Global investors place Rmb1tn bet on China breakthrough

Bonds, stocks and currency draw in buyers in a year when everything unexpectedly came together

Hudson Lockett and Thomas Hale in Hong Kong

China’s bond market in particular has been a massive draw for investors during the pandemic © FT montage; Shutterstock

Despite a global coronavirus pandemic that began in China, 2020 has transformed into the year it all came together for the country’s capital markets, as foreign investors snapped up more than Rmb1tn worth of stocks and bonds.

China’s benchmark CSI 300 index is up about 27 per cent this year, in dollar terms, beating the S&P 500 by more than 13 percentage points. Shenzhen’s tech-focused ChiNext has risen some 59 per cent, on the same basis, exceeding even the runaway US tech benchmark, the Nasdaq Composite. Chinese government bonds have also drawn new fans with their rare source of yield.

The $150bn-worth of inflows, which came through Hong Kong programmes that connect investors to the mainland, mark a contrast with January, when Chinese stocks were the first in the world to feel the heat from the pandemic. Investors say the surge is likely to keep coming.

“I’ve been in Asia for 20 years and for most of that time period it’s been pretty challenging to get investors to look at the onshore market,” said Kenneth Akintewe, head of Asian sovereign debt at Aberdeen Standard Investments.

This year dealt a harsh lesson to those who hesitated to match global benchmarks’ increased weightings for Chinese securities, he said. “For any emerging markets investor that’s been underweight [on China] it’s been quite a painful trade.”

China’s bond market in particular has been a massive draw for investors during the pandemic thanks to reforms to open up the country’s financial system and Beijing’s initially sluggish but ultimately decisive response to the Covid-19 outbreak.

Harsh lockdowns across the country proved sufficient to get the economy back up and running near full capacity in the second half of 2020 — even as the rest of the world struggled to bring the virus’s spread under control.

“China is much further along its post-Covid recovery path,” said Paul Colwell, head of Asia advisory portfolio group at Willis Towers Watson. “The way policymakers act in response to changes in the economy, monetary policy, fiscal policy . . . China operates at a fundamentally different frequency to the rest of the world,” he added.

With China’s growth returning to pre-Covid levels and domestic consumption picking up, the central bank has been able to leave its benchmark interest rates almost untouched while others cut theirs hard or launched bond-buying programmes that crammed yields close to zero.

That meant China was the only game in town for debt investors seeking returns. Foreign holdings of Chinese government debt through the market link in Hong Kong grew by more than Rmb900bn in the first 11 months of 2020.

Sameer Goel, a macro strategist at Deutsche Bank, said foreign bond-buying this year was “even larger than what one would’ve expected” from passive flows after global benchmarks began including Chinese government debt in 2019.

Mr Goel said foreign buying of onshore bonds, which will get another boost next year from incorporation into FTSE Russell’s influential World Government Bond index, had helped drive a record six-month rally for the renminbi.

“Pent-up demand among global investors who wish to diversify away from the US dollar” is helping to support the Chinese currency, said Julia Ho, head of Asian macro at Schroders.

That growing confidence in the renminbi, which had taken a series of sharp falls in recent years as the US-China trade war intensified, has also helped ease investor apprehension over Chinese equities, which are among 2020’s best performers.

Equity inflows, although much smaller than those in the bond market, are now positive after outflows earlier this year. Since Donald Trump lost November’s US presidential election, setting up almost certainly calmer US-China relations, buying appetite has strengthened, with net foreign purchases of Chinese equities through a stock connect programme in Hong Kong swinging back up to about Rmb170bn ($26bn) this year.

Joe Biden’s victory helped push the benchmark CSI 300 index of Shanghai and Shenzhen-listed stocks up 6 per cent in November.

Even in spite of rising tensions, flows into China have run at a rapid pace throughout the Trump presidency, with total inflows of over $620bn over his four years in office. Similarly, the number of Chinese IPOs in the US grew faster under Trump than it had under Barack Obama. But the country faces growing bipartisan hostility in Washington, and Mr Biden has said he will not immediately lift Mr Trump’s trade tariffs.

“The stance will remain adverse”, said Thomas Gatley, an analyst at Gavekal Dragonomics in Beijing.

A global vaccine rollout could also undermine China’s competitive edge as one of the few major functioning global export economies, Mr Gatley added.

Recent bond defaults by cash-strapped state-owned enterprises, once thought to be fully guaranteed by Beijing, have also alarmed some local investors, who fear policymakers’ desire for fiscal discipline is returning. 

