Lend me 100 and I pay you back 99.6.

Lend me 100 and I pay you back 99.6. 

The Japanese Central Bank started it and the European Central Bank took it to a different level.  Japan’s government has been paid USD 464 million to borrow money since yields turned negative in October 2014.  The European Central Bank (“ECB”) went full throttle with negative interest rates and lowered its overnight deposit from -0.3% to -0.4%.  It is like taxing people with money in bank account.  Mario Draghi, European Central Bank President said it out loud that interest rates would stay very low for at least another year.  Mario is doing everything it could to stop Euro zone economy goes into deflation.  ECB extended its monthly asset purchase to EUR 80 billion a month and will add investment grade euro-denominated bonds issued by non-bank corporations.  This means ECB is practically lending money to non-bank corporations directly.  German mortgage bank Berlin Hyp AG made history by selling a EUR 500m 3-year bond at a yield of -0.162% last week.  There is now over EUR 6 trillion of debt in the world that yields negative which is 29% of the Bloomberg Global Developed Sovereign Bond Index.  Central Banks in Switzerland, Sweden, Japan, Denmark and ECB are all in the Negative Interest Rate Policy (“NIRP”) Club.  What this could mean is that US interest rate and UK interest rate could eventually get to negative as well.  Normal citizens are getting used to getting close to zero for their deposit in GBP.  In the corporate world, its means blue chips companies would enjoy cheap borrowing and they are encouraged to leverage and expand through acquisition.

Marriott and China’s Anbang Insurance Group have made Starwood Hotels and Resorts Worldwide Inc shareholders very happy.  Marriott is keen to acquire Starwood that owns the Sheraton and Westin hotel brands to create the world’s largest hotel chain in the world.  Marriott offered USD 12.2 billion or USD 72.08 per share in November last year.  Anbang put USD 13.16 billion cash on the table in March (equivalent to USD 78 per share).  Marriot increased its offer to USD 13.6 billion with a stock and cash offer on 21 March, 2016.  Anbang may not get the hotels but they have surely flexed their muscle.  Last October, Anbang bought Waldorf Astoria New York for USD 1.95 billion, the largest-ever US real estate purchase by a Chinese buyer.  Anbang is Beijing based, started in 2004, and has 30,000 staff and more than EUR 100 billion in assets.  Anbang has less than 5% market share in the domestic insurance market in China.

Cheap borrowing could also lead a company to the cliff.  Valeant Pharmaceuticals was once a real gem in the fund managers’ eyes.  Valeant made use of cheap funding available.  Buy up companies and increase the price of drugs.  Their big wins included eye-care company Bausch & Lomb and gastrointestinal medicines maker Salix Pharmaceuticals.  Valeant also tried to buy Botox maker Allergan but that did not go through.  Buy low sell high, rule number 1 in trading.  Unfortunately, politics are not exactly science and politicians questioned Valeant aggressiveness in raising two heart drugs prices.  The stock dropped 88% in the last 6 months as of 21 March, 2016.  The company is trying to pivot its strategy through getting a new CEO.  Billionaire investor Bill Ackman’s Pershing Square Capital Management lost USD 764 million in its investment in Valeant.  The board of Valeant invited Mr Ackman to join the board, a very expensive board seat.

The new mega trend is cheapest funding ever is available to corporates.  The old trick is to leverage and buy low sell high.  Borrowing rate at zero means infinite rate of return in theory.  If one company pays nothing to borrow money (or even gets paid to borrow money), any profit this company could make from the loan means huge return.  Too good to be true?  It happened before and probably still happens in some countries where if you know the right person in the government, you get cheap land, cheap construction loan and guarantee buyers and tenants.  Government toll road projects and green energy projects are classic example.  The negative interest rate could make this business model even more lucrative.  This is exactly the purpose of ECB to encourage corporations to invest and grow.  ECB and central banks in the NIRP Club believe this can fight against deflation and increase GDP.  Before that happens, investors should expect to see more mergers and acquisitions in the stock market and stock prices could reach higher level.  There will be winners becoming losers like Valeant.  Very few people have betted on Leicester City winning the league at the beginning of the season.  Quite a few would guess Arsenal getting into top 4.  Some investors would find the Starwood and Valeant.  Some may prefer to take FTSE or DAX index funds to catch the general trend.

