China picks stock winners and losers

Who’s in their sights [Click to view in browser](. Monday’s top earnings announcements: - [General Electric (GE)]( - General electric stock gains on Q2 earnings beat, positive industrial FCF, raised outlook. - Top line: $18.3 billion vs $18.13 billion (Act. vs Est). - Bottom line: $0.05 EPS vs $0.04 (Act. vs Est). - Orders and the revenue returned to growth while operating margins expanded across all segments. Healthcare and services and Aviation are showing early signs of recovery. - [Tesla (TSLA)]( - 98% revenue growth to $11.96b, semi shifts to 2022, no bitcoin transactions. - Top line :$11.96 billion vs $11.21 billion (Act. vs Est). - Bottom line: $1.45 EPS vs $0.96 (Act. vs Est). - Vehicle production topped 200,000 manufactured and delivered in Q2. - Semiconductor shortages hurt Tesla like everyone else. - [United Postal Services (UPS)]( - United Parcel Service beats on Q2 earnings, clocks operating profit growth, margin expansion. - Top line: $23..4 billion vs $23.24 billion (Act. vs Est). - Bottom line: $3.06 EPS vs $2.81 (Act. vs Est). - Revenue increased 10.2% in the U.S. and 30% internationally. - UPS disappointed investors with a forecasted operating margin of approximately 12.7% vs 14% this last quarter. Market moving stories you missed: - [New homes sales hit a brick wall.]( - [Case-Shiller: National House Price Index increased 16.6% year-over-year in May.]( - [Court blocks Disney (DIS) from launching Star+ streaming brand in Brazil.]( - [Why centralized cryptocurrency exchanges are seeing a mass exodus.]( China picks stock winners and losers February 19th, 2021, TAL Education Group (TAL) crested $90 per share. Today it trades below $5. China’s extraordinary crackdown on private sector companies sent waves through equity markets. But you wouldn’t know it from looking at the Chinese stock market. The Shanghai Index is off less than 3% in the last few days. Faring worse, the Shenzhen Index is off more than 8%. Yet, the iShares China Large-Cap ETF (FXI) has shed more than 12%. What’s causing the split? China’s crackdown that started in the tech sector quickly expanded to adjacent areas like education. For instance, under the guise of easing homework and after-school study hours, the government said companies teaching subjects covered in primary and middle school, which are compulsory, should register as non-profits. Plus, no new private tutoring forms can register in the interim. Several weeks ago, Didi (DIDI) began trading in the U.S. The ride-sharing app operates entirely in China. Almost immediately, the Chinese government banned downloads of the app citing user privacy concerns. More recently, Tencent’s WeChat suspended new user registration to comply with ‘relevant laws and regulations.’ Last year, the government squashed Jack Ma’s Ant Group from going public in what would have been the largest to date. All of these companies touch or interact with the outside world in a way that the government doesn’t approve of. Are all Chinese stocks are in danger? For investors outside the country, yes. The mercurial nature of the Chinese government means they can come in and sweep up whomever they please whenever they wish. It’s a big reason why most Chinese stocks trade at a discount to similar companies in the U.S. While it subsided for years, geopolitical risk always exists. Unless you’re deep into the country’s political scene, you never know when or where crackdowns might occur. What’s next? Experts think the online gaming industry is in the crosshairs. Healthcare is also being mentioned around the water cooler. Our hot take Always factor in country risk in your investments, whether it be Brazil (see the Disney+ story) or the United Kingdom. Even the U.S. isn’t immune. How many times has a change in administration brought about a funding reduction in a given sector? For more insights and information on the financial markets, check out content from our publisher network below. 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