what do you think about the avalanche of tariffs? to me they look very problematic for the China's export driven growth model, not to mention that they also lower disincentives to go into a (world) war...
China was always going to have to shift to a consumption-led model. Indeed, it was doing so after the Great Financial Crisis, though this effort was curtailed by 2016, but most of its 2023 growth was driven by growth in consumption, not growth in exports.
Granted, lots of analysts would question the accuracy of the exact figures, but consumption is already the main growth engine by quite a long way.
Protectionism appears likely to become a prevailing theme globally.
do you think that government even care about stocks?
Consumer confidence weighs on both household spending and allocation towards risk assets, so the government will have to find effective ways of stimulating demand and entice households into equities.
They care enough to prop it up. But this is a good question, which the next instalment would also address. For now though:
1. They would like capital to move towards deep tech sectors, which would provide IPO exits and attract investors in earlier rounds.
2. This means that they would have to make equities as a class more attractive.
3. They would presumably prioritize stabilizing Shanghai and Shenzhen-listed A-shares ahead of HK shares, since most households would not have easy access to the latter (except indirectly through funds), but would be focusing on A-shares.
4. However, Chinese Big Tech are mostly listed in HK, so international investors tend to focus on HK-shares (and ADRs) much more.
5. However, the government appears to be gradually increasing the accessibility of Chinese Big Tech to onshore Chinese investors; for example, Alibaba may be made available to the Stock Connect program, by some accounts before the end of this year.
6. This means that any future lift for Chinese equities will be more likely to also lift H-shares in the rising tide.
Traditionally, Chinese households treated real estate as investment, and equities as somewhere between Vegas and Coinbase. The CSI 300 - a more relevant index for Chinese onshore investors - is down some 40% from ATH, not as badly hit as the HSI, and valued at 12X P/E versus 8X for the HSI. This depth of drawdown is nothing out of the ordinary for A-shares, so the stock market intervention has not been super forceful.
On the other hand, there will be so much household savings the government will have to direct somewhere in the future. Real estate is out. WMPs (driven by LGFVs) are out. Alts and crypto are also a no-go. But with the low CNY rates, households are eager for higher returns. So there was immediate speculation in the LT government bonds released in the past couple of months. And you can see their immediate moves against this speculation, to prevent any bubble here.
They obviously don't want households to move into forex, or gold and other non-income producing commodities - that'll just be purely speculative. So what would be the remaining outlet? Equities.
what do you think about the avalanche of tariffs? to me they look very problematic for the China's export driven growth model, not to mention that they also lower disincentives to go into a (world) war...
China was always going to have to shift to a consumption-led model. Indeed, it was doing so after the Great Financial Crisis, though this effort was curtailed by 2016, but most of its 2023 growth was driven by growth in consumption, not growth in exports.
Granted, lots of analysts would question the accuracy of the exact figures, but consumption is already the main growth engine by quite a long way.
Protectionism appears likely to become a prevailing theme globally.
do you think that government even care about stocks?
Consumer confidence weighs on both household spending and allocation towards risk assets, so the government will have to find effective ways of stimulating demand and entice households into equities.
They care enough to prop it up. But this is a good question, which the next instalment would also address. For now though:
1. They would like capital to move towards deep tech sectors, which would provide IPO exits and attract investors in earlier rounds.
2. This means that they would have to make equities as a class more attractive.
3. They would presumably prioritize stabilizing Shanghai and Shenzhen-listed A-shares ahead of HK shares, since most households would not have easy access to the latter (except indirectly through funds), but would be focusing on A-shares.
4. However, Chinese Big Tech are mostly listed in HK, so international investors tend to focus on HK-shares (and ADRs) much more.
5. However, the government appears to be gradually increasing the accessibility of Chinese Big Tech to onshore Chinese investors; for example, Alibaba may be made available to the Stock Connect program, by some accounts before the end of this year.
6. This means that any future lift for Chinese equities will be more likely to also lift H-shares in the rising tide.
Traditionally, Chinese households treated real estate as investment, and equities as somewhere between Vegas and Coinbase. The CSI 300 - a more relevant index for Chinese onshore investors - is down some 40% from ATH, not as badly hit as the HSI, and valued at 12X P/E versus 8X for the HSI. This depth of drawdown is nothing out of the ordinary for A-shares, so the stock market intervention has not been super forceful.
On the other hand, there will be so much household savings the government will have to direct somewhere in the future. Real estate is out. WMPs (driven by LGFVs) are out. Alts and crypto are also a no-go. But with the low CNY rates, households are eager for higher returns. So there was immediate speculation in the LT government bonds released in the past couple of months. And you can see their immediate moves against this speculation, to prevent any bubble here.
They obviously don't want households to move into forex, or gold and other non-income producing commodities - that'll just be purely speculative. So what would be the remaining outlet? Equities.