Asia links 5 Nov 2020: Biden's impact on Asian stocks and geopolitics, China stockpiling commodities
Insight #1 – A Biden presidency is bullish for Asian stocks
Asian stocks reacted positively to Biden’s clear lead in the US presidential election. Potential future US Treasury Secretary Lael Brainard has expressed dovish views that signal yield curve control and financial repression. Interest rates are likely to stay lower for longer. We are thus likely to see waves of carry trades from the US Dollar into higher yielding emerging market assets. In addition, Biden is likely to deal with China in a much less confrontative way. Whether tariffs will be lowered remains to be seen. But the prospects of China’s manufacturing economy is much stronger today than they were under the Trump administration.
Insight #2 – Biden winning the presidency could be disruptive to Asian geopolitics
This article from Taipei Times shows how Biden is likely to react in a conflict between the People’s Liberation Army and the Taiwanese Armed Forces. He would inform the US Congress of any threat but probably not take immediate action himself. People around Biden have suggested that the US should end its involvement in “China’s civil war”. Biden will never push for US troops to be stationed in Taiwan. He will cancel the recent US-Taiwan arms deal. And it does not seem likely that US forces would intervene in a conflict. That will make Taiwan - and potentially other nations such as the Philippines - more vulnerable over the next four years.
Insight #3 – China is stockpiling natural resources but we don’t know why
China is stockpiling a range of raw materials but we don’t know why. Warren Pies reported on 27 October that oil transported through the Eastern Siberian-Pacific Ocean pipeline started trading at a >$2 premium to Brent, suggesting China has been in a rush to build up its strategic petroleum reserve. But crude oil is just one example. In September, an SOE advised the government to buy 2,000 tons of cobalt. China has also kept its stockpiles of grains high. Wheat and rice stocks have also risen. Beijing has obviously been preparing for a potential decoupling from world commodity markets, either due to the pandemic, potential sanctions or even worse - a war.
Asian stock ideas
New website DelloiteFraud also accuses GSX Techedu of fraud
The Generalist on Ant Group
Singaporean blog Profit Hunting shows how he has structured his dividend focused portfolio
Redditor InfiniteValueTrap: “What we found after analyzing Hollysys Automation for more than 6 months”
Value Pendulum on cinema operator IMAX Corporation’s quick recovery from COVID-19
Articles worth reading
Information on how Biden is likely to deal with Taiwan
Ant Financial IPO halted, government plans a big crackdown with lending curbs
Net Interest Substack discusses China’s proposed central bank currency
Variant Perception: The Next Commodity Supercycle?
Energy expert Warren Pies’s first report at his new firm 3Fourteen Research
Sentimentrader: Energy is the worst sector, ever
Vitaliy Katsenelson on defense stocks globally
Mule’s first primer on semicaps
FT: Asia US Dollar debt issuance at a record level
South China Morning Post summarizing China’s new 14th five-year plan
HK Exchange finally approves secondary listings for companies with corporate weighted voting rights
How China uses surveillance technology to keep its citizens in check
Malaysia’s former prime minister Mahathir: “Muslims ‘have right to kill millions of French’
Podcasts and videos
Bloomberg Odd Lots interviewing Steve Clapham on Chinese Internet stocks
The Little Red Podcast on Xi Jinping’s relationship with his father
Wall Street Journal on the timeline of Malaysia’s 1MDB scandal
Chart of the week – “Dr Copper” signals an improvement to world trade
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