This could lead to more caution from investors, said Michelle Lam, senior China economist at Société Générale, “and this tightening of credit conditions will be negative for growth”.

But Hayden Briscoe, head of fixed income for Asia-Pacific at UBS Asset Management, suggests that China is positioned for both positive and negative scenarios for the coronavirus, and that global flows into the country are “just going to accelerate”.

“The number of conversations we’re having with clients is just ever-increasing,” he said. “People are making their first standalone allocations in China.”

What the Numbers Tell Us About Work Right Now

Drastic changes caused by the pandemic have created a totally different job landscape in 2020, affecting productivity, diversity, mental health and more

By Rachel Feintzeig


We worked from our kitchen tables, or donned masks to do our jobs. 

Our vocabulary changed: We learned what PPE was, and that some roles were essential. Protests, the racial justice movement and a historic election shook the country. We felt stressed, lonely; we lost our jobs or had to leave them.

It’s been a wild year that’s transformed work. To try to capture the breadth of what’s changed, and understand where we might be heading, I turned to the numbers: surveys, economic data and research papers.

They tell the story of women dropping out of the workforce in droves, companies catalyzed—at least on the surface—by the death of George Floyd, and a country where a quarter of households have had someone laid off. They point to a future where those who don’t have to don’t go into an office, at least not every day. Here’s our year at work, by the numbers.

Productive…at a cost

We’re getting our work done, but we feel pretty miserable. 

In a September survey of 330 human resources leaders by the Conference Board, 47% of respondents reported an increase in productivity at their companies, while only 13% reported a drop. 

But 60% said their employees are working more hours and 63% said their employees are spending more time in meetings. 

Four out of 10 reported more mental health problems among workers.

Part of it is surely the work itself—we’re exhausted from back-to-back video calls, without even a commute as buffer between work and life. We’re scared of losing our livelihoods. And then there’s the health crisis: 78% of participants in an American Psychological Association survey of 3,409 adults said the pandemic was a significant source of stress, so it’s no surprise that’s bleeding into our work lives.

What might help? Some employers say they’re planning to discount mental health services next year. And some employees say it’s time for a change. A November survey by public relations firm Weber Shandwick finds that 66% of people polled were planning to make a shift like switching jobs, moving out of town or cutting their hours to part-time as the pandemic wears on.

Realizing diversity needs

The Black Lives Matter movement certainly got corporate executives talking more about race and inequality. The share of organizations where leaders and employees say diversity and inclusion is a value or priority rose to 72% in 2020 from 65% in 2019, according to a continuing PricewaterhouseCoopers survey. At the same time, a third of respondents agree that diversity is a barrier to progression at their organizations, up from 28% in 2019.

Companies have taken steps like designating Juneteenth a paid holiday in 2021 (10% of those surveyed by XpertHR, an online provider of compliance guidance) and creating formal mentoring programs for underrepresented employee groups (42% of those surveyed by human resources organization WorldatWork.) 

But this statistic really stood out to me: More than half of people surveyed by Weber Shandwick reported that their company “says all the right things about diversity, equity and inclusion, but does not do what they say.”

Employees seem hungry for real action. Three-quarters of those participating in the Weber Shandwick survey said they want their employer to commit to fight racism, discrimination and unconscious bias, and 82% want a commitment to fair pay. We’ll see if 2021 brings more than just words.

Job news, most of it bad

The economic crisis continues affecting our paychecks. Almost a third of the companies surveyed by the Conference Board had deferred pay increases or bonuses to workers, and another 8% planned to do so before the end of the year. A similar number of firms had conducted permanent layoffs. A quarter had furloughed workers and a fifth had frozen all hiring.

The unemployment rate jumped more in three months—from 3.8% in February to 13% in May—than it did in two years of the last recession, according to an analysis of government data by Pew Research Center. It stands at 6.7%.

Another survey from Pew, of 13,200 Americans in August, found that one in four had either been laid off or had someone in their household lose their job. And yet the Conference Board survey suggests that finding workers is tough, especially in industries like construction and transportation. 

Some of those counted in unemployment figures aren’t really looking for work, the business research group hypothesizes. Instead, concerns about exposure or child-care responsibilities are keeping them from taking on jobs.

Trials for working parents

Remote school and day-care closures have left parents with a heavy burden. The solution many families have landed on: Mom quits her job. Some 865,000 women dropped out of the labor force in September, the start of the academic year, according to an analysis of Bureau of Labor Statistics data by the National Women’s Law Center. 

That’s compared with 216,000 men.

