1. #China’s official manufacturing and non-manufacturing Purchasing Managers Index (PMI) came out today with mixed results.
The bad news is that the country’s non-manufacturing #PMI (i.e. services sector) declined from 51.5 in July to 51.0 in August. That would indicate a deceleration in expansion in the very important services sector, which had been hoisting economic growth in the face of a slowing property and export market. It was also below the 51.2 figure the market had been expecting. However, the manufacturing PMI for August came in at 49.7, higher than the 49.3 figure the previous month and better than the 49.2 the market was expecting. This suggests that industrial activity is picking up, possibly to do with a return of export orders in preparation for the holiday season. With Beijing acting more aggressively in recent days to stimulate the economy through interest rate cuts and lower bank reserve requirements, September will be a key month to watch. $KraneShares Bosera MSCI China A 50 Connect Index ETF(KBA)$ $iShares MSCI China ETF(MCHI)$ $iShares China Large-Cap ETF(FXI)$
2. Chinese artificial intelligence leader, Baidu, announced that its AI chatbot “Ernie Bot” will be released to the public today. Baidu_Inc first introduced its answer to #ChatGPT in March but got criticized for a prerecorded demonstration of #ErnieBot’s AI features. But since then, the company has fine-tuned its product and upgraded its capabilities and speed several times to reach a level management deems comparable - even superior - to ChatGPT. Upon its release today, Ernie BOT became the most popular download on Apple’s China #AppStore. Also today, Baidu #AI Cloud made fully available Ernie BOT services to enterprise clients, which will allow these clients to develop, deploy, and leverage their own large model AI services. $Baidu(BIDU)$ $BIDU-SW(09888)$
3. Hong Kong’s retail sales grew by a slower-than-expected 16.5% in July.
The market was expecting a growth of 18% compared to the same month a year ago given the full reopening of the city to international and local (Mainland China) travelers. Online #retailsales grew by just 1.4% and accounted for a mere 6.8% of total retail sales. It shows that #HongKong’s retail market is really driven by physical purchases, as it remains a prime tourist destination for short- and long-term travelers looking to take advantage of the city’s tax-free shopping industry. Sales in department stores grew 25.6%, while those of jewelry, watches, and other valuable gifts jumped 19.8%. Nearly all segments of retail shopping posted good growth as tourism returned to Hong Kong, which was offset by weak growth or declines in sales of cars, fuels, and furniture. $iShares MSCI Hong Kong ETF(EWH)$ $Chow Tai Fook Jewellery Group Limited(CJEWY)$ $Luk Fook Holdings International Ltd(LKFLF)$ $Chow Sang Sang Holdings International Ltd.(CHOWF)$
4. #CountryGarden reported a record loss for the first 6 months of 2023.
The heavily indebted and troubled developer, once one of China’s largest #property firms, posted a whopping $6.7 billion loss during the period compared with an $83 million profit the previous year. That despite realizing a 39.4% increase in revenue to $31 billion. This was due to the company enacting measures to ensure the timely delivery of projects at the expense of profitability. It resulted in a $5.5 billion writedown of properties either under development or completed and held for sale. Moreover, the company’s cash position dropped $3.7 billion to $13.8 billion, while still carrying $35.3 billion in interest-bearing obligations. Country Garden warned that if conditions worsen, it may default on its debt. That’s going to slam the markets once again should it occur, which is why Beijing is under a lot of pressure to quickly restore confidence among homebuyers. $Global X MSCI China Real Estate ETF(CHIR)$ $Country Garden Holdings Co., Ltd.(CTRYF)$ $China Resources Land Ltd.(CRBJF)$
5. Sales of insurance products in Hong Kong are back to pre-pandemic levels thanks to a surge in buying from Mainland Chinese visitors.
These products, often life #insurance bundled with investments (i.e. variable life insurance products), have become more attractive to Chinese buyers as deposit rates back at home continue to fall. For instance, you can get a one-year time deposit in Hong Kong at 3.5% to 4.0% rate of interest, while the same instrument in China yields 2.5% or less. Plus, interest income is tax-free in Hong Kong. The surge in insurance product sales is also a sign that Chinese travelers are keen on seeking coverage outside of the mainland in order to diversify their risk, given Hong Kong’s relatively more stable financial system. This could somewhat complicate Beijing’s efforts to boost liquidity in China with lower rates, as locals could take some of their money to earn higher yields across the border. $Manulife(MFC)$ $Sun Life(SLF)$ $AIA Group, Ltd.(AAGIY)$
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