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TikTok is a warning to us all

Daryl Guppy
Daryl Guppy • 5 min read
TikTok is a warning to us all
This is how it works. You have a hugely successful business in the US, but you are a foreign company. Your US competitors missed the boat and cannot catch up. The first step comes with the unproven charges that your company is a security risk.
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They used to be called standover thugs. In Singapore, they were employed in 2006 by the infamous Ang Soon Tong gang and today those in the clutches of illegal money lenders know their methods. In the US, these stand-over thugs were a feature of Tammany Hall politics epitomised by Mayor Daley in Chicago and lurid stories by Mario Puzo about the mafia.

We thought they had largely disappeared, but these methods have returned with renewed vigour in the US. This is a concern for all who want to do business in the US, or those who deal with others who do business in the US.

This is how it works.

You have a hugely successful business in the US, but you are a foreign company. Your US competitors missed the boat and cannot catch up.

The first step comes with the unproven charges that your company is a security risk. The next step is when the equivalent of “muscle” turns up at your doorstop and demands that you hand over your business to a US competitor company. If you do not agree then your company will be banned from operating in the US.

This is the first part of the standover tactics. You have not broken the law. Your company business is not illegal — but only taken over by a US competitor.

The second part of this is the kickback. Money will have to be paid to another party because the boss has helped to arrange this shakedown.

No, this is not some outlandish plot in a Starhub soapie. This is what is really happening with TikTok in the US. It is important because it shows just how far President Trump is prepared to step outside of the global rules of commerce to destroy a company in competition to US companies. And that something that should concern every business operator and every government.

This is coercive action taken by the President of the US using an executive order that bypasses the need for Congressional approval. Trump said TikTok will “close down” in the US on Sept 15 unless a deal can be negotiated between TikTok, an appropriate company and the US government.

Trump said: “I did say that if you buy it, whatever the price is that goes to whoever owns it, because I guess it’s China essentially, I said a very substantial portion of that price is going to have to come into the Treasury of the United States because we’re making it possible for this deal to happen.”

Microsoft may not have been party to this business hijack, but it will become a beneficiary of these presidentially initiated stand-over tactics.

Can you imagine the uproar from the US if China forced an American company to sell all its international operations in China to a Chinese player? These stand-over tactics destroy the heart of international business and introduce new levels of sovereign risk. Governments and business must stand up against these coercive tactics because your international business, or your investment in an international business, may be next in the firing line.

Technical outlook for the Shanghai market

The Shanghai index rebound is strong and is moving the tests the resistance features of trend line B. The rebound rally used the upper edge of the long-term Guppy Multiple Moving Average (GMMA) indicator as a support level.

The rebound from the upper edge of the GMMA shows that investors are eager to get involved in the market. This is a vote of confidence and confirms the sustainability of the trend. The index did not fall into the middle of the long-term GMMA and it did not use the long-term uptrend line A as a support level. This shows strong confidence in the uptrend because it shows investors could not wait for these support features to be tested. Instead, they moved quickly and aggressively to join the rally as soon as it developed. This is strong bullish behaviour.

The long-term GMMA did not compress in reaction to the market retreat and this shows investors did not join the selling activity. The wide separation in the long-term GMMA shows investors remain confident about the future of the uptrend.

The first upside target for the index is the value of the uptrend line B. This is near 3,440. This is also near to the value of the previous high in July. This combination of resistance features suggests there will be some consolidation around this level before the index moves higher.

Trend line B is currently acting as a resistance feature and this will limit the level of rise in the index. If the index moves above trend line B, then trend line B will act as a support feature. In this situation the next upside target is near 3,560. This type of breakout signals a new fast rally continuation so there is a higher probability of rally and retreat behaviour.

If trend line B acts as a resistance level, then it will slow the rise of the index. This will help to stabilise the trend between the values of trend line B and the value of the upper edge of the long-term GMMA. The trend is more stable in this environment because the trend behaviour is not a steep rally.

All of these behaviours are indicators of investor confidence and this supports a continuation of the uptrend.

Daryl Guppy is an international financial technical analysis expert and special consultant to Axicorp. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a national board member of the Australia China Business Council.

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