EM Stocks Set for Best Month Since September on China Boost
Emerging market equities are set to extend their best monthly performance in six months as a rebound in Chinese shares gain momentum on more fiscal measures.
The MSCI Emerging-Market Index has risen nearly 3% in March, on track for the largest monthly advance since September, driven mainly by advances in Chinese equities. After a DeepSeek-fueled rally, investors are awaiting details from a planned briefing on efforts to revive consumption that would help sustain further gains in the local market.
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San Francisco Chronicle
an hour ago
- San Francisco Chronicle
California's fishermen are struggling. Is this tiny catch their last big chance?
From the cockpit of his 63-foot fishing boat in Monterey Bay, Porter McHenry is on the hunt for what might be the last lucrative catch in California — though competitors and tariffs are closing in on his profit. To spot his prey, he scrutinizes the behavior of seabirds, the patterns on his sonar screens and especially the tell-tale movements of the boats around him. His tiny target: California market squid, sometimes called Monterey squid, each 6 inches and 10 arms of opalescent white and purple. With salmon season closed for three years in a row and Dungeness crab season dramatically shortened, squid is now the only species in the state that still holds the promise of a massive payday for struggling fishermen. 'A good crab season, you could probably gross $3… $400,000,' said McHenry. 'Squid here, you could gross well over a million.' But when squid season opened in late April, there was no mad dash for the first catch. Instead, with Chinese tariffs threatening the price, a standoff ensued. Fishermen refused to fish, and their local processors, who buy and freeze their catch for transport, refused to offer a high price in an industry reliant on exports. The vast majority of all squid caught in the U.S. is shipped abroad, with the largest portion caught in California and sent to China. Last year, China purchased some $113 million worth of squid from the U.S. — 64% of the exported product. That makes today's tariffs particularly ominous for squid fishermen. 'It's just the uncertainty,' said McHenry. During a 2018 trade dispute, China temporarily stopped buying U.S. squid altogether. Even after the U.S. and China agreed in early May to substantially lower their tariffs on each other, the price of squid stayed down 25% from last year. There's an ongoing effort to sell more market squid to local buyers, bypassing tariffs and expanding the niche market for squid that stays in California. Michelin-starred restaurants like San Francisco's Kin Khao are already on board, offering diners some of the freshest, most tender squid caught in the U.S. But China remains the No. 1 customer, and this year, fishermen like McHenry could face even fiercer competition in an industry that is cutthroat even in times of economic peace. 'If I went and caught five tons of squid tonight, by the morning, everybody in the industry would know that I'd caught five tons of squid, and probably where I caught it,' said McHenry. 'The amount of espionage is incredible.' The games begin Squid season starts with a rumor. Around April, the cephalapods return to their favored spawning grounds in Monterey Bay. Until then, fishermen like McHenry wait impatiently, passing the time by working on their boats until they catch wind of a recreational fisherman who has spotted a shoal, or a halibut fisherman reports that his catch have mouths full of squid guts. News travels fast in this small community. Last year, just 72 boats brought in the season's 126 million pounds of squid. And getting into the squid fleet is its own competition: With a fixed number of permits, each with a one-time cost of about $900,000, the only way in is to wait until someone else retires or sells a coveted permit. But 72 can feel like a lot when a few dozen 60-foot vessels are crisscrossing paths as they furiously search for fortune. On April 23, after weeks of anticipation, word spread that a fisherman in Monterey found 50 tons of squid. That should have marked the opening of the season. Instead, when he brought his catch to a processor expecting $1,200 per ton, they offered $800, citing concern over the impact of tariffs. The rest of the fleet decided not to fish until a price was settled. But solidarity is fragile when every day spent waiting is a day of income lost. On April 29, local processors offered several of the fishermen in Monterey $900 per ton, which they accepted. Squid season had begun. Dropping an anchor Rather than broadcast their deal, the Monterey fishermen seized the advantage. They used their head start to deploy one of the most powerful moves in squid fishing: dropping an anchor. A dropped anchor is effectively a force field — no other boat is supposed to fish within an eighth of a nautical mile of an anchored boat. 'That's where the competitive nature of the squid fishery comes in,' said Frank Sousa, McHenry's fishing partner. 'You've got to be kind of aggressive in trying to find the right spot, and guys will try to push other people off their eighths, or try to get as much room as they can get in the best area.' Sometimes, a massive shoal of squid picks a spot to spawn and doesn't move. When that happens, the first one to drop anchor in the right place can keep their boat there for weeks, hauling up hundreds of tons from their untouchable supply. The cavernous belly of McHenry's boat can hold 120,000 pounds of squid, enough to fill four semitrucks at the dock. When he's found squid, he unrolls the massive seine net bolted to his deck, unspooling it like a giant web of thread, then uses it to encircle up to 80,000 pounds of prey, cinching it at the bottom to trap them. Almost every squid fisherman also employs a smaller secondary vessel, called a light boat, which shines bright lights into the water at night, attracting squid to their capture like moths to a flame. But squid are unpredictable. Just as easily as they settle on a spot, they can drift away, out of your eighth and into the next boat's. 