Can the 8-Day Winning Streak of US Stocks Continue?
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Here's what happened in China's markets last trade day (11/3):
1. Chinese EV manufacturer Nio trimmed staff count by 10% after denying rumors early on.
The company confirmed plans to reduce staff count to improve operational efficiency in light of growing losses. Projects that fail to contribute to the company’s financial performance within three years will also be shelved or cut. The company delivered 16,074 units in October, a 60% year-on-year increase, but still well below the 20,400 units delivered in July. Meanwhile, competitors like Li Auto and Xpeng have been steadily increasing their deliveries to record monthly amounts. Cutting costs would help Nio win over more investors, which see China’s EV price war as an opportunity to buy strong companies capable of successfully adapting to changing market environments.
2. A private industry reading of economic activity in China inched higher in October.
The Caixin/S&P Global services PMI for the month hit 50.4, up from 50.2 in September. A reading above 50 indicates expansion in the industry but the October reading still came in below an estimate of 51.2. This latest reading differs from the official services PMI reading, which includes large state-owned enterprises (SOEs), that showed a deterioration in non-manufacturing PMI of 50.6 compared with 51.7 the prior month. Both readings, while still in expansion territory, are noticeably getting weaker. This puts more onus on Beijing to become more proactive with regards to stimulating the economy, which hopefully includes cash vouchers that consumers can spend on parts of the economy that need help. Indeed, the National Development and Reform Commission (NDRC) announced that it will look for more ways to expand domestic consumption.
3. Apple will start development of the iPhone 17 in India according to a well-known analyst of the stock.
Ming-Chi Kuo, who’s know to be very accurate when it comes to developments at Apple, expects India to play an increasingly large role in the tech giant’s future production and development. Indeed, he expects development of the standard iPhone 17, which is two generations away, to begin in India in the 2nd half of next year. About 12% to 14% of iPhones would be produced in India this year, which will double next year. Apple sees India as its next growth driver given the huge population and growing disposable incomes, as investments pour in from Western nations looking to diversify their supply chains away from China.
4. Leveraged buying of Chinese stocks hit a 19-month high after valuations hit bargain levels.
After China’s main stock index dropped below pandemic lows last month, buyers started coming back into the market en mass. The combined value in margin trading in China’s stock exchanges hit $211.9 billion, the highest level since April 2022. When it hit that level last year, the main CSI 300 Index climbed 19% from its lows in less than 3 months. This time, Beijing recently mentioned that it was looking for ways to increase pension and insurance ownership in the domestic stock market. And last month, an arm of China’s sovereign wealth fund started buying up shares in the nation’s leading banks and some exchange-traded funds. The MSCI China Index was recently trading below 10X price-to-earnings despite the outlook for earnings the highest since 2018.
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