Weekly Posts

China Last Week – Jonathan Krane Discusses Lunar New Year Events and Stock Trends

Hi! I’m Jonathan Krane, founder and CEO of KraneShares. Welcome to our China Last Week recap video. As Chinese New Year is approaching this weekend, people will be celebrating all around the world.

This year is the year of the Rat, which according to the Chinese zodiac, is an animal known for its intelligence and vitality. I would like to use this opportunity to wish everyone a happy and healthy New Year!   Markets will be closed next week in Mainland China in observance of the New Year/Spring Festival Holidays.

During the holiday, one way families celebrate is by drinking China’s traditional spirit, baijiu, and it is very popular. To put this into perspective, according to JD.com, the sale of baijiu over the Spring Festival period increased 110% in 2018. Bye-joe is also popular year-round. China’s top spirit brand, Kweichow Moutai, saw its stock rise by 100% last year.

As a part of tradition, people sit with their families to watch the New Year Gala on CCTV. Every year, about 120 million people watch the gala as an integral part of the national celebration. This year, Kuaishou, a live streaming short video platform similar to Bydance’s Tiktok, will partner with CCTV, and give away 1 billion yuan in Red Envelopes (around 150 million US dollars) to its Chinese audience in celebration. There are rumors that Kuaishou is pursuing a US initial public offering this year. We believe this partnership could provide a massive boost to Kuaishou’s active user base.

This week saw some challenges for China’s capital markets. The MSCI China All shares Index was down about 2% due to the news about the coronavirus in China. The central city of Wuhan and its 2 neighboring cities have imposed travel restrictions ahead of what is typically a very busy travel period.

Wuhan is an important travel hub due to its central location and advanced transportation infrastructure. With new high-speed railways and dozens of platform stations, it also has a migrant population of around 3 million people.

These travel restrictions could have an economic impact on Wuhan during the Spring festival. Across the nation, surgical masks are sold out on Taobao and JD.

And these popular Chinese pharmaceutical companies saw their stocks rise by 10% a day. We will be following this closely in the weeks to come.

While the coronavirus dominates headlines, the reality is that Jan 22th was the last day for foreign investors to trade Mainland stocks via Northbound Stock Connect as Mainland exchanges will be closed until next Friday.

We believe it would be wise for asset managers to use the dip to buy Mainland stocks. The modest outflows this week appear minor relative to the large inflows into Mainland stocks since the beginning of November 2019.

We hope you enjoyed this recap.

If you would like to see more, you can subscribe to us at ChinaLastNight.com. 

Please tune in next week for the latest update of China’s equity, fixed income, and currency market performance.