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Is it time for emerging markets investors to switch out of China and back Indian stocks?

2021 has been a tough year for investors in Chinese stocks which have been…
The post Is it time for emerging markets investors to switch out of China and back Indian stocks? first appeared on Trading and Investment News.

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2021 has been a tough year for investors in Chinese stocks which have been put under pressure by a combination of factors. The MSCI China index hit a record high in February but has lost over 30% since then and is down by close to 20% for the year-to-date.

chart

Source: Nasdaq.com

Over the same period, Indian stocks have done very well indeed. The MSCI India index is up around 28% over the year-to-date. By contrast, the UK’s FTSE All Share index has gained 9% this year, the FTSE 100 8.4% and the tech-heavy Nasdaq in the USA has gained a significantly lower 18.8%. Even the S&P 500’s 2021 returns of 22.6% are some way off the MSCI India.

chart2

Source: Nasdaq.com

The losses for Chinese stocks and gains for Indian stocks over 2021 can be interpreted in two ways. The first would be to see a buy opportunity for Chinese stocks. That would imply long term faith in China’s private equity markets and a belief recent valuation drops mean there is currently value to be had in China.

The other way of looking at it would be to infer geopolitics, global economic trends and the new policy of China’s authorities to limit the size and influence of the country’s biggest companies means Chinese stock markets have had their day in the sun and could now be entering a long winter. And that India’s economy and private equity markets will remain in the ascendancy, making it the most attractive of the larger emerging markets for investors to have exposure to.

Which is right? Should you be snapping up discounted Chinese stocks or abandoning the market and changing horses to India’s stock market? Let’s take a look.

What’s happened to Chinese equities in 2021?

The biggest factor to have dampened international investor appetite for Chinese stocks is the government crackdown on the huge country’s biggest technology companies like Alibaba and Tencent but extending across the sector. Moves to deleverage huge construction companies like Evergrande have also hit sentiment even if there is tacit recognition that may strengthen China’s financial systems in the longer term by removing a potential major systemic risk.

However, with most international investment trusts and funds focused on Chinese equities heavily exposed to the valuation of China’s biggest technology companies, which comprise a heavy weighting in all major indices, it is their woes that have had the biggest negative impact on returns this year. Three of the biggest China-focused investment trusts, JPMorgan China Growth & Income, Fidelity China Special Situations and Baillie Gifford China Growth, all count the two tech giants within their top three holdings.

Hong Kong-listed Alibaba has seen its market capitalisation almost half in 2021 with losses of 47.5% for the year-to-date. Tencent, also listed in Hong Kong, is down 19.2% this year as a result of moves by regulators to limit the screen time, introduce new data protection laws and require all new apps to receive government approval before they can be published.

alibaba group

Baillie Gifford director James Budden commented for The Times newspaper:

“The reality is that big tech is under the microscope globally because of its growing influence, and the regulatory framework is tightening everywhere. For better or for worse, the difference is that China’s system of government allows it to act faster.”

Of course, for investors considering emerging markets exposure today, the question is less what has caused the downwards pressure on Chinese stocks in 2021 and more whether those influences have already been fully priced in. If they have, moves to the upside may come next. If they haven’t, there could still be more pain to come for China’s private equity markets.

Catherine Yeung, investment director at Fidelity China Special Situations and Asian Values trusts, thinks the latter scenario is likely to be closer to how it pans out, commenting:

“We’re probably moving into the second phase where you’re going to hear continued newsflow around the policy that has been announced. We don’t think we’re going to see any big surprises.”

However, it’s hard to argue Ms Yeung’s position is not compromised by the fact she heads up a fund whose success relies on investors keeping faith in China’s growth story. But flows of capital into, and circulating within, emerging markets funds suggest many investors now see more potential in India’s stock market over coming years. Capital flows like the look of the trends in favour of the economy of the world’s second most populous nation.

Why are investors pouring capital into India?

