China cracks down hard

No foreign investment is safe [Click to view in browser](. Earnings watch: - [Intel (INTC) reported earnings that weren’t impressive.]( - Kimberly Clark (KMB) said higher commodity costs hurt margins. - Twitter (TWTR) smashed estimates with 74% YOY topline growth. - [Snapchat (SNAP) surprises with a profit sending shares soaring.]( Earnings season is all about revenue growth. No one trusts EPS. Market moving stories you missed: - [European Business Activity Expands At Fastest Pace In Two Decades.]( - [Lucid Motors SPAC Merger Is Finally Approved.]( - [Snapchat Scores Exclusive Olympics Content In NBC Deal.]( - July PMI flash manufacturing index landed at 63.1 vs consensus 62.1, the services index at 59.8 vs consensus 64.6, and the composite index at 59.7. China drops the hammer - Chinese companies aren’t held to the same fiduciary standards. - [Government considers ‘unprecedented’ penalty for DiDi](. - [Forcing tutors to go non-profit is also on the table]( sending stocks like TAL, EDU, and GOTU lower. - [Regulators already forced many crypto miners to close, instead favoring their own digital currency.]( - Lower your risk through ETFs We all know investing abroad comes with risks, especially in emerging markets. That’s why investors should require higher rates of return than similar companies in the U.S. Let me give an example of why. Luckin Coffee (LKNCY) was one of the most popular trades on Wall Street to start off 2020. Shares had more than doubled, rising from $20 to over $50. And then the news hit that the company falsified sales. The stock was halted before it plunged below $2. While the U.S. has a sordid history of corporate malfeasance (IE Enron), we’ve suffered fewer in recent years than Chinese companies have. Starting in 2011, we learned that Chinese accounting and financial disclosures were rife with problems. That’s when the SEC took action, barring nearly 180 Chinese companies from U.S. trading. Yet in 2017, nearly 100 Chinese companies had their IPO in the U.S. Among them was Luckin Coffee. Why does this happen? A combination of different accounting and regulatory standards. China tightens control Didi (DIDI) was listed on U.S. markets earlier this month. Three days later, regulators stopped Chinese citizens from downloading ridesharing app citing cross-border data security issues. In the 24 hours, China’s government began to consider forcing education and tutoring platforms to become non-profit, effectively eliminating all equity value. This follows a well-worn pattern by the China Securities Regulatory Commission (CSRC) to gain more control over data and content. Even the great Jack Ma wasn’t immune as his Ant Group was forced to pull back on what would have been one of the largest IPOs in history last year. Equities aren’t the only victims here. Crypto miners and exchanges have been effectively banned. In fact, traders point to the government shut down of Bitcoin miners as a catalyst for the recent selloff. Our hot take Picking up individual companies in China is difficult when you can only invest in ones listed on the U.S. exchanges. That’s why ETFs which directly invest in stocks unavailable to U.S. investors (but accessible to Chinese investors) make a great deal of sense at the moment. At least until this regulation fervor settles down. For more financial market insights and ideas, check out a list of our publisher content below. Power Plays [5 Growth Stocks Reddit’s WallStreetBets Is Buying]( In this article, we discuss the 5 growth stocks Reddit’s WallStreetBets is buying. 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