Weekly Market Links [11-17 Oct 2021] - Evergrande's China Moment, NFTs On TikTok
China's debt bubble problems loom with Evergrande failures cascading, NFTs and content collide, Space-based wifi in your airplane
Apple’s just released their Apple Watch 7, while iPhones are being delayed. TSMC confirms this as their 3 Nanometer shipments are pushed all the way till Q1 2023, with transistor costs up to about 20K, from being roughly 10K each previously. This doubling has consequences, and only the high priority customers will be prioritized as we move into 2022.
Google has a sudden counterclaim in the Epic Games lawsuit. The giant is insisting on relief due to breaching Google’s developer distribution agreement. This is due to Epic using their own payment processing technology, in which Apple won. Guess its Google’s turn to take a slice of that pie.
Netflix is back on track with their scheduling. That means, more shows and more content.
And maybe we can watch Netflix on planes, when this whole pandemic blows over (hopefully soon). Starlink is talking with airlines on installing their satellite broadband. Current in-flight internet providers are going to have a hard time - same issue with telcos with legacy infrastructure, and high total cost of ownership for any client.
Consumers win though!
Reddit hired a Chief Product Officer, in charge of developing Reddit’s product organization and tools and features to bring “community and belonging” to Reddit. Currently, Reddit has 50M DAU, and 100K active subreddits.
Its interesting to see more involvement on Reddit’s part in this area - are they ramping up more efforts to do with content (albeit mostly forums) and groups similar to Facebook?
Bytedance’s TikTok is venturing into NFTs. Called TikTok Top Moments, it registers the short videos that go viral, attaching an NFT to its owner, while giving creators an additional way to make money.
Its already asking if you want to link your crypto wallet - Not sure if China is going to let this fly though, since they’ve had an outright ban on all sales and trading of cryptos - NFTS are a type of crypto isnt it?
There have been concerns over its execution though - prominent TikTok Creators have described the roll-out as a “challenge”, with difficulties in execution preventing more take-up. It is still worth looking at as a new revenue stream for content creators, and will ultimately be driven by how content consumers and NFT traders react - of course with regulation at some point. Interesting times!
Delivery / Ride-Hailing
Seven Eleven will test using delivery drones in Korea. Starting from Seoul in either Gapyeong or Gyeonggi province, Domino’s Pizza has also started testing in Sejong city.
Robinhood is seeing a 41% decline this year, thanks to its upcoming sale of shares (diluting existing stockholders), while cryptocurrencies are being increasingly regulated. Traders have also boycotted the app, due to its link to Payments For Order Flow.
Online gaming rules are being bypassed with teens buying multiple gaming accounts. With recent laws, minors can only play a maximum of 3 hours on games.
Evergrande-linked entities such as Citic are defaulting, while real-estate prices have fallen across the board by ~2.7%. For context, Citic is one of the largest conglomerates in China, and is a state-owned enterprise (SOE) since 1979.
In more extreme cases:
“Heilongjiang in the northeast saw the steepest drop in housing prices in August at 21%. Yunnan and Guizhou provinces in the south registered double-digit drops, as did the inland Ningxia Hui Autonomous Region”
Furthermore, land sales saw a 20% reduction in revenues - and these were numbers from China’s Finance Ministry.
Wouldn’t blame Evergrande for all this though - they were merely the trigger point for dominos following. They are trying to sell electric cars in 2022 even in their situation. Diversification?
It would be interesting to see if SOEs (Citic) will be prioritized over private enterprises (Evergrande).
As for the rest of the dominoes that may fall regardless of Government action? That could still happen due to over-leveraged books by other greedy players - and if there are more players than what I think there are, a wave of defaults may be coming in 2022. Debt bomb alert.
China has other problems coming on the horizon - Inflation. Soy Sauce, a staple in Asia, saw its prime manufacturer hiking prices by 7%. Our take is that once basic necessities start increasing in prices, inflation is more or less set. Wholly disagree that this inflation is ‘transitory’ when demand and supply has normalised against each other with a change in price.
Tortoise is a remote-controlled delivery robot. I found it cool that they’re already up and running, but its great if you want to outsource this portion to, say, VR players looking to make a quick buck from their home. Tortoise deliveries work best within 3 miles from a store, and move at 4 miles per hour maximum. Still slow (like a tortoise), but for something remote controlled, you’ve got to factor in safety.
What’s also cool is that Tortoise can help make new routes, instead of depending on ones from an open-source map (such as Grab’s), or its own routing algorithm. With sufficient data, Tortoise can have additional revenue opportunities with its aggregated routes that blend machine and human efforts.