FINSUM + Magnifi: China Forcing Financial Institutions to Go Green
April 27, 2021
Central Bank Governor Yi Gang said that Chinese financial institutions will have to commit to green finance as soon as possible to meet the country's climate goals. President Xi Jinping has made it clear that the country wants to hit peak emissions pre 2030 and neutrality by 2060. The central bank wants financial institutions to be an integral part of this change and is introducing new measures to ensure they hit their target. The central bank will target ratings, deposit insurance rates, and macroprudential policies. It will also incentivize green bonds and direct climate change stress tests for the macroeconomy. The details of these plans will be unveiled this year to meet the country’s carbon requirements ASAP.
FINSUM + Magnifi: Gold Could Surge on Chinese Import Changes
April 20, 2021
China is one of the largest gold consumers in the world, but the pandemic has put the market in turmoil as supply couldn’t match. This has elevated domestic prices high above the international rates. However, China has permitted banks to import Gold into the country. This could be a boom to world gold prices as the country plans to invest $8.5 billion into imported gold in April for April and May supply. Vaccines and stimulus have halted Gold's growth as of late but a fundamental shift from a major bullion consumer might turn the market bullish.
FINSUM + Magnifi: Chinese Economic Data and Opec Demand Report Lift Oil Prices
April 16, 2021
China is one of the biggest importers of crude oil and good news on trade reports boosted the oil futures market. Imports in U.S. dollars rose in March by 38.1% from the prior year which was well above estimates. Additionally OPEC forecasts a 100,000 barrel a day increase in its oil demand projections for 2021. It expects it to climb to 96.5 million barrels per day by the end of the year. The upward revisions all come despite the slowing of the vaccine rollout from Johnson and Johnson. OPEC sees reopening and strong growth in OECD countries in Q2 and Q3 driving the oil demand. Oil was over $60 a barrel in futures markets.
FINSUM + Magnifi: Chinese Tech Stocks Slip is an Opportunity
April 1, 2021
Chinese technology and financial regulation have been on the rise. And big tech companies such as
Tencent, Baidu, iQiyi, and Vipshop have seen their stock prices fall. Additionally, the forced liquidation of
key investment firm Archegos Capital Management hit these companies hard. However, KraneShares
CIO Brendan Ahern says this just sets the KraneShares CSI China Internet ETF back YTD, and that ultimately they are still bullish on the medium and long-run outlook for this sector. ETF Trend’s CEO
David Lydon, says this is a buying opportunity and these are key innovators in global technology.
FINSUM + Magnifi: How to Adapt as China Pulls the Reins on Stimulus
(March 2021)
The U.S. is set to ramp up its stimulus efforts as it passes the Biden Administrations' $1.9 trillion covid relief package. China, however, is preparing to curb spending. The People’s Bank of China will begin to close the faucet as money market liquidity, government bond issuance, and private credit growth all taper. In a typical slowdown, one could expect major changes for China. However, economist Carol Liao and Pimco strategist Gene Frieda believe this could be different. The Biden stimulus package will boost demand in the U.S. and developing markets. This could be a stabilizing force for China, particularly in the commodities markets. The yuan looks more attractive as currency movements can lag credit swings. Finally, U.S. tariff relief could be promising for the country's currency.
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FINSUM + Magnifi: Chinese Banking Experiences Unprecedented Rally
(March 2021)
The Chinese banking sector has a tighter leash with regulators than most all other countries. For the most part, this oversight keeps investors away, but a new day has come for the Chinese banking sector. Many investors are scouring previously underinvested industries to find value as Chinese mainstays have dipped. China’s cap-weighted index, CSI 300 Bank Index is up 12% YTD, despite fundamentals being relatively unchanged. Investors are veering away from companies that form the CSI 300 consumer staples index, seeing rising price-to-earnings ratios as a warning sign. Many also expect the regulatory burdens facing Chinese banks, who are being asked to support the economy with low-interest rates, to be lifted. Higher interest rates would bolster future earnings for the banking sector.
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FINSUM + Magnifi: Bonds Offer Security for Income Investors
(March 2021)
Bond market investing hasn’t seemed so attractive recently as rates on even long-term government debt such as the 10-year Treasury hit lows of 0.318% nearly a year ago, but the yield curve is sloping upward and it's time to move back into the bond market. For retirement investors, in particular, bonds offer safety and security at least at maturity, and for those looking to hedge, bonds gain in value as the tougher times hit the equity market. While young investors can bear swings in stocks, many don’t consider bonds to offer stability in tumultuous equity and employment markets. For investors getting closer to retirement, increasing bond/equity share is a no-brainer, but all investors can add some diversity to their portfolios. For growth-oriented investors international and corporate bonds ETFs like BND or BWX, income investors can look to inflation-protected securities like TIPS or ETFs like BLV, and short-term government debt is the answer for the most conservative.
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FINSUM + Magnifi: Regulators Stepping into Chinese Fintech
(March 2021)
The Premier of the state council of China, Li Keqqiang, announced plans to increase oversight and regulation in the country’s financial and fintech sectors. This comes as an addition to an over 3-year long saga of back and forth between the government regulators and the inscrutable financial sector. The aims are to create an economy that serves the people and the real economy, but in practice, it will very much curb the growing role of technology companies in finance. Giants in Chinese technology, such as Tencent and Ant Group Co., will be particularly hard hit by the new regulations. Microlending restrictions already shook up Ant Groups' initial public offering, placing it on hold. Regulators are also artificially lowering rates on lending and extending repayment timelines for small businesses.
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FINSUM + Magnifi: The China Situation Will Grow More Tense, and Not Because of Trump
(October 2020)
President Trump has been very critical of China and the US’ relationship to Beijing over the last four years. He has almost single-handedly driven a tense trade war between the two countries. However, following almost four years of escalating stand-offs, something odd is happening—policy experts say that a Biden victory might actually make the US-China relationship even worse than it is with Trump. According to the top Asia official from the Obama years, “I think there is a broad recognition in the Democratic Party that Trump was largely accurate in diagnosing China’s predatory practices”. And according to a former Chinese trade negotiator, “If Biden is elected, I think this could be more dangerous for China, because he will work with allies to target China, whereas Trump is destroying U.S. alliances”. To that point, another commentator, a Chinese policy expert at Renmin University in Beijing says “Biden would make the hard lines more effective and more efficient”.
FINSUM + Magnifi: Here is How to Play the Tension with China
(September 2020)
US tension with China is reaching new heights over the last few weeks. Not only are the two countries in an escalating trade war that has finally started to see China getting more assertive vis-a-vis Trump’s actions, but now Beijing and Washington are squaring off over TikTok. With trade relations between the countries devolving, Goldman says the best action investors can take is to invest in funds which have exposure to US onshoring efforts. Goldman’s thesis is that economic tension with China will lead to the onshoring of US supply lines, and that such a transition will benefit a handful of sectors. In particular, pharmaceuticals may do well as it is becoming very plausible that the US government might mandate that pharmaceutical drugs need to be made in the US. Additionally, automation and robotics companies stand to gain as the expense of reshoring US manufacturing leads to investments in automation.
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