Finance

Seven hundred years ago, maritime trade routes that stretched from the coast of Japan to the Red Sea were peppered with Arab dhows, Chinese junks and Javanese djongs, ferrying ceramics, precious metals and textiles across the region. At its centre, a trading post known as Singapura flourished. The enormous intra-Asian commercial network was disrupted only by the arrival of sailors from rising European empires and the emergence of farther-flung markets for Asian goods.image: The EconomistToday another reconfiguration is under way. The “Factory Asia” model of the late 20th century, in which the continent produced products for American and European consumers, provided an astonishing boost to the prosperity of China, Japan, South Korea and Taiwan. In 1990 just 46% of Asian trade took place within the continent, as vast quantities of goods flowed to the West. Yet by 2021 that figure had reached 58%, closer to European levels of 69% (see chart 1). More regional trade has led to an increase in capital flows, too, binding countries tighter still. A new era of Asian commerce has begun—one that will reshape the continent’s economic and political future.Its emergence began with the growth of sophisticated supply chains centred first on Japan in the 1990s, and later on China as well. Intermediate goods—components that will eventually become part of finished products—soon started to move across borders in greater numbers. They were followed by foreign direct investment (fdi). Asian investors now own 59% of the stock of fdi in their own region, excluding the financial hubs of Hong Kong and Singapore, up from 48% in 2010. In India, Indonesia, Japan, Malaysia and South Korea the share of direct investment from Asia rose by more than ten percentage points, to between 26% and 61%.After the global financial crisis of 2007-09, cross-border banking also became more Asian. Before the crisis hit, local banks accounted for around a third of the region’s overseas lending. They now account for more than half, having taken advantage of the retreat of Western financiers. China’s huge state banks led the way. Overseas loans by the Industrial and Commercial Bank of China more than doubled from 2012 to last year, rising to $203bn. Japan’s megabanks have also spread, in order to escape narrow margins at home, as have Singapore’s United Overseas Bank and Oversea-Chinese Banking Corporation.The presence of Western governments has also diminished. In a recent survey of South-East Asian researchers, businessfolk and policymakers by the iseas-Yusof Ishak Institute in Singapore, some 32% of respondents said they thought America was the most influential political power in the region. Yet just 11% of respondents called it the most influential economic power. State-led investment from China to the rest of the continent under the Belt and Road Initiative has captured attention, but official assistance and government-facilitated investment from Japan and South Korea are also growing.These trends are likely to accelerate. In the face of deteriorating relations between America and China, companies in the region that rely on Chinese factories are considering alternatives in India and South-East Asia. At the same time, few bosses expect to desert China entirely, meaning two Asian supply chains will be required, along with some doubling-up of investment. Trade deals will speed this along. A study published last year suggested that the Regional Comprehensive Economic Partnership, a broad but shallow pact signed in 2020, will increase investment in the region. By contrast, as a result of America’s abandonment of the Trans-Pacific Partnership trade deal in 2017, there is little chance of Asian exporters gaining greater access to the American market.image: The EconomistThe need to establish new supply chains means that transport and logistics are another area where intra-Asian investment will probably increase, notes Sabita Prakash of adm Capital, a private-credit firm. Matching investors searching for reliable income with projects looking for finance—the mission of such private-credit companies—has been a lucrative pastime in Asia, and is likely to become a more popular one. The size of the private-credit market in South-East Asia and India rose by around 50% between 2020 and mid-2022, to almost $80bn. Other big investors are turning to infrastructure, too. gic, Singapore’s sovereign wealth fund, which manages a portion of the country’s foreign reserves, is spending big on the building required for new supply chains.Changes to Asian savings and demography will also speed up economic integration. China, Hong Kong, Japan, Singapore, South Korea and Taiwan have climbed the ranks of overseas investors, becoming some of the world’s largest. These richer and older parts of the continent have exported striking volumes of capital into the rest of the region, with cash following recently established trade links. In 2011 richer and older countries in Asia had about $329bn, in today’s money, invested in the younger and poorer economies of Bangladesh, Cambodia, India, Indonesia, Malaysia, the Philippines and Thailand. A decade later that figure had climbed to $698bn.Silk flowsIn India and South-East Asia, “you’ve still got urbanisation happening, and capital follows those trends,” says Raghu Narain of Natixis, an investment bank. Bigger cities require not only more infrastructure investment, but also new companies better suited to urban life. Asian cross-border merger-and-acquisitions (m&a) activity is changing, according to Mr Narain, becoming more like that found in Europe and North America. Even as deals into and out of China have slowed considerably, m&a activity has become more common elsewhere. Japanese banks, facing low interest rates and a slow-growing economy at home, are ravenous for deals. Over the past year Sumitomo Mitsui Financial Group and