India has a growing middle class, a much younger population than China and relatively strong rule of law compared to emerging markets competitors. And there isn’t the same kind of geopolitical tension between Delhi and the largest developed market economies like the USA, Germany and the UK as currently sours relations with Beijing.

However, might strong gains over the past year mean Indian stocks currently look expensive? Indian companies do look more expensive than Chinese peers with the MSCI India index’s forward price earnings ratio at a multiple of x23 as of the end of October. At the same time, the MSCI China index was trading at a forward price earnings ratio of 13.

Indian equities have since dipped, lowering that multiple slightly. But so have Chinese stocks, meaning the gap remains similar to what it was a month ago. The emerging markets average is also a forward price earnings ratio of 13, putting Indian equities well ahead of most rivals in the premium they command.

There is an argument India’s prospects support that premium but it does expose investors to some risk. In November, the share price of the Indian fintech One97 Communication , which owns the popular payments app Paytm, which had recently become the country’s largest ever IPO, fell by over a third during its first two days of trading. Overvalued tech IPOs are one major tell-tell sign of an overheated market. There has, however, since been a 21% recovery from that early low.

one97 communication ltd

India’s largest companies have also seen strong earnings recovery this year, supported by the rollout of a mass Covid-19 vaccination programme and government policy, including tax reform and state-backed loans that have helped businesses through the pandemic. Those factors offer some kind of buffer for relatively the high current valuations of many Indian large-caps.

India’s mid and small-cap companies are also far cheaper than the country’s large caps. For investors worried that valuations look stretched at the top end of India’s stock market, smaller companies could still be an attractive bet. One trust that offers that option is Ashoka India Equity whose portfolio has an allocation of less than 40% to companies worth over £10 billion. That compares to the 78% exposure the MSCI India index has to Indian large caps.

Conclusion

The latest Omicron variant of the Covid-19 virus could mean more stock market volatility in the months ahead. India may be more affected by that than China, whose strict lockdown policies have largely controlled the day-to-day societal impact in the country and brought infection levels down to levels that are now very low in an international context. But of course, its still manufacturing-reliant economy is heavily influenced by what’s going on in the rest of the world.

Mid-term, the performance of Chinese equities will be heavily influenced by how new government policies actioned over the past year are enforced. And to what extent China withdraws into itself internationally compared to the past few decades as well as international relations, especially with the USA.

India’s stock market doesn’t suffer from the same kind of uncertainty. This is likely a major factor in why emerging markets investors have recently favoured it. A diversified investment in Indian stocks, especially one focused on mid and small-caps, is a bet on the growth of India’s economy over the next decade or so. It’s a bet an increasing number of emerging markets investors have been happy to make.

The post Is it time for emerging markets investors to switch out of China and back Indian stocks? first appeared on Trading and Investment News.

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A Deeper Dive Into The CDC Reversal

A Deeper Dive Into The CDC Reversal

Authored by Jeffrey Tucker via The Brownstone Institute,

It was a good but bizarre day when the CDC finally…

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A Deeper Dive Into The CDC Reversal

Authored by Jeffrey Tucker via The Brownstone Institute,

It was a good but bizarre day when the CDC finally reversed itself fundamentally on its messaging for two-and-a-half years.

The source is the MMWR report of August 11, 2022. The title alone shows just how deeply the about-face was buried: Summary of Guidance for Minimizing the Impact of COVID-19 on Individual Persons, Communities, and Health Care Systems — United States, August 2022

The authors: “the CDC Emergency Response Team” consisting of “Greta M. Massetti, PhD; Brendan R. Jackson, MD; John T. Brooks, MD; Cria G. Perrine, PhD; Erica Reott, MPH; Aron J. Hall, DVM; Debra Lubar, PhD;; Ian T. Williams, PhD; Matthew D. Ritchey, DPT; Pragna Patel, MD; Leandris C. Liburd, PhD; Barbara E. Mahon, MD.”

It would have been fascinating to be a fly on the wall in the brainstorming sessions that led to this little treatise. The wording was chosen very carefully, not to say anything false outright, much less admit any errors of the past, but to imply that it was only possible to say these things now. 

