White House deliberates block on all US investments in China


Administration is considering blocking investment in China that includes possibly delisting all Chinese sauce from US exchanges. Those headlines sending stocks sharply lower today. Let's get the latest on this developing story. Even Jaber's live at the White House with the details ain't yeah Melissa that's right. I'm told that those was headlines. That crossed earlier today. Those are accurate headlines. That's what got the market's attention they are considering some measures behind the scenes here at the White House to stop US US investors being able to invest in Chinese companies in one way shape or form or another but they're they're very early on in those conversations is my understanding. There's there's no time line at this point for any fundamental decision. All of this is framed in the in the guise of investor protection. The idea here is that there's a concern that there are some Chinese companies that may be listed in the US that aren't exactly what their purported to be because of the accounting standards and other other differences between the way the two countries countries handle corporate disclosures so that is being discussed behind the scenes. It's not clear there are a lot of options not clear where they're going to land or when that decision is coming one model all for it might be the piece of legislation that Senator Marco Rubio and others are considering up on Capitol Hill they've talked about that in the past the idea there would be they would delist companies unless they conformed more stringently to American securities regulations those Chinese companies would so that's one proposal but Rubio's office told CNBC this afternoon they have not been in direct contact coordinating with the White House on the proposals at the White House is working on so that's a separate idea that it's moving on a separate track but it gives you a sense of where this might land ultimately it's still dvd though would this have to come from Congress Ayman or a vote by the the SEC or I mean how can administration force exchange to decide what their listing standards are it it. It really depends on what they decide to do right. some of those ideas like you're talking about would require. Congress to pass a law and that would mean they'd have to get the White House would have to get support from Democrats adds to do it because Democrats control the House of Representatives so in a contentious election year that might not be as doable there might be other smaller more regulatory changes that they can Hindu on their own I'm told that the mechanics of all this are still being discussed and they don't have a particular plan for how to roll it out yet because it's it's still very early on okay amen. Thank you very much aiming. Java's there's Sony ways to go but what is definitely clear is the reaction that we saw in today's markets markets. We had a lot of the Chinese. ATF's dive lower closed session lows a lot of the Chinese stock did the same a lot of sort of the trade war poster. Children stocks like semiconductors took a further leg. Laura's it. The Micron News Wasn't enough and close on the lows of the session. So where do you go with this year. It won't mean if this isn't a I don't know what this is number one however if it's an Goshi hitting tactic tick as we get into the October date whenever that is the tenth or so when the two sides to sit down. It's pretty high stakes game of poker there now. I think they've been fit rumblings about this over the years. I don't think it's ever been considered all that serious but again in negotiating tactic. I think you have to be worried but I'll say this. If you told me at eight thirty this morning that these he's headlines would come out and say guy. Where's the market and we say well given the run. We've had given the backdrop of everything yes and he's going to be down. Fifty sixty handles souls Nasdaq semi down one fifty and we're going to end the bond market is exposed the upside none of that really happened again. It speaks to either the complacency of the broader market or the strength and resiliency of it now. I say it's complacent but I can understand the bull case that it's strengthened and relative strength given the rest of the world. I I think it's probably resilience probably all those things but it's probably more resilient. It's probably not getting ahead of this and the fact that this probably could never happen. I don't think you can D- list I all of these names. I don't think it's going to happen but when you look at the end of the month the quarter would you look at where it's seven handles above negative on quarter. We bounced back dramatically from the middle of the day. That's impressive. That's true and we did bounce back right off the fifty day almost to the number number so I think there are a couple of things to think about here number one just think about the MSCI indexes for example. You know a lot of our clients a lot of clients in general they get exposure to international all stocks emerging markets via that track that index so you think about em for example you're talking about a thirty percent exposure to China and that's been systematically going up as MSCI STI has been increasing the exposure to China so that's important as far as the broad market. I think we're probably range-bound quite honestly and to your point about the market we're covering today. I think a lot of it comes down to positioning as well as sentiment I keep saying it again and again on the show and I probably sound like a broken record but the FTC positioning second week in a Arro- net short a I will bear survey flip negative so bears outweighing bull so I think it doesn't mean we can't correct doesn't mean there can't be volatility but I think that put some floor under or how bad things can get by the way Nice Haircut Very High and tight Jeff thank you can. I did it for you on right to this felt a little bit like an American companies here by will all no longer you know and so in terms of what listing standards are. Let's be clear. There's a lot of Chinese companies aren't listening here because they can't make these standards for the good news folks is I think the American aircon listening standards and the exchanges are very very high and they include accounting standards and they include transparency in corporate governance. I I think that that is really the standard and I think that is something that will win out but but we're talking about Jeff talking about emerging markets which which I would put closer to forty forty five percent China and where you can see actually from the April highs the downtrend which is now four or five sessions well off trying to break through. It's a downtrend can't breakthrough frankly with the dollar going higher. I trouble seeing this breakout. Alibaba is a name that I'm long in a name. That's done nothing for a