CHINA’S ECONOMY SHOWS SIGNS OF STABILIZING—AND A SLOWER RECOVERY

China’s economy is showing signs of stabilising but the improvements are decelerating. That could leave it in an L-shaped recovery—where the economy doesn’t see an upturn—that is unlikely to excite investors.

The iShares MSCI China ETF (ticker: MCHI) is down 11% so far this year. China’s recovery from three years of Covid restrictions has underwhelmed, there are concerns about the country’s longer term growth prospects, and geopolitical tensions loom.

While most analysts expect China to hit its 5% economic growth target, that may keep officials from bigger stimulus efforts, resulting in a recovery that is still anemic.

Indeed, a spate of October data from independent research firm China Beige Book show areas such as the property market still struggling to find a bottom, while there has been a slowdown in consumer spending.

Housing sales have softened in October from a month earlier and commercial real estate has had its worst showing this year. Both factory production and domestic orders also slowed.

Consumer spending is cooling, with households pulling back from big-ticket items including cars and appliances. They also are reducing their revenge spending on travel and dining out in recent months, according to China Beige Book.

Still, analysts are feeling more confident Beijing will do what is needed to create some stability, especially after it approved an additional $1 trillion renminbi government bond issuance to support infrastructure investment.

The debt will be issued not by local governments but by the sovereign, pushing headline deficit to 3.8% of GDP. It is a surprise move indicating political will to put a floor under economic activity, but also the latest signal of pain in the economy, says TS Lombard’s Rory Green in a note to clients.

Central authorities are trying to put a floor on equities, with reports Central Huijin Investment Limited—which is a part of the sovereign-wealth fund—bought exchange-traded funds. And authorities are trying to limit weakness in the yuan as part of stimulus efforts, he adds.

The next guideposts are a Politburo meeting in November and a Central Economic Work Conference in December that could offer clues to next year’s growth and fiscal outlook.

Green expects more emphasis on reallocating resources to technology sectors aligned with Beijing’s efforts to become more self-reliant, and a possible plan on how officials resolve local government debt burden.

The hottest crypto trade has turned cold. Some investors are saying “told you so,” while others are doubling down.

It was the move to make for much of the year: Sell shares or borrow money, then plough the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these “crypto-treasury” companies, seeing them as a way to turbocharge wagers on the volatile crypto market.

Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy , into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion.

The selloff is hitting big-name investors, including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies, as well as individuals who followed evangelists into these stocks.

Saylor, for his part, has remained characteristically bullish, taking to social media to declare that bitcoin is on sale. Sceptics have been anticipating the pullback, given that crypto treasuries often trade at a premium to the underlying value of the tokens they hold.

“The whole concept makes no sense to me. You are just paying $2 for a one-dollar bill,” said Brent Donnelly, president of Spectra Markets. “Eventually those premiums will compress.”

When they first appeared, crypto-treasury companies also gave institutional investors who previously couldn’t easily access crypto a way to invest. Crypto exchange-traded funds that became available over the past two years now offer the same solution.

BitMine Immersion Technologies , a big ether-treasury company backed by Thiel and run by veteran Wall Street strategist Tom Lee , is down more than 30% over the past month.

ETHZilla , which transformed itself from a biotech company to an ether treasury and counts Thiel as an investor, is down 23% in a month.

Crypto prices rallied for much of the year, driven by the crypto-friendly Trump administration. The frenzy around crypto treasuries further boosted token prices. But the bullish run abruptly ended on Oct. 10, when President Trump’s surprise tariff announcement against China triggered a selloff.

A record-long government shutdown and uncertainty surrounding Federal Reserve monetary policy also have weighed on prices.

Bitcoin prices have fallen 15% in the past month. Strategy is off 26% over that same period, while Matthew Tuttle’s related ETF—MSTU—which aims for a return that is twice that of Strategy, has fallen 50%.

“Digital asset treasury companies are basically leveraged crypto assets, so when crypto falls, they will fall more,” Tuttle said. “Bitcoin has shown that it’s not going anywhere and that you get rewarded for buying the dips.”

At least one big-name investor is adjusting his portfolio after the tumble of these shares. Jim Chanos , who closed his hedge funds in 2023 but still trades his own money and advises clients, had been shorting Strategy and buying bitcoin, arguing that it made little sense for investors to pay up for Saylor’s company when they can buy bitcoin on their own. On Friday, he told clients it was time to unwind that trade.

Crypto-treasury stocks remain overpriced, he said in an interview on Sunday, partly because their shares retain a higher value than the crypto these companies hold, but the levels are no longer exorbitant. “The thesis has largely played out,” he wrote to clients.

Many of the companies that raised cash to buy cryptocurrencies are unlikely to face short-term crises as long as their crypto holdings retain value. Some have raised so much money that they are still sitting on a lot of cash they can use to buy crypto at lower prices or even acquire rivals.

But companies facing losses will find it challenging to sell new shares to buy more cryptocurrencies, analysts say, potentially putting pressure on crypto prices while raising questions about the business models of these companies.

“A lot of them are stuck,” said Matt Cole, the chief executive officer of Strive, a bitcoin-treasury company. Strive raised money earlier this year to buy bitcoin at an average price more than 10% above its current level.

Strive’s shares have tumbled 28% in the past month. He said Strive is well-positioned to “ride out the volatility” because it recently raised money with preferred shares instead of debt.

Cole Grinde, a 29-year-old investor in Seattle, purchased about $100,000 worth of BitMine at about $45 a share when it started stockpiling ether earlier this year. He has lost about $10,000 on the investment so far.

Nonetheless, Grinde, a beverage-industry salesman, says he’s increasing his stake. He sells BitMine options to help offset losses. He attributes his conviction in the company to the growing popularity of the Ethereum blockchain—the network that issues the ether token—and Lee’s influence.

“I think his network and his pizzazz have helped the stock skyrocket since he took over,” he said of Lee, who spent 15 years at JPMorgan Chase, is a managing partner at Fundstrat Global Advisors and a frequent business-television commentator.

CHINA’S ECONOMY SHOWS SIGNS OF STABILIZING—AND A SLOWER RECOVERY

Selloff in bitcoin and other digital tokens hits crypto-treasury companies.