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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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