To The Moon

1. China’s benchmark stock market index expected to change to include more tech firms.

The compiler of the CSI 300 Index, China’s main stock index similar to the S&P 500, will be adding technology-related companies as part of its bi-annual review. The move is seen as an attempt to allow the main index to better reflect China’s changing economy, which is being driven by technological changes from chip manufacturing to AI and cloud computing. Chip industry leaders Cambricon Technologies, Empyrean Technology and Hygon Information Technology will be joining the CSI 300 Index starting December 2023. As it stands, the CSI 300 Index is heavily weighted in favor of financials and consumer staples, with information technology accounting for just 11.2% of the index. That contrasts with the S&P 500, which has information technology accounting for 28.1% of the index. $KraneShares Bosera MSCI China A 50 Connect Index ETF(KBA)$ $KraneShares CICC China Leaders 100 Index ETF(KFYP)$ $iShares China Large-Cap ETF(FXI)$ $iShares MSCI China ETF(MCHI)$

2. China’s financial sector faces renewed pressure from the scandal at a major shadow banking institution.

Zhongzhi Enterprise Group, one of China’s largest informal lenders with tens of billions of dollars in assets, shocked investors last week after it revealed a $36.4 billion hole in its liquidity. The company is already facing a criminal probe by authorities, as investors stand to lose as much as $56 billion based on one estimate. Zhongzhi had been a popular investment firm for wealthy Chinese who sought higher-than-normal returns from investments in real estate, stocks, bonds, and commodities. However, a prolonged decline in China’s real estate market, defaults by major developers, and a deepening bear market helped Zhongzhi’s leverage to overwhelm the company. Despite the size of the loss, it is not expected to lead to anything systemic. $Global X China Financials ETF(CHIX)$

3. Three major Chinese property developers are given the green light to launch their REITs.

China Resources Land, China Jinmao Holdings, and SCPG Holdings have been approved to spin off their consumption-related assets like shopping malls and department stores into real estate investment trusts (REITs). It’s a move that will allow the companies to raise more funds to expand, pay off debts, and complete existing projects. China Resources Land, for instance, expects to raise almost $1 billion through the listing of its consumption-related assets, while SCPG Holdings - a unit of China Vanke - is aiming to raise about half that amount. These spin-offs will join the 29 REITs already listed in China’s stock markets and provide a stable source of income for investors looking for alternatives to traditional yield-generating instruments. $China Resources Land Ltd.(CRBJF)$ $Global X MSCI China Real Estate ETF(CHIR)$

4. The Chinese yuan’s share in international payments declined in October.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) reported that the Chinese yuan saw its share of global payments fall to 3.6% in October from 3.71% in September. It was taken by some as a setback to Beijing’s hopes of the yuan becoming a dominant currency for settlement. However, given that October marked an unusually longer National Day Holiday, global transactions involving China last month likely took a breather as exporters went on vacation. China’s yuan still remains the fifth most popular currency on the planet.

5. China’s software and information technology sector has logged double-digit growth in sales and profits so far this year.

The Ministry of Industry and Information Technology (MIIT) announced that companies in China’s software and IT sectors experienced a 13.7% year-on-year increase in aggregate revenue to reach RMB 9.82 trillion for the first 10 months of 2023. Their profits grew by an almost similar 13.8% rate to hit RMB 1.14 trillion. This growth rate reflects the impact of new drivers for these industries, including the arrival of artificial intelligence, stronger demand for cloud computing services, and the increasing use of augmented reality in consumer devices and industrial applications. $CHINASOFT INT'L(00354)$ $KINGSOFT(03888)$

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