Mitsubishi ufj Financial Group have snapped up Indonesian, Philippine and Vietnamese financial firms.image: The EconomistMeanwhile, rising Asian consumption makes local economies more attractive as markets. Whereas in Europe 70% or so of consumption goods are imported from the local region, just 44% are in Asia. This is likely to change. Of the 113m people expected next year to enter the global consumer class (spending over $12 a day in 2017 dollars, adjusted for purchasing power), some 91m will be in Asia, according to World Data Lab, a research firm. Even as Chinese income growth slows after decades of expansion, other countries will pick up the pace. The five largest economies in asean, a regional bloc—namely, Indonesia, Malaysia, the Philippines, Singapore and Thailand—are expected to see imports grow by 5.7% a year between 2023 and 2028, the most rapid pace of any region (see chart 3).These regional trading patterns would represent a return to a more normal state of affairs. The globe-spanning export model that delivered first-world living standards to large parts of Asia, and encouraged investment from far afield, was a product of unique historical circumstances. The amount of goods that travel from the continent’s industrial cities to America is far higher than would be predicted by the relative size of their respective export and import markets, and the distance between them. Indeed, a paper by the Economic Research Institute for asean and East Asia suggests that machinery exports from North-East and South-East Asia to North America in 2019 were more than twice as high as such factors would suggest.Closer commercial links will bind the business cycles of Asian economies even more tightly together. Despite the enduring use of the dollar in cross-border transactions and Asian investors’ continuing penchant for Western-listed markets, a study by the Asian Development Bank in 2021 concluded that Asian economies are now more exposed to spillovers from economic shocks in China than in America. This has been on display in recent months, as China’s faltering trade has hit exporters in South Korea and Taiwan. More trade, not just in intermediate parts but in finished goods for consumption, means the continent’s currencies and monetary-policy decisions will increasingly move together.This will have political ramifications. America will retain influence over Asian security, but its economic importance will decline. Local businessfolk and policymakers will be more interested in and receptive to their neighbours, rather than customers and countries farther afield. With local factories still being built, consumption growing and a deep pool of savings from Asia’s increasingly elderly savers desperate for projects to finance, the high point for regional integration has yet to be reached. The new era of Asian commerce will be more locally focused and less Western-facing. So will the continent itself. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Seven hundred years ago, maritime trade routes that stretched from the coast of Japan to the Red Sea were peppered with Arab dhows, Chinese junks and Javanese djongs, ferrying ceramics, precious metals and textiles across the region. At its centre, a trading post known as Singapura flourished. The enormous intra-Asian commercial network was disrupted only by the arrival of sailors from rising European empires and the emergence of farther-flung markets for Asian goods.Today another reconfiguration is under way. The “Factory Asia” model of the late 20th century, in which the continent produced products for American and European consumers, provided an astonishing boost to the prosperity of China, Japan, South Korea and Taiwan. In 1990 just 46% of Asian trade took place within the continent, as enormous volumes of goods flowed to the West. Yet by 2021 that figure had reached 58%, closer to European levels of 69%. Greater regional trade has prompted an increase in capital flows, too, binding countries tighter still. A new era of Asian commerce has emerged—one that will reshape the continent’s economic and political future.image: The EconomistIts emergence began with the growth of sophisticated supply chains centred first on Japan in the 1990s, and then later China. Intermediate goods—components that will eventually become part of finished products—soon started to move across borders in greater numbers. They were followed by foreign direct investment (fdi). Asian investors now own 59% of the stock of fdi in their own region, excluding the financial hubs of Hong Kong and Singapore, up from 48% in 2010. In India, Indonesia, Malaysia, South Korea and Japan the share of direct investment from Asia rose by more than ten percentage points, to between 26% and 61%.After the global financial crisis of 2007-09, cross-border banking also became more Asian. Before the crisis hit, local banks accounted for less than a third of the region’s overseas lending. They now account for more than half, having taken advantage of the retreat of Western financiers. China’s huge state banks led the way. Overseas loans by the Industrial and Commercial Bank of China more than doubled from 2012 to last year, rising to $203bn. Japan’s megabanks have also spread, in order to escape narrow margins at home, as have Singapore’s United Overseas Bank and Oversea-Chinese Banking Corporation.The presence of Western governments has also diminished. In a recent survey of South-East Asian researchers, businessfolk and policymakers by the iseas-Yusof Ishak Institute in Singapore, some 32% of respondents said that they thought America was the most influential political power in the region. Yet just 11% of respondents named it the most influential economic power. State-led investment from China to the rest of the continent under the Belt and Road Initiative has captured attention, but official assistance and