The latest twist in the Sino-US trade saga suggests that there is a gulf between the US administration’s anti-Chinese rhetoric and its willingness to negotiate solutions. There were sighs of relief in Shenzhen yesterday after the US announced that it would lift the ban on companies supplying components to Chinese telecommunications giant ZTE.
Imposed for a breach of sanctions on Iran, the ban was supposed to last for seven years. But a new agreement will allow ZTE to buy from US suppliers once more, in return for paying a US$1.4 billion fine, changing its management and board, and submitting to US monitoring. The move has pulled the company back from the brink of collapse, as US-made components are essential to its business.
ZTE’s shares have been suspended since the ban was announced, but shares in its global component suppliers performed well in response to the announcement. Qualcomm and NXP Semiconductors also rose on the news; Qualcomm, a US microchip-maker, hopes to acquire Dutch peer NXP, but requires approval from the Chinese authorities to complete the deal.
The ZTE announcement wasn’t the only good news for Chinese companies this week. The 234 A-share-listed companies included in MSCI’s global and regional indices at the end of May enjoyed their first full week of trading as MSCI components. The A-share market is China’s domestic stock market, consisting of shares listed in Shanghai and Shenzhen, and has previously been relatively inaccessible to global investors.
Together, the Shanghai and Shenzhen stock exchanges make up the world’s second-largest stock market. Although the 234 shares currently included in the MSCI indices are just a fraction of the A-share market’s 3,000 stocks and around $8 trillion in market capitalisation, more are expected to be included soon. In a report published in May, MSCI said that around half its emerging-market index could eventually be made up of Chinese shares.
With a spring in their step on the prospect of buying by index-tracking funds, the major Chinese A-share indices performed well in the first four days of the week.
A tale of two retail sectors
With the S&P 500 index up 1.3% by Thursday’s close, US investors were also in bullish mood. The top performers were retailers Kohl’s and Macy’s. Investors have been encouraged by the way these companies have responded to the e-commerce threat with loyalty schemes and digital operations of their own.
On the other side of the Atlantic, the retail picture was less rosy. The sun has been shining this week, but the UK high street is still in the shade. On Thursday, House of Fraser announced that it would close 31 of its 59 department stores in 2019. These include its flagship Oxford Street store. The move could lead to the loss of 6,000 jobs. Although House of Fraser is privately owned, publically traded retailers were weak, with both Tesco and Sainsbury’s slumping on Thursday. Overall, though, the FTSE 100 eked out a modest gain of 0.3% by Thursday’s close.
Tech treks on
This was another eye-catching week for the technology sector. Amazon made gains, partially at the expense of insurers, as rumours emerged that the e-commerce titan is to move into the insurance sector. Another tech standout was Twitter. Its shares hit a three-year high as it replaced Monsanto in the S&P 500 – and investors were swift to register their ‘likes’.
And finally ….
Twitter users are often warned that internet never forgets. But nor, sometimes, does the Earth – not even over a period of half a billion years. This week, scientists in China announced that they had discovered the world’s oldest footprints in the Three Gorges area of Hubei province.
These are the first known footprints to predate the ‘Cambrian explosion’, when a wide variety of animal life appeared. Instead, the Three Gorges stepper belongs to the Ediacaran period, from which relatively few fossils have been found. That’s because most Ediacaran earthlings were simple, soft-bodied beasties.
The creator of the Yangtze footprints, however, may have been a hard-bodied arthropod, or perhaps a bristly sort of worm. Whatever it was, it was only around two centimetres long and about half that across. But its tiny footprints could represent a sizeable step in our understanding of our planet’s prehistory.
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