Premarket stocks: Chinese stocks on Wall Street aren’t in the clear yet

What’s Happening: Stocks of the tech giant alibaba (slime) in New York rose nearly 7% on Monday. e-commerce platforms pinduoduo (DPD) and jd.com (JD) jumped 16% and 7%, respectively.

But the celebration may have been a bit premature, as US and Chinese negotiators continue to iron out the details and tensions between the world’s two largest economies simmer beneath the surface.

“The policy is still evolving and there is still a lot of uncertainty,” Xiaomeng Lu of the consultancy Eurasia Group told me.

Over the weekend, the China Securities Regulatory Commission, the country’s top securities watchdog, proposed changing a decade-old rule that prohibits Chinese companies from sharing sensitive data and financial information with foreign regulators.

Remember: US regulators have long complained that they can’t access the books of Chinese companies. In 2020, the Foreign Company Accountability Act was enacted, giving the Securities and Exchange Commission the power to kick foreign companies off Wall Street if they don’t allow US regulators to review their audits for three years in a row.

But Beijing, citing national security concerns, has resisted reviewing its policies. It requires companies trading abroad to conduct their audits in mainland China, where they cannot be scrutinized by foreign agencies.

The new amendment could finally allow US regulators to dig deeper into these disputed materials. If that helps resolve the dispute, it could alleviate a major source of concern for the more than 200 US-listed Chinese companies, which have been hit hard over the past year.

But it is too early to say for sure. It’s unclear whether US regulators will see the potential changes as enough. Last week, SEC Chairman Gary Gensler poured cold water on the idea that a deal was imminent.

“There have been thoughtful, respectful and productive conversations, but I don’t know where this will end,” Gensler said. “It’s up to the Chinese authorities and, frankly, it could be a difficult set of choices for them.”

Another sticking point, according to Lu, is whether there is an exception for companies that have access to sensitive data about the Chinese government or infrastructure.

The “only clear data point we have so far,” he stressed, is Didi. The shuttle had to start pulling out of New York shortly after its initial public offering last year. Beijing launched a crackdown on the company, saying its app violated privacy laws and posed cybersecurity risks.

What comes next: Lu said he sees about a 70% chance of some sort of deal being struck between Washington and Beijing this year. But he still thinks some Chinese companies are likely to pull out of Wall Street at that time.

He pointed out that Alibaba is not only an online marketplace, but also a cloud business. If you provide services to state-owned companies, Chinese regulators may still want you to keep your books private.

What Elon Musk wants with Twitter

It’s not every day that the super-rich CEO of one of America’s top companies takes a huge stake in an entirely different business. But that is exactly what the always unpredictable Elon Musk has done.

The latest: The Tesla (TSLA) chief disclosed a 9% stake in Twitter (TWTR) on Monday, sending shares of the social media platform up 27%.

The investment, which was valued at nearly $3.7 billion when the market closed, makes him Twitter’s largest shareholder.

Musk did not disclose the purpose of the purchase or any plans for the company. But that hasn’t stopped speculation about what prompted the surprise move.

Analysts expect Musk, who has been an outspoken critic of Twitter’s policies, to actively push for changes to the way the company operates. Last month, he said he was “seriously thinking” about creating a new social media platform.

“Since Twitter serves as the de facto public square, failure to adhere to the principles of free speech fundamentally undermines democracy,” Musk tweeted recently. “What should be done?”

He also suggested (tweeting a meme, of course) that he doesn’t support CEO Parag Agrawal, who recently replaced Jack Dorsey.

“Musk has already indicated that he did not agree with Agrawal’s appointment and wants some changes,” Morningstar analyst Ali Mogharabi said in a note to clients.

First order of business: After his involvement was revealed, Musk tweeted out a poll asking if Twitter users wanted an edit button.

But some suspect he could campaign for even bigger shifts at the company. There is speculation that Musk could team up with other activist investors, or even create a consortium to take Twitter private. The company is worth $40 billion. That’s a fraction of rival Meta, which has a market value of $637 billion.

Starbucks stopped buybacks. Will it be the next big oil company?

starbucks (SBUX) made waves with his decision this week to pause share buybacks, the first big move Howard Schultz made following his return as CEO.
Could they be the next largest oil companies in the world? That’s what top House Democrats expect.
House Oversight Chair Carolyn Maloney and Rep. Ro Khanna, chair of the environment subcommittee, want exxonmobile (XOM), Chevron (CLC), PA (PA) and shell (RDSA) scrap share buyback programs and dividends during the war in Ukraine and put that money toward lowering prices at gas stations.

“Fossil fuel companies are taking advantage of the crisis by making record profits and spending billions of dollars to enrich their executives and investors,” they wrote in a letter dated Monday.

Lawmakers also urged oil companies to make “significant investments” in solar, wind and other forms of clean energy to address the climate crisis.

Oil companies, which are cashing in on rising energy prices, have faced ongoing calls to use the extra money to offset the pain of everyday consumers. In the United States and the United Kingdom, a temporary “windfall profits tax” has been called for on your income to help households cover energy bills.

Coming up: The issue is likely to come up at a House hearing on Wednesday, where executives from BP, Exxon, Chevron and Shell are expected to testify.

Until next time

The ISM Non-Manufacturing Index, which tracks the US service sector, comes in at 10 am ET.

Coming up tomorrow: Investors will examine the minutes of the latest Federal Reserve meeting for signs of how aggressive the central bank could be later this year.

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