government-facilitated investment from Japan and South Korea are also growing.These trends are likely to accelerate. In the face of deteriorating relations between America and China, companies in the region that rely on Chinese factories are looking to alternatives in India and South-East Asia. At the same time, few bosses expect to desert China entirely, meaning two Asian supply chains will be required, along with some doubling-up of investment. Trade deals will speed this along. A study published last year suggested that the Regional Comprehensive Economic Partnership, a broad but shallow pact inked in 2020, will increase investment in the region. By contrast, as a result of America’s abandonment of the Trans-Pacific Partnership trade deal in 2017, there is little chance of Asian exporters gaining greater access to the American market.The need to establish new supply chains means that transport and logistics are another area where intra-Asian investment will probably increase, notes Sabita Prakash of adm Capital, a private-credit firm. Matching investors searching for reliable income with projects looking for finance—the mission of such private-credit companies—has been a lucrative pastime in Asia, and is likely to become a more attractive one. The size of the private-credit market in South-East Asia and India rose by around 50% between 2020 and mid-2022, to almost $80bn. Other big investors are also turning to infrastructure. gic, Singapore’s sovereign-wealth fund, which manages a portion of the country’s foreign reserves, is spending big on the building required for new supply chains.Changes to Asian savings and demography will also speed up the economic integration. China, Hong Kong, Japan, Singapore, South Korea and Taiwan have climbed the ranks of overseas investors, becoming some of the world’s largest. These richer and older parts of the continent have exported striking volumes of capital into the rest of the region, with cash following recently established trade links. In 2011 richer and older countries in Asia had about $329bn, in today’s money, invested in the younger and poorer economies of Bangladesh, Cambodia, India, Indonesia, Malaysia, the Philippines and Thailand. A decade later that figure had climbed to $698bn.Silk flowsIn India and South-East Asia, “you’ve still got urbanisation happening, and capital follows those trends,” says Raghu Narain of Natixis, an investment bank. Not only do bigger cities require more infrastructure investment, but new companies better suited to urban life can thrive. Asian cross-border merger-and-acquisitions (m&a) activity is changing, according to Mr Narain, becoming more like that found in Europe and North America. Even as deals into and out of China have slowed considerably, m&a activity has become more common elsewhere. Japanese banks, facing low interest rates and a slow-growing economy at home, are ravenous for deals. Over the past year Sumitomo Mitsui Financial Group and Mitsubishi ufj Financial Group have snapped up Indonesian, Philippine and Vietnamese financial firms.Meanwhile, rising Asian consumption makes local economies more attractive as markets. Whereas in Europe 70% or so of consumption goods are imported from the local region, just 44% are in Asia. This is likely to change. Of the 113m people expected next year to enter the global consumer class (spending over $12 a day in 2017 dollars, adjusted for purchasing power), some 91m will be in Asia, according to World Data Lab, a research firm. Even as Chinese income growth slows after decades of expansion, other countries will pick up the pace. The five largest economies in asean, a regional bloc—namely, Indonesia, Malaysia, the Philippines, Singapore, and Thailand—are expected to see imports grow by 5.7% a year between 2023 and 2028, the most rapid pace of any region.image: The EconomistThese regional trading patterns would represent a return to a more normal state of affairs. The globe-spanning export model that delivered first-world living standards to large parts of Asia, and encouraged investment from far afield, was a product of unique historical circumstances. The amount of goods that travel from the continent’s industrial cities to America is far higher than would be predicted by the relative size of their respective export and import markets, and the distance between them. Indeed, a paper by the Economic Research Institute for asean and East Asia suggests that machinery exports from North-East and South-East Asia to North America in 2019 were more than twice as high as such factors would suggest.Closer commercial links will bind the business cycles of Asian economies even more tightly together. Despite the enduring use of the dollar in cross-border transactions and Asian investors’ continuing penchant for Western-listed markets, a study by the Asian Development Bank in 2021 concluded that Asian economies are now more exposed to spillovers from economic shocks to China than America. This has been on display in recent months, as China’s faltering trade has hit exporters in South Korea and Taiwan. More trade, not just in intermediate parts but in finished goods for consumption, means the continent’s currencies and monetary-policy decisions will increasingly move in sync.This will have political ramifications. America will retain influence over Asian security, but its economic importance will decline. Local businessfolk and policymakers will be more interested in and receptive to their neighbours, rather than customers and countries farther afield. With local factories still being built, consumption growing and a deep pool of savings from Asia’s increasingly elderly savers desperate for projects to finance, the high point for regional integration is yet to be reached. The new era of Asian commerce will be more locally focused and less Western-facing. So will the continent itself. ■ More