“As SARS-CoV-2, the virus that causes COVID-19, continues to circulate globally, high levels of vaccine- and infection-induced immunity and the availability of effective treatments and prevention tools have substantially reduced the risk for medically significant COVID-19 illness (severe acute illness and post–COVID-19 conditions) and associated hospitalization and death. These circumstances now allow public health efforts to minimize the individual and societal health impacts of COVID-19 by focusing on sustainable measures to further reduce medically significant illness as well as to minimize strain on the health care system, while reducing barriers to social, educational, and economic activity.

In English: 

everyone can pretty much go back to normal.

Focus on illness that is medically significant. Stop worrying about positive cases because nothing is going to stop them. Think about the bigger picture of overall social health. End the compulsion. Thank you. It’s only two and a half years late. 

What about mass testing?

Forget it:

“All persons should seek testing for active infection when they are symptomatic or if they have a known or suspected exposure to someone with COVID-19.”

Oh. 

What about the magic of track and trace?

“CDC now recommends case investigation and contact tracing only in health care settings and certain high-risk congregate settings.”

Oh. 

What about the unvaccinated who were so demonized throughout the last year? 

“CDC’s COVID-19 prevention recommendations no longer differentiate based on a person’s vaccination status because breakthrough infections occur, though they are generally mild, and persons who have had COVID-19 but are not vaccinated have some degree of protection against severe illness from their previous infection.”

Remember when 40% of the members of the black community in New York City who refused the jab were not allowed into restaurants, bars, libraries, museums, or theaters? Now, no one wants to talk about that. 

Also, universities, colleges, the military, and so on – which still have mandates in place – do you hear this? Everything you have done to hate on people, dehumanize people, segregate people, humiliate others as unclean, fire people and destroy lives, now stands in disrepute. 

Meanwhile, as of this writing, the blasted US government still will not allow unvaccinated travelers across its borders! 

Not one word of the CDC’s turgid treatise was untrue back in the Spring of 2020. There was always “infection-induced immunity,” though Fauci and Co. constantly pretended otherwise. It was always a terrible idea to introduce “barriers to social, educational, and economic activity.” The vaccines never promised in their authorization to stop infection and spread, even though all official statements of the CDC claimed otherwise, repeatedly and often. 

You might also wonder how the great reversal treats masking. On this subject, there is no backing off. After all, the Biden administration still has an appeal in process to reverse the court decision that the mask mandate was illegal all along.

“At the high COVID-19 Community Level,” the CDC adds, “additional recommendations focus on all persons wearing masks indoors in public and further increasing protection to populations at high risk.”

The problem from the beginning was that there never was an exit strategy from the crazy lockdown/mandate idea. It was never the case that they would magically cause the bug to go away. The excuse that we would lock down in wait for a vaccine never made any sense. 

People surely knew early on of the social, economic, and cultural devastation that would ensue. If they did not, they never should have been anywhere near the control switches of public health. Badges and bureaucracies do not terrify a virus destined to spread to the whole planet. And not one person with even the most casual passing knowledge of coronaviruses could have sincerely believed that a vaccine would magically appear to achieve something never before achieved in the whole history of medicine. 

When the Great Barrington Declaration appeared on October 4, 2020, it caused a global frenzy of fury not because it said anything new. It was merely a pithy restatement of basic public-health principles, which pretty much instantly became verboten on March 16, 2020, when Fauci/Birx announced their grand scheme. 

The GBD generated mania because the existing praxis was based on preposterously unproven claims that demanded that billions of people buy into complete nonsense. Sadly many did simply because it seemed hard to believe that all world regimes but a handful would push such a damaging policy if it was utterly unworkable. When something like that happens – and there never was the hope that it could work – the regime imperative becomes censorship and shaming of dissent. It’s the only way to hold the great lie together. 

