Chinese stocks tumble with Xi more powerful, how companies calculate emissions and what matters in the market

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Xi’s concentration of power brings down Chinese stocks

The confirmation of a third term for Xi Jinping at the helm of China came as no surprise, but the all-allied Communist Party summit tumbled shares of Chinese companies on Monday, particularly those traded in the US.

In numbers: Hong Kong stock index plummeted 6.36%, on its worst day since 2008, when the US financial crisis erupted.

• Shares of Chinese giants traded on US stock exchanges fell further. This is the case of Alibaba (-12%), Pinduoduo (-24%), JD.com (-13%) and Baidu (-12%).

What explains: investors viewed the new formation of the Communist Party leadership as a way for Xi to centralize even more power.

• He must gain more strength to adopt the so-called “common prosperity”, a term used by the president to address the less unequal distribution of wealth and the promotion of social well-being.

And what changes for Brazil? Xi’s economic model should prioritize growth based on household consumption and reduce the strength of investments in infrastructure and real estate developments, according to experts consulted by the Sheet.

• On the Brazilian stock exchange, the most favored must be companies linked to agribusiness, mainly meatpackers and companies with activities aimed at exporting grains, such as soy, corn, sorghum, barley and wheat, used in animal feed.

• Those affected may be those linked to metallic commodities, with the brake on the real estate sector. Among them are Vale, CSN and Usiminas, whose shares fell 2.97%, 8.10% and 2.82%, respectively, this Monday.

Stock market plummets after Jefferson

The Brazilian financial market began the week with a strong aversion to risk, reflecting the crisis involving Roberto Jefferson (PTB) and its impact on the reelection campaign of Jair Bolsonaro (PL).

In numbers: pulled by state-owned companies, the Ibovespa fell 3.27%, at 116,012 points, even with a positive day abroad. It was the biggest daily drop in the main Brazilian stock index since November last year.

• the dollar soared 2.97%a BRL 5.30and the real had the worst performance both against emerging market currencies and against major global currencies.

What explains: the crisis involving Roberto Jefferson, who was arrested by the Federal Police after trying to resist the court order. The episode made part of the market reevaluate Bolsonaro’s reelection chances, a candidate whose agenda was perceived as more liberal.

• Analysts consider that, although it is difficult to assess the impact of the event on the current president’s campaign, it is possible that the crisis was among the factors that led to the fall of this session.

• The downward movement was also a correction of last week’s strong high, when the stock market rose 7%, more than the foreign pairs. In the period, the electoral polls showed an approximation in the voting intentions of the two candidates.

Among the companiesthe highlights were the fall of 10% of Banco do Brasil and 9% for Petrobras papers.

• State-owned shares fell more because the general view of the market is that Bolsonaro should have a less interventionist agenda in these companies compared to Luiz Inácio Lula da Silva (PT).

More about investments:

• Michael Viriato, from the blog De Grain em Grain, explains how the credit risk of a fixed income that only goes up can be much worse than a fund with higher volatility.

How companies calculate their emissions

The number of companies reporting their carbon emissions has doubled in the last three years and reached a record level in Brazil.

In numbers: were 305 companies that published an inventory of greenhouse gases in 2021. In 2018, 145 organizations made the disclosure, points out a survey by FGVces (Center for Sustainability Studies of Fundação Getúlio Vargas).

• The data are from the Public Emissions Registry, a method adapted from one of the most used in the world to make an emissions inventory: the GHG Protocol (Greenhouse Gas Protocol).

• Most companies that publish inventories on the platform are large, publicly traded and belong to the financial, retail, energy and agribusiness sectors.

why it matters: standardization of emission calculations is essential to ensure transparency and avoid greenwashing – when the company claims to be serious about the ESG agenda, but does not take concrete action in this regard.

How the calculation is done: it does not consider only the carbon directly released by the productive activity. It is divided into three scopes:

• Scope 1: are the emissions generated directly by the company’s operations.

• Scope 2: gases released indirectly in energy consumption.

• Scope 3: it takes everything else, from business trips to buying raw materials, transporting products and suppliers. He usually concentrates most of the emissions.

Purchase and electricity bills, property registrations, machinery and vehicles, employee travel…See here for more details on how companies calculate their greenhouse gas emissions.

The most indebted in the world

Automakers and telecommunications companies are among the most indebted companies in the world. But being on this list is not necessarily a bad thing.

Understand: Loans can be the best way for companies to obtain resources to invest in new technologies and, thus, increase the profitability of their operations.

In numbers: manager Janus Henderson’s list of the most indebted companies considers 2021 figures and is headed by Toyota and Volkswagen, which had a net debt of $186 billion and $185 billionrespectively.

• Next come AT&T, Verizon and the German Deutsche Telekom, with $182 billion, $174 billion and $153 billion in debt each.

Is here? THE Sheet showed at the beginning of the month how high interest rates and the need for investments put pressure on the indebtedness of Brazilian companies.

• The Trademap platform survey considered the Ibovespa companies with the highest level of indebtedness until June 2022 and used the ratio indicator between net debt and Ebitda (earnings before interest, taxes, depreciation and amortization).

• The market usually uses this metric to assess how many years the debt would be paid only with the funds generated by the operations.

the ranking of the most indebted is led by the airline Azul, with net debt exceeding Ebitda by 8.3 times.

• Then come Hapvida (5.2x), Cogna (4.7x), Embraer (4.4x) and Ecorodovias (4.3x). See the rest of the list here.