Health savings accounts, or HSAs, have unique tax benefits that can trump both 401(k) plans and individual retirement accounts.
When prioritizing where to save money, many people should first get their full company 401(k) match and then max out their HSA, advisors said.
HSAs also allow the flexibility of repaying oneself at any time in the future for out-of-pocket costs.

Maskot | Maskot | Getty Images

For savers, choosing how to best allocate money among a stream of account types may seem an impossible task.
There are 401(k) plans, individual retirement accounts, 529 plans, high-yield savings accounts, taxable brokerage accounts, flexible spending accounts, health savings accounts and so on — a veritable hodgepodge of letters, numbers and tax rules.

Each saver is different, meaning the optimal financial answer will vary from person to person.
More from Personal Finance:Your 401(k) could have these hidden risks, experts say3 things to consider before making a Roth conversionWhy health insurance is poised to make inflation jump
But for many people, there seems a clear path: After saving enough money to get your company’s full 401(k) match, save your next dollars in a health savings account if you have access to one, according to financial advisors.
“Imagine a Roth IRA, but extra strength,” said Sabino Vargas, a certified financial planner and senior financial advisor at Vanguard Group.

HSAs have unique and powerful tax benefits

“People don’t think about the HSA as being so beautiful, but it really is,” said Carolyn McClanahan, a CFP based in Jacksonville, Florida, and a member of CNBC’s Advisor Council.

That beauty is largely due to the outsized tax benefits of HSAs — which are meant for health-care expenses — relative to other accounts.
HSAs offer a unique “triple tax advantage,” said Vargas. Specifically, contributions are tax-free, investment growth is tax-deferred and withdrawals are tax-free if used for eligible medical costs.
That means a saver would generally rarely if ever pay tax on their HSA money, unlike retirement accounts such as a pre-tax or Roth IRA.

Consider this analysis from a new Vanguard report: A $1 investment in a pre-tax or Roth IRA would yield $2.98 after 25 years. The same $1 invested in an HSA would yield $4.29 over that time. (The analysis makes various assumptions about investment returns and tax rates.)
Because health-care costs are “inevitable” in old age, the HSA functions like “an off-label account for retirement preparation,” Vargas said.
HSAs have other advantages, too. For example, savers can invest some or all of their balance. The accounts are also portable, meaning savers can take the money with them if they leave an employer.
Consumers should generally save enough in cash in an HSA to cover their insurance deductible and invest the remainder, as one would with retirement funds. Anyone who can afford to do so should try to pay out of pocket for current health costs and allow HSA investments to grow, advisors say. You can save those receipts and redeem them years down the line (more on that later).

The IRS counts qualified medical expenses as those generally eligible for the medical and dental expenses tax deduction. Those expenses are listed in IRS Publication 502. The list is relatively expansive, advisors said.
If HSA funds are used for non-qualifying health costs, they’d lose one prong of their three-pronged tax benefits: Savers would owe income tax on a withdrawal. However, in this sense they’d still be taxed similarly to a 401(k) or IRA. (Note: HSA users younger than age 65 would owe a 20% tax penalty in addition to income tax.)
To be sure, not everyone has access to an HSA. They are only available to people enrolled in a high-deductible health plan, which have become more prevalent but may not be offered by your employer. A high-deductible plan also may not make financial sense for certain people relative to a traditional co-pay health plan.

The order of operations for saving money

Luis Alvarez | Digitalvision | Getty Images

Budgeting constraints are common for the typical person, meaning there’s only so much (if any) money left over after necessities to fund savings or pay down debt.
Workers with access to a 401(k) plan should first prioritize saving enough to get their full employer match, advisors said.
“We never want to leave free money on the table,” Vargas said.
A 401(k) can also serve as an emergency fund due to hardship withdrawals allowed by most employers.
The second priority would generally be to max out an HSA, said McClanahan, founder of Life Planning Partners. Individuals can contribute up to $3,850 and families up to $7,750 in 2023.

Imagine a Roth IRA, but extra strength.

Sabino Vargas
senior financial advisor at Vanguard Group

There are some caveats that might change this HSA calculus. For example, if a saver has credit-card debt, paying that down would take priority over funding an HSA, McClanahan said.
Likewise for someone without an emergency fund: Work on having at least one month of living expenses in savings, then max out your HSA, then prioritize expanding emergency savings to three to six months, McClanahan said.
If there’s money left over, ensuing saving priorities might include IRAs, 529 plans, additional 401(k) savings and taxable accounts, advisors said.

There’s another big HSA benefit

Aside from tax benefits, there’s another handy feature of HSAs: the ability to repay yourself at any time.
Someone who pays out of pocket for a qualified health-care expense can withdraw that money from their HSA at any point in the future.
Here’s an example of how it works from Vanguard: “Let’s say you pay $4,000 out of pocket today for your child’s braces. If you save the receipt, you can reimburse yourself for that expense later by withdrawing that same $4,000 — tax-free — to pay for a nonmedical expense like college tuition or retirement costs.”
There are caveats: For one, the expense must have occurred after opening an HSA. You must save your receipts, too. McClanahan suggests keeping a spreadsheet of unreimbursed health costs in case receipts fade over time. More

The Carnival Miracle cruise ship operated by Carnival Cruise Line is docked at Pier 27 in San Francisco, Sept. 30, 2022.
Justin Sullivan | Getty Images

Check out the companies making headlines before the bell:
Carnival, Royal Caribbean— The cruise lines both gained about 2% after being upgraded by Truist. The Wall Street firm moved Royal Caribbean to buy from hold and Carnival to hold from sell, citing forward-looking trends for 2024 and 2025 that look “exceptionally strong.” Truist maintained its hold rating on Norwegian Cruise Lines, which was up more than 1% in premarket trading.

