The Capital Note

An Overture to China from the New York Stock Exchange?

A U.S. flag hangs above an entrance to the New York Stock Exchange in 2015. (Lucas Jackson/Reuters)

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: The Big Board and China, vaccine distribution, Elon Musk, California, and a very expensive tweet, 0 percent mortgages (for 20 years), and fractional trading. To sign up for the Capital Note, follow this link.

With power, unsurprisingly, draining away from a Trump administration just weeks away from its conclusion, it’s not particularly surprising to read that the New York Stock Exchange is signaling that it is ready to getting back to doing business as usual with the Peking regime.

After all, as we could all read today in the New York Times today, things are going pretty well in China:

China resembles what “normal” was like in the pre-pandemic world. Restaurants are packed. Hotels are full. Long lines form outside luxury brands stores. Instead of Zoom calls, people are meeting face to face to talk business or celebrate the new year . . .

The pandemic has upended many perceptions, including ideas about freedom. Citizens of China don’t have freedom of speech, freedom of worship or freedom from fear — three of the four freedoms articulated by President Franklin D. Roosevelt — but they have the freedom to move around and lead a normal day-to-day life.

I’m not sure how well those comments would play to Uyghur readership, but anyway:

In a pandemic year, many of the world’s people would envy this most basic form of freedom.

The global crisis could plant doubts about other types of freedom . . .

But back to the NYSE.

The Financial Times:

The New York Stock Exchange has backtracked on plans to delist three Chinese state-run telecoms groups, reversing a decision that had threatened to further inflame tensions between Washington and Beijing.

The exchange had begun proceedings to delist China Mobile, China Telecom and China Unicom to comply with a Trump administration executive order that bars US investors from holding stakes in companies with alleged ties to the Chinese military.

But the NYSE said on Monday evening that it no longer intended to carry out the delistings “in light of further consultation with relevant regulatory authorities”.

The bourse declined to offer a further explanation for reversing the December 31 decision, which had sent both US- and Hong Kong-listed shares in the telecoms groups tumbling this week.

In the original announcement, the NYSE said the delistings could begin as early as January 7, but added that the companies had the right to challenge the decision.


The move came as a surprise and sparked confusion among officials at the U.S. Treasury and State departments, and National Security Council, according to people familiar with the matter, who asked not to be identified because the conversations were confidential.

The about-face, described as “bizarre” by a Jefferies Financial Group Inc. analyst, also whipsawed investors who on Monday had sold shares of the Chinese telecom companies and raced to bet on which stocks might be delisted next. China Mobile Ltd.China Telecom Corp. and China Unicom Hong Kong Ltd. all rallied on Tuesday.

The Wall Street Journal:

The China Securities Regulatory Commission on Sunday said the executive order [mandating the delisting] was for political purposes and “entirely ignored the actual situations of relevant companies and the legitimate rights of the global investors, and severely damaged market rule and order.”

The idea that China is some sort of exemplar of market rule and a stable global order is, of course, an old refrain from the Chinese dictatorship and its proxies. It earned Xi plaudits in Davos in 2017, too, where he was favorably contrasted with the newly elected wild man, Donald Trump, an illusion that the technocrats of the World Economic Forum found very comfortable to believe.

The illusion, in reality the most transparent of pretenses, was shown up for what it was in the years to come.

And history is repeating itself.

The New York Times:

“In meeting the climate challenge, no one can be aloof and unilateralism will get us nowhere,” Mr. Xi said. “Only by upholding multilateralism, unity and cooperation can we deliver shared benefits and win-win for all nations.”

Mr. Xi’s statement came three months after he announced in September that China would reduce its emissions of carbon dioxide, one of the main greenhouses gases that have warmed the planet since the dawn of the industrial era, to net-zero, meaning that China would remove from the atmosphere whatever emissions it could not cut, by 2060.

To believe that would require remarkable naivete — or malice on the part of those who merely pretend to believe it. And yet many climate warriors — inside or outside of government — claim to do so.

Like it or not, the U.S. and China are now major (and not particularly friendly) strategic rivals. The delisting of Chinese companies was a small signal (it won’t significantly affect their ability to raise capital) that signified how seriously (if belatedly) the U.S. was beginning to take this contest. It appears that the NYSE prefers a different approach.

Even if the NYSE argues that it is not its role to take sides in a struggle between the U.S. and China, it might perhaps have taken the side of corporate governance, and thus American investors. A few scraps of promises tossed its way by Chinese regulators, who are no more independent of the state than anyone else in that country, would not change the fact that Chinese companies are, directly or indirectly, creatures of the regime.

Writing in the Capital Note yesterday, Daniel Tenreiro asked where Jack Ma, the founder of Alibaba and China’s richest man, had gone. He hasn’t been seen for a while and is clearly on Xi’s wrong side. That’s more than a touch ominous. In a number of respects China appears to be reenacting the tussle between Vladimir Putin and Russia’s oligarchs during the early years of this century. It looks to me as if Ma may be slipping into the role of Mikhail Khodorkovsky, once (arguably) the richest man in Russia, who later spent years in jail before being exiled.

From CNBC today:

After reports speculating about Alibaba founder Jack Ma’s whereabouts, CNBC’s David Faber reported Tuesday that the billionaire is not missing, according to a person familiar with the matter. Instead, Ma has been lying low for the time being, Faber reported.

I hope he has been lying low outside China.

It is, perhaps, worth remembering this story (via the Financial Times) from September:

A Beijing court sentenced a prominent property tycoon to 18 years in prison for alleged corruption on Tuesday in a verdict that will finally silence one of President Xi Jinping’s most outspoken and fearless critics.

According to a statement by the Beijing No 2 Intermediate People’s Court, Ren Zhiqiang was found guilty of charges including bribery, embezzlement of public funds and abuse of power.

