David Fuller and Eoin Treacy's Comment of the Day
Category - China

    All Your Favorite Brands, From BSTOEM to ZGGCD

    This article by John Herrman for the New York Times may be of interest to subscribers. Here is a section:

    Almost half of top Amazon sellers — those selling more than $1 million in the U.S. — are in China; about a third of Amazon’s Chinese sellers overall are estimated to be in Shenzhen. (This according to Marketplace Pulse, which tracks e-commerce marketplaces.)

    Amazon shuttered its Chinese store, Amazon.cn, in 2019, after it failed to crack a market dominated by domestic giants like JD and Alibaba.

    But it has been much more successful in recruiting Chinese entrepreneurs to sell abroad, opening “cross-border e-commerce parks,” where sellers can get assistance with logistics, branding, and navigating Amazon’s platform. For the last five years, the company has also hosted summits for Chinese cross-border sellers. Last year’s conference, held in Shanghai, was attended by more than 10,000 sellers, many of whom see, in Amazon, an alternative to increasingly saturated domestic platforms like Taobao.

    A seller in America might start with a brand idea and need to figure out how to get it manufactured; a seller connected to a factory in China’s manufacturing capital needs to figure out how to sell to Americans, which Amazon has been working hard to facilitate.

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    3 Trillion Can't Buy China Out of Virus Trouble

    This article by Sanjit Das for Bloomberg may be of interest to subscribers. Here is a section:

    Finally, the economic model underlying the reserves creates a complex financial interdependence between Asian central banks and advanced economies, termed the “fatal embrace” by the late Paul Volcker, former chairman of the Federal Reserve. Foreign-exchange reserves represent advances allowing the importing country to buy the exporter’s goods and services on credit. Withdrawing support would risk destroying the value of existing investments and damaging the borrowers’ real economy and export demand.

    The interdependence runs deeper. Since 2009, the growth of developing-country reserves is highly correlated to the growth of the balance sheets of advanced-economy central banks, which has been driven by quantitative easing. Attracted by higher returns than available at home, investors moved capital into emerging markets, which in turn supported demand and economic activity in developed economies. This is evident in the increased reliance of many North American, European and Japanese businesses on emerging economies for growth and earnings.

    Unfortunately, this cheap capital encouraged rapid rises in debt and increased the risk of future financial instability in many emerging countries. The solution lies in international co-operation to create a new international monetary system and for surplus countries to boost domestic demand.

    In a world of rising political tensions, trade wars and adherence to debt and export driven economic models, the prospects for that may appear bleak. Still, this is unfinished business the world will have to return to — once it has got past the economic shock of the coronavirus epidemic.

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    Wall Street Warnings Grow Louder for Investors Defying Virus

    This article by Cecile Gutscher and Anchalee Worrachate for Bloomberg may be of interest to subscribers. Here is a section:

    “Pretty much every client we talk to wants to buy the dip,” wrote Tobias Levkovich, Citigroup Inc.‘s chief U.S. equity strategist in a note. “And that is not comforting.”

    The S&P 500 edged higher Thursday, extending the week’s gains to more than 3.5%, as the Stoxx Europe 600 Index climbed to a record and stocks soared in Asia. A gauge of European credit risk hit its lowest since 2007.

    Yet the battle against the virus could suffer a setback as factories reopen in China in the coming days and more people come into contact with each other. On the other hand, if factories fail to reopen, the economic impact could prove much more severe.

    At Robeco, money manager Jeroen Blokland is eyeing the rally warily. The head of multi-asset funds at the Rotterdam-based firm recently cut an overweight allocation to stocks to neutral because of the spread of coronavirus. He says it’s not yet time to dive back in.

    “Every investor is looking for the bottom and wants to find it a little bit earlier than his neighbor,” he said. “We need a little bit more confirmation that the outbreak will be contained before moving again.”

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    Japan Seen Needing U.S. Help to Check China's Digital Yuan

    This article by Yuko Takeo, Emi Urabe and Toru Fujioka for Bloomberg may be of interest to subscribers. Here is a section

    “We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony,” said Nakayama, a top member of the ruling party group that drafted the proposals. “Without the U.S., we cannot counter China’s efforts to challenge the existing reserve currency and international settlement system.”

    The comments indicate the heightened concern among policy makers in Japan over the likely impact of a digitized yuan expected for later this year. China’s plan and Facebook’s efforts to launch its own Libra currency have sparked central banks around the world to get up to speed on how digital currencies would function and what their impact could be.

    “There are 1.4 billion people in China, so within the one belt, one road digital economic framework, the digital yuan has a high likelihood of becoming the standard within that digital economy,” 

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    Goldman's Currie Likes Palladium on Potential Deficit in China

    This article by Elena Mazneva, Francine Lacqua and Tom Keene for Bloomberg may be of interest to subscribers. Here is a section:

    Palladium could be an interesting trade given potential supply disruptions to China because of the coronavirus, Jeffrey Currie, head of global commodities research at Goldman Sachs, told Bloomberg TV.

