Blinken’s Beijing Trip, Alibaba’s Corporate Split Moves Forward

Key News

Asian equities were mixed/lower overnight. Monday, the People’s Bank of China (PBOC), China’s central bank, lowered the 1 and 5-year loan prime rate by 10 basis points each to 3.55% and 4.2%, respectively. The market gave the move a thumbs down as investors had hoped for a more aggressive cut. Equity markets were weak Monday and today. Meanwhile, Hong Kong and Mainland China have shortened weeks, so we should expect thin/light-volume days, which can exacerbate price movements. However, Mainland China and Hong Kong have had a strong start to the month, as the upcoming market holiday is likely driving short-term profit-taking.

US Secretary of State Blinken met with President Xi, Foreign Minister Qin Gang, and China’s senior diplomat Wang Yi in Beijing. The meetings appear to have gone well, which paves the way for further diplomatic trips. The lack of military communication was not resolved though no media accounts mention that the issue preventing it is the Trump-era sanction of the current defense minister during his previous role. Remove the sanction and remove the issue, in my opinion. Regardless, the Blinken trip is a step forward to repairing the most important economic relationship globally. The US-China political relationship is a major overhang, as many researchers noted that the underweight to China in portfolios is back to October 2022 levels.