After the TikTok ban, thousands of Americans paid the "cat tax"... On January 19, Congress banned Chinese social media platform TikTok. The aim was apparently to avoid foreign influence and data collection.
Editor's note: Today at the Chaikin PowerFeed, we're turning things over to our friend Sean Michael Cummings... As regular readers know, Sean is an analyst at our corporate affiliate Stansberry Research. And today's essay from him is an adapted version of one that published in the February 24 edition of Stansberry's free DailyWealth e-letter. In it, Sean explains why investors should be aware of a big development that could shift sentiment about Chinese stocks...
A 'Mini Glasnost' Could Send Chinese Stocks Soaring
By Sean Michael Cummings, analyst, Stansberry Research
After the TikTok ban, thousands of Americans paid the "cat tax"... On January 19, Congress banned Chinese social media platform TikTok. The aim was apparently to avoid foreign influence and data collection. This left more than half a million "TikTok refugees" in need of a new social media site. And they soon found a new home... TikTok users flocked to another Chinese social network called Xiaohongshu (also known as RedNote). And even though the ban on TikTok didn't last long, a lot of Americans haven't left RedNote behind. Unlike TikTok, RedNote doesn't separate users by region. But the app is overwhelmingly used by Chinese nationals. More than 218 million users are Chinese... while only about 3 million active users are American. As a joke, longstanding RedNote users have "taxed" their new American friends by demanding pet pictures in exchange for use of the site. RedNote's "cat tax" may be an ironic Internet meme – but it represents a historic moment in relations between the U.S. and China. And investors need to be aware of it.
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The cultural exchange on RedNote echoes another watershed moment in geopolitics... At the twilight of the Soviet Union, then-Soviet President Mikhail Gorbachev kick-started a similar cultural exchange between Eastern Europe and the West. He called the policy "glasnost." Glasnost (or "openness") was an easing of foreign relations starting in 1987. It lowered the "Iron Curtain" and allowed Western media, culture, and ideals to reshape the former Soviet Union. Right now, a "mini glasnost" is unfolding on Chinese social media. And that's likely a big inflection point for China investor sentiment. A large swath of Westerners are immersing themselves in Chinese culture through RedNote. And more are signing up. Today, the app is the No. 37 social media site on the Apple app store. As of last month, users can even translate messages in real time using artificial intelligence... so everyone on RedNote can understand each other clearly. The result is an unprecedented cultural exchange between China and the U.S... RedNote's mini glasnost will build trust and transparency between U.S. and Chinese citizens. And remember, among the TikTok refugees are high-profile influencers and communication professionals. So it's likely we'll see the effects of the exchange trickle into offline culture. This setup could be a major tailwind for Chinese stocks... If you read much bearish coverage on China, you'll likely see claims that the country is "uninvestable." Ultimately, this term is shorthand for the trust gap between Western investors and foreign businesses. Things like currency manipulation, shaky government, and lack of infrastructure can all make a country "uninvestable." But today, the trust gap is vanishing in China. And the mini glasnost will help knit China and the U.S. closer together – potentially killing the uninvestable narrative. This sentiment shift is already playing out in Chinese tech stocks... We can see it using the KraneShares CSI China Internet Fund (KWEB). This fund tracks a broad basket of Chinese tech companies. So it works well as a stand-in for the country's tech sector. Chinese tech stocks have been in an uptrend for a few years. But the bullish move found a new gear last fall. Take a look...
As you can see, Chinese tech stocks have soared since September. And they've largely been making higher lows since the start of the year. RedNote is improving American sentiment toward China. And it's laying the groundwork for a big turnaround in Chinese stocks this year. This is likely to be one of the year's biggest financial narratives. If you don't have any exposure to Chinese tech, I encourage you to change that today. Good investing, Sean Michael Cummings
Editor's note: In DailyWealth, Sean and his colleagues regularly share these kinds of insights with their readers. They also share ideas on how to safely and steadily build a lifetime of wealth. Just like the PowerFeed, DailyWealth publishes each weekday that the markets are open. And it's free to read. Learn more about DailyWealth and find out how to sign up to receive it by clicking here.
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.37%
6
21
3
S&P 500
-0.5%
65
328
105
Nasdaq
-1.26%
18
69
13
Small Caps
-0.38%
280
1146
478
Bonds
+1.72%
Consumer Staples
+1.42%
6
19
13
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bearish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Staples
+3.34%
Health Care
+3.02%
Real Estate
+1.56%
Utilities
-0.46%
Energy
-1.82%
Financial
-2.32%
Materials
-2.57%
Industrials
-2.68%
Communication
-2.99%
Discretionary
-4.39%
Information Technology
-5.64%
* * * *
Industry Focus
Software & Services
30
105
8
Over the past 6 months, the Software & Services subsector (XSW) has outperformed the S&P 500 by +9.33%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #3 of 21 subsectors.
Top Stocks
ATEN
A10 Networks, Inc.
AMPL
Amplitude, Inc.
CCSI
Consensus Cloud Solu
* * * *
Top Movers
Gainers
SOLV
+9.54%
MOH
+6.45%
AMT
+6.12%
WBA
+5.18%
FICO
+4.88%
Losers
SRE
-18.97%
SMCI
-11.76%
TSLA
-8.39%
LYV
-6.57%
PODD
-5.93%
* * * *
Earnings Report
Earnings Surprises
AXON Axon Enterprise, Inc.
Q4
$2.08
Beat by $0.68
AMT American Tower Corporation
Q4
$2.62
Beat by $0.64
INTU Intuit Inc.
Q2
$3.32
Beat by $0.74
FSLR First Solar, Inc.
Q4
$3.65
Missed by $-1.08
EXR Extra Space Storage Inc.
Q4
$1.24
Beat by $0.17
* * * *
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