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Investors Would Be Wise to Consider MSCI China Index

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Tuesday, 14 Nov 2017 07:13 AM Current | Bio | Archive

After the House Ways and Means Committee Chairman Kevin Brady said he would not accept elimination of a federal deduction for state and local taxes, it now seems he has the votes to get the House tax plan passed by the House.

The problem with that is that the House tax plan is not the Senate’s tax plan, and it is the Senate’s tax plan that counts.

The Senate has a smaller majority and President Trump has not exactly been conciliatory to the Republican Senators that make up that majority.

A vote in the House if possible on Thursday, which is when President Trump is due to give a speech on tax.

I personally do believe that eventually a tax deal will be done.

The United States offers the National Federation of Independent Business (NFIB) small business opinion poll. The NFIB has been critical of some of the details of the tax proposals and it does seem to be an amazing correlation between the NFIB’s lobbying position and the survey results of its opinion poll.

The producer price inflation (PPI) data are more interesting. This is the best reflexion of corporate pricing power that we have and a modest rise in corporate pricing power, reflecting increased labor costs, would be of interest.

The Euro area just released its 2nd flash estimate of the 3rd quarter GDP that came in at 0.6 percent q/q and 2.5 percent on a yearly basis.

In the U.S., Q3 GDP came in at 0.7 percent q/q and 2.3 percent y/y.

From the UK, there are more Brexit divorce negotiations consequences. These are tedious and should not be considered significant until politicians have learned to stop posturing.

Alternatively, as it seems relatively unlikely that politicians will learn to stop posturing, these should not be considered relevant until a lot closer to the December EU heads of government summit.

U.K. producer price inflation (PPI) increased 2.80 percent in October over the same month in the previous year and down from 3.3 percent in September.

Consumer price inflation (CPI) came in at 3 percent in October, unchanged from September.

The lingering effects of sterling’s weakness seem to have less of an impact than some might have supposed.

Now this is interesting for investors to know. On November 11 we got the Chinese Singles’ day, which is the day that the young Chinese celebrate the fact that they are proud of being single, and that has become a very important commercial event that cannot be overlooked.

On that day, buying through Alibaba’s main shopping sites totaled of $25.4 billion dollars, which is 4 times the combined figure for Black Friday, Cyber Monday and Thanksgiving in the U.S. last year

It’s also interesting to take notice that Alibaba set a world record that day for payment transactions with its mobile wallet app Alipay processing 256,000 payment transactions per second. A total of 1.48 billion transactions were processed by Alipay in the entire 24 hours, with delivery orders through Cainiao (Alibaba's logistics affiliate) reaching close to 700 million, breaking 2016's record.

Now, the methods that are used by one of the top Chinese e-commerce firms to achieve $25.4 billion in sales in one day is also important to have knowledge of:

First, 90 percent of Alibaba’s total transactions were executed via mobile devices. It must be said that Alibaba’s apps have improved the browsing, search and payment process for users.

Automation had everything under control. Alibaba delivered 56 billion AI-powered personal recommendations to customers on Singles’ day, and 410 million personalized ads. Automated AI chat bots handled 95 percent of customer inquiries on the day.

Alibaba has turned the Single’s day event into a global event as transactions came from 225 countries and regions while roughly 40 percent of the 140,000 participating vendors and brands were international.

By the way, the best-selling brand wasn’t Chinese, but was Apple.

Investors could do well keeping in mind that the use of next-generation tools and techniques underlines the growing ability of Chinese firms to move up the value chain and spread their international influence.

This is especially true of the Chinese tech sector, which accounts for 40 percent of the MSCI China index.

For investors who have interest, the MSCI China index could be used as investment vehicle when tactical diversification is considered. Please take notice, this is not investment advice.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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For investors who have interest, the MSCI China index could be used as investment vehicle when tactical diversification is considered.
china, msci, index, investment
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2017-13-14
Tuesday, 14 Nov 2017 07:13 AM
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