Deere, CNH Industrial — The two stocks slid in the premarket after Evercore ISI downgraded each to in-line from outperform, citing agricultural production cuts. Deere fell 1.4%, CNH declined 1.2%.
Starbucks — Shares fell 1.2% after TD Cowen downgraded the coffee giant over the “worrisome” macro backdrop in China. The firm believes slower consumer spending in China could hit share growth and affect Starbucks’ multiple.
CVS Health — The pharma stock rose less than 1% after Evercore ISI upgraded CVS Health Tuesday to outperform from in-line, saying the stock is currently attractively valued.
Dell Technologies — Shares rose more than 1.2% after Daiwa Capital Markets upgraded the computer stock to outperform from market perform. The Wall Street firm hiked its price target to $80 per share from $50, implying roughly 16% upside from Monday’s close.
Super Micro Computer — The information technology stock added more than 2% after Barclays initiated coverage of Super Micro Computer on Tuesday with an overweight rating. The firm’s $327 price target represents nearly 34% upside from Monday’s close.

Planet Fitness — The recent CEO shakeup at the gym franchise was a contributing factor in JPMorgan downgrading the stock to neutral from overweight. Along with the downgrade, the firm cut its price target on Planet Fitness to $52 from $70, a move that still implies 7% upside. Shares fell about 2% premarket.
Rocket Lab — The aerospace stock plunged 22% after Rocket Lab’s first launch failure in more than two years Tuesday morning. Shares closed Monday at $5.04.
— CNBC’s Michelle Fox and Hakyung Kim contributed reporting More

Among China-focused investment firms, only four U.S. dollar-denominated venture capital funds established between 2015 and 2020 have at least returned investors all the money they put in.
That’s according to a new report “China’s Private Capital Landscape” from Preqin.
While those funds may have a few more years to go before they really need to show performance, their difficulties so far reflect a lack of IPOs — even before the latest market slump.

Pictured here is Shenzhen in southern China. The city is sometimes considered China’s Silicon Valley.
Nurphoto | Nurphoto | Getty Images

BEIJING — In the years since Alibaba’s U.S. listing in 2014, early-stage investing has drawn tens of billions of dollars into China with relatively little to show for it.
Among China-focused investment firms, only four U.S. dollar-denominated venture capital funds established between 2015 and 2020 have at least returned investors all the money they put in.

That’s according to a new report “China’s Private Capital Landscape” from Preqin, an alternative assets research firm. Alternative assets include venture capital, but not publicly traded stocks and bonds.
Preqin looked at an industry metric called distributed paid-in capital (DPI) and listed the 10 funds in the category with the highest DPI.
The other six have yet to give investors back all their money, not to mention any excess returns, the report showed. Preqin doesn’t track every single China VC fund, and only included those with data as of the end of last year or more recently.
While those funds may have a few more years to go before they really need to show performance, their difficulties so far reflect a lack of IPOs — even before the latest market slump.

“The most important trend is the switch of the investment cycle,” Reuben Lai, vice president, private capital, Greater China at Preqin, told CNBC in a phone interview earlier this month.

From around 2015 to 2018, fundraising in China “flourished,“ he said. Now, “people are focusing more on investment itself and exiting, the returns.”
In the world of early-stage investing, “limited partners” (typically institutions) give money to “general partners” (venture capital funds) to invest into startups. Once the startups go public or get acquired, it allows the funds to “exit” — and make a return they can share with the limited partners. The funds also earn asset management fees in the interim.
Fengshion Capital Investment Fund, LYFE Capital USD Fund II and GGV Capital V were the only U.S. dollar-denominated VC funds established between 2015 and 2020 that gave their investors back all their money — and then some, the Preqin data showed.

The market is tough. Not a lot of companies are able to get to the IPO stage.

Reuben Lai

The 10th best-performer, BioTrack Capital Fund I, only returned 8.1% of capital to its investors as of March, about five years since the $186 million fund was launched.
The same trend held true for U.S. dollar-denominated private equity funds established in that same 2015 to 2020 period — just four giving investors back more money than they’d put in, Preqin said.
The outperforming funds were: Loyal Valley Capital Advantage Fund I, Hillhouse Fund II, Oceanpine USD Fund I and HighLight Capital USD Fund II.
Sequoia didn’t make the top 10 lists for highest DPI, according to Preqin’s data. The Sequoia Capital China Growth Fund V ranked 6th on another metric, internal rate of return (IRR) among U.S. dollar-denominated private equity funds established between 2015 and 2020.
IRR is an estimate of expected annual returns based on cash flows and the valuation of unrealized assets.
Several of the funds with high DPI also did well on an IRR basis, the Preqin report showed.

