A new deal between the US and Australia could bring a lot of good for some military companies - and a lot of bad for others. China's tech firms face higher labor costs. American hotels expect further drop in revenues.
Disclaimer: when we talk about, that something has grown, we mean a comparison with the same quarter a year earlier. Since all issuers are from the USA, then all results in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
Biden's head, don't put your finger in his mouth
Last week it became known about a major military agreement between the US and Australia: homeland of Mad Max will receive technology from the Americans to build nuclear submarines, there are also additional agreements on cooperation in the field of artificial intelligence, quantum technologies and other similar things. The UK is also involved in this whole story..
Agreement is very important, since it is obvious to almost everyone, against whom Australia and the United States are going to be friends: it's about the country, in which the main language of communication is Chinese.
China has been playing muscles in the region for quite a long time and "nightmare" its Asian neighbors. In the case of Australia, the Chinese have been playing a game of increasing influence within this country for many years - and even succeeded in some ways.. You could even say, that have succeeded too much: this caused a sharp counter-reaction from the Australian leadership. And as a result - a major military agreement with the United States, clearly directed against the PRC. Strengthening the Australian submarine fleet, and even at the suggestion of the Americans and with their participation, is an attack on China, because she is the last 10 years at an accelerated pace has been building a huge military fleet, to protect their maritime communications and, of course, intimidate Asian neighbors, with many of which China has territorial disputes.
Why is it important for the exchange. Given the extreme pain of this topic for the PRC, a whole fan of opportunities awaits investors.
Firstly, this, in principle, serves the cause of aggravating relations between the United States and China - and not only purely "nuclear" companies like BWX Technologies will benefit (NYSE: BWXT). A whole series of local ground conflicts can be expected, in which the PRC will support the non-American side - for example, it is quite possible to expect loud provocations from the DPRK. All military issuers will benefit from this, even if there is no war: investors may well pump up quotes "for future use". Also "for future use" in Washington may increase funding for the American army: waiting for answers from the Chinese.
Secondly, these events, certainly, motivate China to respond to the United States in the economic plane: this is the only way for China to actually harm the US, since militarily the PRC is not yet the most terrible enemy. The last war in China was already in 1979 with Vietnam - and it was not the Vietnamese who lost it at all. It seems to me, that there are high risks of zeroing the shares of a number of Chinese companies, traded on US stock exchanges. This option is very likely., because many of these shares have an ambiguous legal status. So investors in Chinese stocks - it is Chinese stocks from American stock exchanges that are available on the Russian exchanges - should keep this in mind.
Thirdly, surprisingly, in the place of the shareholders of American military companies, I would be afraid of the possibility of disrupting part of the contracts, concluded with customers outside the USA. The US-Australia agreement means, that Australia will cancel a previously concluded purchase contract 12 conventional French submarines totaling $ 60 billion. So the news of the US-Australia agreement infuriated the Gauls. If no solution is found, suit paris, then, probably, France will use its considerable diplomatic clout to, to ruin the lives of American defense contractors. But this, however, just a guess.
Flesh entrainment
China's communist leadership summons representatives of the country's biggest tech companies to the carpet: Alibaba, Tencent, DiDi Global and others - to talk about the state of affairs with the contract workers of these companies.
The lion's share of their employees work on a piecework basis - without any guarantee of payment.. Basically, things are about the same in similar companies in the West - but with one significant difference: in China, due to the poverty of the population and the generally unfavorable social situation, it is possible to bend workers much lower, than it is possible in the USA.
For example, if you compare American Amazon with Chinese Alibaba, one important difference is striking: Amazon's retail segment is characterized by extremely low margins, but Alibaba has a very marginal one. You don't have to look far to explain this..
Chinese economy, more precisely, its least prestigious and least skilled industries depend in no small measure on the influx of migrant workers from rural areas, put in fact in the position of "inner colony". Rural migrants have serious restrictions on access to insurance when moving to the city, education and other urban amenities. Respectively, a lot can be done with such a workforce.
In the last couple of years, contract workers have become very active in terms of union formation., What did the Chinese authorities pay attention to?. The Chinese Communist Party predictably dislikes uncontrolled activities of citizens, but she decided not to ignore the purely economic demands of the dissatisfied quite frankly. Back in July of this year, the government issued a directive, which obliged the owners of the respective companies to correct the algorithms of the applications: do not overload workers, limit penalties for being late.
Strictly speaking, the Chinese government simply decided to remind these companies of the previously issued directives. But now this is happening in the context of the most powerful pressure from regulators on the Chinese technology sector.. So that, I think, these companies will heed the message of the CCP this time. For the latter, this is an opportunity to somewhat strengthen its authority within the country without special costs.: all costs will be on the companies, who will have to make concessions to employees.
In practical terms, this could mean a decrease in the margins of a number of Chinese companies., relying on cheap and low-skilled labor in the first place, in the field of logistics and transportation. So the shareholders of these same companies should keep this possibility in mind..
Dead Season
According to a recent study by the American Hotel and Accommodation Association, American hotels will receive less money from business travel this year: the difference compared to 2019 will be $59 billion. This is very bad news., as the travel of ordinary Americans can be very volatile: it all depends on the regime of coronavirus restrictions and the income situation.
Consumers from the conditional "business class" have always been distinguished by both high marginality, and greater stability: schedule the work and activities of the enterprise involves a long planning horizon, and the spread of new strains of coronavirus has forced many businesses to cut travel budgets. So there's hope, that hotels and restaurants will be able to at least slightly compensate for the failure of 2020 by resuming the flow of posted workers, failed.
This is generally very bad news for all issuers in general., working in the hospitality industry: as for hotels and restaurants, and for suppliers of products for them. Very likely, that this industry will face a new series of bankruptcies.
