The slump in U.S.-listed Chinese shares goes on. Apple warns of slowing sales growth. Phuket’s quarantine-free reopening to tourists is under threat. Here’s what you need to know today.
The slump in U.S.-listed Chinese shares accelerated Tuesday, wrapping up another day of heavy losses, as investors shunned the assets amid a broad-based crackdown by regulators in Beijing. In the span of three trading days, the Nasdaq Golden Dragon China Index, which tracks 98 of China’s biggest firms listed in the U.S., has plunged more than 19%, its biggest such drop on record. Most Asian stocks looked set to retreat Wednesday. Equity futures fell in Japan and Australia but rose in Hong Kong. Treasuries were boosted by the flight-to-quality sparked by the China selloff and a solid 5-year auction. A gauge of the dollar retreated for a second day in U.S. hours.
Apple slipped as much as 2.9% in late trading after warning that sales growth may be slowing and supplies are getting tight, putting a damper on investor excitement. The company said on a conference call that supply constraints will affect the iPhone and iPad in the current quarter. Decelerating demand for services also will drive the slowdown. Apple declined to provide specific revenue forecasts, a practice it adopted during the pandemic. The cautious remarks followed a sales gain of 36% in the third quarter, with revenue of $81.4 billion shattering Wall Street’s $73.8 billion estimate.
The quarantine-free reopening of Thailand’s Phuket to vaccinated tourists is under threat after a flareup in new Covid cases that led to the closure of schools and shopping malls. The resort island reported 125 new Covid-19 cases during the week ending July 27, higher than the government-set threshold of 90 weekly cases that could trigger a temporary suspension of the program. Meanwhile, U.S. health officials said fully-vaccinated people should go back to wearing masks indoors in areas where cases are surging; the U.K. government plans to allow visitors from the U.S. and the EU to travel to England without needing to quarantine if they have been fully vaccinated; and just a few weeks ago much of the world seemed poised to leave Covid behind. This is the crushing reality today.
China’s top legislative body will discuss imposing new laws on Hong Kong and Macau next month, the official Xinhua News Agency reported. The Standing Committee of the National People’s Congress will review proposals to add national laws to the annexes of the territories’ Basic Laws — their de facto constitutions — at its upcoming session from August 17 to 20. No details of the laws being considered were revealed. On Tuesday Hong Kong saw its first conviction under the Beijing-imposed national security law, when an activist was found guilty of inciting secession for displaying a banned slogan that was chanted by tens of thousands of protesters. And yet, in spite of China crushing the city’s protests and overhauling laws, signs of an investor exodus are hard to find.
U.S. Defense Secretary Lloyd Austin sought to reassure the Asia-Pacific that the U.S. was committed to engagement in the region, while vowing to challenge what he called China’s aggression. “We will not flinch when our interests are threatened,” Austin said in a speech in Singapore. Austin’s remarks focused on U.S. ties with Association of Southeast Asian Nations, including the millions of vaccines that Washington has donated to the region. But he also stressed that the U.S. and its partners faced a common challenge in China. The Pentagon chief’s visit coincides with the U.S. military drawdowns in Afghanistan and Iraq, a move that will allow Washington to shift more of its focus to the Western Pacific.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours:
And finally, here’s what Tracy’s interested in today
Behold, the flip side of China's recent clampdowns. On Tuesday shares of China's national semiconductor champion, Semiconductor Manufacturing International Corp., jumped by as much as 20%. While there have been r umors of an order from Huawei for a while, the timing and extent of the move — the biggest jump since the company debuted on the Shanghai exchange last year — suggests something else might be afoot.
The move is “due to a sector rotation, with the semiconductor industry expected to benefit from government policies as China aims for self-sufficiency,” said Charles Shum, an analyst at Bloomberg Intelligence.
So while China's crackdowns on tech, private education companies and other businesses have destroyed billions of dollars of market value in recent days, they're also presenting opportunities for investors who are able to figure out and align themselves with government policy.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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