China's $114 billion stimulus package immediately boosted its stock market. But can it last?
- This post originally appeared in the Insider Today newsletter.
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In today's big story, Wall Street's big bet on China might be fool's gold.
What's on deck:
- Markets: Trump and Harris both want the crypto community in their corner.
- Tech: This chart shows how Netflix is absolutely crushing the streaming wars.
- Business: Everything thing you need to know about the potential strike that would upend supply chains.
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The big story
Here we go again
Just when Wall Street thought it was out, China is pulling it back in.
US financial firms' interest in China was on its last legs, but a new stimulus package has some investors excited again.
The immediate impact of China's $114 billion package, which includes cutting interest rates and reducing the amount of money banks need to keep in reserve, has been big. But Business Insider's Linette Lopez isn't sold on this being the start of a turnaround.
The fix is more of a bandage than anything else, as it doesn't address key economic issues plaguing the country.
Reducing bank reserve requirements means more loans can be issued, but accessing capital isn't the problem, Linette writes. China's dumpster fire of a property market is what has consumers stuck in place.
The majority of Chinese household wealth is invested in property (70%), which is a problem considering housing prices have fallen as much as 30% in Tier 1 cities.
In short, Chinese consumers' money is tied to assets dropping like lead balloons, which doesn't make them keen to spend money.
If you're still buying into the China hype, consider this: The stimulus package isn't that big.
The government spent more than $1 trillion in the wake of the finance crisis and $157 billion in 2012 on infrastructure projects.
As Linette puts it, "The problem does not match the price tag here."
Still, that's not stopping some Wall Streeters from diving back into China.
Hedge fund billionaire David Tepper is extremely bullish on the investing situation in China after the most recent stimulus package, describing it as a buy "everything" moment.
He's not alone. Traders, investors, and speculators have sent China's stock market to its best month in nearly a decade, signaling that the market players think that Beijing's moves are a "bazooka."
Most analysts agree that more will need to be done to keep the good times rolling. (Tepper, for what it's worth, acknowledged as much, noting that People's Bank of China governor Pan Gongsheng "promised to do more and more and more."
What that looks like remains to be seen. The key gap in the current policy remains fiscal support for China's discouraged consumers, writes BI's Filip De Mott
In the meantime, Wall Street's on-again-off-again relationship with China will prevail. As frustrating as the country can be to investors, too much opportunity exists for financiers to turn their back on it forever.
So even if this latest crop of China believers gets burned, there will likely be another group willing to follow in their footsteps. After all, maybe this time will be different.
News brief
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3 things in markets
- Ones to watch on Wall Street. Our annual list of Wall Street rising stars is here. We identified 25 of the top traders, investors, and dealmakers aged 35 and under. Check out the full list.
- The fight for crypto bros' votes. Crypto might not matter to most voters, but for those who do care, it matters a lot. That's why former President Donald Trump and Vice President Kamala Harris are both dedicating resources to court the crypto-community vote amid a tight race.
- The math ain't mathing on Trump Media's valuation. The company's nearly $3 billion market cap "seems unjustifiable," a chief global strategist said, considering its reported sales of $837,000 last quarter and a net loss of $16.4 million. What's worse, the political nature of the company means it has limited upside.
3 things in tech
- Elon Musk's "autocratic" style is an asset. His fixations are a threat. A new book by a veteran space journalist outlines SpaceX's success under Musk, who's described as a "mercurial leader." While his "autocratic control" of the company helped it gain dominance, his veer to the political right and fixation on X could undermine that dominance.
- OpenAI execs were reportedly worried the company could collapse when Ilya Sutskever left. Sutskever, the company's cofounder, left in May. According to a new report from The Wall Street Journal, executives attempted to woo the AI researcher back before rescinding the offer.
- The streaming wars have a clear winner. Netflix is crushing the competition, but its victory was far from assured. The streamer's fortunes have changed astronomically in just a little more than two years — and it's left the competition in the dust.
3 things in business
- The war on "organized retail crime." Since the COVID-19 pandemic, retailers and law enforcement have been cracking down on retail theft, calling perpetrators "criminal masterminds." But those who commit these crimes are often homeless or mentally ill — and some say this crackdown has effectively criminalized poverty.
- Ready. Set. Strike. The International Longshoremen's Association, the largest union of maritime workers in the US, is set to start striking Tuesday if its wage demands aren't met. Even a two-week strike would disrupt supply chains into 2025, according to one expert.
- Medical bills are more negotiable than you think. You can negotiate your salary, and some people even haggle on things like cell phone bills and rent. When it comes to medical bills, though, many people accept the cost at face value. But healthcare experts told BI that pushing back on pricey bills is actually worth a shot.
In other news
- Elon Musk wants to put people on Mars by 2030. Don't count on it.
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- Is Mark Zuckerberg still obsessed with efficiency? Check Meta's WiFi password.
- A record number of apartments will hit the market this year. That's great news for real estate affordability.
What's happening today
- Fed chair Jerome Powell will speak at the National Association for Business Economics annual meeting.
- The US fiscal year ends.
- Ryan Routh, the man accused of attempting to assassinate Donald Trump on his golf course earlier this month, is arraigned on gun charges.
- A court hearing for son of Mexican drug lord El Chapo on charges of drug trafficking and money laundering.
The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, senior editor, in London. Grace Lett, editor, in Chicago. Amanda Yen, fellow, in New York. Milan Sehmbi, fellow, in London.