JPMorgan’s Kolanovic identifies when to restart investing in ravaged asset class
Stock futures indicate a rebound for Tuesday, as investors push back concerns about the rapidly spreading delta variant of COVID-19, for now.
Elsewhere, fears of regulatory repression from China have once again erupted, with the lucrative gaming industry a potential target this time around (see below), and Tencent being hit hard.
Investors, who have long been asked to diversify their portfolios, may feel burnt these days by exposure to some hard-hit U.S.-listed Chinese stocks – the Invesco Golden Dragon China ETF PGJ,
is down about 24% so far this year.
Our call of the day of JPMorgan says investors should be concerned about Beijing’s regulatory measures spillover to other sectors or emerging markets. China “will stop before the changes that shock economic growth,” said a team led by chief global markets strategist Marko Kolanovic.
“We view the risk of further regulatory changes in China as a local issue rather than a global one. Given the substantial correction in the affected market segments, this risk seems to be already taken into account and could subside from here on out, and in our view it poses little threat to our overall risk position ”, a Kolanovic said in an August 2 note.
Regulatory risk outside of China, “headwinds in emerging markets appear to be picking up as growth, earnings and vaccination differentials relative to [developed markets] should converge, ”he said. The team is sticking to an overweight position in emerging market equities, as “Chinese equity valuations in affected sectors are now valued at a substantial discount to history.”
Former Robeco portfolio manager Jeroen Blokland, founder and head of research at True Insights, who begs to differ, said investors now need a “higher risk premium on Chinese stocks.”
“Government interference is not just bad news for Chinese stocks. China has a weight of around 40% in the MSCI Emerging Markets Index, which is down more than 12% since the February peak and wiped out all of this year’s gains, ”Blokland said in a recent article. on LinkedIn.
It is underweight emerging markets relative to developed markets, citing an already unfavorable outlook due to less fiscal stimulus, further tightening of the region’s central banks, a stronger US dollar and slow deployment of vaccines.
More wins and game over (maybe) in China
Gaming stocks in China, including Tencent 700,
NetEase 9999,
NTES,
and XD 2400,
were hit hard after an article in a state-run media outlet likened the industry to “spiritual opium” for teenagers. Tencent has already announced concessions for underage players.
Alibaba BABA,
shares fall after the Chinese multinational tech group beat earnings expectations and stepped up its buyout program, although sales were lower.
Shares of video game maker Take-Two Interactive TTWO,
are down after lower than expected guidance. Rival Activision Blizzard ATVI,
which has been criticized for an allegedly toxic work environment, is ahead of its expected results after the close.
Read: The gaming industry faces a difficult transition
DuPont de Nemours DD Specialty Materials and Chemicals Group,
is up after beaten earnings and sales and a boosted outlook. Manufacturer of household items Clorox CLX,
gets beaten up over weak results and lowered prospects. Caesars Entertainment CZR Casino and Hotel Group Results,
and the cloud solutions company Akamai Technologies AKAM,
are due later.
In business news, beverage giant PepsiCo PEP,
will sell juice brands including Tropicana and Naked in North America and Europe for $ 3.3 billion to PAI Partners. And the chip supplier Marvell Technology MRVL,
buys software group Innovium in a stock transaction valued at $ 1.1 billion. Actions of Translate Bio TBIO,
are booming after the French health group Sanofi SNY,
SAN,
announced a $ 3.2 billion deal to purchase the mRNA therapeutic group.
On the data front, factory orders and auto sales are ahead.
Louisiana and San Francisco have become the latest to reintroduce mask warrants on the rapidly spreading delta strain of COVID-19. And the 11 million people in China’s Wuhan province, the epicenter of the original outbreak, will be tested amid a wave of epidemics.
The steps
YM00 equity futures contracts,
ES00,
NQ00,
are on the rise, with gains across Europe SXXP,
and a mixed day outside Asia. The 10-year Treasury yield TMUBMUSD10Y,
fluctuates at a little less than 1.2%. Bitcoin BTCUSD,
is approximately $ 38,500. U.S. Securities and Exchange Commission chairman Gary Gensler hinted he was looking for more oversight in a Bloomberg interview.
Read: What would the new crypto tax rules mean for investors and average miners
Random readings
Microsoft and other big companies have planted trees to offset carbon emissions. These forests are now burning.
It’s a bronze medal on balance for American gymnast Simone Biles.
The animal joy of penguins:
And cats:
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