Chinese stocks reeling from Biden-Xi meeting, China outlook
The APEC (Asia-Pacific Economic Cooperation) Summit in San Francisco continues after its headline event: President Biden's meeting with Chinese President Xi Jinping on Wednesday. Chinese stocks are seemingly still reeling from the talks between the world leaders and forecasts on business investments into China, as Alibaba (BABA), Pinduoduo (PDD), and JD.com (JD) shares see losses in today's pre-market trading.
Yahoo Finance Markets Reporter Jared Blikre takes a closer look at Chinese and China-exposed stocks in relation to China's expected GDP decline.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
- As APAC continues in San Francisco, many investors still looking for exposure to the world's second biggest economy, even though China is still feeling the squeeze. For more on this, we've got Yahoo Finance's reporter, Jared Blikre, to break it all down. Hey, Jared.
JARED BLIKRE: Hey there. Well I'm taking a look here at the NASDAQ Golden Dragon Index, and we can see a lot of these stocks that are native to foreign to China and to Hong Kong are really taking a beating here.
Alibaba which was up 3.82% yesterday, that's the background, you can see in the early morning we are down 8.18%. Pinduoduo down 3%. NetEase down 3. JD.com down 5. And the list goes on. So a lot of pressure here.
Now, if I look at China-- Chinese exposed stocks that are actually from the US that are based in the US, there's a lot less carnage. Broadcom down 1.5%. NVIDIA derives a lot of its income from China, down 7/10%. Apple huge in China that's actually up a half a percent. So it looks like the domestic securities over there are having a more difficult time digesting all of this.
And we've been talking about the foreign direct investment in China that has fallen off a cliff. And first, I want to show you Chinese GDP because this is their demographic-- this kind of relates to their demographic time bomb as their population ages. They have lower growth expectations.
And if you're looking at this, we're talking about three to 3% in the long term. That is a far cry from the 10% that we expected a little more than a decade ago. And then on to the foreign direct investment, that has fallen off a cliff as well. This goes back to the early 2000s here.
And you can see the line-- and these are the purple bars that I'm looking at. These are the purple lines that reflect direct investment, these have gone negative. So an actual reversal of that. Now, this cyan line right here is the interest rate differential between the US and the Chinese bonds on the 10 year tenor.
And what this is showing is, because US interest rates have risen so rapidly and to such a large degree, they're actually competing with China for a lot of the yield that investors around the global are looking for. So China's lost out on a lot of business through its zero tolerance, no COVID policy. They didn't reopen as quickly as they wanted to. They've struggled to really kick start their own stock market.
And you take a look at KWEB for instance, that's my proxy for what's going on over there. Let's see if I can find this here. And if I go to a year to date chart, that's going to be one of the bottom performers here I believe. Well anyway, KWEB down 4.9% for the year. Let's take a look at a five year chart.
You can see, peaked really on early on in 2021. US tech did something like this, and Chinese tech did something like this, the wrong direction. So there's a lot of still frosty relations between the US and China, and we'll have to see where this all shakes out. But things are dicey. I don't think there's any way around that.
