This Chinese skeptic concedes tech stocks are cheap as chips, but warns against long-term holding

It seems traders think there is some good business among Chinese internet stocks.

PDD Pinduoduo,
+ 22.25%
jumped 22% on Tuesday as the Chinese e-commerce group pledged $ 1.5 billion in future profits to charity after Tencent made a large donation as Chinese President Xi Jinping cracked down on the business.

It’s not the only Chinese title that has jumped. JD,
+ 14.44%
jumped 14%, after reporting higher-than-expected income and securing an investment from star fund manager Cathie Wood. Tencent Music Entertainment TME,
+ 12.75%
added 13%.

George Magnus, the former chief economist at UBS and author of Red Flags: Why Xi Jinping’s China is in Jeopardy, admits that traders may have an interest in increasing these stocks.

“On the average reversion criteria, these technologies and associated actions are now as cheap as chips,” he told MarketWatch. But, he says, they should be for trading only, not a retirement or long-term portfolio. “While many of these companies are politically and regulatory literally, they shouldn’t be traded as growth stocks, in my opinion. The change in valuation should be permanent, ”he says.

Magnus is the author of an article on Xi’s crackdown for the London-based SOAS China Institute, in which he said that “everything about Xi’s China suggests a lust for control and Leninist discipline that is not not compatible with good economic results ”. He agrees that the Chinese authorities have reasons to fight inequality, but says that to do so effectively, China will have to do more than crack down on the super rich.

“The government should ensure that tax revenue collected goes directly to other less well-off households, including migrant workers in urban areas without urban registration, and not into government coffers or other low-income projects. value for the majority of citizens. Otherwise, it would not be possible for low-income households to consume more and save less, and thus become more geographically and professionally mobile, ”explains Magnus.

The rise of the odd-job economy is even more pronounced in China than in the United States, where informal employment accounts for nearly 60% of jobs. This low-wage and precarious employment situation makes the issue of inequalities in China so important, he says, especially since its social safety net is not generous.

The buzz

The People’s Bank of China has pledged to stabilize the supply of credit and increase the amount of money for small businesses, and the country’s third largest container port has reopened after it was closed for COVID-19.

The Democratic-led House on Tuesday brought forward a key measure related to President Joe Biden’s big spending plans, spreading a rebellion of the centrists. Biden is due to meet with top tech executives, including Apple’s AAPL,
Tim Cook, MSFT at Microsoft,
Satya Nadella and AMZN from Amazon,
+ 1.22%
Andy Jassy, ​​to discuss cybersecurity on Wednesday.

Data on durable goods orders should be published.

After the close, enterprise software giant CRM,
and the database software company Snowflake SNOW,
report the results. Urban Outfitters URBN Retailer,
+ 5.44%
On Tuesday night, better-than-expected profits were announced, as was tax preparation software maker Intuit INTU,
+ 0.28%.

In Germany, the Social Democratic Party is now voting in front of the CDU / CSU bloc ahead of the September 26 elections. A measure of German business confidence fell for a second month.

The steps

Looks like a pre-Jackson Hole lull has kicked in, with ES00 equity futures,

constant. The 10-year Treasury yield TMUBMUSD10Y,
climbed to 1.30%.

Random readings

How anonymous English artist Banksy manages to avoid detection.

It turns out that cotton tote bags aren’t good for the environment.

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