Chinese shares careened lower to close the week, with local equities seen vulnerable following ceremonies marking the 100th anniversary of the Communist Party.
Beijing is keen to project stability in the lead-up to important domestic political events. With the centennial celebrations winding down, some investors hit the exits.
The CSI 300 closed below its 200-day moving average after rising steadily for nearly two weeks. Friday’s 2.8% loss marked the worst session in nearly four months (figure below).
Losses were particularly acute for the ChiNext, which fell 3.5%. Earlier this week, the gauge hit the highest since June of 2015, when China’s equity bubble famously burst.
The PBoC drained a net 20 billion yuan in liquidity via OMOs Friday. The offshore yuan is coming off its worst month since the onset of the pandemic, amid dollar strength.
Meanwhile, GPIF logged a truly remarkable $339 billion investment gain for the fiscal year 2020. The 25% return (figure below) was the largest in the fund’s history as manager of Japan’s pension assets.
The fund ran it up in foreign equities, where its holdings returned almost 60%. Domestic equities logged a 42% gain. Only domestic bonds were a drag. President Masataka Miyazono called the results “especially high,” on the way to stating the obvious: 2020’s performance isn’t likely replicable. Last year, the BoJ passed GPIF as the largest holder of domestic stocks.
On the pandemic front, Johnson & Johnson said its COVID vaccine “neutralizes” the “Delta” variant. That’s good news and it may help “neutralize” some people’s hesitancy towards the shot after the blood clot scare in April. Paul Stoffels, Vice Chair of the Executive Committee and Chief Scientific Officer at J&J, said that in the company’s view, the vaccine “offers durable protection against COVID-19 and elicits neutralizing activity against the Delta variant, add[ing] to the robust body of clinical data supporting [the] single-shot vaccine’s ability to protect against multiple variants of concern.”
The “Delta” variant will likely be the dominant strain stateside within weeks, the CDC reckons. In an interview with Bloomberg, Johan Van Hoof, J&J’s global head of infectious diseases and vaccines, described the company as “extremely happy, actually.” J&J is “confident there’s no need for [a] booster at the moment and we’re protected against different strains.” It took the vaccine around 29 days to neutralize “Delta.” The protection apparently becomes more robust over time.
Finally, it’s worth noting (and that’s an amusing understatement) that annualized inflows to stocks, TIPS, financials, materials and infrastructure funds in the first half of 2021 were “all greater than cumulative inflows [over] the prior 20 years,” according to BofA. I suppose I’d channel Masataka Miyazono in suggesting that isn’t likely replicable.
