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Today's big stories

China’s lockdowns are continuing to put a dent in the country’s economy
One asset is particularly hated by investors right now, but that might give you an opportunity to take a contrarian stance – Read Now
Saudi Aramco posted its highest quarterly profit since listing on the stock market

China Syndrome

What’s Going On Here?

Yet more data out on Monday showed the toll China’s lockdowns are taking on its economy.

What Does This Mean?

China’s efforts to keep Covid at bay have kept major cities like Shanghai locked down for weeks, and an influx of data on Monday confirmed how bad things have become. Retail sales fell around 11% in April from the same time last year – the second-straight month they’ve fallen, and almost double the dropoff analysts were expecting. In fact, only sales of medicine, fuel, and food and drink grew from April 2021. Industrial production was down too, dipping for the first time since March 2020. And since the country’s companies suddenly didn’t need as many workers, the unemployment rate climbed to 6.1% – and unemployment among young people hit a new record.

Why Should I Care?

The bigger picture: Is China finally reopening?
Some economists now reckon the Chinese economy will grow just 0.5% this quarter, but the more hopeful of them think April’s data will mark the worst of the slump. After all, the government said it’s going to let some companies reopen this week, and aims to be back to business as usual by the middle of June. The country’s central bank also cut mortgage rates for first-time homebuyers over the weekend, and optimists reckon there could be more measures to boost the economy on the way.

For markets: Investors welcome their prodigal son.
The prospect that things might only be getting better for the country will give investors even more confidence, after having already sent the Chinese stock market up 2% last week. It’s already working wonders on the professionals: analysts at JPMorgan upgraded their ratings on a bunch of Chinese tech companies – including Alibaba and Tencent – on Monday (tweet this).

You might also like: How to buy China’s dip.

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Analyst Take

You Might Learn To Love The World’s Most Hated Investment

Stéphane Renevier, Analyst

When we say “hated investment”, we mean it.

Like, right now, investors are crossing the road to avoid them. They’re talking about them behind their backs. They’re putting their pictures in their Mean Girls-esque Burn Books.

No surprises there: the combination of high inflation and rising interest rates make this environment a nightmare for the asset.

But here’s the thing: when you see everyone and their grandma bearish on one particular asset, you’re probably onto an interesting contrarian trade.

So that’s today’s Insight: why the world’s most hated investment might actually be a better trade than you think.

Read or listen to the Insight here

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Rigged System

What’s Going On Here?

Saudi Aramco, the world’s biggest oil company, reported booming quarterly profits over the weekend.

What Does This Mean?

Aramco had a couple of things working in its favor last quarter. For one, the war in Ukraine limited the supply of oil and pushed its price to a 14-year high. And for another, OPEC+ – a group of oil-producing countries and their allies – continued to unwind the production caps it introduced during the pandemic. That helped drive the company’s profit 82% higher than the same time last year to $40 billion – its highest quarterly profit since its arrival on the stock market.

Aramco’s not done yet: the company is confident that demand for oil and gas will be strong for decades, even as its international rivals make a decisive shift toward renewables. That might be why it said it’s planning to spend billions on ramping up its oil production, as well as on boosting its natural gas production by 50% by the end of the decade.

Why Should I Care?

For markets: An iPhone won’t pick the kids up from school.
Aramco’s stock is now up over 30% so far this year, while Apple’s has fallen 19% on the back of a tech stock rout. That means it’s now overtaken the tech giant to become the world’s most valuable company for the first time since 2020. That stands to reason: one of the things working heavily in Aramco’s favor – rising prices – is working against Apple, whose little luxuries are the first things to go when it costs a fortune to fill your car.

The bigger picture: Saudi Arabia gets a caffeine kick.
The Saudi government – which owns the majority of Aramco’s stock – will be pleased to hear that the company is on track to return $19 billion to its shareholders this quarter. The country is aiming to use some of the extra cash it makes to invest in new exports that will help reduce its reliance on oil. Coffee beans – you’re up.

You might also like: Could oil really hit $200?

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💬 Quote of the day

“Outside of a dog, a book is man’s best friend. Inside of a dog, it’s too dark to read.”

– Groucho Marx (an American comedian, actor, and writer)

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🎉 Coming Up This Week

All events are in UK time.

🌎 How To Invest In The Global Chip Shortage: 5pm, May 17th
🏡 How To Buy A Digital Condo: 12pm, May 18th
🚗 The Leaders Of The EV Revolution: 5pm, May 19th
♻️ How To Pick Winning ESG Stocks: 5pm, May 20th
🧐 A Guide To Investing In Derivatives: 6pm, May 23rd
📈 How To Invest Thematically: 12pm, May 24th
🎨 How To Build And Manage A Balanced NFT Portfolio: 5pm, May 24th

💪 And Then After That…

⚡️ How To Invest In The EV Revolution: 1pm, May 25th
😎 The Blockchain And Real Estate Revolution: 6pm, May 25th
📈 The Future Of The M&A Market: 5pm, May 26th
📱 How To Hedge Against The Chip Shortage: 1pm, May 30th
📉 A Guide to Automated Crypto Trading: 6pm, May 30th
♻️ How Green Bonds Can Fuel A Sustainable Future: 1pm, May 31st
🏆 Peer-To-Peer Vs. Crypto Exchanges: 5pm, May 31st
🎉 De-Mystifying Refi: 5pm, June 1st
🌿 How To Get The Green With Cannabis ETFs: 12pm, June 9th
🎮 How To Invest In Video Games: 5pm, June 9th
🌍 How And Where To Invest In Africa: 5pm, June 14th
🚀 Finimize NFT Fest: 12pm, 15th June
🤗 Investing In Metaverse Opportunities: 5pm, 23rd June
🏘 How To Diversify Your Crypto Investments Through Commercial Real Estate: 6pm, August 3rd
🏡 Tokenizing Real Estate: 6pm, September 13th

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