Even Tupac has his eyes on China now.
The Chinese markets rose to greater heights. The Hang Seng China Enterprise Index (HSCEI) gained 12% for the week to 8,156 as investors piled on into the market following bold actions taken by the Chinese central bank.
Last week, I published a full article on the effectiveness of monetary policy in China and which sectors have gained the most. Be sure to check that out!
My plan for this week is to outline 5 stocks each that I will be researching from the US and China based on these two trends that I have identified
To be clear, I will be detailing the process and not recommending any stocks. The research will be objective and factual, not investment opinion or advice.
Disclaimer: This is not investment or financial advice. This is meant for educational purposes and we take no responsibility for anyone’s decision.
The Big 5s in Economic and Market New
Here are the 5 big news that hit the markets last week
- US port strikes: 50,000 people have gone on strike in major US ports in the East and Gulf Coast (Read More)
- They are demanding a $5 per hour raise annually for the next 6 years.
- Around 50% of US imports run through these ports.
- Potential impact: Prices could increase due to higher freight charges
- Open AI’s latest funding round: Open AI has raised $6.6 billion in its latest funding round led by Thrive Capital (Read More)
- Open AI is valued at $157 billion now compared to $14 billion in 2021
- To watch out: Open AI is undergoing a structural change to turn into profitability in the next few years. It operated at a loss of $5 billion this year.
- Record month for Chinese EVs: Chinese electric vehicles reached a record month of vehicles delivered in September 2024 (Read More)
- Driven mainly by discounts and promotions as Chinese EV makers compete on pricing now.
- BYD: 419,226, Li Auto: 53,709, Xpeng: 21,352, Zeekr: 21,333, Leapmotor: 33,767, Nio: 21,181
- To watch out: The EV market in China is ultra-competitive but the recent stimulus has reignited interest in the sector.
- Duties on SE Asia solar panels: The US have imposed preliminary duties on solar panels imported from Southeast Asia (Read More)
- The US found that SE Asia gave illegal government aid
- Prelim rates on countries
- Thailand: 23.1%
- Malaysia: 9.1%
- Cambodia: 8.3%
- Vietnam: 2.9%
- Malaysia X Middle East: Market sentiments are turning cautious on Malaysia’s stocks after the Middle-east tensions (Read More)
- The FBM KLCI sunk to a 3-week low
- To watch out: Developments in the Middle East
Markets Fresh from the Oven
The down-low to the performance of the U.S., Malaysia and other North Asia markets for the week in 1 minute.
The U.S.: The S&P 500 was flat for the week, gaining by only 0.2% to trade at 5,751. It seems like most investors’ attention has shifted away from the US to China.
According to SimplyWallSt, both the energy and finance sectors were up by 6.6% and 1.6% as
- WTI crude oil prices rose by 9.1% to help energy companies
- Expectations of more rate cuts to help banks
Malaysia: The FBMKLCI was down by 1.8% to 1,630 for the week. The flare-up of Middle-East tensions was the main culprit.
The telecom (-4.2%), industrial (-2.1%), utilities (-1.8%), tech (-1.7%), and financial (-1.5%) sectors led the losses in the market.
North Asia: Despite the boom in Chinese markets, Taiwan (-2.3%), South Korea (-3.0%) and Japan (-3.0%) markets declined.
Slicing the Economic Pie
Diving deeper into the economic data from last week.
U.S. Unemployment rate: The unemployment rate has declined slightly to 4.1% in September 2024 from 4.2% in August 2024.
It seems like the US economy has added about 254,000 new jobs for the month, and exceeded expectations.
Where is the recession? Doesn’t seem like there is one anytime soon.
Market Trends for the Week
Here are the market trends that I am be keeping an eye out for the week.
The Chinese stock market boom: This is entirely driven by renewed investor optimism in China as the government is aggressively rolling out support for the economy.
- Goldman Sachs Upgrade: GS upgraded to ‘Overweight’ and cited another 15%-20% gain in the market.
- Mercer: Optimistic about China’s policies.
- Invesco, JP Morgan, HSBC, Nomura: Skeptical about the rebound and is waiting for firmer policy support. Thinks some stocks are overvalued.
The spillover effects to North Asia?: With the rise of the Chinese stock market, what happened to Taiwan, South Korea and Japan markets?
Last week, they declined as investors shifted to China but China is these countries number 1 trading partner.
Here’s how much China exports are to these countries from OEC
- Taiwan: 22.4% of total exports are to China
- South Korea: 21.2%
- Japan: 18.6%
Basically, when the Chinese economy does better, these countries can export more.
Bargain hunting for Malaysia: As highlighted just now, the Malaysia market is at its 3-week low due to the tensions in the Middle-East.
However, Areca Capital’s CEO sees bargain-hunting opportunities in the current sell-off. He thinks that the fundamentals are still there.
A quick search on SimplyWallSt reveals that the Malaysian market is trading at a price-to-earnings ratio of 17.4 times compared to the 3-year historical average of 17.5 times.
From the beginning of the year, it has traded at around 19 times to 21 times.
Disclaimer: This is not investment or financial advice. This is meant for educational purposes and we take no responsibility for anyone’s decision.
Slice of P.I.E 