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Tag: Chinese stocks

  • European Stocks Futures Gain Before US Jobs Data: Markets Wrap

    European Stocks Futures Gain Before US Jobs Data: Markets Wrap

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    (Bloomberg) — European and US stock futures gained in line with Asian equities ahead of US jobs data that will identify the path ahead for interest rates. An oil price rally eased after Middle East tensions led to the biggest one-day jump in almost a year.

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    Euro Stoxx 50 futures rose 0.2%, and contracts on the S&P 500 advanced 0.1%. Equities in Japan and South Korea rose while markets in mainland China were shut for a holiday. A gauge of Chinese shares in Hong Kong advanced as traders assessed its recent rally’s sustainability and await details of fiscal stimulus and holiday spending.

    An index of dollar declined marginally, but is still poised for the biggest weekly gain in nearly six months as traders pared back expectations for aggressive US rate cuts. Treasuries were flat after selling off on Thursday, increasing yields to levels not seen since September.

    West Texas Intermediate and Brent crude eased slightly after each rose more than 5% to a one-month high on Thursday. Earlier gains came after puzzling comments from President Joe Biden, who told reporters the US was discussing whether to support potential Israeli strikes against Iranian oil facilities.

    Investors are concerned that, should Israel strike critical Iranian assets, the Islamic Republic will lash out and escalate the conflict, dragging in more countries and potentially disrupting global energy shipments. Israel said it bombed more than a dozen Hezbollah targets in Beirut on Thursday.

    “The market fear is that there could be supply disruptions coming out of Iran,” said Tai Hui, chief Asia market strategist for JPMorgan Asset Management, on Bloomberg Television. “Demand for oil should remain healthy, but at the same time the risk to the supply side is very much there.”

    The initial buying frenzy in Chinese stocks after Beijing’s stimulus is waning as traders take profit and await policy details and holiday spending data for further confidence. Invesco Ltd.’s chief investment officer for Hong Kong and China, Raymond Ma, who predicted double-digit returns in Chinese equities this year, said there are signs the surge has gone too far for some stocks. Still, strategists at HSBC Holdings Plc and BlackRock Inc. are among Wall Street heavyweights turning bullish on the once beaten-down market.

    The yen strengthened 0.6% against the dollar, paring some of its recent losses from earlier this week after Japanese Prime Minister Shigeru Ishiba had said the nation isn’t ready for another interest-rate increase.

    Amid all the geopolitical uncertainty, investors are looking for further signals on the health of the US economy, with the monthly payrolls report due on Friday. The unemployment rate is forecast to hold steady at 4.2% in September while payrolls are expected to rise by 150,000.

    “If the unemployment rate ticks up, I wouldn’t be surprised that markets would shift back toward expecting 50 basis points and then it is a question of how the Fed may react,” Kallum Pickering, chief economist at Peel Hunt, said on Bloomberg Television.

    Other economic signs showed robustness in the US economy. The Institute for Supply Management’s index of services posted its best reading since February 2023, ahead of Wall Street estimates. Applications for US unemployment benefits rose slightly last week to a level that is consistent with a limited number of layoffs. Continuing claims, a proxy for the number of people receiving benefits, were little changed from the previous week.

    “The US dollar could stay supported on safe haven demand amid Middle East risks, and more so if US payrolls surprise on the upside,” Wei Liang Chang, a foreign-exchange and credit strategist at DBS Bank Ltd., wrote in a research note. “The yen may be a beneficiary too, as geopolitical risks restrain appetite for carry trades”

    Key events this week:

    Some of the main moves in markets:

    Stocks

    • S&P 500 futures were little changed as of 6:34 a.m. London time

    • Nikkei 225 futures (OSE) were little changed

    • Japan’s Topix rose 0.3%

    • Australia’s S&P/ASX 200 fell 0.7%

    • Hong Kong’s Hang Seng rose 2.2%

    • Euro Stoxx 50 futures rose 0.2%

    • Nasdaq 100 futures rose 0.1%

    Currencies

    • The Bloomberg Dollar Spot Index was little changed

    • The euro was little changed at $1.1030

    • The Japanese yen rose 0.6% to 146.11 per dollar

    • The offshore yuan fell 0.2% to 7.0571 per dollar

    • The Australian dollar was little changed at $0.6846

    • The British pound was little changed at $1.3134

    Cryptocurrencies

    • Bitcoin rose 0.6% to $61,156.99

    • Ether rose 1.5% to $2,376.85

    Bonds

    Commodities

    • West Texas Intermediate crude fell 0.1% to $73.62 a barrel

    • Spot gold rose 0.4% to $2,666.99 an ounce

    This story was produced with the assistance of Bloomberg Automation.