So finally, nearly two years later the CDC has embraced the Great Barrington Declaration rather than doing a “quick and devastating takedown” as Francis Collins and Anthony Fauci called for the day after its release. No, they had to try out their new theory on the rest of us. It did not work, obviously. For the authors of the GBD, they knew from the time they penned the document that it was a matter of time before they were vindicated. They never doubted it. 

Dr. Rajeev Venkayya is widely credited with coming up with the idea of lockdowns while he was working for the Bush administration back in 2005. He had no training at all in public health or epidemiology. He later marveled that it fell to him, a young desk-dwelling White House bureaucrat, to “invent pandemic planning.” Maybe he should have demurred that day that George W. Bush asked him to lead the charge to inaugurate a new war on pathogens. 

Somehow his views gained converts, among whom was Bill Gates, the foundation for whom he worked for years. The rest is history. 

In April 2020, Venkayya called me to explain why I needed to stop attacking lockdowns. He said that the planners need a chance to make their scheme work. 

On the phone, I asked the same question over and over: where does the virus go? The first two times, he did not respond. I pressed and pressed. Finally he said there will be a vaccine. 

It’s hard to appreciate just how preposterous that sounded at the time, and I said something along those lines: it would be a medical miracle never before seen to have a shot for a coronavirus that was sterilizing against wild type and all inevitable mutations, and to do it in a reasonable time so that society and economy had not completely fallen apart. 

The whole approach was clearly milliennarian at best and utter madness at worst. And here I was, in the thick of global lockdowns, on the phone with the architect of the whole idea, an idea that had reduced billions to servitude, wrecked schools and churches, and sent communities and countries into complete upheaval. I wondered at the time what it would be like to be Dr. Venkayya that day. After all this ended in disaster, would he take responsibility? His LinkedIn profile today says otherwise: he is prepared to “tackle current and future epidemic & pandemic threats as the CEO of Aerium Therapeutics.”

There never was an exit strategy from lockdowns and mandates but they eventually did find an exit nonetheless. It came in the form of a heavily footnoted and opaquely written reversal, published by the main bureaucracy responsible for the disaster. It amounts to a repudiation without saying so. And thus does the great experiment in mass compulsion come to an intellectual end. If only the carnage could be cleaned up by another posting on the CDC’s website. 

By the way, the Biden administration has extended the declaration of Covid emergency. And my unvaccinated friends in the UK still can’t board a plane to come for a visit. 

All of this gives rise to the great question: what was the point? Maybe it was all a mistake and now it is gone forever but that’s unlikely. The intellectuals who pushed this project on the world have a view of the world that is fundamentally ill-liberal. They differ among themselves on the details but the general approach is technocratic central planning rooted in deep suspicion of basic tenets of freedom. 

How many people on the planet have now been acculturated to top-down control, socialized to live in fear, accept whatever comes down from above, never to question an edict, and expect to live in a world of rolling man-made disasters? And was that the point after all, to cultivate low expectations for life on earth and relinquish the soul’s desire for a full and free life? 

Tyler Durden Thu, 08/18/2022 - 09:49

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A dog has caught monkeypox from one of its owners, highlighting risk of the virus infecting pets and wild animals

The monkeypox virus can easily spread between humans and animals. A veterinary virologist explains how the virus could go from people to wild animals in…

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A dog in Paris has become the first case of a pet contracting monkeypox from its owners. Cavan Images via Getty Images

A dog in Paris has caught monkeypox from one of its owners, both of whom were infected with the virus, according to a scientific paper published on Aug. 10, 2022. This is the first case of a dog contracting the monkeypox virus through direct contact with skin lesions on a human.

I am a veterinary pathologist and virologist who has been working with poxviruses for over 20 years. I study how these viruses evade the immune system and am working on modifying poxviruses to prevent infection as well as treat other diseases, including cancer.

With monkeypox spreading in humans throughout the world, my colleagues and I have begun to worry about the increased risk of monkeypox spreading from humans to animals. If monkeypox spreads to wildlife species in the U.S. and Europe, the virus could become endemic in these places – where it has historically been absent – resulting in more frequent outbreaks. The report of the infected dog shows that there is a decent chance these fears could become a reality.

