<p>Three quick thoughts on the rout in Facebook’s shares, appointment of Yi Gang as PBOC chief and strong US industrial production.  </p><p><strong>1) Facebook is losing face</strong></p><p>The shares of Facebook slumped 6.5% in reaction to the Cambridge Analytica scandal. </p><p><strong>Analysis:</strong> Facebook is facing a backlash for allowing Cambridge Analytica to harvest information from million of users without permission. The scandal got worse on Monday. Britain’s Channel 4 News broadcast a video of Cambridge Analytica’s CEO Alexander Nix promoting the use of fake news and honey traps to help clients in election campaigns. Cambridge Analytica is linked to President Donald Trump with its analysis of data from Facebook to aid Trump in its 2016 presidential campaign. Thus, the fallout could provide fodder for special counsel Robert Mueller’s investigation into President Trump’s campaign.</p><p>Facebook’s most valuable asset is its large user base of more than 1.4 billion of Daily Active Users. Scandals like Cambridge Analytica risk driving users away from its platform. Regulators may also come down hard on Facebook to address such data breach. This could lead to higher security capex by Facebook on protecting user information. Such concerns could affect Facebook’s valuation and lead to a correction in its share price.</p><p><strong>2) Yi Gang as the next PBOC Governor</strong></p><p>The new head of China’s central bank is Yi Gang, who will replace outgoing chief Zhou Xiaochun. </p><p><strong>Analysis</strong>: There is continuity in the leadership transition of China’s central bank as Yi Gang formerly served as deputy governor in People’s Bank of China.Although Yi is trained as an economist in the US, he is not likely to follow the example of US leadership in pursuing closed door policies such as the recent steel tariffs.  Instead, he will follow Zhou’s reform agenda in further opening up of China’s financial markets. Yi hinted that there could be a series of reform in the next three weeks. The reforms could include allowing foreign companies to own majority stakes in Chinese financial institutions as well as measures on financial deleveraging and curbing of shadow banking activties in China.</p><p><strong>3) Strong industrial production in US</strong></p><p>US industrial production climbed 1.1% m-o-m in February, better than expectations of 0.4%.</p><p><strong>Analysis:</strong> The pickup in industrial production is driven by manufacturing production which rose 1.2%. Also, computer and electronics production grew 1.5% m-o-m and capacity utilization crept up to a robust 78.1% level. A high rate of capacity utilization could lead companies to increase prices. This will be supportive for inflation and higher bond yields.</p><p><strong>Edmund Chan, CFA</strong></p>