IPO alternatives

Far more money, however, is still waiting to be returned to investors.
Private equity funds in China have about $1.3 trillion in assets under management, with at least $20 billion to $40 billion in exits every year, Alex Shum, a managing director at TPG NewQuest, said in early September at the AVCJ conference in Beijing, a major annual gathering of China-focused venture capital firms.
That means existing assets need roughly 20 to 30 years to exit, he said, noting the need to diversify away from IPOs to mergers and acquisitions, or general partner-led deals — or deals that involve the sale of an investment fund between different limited partners.
Preqin’s Lai said there’s been an uptick in such general partner-led deals.

“The market is tough. Not a lot of companies are able to get to the IPO stage. With the elongated fundraising period … people have to hold onto the portfolio a bit longer,” said Lai. “Hence they have to switch the owner using a secondary fund, transaction it to somebody else.”
Lai said it’s difficult to know what the returns on such transactions are.
“It’s a pretty secretive thing. People don’t want people to know they are doing secondary returns because it means they are doing badly,” he said. “We’re seeing [sellers] offering a more generous discount compared to the previous few years. People are, I guess you can say, more desperate.”

Another option is selling the company to one listed on China’s mainland stock market.
Jinjian Zhang, founding partner of venture capital firm Vitalbridge, said last week at the AVCJ conference that his firm sold an investment to a listed company in March, about three months after the initial deal.
That deal was one of 10 projects he said the fund invested in during the second half of 2022, as soon as the Shanghai lockdown was lifted.

For a long-term investor, today part of [the situation] is regulation, but part of it is the emotions brought about by regulation.

Jinjian Zhang
founding partner, Vitalbridge

In 2021, Zhang said Vitalbridge raised more money than it had aimed to, but the firm generally held off on new investments because the market was overvalued. Zhang said people who provided investment term sheets hadn’t actually seen the projects in question, and startups were demanding excessively high prices.
In the two years since, sentiment has shifted dramatically with a slew of regulation aimed at education, gaming and internet platform companies.
This year, Beijing has signaled a softer stance.

Read more about China from CNBC Pro

The U.S. and China last year also reached an audit agreement that reduces the risk of Chinese companies having to delist from U.S. stock exchanges.
Several China-based companies, mostly small, have listed in the U.S. so far this year.
“For a long-term investor, today part of [the situation] is regulation, but part of it is the emotions brought about by regulation,” Zhang said in Mandarin, translated by CNBC.
“So at this point, [if you] look beyond regulation to do a 10-year VC fund, there are lots of opportunities,” he said. “We are focused on what those opportunities are, not what the sentiment around regulation is.” More

In an aerial view, the Valero Houston refinery is seen on August 28, 2023 in Houston, Texas.
Brandon Bell | Getty Images

Check out the companies making headlines in midday trading.
Oil stocks — Petroleum refiners Valero Energy and Marathon Petroleum gained 1.4% and 1.5%, respectively, as West Texas Intermediate and Brent crude prices reached their highest levels since November, 2022. The oil services ETF and S&P 500 Energy Index both rose 1%.

Arm Holdings — Shares declined 7.4% on the back of the company’s blockbuster Nasdaq debut Thursday, when it surged nearly 25%. Bernstein initiated coverage of the chip designer with an underperform rating on Monday, saying it’s “too early” to name Arm an AI winner. Needham initiated coverage of the chip designer with a hold rating on Friday, saying Arm’s valuation looks “full” in a post-smartphone era.
Moderna — The pharmaceutical company lost more than 8% Monday, making it the biggest decliner in the S&P 500. Co-founder and board chairman Noubar Afeyan sold 15,000 shares for approximately $1.64 million, according to a Securities and Exchange Commission filing. Pharmaceutical peer Pfizer said in a press conference Monday that it expects a 24% vaccination rate for Covid-19 shots in the U.S. this year. Moderna’s updated Covid vaccines have been approved in both the U.S. and the U.K.  
Tesla — Shares of the electric vehicle maker slipped 3% after Goldman Sachs lowered its earnings estimate. Analyst Mark Delaney cited the potential for further price cuts and lower margins as reasons for the reduction.
PayPal — The payment platform slipped 1.5% following a downgrade to market perform from outperform by MoffetNathanson. The firm said PayP still faces challenges as a new CEO takes the helm.
Ralph Lauren — The luxury retailer saw its shares rise 0.7% after Guggenheim upgraded the stock to buy from neutral. The Wall Street firm said Ralph Lauren’s earnings are set to benefit from several cyclical tailwinds, including clean inventories, lower freight expenses and lower cotton cost, adding that the recent pullback has provided an attractive entry point.