Despite nearly half a million women rejoining the workforce in October, women held 5.5 million fewer jobs that month than they did in February, according to an analysis by the Institute for Women’s Policy Research. The unemployment rate is especially high for Black and Hispanic women.

Employers seem reluctant to provide much substantive support for working parents. 

Many report allowing things like flexible hours but are far less generous with benefits like paid leave. 

In a U.S. Chamber of Commerce Foundation survey, 4% of 790 organizations surveyed said they’d offered financial assistance for child care, and most were unwilling or equivocal about increasing their company’s investment in child care.

Remote work forever

For years, it existed as an afterthought, or even a secret in many corporate jobs. 

Remote work was the hushed arrangement for a new parent returning from leave, the one-off negotiation for a longtime colleague moving to California.

Now, it’s gone mainstream. The number of working days Americans spend at home has increased eightfold with the pandemic, according to an analysis by Nicholas Bloom, an economist at Stanford University’s Graduate School of Business. Nearly 34% of Americans were working from home in November, according to a Stanford survey of 2,500 people.

Once the threat of the coronavirus has subsided, we may not be going back—at least not to the way things were. 

The average employee wants to work from home twice a week after the pandemic, according to a continuing Stanford survey. Workers and employers have invested in the new way of working, from buying furniture to learning to use videoconferencing software.

The stigma once associated with remote work is fading. We all see it’s not just watching Netflix while occasionally shooting off an email. 

Forced to try something new, we’ve realized some change isn’t so bad.

Hedge Funds Are Highly Invested in Stocks. Here’s Why That Could Be a Problem.

By Jacob Sonenshine

           Hedge funds surveyed by Evercore strategists have a 51% net equity exposure.

Hedge funds have been buying up stocks of late, but if history is a guide, the trend could reverse itself—and that would be a pressure point on stocks.

Hedge funds’ net equity exposure has risen sharply in the second half of 2020 as the stock market has spiked from its pandemic-induced bear market in March. 

Net equity exposure is the total percentage of a fund represented by long positions in stocks, minus the percentage of the fund in short positions on stocks it is betting against.

Hedge funds surveyed by Evercore strategists have a 51% net equity exposure, meaning the majority of hedge-fund positions are long, a sign those investors are optimistic on the market. 

That exposure is up from just above 48% at the end of the first half of the year.

This level of exposure is relatively high historically. The long-term median for Evercore’s survey, displayed in a graph, shows hedge funds at roughly 48% net exposure. 

The current level is in the 75th percentile of exposure.

The caution is that these investors might start reducing risk sooner rather than later. 

“December’s backdrop is quickly becoming one that encourages reducing hedge fund net exposure,” Dennis DeBusschere, Evercore’s head of portfolio strategy research, said in a note. One “binary event” he warned of is the runoff election in Georgia for the U.S. Senate. Control of the Senate hinges on the two races.

If Republicans keep control, then Congress would be split, a scenario that would make big fiscal spending less likely than if Democrats controlled the House and the Senate. 

That could be a negative for the economy and economically sensitive stocks, although with fiscal stimulus expected soon and Covid-19 vaccines being delivered and administered, a split Congress might be not so bad for stocks.

To be sure, a split Congress would benefit traditional oil and banking companies, because it would mean less stringent regulation on those industries.

Still, investors loathe uncertainty, and with the Georgia runoffs not being decided until Jan 5, highly exposed investors might want to avoid some volatility.

In any event, if hedge funds take some chips off the table, that would create selling pressure in the stock market. 

Other investors are part of the mix, as well. 

Individual investors have contributed substantially to market gains during the year, but when wealthy hedge funds unload long positions, that pressure can often overwhelm positive forces for stock prices.

The market has largely priced in another fiscal stimulus bill this year and the approval of Covid vaccines. 

The Vanguard S&P 500 Value Index Exchange Traded Fund —value stocks are highly correlated to changes in the economic outlook—is up just under 9% since Nov. 6. 

That was the last trading day before biotech giants announced their vaccines were almost 100% effective and preceded several positive fiscal-stimulus developments. Now, negative surprises on those fronts leave stocks vulnerable. And since Dec. 4, stocks have taken a pause and the value fund is down 1%.

In the short-term, stocks might have more downside than upside.


by Matthew Piepenburg

American exceptionalism, as current COVID and capitalism disasters confirm, has morphed into a distortion that resembles more of a comorbidity than a guiding light.

Despite a prior reputation for leading the world in innovation, problem solving and health care, the U.S. is witnessing record hospitalizations in a nation comprising 5% of the global population yet 25% of its COVID infections.

