China - Market Strategy 06 (Jul 24 - Dec 26)

[behappyalways]

CSI300 rebounded 16% from Feb through mid-May as state funds purchased billions of $ worth of ETFs & regulators clamped down on short sales & quant trades.

Its slide since then is just another example of how policies have failed to address fundamental ailments hurting sentiment”

https://x.com/shehzadhqazi/status/1833122697389187122

[winston]

Chinese stock traders ponder just how bad the economy can get

Figures released on Saturday (Sep 14) showed Chinese factory output, consumption and investment all slowed more than forecast for August, and the jobless rate unexpectedly rose to a six-month high. Home prices declined from the previous month.

“The fear is that the authorities are losing control of the economy and they won’t admit it”.

“The market looks set to go to significantly lower levels in the absence of real, substantial new policies.”

The CSI 300 Index fell to its lowest since early 2019 last week. In Hong Kong, the Hang Seng China Enterprises Index has dropped 13 per cent from a high in May.

Source: Bloomberg

https://www.businesstimes.com.sg/compan ... my-can-get

[behappyalways]

Yikes: In all, about $6.5 trillion has been wiped out from the market value of Chinese and Hong Kong stocks since a peak reached in 2021. That’s almost equal to the size of Japan’s equity market. On Tuesday, the CSI 300 index fell as much as 0.7%
https://x.com/nerysinchina/status/1833541401734164492


China’s poor performance is in stark contrast to a bull run in global stocks this yr underscoring investors’ skepticism towards Xi’s vision of China. CSI 300 is now close to levels seen in early 2019 whereas benchmarks in the US, Japan and India have nearly doubled their levels"
https://x.com/shehzadhqazi/status/1833560203612328086

[winston]

<Research>M Stanley Abandons Preference for A-Shrs Over Offshore CN Shrs as 'CN National Team' Reduces Mkt Entry

According to a recent Morgan Stanley report, the broker abandoned its preference for A-shares over offshore Chinese stocks as China's "National Team" is reducing its market entry, the likelihood of RMB depreciation is diminishing, and A-shares are facing pressure from downward earnings revisions, which will reduce the attractiveness of A-shares.

The report mentioned that the support from the "National Team" for the A-share market may pause in the short term, as the total amount of A-shares purchased by the "National Team" had reached RMB3.2 trillion by the end of 2Q.

Currently, the "National Team", pension funds, social security funds, and insurance funds collectively hold A-shares worth a total of RMB4.6 trillion, both figures nearing historical highs.

The momentum of such capital flows has been calming since late August and early September, indicating that government-led market entry is slowing down.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

China Strategy: Unlocking the power of innovation

Artificial intelligence (AI) is transforming how people live, work and interact with technology, offering vast opportunities from virtual assistants and advanced data analytics to autonomous vehicles and robotics.

Chinese policymakers’ focus on “new quality productivity forces” and emphasis on innovation, technology upgrades and localisation would continue to lend support and open investment opportunities in
i) hardware and infrastructure, which we view as AI enablers and early beneficiaries; ii) the internet; and
iii) software and application.

In our earlier report Chinese tech/telcos/internet – Harnessing the digital opportunities, we discussed China’s cloud industry and the proliferation of AI in telcos, hardware, smartphone, PC and internet players.

For internet and platform companies, key players such as Tencent and Alibaba have been leveraging AI and large language models (LLM) to facilitate their operations, driving ad monetisation and developing AI-integrated ecosystems.

For telcos, China Telecom and China Mobile continue to optimize their smart digitalization infrastructure and accelerate AI deployment to capture opportunities from the development of “new quality productive forces”.

We also discuss China’s autonomous driving (AD) industry in this report as we see it as an emerging technology. AD allows vehicles to operate without human input by using sensors, AI and machine learning.

With the potential to improve safety, reduce traffic congestion and increase mobility, the development of AD represents a transformative shift in the transportation industry.

Key players in the automotive and technology industries such as Tesla, Waymo, Baidu, and Chinese pure-play electric vehicle (EV) brands such as XPeng, Li Auto, Geely, NIO and BYD are racing to perfect the technology.

We believe China holds a significant advantage in connectivity, with advanced infrastructure like highways, 5G networks, data centres, and base stations, which are crucial for supporting the progression of AD.