year and a half essentially traded sideways but if you look at the upper end of the range anywhere between one eighty and one ninety this this is stock. That's been dead money. Despite the fact that you had an invest today Investor Day Jack Ma kind of move on people thought there was actually going to start to be a little more transparency a little a bit more inside an ant financial a little more insight into how they were going to run their businesses so it's not a particularly exciting time to be investing in emerging markets or mega cast regardless of this noise. I'm saying it's not right time I. I don't think even if the trade war ended tomorrow I think these stocks would get a pop. The commissary autry twenty nine stocks. Everyone goes out and the number one fifty six if you add in Hong Kong stocks to twenty nine. None of them meet the accounting extenders that the US companies do what I don't understand. What what number are you referring to fifty six of the listed Chinese stocks listed on American Exchange Okay so one hundred fifty six companies which one hundred eighty six but if you go with the Hong Kong number addy and Hong Kong and Chinese stocks it's about two twenty nine okay and the accounting standards of of the US listed companies? None of them do so some some standards. That's what this whole. Debate is about and with that equitable. We'll act that they're talking about. They get three years to comply listen. I can't speak to the standards to be a listed company I but but the concerns it should be I would think is there retaliation. Now that to me is the bigger concern again. You know we push the envelope the Chinese pushback so it gets back down onto. Is this make a deal more imminent or is this make a deal less likely I would say this makes it less likely and again. It's shocking to me and I've I've been wrong so after prep but it shocking me that even off the backdrop of everything. That's happened over the last couple of weeks. The VIX has still it's seventeen handle and we're still within a whisper birther of an all time high knee S. and P. Five hundred quickly if you want to look at one thing the Russell the WM look at where it stopped on the upside at stocked basically we topped out in March March and a number of times since one fifty and a half one fifty nine level closed lower today to me the Russel's been tell all along and if that starts to sort of roll over from here that that might actually pull down the broader market. You'RE GONNA add in the price action the exchanges today yes. You're in my head well so then you're in your kitchen. That's going should be troubling to all of us on the ice. That's a small portion of their revenues but but it's but it's a larger portion and of of course you have people shoot first and then research it later. I don't think that this is going to happen. I think that's important but this has been going on for years and it stems from the House of Representatives bibs not from the White House. The White House is actually picking up. I understand this has been going on for years but it hasn't been going on until these recently with the context of a trade war with the context of a China that is going to look for ways to retaliate to guys point and China retaliates. What can they do they can make it very difficult for US companies to expand in China on it to do more business in China to get their stuff through the supply chains in China JV's in China to actually go there and it already was so it'd be clear companies like apple and some of the technology companies for sure have figured out with the rules of engagement are and and I think I've kissed the ring so to speak and I think you know that's how the quid pro quo takes place? I do think that this is a guy you're right. I ultimately it's very difficult to see how this doesn't lead to a ratcheting up of a of a tit for tat and I think as we go into October ten. I think the market is a little bit too complacent as it relates to trade. I think I think jeff talk about where positioning not so complacent greatly. Even though I think in the last couple of weeks those a I bear spreads are things that can change pretty quickly. They're kind of like like relative strength indicators they can get pretty overbought oversold but the general positioning and equities is very underway and the one thing that continues to be strange to me and I talk about this a lot too but it's that correlation Asian between trump's approval rating and the de Escalation of trade tensions and they're actually positively correlated trump has to know that he sees those approval ratings and those approval ratings are directly tied ride to the votes. He's likely to get in the presidential election. He has to know that in the back of his mind and even with impeachment coming up maybe that pushed him to want to do a deal a little bit more to try to save some MM SORTA face there and to your point about the positioning. I think the one thing that might be under appreciated. Is that look. The economy here isn't that bad. Consumer confidence bounce a little bit today. The housing housing data is better. I'm not saying we're off to the races but again as it relates to a support and a potential catalyst for that sentiment why would China retaliate the my because because they don't want the supply chain to change any more than it's already changed with Tara so we've heard of apple trying to work around China already. Why would they give other companies more of an incentive to try to do that. I think that maybe it makes it less likely that a deal gets done but I don't see retaliatory measure that behooves China. I mean I think I think what the other thing that trump knows is that you know he's always emphasizing the spread the difference in performance between Chinese markets and US markets and how they're feeling any more pain versus the US markets etc.. This is a way of weaponising the trade war hot and saying you know what we're going after Chinese stocks. We're GONNA make it more difficult for to raise capital in the best market in the world here and that's going to hurt you. I agree one hundred percent. Which is my point is and Steve Might Happy Right. I mean why would see I think Americans we look through everything through the prism through the Lens of being American so it's hard for any of us to understand how the other side would react the act but if you take a step back and say to yourself you know who's in a better position who's in a position to can outlast the other again president. She doesn't have to run for reelection action in a year president trump does so my sense is and I've said this for a while. I think the Chinese are better suited to play the long game than we are. I think very very clearly the our markets are the deepest most sophisticated in the world. China wants to be a part of these markets and I think this hurts

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