Shares in premarket: Chinese stocks on Wall Street not yet clear

What’s going on: Tech giant stocks Alibaba (WOMAN) in New York rose almost 7% on Monday. e-commerce platforms Pingduoduo (SDA) as well as JD.com (JD) jumped by 16% and 7% respectively.

But the celebration may have been a little premature as negotiators from the US and China continue to work out the details and tensions between the world’s two largest economies simmer under the surface.

“Policy is still evolving and there is still a lot of uncertainty,” Xiaomeng Lu of consulting firm Eurasia Group told me.

Over the weekend, the China Securities Regulatory Commission, the country’s top securities watchdog, proposed changing a ten-year rule barring Chinese firms from sharing confidential data and financial information with overseas regulators.

Remember: US regulators have long complained that they can’t access the books of Chinese companies. In 2020, the Foreign Companies Liability Act was signed into law, giving the Securities and Exchange Commission the power to exclude foreign Wall Street companies if they do not allow U.S. regulators to review their audits for three consecutive years.

But Beijing, citing national security concerns, is resisting a revision of its policy. It requires companies that trade overseas to conduct their audits in mainland China, where they cannot be audited by foreign agencies.

The new amendment may finally allow US regulators to examine these contested materials. If it helps resolve the dispute, it could ease a huge source of concern for the more than 200 Chinese firms registered in the United States that have been hit over the past year.

But it’s too early to say for sure. It is not yet clear whether US regulators will consider the potential changes sufficient. Last week, US Securities and Exchange Commission Chairman Gary Gensler denounced the notion that a deal was inevitable.

“There were thoughtful, respectful, productive conversations, but I don’t know how it will end,” Gensler said. “It’s up to the Chinese authorities and, frankly, it can be a difficult choice for them.”

Another stumbling block, Lu said, is whether there is an exemption for companies with access to sensitive data about the Chinese government or infrastructure.

“The only clear data point we have so far,” she stressed, “is Didi. The taxi service was due to begin delisting from New York shortly after its initial public offering last year. Beijing launched a crackdown on the company, saying its app violates privacy laws and poses cybersecurity risks.

What’s next: Lu said she sees a roughly 70 percent chance that some kind of deal between Washington and Beijing will be reached this year. But she still believes that some Chinese firms may have to delist themselves from Wall Street at this point.

She noted that Alibaba is not only an online marketplace, but also a cloud business. If it provides services to state-owned enterprises, Chinese regulators may still want its books to remain closed.

What Elon Musk wants from Twitter

It’s not every day that the super-rich CEO of one of America’s leading companies gets a huge stake in a completely different business. But that’s exactly what the eternally unpredictable Elon Musk did.

Last thing: Tesla (TSLA) main disclosed 9% of the shares in Twitter (TVTR) on Monday, sending the social media platform’s shares up 27%.

The investment, which was valued at nearly $3.7 billion at market close, makes it Twitter’s largest shareholder.

Musk did not disclose the purpose of the purchase or any of the company’s plans. But that hasn’t stopped speculation about what prompted the unexpected move.

Analysts expect Musk, who has been a vocal critic of Twitter’s policies, to actively push for change at the company. Last month, he said he was “seriously thinking” about creating a new social media platform.

“Given that Twitter serves as the de facto public square, failure to uphold the principles of free speech fundamentally undermines democracy,” Musk recently tweeted. “What must be done?”

He also suggested (by posting a meme on Twitter, of course) that he didn’t support CEO Parag Agrawal, who recently took over from Jack Dorsey.

“Musk has already indicated that he does not agree with the appointment of Agrawal and that he wants some changes,” Morningstar analyst Ali Mogarabi said in a note to clients.

First course of action: After his stake was revealed, Musk posted a poll on Twitter asking if Twitter users needed an edit button.

But some suspect he may have been campaigning for even bigger changes at the company. There is speculation that Musk could partner with other activist investors or even form a consortium to take Twitter private. The company is valued at $40 billion. It is part of the rival Meta, which has a market value of $637 billion.

Starbucks has suspended the buyback. Is big oil next?

Starbucks (SBUX) made a splash with its decision this week to suspend share repurchases, the first major step taken by Howard Schultz since his return as CEO.
Could the world’s biggest oil companies be next? Here’s what leading House Democrats are saying hope.
House Oversight Chairperson Carolyn Maloney and Rep. Ro Hannah, Chair of the Environment Subcommittee, Want ExxonMobil (XOM), Chevron (CVX), HELL (HELL) as well as shell (RDSA) abandon share buyback and dividend programs during the war in Ukraine and use this money to lower prices at a gas station.

“Fossil fuel companies are taking advantage of the crisis, making record profits and spending billions of dollars to enrich their executives and investors,” they wrote in a letter Monday.

Lawmakers also urged oil companies to make “significant investments” in solar, wind and other forms of clean energy to tackle the climate crisis.

Oil companies, which are cashing in on rising energy prices, face constant calls to use spare cash to offset the pain of everyday consumers. There have been calls in the United States and the United Kingdom a temporary “windfall tax” on their income to help households cover their electricity bills.

Ahead: The issue is likely to be taken up in a House hearing on Wednesday, where executives from BP, Exxon, Chevron and Shell are due to testify.

Next

The ISM non-manufacturing index, which tracks the US services sector, is due out at 10:00 am ET.

Tomorrow: Investors will carefully study the minutes of the last meeting of the Federal Reserve for signs of how aggressive the central bank may be later this year.

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