Chinese Bookends (TWTW – Sept 20-24, 2021)

Chinese Bookends

We entered the week fearful of the contagion risk inherent in a potential default by Chinese Real Estate Company Evergrande (great name!),  exiting it with news that Huawei Executive Meng Wanzhou had reached a plea bargain agreement with US prosecutors allowing Canada to let her go free. The great news, of course, is that Canada’s two Michaels were freed, and arrived back home on Saturday. Funny how Huawei and the two Michaels were “unrelated” …

Will it change Canada’s approach to dealing with China? Unlikely. After all, we have a PM (re-elected to a minority government last Monday 👎 as far as I am concerned ), that proclaimed great admiration for the CCP a while back. By the way, great article here about China and the Liberals in Canada (too bad they got re-elected … even with reduced support …) => Click HERE!

Everyone last week seems to have come to the conclusion that Evergrande whose bonds were already trading in the low teens was unlikely to be a “Lehman moment”, respectively that China would handle it. At week’s end, some interest payments had been missed … where to from here? Here is Picton Mahoney’s Head of Fixed Income Phil Mesman’s perspective => Click HERE!

After Monday’s initial sell-off, the week turned more positive, unless of course you have Crypto currency exposure, since China struck again on that front also => click HERE! announcing it would deem all Crypto transactions as illicit, and would ban them going forward …

my 10 cents on Bitcoin et all crypto “coins” – I know, I know, digital gold; FOMO par excellence magnet for “investors” (speculators?). I love how in the age of disruption and plenty on so many fronts, somehow … just somehow … because all the masses eventually will buy (have to?) buy into Bitcoin, which has been engineered for scarcity … it can only (eventually) make everyone rich beyond their wildest dreams … fly in the ointment? Government launching their own legal tender crypto, and declaring – like the Chinese – all non Gov approved crypto “illegal”. Voila. Does it ultimately matter? It does to those that have huge bets on Crypto. For me, if FOMO gnaws at you: 2-5% exposure, then … NEXT (either a lottery ticket that will pay off, or one you’ll have to rip up…).

All in all – no noticeable impact from Evergrande … (aftershocks this week?)

as shown in the below chart depicting VIX Volatility last week (implied vol embedded in options pricing):

with week (also noteworthy) ending with further drop in VIX (meaning? maybe that market participants not worried about week-end news signalling further troubles ahead?).

Sectors last week (vs FTSE Canada):

All in not much movement, unless you are in Energy, which led gainers last week, and left behind the recent pullback … (XEG up 13.2% month-date, not counting dividend). For that matter, and for perspective, the FTSE Canada index looks to be less than 1% down from Aug 31, 2021 … so again, not much movement. The notion that the US FED would remain “dovish” for some time to come no doubt helped. that said, they also telegraphed that bond purchases would likely be curtailed in relatively short order (? November?).

Meanwhile on the “thematic” front – notable + performance on the week on the part of Travel and Leisure, while Disruption and Innovation showed some weakness …

Horizons – launched an ESG Bond fund last week => Click HERE!

Evolve – is 4 years old and reaching CAD 2 Billion of AUM. Underpinning this growth? Thematic / Disruptive, with the firm conducting a survey suggesting Advisors are planning on increasing their exposure to the segment going forward => click HERE!

iShares Canada => September 2021 distributions => Click HERE!

BMO ETFs => September 2021 distributions => Click HERE!

Vanguard Canada ETFs => September distributions => Click HERE!

and HERE!

as well as HERE!

Horizons ETFs => September distributions => Click HERE! 

and HERE! (for Covered Call ETFs)

Have a great week 🙂

Yves