Premier Li Keqiang proposed “timely reduction of reserve requirements”
SEC issues detailed rules for the implementation of the foreign company Accountability Act
Powell said that he would speed up the pace of reducing debt purchases to deal with high inflation
New highlights: 1) China’s monetary policy: on December 3, Premier Li Keqiang said in a video meeting with IMF President georgiyeva that China will continue to implement a prudent monetary policy, maintain reasonable and sufficient liquidity, formulate policies around the needs of market players, reduce reserve requirements in due time, increase support for the real economy, especially small, medium and micro enterprises, and ensure the stable and healthy operation of the economy. 2) Zhonggai shares: December 2, The U.S. Securities and Exchange Commission (SEC) announced that it has revised and improved the implementation rules for information submission and disclosure related to the foreign company Accountability Act. This indicates that the regulatory policy for zhonggai shares has officially entered the substantive implementation stage. These information disclosure requirements include that it is determined by the SEC that “accounting supervision cannot be effectively implemented” The issuer shall submit materials to prove that it is not owned or controlled by government entities, and disclose its own or foreign operating entities in its annual report. For issuers who “cannot effectively implement accounting supervision”, the SEC will start to calculate the financial year starting after December 18, 2020, that is, if they cannot meet the relevant requirements before December 31, 2021, they need to disclose the above information in the financial year report before the end of December 31, 2022. On December 3, Didi announced the delisting of the New York Stock Exchange and the preparation for listing in Hong Kong. The board of directors plans to realize the operation of board conversion and listing in the form of share exchange. Didi said it would organize a meeting of shareholders to vote on this matter. Didi did not disclose the specific plan for delisting from the New York Stock Exchange. 3) Evergrande crisis: on December 3, China Evergrande group issued an announcement on its inability to perform its guarantee obligations on the Hong Kong stock exchange, indicating that the failure of the group to perform its guarantee or other financial obligations may lead to creditors’ demand for accelerated maturity of debts. “In view of the current liquidity situation, the group is not sure whether it has sufficient funds to continue to perform its financial responsibilities. It will actively communicate with overseas creditors and formulate feasible overseas restructuring plans for all stakeholders.” Guangdong Provincial People’s government said that at the request of the company, it agreed to send a working group to Evergrande real estate group to urge and promote enterprise risk disposal, effectively strengthen internal control management and maintain normal operation. The party and the two sessions spoke intensively to maintain the steady and healthy development of the real estate market and the legitimate rights and interests of housing consumers. 4) Federal Reserve monetary policy: on November 30, when attending the hearing held by the Senate Banking Committee, Federal Reserve Chairman Powell said that it would be appropriate to complete the debt purchase and reduction at a faster speed at the December monetary policy meeting, and the statement that inflation is “transient” can retire.
Macroeconomic data: China: 1) the official manufacturing PMI in November was 50.1, Exceeded expectations (October: 49.2); official non manufacturing PMI was 52.3, less than expected (October: 52.4). 2) Caixin manufacturing PMI was 49.9, less than expected (October: 50.6); Caixin service PMI was 52.1 (October: 53.8). The United States: 1) non farm employment increased by 210000 in November, less than expected (October: 546000); the unemployment rate fell to 4.2%, better than expected (October: 4.6%). 2) in November, ISM manufacturing PMI was 61.1, exceeding expectations (October: 60.8); ISM service PMI was 69.1, exceeding expectations (October: 66.7).
Stock Market Overview: the Hang Seng and MSCI China indexes fell 1.3% and 2.9% respectively in the past week, while the Shanghai and Shenzhen 300 index rose 0.8%. MSCI China Index: the energy (+ 6.2%) sector outperformed the market, while the optional consumption (- 7.7%) sector underperformed. The valuation of Hang Seng / MSCI China / CSI 300 index was 11.5x / 13.1x / 15.2x forward-looking P / E ratio respectively (the median level in the past three years is 11.2x / 12.8x / 12.6x). Omicron variant virus and regulation on zhonggai shares impact investor confidence. We believe that these headwinds will bring continuous pressure to the market. Main catalysts / risks: 1) Omicron variant virus; 2) macro data; 3) China US relations; 4) government regulatory measures.
