Insight #1 – The new anti-trust law signals a power struggle between the CCP and Big Tech

A few years ago, Xi Jinping called tech entrepreneurs to Beijing to a briefing. They were told that from that point onwards they need to serve the party and nobody else. Since then, tech companies have gradually begun to toe the party line. Several of them have co-operated in building out “city services” for the government, an euphemism for surveillance networks. And in a strange series of coincidences, the founders of JD, Alibaba and Pinduoduo all stepped down - one after another. There were reports that Ant Financial had been reluctant to share its data with the government for use in its new social credit system. But this week, the government finally struck back. With a new anti-trust law, the tech sector will be in the crosshairs for years to come. Tech companies will now have to seek approval to operate VIEs. They will have to share their data. They will also have to stop engaging in anti-competitive behaviour such as subsidizing services below cost. I think could be an “Ida Tarbell” moment for the industry, with tech companies’ power diminished and potentially broken up - just like Standard Oil was broken up in 1911.

Insight #2 – Hong Kong is well on its way to become a mainland Chinese city

Beijing just issued a resolution that basically prohibits any Hong Kong lawmaker from supporting the pro-Democracy movement. The language in the resolution is vague. But it’s clear that any politician questioning Beijing rule will be thrown out of the top legislative body. Following the announcement, 15 opposition lawmakers resigned on the spot. So even if there is an election in Hong Kong next year, there will be no opposition to vote for. This is all part of a longer-term plan to integrate Hong Kong into the mainland. I suppose it shouldn’t come as a surprise to anyone. Given the likely restrictions on Hong Kong’s judiciary, Internet, freedom of speech and education system, Hong Kong will be a much less pleasant city to live in.

Insight #3 – The HK-Singapore travel bubble is a step in the right direction, but a very small one

Singapore and Hong Kong finally announced one of the world’s first travel bubble, due to start on 22 November. It is not a major deal. First, only 200 people will be allowed to travel per day in either direction. Second, individuals will need to take up to three tests for each round-trip. Third, the tests are unpleasant - involving inserting a decimetre long swab into your nose. Fourth, the tests will cost well over US$200 per round-trip. Fifth, if there is any outbreak of COVID-19, the travel bubble will be suspended for two weeks, so make sure you buy tickets that can be rebooked.

Asian stock ideas

• New long idea on “Asian Century Stocks”: social media giant Weibo

• Pembridgecap on how Nintendo is entering into the cloud era

• Value Pendulum on Japan Tobacco and China Telecom

• Aikya on Indian FMCG stock Marico

• India’s 2Point2 Capital’s quarterly letter mentioning CARE Ratings

Articles worth reading

• China’s new tech anti-trust regulation: Bloomberg’s take + CXJ Research’s take

• Sentimentrader: optimism for Asian stocks are the highest in months (paywall)

• First Eagle Investments on China’s economy

• Arisaid on the Chinese corporate governance

• DoubleLine Capital on the danger of central bank digital currencies

• S&P Global on the recent boom in undiscounted bankers’ acceptances in China

• The Chinese Communist Party expert Richard McGregor’s NYT op-ed on Xi Jinping

• Why Chinese tech giants struggle to make good B2B software

• Rui Ma on why Ant Financial’s IPO was halted

• 15 Asian nations including China sign the RCEP trade deal

• Thomas Shugart on China’s investments in its navy

• Bridgewater’s Ray Dalio says that not investing in China is very risky

• Chinese coast guard now allowed to fire on foreign vessels across the South China Sea

Podcasts and videos

• Australian short-seller John Hempton on tobacco stocks and custodian banks

• Niall Ferguson on the new “cold war” between the US and China

Chart of the week – China’s export market share has increased throughout the pandemic

Source: @SoberLook

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