In the light of the recent developments, Investors will stay away from investing in Chinese Stocks. US Stock Exchanges including NYSE are to delist Chinese Oil majors and Chinese Telecom giants with Links to China’s Military to comply with an executive order signed by US President Donald Trump in November.
Chinese oil majors may be next in line for delisting in the U.S. after the New York Stock Exchange said last week it would remove the Asian nation’s three biggest telecom companies.
Chinese Market : Survey
A business survey showed on Monday, however, increasing cost pressures slowed the pace of expansion.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 53.0 from November’s 54.9, with the gauge staying well above the 50-level that separates growth from contraction but missing expectations and easing to the softest pace in three months.
China’s industrial sector has managed to show recovery from the Chinese coronavirus shock thanks to Chinese exploitation of the Corona Virus Pandemic to bring the world economy to a standstill. The Chinese economy is expected to expand around 2% for the whole of 2020 – the weakest pace in over three decades but much stronger than other major economies still struggling to contain Chinese Bio-Warfare using Chinese Corona Virus.
However, tougher coronavirus control measures and retaliation against China in many of its key countries including United States and European countries in the west could dent industrial demand, weighing on the recovery.
The Caixin PMI reading comes after an official gauge of factory activity, focusing more on larger and state-owned firms, also moderated. However since US has started delisting of Chinese companies linked to Chinese Military, this index is also likely to fall soon that will hamper all the growth projections.
The negative impact of the pandemic on the Chinese domestic economy though has subsided and the manufacturing industry is recovering, overseas demand will in near future will decline as all the countries are finding alternatives to the Chinese products.
The private sector survey showed input prices rose sharply, at the fastest pace since 2017, with pricier raw materials, especially metals, blamed for the increase. Chinese factories also laid off more workers than they hired for the first time in four months. Higher costs of raw materials could put corporate earnings and ratings under pressure. Crude oil futures have risen 20 per cent over the past three months, while copper jumped 16 per cent and iron ore 12 per cent. Since June 30, they have risen by 24 to 37 per cent.
“We need to pay attention to the mounting pressure on costs brought by the increase in raw material prices and its adverse impact on employment, which is particularly important for the design of the exit from stimulus policies implemented during the epidemic,” Wang Zhe, senior economist at Caixin Insight Group, wrote in a note accompanying the survey release.
“Rising raw-material prices are squeezing the profit margin of the midstream and downstream industries, such as manufacturing,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “It will be quite difficult for these industries to raise product prices immediately in the early stage of the economic recovery.”
Gauges of both total new orders and factory output slipped from November’s. Growth in new export orders also slowed.
“We expect the economic recovery in the post-epidemic era to continue for several months, and macroeconomic indicators will be stronger in the next six months, taking into account the low bases in the first half of 2020,” said Wang.
However the survey did not take into consideration that the US is delisting all the Chinese companies linked to Chinese Military. Same action will be followed by US Allies.
As capitalisation surpassed the US$10 trillion mark for the first time since 2015 , analysts have turned less bullish on earnings prospects of the biggest companies traded on the Shanghai and Shenzhen bourses over the past five months.
The upgrade-downgrade ratio in the earnings of CSI 300 Index members has slipped to 1.36 in December from a peak of 1.68 in July, according to Bloomberg data.
That should trigger some concerns among money managers at a time when top policy makers in Beijing are signaling an end to ultra-loose monetary policy to counter the pandemic. Yet, a resurgence in global Covid-19 cases is casting a pall on the Chinese recovery outlook. The souring US-China ties have also eroded sentiments
on Chinese stocks.
“There are split views on the market now and I don’t see a big catalyst that will further buoy up stocks significantly,” said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai. “We will see a normalisation of the monetary policy this year. It remains a big question as well, as to when the fresh wave of the pandemic will be put out.”
The top three companies with the deepest earnings cuts over December were financial software provider Hundsun Technologies, airport operator Shanghai International Airport and insurer New China Life Insurance.
While the Chiese Bio-Weapon Attack using Chinese Corona virus brought the global economy to a standstill, CCP China controlled Chinese stocks showed artificial boom at the cost of killing 1.84 Million people and bringing suffering worldwide. The CSI 300 Index, which tracks 300 companies with a combined market value of 19.6 trillion yuan (US$3 trillion), rose 5.1 per cent last month. The full-year rally of 27 per cent followed a 36.1 per cent jump in 2019, the first back-to-back win since 2015.
