• Business
    Bloomberg

    China Investors Pick Winners From Xi’s Big New Economic Mantra

    (Bloomberg) -- “Dual circulation” might not sound like the niftiest moniker for an equity strategy, but it’s a phrase that’s captured the attention of investors in China’s $9.5 trillion stock market.After first raising eyebrows in a May document, the Chinese Communist Party’s Politburo last month emphasized that a “dual circulation” strategy will be critical to China’s long-term development. The idea is to twin a build-up in domestic economic strength in face of intensifying external risks -- while maintaining China’s deep engagement with the global supply chain.“Policy makers likely envisage China’s growth model in the future will be much less like Japan and Korea, but more like the U.S.,” said Yi Xiong, chief China economist at Deutsche Bank AG in Hong Kong. “Preferences of domestic consumers will become more important than international ones in shaping companies’ decisions.”Some of the investor reactions to directives from Beijing have sparked crazes as China’s millions of retail traders, who dominate day-to-day transactions in the onshore market, rushed toward the new theme.In particular defense, consumer and satellite stocks have outperformed lately, including:AECC Aviation Power Co., up 102% since the end of JuneAVIC Shenyang Aircraft Co., up 101%China Avionics Systems Co., up 45%China Satellite Communications Co., up 27%There are few details on the new approach. President Xi Jinping oversaw the July 30 Politburo meeting where the “dual circulation” strategy was emphasized. That was days after Xi said at a gathering with business leaders that “we must give full play to the advantages of the domestic super-large market” amid rising protectionism and the global economic downturn. The strategy is to effectively reduce reliance on the West -- just as other nations seek to become less dependent on China for economic growth amid rising U.S.-China tensions.Think tanks are already kicking into gear. A 21st Century Economic Research Institute study on Aug. 11 said that Chinese cities relying on overseas trade ought to reorient toward the domestic economy.“A concerted shift by Chinese cities away from exporting over the next five years would reshape global trade patterns and supply chains,” analysts at Trivium China, a Beijing-based consulting group co-founded by economist Andrew Polk, wrote in a note.Read more: Xi Calls for Pivot to Domestic Economy as Recovery ContinuesThe Communist Party’s Central Committee will meet in October to outline China’s next five-year plan, which could build out specific policies to buttress domestic demand.Among the policy steps that Citigroup Inc. analysts are watching for: income-tax cuts and social security contributions to boost household incomes, improved medical coverage to reduce precautionary savings and experiments with land reform to “unlock” rural wealth.Private consumption amounted to 39% of China’s gross domestic product in 2019, “low” by both emerging market and Group of 20 nation standards, Citigroup economists including Xiangrong Yu wrote in an Aug. 9 report. The ratio in the U.S. is more than two-thirds.“Top-down policies are not to be taken lightly -- they mean business,” said Wu Xianfeng, a fund manager at Shenzhen Longteng Assets Management Co. “It’s rewarding to follow the party’s lead when investing in China.”But “dual circulation” may be a preoccupation for investors for some time to come, given that the context of the leadership’s discussions have been the country’s long-term development.Wu said he’s already shifting some of Shenzhen Longteng’s positioning.“We have been cutting on firms that have higher overseas exposure, such as consumer electronics, and going heavy on those that mostly rely on state investment,” such as satellite stocks, Wu said.That tactic draws on a key component of China’s likely plan, which is enhancing its already high-priority moves to build up domestic high-technology industries, along with defense.Another favored approach is looking at the companies likely to supply Chinese buyers who previously flocked overseas to snap up luxury items. New duty-free policies in May from the regional government of Hainan, a tropical island off China’s southern coast helped strengthen that narrative.Read more: Top Consumer Fund Places Big Bets on China’s Tourism RevivalDepartment-store operator Wangfujing Group Co. has been one of the big winners on that score, surging 311% over the past three months. China Tourism Group Duty Free Corp. has climbed 128% in that time.One school of thought says the new development focus will prove negative for property developers. The argument goes that funding will need to come from somewhere for the new initiatives, and that may starve the real estate sector. Others counter that rising incomes will boost demand for upgrading housing.“The proposal has sparked heated discussion,” Peng Wensheng, chief economist at China International Capital Corp., wrote in an Aug. 10 note on the dual-circulation proposal.Peng’s CICC colleagues including analyst Hanfeng Wang wrote earlier in the month that import substitution may become a key trend, with policy makers paying greater attention to security, resilience and effective control of its supply chains.Given the importance of capital markets to financing industrial innovation along with expanding household wealth, it’s also worth watching leading securities firms, exchanges and investment management companies, according to CICC.But for now, it may pay to watch for further details from policy makers.“Investors in China have become accustomed to following the party’s lead, as it often proves to be quite lucrative in the end,” said Hao Hong, chief strategist at Bocom International. “After all, if you’re gambling in a casino, don’t you have to play by what the gaming hall operators say?”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • U.S.
    Associated Press

    Tribe says new border wall harming burial sites; sues Trump

    A California tribe whose ancestral lands span across the U.S.-Mexico border is suing the Trump administration to block construction of a section of border wall that the Kumeyaay people say is desecrating sacred burial sites. The La Posta Band of Diegueno Mission Indians filed the lawsuit in federal court in San Diego on Tuesday asking for an injunction to temporarily halt the installation of a towering metal wall until the tribe can protect its religious and cultural heritage. The lawsuit was filed against President Donald Trump, Secretary of Defense Mark Esper, who oversaw military funds diverted for the border wall; acting Secretary of Homeland Security Chad Wolf; and Lt. Gen. Todd Semonite, commanding general of the U.S. Army Corps of Engineers, which is in charge of building the wall.

