July 24 FT HK Knives, HK/UK Property, Consultates China orders US Chengdu to close the next stage..

27 Jul

July 24 FT HK Knives, HK/UK Property, Consultates China orders US Chengdu to close the next stage..

Markets At 1:10 Hong Kong time
JAPAN closed re-opens Monday
S KOREA Market opened lower but initially traded higher and slightly into the green but then news of China demanding the US close its Chengdu Consulate has markets spooked.Kosdaq -0.9%, Kospi -0.6%
TAIWAN opened higher and traded sideways until the news about China demanding the US Chengdu consulate closure which prompted selling. Although it has seen a slight bounce currently -0.5%
CHINA Opened lower and trended lower into lunch. Seeing more selling in the PM on the consulate closure news Currently CSI 300 -4%
HONG KONG HSI opened lower following the US overnight with signs of Team China giving support to try and hold 25k level but after several attempts the market gave up and then trended lower into lunch. New about the US consulate in Chengdu being ordered to close has prompted further selling in the PM. Expect some margin call later and again on Monday. Currently -2.4%
EUROPE. I would expect markets to open lower on hightened US/China tensions and caution over covid and company results.
US Futures opened flat but expect more downside on the China retaliation.

Breaking news that China has called on the US to close its Chengdu Consulate having revoked the Chengdu consulate’s licence to operate. Saying it was “a legitimate and necessary response to the unreasonable actions of the United States”.

Hong Kong buyers boost UK property market British homes are relatively cheap for territory residents unnerved by China’s actions. Looks at how some Hong Kong home owners are finding that UK house prices will make the potential move to the UK attractive. Especially as the Hong Kong home prices have remained relatively stable. Also making the UK attractive is the weakness of the UK pound at present. Lastly the advantage of the UK is that the property law is very similar to that of Hong Kong with the added bonus of being able to acquire freeholds.
From a lifestyle point of view the UK is also attractive from a language and education option too. It's also worth noting that those leaving are unlikely to trigger a market sell off on Hong Kong property.
For the UK the potential buyers are seem as helping otherwise slow markets but because the interest will be across the whole of the UK again the impact is unlikely to be significant.

LEX Hong Kong stocks: falling knives. Notes how the HSI still looks over valued. Thinks that unlike the mainland markets Hong Kong cannot rely on Beijing’s support. It expects further downside. I would agree with much of what it is saying but Hong Kong will be supported by Beijing until such time as the mainland markets are fully open to International investors and the Rmb is fully convertible. Until then China needs Hong Kong for access to international money. Which is why Trumps threat to remove China’s access to the Swift system or restrict US funds from investing in Chinese equities is so powerful. Without access to USD investments China would be thrown into disarray.

Consulate closure deepens US-Sino hostility The risk of a new cold war has increased, fear some analysts, but others are less convinced. Some say China will retaliate and it has just been announced that China has ordered the US to close its Chengdu Consulate.
Others say the action as necessary to show China that its past and current actions are not acceptable as the deputy US secretary of state, told a Senate hearing on Wednesday; China had failed to embrace the rules-based international order. “The unfortunate trends we see in China make our actions all the more urgent.”
From China’s point of view they are finding it increasingly difficult to find things to retaliate with that don’t actually hurt China too. Equally making a big statement now could have unintended consequences after the US elections depending on who wins.
Today will be interesting as the Houston Consulate says that it intends to remain open saying that it has appealed against the move by the US….. but only after burning a lot of papers.
I think increasingly nations are becoming tired of China taking advantage of their openness and not reciprocating with access to China and also of claiming the benefit of this international norms that benefit China but not those that would have consequences for China.
If you want to play then you have to play by all the rule not just the ones that suit you.

Morgan Stanley reins in China interns over security fears. Chinese interns can’t remotely access the Morgan Stanley virtual networks. Interesting because the other large US banks are allowing their interns access. If it was about security laws and liabilities then surely all the banks would have the same approach.

Beware the effect on savings from new era of financial repression by Russell Napier
He has recently changed his viewing is now the option that there will be a new. Era of inflation. He thinks that holding as much gold as possible and as little government debt is the way forward. Equities that are doing well at the moment will not be able to maintain that performance as governments force life insurers and mutual funds to buy government debt at rated below the inflation rate. That means those investors will see their savings being eaten away by inflation. Worth a read. I listen recently to a talk he gave and it does make sense.

FT BIG READ. ECOMMERCE The struggle to deliver profits. Covid-19 has led to a surge in shoppers buying their groceries online. But the costs of running a delivery network are high, leaving supermarkets struggling to turn a profit from the increased demand.
Nice quote from Sainsbury’s chief executive Simon Roberts summed the situation up, saying Covid-19 was “moving sales out of our most profitable convenience channel and driving a huge step-up in online grocery participation, our least profitable channel”.
A good read which illustrates the difficulty of adapting store to online. Notes that Ocado does well because it didn’t have stores to start with. Some Chinese stores are starting with the delivery and working back which also sets to work.
The key points are that for the UK the move to on-line came quicker than anyone was expecting. It has establish infrastructure which isn’t ideal or easily adapted.
There are a number of different models but costs are high.

Financiers’ call for grants rather than loans is flawed. Worth reading because of the risks involved; namely that badly run companies would benefit better than well run companies; which not only unfair but also lowers the quality of business for all.
Nice quote '“Grants, not loans,” was the student slogan. Our campaign was doomed because we failed to understand that we would be the prime beneficiaries of our higher education, not society at large.'

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