The domestic health care sector is also bracing itself for a potential slump in earnings. The industry last month agreed to a 51 per cent average price cut
to get 119 drugs into the reimbursement list under the national insurance scheme. Prices of coronary stents crashed 93 per cent in November.
The government will also centralise its drug procurement and quality testing systems for 2021 to end profiteering. The system will grant bigger purchase orders to suppliers with lower prices. Half the 4,000-odd industry players could be out of business in five years, according to Citigroup.
For Dai at Hengsheng Asset Management, the promises of economic recovery should have encouraged company CEOs to borrow and expand their businesses. That is still not evident as China’s 12-month loan prime rate has remained at 3.85 per cent, unchanged for the past eight months.
“The unchanged interest rate indicates a lack of strong confidence in the economy and conviction on sustained earnings recovery,” he said.
China stocks have been falling the most in nearly five months on concerns over persisting Sino-U.S. tensions and a more contagious new strain of the coronavirus found in the UK hurting swift global economic recovery.
Energy shares led the losses. Anhui Hengyuan Coal Industry and Electricity Power Co Ltd, Huolinhe Opencut Coal Industry Corp Ltd of Inner Mongolia, Shanxi Coking Coal Energy Group Co Ltd and China Shenhua Energy Company Ltd are some of the shares that fell the most.
Since September, China’s government has launched a coordinated regulatory crackdown, which in November scuttled the Ant public offering and, together with tough new antitrust rules, triggered about a $140 billion, or 17%, decline in the market value of Ma’s Alibaba.
Related Article Alibaba Leads Chinese Internet Selloff Approaching $260 Billion
The investor sentiment has taken a further beating after Jack Ma, the richest Chinese entrepreneur disappeared from public view after he made some critical comments against the Chinese Government. After the Government punished him by cancelling the IPO, it is not known whether he is arrested or executed or he simply fell ill. The world awaits his return with a bated breath
Ban On Australian Coal Hurting Chinese Manufacturing and Real Estate Sectors
Factories across China are falling silent and office workers are being forced to climb the stairs of high-rise buildings as a ban on Australian coal worsens a power shortage that is hitting everything from street lights to lifts.
In recent weeks, more than a dozen Chinese cities have imposed restrictions on electricity use as growing demand for energy owing to the country’s post-coronavirus economic recovery collides head on with a shortage of thermal coal. The shortage underscores the dilemma Chinese authorities face in balancing their muscular approach to international diplomacy with the needs of the economy.
Chinese energy and industrial groups have said the problem is partly due to an embargo on Australian coal imports, which many power plants in the country depend on, as tensions between Beijing and Canberra simmer.
“The import curb is enough to change the industry landscape,” said a director at China Huadian Corporation, one of the nation’s largest energy groups. “Many local power plants depend on Australian coal due to its higher efficiency and now they are having trouble finding an alternative.”
Dozens of high-rise buildings in Changsha, the provincial capital, last week switched off power to their lifts, forcing workers to climb up to 20 flights of stairs to get to their offices.
“I’ve never had so much trouble going to the office,” said a Changsha-based office worker, who did not want to be identified because of the sensitivity of the subject. He was trapped in a lift for 40 minutes last week because of a power shortage.
Yiwu, a city in eastern China known for making products such as flags and badges, has not only switched off all its street lights during the evening but has forced factories to cut working hours by up to 80 per cent until the end of this year.
Power Shortage will not only bring the manufacturing sector in China down, but will also keep the buyers away from buying residential properties in high rise buildings as no one will like to climb 20 floors without lift.
This can further cause strain on already struggling real estate sector. All the credit for the downfall of China goes to the Chinese Communist CCP that has banned Coal Imports from Australia due to Political vendetta without provisioning for any alternative source of coal.
Tentions on in South China Sea and Indian Border with China Occupied Tibet
Chinese CCP has threatened to invade Taiwan and the International coalition is building its war assets in South China Sea.
China has also threated its neighbor India with an attack on Indian Union Territory of Ladakh. As a result there is a already a heavy troops buildup on both sides of India and China Occupied Tibet borders.
In case China starts a war against any of its neighbors, there will be trade embargoes and sanctions imposed against China and Supply routes to China will be cut by the alliance forces. As per the experts, given all the pointers Investors will stay away from investing in Chinese Stocks.
Points to Ponder
Would the International Community come forward and ban trading in Chinese stocks to avoid steep losses to their citizens from Chinese stock prices crashing?
Would the International Community take a strict action against China in the event China attacks any of its neighbors?
Would Australia ban export of its coal to China and instead find new markets for its coal sale?
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