Here's what happened in China's markets today (12/6)
1. China’s central bank acts modestly to keep banking system liquidity adequate through reverse repos.
The People’s Bank of China (PBoC) conducted RMB 240 billion worth of 7-day reverse repurchase (repo) agreements with commercial banks today at a rate of 1.8%. That was unchanged from the reverse repo the PBoC did yesterday worth RMB 210 billion. These are considered elevated levels of reverse repos based on historical transactions and indicates Beijing’s willingness to sustain the current policy of easing liquidity to help the economy. In October, loan growth in China clocked in at 10.9%, which was well below the long-term average growth of 15.3%. That’s a reflection of weak confidence in the private sector, possibly influenced by the ongoing bear market in real estate. $Global X China Financials ETF(CHIX)$
China’s energy sector reached a key milestone after it started commercial operations of the Shidaowan high-temperature gas-cooled reactor (HTGR) nuclear power plant. Gen 4 nuclear reactors were not expected to come online before 2040, but as one of the world’s leading nuclear power technology developers, China appears to have pole-vaulted ahead of the global nuclear power industry with this new power plant. This comes just two years after China became the first country in the world to demonstrate a 4th gen reactor. China has 25 reactors under construction as of November 2023, accounting for 41% of the world's total. $Cameco(CCJ)$ $Sprott Uranium Miners ETF(URNM)$ $Energy Fuels(UUUU)$ $Uranium(UEC)$
3. Foreign institutions continue to pile into Chinese government bonds in 2023.
Offshore institutions are recorded to have purchased a net of RMB 1 trillion in Chinese government bonds since the beginning of the year, with the amount in October alone exceeding RMB 200 billion. This figure is expected to reach RMB 250 billion in November, as the Federal Reserve is seen ending its rate hikes and Beijing goes all out to support its financial markets and real estate sector. The net inflows are a reflection of foreign institutions’ confidence that Beijing will be able to contain the risks stemming from several major developers defaulting on their financial obligations. Foreign institutions hold RMB 3.3 trillion ($460 billion) worth of Chinese bonds, which is a drop in the bucket compared with China’s $12 trillion onshore credit market. $KraneShares Bloomberg Barclays China Bond Inclusion Index ETF(KBND)$
4. Lithium carbonate prices in China hit a new low in the Guangzhou Futures Exchange (GFEX).
The price of the key raw material used in manufacturing electric vehicle batteries, lithium carbonate, continue dropping in China on oversupply concerns. That’s despite having the world’s largest and fastest growing major EV market, where penetration is expected to reach 50% by 2025 or sooner. In response to surging EV demand, lithium producers globally boosted production by 21% to 130,000 metric tons last year. This year, production is expected to grow by an even faster 31.3% to 170,800 metric tons, as major new mines come online. With lithium carbonate prices now more than 80% below their 2022 highs, a bottom may be coming soon. $Lithium Americas Corp.(LAC)$ $Global X Lithium & Battery Tech ETF(LIT)$
5. Chinese EV startup Nio, Inc. reveals plans to spin off its battery manufacturing unit.
China’s largest producer of electric vehicles in the RMB 300,000 ($42,000) and higher category, Nio, announced it plans to spin off its EV battery manufacturing unit. The move comes a day after the company announced 3rd quarter results and decision to purchase the two manufacturing plants of its vehicle partner JAC. Spinning off the battery unit could be an effort to raise cash, trim non-core business losses, and focus on vehicle manufacturing once the JAC acquisition is finalized. Nio had previously envisioned manufacturing its own battery packs by 2024, however had to postpone this timeline due to economic considerations. They currently procure batteries from Chinese manufacturer WeLion. $NIO Inc.(NIO)$ $NIO Inc.(NIO.SI)$ $NIO-SW(09866)$ $XPeng Inc.(XPEV)$ $XPENG-W(09868)$ $Li Auto(LI)$ $LI AUTO-W(02015)$ $BYD Co., Ltd.(BYDDF)$ $BYD COMPANY(01211)$ $Tesla Motors(TSLA)$
https://twitter.com/BrianTycangco/status/1732381839371952619
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