Brexit. This suspense is terrible.

Brexit.  This suspense is terrible.

This suspense is terrible.  I hope it will last until 23rd June.  UK referendum to exit Euro zone is a big deal.  Yes to stay and accept the immigrant issues, get one off refund from Eurozone bailout, enhance London financial center status and other terms.  No means exit Euro zone and many things could change from import export tax to individual working visa.  The GBP dropped 2% on 22nd February on the back of London Mayor Boris Johnson joined Brexit campaign.  This shows the financial market may not welcome the possible exit which is generally viewed as bad for business.

One of the smartest UK decisions in history is to retain British Sterling and did not use Euro.  UK could maintain its own independent monetary policy such as interest rate, issuance of debts and budget.  Imagine if UK has to follow Euro zone to adopt negative interest rate.  Look at the headache Switzerland had in trying to defend EUR CHF.  Something is not working in this relationship and both UK and Euro zone have put in effort to mend it.  Prime Minister David Cameron has put in great effort to negotiate the terms for this referendum but the terms seem to be just pain killers. It may ease the pain but does not change the relationship.  If UK citizens vote yes to stay, the big picture remains unchanged.  If UK citizens vote no, UK can decide its immigration policy on Euro zone citizens.

Immigration policy is probably as important as monetary policy.  It has a very long term and deep impact to the culture.  While the facebook, the Instagram and YouTube have flattened the world as every global citizen is exposed to similar information, actual people movement can have big impact to employment, demography, religious, talent structure of a society.  The hedge fund managers and traders may sell off GBP as an immediate reaction to the uncertainty of Brexit.  But these movements in financial market are short term.  Voters need to consider the impact to the future generations.

Global stock market continues to be volatile and fragile.  Some oil exporting countries are liquidating asset to make up of the shortfall in cashflow due to low oil price.  Mutual funds and hedged funds are probably still getting redemption from oil related high networth individuals and family offices.  As stock prices drop, there are margin calls on clients who are leveraged and these margin calls lead to more liquidation.  The low interest rate in USD, EUR and JPY encouraged investors to leverage in the past years.  So the market is deleveraging portfolio that took years to build.  The selling is so fierce that it distorts market valuation to 2008 level.  If this is 2008 and history repeats, then it is a year to bargain hunt.  Some investors may consider buying index funds.  However, the banking sectors, the oil and gas companies, commodities sector and properties in some markets deserve further consideration.  European banks are once again under the spot light and there have been a lot of news about Deutsche Bank.  Deutsche Bank is trading at EUR 14.92 as of 24 February, 2016.  It has fallen 33.3% since 31st Dec 2014.  Credit Suisse, BNP, HSBC, Barclays have all fallen 39%, 21%, 23% and 26% in their share price since 31st December, 2015 respectively.  No bargain hunting here.

BP and Royal Dutch Shell have gone down 3% and up 4.6% in share price since end of last year.  In the same period, oil price is down 14%.  BHP Billiton, Rio Tinto and ArcelorMittal share prices are 10%, 8% and 19% down year to date respectively.  Many of these companies have debt to be re-financed and even if some of them managed to find lenders, the cost of fund is likely to increase.  There is an over capacity issues in the resources sector and consolidation will happen.  It is probably too early to bargain hunt but there should soon be some emerging opportunities in oil and gas stocks.  They just got hammered too badly.

