September 3, 2023

Notable market news this past week (03-Sep-23)

Here is the Skeptivest roundup of the latest market headlines for the week

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♠️ A Chinese card game has become an essential business proficiency

“Officials like this game, so we play along,” - Mr Yang Yiming, Investment Banker

A social lubricant for business: In each country, there are specific social activities that facilitate business deals, such as golf in the US and saunas in Finland. However, in China these days, the focus is on the practice of "egg throwing."

Stronger need to build domestic network especially with US-China tension: Foreign investment in China reached a 25-year low early this year. As a result, Chinese dealmakers seeking yuan are now often engaging with local bankers and regional government officials who provide financial incentives to strategic industries.

Building "guanxi" or connections‍: Playing the game has become a reliable way to establish "guanxi," or connections and bond with them. The game, which may stretch for hours, gives an opportunity for chit-chat, sharing of information and building trust. Mr Yu Longze, a broker based in Beijing, said his boss in August ordered all staff to learn the game.

Learning about the personality of someone through the game: "From observing someone's playing style, you can tell if he is smart, aggressive or a team player. This can help you decide if you want him as a business partner," said a businessman surnamed Huang, who runs a private clubhouse

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🌿 A win for Crypto

“The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,” - Judge Neomi Rao

Context - Crypto's Wall Street aspirations: For over a decade, crypto firms have tried to launch ETFs directly tied to bitcoin’s spot price in hopes of attracting more institutional investors. However, their efforts have been consistently thwarted. Since 2021, the SEC has rejected all over 30 ETF proposals, citing concerns about the ability to prevent market manipulation as a key issue. Nevertheless, optimism surged in June when BlackRock, the world's largest asset manager, submitted its own application for a Bitcoin ETF.

Win for crypto sending Bitcoin up 6% and Coinbase stock up 15%: A three-judge panel in the US Court of Appeals in Washington reversed regulators' decision to block Grayscale Investment's (world's biggest crypto fund) Bitcoin price-linked ETF. This development is seen as a significant milestone for the crypto industry, which has been under SEC scrutiny. The ruling now allows the industry to potentially access billions of dollars from everyday investors.

What's next: Despite the Grayscale CEO considering it a "significant victory" for crypto, it's important to note that the SEC is not obligated to grant approval for the ETF application and could potentially challenge the court's decision. Nevertheless, while the DC court’s decision doesn’t guarantee Grayscale’s ETF request, it's an important step toward eventual approval.

☕️ Quick fire happenings to note

• UK inflation cooling: Lower grocery costs in August eased UK store inflation, lessening pressure on the Bank of England to raise interest rates further. The British Retail Consortium reported a drop in shop price inflation fell from 7.6% to 6.9%
• Zhongrong bailout?: China has requested that two of its largest financial institutions review the financial records of Zhongrong International Trust, potentially laying the groundwork for a government-led intervention to rescue the distressed shadow bank.
• Country Garden warned potential default: The Chinese developer, issued a warning of possible debt default and concerns about its viability following a nearly $7 billion loss in the first half of the year. The company stated in a filing that it might struggle to meet debt obligations if its financial condition worsens.
• Hong Kong closes: Hong Kong is bracing for the arrival of Super Typhoon Saola, prompting the closure of its $5t stock market, schools, and suspension of transport routes. This could be the city's strongest storm in five years. A No. 8 storm warning was issued at 2:40 a.m. on Friday, with the local observatory considering raising tropical cyclone warnings.
• Indonesia is introducing a "golden visa": To attract foreign individual and corporate investors in an attempt to boost its national economy. The 5 year visa requires individual investors to set up a company worth $2.5m while the 10 year visa requires a $5m investment.
• Sea brings back top game titles in India after ban: Free Fire India will be made available in Sep 5. India banned the game in Feb-22, at the time Sea's most popular mobile gaming title in the country. The relaunch is set to boost Sea's growth especially amidst slowing growth as seen in the latest earnings.
• UBS's takeover of Credit Suisse makes massive profit: UBS reported a $29b profit (largest quarterly net profit of any major bank, ever), a result of the accounting difference between the value of Credit Suisse’s balance sheet and the $3.8b UBS paid for the bank.
• Next generation of the Ambani family: Mukesh Ambani, Asia's richest man, is grooming his three children for leadership at Reliance Industries over the next five years. They've been named non-executive directors. This is part of Ambani's succession planning amid past family power struggles.‍
• Foxconn founder Terry Gou joins race to become Taiwan's next President: Despite trailing in polls, aims to initiate peace talks with Beijing to attract voters favoring unification. He competes with two candidates who share his stance on closer Taiwan-China ties, challenging Vice President Lai Ching-te, a strong advocate for Taiwan's independence from the ruling Democratic Progressive Party.