'It's a chess game with a moving board,' said Sousa. Looking for clues Out on the ocean, sometimes for days on end, fishermen pass the time tuned into the same radio frequencies and talking on group calls. Even if a captain finds squid miles away from the nearest boat, chatty workers at the unloading docks and processing facilities make it nearly impossible to keep a secret. 'Everybody's got, you know, spies out,' said McHenry. There are clues to the squid's whereabouts on board, as well. McHenry's $14,000 sonar system scans the water around and below him for sea life. 'These are little pieces of squid,' he said, pointing to red, Rorschach-like blotches on a blue sonar screen. 'Four or five ton, maybe.' Tall and always dressed for a chilly night out on the ocean, McHenry is a second-generation Half Moon Bay fisherman, and he uses his historic knowledge of preferred spawning grounds and knowledge of habitat features like fathom curves to track his targets. 'The fishermen probably know more than any scientist about when the squid move in and how long they stay on the spawning beds,' said William Gilly, a professor at Stanford who has studied the physiology and behavior of squid for more than 40 years, catching thousands of market squid specimens in Monterey Bay. A big appetite For as long as he's been researching them, Gilly has been ordering squid at restaurants. Most of the time when he sees 'Monterey squid' on the menu, 'it's blatantly obvious that it's not Monterey squid … they'll be a quarter-inch thick, and Monterey squid mantles don't get that thick,' he said, referring to its body. Once, when Gilly was conducting research in La Paz, Mexico, he ordered what the restaurant assured him was market squid from California. Doubtful, he brought the dish back to his lab and tested the squid's DNA; it was Chinese. China is both a source and destination for squid because it processes more squid than any other country. When McHenry started squid fishing with his father in 2001, they earned $250 per ton. Today, thanks to buyers in China, he can make five times that. 'Asian countries have always liked this smaller squid because it's similar to what they have,' said Diane Pleschner-Steele, who spent nearly two decades as the executive director of the nonprofit California Wetfish Producers Association. The original squid fishermen in Monterey Bay were Chinese immigrants, pushed out of other, more profitable fisheries in the late 1800s, and fishing by night with torches to attract their catch. While countries halfway across the globe are clamoring for California's squid, Pleschner-Steele said it's been more of a challenge to find buyers close to home. And even if the U.S. appetite for market squid were stronger, there are few processing facilities here, and the U.S. can't compete with China's low cost of labor. Ultimately, it can be cheaper to send squid on a 12,000-mile round trip than to process it domestically. The irony is calamari rings consumed in the U.S. may have been caught here, shipped to China for processing, then shipped back. Keeping it local Still, the domestic market for squid has increased in recent years. At Japanese restaurant Rintaro, on the northern edge of San Francisco's Mission district, chef and owner Sylvan Mishima Brackett buys unprocessed squid wholesale from Monterey Fish Market at Pier 33 after it's trucked from Monterey. Brackett honed his instinct for ingredients while training in Japan and serving as the creative director at Berkeley's Chez Panisse. He likes the fresh, clean flavor of the market squid, and has made the small, delicate species the star of one of Rintaro's signature dishes, ika no nuta, for which it is poached, marinated in vegetable oil, and mixed with mustardy miso sauce and vegetables. With no cost for pre-processing, he said the squid is 'really cheap.' On his most recent order sheet, it cost $6.95 a pound, the same price as Manila clams from Washington and far less than the halibut that cost him $12 per pound. But it takes work. 'Cleaning squid is not, you know, super fun, but you just do it,' Brackett said. Five pounds of squid takes his team about 20 minutes to clean, debeak, and prepare for cooking. Brackett's outlook is rare. The most recent Fisheries of the United States Report, compiled by NOAA, estimated that 75%-90% of all seafood consumed in the U.S. is imported, the flip side of the roughly 80% of seafood caught in the U.S. that is exported. That's disappointing to some fishermen like Sousa. 'I wish that a lot of our seafood here was utilized more here,' said Sousa. 'But, you know, what it comes down to is we're trying to survive and support our families, and if shipping overseas is our best option, then I'm 100% okay with it.' Down in Monterey Bay on June 4, he and McHenry unloaded a small batch of squid through a tube at the dock. It hadn't been a great start to the season, but they found a decent spot around 3 a.m., and by the time the sun had warmed the walkways of the wharf, they'd caught 6 tons. This year's squid are bigger than last year's, about 10 per pound, which McHenry said signals a healthy ocean — and the potential for better fishing in the coming weeks. 'We've got that ever optimistic hope that it will get good,' he said.
