Although July CPI print was good (0.5% vs. forecast 0.3%), it’s still 1.5% away from a healthy 2%.
Core CPI (excl. food & energy) was 0.4% yoy.
Pork was helping CPI (+20.4% yoy in July), especially in the last 3 month – although it’s more due to limited supply, rather than strength in demand.
This is interesting: when I think of recent popular books in China written by or about US CEOs, it doesn’t seem to be good!
1/ Bob Iger’s book: The Ride of a Lifetime (一生的旅程 in mainland China)
2/ Books about Elon Musk
3/ Ray Dalio’s book: Principles (原则 in mainland China)
Concerns for those names.
1/ what’s the long-run prospect for gambling?
seems that the rich shall just go to Singapore etc.; too risky in Macau
mass market? why would the PRC gov wants gambling to grow?
for certain people (mainland gov officials etc.), it’s hard to go to Macau.
there is the licensing renewal issue every 10 years
2/ luxury shopping?
near-term most Chinese middle class families are still not in the mode of spending on luxury stuff.
shopping in tier-one cities like Shanghai, Beijing etc. is very convenient, although a bit pricer; if it’s in the $3k range, there’s not much difference (say 10% cheaper so saving $300 in shopping, but need to spend on flights & hotel)
the rich can go to Japan for shopping for weak Yen.
3/ food?
Portuguese egg tart? it’s very good indeed!
but you can try the KFC version of Portuguese egg tart in China; it’s about the same.
1/ A new anti-graft sub-committee was created for the financial sector within Communist Party’s Central Commission for Discipline Inspection.
Wang Weidong heads this committee/working group.
2/ CSRC vice chairman (similar to SEC in China)
Li Ming replaced Fang Xinghai.
3/ National Financial Regulatory Administration’s (NFRA) Shanghai branch head
Qi Xiang replaced Wang Junshou.
4/ National Financial Regulatory Administration’s (NFRA) Beijing branch head
Pei Guang replaced Yang Dongning.
On a separate note, in recent days it was announced that
Dong Guoqun, an executive vice president of Shanghai Stock Exchange was charged / investigated.
Chen Xiaopeng, CSRC Shenzhen branch former head was charged / investigated.
ByteDance has deep wallet: in 2023, it generated $40bn+ EBITDA.
To compare, Meta had over $60bn in EBITDA during the same period.
Meta will grow to $80bn ebitda in 2024, while capex guidance is as much as $40bn – half of its EBITDA.
Assuming half of Meta’s capex goes to data centers -> $20bn. And half of that goes to GPUs > $10bn; building out those data centers etc. will be $5-10bn for Meta.
ByteDance is also growing, say at a similar rate as Meta, so $50bn+ EBITDA in 2024. And assume ByteDance invests at a similar ratio as Meta, then it needs to spend ~$25bn in capex, or ~$12bn (or 60% of $20bn) for data centers – $6bn for GPUs, and $3-6bn to build out data centers etc.
Just using interest rate parity.
Before the interest hike cycle, in early 2022, 1 dollar = 115 yen.
To make it simple, assuming USD interest rate is 5% and JPY is 0%.
If you exchanged 115 Yen [$1 worth of JPY] for USD and held USD for for 3 years, you should get $1.05^3.
If you hold Yen for 3 years, you shall have 115 Yen. So 115 Yen = 1.05^3 USD
1 USD = 99 Yen…
Real life is not like that.
In the real world, people exchange JPY for USD to earn higher yield, which created demand in the short-term.
That portion of USD can be deployed in the equity market, buying S&P 500 for example.
In this case, if you borrow Yen, you pay very little cost of capital (near zero), and you earned S&P 500 return.
Meanwhile, as everyone wants to do this kind of trade, and due to this imbalanced demand in the short term, USD will appreciate against JPY << this means you earn extra return when exchanging USD back to JPY (1USD = ~160JPY a few weeks ago, vs the 115 exchange rate 3 years ago).
In sum, you get S&P 500 return, you get USD appreciation return (~40% in 3 years), and you pay only JPY interest rate.
This is crazy.
Why would this happen? against the interest rate parity?
The other side of the trade seems to be those who are bearing the low rate of return on JPY… The savers in Japan I shall say.
this is also happening again in China?
The victims are obvious.. savers who are only paid 2-3% in China.
Just look at BYD, the largest new energy carmaker (in terms of sales volume).
BEV used to be almost 30% higher than Hybrid in late 2023;
Now Hybrid is over 50% higher than BEV in Jul 2024.
—
Related: why not full BEV in the near future
A very random thought on two seemingly unrelated events.
Hamas political leader was killed in Iran.
Iran uses Huawei equipments I assume.
Huawei also needs foundry which uses ASML.
ASML and Japan’s equipment makers are exported to be exempted from a new drafted rule.
Is this weird that these two things are happening & making to the headlines this week?
Is there any possibility that someone from China “helped” US/Israel on Hamas and someone from the US “helped” China on semi control?
This is like a prisoner swap on another level.
The “Wanting it all” mentality is dangerous.
In Chinese, a trendy phrase is “既要又要还要”. It’s often used to describe/complain what regulators want in China in recent years.
Some examples:
China wants economic growth and security, and it wants high tech.
When local gov wants growth, it wants a market participant that can do the construction (industrial park, infra, city updates etc.), plus bringing in good businesses, and it doesn’t want to give monetary support.
In economics, there is this impossible trinity – fixed exchange rate, free flow of capital, and independent monetary policy. China wants it all – policy needs to be “independent” and not influenced by others; it doesn’t want RMB to depreciate fast which could be a “loss of face”; and it wants foreign flows/investments to support its “open” narrative.
It’s not just China. US has this “wanting it all” mentality in drug pricing and supply (insulin for example) – US wants innovation in biotech; it wants low drug price; it wants de-risked supply chains. Companies are put into a hard position and are challenged if decisions like this are made (Novo Nordisk to discontinue Levemir in the US).
—-
One doesn’t become a leader just by making requests; one leads with directions.
“Crypto capital of the planet”
“Fire Gary Gensler” (SEC Chair)
..
This does seem logical from Trump’s point of view –
if Trump know what words can be “most relevant” for a specific group of people, he will just say it and get their votes, as long as it’s not contradictory with Trump’s other statements.
plus, the more eye-catching the moment is, the more “free marketing” Trump gets.
oh, and the crypto industry must be super rich and can make big donations I suppose.
and this is something PRC opposes – good!
Btw, some people floated the idea of Trump picking Jamie Dimon as Treasury Secretary.. I guess Jamie Dimon and the world crypto are very hard to mingle.
Probably the JD Vance pick has already lowered the chance of Trump working with traditional Wall Street people?
but I don’t know if the JD Vance pick (for mass mfg workers I assume) and the rich crypto moguls can fit into one photo…
Maybe Trump is just leveraging crypto + Vance to get as many votes as possible first – that’s all Trump needs indeed. If that’s the case, policies from Trump at this stage are less about what should be done / what’s good for the long run, but just what’s popular. Maybe this has always been the case, for most campaigns…