Property prices in Asian cities like Hong Kong and Singapore are softening.  This is because of the government policies in Hong Kong and Singapore have been armed to deflate the property bubble.  On the other hand, residential property prices in China tier one cities like Beijing, Shanghai, Shenzhen are rising 30% to 60% in the past 12 months according to local property agents.  Some high end luxury properties in these Chinese cities are selling at over GBP 1,000 per square foot.  Chinese government has narrowed the gate for money outflow and the local stock market has been more than disappointing.  This combination drives excess liquidity to tier one cities property.  London properties will probably continue to attract Asian buyers.

Global stock markets to start 2016 with a nose dive

Global stock markets to start 2016 with a nose dive

FTSE 100 index ended 2015 at 6,242.32 and took a nose dive to 5,673.58 closing level on 20^th January. That was a 9.1% drop in less than a month. As of 25^th January, FTSE 100 recovered a little bit from the low and closed at 5,877. In the same period from 31^st December, 2015 to 25^th January, 2016, Eurostoxx 50 Index dropped 8.1%, Dow Jones dropped 8.8%, Nasdaq Composite dropped 8.7%, Japan Nikkei 225 dropped 10.1%, China Shanghai Composite dropped 17.0%. This is a truly global sell off and there is no escape. Institutional selling has to be part of it. What happened? Did Santa send the wrong presents to the fund managers? One explanation is the butterfly effect of falling oil prices is hurting oil rich countries war chest. Hence these countries are selling their mutual funds and overseas investment to make ends meet. Saudi Arabia has been withdrawing billions from markets and it is considering to list Aramco, its state-owned oil giant.

Oil price is at 13-year lows and went below USD 30 a barrel. US, Russia and Saudi Arabia are neck to neck as the 3 biggest oil producers in the world, each at above 10 million barrels per day. For countries like Russia, Saudi Arabia, Nigeria, Venezuela who are living off petro dollar, a lower oil price could also force them to sell more to maintain cash flow. The 13-member oil cartel OPEC led by Saudi Arabia abandoned its policy of restraining production to control oil prices in 2014 and some of these countries are pumping faster than ever to pay for their bills. Iran, with the world's forth largest oil reserve base, is ready to pump up its oil production as sanctions against it are lifted. Such increasing supply put oil price and producers' financial health in a downward spiral.

Let's also point fingers to US uplifted its 40-year ban on oil exports. US oil producers can export crude oil after a surprise change in policy that was strongly opposed by President Obama and fellow Democrats. In December 2015, politicians in US Congress made a compromise. Democrats agreed to lift the 40-year ban on US crude oil exports. Republicans agreed to extend tax subsidies for wind and solar by 5 years. The 30 percent tax credit for solar was going to expire in 2016 and the tax credit for wind expired in 2014. The effects of these policy changes are estimated to be USD 25 billion or the wind and solar energy sectors. Most US oil producers need oil price at USD 40-50 per barrel to have a profitable business. So with oil struggling at USD 30 a barrel, most US oil producers are not going to produce much and definitely not to export any oil overseas. However, this means oil price could be capped at USD 50 or so because US production can significantly increase supply when pricing is right.

As of 25^th January, GBP lost 3.3% against USD since end of 2015 and it is at a 7-year low. Basically, GBP is catching up with other currencies and giving in to the strong USD. As all major currencies are weakening against the USD to increase export competitiveness and release downward pressure on asset prices, the GBP eventually followed. The strong USD finally transferred to a US stock market correction which sent a quiver to stock markets all over the world.

China's energy demand is growing at the slowest pace since late 1990s and growth in energy-intensive sectors such as steel, iron and cement collapsed. It has waved goodbye to double digit economic growth and trying to keep up 6% GDP growth a year. The Chinese Yuan got its place in the Special Drawing Rights basket, a reserve currency basket decided by the International Monetary Fund last year and they must be exhausted. The Yuan has fallen 1.3% year to date against USD, 4.1% since end of October 2015, 6% since 10 August 2015. The Yuan depreciated 2.9% in a single day on 11 August 2015. A weakening economy, a falling stock market and a falling currency in China reminds people of what happened to Russia. The BRIC countries have all lost their steam and the world economy is like a plane with an American captain with all engines stalled but 1 and running on reserve fuel. Perhaps the world economy is not crashing like in 2008 but certainly January was a hard landing. Just hope that it was a landing and not just going through turbulence.

