Spinee wrote a post · Jul 24, 2023 08:42

Here’s what happened in China markets today (7/24):

1. China has brought up loosening and supportive measures aimed at the real estate and retail consumption sectors. China’s new home starts fell to their lowest level in 17 years, highlighting the urgent need for more substantive measures to generate economic activity in other sectors while the real estate market recovers. The National Development and Reform Commission also promised to open up more infrastructure projects to private-sector participation and investment. $COUNTRY GARDEN (02007.HK)$ $CG SERVICES (06098.HK)$ $COUNTRY GARDEN HLD (Delisted) (CTRYY.US)$

But there’s been little by way of specific dollar figures Beijing is willing to throw at the economy in sharp contrast to the hundreds of billions unleashed at the height of the Global Financial Crisis. Perhaps it could be partly due to uncertainty surrounding US federal rate policy, which remains hawkish despite waning inflation. Acting too soon with a huge stimulus, including lower Chinese rates, may result in a spike in demand for US dollars and cause instability in the yuan. $USD/CNH (USDCNH.FX)$ $USD/CNY (USDCNY.FX)$ $CNY/USD (CNYUSD.FX)$

2. During the meeting, President emphasized the need to boost consumption of automobiles, electronic products, household goods and other consumption-related products. This is largely a repeat of what other officials in government have been stressing these past few weeks. But coming from President himself, it will likely lead to more specific support measures now that officials have the “green light” to proceed, so to speak.

President also omitted mentioning that “property is not for speculation”. We can expect substantive measures to be announced in the coming weeks but it remains to be seen whether these measures will be enough to get this supertanker of an economy back on course. $Global X Funds Global X Msci China Real Estate Etf (CHIR.US)$ $Global X MSCI China Consumer Discretionary ETF (CHIQ.US)$ $Trip.com (TCOM.US)$ $H World Group (HTHT.US)$

3. Japan went ahead with its plans to tighten tech export restrictions to China by adding 23 types of cutting-edge chip equipment to the export control list. This comes just weeks after the Netherlands, a key exporter of advanced chip-making equipment, announced new export restrictions against China to take effect in September.

This increases the likelihood of Beijing stepping up its retaliatory measures following its decision to restrict exports of gallium and germanium - two key metals vital to the semiconductor industry. It’s not far-fetched to expect Beijing hitting Japan with rare earth export restrictions similar to what it did to Japan in 2010, sending rare earth prices up 50% and even more than 100% in some instances. $ASML Holding (ASML.US)$ $Taiwan Semiconductor (TSM.US)$ $Tokyo Electron (ADR) (TOELY.US)$

4. Alibaba declared that it would not be participating in the announced $6 billion buyback by AntGroup of shares from existing investors following the near $1 billion fine it received from Chinese regulators. It’s both a show of confidence in Ant Group’s business and a move to free up more of the amount to give other non-core investors a way out after the 2019 IPO was shelved. Alibaba will then retain its 33% stake in Ant Group, which is more likely than not going to launch a revamped IPO to replenish its cash pile and expand its restructured business. $BABA-W (09988.HK)$ $Alibaba (BABA.US)$ $Hang Seng Index (800000.HK)$ $KraneShares CSI China Internet ETF (KWEB.US)$

5. India’s Department of Commerce rejected a proposal by Chinese EV giant $BYD COMPANY (01211.HK)$ to invest $1 billion in the country to build a car and battery factory with Megha Engineering & Infrastructure. The DoC cited security concerns with respect to Chinese investment in the country as the reason for the rejection. At the same time, Indian conglomerate, TataCompanies, announced plans to build a 40-gigawatt EV battery factory in the UK worth $5 billion. The UK is planning to ban the sale of all petrol and diesel-powered vehicles by 2030, and this investment by Tata is preparing for that eventuality. BYD began selling its all-electric ATTO 3 model in the UK in March 2023. $BYD Company Limited (002594.SZ)$ $Tata Motors (TTM.US)$ $Tesla (TSLA.US)$ $NIO Inc (NIO.US)$ $NIO Inc. USD OV (NIO.SG)$ $NIO-SW (09866.HK)$ $XPeng (XPEV.US)$ $XPENG-W (09868.HK)$

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