For the first time in 52 years, you can't see giant pandas at the National Zoo...
The zoo in Washington, D.C. has housed pandas since 1972. Beijing gave two bears to the family of President Richard Nixon that year – part of a long-standing Chinese policy of so-called "panda diplomacy."
The gesture marked the dawn of modern Chinese-U.S. relations. China began lending out pandas to U.S. zoos under multiyear contracts as a gesture of goodwill.
Then China became less generous with its panda loans...
The San Diego Zoo had to send its three bears home by 2019. In April 2023, the Memphis Zoo returned its single panda... And the National Zoo said goodbye to its pandas last November.
For a time, only four pandas remained on U.S. soil: Zoo Atlanta's Lun Lun, Yang Yang, and their two youngest cubs. All of them are scheduled to return to China this winter.
But now, pandas are back...
China reversed course, and the first new pandas in 21 years arrived in San Diego in June. Yun Chuan and Xin Bao went on public display on Thursday... leading Gov. Gavin Newsom to declare August 8 "California Panda Day."
The National Zoo, too, will welcome a new pair of giant pandas by the end of the year. You can see one of the bears, Bao Li, below...
Pandas returning to America isn't just a fluff piece for the zoo-going public. It's a sign of a much bigger change... a budding opportunity in Chinese stocks.
Let me explain...
China is taking steps to calm the rough geopolitical waters it has faced in recent years. And panda diplomacy is just one of its strategies. The country is imposing sweeping reforms to shore up its international friendships – and to bring foreign cash back into its stock market.
Yes, the country has had big issues in recent years. You might think they're deeply entrenched... But they're short-term problems. Let's look at two issues to see what I mean…
First, geopolitical risks are stabilizing...
Folks are concerned about a conflict between China and the U.S. We've seen tensions boil over more than once in the past decade... from the "trade war" that began in 2018 to China's escalating stance on Taiwan.
Slowly but surely, though, the relationship between these two superpowers is improving...
President Joe Biden didn't meet with Chinese President Xi Jinping for almost two years after his inauguration. But the two leaders finally shook hands at the G20 summit in 2022... where they vowed to restore the lines of communication.
Biden and Xi met again last November in California. They reached agreements to fight drug trafficking and establish better military communications.
Biden said the meeting fostered "some of the most constructive and productive discussions we've had."
Since then, both countries have made active diplomacy efforts. U.S. Treasury Secretary Janet Yellen visited Beijing to discuss economic policy in April. And U.S. Secretary of State Antony Blinken went to Beijing later that same month... his second visit in less than a year.
Blinken met with Foreign Minister Wang Yi to discuss some of the more delicate issues facing the two nations – things like stability in Taiwan and China's trade practices with U.S. companies. Blinken called the three-hour meeting "extensive and constructive."
The realm of politics is never certain. But the market loves stability... And one thing is clear: The relationship between the U.S. and China is a lot more stable today than it was just a few years ago.
Even without this piece of the puzzle, China's economic outlook is getting better, too. You see, China is quickly moving from anti-business to pro-business.
Back in 2020, Chinese regulators had tech firms in their sights. These big companies had grown unchecked for years. So Beijing imposed harsh regulations to rein them in.
Today, the regulatory picture is much sunnier. The wave of reforms that once stunned the market has dried up.
Now, China is changing course again. It's enacting pro-business policies at the fastest pace in history...
Longtime readers have heard us mention KraneShares, a China-focused exchange-traded fund ("ETF") provider... So its research team covers this market carefully.
Since the start of 2023, KraneShares has tracked nearly 40 new pro-business catalysts in the Chinese market. These included five regulatory shifts, six cases of fiscal stimulus, 13 cases of monetary easing, and 14 events (including press conferences, diplomatic meetings, and investments) by government entities.
Several big moves happened in April alone. For one, China's securities regulator announced five measures to support Hong Kong's capital markets. The changes are meant to cement Hong Kong's position as a hub for foreign investment.
China knows its regulation-heavy stance hurt stocks. Now, the pendulum is swinging in the other direction.
Beijing wants to encourage investment. It wants to fix the problems it created. And that's a good sign for Chinese stocks.
Obviously, lots of investors want nothing to do with China. But based on the "panda indicator," this is an investment you should consider right now.
Pandas are coming back to U.S. zoos. And that's a surprising but positive sign for Chinese stocks.
Good investing,
Sean Michael Cummings
Further Reading
In 2020, Beijing unleashed a crackdown on China's largest technology companies. Since then, investors have believed China is "uninvestable." The crash has lasted for years. But now, the pain of aggressive regulations may be over... Get the full story here.
Not all beaten-down stocks are ripe for a turnaround. To find the promising opportunities, you need to understand one critical factor – because without it, you could end up playing the "waiting game" for years... Read more here.
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