Enphase Energy — Shares lost 2.6% after Citi lowered its price target on shares to $170 from $209 while keeping its buy rating. The new price target implies 41% upside from Friday’s close.
Tenable Holdings — Shares gained 2.6% after TD Cowen initiated coverage of the cybersecurity stock with an outperform rating. Cowen said Tenable appears well positioned to benefit from tailwinds in a total addressable market of $25 billion.
Vertex — Shares of the tax software stock climbed 2.4% Monday. Morgan Stanley resumed coverage of Vertex on Monday with an overweight rating. Analyst Chris Quintero highlighted the growth opportunity for the company following a strong investment cycle.
DoorDash — Shares of the food delivery service ended flat Monday, after adding as much as 1.6% midday. Mizuho upgraded the company to buy from neutral in a Monday note, citing continued market share gains.The company also expanded its partnership with Aldi to allow alcohol orders, in addition to adding new grocery providers, including Lowe’s Markets and Eataly.
Micron Technology — The stock gained 0.9% after Deutsche Bank upgraded the memory and storage semiconductor maker to buy from hold on Sunday, and also raised its target price. The firm said Micron’s pricing power in direct random access memory is hitting an inflection point, and could push the company to beat expectations for its fiscal first-quarter revenue and earnings guidance in November.
Paramount Global — Shares of the entertainment company fell 3.2% Monday. Raymond James began research coverage with a market perform rating, while giving peers Disney and Warner Bros Discovery outperform ratings.
Simply Good Foods — Shares of the food and beverage company added 3.6% following a Morgan Stanley upgrade to overweight from equal-weight on Monday. The investment bank bumped up the stock’s price target to $40 from $37, citing Simply Good Foods’ diverse product offering and shifting consumer preferences to healthier choices as catalysts.
Iridium Communications – The satellite company’s stock jumped more than 5% following an upgrade from Deutsche Bank to buy from hold. The firm said it sees an attractive entry point for Iridium shares, which have plunged 19.4% quarter to date. 
ASGN — Shares of the digital innovations solutions company rallied nearly 3% Monday. Wells Fargo started research coverage with an overweight rating on the company, encouraging investors to buy the dip. The stock is little changed in 2023.
— CNBC’s Alex Harring, Brian Evans, Samantha Subin, Yun Li, Lisa Kailai Han, Pia Singh and Michelle Fox contributed reporting More

A pay transparency law in New York state took effect on Sunday. Certain employers are required to disclose a salary range in job advertisements.
California, Colorado and Washington state have adopted similar laws since 2021. Various cities and municipalities have passed laws, too.
In August, 50% of online job listings advertised salary, up from 18.4% in February 2020, according to Indeed Hiring Lab data.

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Pay transparency is on the rise for job applicants — and momentum suggests that trend will continue, experts said.
In August, 50% of online job listings advertised salary, up from 18.4% in February 2020, according to Indeed Hiring Lab, the economic research arm of career site Indeed. Such businesses disclose an exact salary or a salary range.

The growth is largely attributable to recent pay transparency laws enacted by states and municipalities. In addition, job seekers also recently had historically high leverage as employers clamored to hire workers at the reopening of post-pandemic economy.
“With the growth of such pay transparency, the lingering norms and policies around pay secrecy have simply lost their teeth,” Tomasz Obloj and Todd Zenger, professors at Indiana University and the University of Utah, respectively, recently wrote in Harvard Business Review.
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It appears pay transparency rates “will continue to climb,” said Cory Stahle, an economist at Indeed.
The Indeed stats don’t include ads that post only a maximum salary, due to the ambiguity of the practice, Stahle said. (Those might say a worker can earn “up to” $20 an hour, without stipulating a floor, for example.)

New York just adopted a pay transparency rule

New York on Sunday became the latest state to adopt a pay transparency law. Employers in the state with at least four employees must make a “good faith” salary disclosure in job postings.
It joins California, Colorado and Washington state, as well as New York City.
The pay transparency movement is relatively new. Colorado was the first state to pass such a law, in 2019, and it took effect on Jan. 1, 2021.

Other local governments — like the city of Ithaca, along with Albany and Westchester counties in New York, and Jersey City in New Jersey — have enacted pay transparency laws, according to the National Conference of State Legislatures.
Other states have taken “a slightly more flexible approach,” NCSL said.
For instance, states and municipalities such as Cincinnati and Toledo in Ohio; Maryland; Connecticut; Rhode Island; and Nevada have passed laws that allow employers to disclose salary ranges to job applicants upon request, according to the National Women’s Law Center.
A “profusion” of websites — like Glassdoor.com, Payscale.com, and Salary.com — have also provided “rather open access to employer pay information,” Obloj and Zenger said.

There are pros and cons

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Greater access to salary information in job postings poses clear benefits for both workers and businesses, experts said.
For instance, transparency can help close persistent pay gaps, especially for women and people of color, said Mandi Woodruff-Santos, a career and money coach.
“It levels the playing field,” she said. “At least they have a starting-off point.”
Salary information also reduces frictions in applying and hiring, since workers can more easily filter and determine the jobs for which they’d prefer to apply, Stahle at Indeed said. It also might help young workers and recent graduates when doing career planning, he said.

It levels the playing field. At least they have a starting-off point.

