Unfortunately, we have new developments in the Chinese economic coercion crisis. There are now anticipated buying boycotts in copper, copper concentrate, timber, sugar and lobster. These are added to those which are already known in wine, coal, barley, and beef. Now we are hearing about potential boycotts in wheat also.
When asked if the latest restrictions were designed to punish Australia politically a Chinese Foreign Ministry spokesman said “We hope Australia can do more things conducive to mutual trust, bilateral co-operation and the spirit of China-Australia comprehensive strategic partnership, and bring the bilateral relations back to the right track as early as possible”.
China did not deny allegations it was conducting a campaign of economic coercion on Australia following the Morrison government’s call for an inquiry into the origins of corona-virus. No matter what the allegations China levels against these products, the evidence points to a planned diminution of trade because of our Prime Minister’s comments. Without doubt this is to teach Australia a lesson about where our bread is really buttered. There are alternative markets where China can buy most of these products.
What do Australia and Jack Ma have in common?
This lesson for Australia is remarkably like that of Jack Ma, the Chinese entrepreneur behind the biggest share offering in the world. Analysts say Ma’s criticism of Chinese authorities’ is likely to be the reason for Ant Group’s IPO being halted. In a characteristically blunt speech, Ma directly criticised local regulators and the state-dominated banking sector.
Jack Ma was reined in by Beijing showing who is boss. Australia too is being taught who is boss. Just as the IPO will be reinstated, we hope Australian trade will be too.
Markets hate uncertainty
The US election warrants a comment. No matter who wins the Presidency, fiscal stimulus will occur – the size of the spending is the main difference between Trump and Biden. The Federal Reserve will continue to stimulate the economy regardless. This is positive for equity markets.
At the time of writing there isn’t a winner of the election, but it appears that Biden will ultimately win the Presidency, subject to legal objections from the Trump campaign. Initial estimates were that a Biden win would be bad for 55% of listed companies due to a reform agenda and the prospect of higher taxation. However, it appears that he won’t have enough power to be able to make the changes that were expected. This means the extreme factions can’t achieve their agenda which would have been bad for stock markets. Right now the markets like it.
Where else but shares
There is no-where else to invest with greater prospects. Share markets are the best alternative especially as activity is beginning to show signs of a big turnaround – the much-debated V-shaped recovery.
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