers make viewings via video call, says Ms Wu, and buy without first visiting the property. Australia has also seen a surge in overseas demand for property, mostly from potential owner-occupiers, rather than investors as in previous waves, says Peter Li of Plus Agency, a local realtor. Data from Juwai IQI, a property firm, seem to confirm the trend. Since 2020 the median price of homes around the world receiving inquiries from Chinese buyers has risen from $296,000 to $728,000. Rather than buying smaller properties to let, buyers are opting for spacious ones in which they will actually live.Chinese capital can cause problems. It has put pressure on Singapore’s housing market, which is dominated by state provision and contains fewer than half a million private units. In April the state introduced an eye-watering 60% tax on all property purchases by foreigners to try to cool things down. The city’s financial secrecy may also invite the wrong kinds of activity. In August police raids resulted in the seizure of assets including cars, jewellery and luxury property, together worth around $2bn, and the arrests of ten foreigners. The group had all been born in China, but most had acquired other citizenships through international investment schemes. In October the Singaporean government noted that at least one of the accused may have had links to a family office. Other countries in the region, such as Cambodia and Thailand, are wary of hosting elite Chinese citizens who may bring politics with them.Although outflows from China are not yet on the vast scale of those seen during the panic of 2015-16, they might prove more enduring. Back then, a government-engineered credit boom in the property industry helped revive the economy’s animal spirits. This time around, the Chinese government wants to allow the industry to cool. Without a sudden, unexpected recovery in the fortunes of the Chinese economy, the stream of capital looking for an exit is unlikely to slow. Investors and companies will continue to seek a wide variety of foreign assets—the ones, at least, they are still allowed to buy—prompting joy and headaches wherever they land. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More