August 24, 2023 | Daily JAM, Videos |
Today’s video is: Stay Away From China for a While. China is looking at a long-term downward trend in the price of Chinese stocks. The iShares MSCI China ETF is down 8.1% year to date. It was down nearly 23% in 2022 and around 22% in 2021. What’s causing this? China has a long-term demographic problem. You’ll see occasional spikes in stock prices whenever the government puts money into the economy, but those spikes disappear after it becomes evident that putting more money into the system isn’t enough to fix it. In the long term, China is going through some extreme demographic changes. Last year, China’s population fell for the first time since 1961 and the United Nations predicts that China’s population will go from 1.4 billion now to 800 million by the end of this century. This is because fewer couples are deciding to have children, and the one-child policy led to a scarcity of females in the population. The younger generation is highly educated but unable to find jobs, which has led to negative sentiment on the economy and sluggish consumer spending. China’s economic policy has been based on high-tech industrialization and a dampening of consumer spending in an effort to provide the capital needed to support its industrialization. This model works for a while but inevitably hits a wall because the things you produce need somewhere to go. For a long time, China exported most of its goods, but many countries, like the United States, have pivoted to policies designed to increase domestic production. China looks to have hit the middle income economy wall, like a lot of industrializing countries before it.
June 26, 2023 | Daily JAM, Long Term, Videos |
Today’s Trend of the Week is China’s Troubling Economic Trend. This graduation season is highlighting the economic problems China is facing. The 16-24-year-old Chinese demographic went to college as a way of delaying entering the job market during COVID, with the expectation of a guaranteed job upon graduating. The bad news is those jobs have not materialized. Unemployment for the 16-24 year age group was up to 20.8% in May, even higher than April’s shocking number. These Chinese college graduates have recognized this problem and have started a movement called “lying flat.” These potential consumers, they say, will not be buying houses, or cars but instead, will cut consumption. This negative view of the future trend in the economy has spread to all demographics and has led to people hoarding cash. The People’s Bank of China has cut short-term interest rates and the state council has suggested another stimulus package is coming. These factors could give Chinese stocks a bump up, but won’t get to the heart of the economic problem or bring the country’s growth above 5%. I’ve switched my international diversification to South Korea from China on JubakAM.com because I believe this economic trend is a long-term issue and that these problems are deeply embedded in the Chinese economy.
May 31, 2023 | Daily JAM, Perfect Five-ETFs |
The hits just keep on coming. On Wednesday, the release of May numbers on factory activity provided the most recent bit of bad news. China’s official manufacturing Purchasing Managers’ Index dropped to 48.8 this month, down from 49.2 in April, according to data released by the National Bureau of Statistics on Wednesday. It was the second straight contraction. In this index, a reading above 50 indicates expansion, while anything below that level shows contraction. The index, which mainly covers larger businesses and state-owned companies, is at its lowest level since December. In that month China ended most of its pandemic restrictions early that month. That led to hopes of a big economic rebound. And a strong stock market rally.
Now those hopes look premature or just plain exaggerated.
May 4, 2023 | Daily JAM, Jubak Picks, LVS, Videos |
Today’s Quick Pick is Las Vegas Sands Corp. (NYSE: LVS). Is Macau gaming the best way to play China? I would say yes. News out of China is that it’s clearly reaccelerating and will easily hit 5% economic growth in the current quarter. The economy is reopening and growth is up and Macau, as a gaming center, is benefitting in a pure Covid reopening story. Total gaming revenue in Macau was up 247% year over year in March and 450% in April. Normally I’d look at MGM International to play Macau, but their Las Vegas presence outweighs their China presence, and at this moment, I’m looking for something with less presence in Las Vegas. Although the name may suggest otherwise, Las Vegas Sands has a much bigger presence in China and is in the process of selling their Las Vegas assets in order to invest more in Singapore and Macau. This is a good place to play China gaming as the country accelerates and I’ll be adding it to my JubakPicks Portfolio with a target price of $70 a share.
March 13, 2023 | Daily JAM, Jubak Picks, Top 50 Stocks, Videos |
This week’s Trend of the Week is Voter Suppression…in China. During the most recent National People’s Congress in China, two people were notably not invited–entrepreneurs Tony and Pony Ma, the heads of Alibaba and Tencent. Other entrepreneurs were also notable for their absence. Xi Jinping has made it clear that entrepreneurs have a much smaller role in his economy going forward, as he looks to consolidate power in the hands of the Chinese Communist Party and prevent any potential competition from power centers. Xi’s new policies, coming out of the National People’s Congress, focus on spending by state-run businesses and emphasize consumer spending, as opposed to infrastructure, as a source of economic stimulus. So how should you invest in China? Despite Pony Ma’s absence at the People’s Congress, Tencent Holdings (OTCMKTS: TCEHY) remains at the forefront of Chinese innovation and technology. It’s clear that China will not adopt US-made chatbots and will develop its own. Tencent looks likely to take a leading role in that effort. The company is also the dominant game producer in the world and gets a lot of its revenue from outside of China. It’s the China stock I’d look at for the long term. In the short term, I’d look at JD.com, which is well-suited to get a bounce from the emphasis on consumer spending. The current price is a good entry point. I’ll be adding it to my JubakPicks.com portfolio tomorrow.
