China’s central bank pledges to support domestic demand
(…) “Prudent monetary policy should be precise and forceful, with greater emphasis on cross-cyclical and countercyclical adjustments, enriching the monetary policy toolbox,” the bank said.
The bank added it would “further unblock the monetary policy transmission mechanism”, enhance the stability of financial support for the real economy and keep prices “reasonably stable”. (…)
The bank said it would guide financial institutions to resolve local debt risks and noted there was urgency for faster economic transformation.
“Supply and demand dynamics in the property market have greatly changed,” the central bank said.
The bank said it would keep the yuan — which has come under pressure on the foreign exchange market this year — “basically stable” and strive to foster a sound monetary and financial environment.
- China Seen Unleashing $319 Billion of Special Bond Quota Early Authorities expected to unleash 60% of 2024’s allowance early
(…) That implies the overall size of the next year’s special local bond quota — primarily meant for infrastructure investment — could total 3.8 trillion yuan, according to Bloomberg calculations based on figures provided in the report. That would equal this year’s quota.
The Chinese government’s decision to release the quota early would signal President Xi Jinping’s commitment to bolstering economic growth through infrastructure spending. It also suggests policymakers won’t scale back on local governments’ special bond issuance, even as they ramp up sovereign bonds to fund construction. (…)
China increased its headline deficit to the largest in three decades last month, by issuing an additional one trillion yuan of new special sovereign bonds for infrastructure spending. Some economists expect Beijing to set the deficit ratio at a relatively high level next year.
China’s basic problem (charts from Ed Yardeni):
- Declining population: It declined by 850,000 during 2022, the first decline since 1961.
- Recurring problem:
The Beijing Stock Exchange has de facto implemented a new policy that prevents major shareholders of companies listed on the bourse from selling stock, worried that such sales could douse a long-desired rally, three people familiar with the matter said on Monday.
The bourse said in a statement to Reuters on Tuesday that talk of such a policy was “not factual”, and there was “no change to the spirit of relevant published guidelines”.
A “major shareholder” is one with a stake of 5% or more and is required to make a public filing with the relevant stock exchange before selling shares, according to rules for China’s bourses.
The Beijing exchange has been rejecting those filings, said the people who were not authorised to speak to media and declined to be identified.
It was not immediately clear how long this new policy would remain in place, they added.
The bourse had said separately in a statement on Monday morning ahead of this Reuters article that it was closely monitoring trading to ensure normal market order.
The so-called window guidance – where directives are made orally without written documents – is aimed at protecting the rally, the sources said.
One noted that without the guidance, the share price surge “could prompt institutional shareholders to reduce their holdings which could knock the index down again.”
The Beijing bourse currently houses 232 companies with a combined market capitalisation of 366 billion yuan ($50 billion).
By comparison, the Shanghai bourse is home to 2,256 firms worth 47 trillion yuan in total, while almost 3,000 companies listed in Shenzhen have a total market capitalisation of 31.9 trillion yuan. The Shanghai Composite Index (.SSEC) is up 0.4% this month, while the Shenzhen Composite Index (.SZI) is down 0.8%.
John Authers: Here’s a Weight-Loss Plan for the Magnificent Seven
(…) Between them, they account for 28.9% of the S&P 500.
This chart from Apollo Group’s Torsten Slok compares an “S&P 7” index with an S&P 493 that includes all the rest. The gap is astonishing:
We’ve been here before. Whenever the market gets dominated to this extent by a group of companies that are using technology to do capitalism better than anyone else, burst investment bubbles tend to follow. Slok also offered this chart comparing the valuations of today’s big seven with the multiples people were prepared to pay for the biggest “Nifty 50” stocks in 1972, and tech stocks in the internet bubble of 2000:
(…) Retail traders are still alive and well, even if they don’t seem to have gained much in the way of common sense. Their presence can doubtless be felt in the Magnificent Seven. Just this month, they have piled into the shares of bankrupt companies like WeWork Inc. and trucking company Yellow Corp. But the force has waned. Retail traders last month sold nearly $16 billion in stocks, according to S&P Global Market Intelligence, a selloff that reveals fading enthusiasm from day traders.
But if the excitement over memes has gone, retail traders have found other places to go — such as zero-day stock options. August data show that they likely make up at least 30% of the volume in contracts tied to the S&P 500 that expire within 24 hours — and possibly up to 40% — according to Cboe Global Markets. Long-termist this isn’t. (…)
Some related charts from Goldman Sachs:
FYI: P/E ratios vs Net Margins: I often plot these 2 series to see how current P/Es compare with history and assess how the company’s margins trends reflect on its market dominance and sustainability (management quality). Note that dash lines reflect consensus forecast EPS and margins. Charts from Morningstar/CPMS.
- NVDA: P/E is historically high on trailing EPS but low on forecast. High and fast rising sales and margins.
Data: FactSet; Chart: Axios Visuals
- MSFT: High P/E and high and rising margins.
- META: “Reasonable P/E. Low but recovering (?) margins.
- AMZN: P/E is historically high on trailing EPS but low on forecast. Recovering (?) margins.
- AAPL: Is 31x reasonable? Sustained high margins.
- GOOG: Cheap? Volatile margins. How about the forecast?
- TSLA: 65x! Declining margins.
GOLD:
I personally don’t invest in gold, can’t understand it. This does not help!
“Gold is trading above $2,000, widening its divergence with US real yields (chart shows inverted 10-year TIPS yield).”
