Friday 15th January 2021

Dear Readers,

Happy New Year! That shouldn't be too difficult. 2020 sets a pretty low bar for happiness - but if you're reading this then you're still alive and so am I, so that's a plus. Cogito ergo sum. Think positive, test negative and avoid the tech stock bubble, inflated in part by the trillions of dollars of helicopter money created by central banks buying government debt. Does everyone in the US need another cash handout? No, but they'll get one. Globally in terms of quality-adjusted life-years saved, never has so much been spent and sacrificed by so many to save so few, as our Oxford presentation below discusses. Was it worth it?

It's been nearly 21 years since the dotcom bust, 12 years since the Global Financial Crisis, and a whole new generation of traders locked down in their pyjamas with unspent disposable income now think they have an innate ability to pick stocks and time markets. The group-think around certain stocks has driven them to insane this-time-it's-different levels, and index funds (a much larger share of the market now than in 2000) have no choice but to follow. In the S&P 500, the top 10 companies (11 stocks) make up 28% of the index and the top 41 account for 50%. Never have so many people put so much money into so few stocks, if you'll forgive a second Churchillian phrase in one newsletter.

Meanwhile, in the waning days of the Trump administration, the "Trump Dump" that we forecast in June 2019 has started to happen - commanding US Persons to exit certain Chinese government-linked securities and delist them from US exchanges. Whether the Biden administration will follow a softer line is doubtful in the near-term given the bipartisan US sentiment and the fact that the Chinese Government keeps up its hard crackdown on HK's freedoms that we forecast in September 2019. At least they didn't send the tanks in - protests were conveniently stopped by COVID gathering limits before the National Security Law was rolled out.

When we finally get out of COVID restrictions, it will be a different HK in which organising any form of peaceful political protest may be regarded as subverting state power punishable by life in jail, and many leading pan-democrats will be ineligible for elected office or even a job, if they are not already in jail. At least the HK Government might then begin to withdraw the massive fortifications around its offices and infrastructure, and HK will perhaps be a prettier, more peaceful but authoritarian place to visit and inhabit. Those who are unwilling to accept that will vote with their feet (many local professionals hold full foreign passports already). The UK (under the BN(O) scheme) and other democracies will welcome the inbound talent. HK's talent pool can always be replenished from the North, but it will lose its distinctive, multicultural "World City" character.

Now, back to more immediate local matters.

The Main Board profit requirement - for whom?
Webb-site responds to the HKEX proposal which further raises the barriers to entry for smaller companies on its monopoly stockmarket and reduces investor choice. Help us out and add your voice! (14-Jan-2021)

ESS Revealed
As part of our push for open data, Webb-site tonight publishes the first detailed analysis of approved claims under the so-called "Employment Support Scheme", including league tables of the top 5,000 recipients and a search function for all recipients. (13-Dec-2020)

COVID-19: were the lockdowns worth the socio-economic cost?Video replay
These are the slides from a "Webbinar" with David Webb hosted by Exeter College, Oxford University, this evening. As vaccines draw near, the debate on the global policy responses to the pandemic should begin. (4-Dec-2020)

Back on TraHK (2800)
Company announcement, 13-Jan-2021
Without giving reasons, fund manager State Street (ultimately a US person) now says that TraHK will resume investments in US-sanctioned stocks in the HSI, 2 days after it stopped. 2% of the units have been redeemed since then. This comes after Webb-site called for the Supervisory Committee to remove State Street and replace it with a non-US person. Will they change their mind a second time, like the New York Stock Exchange did when it delisted the stocks? Wait and see.

Criticism of Xinming China (2699) and its Chairman Chen Chengshou
SEHK, 8-Jan-2021
Without telling his board of directors, or announcing it, or getting shareholders' approval, he pledged RMB535.4m of the group's deposits at Bank of Wenzhou (of which he is a director) to secure a loan by that bank to a third party, Zhejiang Muji Trading Co Ltd, just before the 2018 year-end. The pledge was released a few days later after the guarantee fee was not paid.

SFC restricts 3 client accounts at CNI Securities Group Ltd linked to suspected market manipulationRestriction Notice
SFC, 23-Dec-2020
The Gazette Notice reveals the amount involved is HK$109.9m. The unnamed alleged manipulated stock is probably in the Enigma Network, for which CNI has done multiple placings.

MMT finds Li Yik Shuen culpable of insider dealing in Meadville sharesMMT report
SFC, 14-Dec-2020
Tom Tang Chung Yen, former Meadville Chairman and brother of former Chief Secretary Henry Tang, is cleared because the MMT is not satisfied that he intended to tip her off. The appendix (PDF p140) reveals 5 years of delays by the Department of Justice from 2013-2018 before deciding that a criminal prosecution could not be brought.

SFC sues New Ray Medicine (6108) and its former top executives
SFC, 30-Nov-2020
NRM is a company in our "Enigma Network".

Long Hair wins final appeal on prison haircutsJustice is blind, except for haircuts
HK Court of Final Appeal, 27-Nov-2020
The top court unanimously overturns the Court of Appeal's unanimous judgment by (soon to be Chief Justice) Andrew Cheung, Johnson Lam and Jeremy Poon. Male prisoners were not given the same choice as female prisoners over their hair length, and that was sex discrimination. See our article of 1-May-2018 analysing the CA's faulty judgment. First Instance Justice Thomas Au Hing Cheung (now a CA judge) is vindicated.

And much more besides...
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David M. Webb