US investors in Chinese companies are stuck in zombieland: US investors are increasingly unable to repatriate returns in what the New York Times refers to as the Chinese version of “zombie” companies. Like TikTok parent company ByteDance — where some USD 8 bn of capital is stuck — these are Chinese firms, often booming, that are caught in geopolitical crosshairs, preventing investors from receiving returns.

ICYMI- The US House of Representatives last week voted to give ByteDance six months to sell TikTok or face a ban in the US over concerns about the Chinese government’s access to US user data.

It’s much more complicated than it may seem: Export control rules on tech imposed by China in 2022 mean that even if TikTok gets sold, its recommendation algorithm — the app’s most valuable feature — is unlikely to be included in the sale. Buying TikTok without the algorithm would be akin to acquiring Hulu without the rights to its content, said Columbia Business School professor Jonathon Knee. “It’s not completely clear what you’re buying,” he explained.

Chinese companies aren’t as attractive as they once were: China’s regulatory crackdowns, coupled with falling company valuations triggered by the country’s economic slowdown, have made acquisitions less tempting for US buyers. Some 3.2k Chinese companies were acquired last year, half of what was bought in 2019.

And less Chinese companies are IPOing in the US: Chinese companies have grown wary of listing in the US since ride hailing app Didi delisted from the New York Stock Exchange in 2022 due to regulatory pressure by China. Only three Chinese startups listed in the US in 2022, down from 18 per year between 2018 and 2021.

THE MARKET THIS MORNING-

Asian markets are mixed and stock futures little changed in trading early this morning as traders take a breather ahead of fresh economic guidance from the US Federal Reserve this week.

EGX30

31,062

-0.8% (YTD: +24.8%)

USD (CBE)

Buy 47.19

Sell 47.33

USD at CIB

Buy 47.27

Sell 47.37

Interest rates CBE

27.25% deposit

28.25% lending

Tadawul

12,762

+0.3% (YTD: +6.6%)

ADX

9,221

-0.4% (YTD: -3.7%)

DFM

4,262

-0.7% (YTD: +5.0%)

S&P 500

5,117

-0.7% (YTD: -7.3%)

FTSE 100

7,727

-0.2% (YTD: -0.1%)

Euro Stoxx 50

4,986

-0.1% (YTD: +10.3%)

Brent crude

USD 85.37

0.0%

Natural gas (Nymex)

USD 1.70

-2.7%

Gold

USD 2,155

0.0%

BTC

USD 68,766

+3.3% (YTD: +62.0%)

THE CLOSING BELL-

The EGX30 fell 0.8% at yesterday’s close on turnover of EGP 3.4 bn (30.1% below the 90-day average). Local investors were net sellers. The index is up 24.8% YTD.

In the green: Fawry (+6.1%), Egypt Kuwait Holding (+4.4%), and Oriental Weavers (+4.0%).

In the red: E-Finance (-5.6%), Eastern Company (-5.5%), and Qalaa Holdings (-5.0%).

CORPORATE ACTIONS-

Ibn Sina to retain earnings: Ibn Sina Pharma will retain its earnings from last year to “support the expected exceptional growth in revenues,” it said in an EGX disclosure (pdf). The decision came as a result of “the expected stability in production due to the availability of foreign currency to manufacturers,” the firm added.

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