Click here for the PDF: The Weekly Beacon – January 26 2024
We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.
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This weeks issue: Stimulus, Chinese aid package for stocks, Alibaba shares, Chinese tech stocks, Jack Ma, iShares China ETF, Netflix earnings beat, Netflix content spending, Netflix and WWE deal, Streaming industry, Bank of Canada interest rate decision, Bank of Canada policy, Mortgage rates in Canada, Joe Lewis, British billionaire insider trades, Pre election versus election year performance, Nancy Pelosi trading, Unusual whales stock tracking, Nvidia call options, AI technology, Government AI program.
Stimmies in China
On Tuesday it was reported by Bloomberg that policymakers in China are putting the final touches on an aid package for the Chinese stock market. The package will be for about two trillion yuan ($278 billion U.S.) where Chinese state-owned enterprises offshore accounts will buy onshore stocks. According to Bloomberg, Chinese policymakers have also put aside 300 billion yuan of local funds that would be used to invest in onshore shares through state-owned financial firms China Securities Finance Corp. or Central Huijin Investment Ltd.
The reports of this package sent Chinese stocks upwards. This comes as Chinese equities have limped along for the last 2.5 years. Alibaba shares jumped by 8% on Tuesday while the iShares MSCI China jumped by close to 4%.
This comes days after the Chinese Premier (China’s second most powerful man) spoke in Davos and did not mention any stimulus for his country’s ailing economy and stock market. The Premier expressed that the Chinese economy is strong and has great growth prospects moving forward. This speech disappointed investors who were hoping for some stimulus to kick-start the Chinese economy.
Many market strategists have recently claimed that China is reminding them of the early 1990s Japan market, weak private demand, demographic issues, deflation, and structural issues that are not being addressed.
Chinese officials have intervened in equity markets in the past, often indirectly and in market routs. The MSCI China ETF is down 12% already this year, before this news, this contrasts the gains across global equity markets. The ETF almost reached October 2022 lows before this report and was closing in on lows it hit during October 2011. China eased its COVID-19 restrictions in October 2022 allowing its equity market to temporarily bounce.