US rate hike . So what?

US rate hike . So what?

Finally, since June 2006, US interest rate has gone up again. Fed Rate has gone up by 0.25% to a range of 0.25 to 0.5%. So why did US Fed increase interest rate in Decembere? There is no perfect timing and perhaps the Fed missed a better slot earlier. Like before the China A shares bubble burst in July. The tension between the European Union and Russia over Ukarine, the Syria rufugees and the unhealing Greek situation have nailed Euro to the floor. Commodities currenies such as Canadian Dollars and Australian Dollars fell as China economic slowed down. China Renmanbi also joined the dark side to depreciate its currency to ease the downward pressure in property and stock market.

Another angle is that the purpose of loosening in monetary policy and dropping interest rate to zero was to save the US finanicial industry. The AIG, Fannie Mae and Frediie Mac, Citibank and other financial institutions that were paralized from the shock of Lehman bankrupcy. Now these Financial Institutions have regained strength and the US Fed can increasae rate. Increase interest rate is like sending US economy to the gym for training. Make the economy sweats, gets fit and builds muscle and prepare for the next bubble bursting. US companies can take advantage of the US Dollar strength to do acquisition. Many foreign markets and currencies have fallen against US Dollar. It could be shopping time.

Bond market would suffer especially bonds with fixed coupon. As interest rate goes up, these bond prices tend to drop. The longer the maturity of the bonds, the more they could drop in prices. The currency market is harder to read as USD is already so strong. Long USD short EUR is an attractive carry trade. Banks charge clients to deposit EUR and pays clients interest on their USD deposit. Would EUR drops to less than a USD? Many institutions have shorted EUR agasint USD and rode the long term trend. Many hedge fund managers and currency traders who short EUR with high leverage got burnt from wrong timing as EUR could rebound fiercely. For those who are non professional but have a strong conviction in the currency market, lower or no leveage position could help you to ride the longer trend and withstand sharp market movement. Leverage or margain trading are definitley high risk investment as the investors could lose more money than they put up in the first place, leading to debt beyond affordability.

For stock investors who feel EUR will be further weakened against USD, companies that are EUR sensitive could be interesting. For example, international airlines that have most of the cost in EUR but getting revenue in USD. Similarly tourism sector, luxury goods, engineering companies and manufacturers. Eurostoxx 50 Index ETF or the German DAX Index ETF are convenient investment tools to get exposure to the Euro zone story. However, the increased compeitiveness due to a weak Euro is offset by many risk factors. The Euro zone is a live case study of a system that is facing all the uncontrollable risks at a corporate level. Currency unpeg, political risk, war, terrorist attack and social unrest are all real risks in the Euro zone. Buyers beware.

There are 2 other economies that could potentially continue their growth in a rising US interest rate environment. UK is likely to enjoy its physical separation as an island from the rest of Europe and its independency in Great British Pound. UK global software and IT sectors are competitive. Education sector is a real GDP contributor and the growing population in oversea university students drives rental market nearby and supports property prices. UK economic grwoth is expected to be around 2.9% in 2015 and it is the second fastest in the advanced world after USA. UK economy is expected to be 6.1%I larger than its peak before the financial crisis. Ireland is the only English speaking country in Europe using EUR. Its GDP rose by 7% in the first half of 2015, probably the fastest in the Euro zone after surpassing the pre-crisis high last year. Its low corporate tax rate of 12.5% attracts phamaceutical companies like Pfizer and tech companies like Apple, Google and Facebook to setup European base.

Investing for a safer world

Investing for a safer world

The attack in Paris has reminded everyone the world is under a lot of tension.  In this article, we will look at the impact to the investment world. 

