The Federal Reserve revealed its December meeting minutes last night, which seemed to reinforce market participants’ expectations for more rate hikes in 2017. This is largely driven by expectations of more expansionary fiscal policy proposed by president – elect Donald Trump and his administration.

As a result, the treasury yield curve shifted upwards across the maturity spectrum, and expectations of long term inflation also moved up. The economic outlook becomes brighter. Fed staff forecasts for real GDP growth over the next few years was slightly higher, based on the assumption that expansionary fiscal policy will be adopted in the coming years.

US equities closed higher after the Fed minutes, reflecting optimism towards fiscal policy, higher inflation and a brighter GDP outlook. The US Dollar Index, however, slid to 102.2 as the EURO and the yen strengthened across the board.  

Tencent surpasses ICBC to become the largest Chinese company by market cap

HK listed Chinese technological giant Tencent surpassed ICBC and became the largest listed company in China by market value. On the new list, US listed e-commerce giant Alibaba was ranked number three, with a market cap of approximately US$226 billion.

This marks a beginning of new era - information technology companies are challenging and surpassing the traditional industries, especially in the retail, banking and telecommunication sector. With Tencent and Alibaba’s ambition to further penetrate into the financial industry, traditional banks are deeply threatened.  Going forward they will probably have to face shrinking market share and lower profitability amid intensified competition with BATs (Baidu, Alibaba, Tencent etc).

Tencent

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