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.
On Thursday, I had the pleasure of returning to the New York Stock Exchange for the second time in a week. Last Tuesday was for opening bell and this time it was closing bell with the Aussies ringing the bell for Australia Day. Thanks to Goldman Sachs Asset Management (GSAM) for the invite and the insights on their market outlook for 2018. Their tag line for this year is "Pro-growth, Pro-equity, Pro-reality." They share our view that global growth will continue in 2018 and given the low interest rate environment that means investors should favor stocks over bonds. GSAM is advising its clients that the emerging market bull market is still in the early innings.
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.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede. Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.