A microscope image of a bunch blue circles in a brown-colored cell.
The monkeypox virus – the blue circles in this image of an infected cell – is a poxvirus similar to smallpox and cowpox and can easily infect many different species. NIAID/Wikimedia Commons, CC BY

A species-jumping virus

Monkeypox is a poxvirus in the same family as variola – the virus that causes smallpox – and cowpox viruses and likely evolved in animals before jumping to humans. Monkeypox causes painful lesions in both humans and animals and, in rare cases, can be deadly. Researchers have found the monkeypox virus in several species of wild rodents, squirrels and primates in Africa, where the virus is endemic. Monkeypox does not need to mutate or evolve at all to be able to infect many different species. It can easily spread from animals to people and back again.

Though there is a fair bit of research on monkeypox, a lot more work has been done on cowpox, a similar zoonotic poxvirus that is endemic in Europe. Over the years, there have been several reports of cowpox infection spreading from animals to humans in Europe.

From people to animals

Until recently, most monkeypox infections occurred in specific areas of Africa where some wildlife species act as reservoirs for the virus. These outbreaks are usually contained quickly through isolation of infected individuals and vaccinating people around the infected individual. The current situation is very different though.

With nearly 40,000 cases globally as of Aug. 17, 2022 – and more than 12,500 cases in the U.S. alone – monkeypox is now widespread within the human population. The risk of any one person transmitting the virus to an animal – particularly a wild one – is small, but the more people are infected, the greater the chances. It’s a numbers game.

There are a number of ways viruses can transfer from animals to people – called spillover – and from people back to animals – called spillback. Since monkeypox is most easily spread through direct skin-to-skin contact, it is a bit more difficult to transmit between species than COVID-19, but certainly possible.

The case of the dog in Paris provides a clear example of how cuddling or being close to a pet can spread the virus. Previous studies on poxviruses like monkeypox have shown that they can stay active in fecal matter. This means that there is a risk of wild animals, likely rodents, catching it from human waste.

A grey rat.
There are a number of species that host monkeypox in Africa – like this gambian rat. Monkeypox can spread from humans to many other animals, including dogs and likely cats and other species of rodents. Louisvarley/Wikimedia Commons, CC BY-SA

The monkeypox virus is also present in saliva. While more research needs to be done, it is potentially possible that an infected person could discard food that would then be eaten by a rodent.

The chances of any one of these events happening is extremely low. But I and other virologists worry that with more people becoming infected, there is a greater risk that rodents or other animals will come into contact with urine, feces or saliva that is contaminated with the virus.

Finally, there is the risk of people giving monkeypox to a pet, which then passes it on to other animals. One case study in Germany described an outbreak of cowpox that was caused when someone took an infected cat to a veterinary clinic and four other cats were subsequently infected. It is feasible that an infected household pet could spread the virus to wild animals somehow.

How to help

One of the key reasons that the World Health Organization was able to eradicate smallpox is that it only infects people, so there were no animal reservoirs that could re-introduce the virus to human populations.

Monkeypox is zoonotic and already has several animal reservoirs, though these are currently limited to Africa. But if monkeypox escapes into wild animal populations in the U.S., Europe or other locations, there will be always be potential for animals to spread it back to humans. With this in mind, there are a number of things people can do to reduce the risks with regard to animals.

As with any infectious disease, be informed about the signs and symptoms of monkeypox and how it is transmitted. If you suspect you have the virus, contact a doctor and isolate from other people.

As a veterinarian, I strongly encourage anyone with monkeypox to protect your pets. The case in Paris shows that dogs can get infected from contact with their owners, and it is likely that many other species, including cats, are susceptible, too. If you have monkeypox, try to have other people take care of your animals for as long as lesions are present. And if you think your pet has a monkeypox infection, be sure to contact a veterinarian so they can test the lesion and provide care when needed.

Even though monkeypox has been declared a public health emergency, it is unlikely to directly affect most people. Taking precautionary steps can protect you and your pets and will hopefully prevent monkeypox from getting into wildlife in the U.S., too.

