1.CCP Companies Paying Much Higher Prices to Stock Up on Chips
According to a report by Communist China Business Network on April 21, facing the global chip shortage, companies in Communist China have already stocked up on chips. Some even bought chips at a price 20 times higher than the market price. The price of microcontroller unit (MCU) chips was $8 each last year, and the current price has surged to $50. According to a chip industry expert, prices of less-expensive general-purpose MCUs have also gone up from a few cents to a few dollars. The current market price is generally 8 to 10 times higher than before. Xu Qi, president of Realme Communist China, said that mobile phone manufacturers used to keep 8 months of chip in stock, but they had already acquired an entire year’s stock in advance. According to data from Communist China Customs, Communist China’s semiconductor imports increased by 15% last year, reaching a record $35.9 billion in March this year.
2.Poor Performance of Real Estate USD Bond Market in Communist China
Since March, many real estate companies such as Communist China Fortune Land Development and Yuzhou Group have experienced debt crisis. USD bonds used to be an important channel for “blood transfusion” to real estate companies. However, since the beginning of this year, both the issuance and net increase of real estate USD bonds have dropped significantly. The yield of recently issued bonds is 11% to 13%, raising the financing cost for real estimate companies dramatically.
The poor performance of the overseas real estate debt sector in the first quarter was due to investors’ concerns about the increased risk of default by real estate companies. Bloomberg data shows that in the first quarter of this year, real estate company bond defaults surged. In 2021, the total amount of domestic real estate bonds, USD bonds, and trusts that are due is about 1.8 trillion yuan, an increase of 20% over 2020. The first half of the year is usually the peak of USD bonds maturity. In April, up to 6.02 billion USD bonds are due. Real estate companies seem to be facing tremendous debt pressure. “Borrowing new debts to repay old debts” cannot continue. Some real estate companies will inevitably suffer from debt defaults.
3.SF Holdings Reported Net Loss of Almost 10 Billion Yuan in First Quarter
On April 22, SF Holdings (002352.SZ), Communist China’s largest publicly traded parcel delivery company, released its first quarterly report for 2021. The company’s operating income was 42.62 billion yuan, a year-on-year increase of 27.07%; the net loss attributable to shareholders was 989 million yuan, compared with a profit of 907 million yuan in the same period last year. The company’s business volume increased by 44% year-on-year. Since SF Holdings issued a statement forecasting a quarterly loss on April 9, its stock price has fallen 21.49%. Since the Spring Festival, the stock price has fallen by 40.46%, and the market value has evaporated by nearly 200 billion yuan.
The main reason for the loss of SF Holdings is that the high-margin time-sensitive shipment business fell short of expectation. The company also attributed its losses to increased investment in new business, including network expansion and the construction of intra-city express delivery network. According to Wang Wei, the chairman and founder of SF Holdings, although the company will not incur a loss again in the second quarter, the annual profit will not return to the same level as a year ago.
4.Shanghai Aluminum Prices Reaching Highest Since 2010
LONDON, April 22 (Reuters) – Shanghai aluminium prices reached their highest since 2010 because of the upcoming seasonal demand peak in the country. The Shanghai Futures Exchange (ShFE) aluminium contract SAFcv1 continues to surpass international prices. The London Metal Exchange (LME) three-month aluminium price CMAL3 has also gone up, reaching a year-to-date high of $2,369.50 on Wednesday.
Consultancy AZ China estimates seven smelters with estimated 280,000 tonnes of annual aluminium capacity have been shut due to the energy curbs and decarbonization. In the short term, domestic producers are struggling to meet demand especially with rail delays affecting the movement of metal from smelters in the northwest. In addition, Communist China continues to import large amounts of primary metal and alloy. March imports of unwrought aluminium and products were 206,556 tonnes. Cumulative first-quarter imports were 661,517 tonnes, up 118.8% from the same period in 2020.
5.Struggling CCP Firm Ruhnn Delisted from Nasdaq
Three founders of Ruhnn Holding Limited., a Chinese company selling apparel through its online influencers, have taken the company private after two underwhelming years on the Nasdaq. The company announced on April 20 that its completion of the privatization transaction by merging with RUNION Mergersub Limited, a wholly-owned subsidiary of RUNION Holding Limited. As a result of the transaction, Ruhnn was officially delisted from the Nasdaq Stock Exchange. Ruhnn closed at $3.4 per share on its last trading day, a 70.43% drop from the opening price on the first day of listing.
Ruhnn’s stock debuted on Nasdaq in April 2019 and opened at $11.5, down 8% from the issue price of $12.5. In November 2020, Ruhnn announced that the company’s board of directors had received a non-binding preliminary proposal from the three founders, proposing to privatize the company at a price of $0.68 per share. According to Ruhnn’s latest financial report, the company’s total net income in the second quarter of fiscal 2021 was 249 million yuan, a year-on-year decrease of 9%.
6.Stock Market Down on Report of Biden’s Capital Gains Tax Hike Plan
Earlier on Thursday, both the Nasdaq 100 and S&P 500 were trading higher, and the Dow Jones was about flat. However, all indexes moved lower in Thursday afternoon trades upon a Bloomberg report that Biden is considering nearly doubling the capital gains tax rate for wealthy people. According to the report, the capital gains tax rate would jump to 39.6% for individuals earning $1 million or more. The current long-term capital gains tax rate is 20%, regardless of a tax filer’s income levels. When the volatile session ended on Thursday, S&P 500 fell 0.92% to 4,134.95; Dow was down 0.94% to 33,814.91. Nasdaq composite dropped 0.94% to 13,818.41.
The increased taxes would fund social spending in the upcoming “American Families Plan,” according to Bloomberg. Biden is expected to announce the tax proposal next week. In addition, the $2.2 trillion infrastructure plan proposed by Biden would be funded by a proposed corporate tax rate increase from 21% to 28%.
By 【Financial Team – Kate】
News Collection: 文罡、文武、Kate