China PBOC Vows ‘Appropriate’ Monetary Policy, Sees Inflation Rising

The People’s Bank of China hinted Monday it will keep monetary policy supportive, prompting expectations it may cut the reserve requirement ratio for banks or lower interest rates in coming months.

The central bank pledged in its quarterly monetary policy report to keep the overall amount of money supply and credit in the economy “appropriate,” a slightly more dovish sign. It also dropped the phrase of “not flooding the economy with stimulus” for the first time in more than a year.

Goldman Sachs Group Inc. economists said the report suggests more policy stimulus may be on the cards. They expect a 25 basis-point cut in the reserve requirement ratio next month when liquidity demand picks up at end of the quarter. That would help “to boost market sentiment and facilitate overall credit growth,” they said.

Recent economic data raised questions about China’s patchy recovery. A rebound in the services sector has far outpaced still-weak manufacturing activity. Consumer prices barely grew in April, borrowing slumped and imports plunged, adding to concerns about demand.

The PBOC said Monday that inflation was “mild” and may gradually rebound in the second half of 2023, adding that China is not in “deflation.” Instead of repeating that it would “keep a close eye on inflation” like it did in the previous quarterly report, the PBOC only said it would pay attention to the “marginal changes in prices.”

The gap between economic expansion, inflation and broad money growth is a result of a delay in the recovery of demand in China, the central bank said, along with the effect of supportive policies.

So far, the PBOC hasn’t offered much in the way of aggressive stimulus. Earlier on Monday it injected more long-term liquidity into the financial system, but kept a key policy rate unchanged.

Citigroup Inc. economists said the PBOC could cut the rate on its one-year loans by 20 basis points in the remainder of the year.

“With the initial reopening impulse set to fade, broad-based weak expectations could become self-fulfilling,” the economists including Xiangrong Yu wrote in a note. “Decisive policy actions are necessary to prevent the Chinese economy from sliding into a confidence trap.”

The PBOC said in a special section of its report that the weighted average rate of new loans granted in March was 4.34%, a historically low level.

The central bank noted in that section that it has adopted a cautious approach to making rate decisions in recent years in order to leave room for adjustments. This is because of uncertainty facing the global economy, it added.

As the economy recovers, people are likely to gradually release their precautionary savings, the PBOC said in its report. It also reaffirmed its stance toward implementing forceful and targeted monetary policy, as well as balancing economic growth and price stability.

“Loosening remains the general direction for monetary policy, particularly structural easing with a focus on expanding credit. We can also expect RRR or interest rate cuts,” Guosheng Securities analysts including Xiong Yuan wrote in a note late Monday.

Source : BNN Bloomberg

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Infographic: The Complex Global Technology Supply Chains

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Source : Morgan Stanley

A $518 Billion Rally Shows Japan Stocks Are All the Rage in 2023

Ishika Mookerjee, Winnie Hsu and Elena Popina wrote . . . . . . . . .

Some of the world’s most famed investors and the biggest Wall Street banks are voicing a near consensus that Japan’s stock market is the place to be as its larger peers — the US and China — grapple with rising economic headwinds.

Man GLG, JPMorgan Asset Management and Morgan Stanley are among those who see more upside after Japan’s Topix Index reached its highest level since 1990 this week. Equities are shooting above levels dubbed as the “iron coffin lid” as the return of inflation, improving shareholder returns and an endorsement by Warren Buffett all combine to burnish the appeal of the world’s third-largest stock market.

“Japan is my favorite global stock market at this point. It’s getting everything it’s wished for,” said Jack Ablin, chief investment officer at Cresset Capital Management, a Chicago-based investment advisory firm that manages about $60 billion. “We are about 50% overweight Japanese stocks in our developed-market strategy.”

Japan stands out amid anxiety in the US over the debt-ceiling issue and a possible recession, and as China’s uneven economic recovery and its lackluster market increasingly frustrate global investors. Overseas funds have further boosted their holdings of Japan stocks this month after snapping up 2.2 trillion yen ($15.9 billion) in April, the most since October 2017.

The Topix Index closed at 2,161.69 on Friday, taking its gain in May to 3.8% in dollar terms. The Nikkei 225 has rallied more than 5% and finished Friday at its highest in nearly 33 years. Meanwhile, China’s CSI 300 Index has fallen about 3.5%, continuing to lose ground after the initial reopening rally evaporated. The S&P 500 has added less than 1%.

Jeffrey Atherton, head of Japanese equities at Man GLG, sees further 10-15% potential for the market on resilient earnings, modest valuations and corporate reforms. Man GLG is one of the investment divisions of Man Group Plc, the world’s largest publicly traded hedge fund.

“We expect Japanese interest rates to remain very low by global standards, so monetary policy should be supportive to risk assets, unlike other regions,” he added.