Mandi Woodruff-Santos
career and money coach

Further, 75% of job seekers are more likely to apply for a job if the salary range is listed in the posting, according to a 2022 Indeed survey. Fifty-six percent are more likely to apply for a company — even if they don’t recognize the company name — if the salary range is listed, Indeed found.
However, there may be drawbacks.
For one, pay transparency may lower overall wages of the broader population of employees, even while raising them for the “inequitably underpaid,” Obloj and Zenger said. That’s because, data suggests, employers might push back against salary negotiations and the practice may therefore “lower employees’ relative bargaining power,” they said.
The practice might also lower worker productivity and change workers’ on-the-job priorities, the duo wrote.

‘There’s still plenty to negotiate’ beyond salary    

Of course, applicants aren’t necessarily beholden to the salary or the pay range posted on a job ad, Woodruff-Santos said. They can ask for more.
“I wouldn’t take it as the final, final word until you’ve asked and they’ve told you,” she said.
Even if there’s not wiggle room on salary, “there’s still plenty to negotiate,” Woodruff-Santos added.
The “big whale” is work-from-home flexibility, which isn’t a direct form of financial compensation but offers value to many workers, she said.

Workers might also be leaving money on the table when quitting an old job, and a new employer can help eat some or all of that financial cost, she said. For example, workers might have to pay back a signing bonus if they depart an employer before the end of a contract period; they might also have an unvested 401(k) match or restricted stock units, for which a new employer may be able to offer financial compensation, Woodruff-Santos said.
Workers may also be able to negotiate a relocation-benefit package if they must move for a new job, or a professional-development budget allowing them to attend conferences or classes to invest in their skills.
They should also generally consider other forms of compensation when applying for a job: wellness benefits like mental health services; health insurance; commuter benefits; tuition reimbursement; retirement benefits; and dependent-care flexible spending accounts, for example, Woodruff-Santos said. More

Morgan Stanley plans to announce that an assistant it created with OpenAI’s latest software is “fully live” for financial advisors and their support staff.
Called the AI @ Morgan Stanley Assistant, the tool gives financial advisors speedy access to a database of about 100,000 research reports and documents.
One adjustment for advisors is that they’ll need to phrase questions in full sentences as though they were speaking to a human assistant, instead of leaning on keywords.

Shannon Stapleton | Reuters

Morgan Stanley has officially kicked off the generative AI era on Wall Street.
The bank plans to announce Monday that the assistant it created with OpenAI’s latest generative AI software is “fully live” for all financial advisors and their support staff, according to a memo obtained by CNBC.

“Financial advisors will always be the center of Morgan Stanley wealth management’s universe,” Morgan Stanley co-President Andy Saperstein said in the memo. “We also believe that generative AI will revolutionize client interactions, bring new efficiencies to advisor practices, and ultimately help free up time to do what you do best: serve your clients.”
Morgan Stanley, a top investment bank and wealth management juggernaut, made waves in March when it announced that it had been working on an assistant based on OpenAI’s GPT-4. Competitors including Goldman Sachs and JPMorgan Chase have announced projects based on generative AI technology. But Morgan Stanley is the first major Wall Street firm to put a bespoke solution based on GPT-4 in employees’ hands, according to Jeff McMillan, head of analytics, data and innovation at Morgan Stanley wealth management.
Called the AI @ Morgan Stanley Assistant, the tool gives financial advisors speedy access to the bank’s “intellectual capital,” a database of about 100,000 research reports and documents, McMillan said in a recent interview.
By saving advisors and customer service employees time when it comes to questions about markets, recommendations and internal processes, the assistant frees them to engage more with clients, he said.

Human speech

The tool, a simple window of text, belies the difficulty in making sure the program would produce quality responses, according to McMillan. The bank spent months curating documents and using human experts to test responses, he said.

One adjustment for advisors is that they’ll need to phrase questions in full sentences as though they were speaking to a human, instead of leaning on keywords as they would with a search engine query, said McMillan.
“No different than how I would ask you a question, that’s how you talk to this machine,” he said. “People are not accustomed to that.”
It’s just the first in a series of solutions based on generative AI planned by the bank, according to McMillan. The firm is piloting a tool called Debrief that automatically summarizes the content of client meetings and generates follow-up emails.

‘Completely disruptive’

Using OpenAI software required a fundamentally different approach than with previous technology efforts, he said. OpenAI’s ChatGPT uses large language models, or LLMs, to create human-sounding responses to questions.
“The traditional way in which you would solve those things is you would write code,” McMillan said. “In the new world, you give examples of what ‘good’ looks like, and the system learns what good is. It’s actually able to ‘reason’ and apply logic that a human would apply.”
Excitement over AI has bolstered the stock market this year and forced entire industries to contend with its implications, leading some experts to declare it the next foundational technology.
“I’ve never seen anything like this in my career, and I’ve been doing artificial intelligence for 20 years,” McMillan said. “We saw a window of opportunity that was just completely disruptive, and I think as an organization, we didn’t want to get left behind.” More