President Xi's Tightening Grip On China Could Boost Some Chinese Stocks

Chinese president Xi Jinping's move on Sunday to secure an unprecedented third term in power and replace four of the seven members of the powerful standing committee of the Politburo with loyalists sent stocks tumbling Monday, and investors are still taking stock of the damage. The SSE Index of stocks traded at the Shanghai Stock Exchange was down only 2% Monday and 18.2% so far this year, compared with the Golden Dragon Index's 47% year-to-date plunge. Jason Hsu, founder and chairman of Rayliant Global Advisors, which has $99 million in its actively-managed Quantamental China ETF, thinks there are still opportunities to invest in manufacturing and exporting stocks, especially if Xi's government injects stimulus to subsidize job growth. Xi's predecessor Hu Jintao was escorted out of the Chinese Communist party's twice-a-decade Congress, which state media attributed to Hu "Not feeling well" but many took as an indication that Xi is solidifying his power. Xi has spent recent years reining in the tech companies that minted ultra-wealthy Chinese billionaires like Alibaba's Jack Ma and Tencent's Ma Huateng, imposing billions in fines from antitrust regulators and enticing those companies to pledge more than $30 billion to "Common prosperity" initiatives. China's renminbi has weakened 13% against the dollar this year, but Hsu thinks Xi will keep an eye on his currency and underperforming stock market as well in an effort to cement his legacy. "With the stock market being so visible-in China the stock market is mostly retail trading-if you have a bad stock market, that appears to be a vote of no confidence against Xi Jinping's administration. I think they will look at that as a and manage it."