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China News Digest: Commodities reserves, equities outlook and Taiwan vaccines

Workers extract copper at a factory in Shangrao city, Jiangxi province. Photo: Reuters

China News Digest, Friday June 18, 2021

China releases commodities reserves, prices fall

After the State Bureau of Grain and Material Reserves issued a notice stating that national reserves such as copper, aluminium, and zinc would be released in batches, copper prices fell to their lowest point in nearly two months on Wednesday. The move may slow the commodities bull market, analysts at CBN suggested.

“US pricing of crude oil, copper, aluminium, lead, zinc and other basic metals, and corn, soyabean meal and other agricultural products still have room for growth,” the analysts wrote. “Supply, demand, and currency factors are still more conducive to the rise, but the rise has also entered the tail stage.”

In the future, due to the impact of carbon peaks and carbon neutrality, market demand will not be to strong, especially for carbon-heavy items such as coal and coke production.

“After the high level price shocks, prices will go down, and there will be more downside space,” said Wu Zhaoyin, director of macro strategy at AVIC Trust.

AllianzGI: Long-term outlook for Chinese equities remains positive

This year has seen increased volatility in China’s stock markets, but AllianzGI has urged investors see past the turbulence.

The first part of the year saw a continuation of the strong momentum from 2020. But after Chinese New Year there was a short but extreme period of profit taking. Allianz GI China equity fund manager Anthony Wong, said such moves were characteristic of retail-dominated markets such as that of China A Shares.

“We do not think this changes the positive long-term outlook for Chinese equities,” wrote Wong.  “International stock market inflows continue and many investors around the world are looking to increase their exposure to the world’s second largest economy as China’s capital markets become more open to the outside world. Moreover, the country’s equity market remains attractive in that it has good diversification characteristics as a result of low correlation with other asset classes.”

In the coming months China is likely to continue to be caught between active regulation and tighter economic policies on the one hand and fundamentally strong corporate sector health on the other. Due to the still favourable fundamental environment, AllianzGI sees market setbacks as an opportunity to build up or expand longer-term positions. However, investors need to be very selective in doing so.

Taiwan to produce its own vaccines from July

Sources in Taiwan reveal the island will start producing its own vaccine given difficulties securing supply. The issue has been exacerbated by high-tech production slowdowns, such as the shortage of microchips globally due to pandemic clusters at Taiwan’s top fabricating plants.

China’s big e-commerce day 618 sees a battle in cyberspace

Friday sees the 618 mid-year shopping festival – often called an e-commerce war – in which platforms promote millions of goods at low prices for several days. Like shopping channels on terrestrial TV, live e-commerce sees items put on sale for periods limited to sometimes minutes.

Live e-commerce among the three big platforms – Taobao, Kuaishou, and Douyin – is still one of the most competitive retail battlefields in China. As well as grabbing market share, these intense promotions give sellers insights into coming retail trends.

Another digital yuan milestone

Digital yuan can now be withdrawn from ATMs. At present, the Beijing branch of ICBC and the Beijing branch of the Agricultural Bank of China have taken the lead in launching the exchange function between ATM digital yuan and cash in Beijing.

ICBC’s more than 3,000 deposit and withdrawal all-in-one machines throughout the capital have activated this function, becoming the first bank in Beijing to fully launch digital yuan cash exchange. Agricultural Bank of China has deployed more than 10 ATM machines in the Wangfujing area (Beijing’s high street), all of which can exchange digital yuan and cash.

Third-generation semiconductors all the rage

Third-generation semiconductor concept stocks have continued to soar recently. The sector once again led the two exchanges on Friday. Taiji, Antai Technology, Roshow Technology, Haite High-tech Daily limit, Jucan Optoelectronics rose more than 13%, Star Peninsula, China Resources Micro, also advanced.

Recently, starting with the gallium nitride used in fast-charging of domestic mobile phone brands such as Xiaomi, and the introduction of silicon carbide transistors used in Tesla cars, the development of the third-generation semiconductor industry has reached a highpoint.

Tesla recently released the world’s fastest mass-produced electric car model with a top speed of 322kph. According to industry analysis, silicon carbide is one of the keys to Tesla’s speed surpassing Bugatti.

At the same time, silicon carbide will also reduce the weight of the inverter by 57% and increase battery life by more than 6%. The use of silicon carbide can reduce the cost of vehicles by $2,000. According to estimates, Tesla alone consumes about 500,000 pieces of 6-inch silicon carbide a year on average. Domestically, many companies such as San’an, Tyco Tianrun, and Century Jinguang have launched automotive-grade silicon carbide products.

Chris Gill

With over 30 years reporting on China, Gill offers a daily digest of what is happening in the PRC.

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