March 1, 2023 | Daily JAM, EUM, FXI, Perfect Five-ETFs |
China’s manufacturing activity recorded its highest monthly improvement in more than a decade in February, while services also showed stronger-than-expected performance. Home sales rose for the first time in 20 months. Which has helped push Chinese stocks higher–along with the belief that the annual People’s Congress meeting that begins on Sunday will produce new stimulus measures from the central government.
January 12, 2023 | Daily JAM |
Today I posted my two-hundred-and-twenty-third YouTube video: Quick Pick Alibaba. This week’s Quick Pick is Alibaba (NYSE: BABA). The past year has not been so great for Alibaba and its shares. China cracked down on domestic internet technology companies and Jack Ma (head of Alibaba, Ant Group, and Ant Financial) specifically. The Ant Financial IPO was squashed by regulators leaving it unable to go public and Jack Ma disappeared for a while. He’s recently resurfaced in Thailand (among other places) and has stepped away from control of Ant Group. This opens up a much stronger possibility that Ant Financial will now get an IPO. This news, along with a loosening of the technology crackdown from the government, has caused Alibaba stock to spike from $88.09 to $114.45 in two weeks. Other Chinese technology companies like Tencent and JD.com are seeing similar trends. Additionally, there’s speculation that because of the slowdown in the Chinese economy, largely due to the Covid-19 outbreak there, the People’s Bank may step in to deliver a big stimulus package. As a relatively short-term, speculative play, Alibaba is attractive. But I don’t know that I’d put it back in my 5-Year portfolio, due to uncertainty from raging Covid in China and the toll that it is taking on the economy there.
August 17, 2022 | BABA, Daily JAM, Jubak Picks, TCEHY, Volatility |
When I added Alibaba (BABA) to my Jubak’s Picks Portfolio on April 29, 2022, and Tencent Holdings (TCEHY) to my Volatility Portfolio on January 3, 2022, I thought two things were about to happen in China. First, I thought that the People’s Bank would unleash enough stimulus to more than compensate for the slowdown in China’s economy. And, second, I thought that we’d seen the end of the regulatory crackdown on China’s big entrepreneurial technology companies. I got both trends wrong.
July 11, 2022 | Daily JAM, Morning Briefing |
China’s stocks took a beating today, July 11, on worries that the country is headed for a replay of the Pandemic lockdowns that battered the country’s economy earlier this year. In Shanghai, the flash point in the lockdown that ended just 5 weeks ago, the Covid case-load continued to march high. The city reported 59 new infections on Monday, the fourth day in a row with case numbers above 50. The sharp rise from single digits about a week ago follows the detection of the more contagious BA.5 sub-strain of the omicron variant. Nationally, close to 30 million people, are under some form of movement restriction. In Macao, state regulators moved to close all casinos for the first time since the early stages of the pandemic.
July 7, 2022 | Daily JAM |
Commodity stocks rallied big time on Thursday, July 7, on news that China’s Ministry of Finance is considering allowing local governments to sell 1.5 trillion yuan ($220 billion) of special bonds in the second half of this year. This would be a huge expansion of the borrowing capacity of local governments–which had looked to be only around $330 million after local governments sold most of the year’s quota in the first half–and would provide a boost to infrastructure spending and China’s economic growth. The news comes as fears grow that China’s economy won’t meet the official goal of 5.5% growth in 2020.
July 6, 2022 | Daily JAM |
The People’s Bank of China slashed its daily short-term liquidity operation to 3 billion yuan ($447 million) this week, the smallest amount since January 2021. At this pace, it’s likely to remove more cash in the first five days of July than it injected at the end of June. At the current rate, the People’s Bank would drain a net 428 billion yuan ($64 billion) of cash in the first five days of July, more than the 400 billion it injected at the end of June. The move looks like an effort to “normalize” China’s financial markets after a period when the People’s Bank added cash to the system in an effort to lower interest rates and increase lending in order to stimulate economic growth after Pandemic lockdowns crushed China’s economy. And to bring monetary policy at China’s central bank in line with that at other central banks that are raising interest rates. Efforts to drain liquidity from the financial system are never good for China’s stock market.
July 6, 2022 | Daily JAM |
Lots of Covid news from China in the last few days. None of it was good. Shanghai reported 24 Covid infections on Tuesday, July 5. That’s the most in three weeks. Two additional cases were reported outside quarantine, raising fears that the virus is already spreading widely. That news prompted a big increase in mass testing, in 10 districts and parts of two others–out of the city’s 16 districts. Fear that this is just the first step in a return to the Pandemic lockdown that crippled Shanghai’s and China’s economies took the CSI 300 Index as much as 2.1% lower during the day. That’s the biggest drop since late May.