    “The one I like right now that we are watching in the commodity market is palladium -- when palladium gets so tight that you actually start to shut down auto manufacturing.”

    Yet, “you don’t know when you hit one of these physical shortages until you actually hit them.”

    NOTE: Spot palladium traded near $2,412/oz Thursday, heading for a ~5% weekly gain after dropping a week earlier from record highs.

    Currie said last month he sees the potential for palladium to test $3,000/oz, then slide.

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    China Cuts Rates, Injects Liquidity as Mainland Markets Sink

    This article by Tian Chen, Yinan Zhao and Miao Han for Bloomberg may be of interest to subscribers. Here is a section:

    “We are fully capable and confident to minimize the impact of the epidemic on the economy.”

    Lian also said that while the government would work to ensure the coronavirus didn’t spread further, it would encourage major projects and enterprises in good condition to resume work and production. Policy makers will also roll out measures to soften the impact of the epidemic on a case-by-case basis, especially to try to help industries that have been hit hard, Lian said.

    Vice Commerce Minister Wang Bingnan said at the same press conference that many exporters in China have been resuming production, and local governments have been issuing policies to help small and medium-sized companies.

    Authorities have pledged to provide abundant liquidity and there seems to be more easing measures in the pipeline. In an interview with the PBOC’s Financial News newspaper, central bank adviser Ma Jun said he expects the PBOC to push the interest rate for new loans lower and to also cut the rate for medium-term funding in February if it uses that facility mid-month, as it usually does.

    If that were to happen, it would be a change to a “rather strong” easing bias for the central bank, according to Peiqian Liu, China economist at Natwest Markets Plc in Singapore.

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    Saut Strategy February 4th 2020

    Thanks to a subscriber for this report which may be of interest to subscribers. Here is a section:

    China Says U.S. Response Harmful; Flights Halted: Virus Update

    This summary of today’s news from Bloomberg may be of interest. Here is a section:

    Chinese officials took issue with U.S. comments about the country’s response to the coronavirus outbreak, and promised they would bring the infection under control.

    “U.S. comments are inconsistent with the facts and inappropriate.” Chinese Ministry of Foreign Affairs Spokeswoman Hua Chunying said in statement posted online Friday. The World Health Organization “called on countries to avoid adopting travel bans. Yet shortly afterward, the U.S. went in the opposite direction, and started a very bad turn. It is so unkind.”

    U.S. officials said this week that they had difficulty getting specialists from the Centers for Disease Control and Prevention to the front lines of the outbreak in China, and late Thursday the State Department advised Americans traveling in China to come home. Commerce Secretary Wilbur Ross on Thursday also said the outbreak may help bring jobs back to the U.S.

    China’s ambassador to the United Nations, Chen Xu, said during a press conference in Geneva that the country had been transparent about the disease.

    “We have conducted our business in an open and transparent manner with the outside world,” he said.

    Xu said that China would work with the World Health Organization to bring the disease under control, following a declaration by the WHO that the outbreak was an international emergency. The declaration will “not only coordinate global prevention control measures but enables us to mobilize international resources to respond to the epidemic,” he said.

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    Amazon Set to Break Record for One-Day Gain in Market Cap

    This article by Brandon Kochkodin for Bloomberg may be of interest to subscribers. Here it is in full:

    If its pre-market trading holds up, Amazon Inc. is about to break a bigger record than just its own peak share price.

    The largest U.S. e-commerce company saw its shares jump by more than 10% after Thursday’s earnings report crushed Wall Street estimates. If that gain stands through Friday’s close of trading, the company could see its market capitalization surge by more than $90 billion, and push the total value above $1 trillion -- a level the stock has flirted with intraday, but never held through the market close. The company’s market capitalization gain stood at $91.7 billion as of 9:30 a.m. in New York when trading began.

    That’d be the biggest single-day gain on record for a U.S. company, according to data compiled by Bloomberg. The previous record was $78 billion, set by Alphabet Inc. on July 26, after its shares surged on its own strong results and a $25 billion share-buyback program.

    To be sure, with markets near all-time highs, marks such as this are bound to be challenged. But it’s also not every day that one of the largest companies in the world gains 10% or more in a single session. Over the last five years, the six companies in the S&P 500 Index with current market caps exceeding $500 billion have had just 10 such days combined. Today would be the 11th such occurrence, and the fourth time Amazon has done so, the most of any company in the group.

    Even if it doesn’t break the market value record today, the company has already set another new high-water mark for itself. Shares opened trading $181 above Thursday’s closing price, its biggest ever gain in dollars per share.

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