Hu Xijin Is Buying China Stocks, Week In Review

Week in Review

• Asian equities were mixed this week as Russia’s Wagner revolt dominated headlines going into the week while Dragon Boat Festival travel data indicated a 12.8% increase in the number of trips taken during the holiday compared to 2019.
• The potential and need for more stimulus captivated investors’ minds this week as Premier Li Qiang reiterated China’s 5% GDP target during a speech at the World Economic Forum, hosted in Tianjin on Tuesday.
• Electric vehicle ecosystem stocks kept the momentum going this week on the extension of tax subsidies through 2027.
• On the international business and government relations front, Bernard Arnault, CEO of global luxury goods giant LVMH, visited China this week while US diplomat Daniel Kritenbrink discussed potentially increasing the number of direct flights between the US and China, which is still down significantly from pre-pandemic levels.

Key News

Asian equities ended the month and quarter mixed as Mainland China, Thailand, and India outperformed on light volumes.

June PMIs met low expectations as the Non-manufacturing PMI indicated expansion at above 50 while the manufacturing PMI indicated contraction at below 50. As we suspected, the “bad news is good news” phenomenon played out as the declining PMIs raise the necessity for more stimulus. Shanghai and Shenzhen reversed their intra-day decline to climb higher following the release of the PMIs, as investors anticipated policy adjustments. While there is certainly a slowdown in the industrial sector, driven by re-shoring and slowing global demand, certain segments are seeing growth, especially non-ferrous metals, driven by demand for electric vehicles.