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Today's big stories

Chinese stocks might be back in favor, with farm produce platform Pinduoduo leading the charge
Hedge funds have hit upon a simple way to profit from the resurgence in company dealmaking – Read Now
… and they’re turning away more investor money than ever too

Healthy Living

What’s Going On Here?

Pinduoduo reported strong quarterly earnings on Tuesday, as China’s “Amazon for farmfoods” proves that your greens really do help you grow up big and strong.

What Does This Mean?

Pinduoduo actually reported weaker-than-expected quarterly revenue, but its all-important profit came in ahead of forecasts. That’s probably not the only reason investors were so keen on its stock, either. See, China’s been cracking down on companies left and right, and it’s been causing all sorts of problems: the country’s stock market is down nearly 16% over the last six months. But this week investors seem to have spotted an opportunity to “buy the dip”, snatching up stocks of Chinese tech giants like Tencent, Alibaba, and JD.com on the cheap. And Pinduoduo was no different: investors pushed its share price up 15%.

Why Should I Care?

For markets: Cathie knows.
Investors might’ve chosen now to start piling into Chinese stocks because of Cathie Wood: the Ark Investment Management CEO – who shot to stardom when her company’s flagship fund climbed 150% last year – revealed on Monday that Ark had bought shares in JD.com. And given that the firm has otherwise been offloading Chinese tech stocks in the last few months, the swift turnaround might’ve convinced other investors to buy back in.

The bigger picture: The crackdown isn’t over till it’s over.
It can’t hurt that China’s recent announcements have started to put investors’ minds at rest, with the government implying that it’s just looking to improve compliance standards, rather than hobble the tech sector altogether. That’s not to say it’s about to go easy on the industry: Didi confirmed this week that it had suspended plans to expand into Europe until the ride-hailing giant agrees with regulators how to handle passenger data. Throw in a crackdown on ride-hailing fees that could halve Didi’s profit margin, and China’s companies might not be out of the woods just yet.

You might also like: Why Chinese stocks might come crashing right back down.

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2. Analyst Take

The Return Of Dealmaking Could Work Wonders

What’s Going On Here?

Like most things, mergers and acquisitions took a bruising last year.

But between cheap loans and dwindling trade tensions, dealmaking has been enjoying a comeback this year. It only looks set to go from strength to strength too.

That’s why hedge funds have taken a shine to one strategy in particular, which aims to take advantage as companies strike deals left, right, and center.

And since it’s an “absolute return” strategy, it tends to perform well in any market environment. Nice to know in case you’re feeling nervous about a sky-high stock market.

So that’s today’s Insight: how this hedge fund favorite works, and the simple way you can fold it into your own portfolio.

Read or listen to the Insight here

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