"Give Xi a Chance"

From China with Love

Sometimes I just have to play a setup even If I don’t particularly like the participants.

In this case, it’s China. I really don’t like Communism and I once tried to go activist by penning a letter to Xi, with such insights as changing their currency from the face of Mao to a less controversial figure, like Jackie Chan (I never heard back from them).

Letter to Xi

The graveyard that is the Chinese stock market may appaul a lot of people, but 2 weeks ago I wrote about long duration bonds and last week I wrote about Biotech. Both felt so disgusting and they both rallied +10% since.

So by going for China this time, it will be 3rd time unlucky so reader be warned.

I will skip all macro-related comments: yes I know China is £”$)£$%£$ed etc etc

What I’m looking for here is an event play.

And the catalyst is the just-announced meeting between Biden and Xi in San Francisco on November 15th.

Now this may be a nothing-burger, but the Chinese market is beaten up into the event and seems like Xi cares (he’s meeting some techies too apparently to pitch China as business-friendly). It’s also the first time Xi visits the US since 2017 so I wouldn’t call this insignificant …

A key point: Last year on 15th Nov 2022 was the G20 summit and the last time that Biden and Xi met. The Chinese tech index (KWEB) had a +14% rally into the event and then had a subsequent +30% rally into year end. In the meantime, the Nasdaq was flat to lower. What’s “alpha” in Mandarin?!

Now this could be a complete non-event. But, it’s not priced in. And as always I like my chances when things are not priced in, even If I lose money.

So I took some KWEB calls for year-end and I will be watching whether the bromance evolves or disolves.

As always, this isn’t investment advice, this is the trading blog of a shrub operator, don’t be stupid.