Xinjiang tensions, block sales, chip shortage, Biden’s huge infrastructure plan and NFPs

The week started on a surprisingly upbeat note in Asia following the news that a block sell-off of Chinese tech giants and US media companies sent some of these stocks’ prices dramatically lower on Friday, amid Tiger Asia’s ex-manager Bill Hwang’s Archegos Capital dumped some $30 billion worth of stocks including Baidu, Tencent Music Entertainment, Vipshop, ViacomCBS and Discovery on margin call.  

While Chinese tech stocks rebounded to close Friday’s session in the green, ViacomCBS and Discovery dived near 27% and didn’t recover. As such, their stock prices that have tripled and quadrupled over the past few months saw their gains shattered in a single move.  

Good news is, Friday’s block sales didn’t really impacted the investor mood in Asia. Stocks in Tokyo, Hong Kong and Shanghai traded in the green, however the US index futures were under a certain selling pressure, with Nasdaq futures leading losses. 

Stocks that remain under pressure are Nike, Adidas, Inditex and H&M, which are recently caught in the crossfire of the escalating tensions between China and the West over the most problematic Xinjiang tensions, and the Xinjiang cotton. On one hand, these companies face revolt from the West over forced labour allegations in the Xinjiang region, on the other hand, they risk boycott from their fastest-growing and most promising Chinese market. The situation evolves rapidly and not in the right direction. The H&M shops are being closed in tier 3 cities, and their pins are being removed from Apple and Baidu map searches.  

Elsewhere, the global chip shortage has likely taken a toll on car deliveries from Tesla and Nio. Tesla is expected to report about 162K vehicles delivered in the first quarter this week, compared to  183K a quarter earlier. Nio has already reduced its quarterly guidance to just below 20K vehicles. And the deepening chip shortage could continue pressuring the deliveries to the downside at a critical moment when the competition among the EV makers step up, joined by traditional carmakers, such as VW. Everyone is on the same boat, though. And the boat started taking on Bitcoin, where mining became too-lucrative-too-pause, and demands an increasing number of chips. Obviously, if chip prices continue surging, Bitcoin miners will have a stronger motivation to acquire chips available in the market.  

Overall, there could be some more downside pressure on US technology stocks this week, as Joe Biden is expected to unveil a multitrillion-dollar infrastructure plan, which could increase the positive pressure on the US yields. Higher government spending means a stronger positive pressure on inflation expectations, hence an additional positive pressure on yields on expectations of a tighter Federal Reserve (Fed) policy in response, combined with the expectations of more than 600K rise in NFP report due Friday. 

Growth stocks, led by tech are more sensitive to rising financial costs as their prices are relatively high compared to their real metrics – especially as the current PE ratios are at historically high levels.  

And finally, giant Ever Given is still stuck in the Suez Canal, but there are hopes that the situation will resolve within a few days with a high tide. US crude sees a strong resistance forming near the $61 per barrel level. Besides the Suez incident, oil bulls are worried that this week0s OPEC+ decision could result in a certain winding of the alliance’s production cut regime. The group general secretary Muhammad Barkido said on a tweet that the positive economic developments and resilient demand in Asia were encouraging. Investors are ready to absorb a 1-1.5 million-barrel rise in daily production. Anything less could give a short-term boost to the oil bulls, but anything more than that will certainly [IO1] add to the downside pressure on oil prices. The price of a barrel is stuck within the $57-61 range, the OPEC decision will certainly help investors to make a decision in one direction or the other, and the bears could win the battle on the back of uncertainty regarding the prospects of economic recovery.