There will be increasing investment in security, surveillance and defense at country level.  Most countries are going to increase resources in police and army.  This is definitely good news for stocks in related sectors.  Increase in government spending in general can create jobs and simulate economy.  Overall positive for stock market in the near term, say, 12 months.  An example of an UK listed company with exposure to the defense sector is Smiths Group plc that rallied from 925.5 GBp on 16 November to 1036 GBp on 25 November.

Social media will be monitored closely by government agents, police and army.  Can big data analysis predict or guess who, when and what?  There will be demand for faster computation power to analyze zillion of messages that appear on all social media platforms.  People want better encryption technology, smarter computer virus, and stronger anti-virus.  Positive news for hardcore tech companies as strong technology will attract investment before operating profits.  Computer Scientists will see more investment from Private Equity, Venture Capital and family offices who want to be there before Google, Facebook, Amazon and the BAT (Baidu, Alibaba and Tencent) from China.  Google is trading at its year to date highest level at around USD 750 a share.  Google beside dominating the search engine business and running YouTube, it is also one of the biggest venture capital in technology.

Central banks are likely to lean towards a more relax monetary policy to boost feel good factor and offset the fear factor.  This leads to the thought of a weaker Euro versus USD.  Good news for Europe based manufacturers like the German car manufacturers which are desperate to regain client and investor confidence after the misunderstanding in carbon emission figures.  With national security as the priority, issues that money can solve such as the Greek bailout may have become a smaller problem.  A weakening Euro has made the Greek bailout cheaper in USD terms.  Currently, EURUSD at 1.06 level is pretty much the bottom in the past 12 months.

Strong security measures will be implemented at transportation facilities.  Some may already notice the longer waiting time at airport custom.  The passengers and the tax payers will eventually bear the increased cost to manage railway stations, airports, bus terminals.  However, the number of people getting on the plane will continue to grow globally as there will be more people in developing world like China and India flying.  Global money managers will still be interested to invest in airports.  Both Heathrow and Gatwick are owned by unlisted companies.  Heathrow Airport Holdings was the old British Airport Authority (BAA Plc) which was delisted in 2006.

Tourism and airlines are immediate victims and present different opportunities.  Most global airlines are already suffering from increasing competitions especially regional budget airlines continue to grow in both geographical coverage and capacities.  This trend is likely to continue and the end of the tunnel is not yet in sight.  Hotel operators will suffer in the short term but the growth will come back.  The recent Marriott Starwood merger will create the biggest hotel operator is like a reality show of the Hotel Tycoon board game.

Retail and consumer sectors will continue to invest more to grow online.  The change of buying behavior from brick and mortar to internet continues and high street and shopping malls will continue to be dominated by global brands.  There are signs of slowing growth in the luxury consumer segment.  The Russian and Middle East petrol dollar has become history.  Chinese are still shopping but in October, the domestic growth has slowed to below 7% for the first time since 2009.  Retail and consumer may not be a segment that offers the easiest return.  Along the food chain, property investment companies especially those invest in shopping malls. British Land Company Limited has gone up from 460 GBp in 2012 to 870 GBp level in October.  It retreated to 830 GBp level in November.

Post offices and logistics companies, in general, have benefitted well from the growth in global e-commerce.  More transactions on Amazon and Taobao mean more parcels to be delivered.  Logistics companies will need to be more cautious about what they are shipping and where they are shipping to.  The impact to logistics companies is probably milder than the impact to passenger carriers. Royal Mail reached 524 GBp in May and 525 GBp in June.  At 480 GBp level currently at about 15 times profit to earnings ratio is already a rebound from 442 GBp on 2 November.  

In the financial sector, more attention to anti-money laundering policy, tighter measure in client onboarding and source of fund.  This means higher running cost and less friendly in account opening process especially for overseas individual or corporate accounts.  Global banks have just spent a fortune to adapt to the post Lehman regulation regime and now they face increasing demand in compliance.  This could be the last straw that breaks the camel bank for the banking sector.  More laid off, lower profitability and lesser return for investors.  Banking services are aligning themselves with government services rather than an exciting private sector.

