Weekly Market Links - 5-11 Jul 2021
Reduced stimulus and shrinkflation is top of mind. Didi (or its downfall). Really fast 5G and alternative meats are becoming a thing.
Macro
Central banks are looking to reduce emergency stimulus measures. Interest rates are likely to increase in tandem with the US. Would be expecting higher market volatility.
Norway is intending to hike the rate twice in H2 2021.
Canada is to increase in H2 as well.
New Zealand has stated Feb 2022 to be their target rise date.
UK has slowed bond-buying, with no rate changes.
The global minimum tax
Is going to affect Ireland significantly. It stands to lose up to a quarter of its corporate tax revenues, directly affecting governing ability and citizens’ quality of life. Accounting and law firms are likely to lobby to prevent this from happening.
Vaccination rates
Just shy of a 70% vaccination (single-dose) already, Singapore aims to cover 100% by their national day, August 9th.
US seems to be plateauing, while the rest of Asia is picking up speed. Slowly but surely, we can win the race - all countries mutually benefit from full vaccination. Looking forward to travel/vaccination tourism bubbles.
“Shrinkflation”: Where you pay the same price, but see your goods becoming smaller.
Reports of shrinkflation range from ice cream, cat food, and yes, toilet paper.
Observe these over the following months, and we’ll know its been done in many manufacturing supply chains to cope.
Countries
USA, Canada
Utah’s Great Salt Lake is shrinking dramatically, with wildfire consuming more each year. Just one of the states facing this issue, US may face a water supply in many other states in due course, as global warming accelerates.
The impact of a mega-drought? Inflated food and water prices, and made worse by industries using tonnes of water - e.g. Bottled water, Semiconductors, and many others.
China
EV deliveries in China have been extraordinary. In May, Xpeng’s deliveries increased 483 percent year on year; Nio’s doubled. Nio shares have returned more than 500 percent in the past year while Xpeng’s have surged 100 percent. Both trades at an enterprise value to forward sales ratio of 11 times, in line with Tesla.
More listed Chinese internet companies are scrutinized, to line up tech companies’ data privacy and cyber security practices.
UK’s largest producer of semiconductors was acquired by Nexperia, a Chinese-owned manufacturer.
Regulators are planning to have rules in place to block Chinese companies from listing overseas. This was a long-time loophole by Chinese technology giants. The implications of this would be huge for start-ups looking to exit, especially with the SPAC route.
UK
Travel businesses have launched legal action against the British government for travel curbs. Talk about the power of lobbying and public health concerns.
Japan
COVID restrictions are being extended for 30 million people until after the Olympics. It seems that events would be going spectator-less. Discussions are ongoing to postpone these restrictions, but would definitely render public health safety measures ineffective.
South Korea
Heatwave advisory is issued in many parts of South Korea, save for Seoul.
Tests of a mmWave 5G network have begun, where super-fast wireless connections allow smartphone download speeds of more than 170 Mbps. K-drama fans, you would be delighted to know, that’s a full movie (~0.3 GB) in 15 seconds, on your phone.
Hong Kong
US Tech giants are likely to leave Hong Kong if data laws are put into effect. These laws would put Facebook, Twitter and Google as those responsible for malicious sharing of individuals’ data, such that doxxed individuals could be harassed.
Singapore
Has developed lab meat and indoor farms to prepare for self-sustainability should another “border-closing” event occur. This is in their goal to produce 30% of nutritional needs locally by 2030. At present, this number is at 10%.
The diversification of food sources are as follows:
SEA
Thailand and MY growth this year are likely to be muted, at 1.9% and 4.1% respectively.
Companies
Apple
Apple wins privacy battle in China, leaving Bytedance, Tencent and Baidu to scratch their heads and thinking of a new way to track advertising traffic of iphone users in apps.
This was due to Apple’s use of their own tracking method, called IDFA, which solidified their walled garden. Now, this walled garden is even higher and thicker with the win.
Macbook Pros could see delays due to lack of supply of miniLED displays. Apple is looking for a second supplier. Interestingly, Apple has cornered the supply of miniLED screens for years, locking other manufacturers out.
Bytedance
The AI powering Tiktok is now being sold. Named as Byteplus Recommend, Bytedance has moved one step further to become an AI platform, rather than just a content one. This could make their AI even smarter, while serving as an additional revenue stream.
AirAsia
AirAsia is acquiring GoJek’s business in Thailand, for $50M, paid in AirAsia shares. Seems like AirAsia is going the super-app route, and heavily diversifying away from airlines. AirAsia is also planning a US listing within 2021 of their digital unit, likely via a SPAC, thus GoJek as part of their portfolio would help to boost valuations.
Strategically speaking, a large proportion of short-haul flights are to-and-fro Thailand - encompassing the full flight experience till the passenger is at the doorstep of a hotel could be something AirAsia wants in their whole user experience strategy.
Didi
Chinese regulators have ordered Didi’s app removed from app stores. This was less than a week into Didi’s IPO.
In a matter of days after this initial report, Didi’s app was removed from Wechat and Alipay apps - a massive blow to the company. Existing users can continue to use the app however, though it remains to be seen whether Didi can survive this.
Now, the SEC have been asked to investigate Didi as well. Double whammy.
Microsoft
Remember that big Pengaton project Microsoft won which left Amazon complaining? Well, this project got killed, because the tech that would be used in the contract is outdated. A new proposal will be drawn up, putting Microsoft and Amazon head-to-head for this lucrative government contract.
Samsung
Samsung is considering investing in a battery factory in the US due to the growing demand for electric vehicles.
Llyods Bank
The home rental business is becoming a thing, such that even banks are jumping on the bandwagon. This was done to diversify its income from just interest (as a bank of course).
At the same time, they were fined 90M pounds for misleading insurance customers. Hmm, way to go for staggering news events.
Paytm
Filing for their 2.3bn IPO, Paytm is likely to bring Alibaba (~30% ownership) and Softbank (~20% ownership) some decent gains.
Tesla / SpaceX
Reporting requirements have been increased regarding incidents with driver assistance or autonomous systems enabled, within a day of a crash. Apart from Tesla, this also affects Alphabet’s Waymo, and potentially any other car / autonomous driving company.
Industry/Commods
Airlines
Travellers in the US are posting very long lines and painful flights
Southwest airlines, known to be a super-reliable airline, have averaged >1300 daily flight delays since June 14. That’s 40% of their total flight schedule.
The surge in delays is a cacophony of events:
More stringent checks/tests
Lack of pilots, craft, and staff
Demand for travel continues to climb as more reopenings occur
Weather delays (global warming?). Standard stuff, but you can imagine how these impact timelines.
Semicon
A smuggler from China was found with 256 Intel core processors strapped to his body. Black market chips are indicative of the excessive supply shock.