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    ©2024 Bloomberg L.P.

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  • China Rally Spurs $7 Billion Loss for Shorts of US-Listed Stocks

    China Rally Spurs $7 Billion Loss for Shorts of US-Listed Stocks

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    (Bloomberg) — The dramatic stimulus-fueled rally in Chinese stocks has cost traders betting against US-listed shares roughly $6.9 billion in mark-to-market losses, according to a report from S3 Partners.

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    The country’s benchmark CSI 300 index has risen more than 27% from its Sept. 13 trough, supported by a spate of policy-easing measures, while the Nasdaq Golden Dragon index of US-listed Chinese stocks has surged more than 36%. That’s erased about $3.7 billion in year-to-date gains, and left shorts now nursing around $3.2 billion in paper losses, according to the market analytics firm.

    “Prior to the recent rally short sellers were profitably building their positions in a falling market,” Ihor Dusaniwsky, managing director of predictive analytics at S3, said in the report. Since the rebound, however, short selling in the group has slowed, he added.

    Before Beijing surprised the market with its stimulus plans, shorting Chinese stocks had been a popular strategy, with a number of market observers underweighting the sector, and some even labeling the country “uninvestable.” Just last month in a Bank of America Corp. global fund manager survey, 19% respondents said that shorting Chinese equities was the most crowded trade, second only to going long the so-called Magnificent Seven technology stocks.

    The most painful trades for short sellers have been Alibaba Group Holding Ltd. and JD.com Inc., S3 data show. On the flip side, traders betting against Nio Inc., Li Auto Inc., XPeng Inc. and PDD Holdings Inc. are still in the black.

    Even with the recent rally in US-listed Chinese equities, short sellers aren’t rushing to cover their positions just yet, the data show. Still, if the market continues to advance, S3 expects “a significant amount of short covering in the sector” to push stock prices even higher.

    “BABA’s stock price might see the greatest impact if shorts begin covering in size as the stock has seen increased short selling into this rally,” Dusaniwsky said. “With short selling no longer offsetting some of the long buying pressure in the stock, buy-to-covers side-by-side with long buying may steepen the trajectory if its price moves.”

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  • ‘Big Short’ investor Michael Burry bet half of his portfolio on Chinese stocks. It’s finally starting to pay off.

    ‘Big Short’ investor Michael Burry bet half of his portfolio on Chinese stocks. It’s finally starting to pay off.

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    • Famed “Big Short” investor Michael Burry is benefiting from the recent surge in Chinese stocks.

    • Burry’s Scion Asset Management has nearly half of its portfolio invested in Chinese tech giants like Alibaba.

    • China’s recent stimulus measures, including interest-rate cuts, have sparked a surge in stock gains.

    The surge in Chinese stocks this week should be music to the ears of hedge fund manager Michael Burry of “The Big Short” fame.

    Burry began aggressively buying Chinese stocks in the fourth quarter of 2022, and it seems to finally be paying off.

    According to 13F filings, Burry’s Scion Asset Management, which manages about $200 million, has about half of its portfolio invested in Chinese tech giants.

    Burry counts Alibaba at his largest position at 21% of the portfolio, and he was still buying the stock as recently as the second quarter, boosting his stake by 24%.

    Burry also has 12% of his portfolio invested in Baidu, and another 12% of his portfolio invested in JD.com. Altogether, Burry had about 46% of his portfolio invested in the three Chinese stock as of June 30.

    All three stocks have surged this week after China got serious about announcing stimulus plans to revitalize its struggling economy.

    The People’s Bank of China announce key interest rate cuts, lowered bank reserve requirements to stimulate lending, and said it plans liquidity support for the stock market.

    The country also encouraged its companies to start buying back stock.

    All of these measures and dovish speak from policymakers led to a massive surge in China’s stock market this week.

    The iShares MSCI China ETF is up 18% so far this week. Meanwhile, shares of Alibaba, Baidu, and JD.com are up 19%, 18%, and 32% so far this week, respectively.

    According to data from HedgeFollow, which tracks and compiles data from 13F filings, the recent gains in China’s stock market should mean Burry too is seeing some sizable gains in his portfolio, with Alibaba leading the charge.