Before his retirement, Ren, 69, headed a state-owned property developer in Beijing that was involved in a number of high-profile projects in the Chinese capital. His one-day trial was held on September 11 . . .

Not, perhaps, the ideal investing environment.

Around the Web

Distributing the vaccines: How it won’t be done here.

The Daily Telegraph:

The prospect of not one but three vaccines offered hope to beleaguered businesses as England fell into a third national lockdown at the start of 2021.

With two vaccines approved in the UK – the Pfizer-BioNTech jab and the one created by University of Oxford scientists with AstraZeneca – ministers are hoping to inoculate 13.2m of the most vulnerable Britons by mid-February.

But with some scientists arguing it is crucial to hit 2m vaccinations a week to protect the NHS as cases soar, businesses have volunteered to help the Government in its efforts to inoculate the population.

From refrigerated supermarket trucks to hotels hosting vaccinations, here are the businesses that have offered their expertise – or at least their premises – so far . . .

Brewers have been among the worst-hit businesses by the pandemic as repeated lockdowns forced them to close – many for good.

With the prospect of life returning to normal with a vaccine rollout, major pub chains Young’s and Marston’s have both offered their premises as vaccine centres.

“We’ve got some very large sites, large outdoor areas and sites in smaller rural areas so we would be very happy to help in any and every way,” said Young’s boss Patrick Dardis.

Ralph Findlay, chief executive of Marston’s, said: “One of the things that we’ve considered doing is using pubs to help in the administration of inoculations.

“We will be going forward to the Government with the offer because we have pubs in many locations with big car parks, we’ve got refrigeration facilities, we’ve got big spaces not being used so we’d be very happy to support it . . .

A Costly Tweet.

Sacramento Business Journal:

As Covid-19 descended on California in March and April of this year, economies began to shut down and the debate raged over what businesses were deemed “essential.” Elon Musk, the founder of Tesla, and Alameda County authorities went back and forth over whether the Tesla plant in Fremont should be allowed to reopen.

This dialogue was punctuated by a pithy tweet from Assemblywoman Lorena Gonzalez, who describes herself as a progressive Democrat, “F*ck Elon Musk.”

At that time, we had no idea how much that tweet, and attitude, would cost us.

Nine months later, Elon Musk is gone. He is selling all his personal real estate in the state. He is now a resident of the state of Texas. He has moved his philanthropic foundation to Texas, too.

Consider the unfathomable irony of progressive Democrats forcing Elon Musk to give up on California. Musk came to this state as an immigrant and proceeded to do more to reduce greenhouse gas emissions through Tesla Inc. (Nasdaq: TSLA) and its subsidiary, solar panel manufacturer SolarCity Corp., than all the “progressive” politicians in the state combined. Musk didn’t talk about it. He simply brought products to market that benefited the consumer, the environment and his shareholders. He should have been the poster boy for the green agenda, but instead they turned on him because he committed the ultimate sins: He made money and he questioned their authority.

This year, Musk is likely paying billions in state tax. Next year, he will be a resident of another state.

The damage goes much deeper than the tax revenue of one person. Musk didn’t just leave the state. He turned on the state. It is now his mission to get other innovators to leave as well. According to Texas Gov. Greg Abbott, he is on the phone with Musk once a week, strategizing about how to get other California companies to relocate to Texas. In the last few weeks, Hewlett Packard Enterprise Co. (NYSE: HPE) and Oracle Corp. (NYSE: ORCL) have both announced they are moving their headquarters to Texas, with other potential moves in the pipeline.

In a nutshell, California state income tax is the highest in the nation, California’s ranking for “business friendliness” is the lowest, and we have elected representatives who would lob crass, vulgar F-bombs at the people who are paying the freight . . .

Twenty-year mortgages . . .at 0 percent.


The country with the longest history of negative central bank rates is offering homeowners 20-year loans at a fixed interest rate of zero.

Customers at the Danish home-finance unit of Nordea Bank Abp can, as of Tuesday, get the mortgages, which will carry a lower coupon than benchmark U.S. 10-year Treasuries. At least two other banks have since said they’ll do the same.

Denmark stands out in a global context as the country to have lived with negative central bank rates longer than any other. Back in 2012, policy makers drove their main rate below zero to defend the krone’s peg to the euro. Since then, Danish homeowners have enjoyed continuous slides in borrowing costs . . .

Random Walk

Fractional shares.

From Jason Zweig at the Wall Street Journal, writing in late December:

Stocks are near record highs, but they’re finally getting cheaper to buy.

No longer do investors need to buy a minimum of 100 shares at a time or even one full share, often at prohibitive cost. Fractional-share trading enables you to purchase a sliver of a share with as little as $1, putting a stake in single stocks within anyone’s reach. As with any technology, whether that’s good or bad depends on how you use it.

Zweig points out that at several leading broking firms, investors can opt to buy a fraction of a high nominal value share such as Tesla’s (which closed today at $735).

What’s more:

Earlier this month [December], the Securities and Exchange Commission adopted rules redefining a “round lot,” which has long been 100 shares. From now on, it will consist of 100 shares only for stocks priced up to $250. At higher prices, the size of a round lot drops to 40 shares, then 10. Above $10,000, a single share will constitute a round lot.

Analyst Richard Repetto, who follows the financial-services industry at Piper Sandler & Co. in New York, calls this “one of the most significant changes to market structure in a decade and a half.” The SEC rule is a long-overdue recognition that you shouldn’t need thousands of dollars to buy a single stock—though the regulator’s definition of a round lot has mattered less to small investors in recent years.

Commonsense or yet another sign of our (arguably rational) bubble? A bit of both, I reckon, but read the whole thing.

— A.S.

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