Foreigners flee Chinese investments

<p>Kia ora,</p><p>Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news that is generally <a href="https://en.wiktionary.org/wiki/go_south" target="_blank"><strong>going south</strong></a>.</p><p>Global credit risks are rising as the triple threat of rate rises, Europe’s energy crisis and China’s stuttering property market and political changes all show no sign of easing. Good corporate profits can't mask any of these threats to credit markets.</p><p>Also, we should watch out for global commercial property valuations and sales activity. Rising yields and p/e ratios make this sector <a href="https://www.imf.org/en/Blogs/Articles/2022/09/21/commercial-real-estate-sector-faces-risks-as-financial-conditions-tighten" target="_blank"><strong>increasingly vulnerable to a slump</strong></a>.</p><p>We are less than ten days away from the next US Fed rate review. Markets are pricing in a full +75 bps (and a bit more) for that meeting, plus another +125 bps and taking their official rate to 5.0% by March 2023 and it is assumed it will level out at that point for the rest of the year. That is a rapid-fire set of increases expected and already priced in. The big question now is, when to slow down? (Markets have priced in a New Zealand OCR at 5.5% by August 2023.)</p><p>The early <a href="https://www.pmi.spglobal.com/Public/Home/PressRelease/add9c8d7702e49c3ab0c3bbfa1822944" target="_blank"><strong>'flash' PMI result</strong></a> for the US paints a "challenging" picture for business conditions there. New order intakes were weak and their factory sector slipped unexpectedly into a minor contraction. But it is their giant services sector that is their main problem, shifting sharply lower into a real contraction. Still, it is not as low as this survey recorded in August. Getting the blame for this contraction are company moves to rein in their fast rising i