25 January 2024

Chinese Stocks in Decline 

Chinese stock markets are in precipitous decline so far in 2024, primarily driven by pandemic problems, government mismanagement, and the property bubble. In January 2024, China’s CSI 300 index has dropped 6% so far, the Shanghai Composite Index has dropped by 7%, and Hong Kong’s Hang Seng Index has dropped by more than 12%. One response to the economic problems is the CCP attempting to stabilize the yuan. Major state-owned banks have tightened liquidity in the offshore exchange market, and they are selling US dollars onshore. The stock market upheaval contradicts China’s desired picture of a robust economy and further indicates that the country is likely entering a period of moderate stagnation. Analysts at places like Rhodium Group have even argued that China’s official GDP growth of 2023 at 5.2% is a lie and that GDP only grew 1.5%. Considering the needs of the country, anemic growth will likely lead to major social problems as the population ages and fewer people have access to good jobs. Other negative economic indicators are found in the property market as new home sales are down 34% in 2023 compared to 2022, and corporate debt has significantly increased. However, it is important to note that China’s economy is less financialized than Western economies, and only a small fraction of household wealth is tied up in stocks. As such, the decline will have a less broad impact than a similar one in the United States or Europe.

 

Pakistan Faces Significant Terrorism Threat Before Election 

Pakistan will hold elections on February 8, and there are high expectations that jihadist and separatist groups will engage in terrorist attacks in the days leading up to the election. These attacks will most likely take place in Khyber Pakhtunkhwa and Balochistan provinces with the primary groups being Islamic State-Khorasan (IS-K), Tehrik-e-Taliban Pakistan (TTP), and the Balochistan Liberation Army. IS-K and BLA have already claimed credit for attacks this election cycle. IS-K and TTP oppose democracy on principle, and the former will most likely target political groups, election rallies, and politicians. TTP is more likely to target security forces, especially at checkpoints and those on patrols. The BLA will also go after political targets, such as when they bombed an election training center in Kharan on January 15. Pakistan already faces a significant threat of terrorism, and in the 30 days before the 2018 election there were approximately 30 terrorist attacks. The threat will be the highest on the election day, and any corporations or personnel operating in the country should take extra precautions.  

 

Microsoft Targeted by Russian Threat Actor 

Microsoft has acknowledged that a Russian-state sponsored threat actor accessed their systems on January 12 and stole emails and documents. Although the company stated that the threat actor only gained access to a “very small percentage” of corporate emails, the emails did include those on the senior leadership team. The threat actors used a password spray attack that started in November 2023, and they used compromised passwords to gain access. This event is not unique and happens regularly, but it highlights two important parts for geopolitics. First, major technology companies are regularly targeted by state actors, and they are actively participating in the geopolitical process. Second, these same companies are critical for the intelligence they gather on state-sponsored threat actors who target corporations, governments, and civil society. 

 

Bukele Likely to Win Reelection in El Salvador 

El Salvador holds its presidential election on February 4, and Nayib Bukele is highly likely to be reelected. Bukele and his political party Nuevas Ideas are exceptionally popular at the moment because of their controversial policies to handle gangs. Over his first administration, Bukele implemented a strong anti-gang approach, and according to polls and reports people are feeling more secure and less harassed. However, his approach has been criticized by human rights organizations because of the extra-constitutional actions taken. However, the success of his policies strongly indicates that he will win reelection in the first round of voting. 

 

US Government Issues Best Practices for Water Cybersecurity 

Three federal agencies of the US government have published a guide of cybersecurity best practices for water and sanitation. The agencies included the EPA, FBI, and CISA, and the manual provides the water industry with needed information on incident response and how to work with the government when events take place. Such topics covered also include “steps for incident detection and analysis, tactics to contain, eradicate and recover from attacks, and how to act post security incident.” This indicates not only that the federal government considers water critical infrastructure that needs to take cybersecurity more seriously, but that the government wants to take a more active role in bolstering defense. Regulations are exceptionally difficult to pass on cybersecurity, so establishing best practices is the most efficacious path for the federal government.  

 

IRGC Targeted by US and Israel 

The United States and Israel are separately targeting the Iranian Revolutionary Guard Corps and proxies throughout the Middle East. Israel neutralized at least five IRGC members in Damascus on January 20 and two Hezbollah militants in southern Lebanon the following day. The United States targeted three facilities in Iraq operated by Iran-backed forces following attacks on American soldiers. Israel is taking the opportunity to degrade Iranian capabilities while it has the chance, but the US is responding to direct attacks on its soldiers in Iraq. This is not an indicator that the Israel-Hamas war will spread to a regional conflict, but it is an indicator that there will be further sporadic attacks against Iran as the Islamic republic attempts to provoke both the US and Israel. 

 

CIA Director Visits East Africa 

Director of Central Intelligence William Burns secretly visited Somalia and Kenya last week as the region faces growing instability. Burns met with Kenya’s president and intelligence director in Nairobi before meeting with Somalia’s president in Mogadishu. This was a deeply unusual visit as typically ambassadors would engage in such discussions, which indicates that the United States is pessimistic about regional stability issues, including the Sudanese civil war, problems in the DRC, Ethiopia’s agreement with Somaliland, and al-Shabaab attacks. Analysts should see this as a negative indicator for regional security over the short term. 

"They laugh at me because I'm different; I laugh at them because they're all the same"

- Kurt Cobain

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