Amy Macneill does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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UBC researchers discover ‘weak spot’ across major COVID-19 variants

Researchers at the University of British Columbia have discovered a key vulnerability across all major variants of the SARS-CoV-2 virus, including the…

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Researchers at the University of British Columbia have discovered a key vulnerability across all major variants of the SARS-CoV-2 virus, including the recently emerged BA.1 and BA.2 Omicron subvariants.

Credit: Dr. Sriram Subramaniam, UBC

Researchers at the University of British Columbia have discovered a key vulnerability across all major variants of the SARS-CoV-2 virus, including the recently emerged BA.1 and BA.2 Omicron subvariants.

The weakness can be targeted by neutralizing antibodies, potentially paving the way for treatments that would be universally effective across variants.

The findings, published today in Nature Communications, use cryo-electron microscopy (cryo-EM) to reveal the atomic-level structure of the vulnerable spot on the virus’ spike protein, known as an epitope. The paper further describes an antibody fragment called VH Ab6 that is able to attach to this site and neutralize each major variant. 

“This is a highly adaptable virus that has evolved to evade most existing antibody treatments, as well as much of the immunity conferred by vaccines and natural infection,” says Dr. Sriram Subramaniam (he/him), a professor at UBC’s faculty of medicine and the study’s senior author. “This study reveals a weak spot that is largely unchanged across variants and can be neutralized by an antibody fragment. It sets the stage for the design of pan-variant treatments that could potentially help a lot of vulnerable people.”

Identifying COVID-19 master keys

Antibodies are naturally produced by our bodies to fight infection, but can also be made in a laboratory and administered to patients as a treatment. While several antibody treatments have been developed for COVID-19, their effectiveness has waned in the face of highly-mutated variants like Omicron.

“Antibodies attach to a virus in a very specific manner, like a key going into a lock. But when the virus mutates, the key no longer fits,” says Dr. Subramaniam. “We’ve been looking for master keys — antibodies that continue to neutralize the virus even after extensive mutations.”

The ‘master key’ identified in this new paper is the antibody fragment VH Ab6, which was shown to be effective against the Alpha, Beta, Gamma, Delta, Kappa, Epsilon and Omicron variants. The fragment neutralizes SARS-CoV-2 by attaching to the epitope on the spike protein and blocking the virus from entering human cells.

The discovery is the latest from a longstanding and productive collaboration between Dr. Subramaniam’s team at UBC and colleagues at the University of Pittsburgh, led by Drs. Mitko Dimitrov and Wei Li. The team in Pittsburgh has been screening large antibody libraries and testing their effectiveness against COVID-19, while the UBC team has been using cryo-EM to study the molecular structure and characteristics of the spike protein.

Focusing in on COVID-19’s weak points

The UBC team is world-renowned for its expertise in using cryo-EM to visualize protein-protein and protein-antibody interactions at an atomic resolution. In another paper published earlier this year in Science, they were the first to report the structure of the contact zone between the Omicron spike protein and the human cell receptor ACE2, providing a molecular explanation for Omicron’s enhanced viral fitness.

By mapping the molecular structure of each spike protein, the team has been searching for areas of vulnerability that could inform new treatments.

“The epitope we describe in this paper is mostly removed from the hot spots for mutations, which is why it’s capabilities are preserved across variants,” says Dr. Subramaniam. “Now that we’ve described the structure of this site in detail, it unlocks a whole new realm of treatment possibilities.”

Dr. Subramaniam says this key vulnerability can now be exploited by drug makers, and because the site is relatively mutation-free, the resulting treatments could be effective against existing—and even future—variants.

“We now have a very clear picture of this vulnerable spot on the virus. We know every interaction the spike protein makes with the antibody at this site. We can work backwards from this, using intelligent design, to develop a slew of antibody treatments,” says Dr. Subramaniam. “Having broadly effective, variant-resistant treatments would be a game changer in the ongoing fight against COVID-19.”


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