Finimize - 🇨🇳 Here’s why China pivoted

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Today's big stories

China announced plans to scrap some Covid restrictions, after the economic fallout became too much to bear
Bill Ackman is re-upping an old bet – Read Now
Mining giant Vale announced plans to break out its base metals business

China Takes A Chill Pill

What’s Going On Here?

Data out on Wednesday showed that China’s economy is flailing, and it seems like the government has finally taken note.

What Does This Mean?

China's known as the world's factory, but that’s looking a little shaky due to the shockwaves set in motion by the country’s strict Covid rules. See, exports took a nosedive last month, contracting 8.7% compared to the same time last year – over double what economists were expecting. And imports didn’t fare any better, falling 10.6%, the biggest drop in nearly three years. That left China's trade surplus – the difference between its exports and imports – 2.5% lower than last year. And that seems to have hit the government where it hurt: it decided to relax restrictions on Wednesday, meaning people can now quarantine at home for the first time, and folks won't have to show negative Covid results to enter most public places.

Why Should I Care?

The bigger picture: Domestic hopes.
The Chinese government is now prioritizing the economy over its Covid battle, and that’s no surprise. After all, the global economy is likely to look even feebler next year, so China's going to have to pin any hopes of growth on domestic demand – and that'll hardly increase if the country’s still locked down. But there won't be any big changes overnight: analysts still think data will be weak for the next few months, as the country goes through a "bumpy reopening".

Zooming out: Black gold’s bleak prospects.
China's weak export performance was partly down to its own Covid-related supply issues, sure, but it's also a sign of the times: after all, global demand for goods is sliding as the world economy cools down. That’s not great news for oil, which might explain why the liquid gold's price fell to its lowest level in a year when the news broke.

You might also like: With less to drag on China’s economy, here’s where to look for opportunities.

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Analyst Take

Bill Ackman Has Made This Bet Before. He’s Making It Again.

By Luke Suddards, Analyst

Bill Ackman has made this wager before, and lost.

But the Pershing Square founder, once dubbed “Baby Buffett” by Forbes, is making it again – betting that the Hong Kong dollar is going to snap out of its longstanding peg with the US dollar.

He says it’s “only a matter of time before it breaks,” and if it does, it could pay off nicely for him.

That’s today’s Insight: why Bill Ackman’s betting that the Hong Kong dollar’s peg will break.

Read or listen to the Insight here

Bezos spilled the beans on Amazon

Bezos said he believes that “Amazon will be disrupted one day”.

And he put his money – or at least his stocks – where his mouth is, dumping billions of dollars’ worth of Amazon stock.

He’s not just sitting on cash, either: Bezos is reinvesting his money into a fledgling technology that he thinks will “improve every business”.

That big bet is all over a tiny, manufactured component – something that Amazon doesn’t even make in-house.

Oh, there’s nothing like a good cliffhanger. Enjoy the suspense, then find out what Bezos is backing with The Motley Fool.

Find Out More

Leaving The Vale Of Tears

What’s Going On Here?

Brazilian mining giant Vale announced plans on Wednesday to break out its base metals business.

What Does This Mean?

Vale makes the lion’s share of its money from iron ore mines in Brazil, but it's also got a growing copper and nickel business. And as the world ditches fossil fuels, EV batteries are making demand for those base metals skyrocket – so you’d think the company would be at the top of investors’ Christmas list right now. But the world isn't biting: see, the iron ore business isn't particularly hot, and Vale's deadly disasters haven't won the firm any admirers. That might be why its stock is trading at a price-to-earnings ratio about half the average figure in the space. But now Vale is taking the bull by the horns, announcing plans to separate out its base metals business next year and bring EV experts on board, in a bid to attract more investment to the segment.

Why Should I Care?

Zooming in: Ambition aplenty.
Vale isn't ruling out an IPO in the future, but for now it thinks this move could give it access to around $20 billion in base metal investments. Plus, it’s selling 10% of the new entity to a "strategic partner" next year, which should bring in another nice chunk of cash. And Vale might need it: it’s aiming to triple its copper production by 2030 and boost nickel by around 50% as part of its plan to become a major supplier in the EV market.

The bigger picture: Get hustling.
It looks like the mining industry has a tough time ahead. Even if it gets the investment it needs, it'll still have to hustle to meet demand. After all, the International Energy Agency is saying we need 50 new lithium projects, 60 nickel projects, and 17 cobalt projects by 2030 – a tall order for an industry that usually takes 15 years to get a project up and running.

You might also like: Investing in the electric vehicles ecosystem.

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💬 Quote of the day

“I believe in getting into hot water; it keeps you clean.”

– G. K. Chesterton (an English critic and author)

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About that cliffhanger…

If you didn’t click the link up there, you’re probably still curious about Bezos’s little investment.

Well, he’s in good company: Mark Cuban said on record that the tech will create the world’s first trillionaire, and Elon Musk is putting almost $1 billion behind it.

Even world-famous investor Warren Buffett has called it “enormously disruptive”, and said it could have a “hugely beneficial social effect”.

Come on, surely that’s done the trick.

Discover what technology has the billionaires all riled up.

Check Out The Motley Fool

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🌍 Finimize Live

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All events in UK time.

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👀 And After That…

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