CNBC
an hour ago
- CNBC
China's EV race to the bottom leaves a few possible winners
China's electric car price war shows little sign of letting up, putting more pressure on companies to survive. Tesla 's China sales fell by 15% in May from a year ago, China Passenger Car Association data showed. BYD , in contrast, reported a 14% year-on-year sales increase as it held onto first place in the market by volume, but even it had to announce sharp discounts as sales growth slowed from April's pace. "We expect additional price competition in the coming weeks as BYD is still lagging behind its sales target," said a team of analyst led by CLSA analyst Xiao Feng in a report Wednesday. While the analysts still have a high conviction, with an outperform rating on BYD's Hong Kong-listed shares, they see Geely as the 'best positioned" for investors as it is striking the optimal balance with its internal business structure and competing on vehicle price. CLSA has a price target of 483 Hong Kong dollars ($61.55) on BYD, and a 23 HKD target on Geely, also listed in Hong Kong. That's upside of nearly 20%, and 28%, respectively, from Friday's close. Geely is a large conglomerate with electric vehicle brands Galaxy, Zeekr and Lynk and Co., which share some of the same tech and manufacturing systems. "Geely's Galaxy NEV brand has successfully targeted BYD's popular models with better specs and lower prices," Macquarie analysts said in a report Thursday, citing a call with an auto dealer who manages dealerships for BYD, Geely and Xpeng in the relatively affluent Suzhou region near Shanghai. "The expert believes Geely's success will continue, as it is still ramping up new models to compete with BYD's entire model line-up," the report said. The Macquarie analysts have a price target of 22 HKD on Geely and rate the stock outperform. But they like U.S.-listed electric car startup Xpeng even more, with a $24 price target. Xpeng is likely to benefit from near-term market share gains given its advanced driver assist system and upcoming car models, the analysts said. The latest delivery data showed Xpeng delivered more than 30,000 cars in May for a seventh straight month, a rare feat among its immediate peers. The company last month also launched a new car under its lower-priced Mona brand. Among publicly listed new energy vehicle companies, a category that includes battery-only and hybrid-powered cars, Leapmotor and Li Auto have proven relatively stable, each with deliveries of more than 40,000 vehicles in May. Both companies have Hong Kong listings, while Li Auto also trades in New York. "Through a continuously expanding product matrix and cost-effective models, Leapmotor has achieved a stable market share in the Chinese mass EV market and has strong growth potential," the CLSA analysts said. They have a price target of 72 HKD, or more than 30% upside from Friday's close. Leapmotor reported a net loss in the first quarter, however, compared with profit in the fourth quarter. But Li Auto maintained profitability in the first quarter, according to results released on May 29. "We still see ample upside as a better-than-feared 1Q should inspire investor conviction about sequential recovery in 2Q," Morgan Stanley analysts said in a May 29 report. They have a price target of $36, for upside of more than 20% from Thursday's close. "The management team has found its pace for a steady and solid comeback, underpinning a more material resurgence of volume/margins into 2H25 amid new model launches," the analysts added. "Li Auto's premium model lineup can steer clear of the fierce pricing competition in the mass market." Li Auto is best known for its SUVs that come with a gas tank for extending the battery's driving range. Prices start around 244,000 yuan ($34,000). Industry giant BYD in contrast now sells some cars at 55,800 yuan, with most models falling in the 100,000 yuan to 200,000 yuan price range. The company also has a high-end sub-brand called Yangwang, which prices cars at well above 1 million yuan. Analysts that still like the stock see potential in BYD's overseas expansion. The narrative on BYD among European investors "sounds more optimistic," contrary to more cautious sentiment in China following the automaker's recent price promotions, JPMorgan's Nick Lai, head of Asia Pacific auto research said in a report Wednesday. Lai and his team also cited conversations with senior BYD management in London in the last week. "All in all, we retain our long-term positive view on the company and believe the (earnings) contribution from the overseas market and BYD's premium portfolio will increasingly play an important role," the JPMorgan analysts said. "We estimate that BYD's overseas business and premium brands will together contribute over 40% of its