    HedgeFollow estimates that Burry has an average cost per share of $78.83 for his Alibaba stake. Shares of Alibaba hit $105.25 in Thursday afternoon trades, representing an estimated gain of 34%.

    This assumes that Burry has not sold any shares since Scion’s last 13F filing, which offers data as of June 30.

    Burry isn’t the only hedge fund manager making money off of the recent surge in China’s stock market.

    Billionaire investor David Tepper said on Thursday that it’s a buy “everything” moment for Chinese stocks.

    Like Burry, Tepper count Alibaba as his hedge fund’s largest position, making up about 12% of his $6.2 billion Appaloosa fund. Tepper believes there’s more upside to be had in Chinese stocks due to their depressed valuations.

    “Even with the recent moves they’re like on a flat-line low compared to where they have been in the past. And you’re sitting there with single multiple PEs, with double-digit growth rates for the big stocks that trade over here,” Tepper said in an interview with CNBC on Thursday.

    Read the original article on Business Insider

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  • Chinese Stocks on Verge of Five-Year Low as Recovery Hopes Fade

    Chinese Stocks on Verge of Five-Year Low as Recovery Hopes Fade

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    (Bloomberg) — Chinese stocks are on the brink of falling to a five-year low seen in February as bearish sentiment grips the market amid a lack of earnings and economic recovery.

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    The CSI 300 Index closed down 1.2% on Monday, taking its slide from this year’s high in May to more than 13%. A further decline would take the benchmark to levels unseen since early 2019, suggesting years of policy efforts to revive the economy and prop up share prices have proved futile. The yuan weakened.

    The market has been stuck in a cycle where stocks would plumb new lows after a brief rebound triggered by short-lived optimism. The government’s piecemeal approach to stimulus has failed to fix a crisis of confidence, with deflationary pressure, anemic consumption and an extended property slump combining to erode hopes of a near-term economic recovery.

    “The ongoing bearishness in Chinese stocks is largely being driven by deteriorating short-term dynamics, particularly the deflationary pressures and signs of weakening consumer demand,” said Billy Leung, an investment strategist at Global X Management in Sydney. “Unless we see a significant policy shift, especially around fiscal support for social welfare or housing, it’s likely this sentiment could persist.”

    The CSI 300 Index rebounded 16% from February through mid-May, as state funds purchased billions of dollars worth of exchange-traded funds and regulators clamped down on short sales and quant trades. Its slide since then is just another example of how policies have failed to address the fundamental ailments that have been hurting sentiment.

    Even long-time China bulls UBS Global Wealth Management, Nomura Holdings Inc., and JPMorgan Chase & Co. have downgraded the country’s equities in recent weeks, citing concerns ranging from a drop in property-led demand to underwhelming stimulus measures and geopolitical tensions ahead of the US elections.

    The equities slump has coincided with a growing consensus among the world’s largest banks that the country would miss its around 5% growth target this year. In the latest blow to sentiment, China’s consumer prices rose less than expected last month, adding to signs policymakers are struggling to get households spending.

    China’s faltering economy has hit global commodity demand as well. Iron ore sank below $90 a ton for the first time since 2022 as industrial commodities faced sustained pressure from tepid Chinese demand. The onshore yuan weakened as much as 0.2% against the dollar on Monday.

    To be sure, some investors say Chinese equities’ ultra-cheap valuations offer good risk-reward opportunity. The MSCI China Index is trading at less than nine times forward price-to-earnings, compared to a ratio of 24 for its emerging market rival India.

    The CSI 300 is near levels seen during the February rout, when exit orders at structured products like snowball derivatives and quantitative funds exacerbated a selloff, and investors rotated into Indian stocks in a major shift in EM portfolios.

    While there are some stock-specific opportunities, “even the long-term Chinese champions are not immune to the persistently weak China economic backdrop with limited visibility of improvement,” said Vivian Lin Thurston, a portfolio manager for William Blair Investment Management in Chicago. “Domestic policy trends and geopolitical risks may continue to pressure the multiples of Chinese equities structurally.”

    Earnings per share for the MSCI China Index fell 4.5% from the year earlier in the second quarter, its worst in five quarters, according to data from Bloomberg Intelligence. Underscoring the contraction was weakening support from the country’s eight biggest tech firms.

    Down nearly 7% this year, the benchmark CSI 300 Index ranks among the world’s worst-performing major gauges and is headed for a record fourth year of losses.

    –With assistance from Winnie Hsu.

    (Updates with prices as of market close.)

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