Japan’s market value has surged about $518 billion since a Jan. 5 low, data compiled by Bloomberg show. Japan equity funds lured $800 million in the week ended May 10, the most in seven weeks, while those in the US and Europe saw outflows, according to EPFR data.

All of this comes as years of loose monetary policy finally translates into higher inflation. Consumer prices excluding fresh food rose 3.4% from a year ago in April, showing that Japan has put deflation firmly behind without stoking excessive price gains that warrant rate hikes like in the US. China, on the other hand, is facing deflationary risks.

Having long sat on piles of cash, Japanese companies are also coming to terms with the need to improve shareholder returns and untangle cross-shareholdings in response to growing demand for better corporate governance.

Share buybacks hit a record in fiscal 2022, with investors expecting more following the Tokyo Stock Exchange’s call in January to boost valuations for firms trading at a book value ratio of below one.

“We are beginning to see the interests of all shareholders being recognised,” said Alex Stanić, head of global equities at Artemis Investment Management. “Too many Japanese companies have been trading for too long at a discount to their book value. That makes for great bargains for investors.”

Warren Buffett helped fuel the recent optimism toward Japan by renewing his endorsement for the market during a trip earlier this year. Societe Generale SA and Pictet Wealth Management are among those with an overweight call on Japan and an underweight on US equities.

Despite the dominant optimism, the market could still suffer pullbacks in the near term as technical indicators show indexes are in overbought territory. Real wages are falling even as inflation picks up, and a slowdown in the global economy could weigh on local exporters reliant on the US and Chinese markets.

Analysts expect Japan’s economy to grow about 1% this year, above the 10-year average. The US and China, at 1.1% and 5.7% respectively, are forecast to expand below their historical trends.

“The Japanese economy’s exit from deflation” and “transition to a moderately inflationary economy” is one of the unique structural changes in Japan, JPMorgan equity strategists including Rie Nishihara wrote in a note dated Friday, adding that the rally is likely to be sustainable, given that these factors are not temporary.

For many investors, it’s Japan’s valuation that is too cheap to ignore. Almost half of TSE Prime Market Index members are trading below book, compared with just 5% of the S&P 500 Index, data compiled by Bloomberg show. Even after the rally, the Topix’s price-to-book ratio is about 1.3 times, in line with its 10-year average.

“Despite strong performance year to date, majority of the sectors are still at large discount to the S&P, which makes valuations appealing,” said Evgenia Molotova, senior investment manager at Pictet Asset Management in London. “We believe Japan will continue to demonstrate strong performance in the medium term.”

Source : BNN Bloomberg

Infographic: The World’s Top 50 Endowment Funds

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Source : Visual Capitalist

The Power and Limitation of ChatGPT

Maurice K.S. Tse wrote . . . . . . . . .

美國學術期刊《科學》（Science）剛發表2022年度科學十大突破，「人工智能生成內容」（artificial intelligence-generated content；簡稱AIGC）技術榜上有名。由開發商OpenAI推出的聊天機械人程式ChatGPT帶動生成式人工智能熱潮，世界首富馬斯克（Elon Musk）本來是創辦人之一，卻因為發展方向上的意見分歧而退出。微軟早前已向OpenAI投資10億美元，近日更打算加碼投資，並把ChatGPT加入新版Bing搜尋器。

AI旋風背後

ChatGPT透過分析大數據，模擬人類的自然對話方式，藉以提供答案或解決方案，功能包括撰寫文章及設計程式；除了解答科學、歷史、常識等提問，更有助於通過大學商學院或法學院考試，以至醫生執業資格試。筆者曾把給學生的論文題目輸入ChatGPT，所生成的答案可評為乙等或以上。

ChatGPT具有自學能力，在接收新數據後，就會加以分析和理解，再自動更新知識庫，從而提高準確性，全程毋須人為干預。當與人類對話時，則會根據上下文本而生成合適的回應，並且可以保持對話主題的連續性和一致性。這使其可以擔當助手角色，協助解答客戶服務問題，或進行簡單的日常對話。此外還能利用神經機器翻譯（neural machine translation）這種機械翻譯技術，以端到端（end-to-end）方式進行翻譯。

金融、商業方面又如何？ChatGPT可通過分析公司的財務數據、業績報告、新聞報道等資訊，協助投資者預測股票價格和市場趨勢。聊天機械人使用自然語言處理技術，對各種新聞公告、財務報表及研究報告進行分析，根據新聞報道中對某一股票正負評語的多寡，推測股票未來的走勢。同時亦能通過分析中央銀行公告或宏觀經濟數據，預測利率和匯率的變化；或通過分析公司債券的財務數據、信用評級來確定信用風險及償債能力，以助投資者選擇合適的投資組合。

