In better news, China just keeps getting better with bullish announcements all week. I’ll touch on them briefly here and the ramifications of them but we do discuss these in detail with David Scutt of StoneX on the weekly podcast. Link here and please do subscribe.
Re China, please observe this lovely chart of Iron Ore this morning posted by Mr Scutt on the Twitter…
Absolute rocket under it at the moment. If you can get into some kid of iron ore play at good valuations then absolutely give it consideration. For any further information please let me know.
In short, starting on Tuesday there’s waves of stimulus going into Chinese banks, mortgage rates lower, cuts to the reserve requirement ratio (the amount of cash that banks must hold at reserves).
It also lowered its seven-day reverse repurchase agreements effective from Friday as well and pledged to deploy necessary fiscal spending to meet 2024 economic growth targets of around 5%. It plans to issue 2 trillion yuan or 285 US billion of special sovereign bonds as part of a fresh fiscal stimulus program.
News out today that Shanghai and Shenzhen will lift key home purchaser curbs.
It’s a continued, coordinated effort to get things moving again in China and stocks are loving it. Stocks are also loving that there’s stimulus included for the buying of stocks by institutions too.
It’s all bullish.
And stocks are absolutely being bought. This from the Goldman Sachs “The Markets” podcast with Equities Sales Trader Mike Washington.
“From a flow perspective this week, I would note that on Tuesday when we got the first announcements around stimulus out of China, our prime brokerage books show Chinese equities collectively saw their largest one day buying since March of 2021 and the second largest buying in the last 10 years. This was almost exclusively driven by long buying, not just short covering. For the last two years, I would say investors have shied away from owning US stocks that have heavy China exposure. But we did see real long buying this week of many of the single-name stocks that I follow that have that heavy China exposure.”
It doesn’t get any clearer than that. There’s 1000 ways to get involved. Something safer than commodities would be an Emerging Markets ETF. Usually, I’ve been all about investing in Emerging Markets by leaving China to the side. Now I’m happy to buy the lot. Reach out for more ideas like this.
North Carolina Under Water
We are witnessing a real tragedy unfolding in the States and I won’t go into it but pay attention to the flood waters. The fragility of global supply chains and our dependence on critical minerals is being exposed once again.
There is a mine in Western NC called Spruce Pine and it is the only place in the world producing ultra high purity quartz.
That quartz makes something called Czochralski crucibles, which are used to make monocrystalline silicon wafers which means no semiconductor chips. It’s a bit dumbed down but everything stops spinning if Spruce Pine gets knocked out.
Source: Ethan Mollick - X
So some movements in semis could be expected.
Nuclear is the way forward
Firstly this, which is bullish as heck for uranium…
Source: Financial Times
And then this, where Apple has quietly snuck in nuclear in the definition of clean energy.
Source: Matt Loszak - X
Keep an eye on some of those uranium names we keep close.
Finally, palladium is set to run this week with more Russian bans of essential materials on the horizon.
We like Chalice mining for exposure to that commodity. CHN is listed here.
Source: USGS "Platinum-Group Metals", January 2022
That’s all for today on markets. Happy to welcome Chris Fawcett to the Wealth team and also we carry on the tradition of shirt presentations to team members after they;’ve settled in.
Andrew Murphy who heads up our Institutional Desk presented with the BPC #39 strip.
Welcome onboard,
All the best and stay safe, go iron ore!
James