vehicle earnings in 2025 (up from 20-25% last year) even though they account for only about 20% of volume." The analysts rate BYD overweight, with a price target of 600 HKD. However, the risk of a flood of cheap cars into markets such as Europe have prompted tariff increases. In China, official commentary is also sounding the alarm about excessive competition. "We believe an end to the current price war will come down to simple economics," the Macquarie analysts said, pointing out that production capacity for both electric and traditional vehicles is more than 50 million units, well above the annual wholesale volume of 25 million to 27 million vehicles. "Thus, the market will likely stabilize either via higher demand or right-sized capacity and consolidation," the analysts said. "We believe this may take at least another three to five years." — CNBC's Michael Bloom contributed to this report.
2 hours ago
New disputes emerge ahead of US-China trade talks in London
BEIJING -- U.S.-China trade talks in London this week are expected to take up a series of fresh disputes that have buffeted relations, threatening a fragile truce over tariffs. Both sides agreed in Geneva last month to a 90-day suspension of most of the 100%-plus tariffs they had imposed on each other in an escalating trade war that had sparked fears of recession. Since then, the U.S. and China have exchanged angry words over advanced semiconductors that power artificial intelligence, 'rare earths' that are vital to carmakers and other industries, and visas for Chinese students at American universities. President Donald Trump spoke at length with Chinese leader Xi Jinping by phone last Thursday in an attempt to put relations back on track. Trump announced on social media the next day that trade talks would be held on Monday in London. The latest frictions began just a day after the May 12 announcement of the Geneva agreement to 'pause' tariffs for 90 days. The U.S. Commerce Department issued guidance saying the use of Ascend AI chips from Huawei, a leading Chinese tech company, could violate U.S. export controls. That's because the chips were likely developed with American technology despite restrictions on its export to China, the guidance said. The Chinese government wasn't pleased. One of its biggest beefs in recent years has been over U.S. moves to limit the access of Chinese companies to technology, and in particular to equipment and processes needed to produce the most advanced semiconductors. "The Chinese side urges the U.S. side to immediately correct its erroneous practices,' a Commerce Ministry spokesperson said. U.S. Commerce Secretary Howard Lutnick wasn't in Geneva but will join the talks in London. Analysts say that suggests at least a willingness on the U.S. side to hear out China's concerns on export controls. One area where China holds the upper hand is in the mining and processing of rare earths. They are crucial for not only autos but also a range of other products from robots to military equipment. The Chinese government started requiring producers to obtain a license to export seven rare earth elements in April. Resulting shortages sent automakers worldwide into a tizzy. As stockpiles ran down, some worried they would have to halt production. Trump, without mentioning rare earths specifically, took to social media to attack China. 'The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,' Trump posted on May 30. The Chinese government indicated Saturday that it is addressing the concerns, which have come from European companies as well. A Commerce Ministry statement said it had granted some approvals and 'will continue to strengthen the approval of applications that comply with regulations.' The scramble to resolve the rare earth issue shows that China has a strong card to play if it wants to strike back against tariffs or other measures. Student visas don't normally figure in trade talks, but a U.S. announcement that it would begin revoking the visas of some Chinese students has emerged as another thorn in the relationship. China's Commerce Ministry raised the issue when asked last week about the accusation that it had violated the consensus reached in Geneva. It replied that the U.S. had undermined the agreement by issuing export control guidelines for AI chips, stopping the sale of chip design software to China and saying it would revoke Chinese student visas. 'The United States has unilaterally provoked new economic and trade frictions,' the ministry said in a statement posted on its website. U.S. Secretary of State Marco Rubio said in a May 28 statement that the United States would 'aggressively revoke visas for Chinese students, including those with connections to the Chinese Communist Party or studying in critical fields.'
