Here's What's On China Traders' Plenum Watch List

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by Tyler Durden
Sunday, Nov 07, 2021 - 09:46 PM

By John Liu, April Ma and John Cheng , reporters and commentators at Bloomberg Markets.

After a year-long regulatory crackdown that wiped out trillions of dollars from Chinese stocks, investors are on high alert for the risk of more policy change as the Communist Party kicks off a major convention this week. The plenum is seen as a chance for President Xi Jinping to reinforce his current “Common Prosperity” push or even usher in new policies that reverberate through equities.

There is no shortage of sectors that could see sharp price moves from the event. Technology and gambling giants are still licking their wounds following regulatory curbs on monopolistic practices and ownership control. Energy suppliers are racing to prepare for winter amid shortages. Property developers remain deep in a debt crisis

Any mention of the real estate sector could be the first item investors search for in the official statement from the closed- door meeting, which is usually published at its conclusion. China Evergrande Group’s liquidity crisis and a slump across developers’ dollar bonds have sparked a record pace of defaults and rating cuts for local issuers

Traders will thus monitor any signs of a shift in the Party view that Evergrande’s risks are controllable, and whether it will maintain the stance that developers must meet their debt obligations. Further, China revealed last month a plan to expand property tax trials. Any details on the pace and scope of the reform, launched in Shanghai and Chongqing in 2011, would draw intense attention from traders seeking policy clarity

  • Semiconductors: China has unveiled ambitions for tech self- sufficiency in its latest five-year policy blueprint, as it tries to reduce dependence on the West for crucial supplies like semiconductors. More specific measures to support the research and application of cutting-edge technologies will give the nation’s internet giants a much-needed chance to lure investors, after their shares were beaten down by government regulation
  • Coal & Power: Shares of coal miners have been slumping as the government took extraordinary steps to tame surging prices amid power shortages. Any developments in this space would trigger swift reaction by stock traders
  • Renewables: The renewable energy sector has been a rare safe haven amid the regulatory storm. Government backing is clear as China aims to make its economy carbon neutral by mid-century. While optimism is widespread about the long-term prospects of wind and solar power and electric cars, a blessing by the plenum would give their shares an immediate boost
  • Consumption: “Fully promoting consumption” was included in last year’s plenum communique as a way to facilitate “dual circulation” as China seeks to hedge against global trade risks. Stimulating consumption and making it a greater growth driver will likely remain pivotal, even though mixed signals could be sent amid the campaign to reduce the wealth gap

Food and liquor firms tanked when Xi hinted at an expansion of consumption tax in an October article.