When Cameron meets Xi Jingping

When Cameron meets Xi Jingping

Cameron and the Royal Family definitely treated the leader of 1.3 billion people well.  Xi Jingping, China’s President, visited UK and made friends with the Queen and princes.  It was only 1997 when China got Hong Kong back from UK and China has grown to the second largest economy in the world since.  Chinese students are flooding into UK Universities and their parents are buying UK properties without paying a visit to the local pub.  We have seen hot money from Middle East and Russia and the Chinese is the similar.  But the base number of 1.3 billion people makes everything so much larger.  UK, being the most business friendly country in Europe, is in a good place to capture the China growth story.  Europe wants to export to China and China wants to invest into Europe.  One of the big picture topics is the globalization of Renminbi, the Chinese Yuan.  London wants to continue its success as a global currency trading center and Cameron has done a good job to secure UK a front row seat in Renminbi globalization.  Mr Osborne’s northern powerhouse project is hoping China will put some money to revive the Industrial North.  Education, tourism, healthcare, design and technology, fashion are some of the sectors where UK has good chance to attract Chinese investors.

US election is getting interesting and people start to think it could be Hillary Clinton versus Donald Trump.  Donald Trump has brought his television personality to the election and his appearance is almost entertaining.  It is hard to imagine how global leaders view Mr Trump’s “Apprentice” style.  The lucky thing is that the next US President is likely to enjoy US being the super power by far in the next decade.  Europe is barely keeping Eurozone together.  Russia is cripple and depending too much on its oil export.  Japan will continue to lean towards US rather than China.  China will grow in a much lower pace in the next decade than the past decade.  The gap between US and China may actually widen due to the lead US has in science and technology.  In 10 year time, it may not be Microsoft or Google that lead the pack, but likely to still be a few US companies leading the industrial revolution.

If you talk to a teenager, there is a fair chance that he or she finds IBM a rather unknown brand.  Although IBM probably has every Fortune 500 company as clients, there is a fair chance it would be a much smaller company in 10 years than today.  For a 104 years old company that reports lower quarterly revenue for 14^th straight quarter, investors have the right to be skeptical.  IBM share price closed at USD 144.71 on 23 October, 2015.  It is at a low range if one looks at its USD 140 to 215 trading range in the past 5 years.  Dividend yield at 3.6%, 12.7 times Price to Earnings Ratio.  Microsoft on the other hand is at its highest share price since 2000 as the stock was up 10% on 23 October to close at USD 52.87.  2.72% dividend yield 35.7 times Price to Earnings Ratio.  IBM is trying hard to transform to services, platform and cloud but new leaders like Google and Amazon are also in this space.  Old guards like SAP and Oracle are defending their territory as well.  While IBM is getting out of hardware, Microsoft is moving into hardware like notebook, tablets and phones.  Windows is probably the only meaningful candidate to squeeze into the mobile operating system arena that Apple IOS and Andriod occupy.  Microsoft has subtly following Apple business model and their Surface Book and Surface Pro are competing against MacBook and iPad.  And Microsoft Xbox has all the additive gamers hooked already.  Imagine you have an Xbox in your mobile.  It will be like iTunes driving consumers to buy iPhone.

According to a research carried out by network experts Ericsson, it estimates there are 2.6 billion smartphone users in the world in 2014 and growing to 6.1 billion by 2020.  Looking at the number of people staring at their phones in the tube or even in restaurants, we know human has just mutated.  However, what more do we need from the phones which is already dominating our lives.  There are already too many apps for everything one could dream of.  The iPhone6 Plus or Samsung Note 5 is already more powerful than most PCs in the office.  The phones already justify more “face time” than your loved ones.  It is time to think how many more dollars can iPhone, Note or Galaxy can get from you.  Perhaps the next Uber can give you the next Nokia smartphone for free as long as you promise to use their services 4 times a month.  Apple share price has gone from USD 40 to USD 120 in 5 years.  It could be the next IBM in this fast changing world.

