🤫 The big, sly short

What’s going on here?

Demand dealt another blow to China’s prophesied recovery last month, with trade taking a further dip.

What does this mean?

Exports have been China’s economic backbone for years, but now it seems the country’s suffering from a touch of sciatica. See, global demand is slowing, and exports from the “world’s factory” have now dwindled for three straight months. And July’s figures were particularly grim, showing a 14.5% drop in exports (in dollar terms) compared to last year – the sharpest dip since the pandemic hit. Domestic demand is dealing with some aches too. Imports took a 12.4% hit, the steepest drop since January’s Covid wave. Both those numbers were worse than forecast – suggesting that China’s road to recovery will be an uphill one.

Why should I care?

The bigger picture: Read the fine print.

China’s seemingly slack domestic demand is raising eyebrows, but a closer look suggests those import figures might not be so terrible after all. See, they’re based on value, and with global commodity prices dropping, China is still buying in bulk – but at cheaper rates these days. Take oil, for example: in the first seven months of the year, the value of China's oil imports dipped by over 12% compared to the same period in 2022, but in terms of volume, the country actually brought in more. That’s not to say China’s in the clear, though: the government still needs to make good on its promised pro-growth tactics in order to meet its 5% growth target for 2023.

Zooming out: Trading more than insults.

US-China tensions have been a thorn in China’s side, but there’s a hint of a turnaround these days: the two powerhouses are dialing up the dialogue, with more signs of progress toward stabilizing relations in recent days. And while these latest moves primarily deal with diplomatic topics for now, more renewed connections just might pave the way for smoother economic ties too.

What’s going on here?

SoftBank’s Vision Fund saw the light at the end of the tunnel last quarter – but other parts of the company were stuck in the dark.

What does this mean?

SoftBank’s Vision Fund segment hasn’t had it easy lately – but after enduring five straight loss-making quarters and last year’s chilling $30 billion loss, it finally set things to rights last quarter. Thanks to a tech sector rebound and easing interest rate jitters, the fund managed to scrape together a profit. But don’t pop the champagne just yet: despite the Vision Fund’s comeback, SoftBank’s overall performance was still in the red, missing the mark set by optimistic analysts. The culprits: a trio of declining shares from T-Mobile, Deutsche Telekom, and Alibaba. On the bright side, though, this quarter’s losses were still a marked improvement on the same period last year.

Why should I care?

Zooming in: Twice shy.

The Vision Fund’s swing back to profit is notable, especially after a year of investment dormancy. And now SoftBank’s days on the investment sidelines seem numbered. With a hefty stash of cash on hand, the firm’s setting its sights on the next big thing – think AI and other tech goodies. In fact, it dove in with almost $2 billion in investments last quarter. But remember, SoftBank’s been burned before with hasty bets, so it’s planning to play it a tad more carefully this time.

The bigger picture: Armed and dangerous.

SoftBank is back to investing, but all eyes are on Arm’s impending stock market entry, a move set to boost SoftBank’s deal-making funds. But there is one wrinkle: see, despite SoftBank’s own valuation of the chip designer jumping 13% last quarter from the quarter before, Arm’s sales dipped 11% on an annual basis due to inventory buildup and a smartphone industry slowdown. That’s not a deal-breaker, but it could make potential investors think twice as Arm’s listing approaches.