The investment bank that put the investment in bank, JPMorgan Chase & Co, says it’s not a bad time to invest in all those “uninvestable” Chinese stocks they blew up about eight weeks ago, while former PM and sinologist extraordinaire, Kevin Rudd, warns the Chinese economy is going to stay screwed until somebody steps up on zero-COVID.

But first, Peking Uni students have staged an angry protest over a newly constructed wall confining them to dormitory area as part of Beijing’s zero-COVID policy.

Students at the off-campus compound say the University took down the half-built wall after  hundreds of kids gathered in the wake of posts on web forums showed staff erecting the sheet metal blockades.



Our story this week begins a few months ago…

Even for the oddly behaving Chinese equity markets, there was a most wonderfully mad sell-off back on March 14.

It was most especially severe in tech for the likes of Alibaba, Tencent and the once world-beating Chinese tech sector.

Already weakened by an annus horribilus year of regulatory smackdowns, the ire of President Xi Jinping and looming US rate hikes, the ill will and poor sentiment for the once-high-flying Chinese tech sector suddenly broke into outright fear.

And into this climate of fear and loathing strode the storied analysts of investment bank JPMorgan Chase & Co.

As the Hang Seng Tech Index slumped, the bank released a downgrade for a bunch of key tech names in a note headlined by a most unexpected – and  well, shocking word – “uninvestable”.

By the end of the day the Hang Seng Tech Index had crashed by 11%. Its worst ever daily drop.

What happens when an investment bank says ‘uninvestable’

In the case of March 14, it helped evaporate circa $200 billion from Wall Street and regional markets, prompting some old school market intervention from Beijing.

Admittedly, tech stocks have been particularly volatile as investors digest the sector lockdowns and the impact of Covid Zero lockups in mega cities like Shanghai.

So, when the same JPMorgan analysts did an apparent about face overnight – suddenly upgrading some 15 major tech names – questions naturally arise over how the bank can suddenly become so punchy about an industry whose very description just two months earlier triggered such an inspired market selloff.

The answer it turns out, is disturbingly simple.

The bank’s now historic “uninvestable” report was actually an historic editorial ‘faux pas’.

JPMorgan sources speaking to US media last week confessed that the bank’s editorial was told to nix the inflammatory vocabulary from almost 30 sets of analyst notes before publication on March 14, but well, totally muffed it all up.

In the states, the Nasdaq Golden Dragon China Index hit its closing low for the year on the day of JPMorgan’s March report.

Which is why heads are shaking on Monday US time, at JPMorgan’s incredibly tight overnight turnaround, as the bank hoisted ratings on some rather key Chinese companies.

The bank has upgraded to overweight from underweight names like Meituan, NetEase, Pinduoduo Inc, as well as Tencent Holdings and Alibaba.

Overnight the bank backpedaled like an absolute champion, telling investors that its bearish POV first described back in March was actually just stage one of a three-stage-cycle.

Phase two: the selling stops, the share prices steady – just arrived a lot sooner than forecast, the bank said.

“Risk appetite could remain low and it may be difficult for speculative growth names to outperform.”

In fact things began to runaround for the Chinese equities almost immediately after the March 14 crash. China’s Vice Premier Liu He grabbed the nearest economic authorities and put out one of those official statements that “vow” to back off their year-long targeted tech crackdown.

China’s economic problems: ‘manifold, complex and strong’

Former Australian prime minister Kevin Rudd, now running things and talking a helluva lot as the boss of the Asia Society, said in a recent live internet address that investor fears over the impact of China’s lockdowns remain front and centre ahead of the looming Chinese Communist Party’s national congress.

“In 2022, the biggest elephant in the room on this score remains the [Chinese] economy,” the president and CEO of the Asia Society said last week, casting doubt on whether Beijing can restore the ruination of private-sector confidence in the face of stringent lockdowns that have broken production and scuppered mobility across the country.

Beijing’s zero-Covid double down exacerbated the regulatory lockdowns on the property and tech sectors despite Xi apparently moving on from the “common prosperity” campaign that inspired them.

With President Xi Jinping widely expected to install himself for a third term at the 20th national congress, Rudd said the world’s second-largest economy is staring down sliding growth since the second half of last year.

“It appears that, despite the economic disruption and the public’s mounting impatience and frustration, Xi’s determination to stick with his so-called dynamic zero-Covid policy remains unchanged,” Rudd said. “But as long as these lockdowns remain in place, the costs of China’s Covid policy on the Chinese economy will continue to compound over time and add to the political and economic headwinds facing Xi in the countdown to the 20th Party Congress in November.”

In March, retail sales in China stepped back by -3.5%, the first fall since July 2020 and the biggest since April 2020, when China was coming out of its first nationwide lockdown.

Monday’s April numbers were a bit more grim, down -11.1%, almost double economist forecasts. Industrial production also slowed sharply, falling -2.9%, against an expectation of a small rise of 0.5%.

“China’s economic headwinds are therefore manifold, complex and strong – and in large part self-inflicted, due to a number of especially poor policy choices by China’s leadership,” Rudd said.