Source: OCBC

[winston]

China’s Stocks Intervention Faces Long Odds Once Euphoria Fades

China’s pledge of up to $340 billion to boost its ailing equities

The first round of financing made available by the PBOC will be worth a total of 800 billion yuan ($114 billion) and could be doubled or even tripled depending on how much demand there is for the money.

The central bank is also considering a “stabilization fund.”

The initial promised amount of 800 billion yuan is barely more than the average daily turnover of Class A shares so far this year.

So far this year, Huijin has purchased more than $90 billion, estimates it will buy more than $110 billion worth of ETFs for the whole year.

Source: Bloomberg

https://finance.yahoo.com/news/china-st ... 44869.html

[behappyalways]

Just thinking.....an old post


This is one reason we haven't seen more aggressive rate cuts from the PBoC in China.
https://x.com/AyeshaTariq/status/1831293159214620950






https://investideas.net/forum/viewtopic ... &start=250

[behappyalways]

Global allocations to Chinese stocks remain very, very low
https://x.com/Mayhem4Markets/status/1838922053723763067

[winston]

Week 40 Equity Strategy:

We now have the Xi pivot to intensify efforts to support the economy.

The CCP Political Bureau (Politburo) which meets three times a year (April, May, December), held a surprising emergency like meeting last Thursday.

It emphasized necessary fiscal expenditure by using special sovereign and local government bonds, “powerful” lowering of interest rates, stabilising the real estate market (by optimizing existing stock) and “vigorously” guiding funds into the stock market.

In May, the Politburo meeting was vague in the support of the economy such as potential interest rate cuts, support ailing developers, relaxing urban residency and creating a level playing field for private enterprise.

Prior to the Politburo meeting, the central bank cut bank reserve requirements by 50bps with plans to do more and opened collateralised liquidity lines for stock brokers and funds to the central bank.

The market responded with Shanghai Composite rising almost 13% in a week.

They finally realised the economy was spiralling downward into that Richard Koo "balance sheet recession". Despite record low interest rates households and businesses are paying down debt or saving instead of consuming.

We don't think these monetary measures will immediately reverse the weakness in demand. It will be a gradual improvement in consumption through a wealth effect. This is similar to the Fed's quantitative easing objective. Only a bump in fiscal spending can reverse the economy in the short term.

We see some of this from consumption coupons issued by several cities. It is worth noting that the aim is to control the new supply of housing but sell existing stock. This is negative for industrial commodities.

Consumption looks like the best bet as China embarks on this structural move away from investments. The rally can sustain near-term because a re-rating of China is underway by reducing the tail risk of a sharper economic downturn and higher valuations as interest rates compress.

However, as we come closer to US Presidential election we expect a de-risking of global equities. Our strategy in riding this re-rating is travel (China Aviation Oil), higher assets values plus consumer spending (CapitaLand Investment) and our recent initiation Zixin Group Holdings which benefits from food security.

Source: Phillips

[winston]

Xi Jinping just fired his giant money cannon at the wrong target

by Linette Lopez

PBOC: 800 billion yuan, or about $114 billion, would be injected into the stock market.

At the heart of its problems is a lack of consumer demand and a property market going through a deep, slow-moving correction.

Goldman Sachs estimated that returning China's apartment inventory to 2018 levels would require 7.7 trillion yuan.

The "stimulus" China's policymakers are offering is a drop in a well, and they know that. Wall Street should too. But I guess they haven't learned.

People in the country do not want to spend money because they are already sitting on large amounts of real-estate debt tied to declining properties.

Seventy percent of Chinese household wealth is invested in property, which is a problem since analysts at Société Genéralé found that housing prices have fallen by as much as 30% in Tier 1 cities since their 2021 peak.

Bottom line: It doesn't matter how cheap and easy it is to access loans if no one wants to take one out.

In 2009, the government dropped 7.6 trillion yuan to save the economy during the global financial crisis. In 2012, it dropped $157 billion on infrastructure projects. In 2015, it injected over $100 billion into ailing regional banks and devalued its currency to boost flagging exports.

Source: Business Insider

https://finance.yahoo.com/news/xi-jinpi ... 02238.html