Aurelia Butler

SHANGHAI/HONG KONG (Reuters) – China’s annus horribilis has seen its stock markets fall, funds run up losses and foreign investors run for the exit. But areas of the market dominated by small stocks and frequented by the country’s retail investors have done surprisingly well.Scores of retail investors are dabbling in micro-cap stocks – stocks whose market capitalisation is tiny – operating under the radar of big funds and investors and their massive market-moving flows. Take self-employed retail trader Joseph Cui, for instance. By buying micro-cap stocks of artificial intelligence(AI) companies, Cui has picked a corner of the market big fund managers can barely squeeze into, and made a fat 20% return on his 2-million-yuan ($273,347.27) investment. “It’s a tough environment for big capital. But for short-term money, it’s easy play,” Cui said.Strategies such as Cui’s stand out this year in a stock market depressed by China’s wobbly economy, heightened geopolitical risks and surging overseas interest rates. The Wind Micro Market Cap Index, which tracks the 400 China-listed A-shares with market value typically less than 3 billion yuan each, is up 37% so far this year. In contrast, the blue-chip CSI300 Index has lost 8%. While institution-dominated companies with large market values in sectors such as banking and manufacturing have faced selling pressure from investment funds in a struggling economy, micro stocks have become neat counter-cyclical targets. Such stocks lend themselves to speculation, particularly when tied in some way to Chinese chip behemoth Huawei Technologies or hot concepts such as AI, making the retail rush somewhat similar to last year’s meme-stock frenzy in the United States, albeit without short-sellers on the other side of the trades. Chinese regulators meanwhile seem cool with the micro-cap craze, even though it is worryingly reminiscent of the casino-like Chinese market culture of more than a decade ago. “Regulators appear to be greenlighting speculative activities so as to prop up the stock market,” said Yuan Yuwei, fund manager at Water Wisdom Asset Management. “The connivance is hurting the system of value investment, encouraging misbehaviours, and is negative to long-term health of the market.” The China Securities Regulatory Commission (CSRC) did not immediately respond to a request for comment.CONCEPT STOCKS Retail investor Helen Wu is not bashful talking about “stir-frying” – the practice of pumping up stocks with hot concepts. “We mainly pick stocks with a big story to tell, such as AI or Huawei, so that stir-frying becomes easy,” Wu said, referring to the mania in China around ChatGPT, as well as much-hyped technological breakthroughs at U.S.-blacklisted firm Huawei. “We don’t touch stocks with big institutional holdings, due to big selling pressure in a downbeat economy.”Retail investors are a big force in China. CSRC Chairman Yi Huiman notes that their transactions accounted for about 60% of the total A-shares turnover in late 2022. An index tracking China’s actively-managed equity funds has slumped 14% this year after sell-offs in once favoured sectors such as battery companies and spirit makers. In contrast, an index tracking ChatGPT concept stocks such as 360 Security Technology and TRS Information Technology has soared more than 40%. In a recent case, loss-making Ningbo Shenglong Automotive Powertrain System Co jumped nearly 250% in three weeks on speculation that is a supplier for Huawei’s planned electric vehicle, forcing the company to flag investment risks last week.Lu Deyong, a retail trader, said he made a 100% profit of 100,000 yuan betting on a Huawei concept stock, Seres Group, whose shares doubled in the past two months even while it booked a loss for the first three quarters of 2023.”Market buys Seres for the imagination of its future, not its current fundamentals,” Lu said. Some brokerages are starting to recommend micro stocks to clients. GF Securities said in an October strategy report that buying micro stocks is part of a new investment paradigm in a stock market suffering from anaemic growth, and global decoupling risks. “Speculation in concept stocks has been active throughout the year, and regulators have their eyes half-closed,” said Huang Yan, general manager of Shanghai QiuYang Capital Co. “A crackdown would dampen an already lifeless market.”($1 = 7.3167 Chinese yuan renminbi) More

