Pre-market equities: Chinese equities on Wall Street still unclear

What’s going on: Tech giant shares Ali Baba (BABA) in New York rose nearly 7% on Monday. E-commerce platforms Pinduo-duo (PDD) and JD.com (J.D.) jumped 16% and 7%, respectively.

But the celebration may have been a little premature, as negotiators from the United States and China continue to hammer out details and tensions between the world’s two largest economies simmer below the surface.

“Politics are always changing and there is still a lot of uncertainty,” Xiaomeng Lu of consultancy Eurasia Group told me.

Over the weekend, the China Securities Regulatory Commission, the country’s top securities watchdog, proposed changes to a decade-old rule that prohibits Chinese companies from sharing sensitive data and financial information with third parties. foreign regulators.

Remember: US regulators have long complained about not being able to access the books of Chinese companies. In 2020, the Holding Foreign Companies Accountable Act was signed into law, giving the Securities and Exchange Commission the power to kick foreign companies off Wall Street if they do not allow US regulators to review their audits for three consecutive years.

But Beijing, citing national security concerns, has resisted overhauling its policies. It requires companies that are listed overseas to conduct their audits in mainland China, where they cannot be scrutinized by foreign agencies.

The new amendment could finally allow US regulators to dig into these contested materials. If that helps resolve the dispute, it could ease a huge source of concern for the more than 200 U.S.-listed Chinese companies that have been battered over the past year.

But it is too early to say for sure. It is unclear whether US regulators will view the potential changes as sufficient. Last week, SEC Chairman Gary Gensler threw cold water on the idea that a deal was imminent.

“There have been thoughtful, respectful and productive conversations, but I don’t know where this is going to lead,” Gensler said. “It’s up to the Chinese authorities to decide, and frankly it could be a tough set of choices for them.”

Another sticking point, according to Lu, is whether there is an exclusion for companies that have access to sensitive data on Chinese government or infrastructure.

The “only clear data point we have so far,” she pointed out, is Didi. The ride-hailing service had to start delisting in New York shortly after its IPO last year. Beijing has launched a crackdown on the company, saying its app violates privacy laws and poses cybersecurity risks.

What’s next: Lu said she sees about a 70% chance that some sort of deal between Washington and Beijing will be reached this year. But she still thinks it’s likely that some Chinese companies will have to pull off Wall Street then.

She noted that Alibaba is not just an online marketplace, but also a cloud company. If he provides services to public companies, Chinese regulators may still want him to keep his books confidential.

What Elon Musk wants with Twitter

It’s not every day that the ultra-wealthy CEO of one of America’s biggest corporations takes a huge stake in an entirely different company. But that’s exactly what the unpredictable Elon Musk did.

The latest: The You’re here (TSLA) chief revealed a 9% stake in Twitter (TWTR) on Monday, sending shares of the social media platform up 27%.

The investment – which was valued at nearly $3.7 billion at market close – makes him Twitter’s largest shareholder.

Musk did not reveal the purpose of the purchase or any plans for the company. But that hasn’t stopped speculation about what prompted the surprise move.

Analysts expect Musk, who has been a vocal critic of Twitter’s policies, to actively push for changes in the way the company operates. Last month, he said he was seriously considering creating a new social media platform.

“Given that Twitter serves as the de facto town square, failure to uphold free speech principles fundamentally undermines democracy,” Musk tweeted recently. “What should be done?”

He also suggested (by tweeting a meme, of course) that he didn’t support CEO Parag Agrawal, who recently took over from Jack Dorsey.

“Musk has already indicated that he disagrees with Agrawal’s appointment and wants some changes,” Morningstar analyst Ali Mogharabi said in a note to clients.

First order of business: After his participation was disclosed, Musk tweeted out a poll asking if Twitter users wanted an edit button.

But some suspect he could be agitating for even bigger changes at the company. There’s speculation that Musk could team up with other activist investors, or even form a consortium to take Twitter private. The company is worth $40 billion. It’s a fraction of rival Meta, which has a market value of $637 billion.

Starbucks has suspended redemptions. Is Big Oil next?

Starbucks (SBUX) made waves with his decision this week to suspend share buybacks, the first big move by Howard Schultz after his return as CEO.
Could the world’s largest oil companies be next? That’s what the top Democrats in the House of Representatives are hoping for.
House Oversight Chair Carolyn Maloney and Rep. Ro Khanna, chair of the environment subcommittee, want ExxonMobil (XOM), Chevron (CLC), BP (BP) and Shell (RDSA) to abandon stock buyback programs and dividends during the war in Ukraine and put that money into lowering prices at the gas pump.

“Fossil fuel companies are profiting from the crisis by raking in record profits and spending billions of dollars to enrich their executives and investors,” they wrote in a letter dated Monday.

Lawmakers also urged oil companies to make “meaningful investments” in solar, wind and other forms of clean energy to tackle the climate crisis.

Oil companies – which are profiting from soaring energy prices – have faced sustained calls to use available cash to offset the pain of everyday consumers. In the United States and the United Kingdom, there have been calls for a temporary “windfall tax” on their income to help households cover their energy bills.

Upcoming: The issue is expected to come up in a House hearing on Wednesday, where executives from BP, Exxon, Chevron and Shell are expected to testify.

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The ISM non-manufacturing index, which tracks the services sector in the United States, arrives at 10 a.m. ET.

Coming tomorrow: Investors will be scanning the minutes of the Federal Reserve’s last meeting for signs of how aggressive the central bank could be later this year.

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