Closing Bell: China’s 2023 rebound could have ‘seismic’ impact on global economy

• ASX 200 down 0.75%, dropping for the third straight day
• Small cap index falls 0.0.56% and 7 out 11 sectors finish lower
• China could reopen next year with ‘seismic’ implications for the rest of the world

The local bourse has dropped for the third day in a row amid rising fears about whether the Federal Reserve’s aggressive rate hikes will trigger a recession in the world’s largest economy. 

The ASX200 was down 0.75% today, and the ASX Emerging Companies (XEC) index was 0.056% lower.

A total of 7 out of 11 sectors were lower, led by Energy, which lost 2.73% and Woodside (ASX:WDS) which lost a whopping 4.31%.

Utilities jumped 0.82% with Origin Energy (ASX:ORG) up 1.29%, AGL Energy (ASX:AGL) lifting 0.99% and Infratil (ASX:IFT) up 2.66%.

Australian payroll jobs and wages data, along with international trade for October was released and our trade surplus declined to A$12.22 billion in October 2022 from September’s three-month high of A$12.44 billion in the previous month.

Compare that to market forecasts of A$12.1 billion – and a CBA forecast of A$15 billion – amid weakening global demand. 

Australia’s Exports fell 0.9% from a month earlier to A$60.07 billion, while imports dropped 0.7% to A$47.85 billion. 

NOT THE ASX

In China, Beijing has eased a range of Covid-19 restrictions to revive economic growth, including scrapping the PCR Covid test and ceasing cross-region travel restrictions. 

This boosted shares of airlines and pharmaceutical companies.

And as the world eyes the US nervously, Bloomberg says China’s long-awaited emergence from Covid Zero would ignite its economy and put upward pressure on prices around the world.

“The broad view for next year is that inflation around the world will slow as interest rates rise, recession looms and consumers spend less,” Bloomberg’s Enda Curran says. 

“Cooling commodity, food and energy prices, magnified by the favorable comparison with last year’s steep gains, will combine to slow the broad rate of inflation.

“But China’s reopening could rattle those expectations.”

If China opens its borders for the first time since the early days of the pandemic “the implications for the rest of the world would be seismic,” Curran says.

The domestic economy would come back to life, students would go overseas again, tourists would start to travel, and business executives would get back on planes. 

“This would be happening at the same time China’s housing market starts to recover, further fuelling consumer spending.”

Bloomberg Economics reckons a China reopening would boost global commodity prices and could create supply chain backups that would put pressure on prices of many goods and services. 

“Assuming China is fully open by mid-2023, Bloomberg Economics estimates energy prices will increase by 20% and the US consumer price index, which they believe may drop to 3.9% by midyear, may jump to 5.7% by yearend,” Curran said.

ASX SMALL CAP LEADERS

Here are the best performing ASX small cap stocks:

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The biggest winner was Patriot Battery Metals (ASX:PMT) for the second day running – with the fresh listee now trading up a tidy 203% from its listing price of $0.60 at $1.82 per share.

Patriot owns 214sqkm of prime spod exploration ground including the Corvette discovery, a 50km trend littered with spodumene outcrop it hopes could be the next major North American lithium discovery.

Among the leadership team is Ken Brinsden, famed for not only helping turn Pilbara Minerals (ASX:PLS) into a $15 billion lithium giant, but also for driving the development of its Battery Material Exchange auction platform to uncover the true market value of Australian lithium concentrate.

Smart camera manufacturer Cycliq Group (ASX:CYQ) announced $1,296,000 of Gross Revenue for the month of November 2022 off the back of launching its Fly12 Sport product September. 

The Cycliq Fly 12 Sport is a purpose-built light and camera safety system for cyclists. 

Compared with previous Fly12 models, the Fly12 Sport has optimised battery life, new intelligent features to increase usability and improved recording capabilities. 

People seem to rate it, with 61% of all Fly12 sport sales going to new customers. 

And Corazon (ASX:CZN) has discovered spodumene (lithium) bearing pegmatite at the Miriam project in WA’s Goldfields region.

A program of initial site reconnaissance spotted widespread indications of pegmatite throughout the project – along with an outcrop hosting “abundant large spodumene crystals”.

The company plans to begin targeted and systematic on-ground exploration once its tenure has been approved by WA’s Mines Department.

ASX SMALL CAP LAGGARDS

Here are the worst performing ASX small cap stocks:

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TRADING HALTS

Flynn Gold (ASX:FG1) – pending an announcement around material exploration results 

Kincora Copper (ASX:KCC) – capital raising

Douugh (ASX:DOU) – capital raising

Meteoric Resources (ASX:MEI) – pending an announcement regarding a material acquisition. 

New World Resources (ASX:NWC) – capital raising

Anova Metals (ASX:AWV) – capital raising

Pivotal Metals (ASX:PVT) – capital raising

Highfield Resources (ASX:HFR) – capital raising