Regardless of one’s politics, the COVID crisis is now an open symptom of failure, not exceptionalism.

The same is true of the current crisis facing American capitalism.

In its purest form, capitalism is an exceptional system, yet sadly one that is morphing into something that is anything but exceptional.


Regardless of legitimately debatable views on how individuals and policy makers (from central bankers to health organizations) have handled the pandemic, we can all agree that COVID represents a turning point.

The question now is whether it will be a turning point for the worse or the better.

One way to forecast this direction is by tracking the current health of U.S. capitalism.


Today, with central banks engaged in open Wall Street socialism wherein artificially repressed rates and unlimited QE have directly benefited the two largest asset classes in America, namely real estate and stocks, we can’t deny the cause-and-effect powers (as well as beneficiaries) of such “accommodation.”

It’s an objective fact that 80 % of those assets are owned by the top 10%.

Does that feel like capitalism working at a national level, or something far more targeted and far less “free-market” driven?

The very concept of central-bank supported (and Congress-lobbied) capitalism is itself an oxymoron, and requires on honest re-assessment (and some hard questions) regarding the true meaning of capitalism.

Can any system, market or sector, for example, that is directly and exclusively supported by trillions in fiat money creation and decades of artificially repressed (and unnaturally low) interest rates by definition be labeled “free market,” “natural” or even “capitalistic”?

Be honest.

And has the $6+ trillion in Fed money creation since 2008 truly “trickled down” to the real economy or has it primarily benefited risk asset markets like stocks on the S&P 500…

…or real estate owners and commission-based brokers:

Again: Be honest.

Whether you be in the top 10% or the bottom 10%, the answer to such primary questions is empirically obvious.

Such asset price inflation (i.e. bubbles) in everything from tech stocks to beach front real estate is not symbolic of the lauded and natural “Darwinism” of competitive, free-market capitalism.

Instead, such bubbles for the top 10% and the consequent wealth disparity that followed for the rest of the country are dangerous indicators of a kind of post-modern feudalism wherein a questionable cabal of policy makers subsidizes a distinct minority of beneficiaries and then calls the result “economic stimulus” as the rest of the country gets poorer by the day.

But again, is that capitalism?

Capitalism, whether defined by Adam Smith or abused by Gordon Gecko, is a dynamic, full-body contact sport of almost blood-thirsty competition played on a level playing field of new ideas, equal capital costs and individual effort.

In addition, true capitalism, the kind our fathers knew, was equally designed to create a broad rather than narrow class of winners and prosperity over time.

Do the above charts suggest a broad class of winners?

Capitalism, of course, should reward executives. But by how much?

Since 1978, CEO compensation has grown by 940%, whereas worker compensation for the same period has grown by 12%. In 1965, the average ratio of CEO to median employee salaries was 21:1, today it’s over 320:1.

For Jeff Bezos at Amazon, the ratio is 1.2 million to 1.

Is such data a sign of an evolving capitalism or an indicator of something far more disturbing?


Unfortunately, there are other and increasingly clear signs of rigged policies (from the Fed, Congress, SEC or White House) which have less to do with fair competition and compensation—the keystones of healthy capitalism—and far more do with an extended yet media-ignored paradigm of favoritism—i.e. cheating.

Today, a kind of pseudo capitalism has emerged which is neither empathetic toward (or beneficial to) its host nation.

Instead, we have a distorted model of capitalism whose benefits and empathies are uniquely targeted to a singular (parasitic?) group of companies, individuals and markets.

For every member of Congress, for example, there are at least four financial lobbyists (from banks and big-tech) scurrying to influence (i.e. purchase) favorable policy decisions.

This suggests healthy capitalism is under the influence of bribery not policy, and backroom deals rather than fair competition.

Of course, any system that is inherently rigged, like the 1919 World Series, is inherently flawed.

Capitalism, when rigged, is no less disgraceful.

We see this rigged game playing out in real time as the weak majority get weaker and the strong minority get stronger in a backdrop that is not a capitalistic “survival of the fittest,” but rather a feudalistic survival of the best-connected.

Record breaking wealth disparity as well as the open and shameful disconnect between a tanking economy and a rising (Fed-supported) securities market is not an homage to capitalism, but rather open proof of its failure.


Take Tesla. It’s a visionary company, but its stock has been skyrocketing on growth projections and historically low borrowing costs, easily managed by exaggerated share price inflation.

In March, it was the 4th most valuable auto company in the world, today it is now the most valuable, worth more than Daimler, Toyota and Volkswagen combined.

