The trade dispute between the two largest economies continues to deteriorate and this is not a surprise to us. It has been very clear that the current US administration is unlikely to make a deal with the China. The gap is too wide between the two countries so it is hard to envision a deal coming together. It seems to be getting worse and we don't expect a deal anytime soon. Back in our January conference call for clients, we pointed to VP Pence's speech from October 2018 at the Hudson Institute. If you want to understand the big issues, this is a must watch.
Alibaba had another incredible sales day with a reported $30.8 billion in sales in 24 hours, its 10th annual Singles' Day sale. The growth actually slowed to 27% which was the slowest growth for the Chinese internet giant. The sales number dwarfs the revenue from all US retailers during Black Friday ($5 billion in 2017), Cyber Monday ($6.6 billion in 2017) and Amazon Prime Day ($4.7 billion in 2018) combined. That is an incredible feat and shows the power of the Chinese consumers.
We all know that China has risen to the 2nd largest economy in the world; however how many China A-Share stocks do you own? The answer may surprise you. The answer is likely none. Even if you own an international ETF or mutual fund, the fact is that the main benchmark index MSCI doesn't include any China A-Share stocks from the Shanghai or Shenzhen exchanges, the 3rd and 8th largest in the world.
In a recent US poll, 88% of respondents said that they had never heard of Alibaba. If you are one of those who don't know the Chinese e-commerce giant, then you can have a quick primer with this epic infographic from 16best.net. Here are a few interesting facts before you dive in:
- Alibaba has a market capitalization of $511 billion as of 3/16/18, just a hair less than Facebook's $535 billion.
- Alibaba has 528 million mobile active users.
- Interestingly 11.1% of Alibaba's visitors are from the US.
- CEO/Founder Jack Ma set up Alibaba with $60k that he borrowed from 18 people. At the end of 2017, the company employed over 50,000 people.
- The company sold over $25 billion in just one day on Singles Day.
Today marks the New Year of lunar calendar. We turn the page on the Year of the Rooster and welcome the Year of the (Earth) Dog. Some famous dogs are Winston Churchill, Mother Teresa, Elvis Presley, President Donald Trump, former Presidents Bill Clinton and George W Bush, Michael Jackson, Madonna and Steven Spielberg. Clearly lots of creative people and powerful leaders, but that isn't important to us. We wonder what the Year of the Dog has in store for the stock market.
Companies from the United States doing business in China are becoming more optimistic about the China-US business environment despite fears of trade tariffs and political rhetoric. According to the 2018 China Business Climate Survey from the American Chamber of Commerce in China and Bain & Company, about 36 percent of respondents believe relations between the two major trading partners will improve this year, up substantially from just 17 percent in 2017. "Regarding the economy, there is cautious optimism that the 'new normal' rate of growth is sustainable for the foreseeable future, providing opportunities for business to expand," said William Zarit, chairman of AmCham in China.
Back in 2013, China's President Xi Jinping announced the One Belt One Road (OBOR) initiative to modernize infrastructure along the ancient Silk Road trading routes. This policy is poised to reshaped the 21st century economy. The project is a potential win win for China and its surrounding neighbors. For China, it seeks to create trade and investment opportunity in infrastructure and construction providing China with a new channel to broaden its export market. For its neighbors, they will benefit from modernized roads and power plants which will help their economies flourish and grow. This rising tide should lift all boats!
While the media is caught up in crpytocurrency mania, the true game changing technology that investors should be focused on is artificial intelligence. From self-driving cars to Dr. Robot, AI is going to change our lives in profound ways in the near future. Russian President Vladimir Putin says, “Artificial intelligence is the future, not only for Russian, but for all of humankind. It comes with colossal opportunities, but also threats that are difficult to predict. Whoever becomes the leader in this sphere will become the ruler of the world.” Many people worry about the risks like robots deciding to destroy humans like in the Terminator or the potential for huge job losses. But I love this quote from futurist Ray Kurzweil:
Starbucks is opening its biggest outlet ever on Wednesday in Shanghai and the company is expecting huge crowds to experience the 30,000 square foot store. The "Starbucks Reserve Roastery" is on Nanjing Road West, the city's most famous shopping street and has been heavily promoted for months on social media. Starbucks has big ambitions in China and this puts the exclamation point on its intentions.
In China, a robot has passed the written test of their national medical licensing exam, an essential entrance exam for doctors, making it the first robot in the world to pass such an exam. While many people will worry about how this will affect jobs in the future, the initial impact should be extremely positive in assisting doctors to analyze data faster and more comprehensively than ever before. This could also help to reduce healthcare cost while improving outcomes.
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