The revival of “Made in Japan” and China just party on

The revival of “Made in Japan” and China just party on

The long awaited rate hike from US Fed did not happen in September.  The Fed is worried that the fragile emerging markets especially their weak currencies may not be able to hold up.  It is great that the Fed is so considerate and they are right to be concerned.  Brazilian Real, Russian Ruble, Indian Rupee and Chinese Yuan have weakened against 52.4%, 8.74%, 4.5% and 2.9% this year as of 22 September.  The Chinese bull has lost steam and commodities prices have been falling.  Australian Dollar and Canadian Dollar have lost 13.9% and 14.2% respectively against the USD in 2015.  Market is saying the current scenario is like Asian crisis in 1998.  The developed markets did not get too hurt in 1998 and they probably could survive “Asian Crisis 2015” just like they survived “Russian Ruble Collapse 2014”.  Well, the Fed made it clear that rate hike is still on the agenda and the plan to starting increasing interest rate is delayed but not cancelled.  Asian emerging markets have an extra month to deal with an even stronger US Dollar.

The dynamics in Asia because of the currency movement have changed significantly in the past year.  Japan has been a quiet winner with a much weaker currency and it manages to be a lot more competitive in exports.  The weakening Japanese Yen has also turbo charged Japan tourism and property markets.  Bloomberg report made a forecast of 4 million Chinese tourists to visit Japan in 2015.  The Japan National Tourism Organization said 576,900 Chinese tourists visited Japan in July 2015.  Hong Kong people are investing in Tokyo property which they find more affordable than Hong Kong property.  Japan manufacturing sector enjoys both weak Japanese Yen and low oil prices.  There is a revival theme happening.  Inflation in Japan is 0.2% year on year in August and local people seems to be able to cope.  Japan economy as reflected by the GDP has contracted by 0.3% in Q2 2015 versus Q1 while Q1 was up 1.1% versus Q4 2014.

China is working hard to develop service industry and domestic economy.  It has said goodbye to the low cost labor export driven economy as many South East Asia countries are a lot more competitive in price.  The recent stock market crash and Chiense Yuan devaluation may get a lot of worrying look from the West.  But the inside story is a fair bit stronger.  Most people in the West may struggle to name a China household brand although a lot of household appliances and gadgets are made in China, including iPhones.  Maybe a few people could name Huawei and Leveno because of mobile handsets and computers.  In China, local brands are doing well in domestic market and that is a 1.3 billion people market.  Consider Alibaba's Taobao.com which is mainly targeting Chinese residence.  As a brand, Taobao is nothing like Amazon but it has 350 million users versus Amazon 244 million users.  Similarly, Facebook's Whatsapp versus Tencent's WeChat is 900 million users versus 600 million users.  Due to Chinese language and regulations, the local brands and products have obvious advantages in the domestic market.  The traditional brick and mortar business is even more localized with the exception of retails especially in fashion and luxury products.  H&M, Zara and Uniqlo have big stores in prime locations.  Hermes, Chanel, LV and many more brands are easier to find than a HSBC branch.  There are 25 Ferrari showrooms in China.  Of course, there are also 1500 Starbucks in China.  China economy is ok and still moving forward.  On the contrary, the Chinese stock market has taken a step back as government and regulators are discouraging trading.  The once most liquid stock and futures markets have gone into nuclear winter.  Stock market turnover has dropped 70% from its peak and has totally lost its popularity as the benchmark index CSI 300 is 40% off its peak in June.  The CSI300 futures used to trade over 2 million contracts a day and now at 30,000 level.  Why?  The exchange decides to charge retail investors 40% initial margin and practically limit retail investors to trade only 10 contracts a day.  This shows the government is determined to tightly manage the stock and futures markets.  If they find it hard to manage, they limit the activities to a scale that they could manually manage.