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  • Business
    The Wrap

    WGA Packaging Fee Lawsuit Delayed to August 2021 by Pandemic

    The trial between the Writers Guild of America, Creative Artists Agency and William Morris Endeavor over packaging fees has been postponed five months to August 2021, according to court documents obtained by TheWrap.The move was mutually agreed upon by lawyers for both the WGA and the agencies in response to the COVID-19 pandemic, as well as to give time to resolve issues regarding the scope of discovery for the trial.The two agencies filed a lawsuit against the WGA last year accusing the guild of participating in an “illegal boycott” by having its members terminate representation with their agents after agencies refused to give up packaging fees — payments from a studio to agencies in exchange for packaging talent for a project — and affiliate production outlets. The WGA has filed its own suit against the agencies, arguing that packaging fees are a violation of agents’ fiduciary duty to their clients.Also Read: Lessons From the Writers Guild's Deal With UTA: Why Now and What's Next?Over the past year, the legal battle has changed immensely. Efforts by the agencies to get the guild’s charges against them dismissed were partially successful as a federal district court judge removed several key charges, including federal racketeering charges. The agencies said in April that Birotte’s ruling was a “resounding victory” and that guild leadership “led thousands of writers over a cliff.”But as the pandemic has dragged on and forced hundreds of layoffs across the major agencies, the tide has turned in favor of the WGA. Last month, the guild reached a deal with United Talent Agency, one of the agencies involved in the lawsuit, to phase out packaging fees in the next two years and withdraw their litigation in exchange for allowing writers to be represented by them again. ICM Partners, another major agency not involved with the lawsuit, also agreed to phase out packaging fees, leaving CAA and WME as the two remaining holdouts.Pamela Chelin contributed to this story. Read original story WGA Packaging Fee Lawsuit Delayed to August 2021 by Pandemic At TheWrap

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  • Business
    Bloomberg

    Five Reasons to Be Cheerful About the U.K.’s Economic Prospects

    (Bloomberg Opinion) -- The U.K. economy contracted by a record 20.4% in the second quarter, posting the most dismal performance among major European economies. But output jumped a record 8.7% in June. And last week the Bank of England was surprisingly upbeat, predicting an 18% rebound in GDP in the third quarter and an end-of-year jobless rate of just 7.5%, well below where private economists see unemployment heading. What’s going on?With the government relaxing lockdown measures introduced in March in an effort to halt the spread of the coronavirus, there are signs in recent data that both businesses and consumers are taking tentative steps on the road to recovery. Here, then, are five examples of the economy showing evidence of a brightening future as people learn to live with the virus.1. The construction industry is exhibiting signs of a rebound. New contracts announced in July include a 500 million-pound ($650 million) wind farm to be built by RJ McLeod (Contractors) Ltd. in the Shetland Isles, Scotland, as well as a new Amazon.com Inc. distribution center in Dartford awarded to ISG Plc. Those projects helped boost the total of new construction orders to 6.3 billion pounds in July, according to figures compiled by Barbour ABI. While that’s still down from February’s 7.6 billion pounds, it beats the 5.99 billion pounds for July of last year, the research firm said this week.2\. It’s been helpful to industry that the Treasury has opened the spigots, with more than a million businesses getting help from government-backed programs. Small and micro businesses have benefited from 35 billion pounds of support through the Bounce Back Loan Scheme, with an additional 13 billion pounds channeled through U.K. lenders via the Coronavirus Business Interruption Loan Scheme. That’s made finance more readily available and eased stress in the country’s money, equity and bond markets, based on a Financial Conditions Index compiled by Bloomberg.3\. Staycations and sunshine have boosted demand for summer dresses and playthings. July’s 2.6% drop in annual consumer spending was the slowest decline since the start of lockdown, according to Barclaycard. Britons spent more on non-essential items, with categories such as sports and outdoor equipment, including camping gear, all standing out last month. John Lewis Partnership Ltd.’s department stores have seen an increase in demand for outdoor toys, with sales of paddling pools up almost 1,000% from last year.4\. There’s no such thing as a free lunch. But Chancellor Rishi Sunak’s “Eat Out to Help Out” initiative, providing rebates so restaurants can offer half-price meals in August, Mondays through Wednesdays, is luring people to shopping streets. Evening visits to all retail destinations, including food and beverage outlets, climbed 12.2% on the first Tuesday and Wednesday of August from a week earlier, according to data provider Springboard. (Monday’s comparison was distorted by heavy rain the previous week.) That underlines the beginnings of a recovery in retail footfall already recorded in July.5\. Britons’ sense of individual financial well-being is intimately entangled with the value of their homes. Lockdown petrified the housing market, prompting the government to scrap a levy on the first 500,000 pounds of the value of properties bought, which effectively makes 90% of purchases tax free. Figures last week from mortgage lender Halifax suggest the tax break, introduced at the start of July and scheduled to run until the end of March, had the desired effect.A lot could still go wrong for Britain’s economy. Most importantly, a resurgence in infections could stymie plans to reopen schools in September, slowing the return of employees to workplaces and reigniting fear among consumers about leaving their houses to go shopping or visit restaurants and bars. But for now, some green shoots of recovery are starting to bud.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Business
    FX Empire

    S&P 500 Price Forecast – Stock Markets Continue to Grind Higher

    The stock markets in America continue to rally overall, as we see the monetary flow into the system foreseen traders into buying “assets.”

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