Or Apple. It took 12 years to get a $1 trillion market cap, but only 5 months to recently reach $2 trillion.

Are such growth stories a consequence of fair, legitimate and natural free-market capitalism, or have they enjoyed an unfair advantage from the policy jocks?

Consider Amazon.

With online sales skyrocketing as citizens are locked at home, Amazon has hired hundreds of thousands of minimum-wage warehouse workers to keep boxes coming to your doorsteps.

We can applaud Amazon for its job creation and raising of the minimum wage.

But let us not forget the larger picture in which AMAZON has gamified municipalities through its absurd HQ2 plan which transfers wealth from city police, fire and school districts to its shareholders.

Nor should we forget that despite years of a profitless balance sheet and legal tax avoidance, Amazon’s share price bubble has allowed it to literally kill, gut and bury small businesses across the nation.

At the same time, by owning the rails and engaging in anti-competitive behavior while dumping products and prices due to their access to cheap capital (against which no other companies can compete), Amazon has slaughtered rather than leveled the fair “playing field” upon which true capitalism was designed to be played.

Instead, names like Amazon, Tesla and Apple have prompted openly pro-capitalist thought leaders like Scott Galloway to question whether the pandemic was created, or at least co-opted, for taking the top 10% into the top 1% while sending the remaining 90% downward.


A recent study by the Robin Hood Foundation, for example, revealed that 32% of the people in New York, the homefield of Wall Street, have been forced to go to a food bank since the onset of the pandemic.

That’s more people in the Empire State seeking free food than those who possess a college degree.

Meanwhile, 1/3 of greater America is worried about paying their rent.

By pure math, we now live in a Dickinsonian backdrop by which it is the “best of times” for a tiny minority (from Face-shot real estate brokers to Facebook tech investors) and the “worst of times” for the broader population.

Is it truly fair to castigate the real America as “losers” in a so-called Capitalistic competition whose rigged rules and policies ensured who the winners would be before the game could even start?

The rigged game playing right under our noses in the U.S. is not free market capitalism, just as an S&P sitting atop a big, fat, $7+ trillion Fed air-bag, sure as hell aint a free market.

Natural price discovery, as all honest Wall Street veterans know, died years ago. Nod to Greenspan, Bernanke, Yellen and Powell.

As a member of the Wall Street elite who benefited from such anti-capitalistic capitalism, I can’t ignore facts to alleviate a fake conscience.

The simple truth is that current U.S. markets, competition and politics have nothing to do with fair competition and hence nothing to do with capitalism.


As Galloway recently observed, “we are barreling toward a nation where 3 million lords are being served by 350 million serfs,” simply because US policy decided to favor corporations over populations as capitalism “collapses upon itself.”

Nor can this modern version of so-called capitalism rely on the “better angel” generosities of billionaires like Bezos or Musk to save the system.

The moral character of overpaid CEO’s will not bring the dying middle class back to its glory days.

Frankly, it’s up to the citizens themselves to get informed rather than angry.

Knowledge begets better results than pitch forks.

America is falling not just because capitalism lost its way or policy-supported CEO’s lack the character and accountabilities of the past.

It’s because citizens and their lobbied (bribed) leaders—red, blue and purple–have lost their sanity and are screaming at each other rather than opening a single economics, math, ethics, history or anti-trust book.

Today, the crowd gets its education from tweets and twits, not informed thoughts, sound leadership and patient knowledge or actual book reading.


This, of course, makes the mal-informed majority (i.e. the bottom 90%) easier to trick and manipulate.

Decision-makers on top, from ancient Rome to Herr Goebbels, have always understood, and hence exploited, such wide-spread ignorance.

In short, policy anti-heroes serve a mal-informed population a mixed cocktail of either: 1) bread & circus (from Netflix to celebrity virtue-signaling) or 2) fear (from “social-distancing” to COVID death rates) to keep the crowd ignorant, divided and afraid.

Today, most U.S. citizens are blind to the rudimentary basics of Fed policy, currency debasement, lobbying tricks, anti-trust principles, or even viral facts.

Thus, as the middle-class flounders and a new financial feudalism replaces genuine capitalism, the mad crowd has no idea where to place its madness other than at each other in an historically divisive era of identity politics replacing anything resembling informed and unifying politics or policies.

Meanwhile, Amazon’s stock climbs as true capitalism crawls, and ancient assets like gold rise, as broken currencies like the dollar, fall.

Such are the symptoms of modern feudalism. Get ready for more.