Brazil cuts working week from six days to five

Luke Wilson (0:01)

Asian markets are hit by another big tech sell-off. It's World Business Express from the BBC World Service. I'm Luke Wilson. Brazil reduces its working week from six days to five, and female farmers in Kenya get a helping hand to achieve financial independence.

A global sell-off in memory chip stocks has deepened, with South Korea's benchmark Kospi index closing down more than 8%. SK Hynex and Samsung Electronics fell 11 and 9% respectively. They account for more than half of the South Korean stock market's total capitalization. I asked Peter Kim, global strategist at the Seoul-based investor KB Financial, what's behind this latest sell-off?

Peter Kim (0:47)

The excessiveness of the sell-off past few days is a confluence of different factors. One is the overall outlook for AI, whether that AI spending is actually going to end up in tears.

Second is obviously we have macro issues with the bond yields rising and probably bracing ourselves for further rate increases. And finally, we had this news over the weekend from China where CXMT is claiming to be narrowing the gap with the Koreans very quickly, much more quickly than anyone expected. Perhaps if it's true, we're probably looking at jumping two, three years in one shot. So I think all of those factors played into it. But clearly, I think the biggest reason is the crowded trade that semiconductors have been within the AI space and of course AI space within the entire equity space is very much a concentrated bet itself. So it's a second or third power of these concentrated bets working.

Luke Wilson (1:59)

We talk a lot about these tech sell-offs, but if we step back, look over the course of the past year, these stocks are doing very well, aren't they?

Peter Kim (2:09)

Ah, yeah. I mean, you know, if you're looking at the average hedge fund return target of high single digits, I mean, you know, you basically made probably four or five years of returns in just 12 months.

Luke Wilson (2:25)

Peter Kim from KB Financial Group in Seoul. Nicholas Hyatt is lead alternatives analyst at Hargreaves Lansdowne. We've had US markets open in the last hour, Nicholas. Is this sell-off continuing?

Yeah, we've seen modest falls in both the S&P 500 and the NASDAQ. Unsurprisingly, that's being led by the US listed semiconductor companies, companies like Intel and SanDisk, and other AI exposed companies are struggling as well. Lamb Research and Core we've both down a fair bit. But the other side of that is we're actually seeing the more negatively exposed AI companies doing quite well, particularly software companies. Well, we've seen chipmakers making record profits, I'm Trevor New at the AI giant Anthropic, up nearly 50%. Why aren't investors reassured?

That's 50% in a quarter, and it's also profitable this quarter, both of which are good news. Unfortunately, it's slightly slower than the blistering pace they set earlier in the year, and that's disappointed some investors. Anthropics also gearing up for its IPO later this year, so really wants it to be putting its best foot forward at the moment, and investors just a little bit disappointed, I think. Nicholas Hyatt from Hargroves Lansdowne, thank you.

India has approved the biggest foreign takeover of one of its banks. Canada's Fairfax Financial Holdings says it's received the green light to buy a more than 60% stake in IDBI, one of India's biggest lenders for $5.6 billion. It has more than 2,000 branches and nearly $50 billion in assets. The deal is part of a broader push by New Delhi to privatize state owned banks and bring in more foreign investment. Brazil's Senate has approved a constitutional amendment to reduce the working week from six days to five, as well as the number of weekly working hours from 44 to 40 The reform was passed by 75 votes to one, as hundreds of supporters protested in the capital Rio de Janeiro. Fabio Rosa was among them President of Sinagencia, the National Labour Union.

Fabio Rosa (4:27)

This is putting pressure on the Senate, putting pressure on the institutions, and they have to learn to read the message from the streets. Brazilians have woken up and will not accept setbacks.

Luke Wilson (4:41)

I asked Pedro Focasato, economist at the University of São Paulo, what it will mean for Brazil's economy.

Pedro Forcasato (4:47)

It's a very big moment. So in the media, the talk has been mostly about reducing from six to five work days a week. But actually the change is larger. So nowadays, we have 44-hour work week.

And this law changes it to 40 hours. So about 75% of formal employees in Brazil work nowadays 44 hours a week. So it will affect massively the labor market in Brazil. Now, one thing we have to keep in mind when we talk about the labor market in Brazil is that about only half of Brazilian employees are in the formal labor market. So the other half works in the informal sector. So only this half that works in the formal sector will be affected by this change, but still is about 50 million people.