Pre-market stocks: China is starting to scare investors less
But in the last 12 months, there has been a significant change.
What’s happening: A year ago this week, Ant Group halted its much-anticipated stock market debut following a meeting between billionaire co-founder Jack Ma and Chinese regulators. In the months that followed, Beijing stepped up efforts to reduce the power of some of the country’s most powerful companies, from online shopping giant Alibaba to ridesharing platform Didi. The campaign wiped out billions of dollars in market value.
This crackdown has forced fund managers to ask tough questions. Foremost among them: Is the market still the winning bet they thought it would be?
Apprehension remains as to what President Xi Jinping will do next as he pursues a nationwide campaign for “common prosperity.” But after a tumultuous year, some of the anxiety subsides.
âSentiment is starting to recoverâ¦ on signs that Beijing is trying to strike a balance between stabilizing growth and continuing structural adjustment,â said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note to customers this week. “We believe Chinese stocks are now near the low.”
See here: In the last quarter, Chinese stocks experienced their worst three-month period since 2015, plunging more than 18%, Haefele noted. But in October, the MSCI China Index rose 3%, ending four consecutive months of losses. The share of Alibaba, particularly affected, jumped by nearly 15%.
The change in mood is largely due to expectations that the Chinese government will moderate efforts to reform private companies to avoid exacerbating an economic downturn.
The country’s production grew at its slowest pace in a year in the last quarter, increasing only 4.9%. Compared to the previous quarter, the economy grew only 0.2% between July and September, one of the weakest quarters since China started posting such records in 2011.
A government survey of manufacturing activity released over the weekend fell for a second consecutive month. There are also fears that the country’s huge real estate sector is caving in under its massive debt load.
This reinforces expectations that policymakers will act aggressively to inject stimulus into the economy to help it stabilize.
But the clouds have not completely dissipated. Haefele notes that “short-term market volatility may remain high”. In Bank of America’s most recent survey of global fund managers, the situation in China was identified as the second biggest market risk, behind inflation.
On the radar: An energy crisis hitting China could dictate how the situation unfolds. The same is true of its approach to dealing with the Covid-19 pandemic.
As countries around the world are gradually opening up, China is still striving to eradicate Covid-19 from within its borders. Shanghai Disneyland entered an instant lockdown on Sunday evening following a single confirmed case. Tens of thousands of visitors and staff were forced to undergo coronavirus tests before being allowed to leave the park.
Forget about Hertz. Rival Avis shares soar
Investors rushed to buy Hertz shares after the company announced tie-ups with Tesla and Uber.
But the stock of rival car rental company Avis Budget is even hotter, reports my CNN Business colleague Paul R. La Monica.
The company beat Wall Street expectations when it released its final quarter results after markets closed on Monday. Sales nearly doubled from a year ago and Avis profits soared to 1,400%, easily beating expectations and hitting a new record.
Driving the boom: The return of business and pleasure travel as people have been vaccinated against Covid-19 has given Avis a huge boost.
“We are seeing the benefits of the initiatives we launched early in the pandemic and are looking to build on this positive momentum as the travel environment continues to normalize,” CEO Joe Ferraro said in a statement.
If demand is facilitated, the company also has a fleet of used cars that it can sell to dealers or consumers.
Investor Snapshot: Hertz stock, which is currently listed on the OTC notice board of the Nasdaq and hopes to return to the regular Nasdaq through an initial public offering, is up nearly 30% since the company emerged from bankruptcy earlier this year and began trading again in July.
Avis Budget shares, meanwhile, have jumped more than 110% since July and are up nearly 380% so far in 2021.
That said: many investors are betting that the stock will go down. Over 20% of Avis Budget’s shares are held short, which means traders immediately borrow and sell them in the hopes of buying back the shares at a lower price and making a profit on the margin.
However, Hertz’s shares could also be vulnerable. Tesla CEO Elon Musk tweeted Monday that “no contract has yet been signed” to sell 100,000 vehicles to the rental car department, casting doubt on the high-profile deal.
It pays to be a shipping company right now
Businesses around the world have expressed growing frustration with the high cost of shipping, as a wave of consumer demand and supply bottlenecks push freight rates up.
Less upset? The world’s largest container shipping company, which just had a record quarter.
The latest: Maersk said on Tuesday that skyrocketing freight rates boosted sales to $ 16.6 billion, while profits tripled from a year earlier to $ 6.9 billion dollars.
Maersk said it expects the “exceptional market situation” to continue into at least the first quarter of 2022, with its growth “subject to high uncertainties” from global shipping congestion.
“On the demand side, high household savings in the United States and Europe should support consumer demand, but the composition of spending is likely to rebalance towards services, and the sharp rise in the prices of some goods could cause consumers to adjust their spending plans, âthe company said. noted.
Future outlook: Maersk has also announced that it is strengthening its air freight business. The Danish company buys German freight forwarder Senator International, leases three cargo planes and buys two new Boeing planes that will be deployed by 2024.
“Witnessing the ripple effects of the pandemic, with widespread port congestion, production problems, but also other external factors such as the limitations of inland transport options, the time has come to take new measures to helping our customers, âMaersk said in a statement.
Coming tomorrow: The Federal Reserve is expected to start canceling pandemic-era stimulus measures to bring inflation under control.