聊天機械人是敵是友？

與互聯網應用相比，ChatGPT具有更高的智能水準，利用機器學習等技術，能較準確地理解和生成自然語言，與人類的互動方式更進一大步。近期掀起的生成式AI浪潮，讓AI走入尋常百姓家，變成大眾的應用工具。

ChatGPT推出短短2個月，全球用戶已超過1億人；當年Instagram用了2.5年，TikTok也花了9個月才有此成績。OpenAI的行政總裁阿爾特曼（Sam Altman）在3月底接受訪問時表示，他與公司內部對於ChatGPT的潛力感到「有點害怕」，並承認它有可能會「消滅」很多職位，尤其在以文字工作為主的行業如寫作、行政、客戶服務、程式編寫等。

AI的能力會否超越人類？答案是肯定的，但AI會否取替人類？對於這個問題，ChatGPT這樣回答：「ChatGPT無法完全取代人類。作為一個AI語言模型，ChatGPT可以在許多情況下幫助人們，例如回答問題、撰寫文章、提供建議等。ChatGPT可以是有用的工具，但它無法取代人類的智慧、情感和創造力。AI技術的發展將不斷改變我們的生活，但人類依然在許多方面具有獨特的優勢。」聊天機械人並沒有自主意識，只能按人類發出的指令完成工作，所以不妨視之為提高學習和工作效率的輔助工具。

須知ChatGPT不是一個真正的智能代理（intelligent agent），不能與環境互動而達到特定目的。它只是一種建基於統計學習的工具，必須大量數據和運算資源，才能夠進行分析並生成語言。加拿大就有數據中心企業指出，以生成式人工智能搜尋資訊每次所需的運算能力，是傳統搜尋器的4至5倍，因此估計單在今年1月已耗用等同17萬5千個丹麥家庭的全年用電量。

透視箇中虛實

ChatGPT缺乏人類的情感、價值觀、道德判斷力和創造力，更不能取代人際交往。它可以執行一些基本和高度重複性的任務，如客戶服務重複回答的問題和大量的文件處理等，減少人類工作負擔之餘，並節省時間和人力成本。其實ChatGPT類似搜尋器，不同之處在於搜尋器所得資料還需使用者自行整理，而ChatGPT則可代勞。然而，若論藝術和文化界從業員的想像力和創意、醫生的專業知識和診斷能力、教育工作者的教學技巧以及師生關係，ChatGPT都無能為力，只能通過資料整理從旁協助，更談不上加以取代。

ChatGPT的另一大局限在於其知識庫只截至2021年9月，未能追上各方面資訊的最新發展。它在操作上需大量訓練數據，因此無法像人類般處理罕見和嶄新情況。面對新問題時，聊天機械人可能需要更多人為干預，以確保其所生成的文本內容正確合理。簡而言之，ChatGPT只是人類工具箱中的一件工具，而並非足可替代人類的技術。

新時代的反思

隨着近年金融產品數碼化，在各國不斷加強金融監管的背景下，數據安全問題顯得尤其重要。一旦金融機構計劃引入ChatGPT，如何保證ChatGPT內數據的安全和演算能力的部署，就會成為首要考慮。其次，由於金融市場對即時數據的要求極高，ChatGPT在設計上亦須注意及此。對於聊天機械人所生成的投資建議，業界必須加以詳細解釋，並附帶風險提示。此外，金融市場的運作是各方參與博弈的結果，取決於博弈時雙方的策略以及彼此的合作程度，以致博弈的結果更形複雜。觀乎ChatGPT的發展情況，仍有待大力優化，才可望應付投資博弈所需。

話說回來，縱使AI並無自主意識，但卻已確實對社會產生影響。社會需要檢視的是，當AI可以回答任何問題時，人們是否有足夠分辨事實真偽的能力，尤其當真假難辨的個案愈多，對以信任為基礎的社會造成的衝擊就會愈大。現時ChatGPT大概僅在中學階段，遠未到大學或研究院程度，因此還未具備取代職位的能力。毋庸置疑，科技發展總有其陰暗一面，就如複製人帶來的倫理爭議，期望今後AI的作用只在輔助人類，而非導致破壞。

作為AI「大好友」，蓋茨（Bill Gates）稱之為足以媲美互聯網或流動電話的革命性發明，並於3月21日在其網誌中表示：「除了有助於提高人的生產力之外，AI亦可減低全球部分最不公平現象。」（【註】）即便如此，但對於如何掌握ChatGPT來協助我們工作和解決問題，務須慎思明辨，也要注意其中的技術限制，這樣才能善用AI，從而進一步提高工作效率和創造力。

目前ChatGPT應用插件（plug-in）還處於alpha測試階段，不久將來，發展應會日趨成熟，可作不同用途，例如預訂航班、編排旅程等，因而或會顛覆固有商業運作模式。政府應與各界攜手，密切注視AI的演進情況。

Source : HKU