Introduction
Welcome to our AlgoMerchant blog!
In this week’s article we will summarise for you everything that has occurred in the Chinese and Hong Kong markets that are important for you to know.
WHAT A WEEK it has been!
Stock Market Capitulation
The chinese stocks fell the most since 2008, with one Chinese Technological Index losing as much as 11% within a single day.
Xi’s closeness with Putin appears to be concerning with analysts and investors, as fears increase over US and allied responses over a backlash and perhaps financial sanctions against Beijing
Check out this Bloomberg article.
The Beijing Option Put
China and Hong Kong stocks sparked a sharp reversal after Beijing pledges to support the financial markets with a coordinated, sweeping and extraordinary string of official statements made by government regulators and key policy officials.
American Depository Receipts (ADRs) even made a massive 33% 1 day move in the US stock exchanges. These ADRs are specific to Chinese stocks listed in the US.
Check out this Bloomberg article.
What do Quant Managers say?
One of China’s largest quant fund recommends their clients to redeem in full their investments, which resulted in extreme market volatility not seen since 2008.
Check out this Bloomberg article.
Beijing’s reversal on Nationwide Property Tax
In 2021, Beijing seemed intent to rein in the bubbly chinese property market. The idea was floated as early as October 2021, but since home sales had decreased -22% in January/February 2022, Beijing is back paddling on the nationwide property tax.
Fears over a property tax increase are residing, resulting in Chinese property stocks jumping 16%, the most since 2005.
Check out this Bloomberg article.
Do not believe China’s official Economic Data
China’s official economic growth data have been questioned by traders and investors, to the extent they have been mocked on social media.
China released very strong economic data between Jan and Feb 2022, which surprised many.
However, a famous China economist posted that the ‘true economic situation may not be so rosy’.
Not surprisingly, that post has since been removed.
Check out this Bloomberg article.
Rumours of Rate Cuts
Interestingly, while the rest of the world, including the US are about to start to increase interest rates.
China on the other hand, one of the first nations to embark on interest rate increases since the Covid pandemic, has decided to hold interest rate hikes.
Markets are clearly on edge, with the worst Covid escalation since Wuhan and numerous promises by Beijing to support the economy might mean stimulus is coming.
Check out this Bloomberg article.
Covid Zero Strategy - No More?
Xi has somewhat signalled that he might be changing the country’s covid strategy as economic pressure mounts.
This means that the world’s last Covid-Zero holdouts might be changing tunes.
This is the first time Xi has done so since the pandemic occurred.
Hong Kong, which recently only surpassed 1 million cases, is also reviewing their approach.
Check out this Bloomberg article.
Biden’s Call with Xi
Biden spoke almost 2 hours with Xi on Friday, according to the White House. This comes at a tipping point relating to relations between China and the US.
The White House said after the call that Biden “described the implications and consequences if China provides material support to Russia.”
On the other hand, Conflict and confrontation is not in anyone’s interest, Xi told Biden at the start of the call, according to Chinese state media.
“Peace and security are the most cherished treasures of the international community,” CCTV quoted Xi as saying on the call.
Check out this article.