SINGAPORE (Reuters) – The yen wobbled near 15-year lows on the euro and a one-year trough on the dollar on Wednesday, having slid on bets that a tweak of Japan’s yield control policy isn’t enough to close wide interest rate gaps that have pressured the currency for years.Moves in early Asia trade were modest ahead of a U.S. Federal Reserve meeting later in the day – where rates are seen on hold – and the release of U.S. Treasury refunding details.The New Zealand dollar slipped 0.4% to $0.5805 as softer-than-forecast employment data cemented expectations of an end to interest rate hikes.Against the dollar, the yen fell about 1.7% overnight, touching a low of 151.74 – a whisker from the 151.94 level that prompted intervention a year ago. The yen breached 160 per euro for the first time since 2008.It was last at 151.27 per dollar – down 13% for the year so far and 38% from its pandemic peak – and at 160.05 per euro.Intervention remained high on investors’ watch list, with Japan’s top currency diplomat noting on Wednesday that recent moves seemed to be speculative, and that authorities were on “standby” to step in. The Bank of Japan raised inflation forecasts on Tuesday, but not policy rates. It redefined its 1% limit on 10-year government bond yields as a reference rate, rather than a hard cap, effectively ending its strict yield-curve control policy.Data from the finance ministry also showed Japan did not intervene in currency markets through October.Taken together, it adds up to “no obvious new official approach to ‘muscle’ a stronger yen,” so traders feel the coast is clear to take up short positions, said Alan Ruskin, macro strategist at Deutsche Bank.”It is now more evident than ever, that a proper turn in dollar/yen is much less dependent on events in Japan than they are on the macro dynamic in the U.S,” he said in a note.On that score the dollar has been helped by the flattering comparison between the U.S. and other large economies. Data on Tuesday showed European growth a little softer than expected and a surprise slump in Chinese factory activity.In the U.S. data showed wages and salaries rose solidly last quarter and while consumer confidence ebbed, it fell far less than markets had expected. The euro declined 0.4% on the dollar overnight and nursed losses at $1.0579.The U.S. dollar index measure against a basket of major currencies rose 0.5% on Tuesday to 106.66. Sterling was steady at $1.2150. China’s offshore yuan held at 7.34 per dollar amid a liquidity crunch in the onshore market that drove overnight repo rates as high as 50% as banks scrambled for month-end cash.China’s Caixin PMI data will be in focus later on Wednesday, ahead of U.S. manufacturing and private payrolls figures – before the Fed meeting.U.S. yields rose in early Asia trade, while Japanese yields fell slightly on thin volumes, leaving the spread between benchmark 10-year rates at 398 bps. That is narrower than 414 bps it had hit in October.”Nominal 10Y rate spreads now warrant dollar/yen a fair bit lower, i.e., 147-8,” said James Malcolm, UBS currency strategist based in London.”Though this relationship is becoming choppier, 10bp has been roughly equivalent to one big figure in spot over the last couple of years.” More

Shares of the flexible workspace provider fell 32% in extended trading after the Wall Street Journal first reported the news. They have fallen roughly 96% this year. New York-based WeWork is considering filing a Chapter 11 petition in New Jersey, the WSJ reported, citing people familiar with the matter. WeWork declined to comment. Earlier on Tuesday, WeWork said it had entered into an agreement with creditors for temporary postponement of payments for some of its debt, with the grace period nearing an end.The company had net long-term debt of $2.9 billion as of June end and more than $13 billion in long-term leases, at a time when rising borrowing costs are hurting the commercial real estate sector.WeWork’s filing for bankruptcy would mark a stunning reversal of fortune for the company that was privately valued at $47 billion in 2019 and a black spot for investor SoftBank that sunk billions.The company has been in turmoil ever since its plans to go public in 2019 imploded following investors’ skepticism over its business model of taking long-term leases and renting them for the short term and worries over its hefty losses.WeWork’s woes did not abate in subsequent years. It finally managed to go public in 2021 at a much-reduced valuation. Its major backer, Japanese conglomerate SoftBank, sunk tens of billions to prop up the startup, but the company has continued to lose money.WeWork raised “substantial doubt” about its ability to continue operations in August, with numerous top executives, including CEO Sandeep Mathrani, departing this year. More

WASHINGTON (Reuters) -U.S. senators from both parties voiced doubts on Tuesday about House Republicans’ plan to provide $14.3 billion in aid to Israel by cutting Internal Revenue Service funding, without providing aid to Ukraine, and Democratic President Joe Biden threatened to veto the bill were it to pass.In the first major legislative action under new Speaker Mike Johnson, House of Representatives Republicans unveiled a standalone supplemental spending bill only for Israel on Monday.This is despite President Joe Biden’s request for a $106 billion package that would include aid for Israel and Ukraine and funding to boost competition with China in the Indo-Pacific as well as security along the U.S. border with Mexico.Republicans have a 221-212 majority in the House, but Biden’s fellow Democrats control the Senate 51-49. To become law, the bill would have to pass both the House and Senate and be signed by Biden.The top Senate Democrat said the Republican bill would be dead on arrival in the upper chamber, even if it passed the House.”The bottom line is it’s not a serious proposal,” Senate Democratic Majority Leader, Chuck Schumer, told reporters.The administration said Biden would veto such a bill were it to reach his desk.”This bill is bad for Israel, for the Middle East region, and for our own national security,” the White House’s Office of Management and Budget said.Senator Mitch McConnell, the Republican leader in the Senate said he felt the four issues needed to be addressed.”We need to treat all four of these areas, all four of them, Ukraine, Israel, Taiwan and the border,” McConnell told reporters. Secretary of State Antony Blinken met with Johnson on Tuesday after testifying in the Senate. At the hearing, Blinken and Secretary of Defense Lloyd Austin said Ukraine needed continued U.S. assistance to win its fight against Russian invaders.Blinken told reporters: “It was a very good meeting. I appreciate the opportunity. I’ll leave our conversation at that.”State Department spokesperson Matthew Miller said they had discussed issues including Biden’s request for support for Ukraine and Israel.Republicans are expected to pass the legislation in the House as soon as this week. More