Notable market news this past week (14-Jan-24)
Here is the Skeptivest roundup of the latest market headlines for the week
💰 SEC Approves Listing and Trading of Bitcoin Exchange-Traded Product (ETP)
SEC’s Approval: SEC authorized funds from the likes of BlackRock Inc., Invesco Ltd. and smaller competitors such as Valkyrie to create exchange-traded funds that invest directly in Bitcoin. The approval is limited to ETPs holding bitcoin, and the SEC emphasises that it does not signal approval for crypto asset securities.
Market Reaction: Cryptocurrency-related stocks, including Coinbase, Robinhood, Cleanspark, and Marathon Digital Holdings, experienced declines after the US SEC approved ETPs investing in Bitcoin. Meanwhile, other major cryptocurrencies such as Ethereum climbed 8%, signalling a sentiment that other cryptocurrencies may be approved for ETPs in the future.
Bitcoin's Performance: The approval marked a significant milestone for the digital asset sector, topping at $49,000. However, analysts warn against conflating Bitcoin price gains with predictions of cryptocurrency overtaking traditional finance.
🇹🇼 Taiwan Elects US-Friendly President, Defying China’s Warning
Lai Ching-te's Victory: Vice President Lai Ching-te of the ruling Democratic Progressive Party (DPP) secured a significant victory in Taiwan's closely contested election with 40.1% of the vote.
Defiance of China's Influence: Lai's election deals a blow to China’s ambitions of increasing influence over Taiwan, emphasizing the Taiwan’s commitment to democracy and its desire to keep China at arm's length despite mounting frustrations over domestic issues such as high property prices and slower-than-expected wage growth.
Balancing Act for Taiwan: The re-elected DPP government, led by Lai, faces the challenge of maintaining peace across the Taiwan Strait, strengthening ties with major democracies, and avoiding heightened tensions with China in a delicate geopolitical landscape.
☕️ Quick fire happenings to note
🌏 Global macro
- Norway Authorises Deep Sea Mining: Norway is the first country to allow seabed mining activities. This move allows companies to apply for permits to prospect for strategic minerals such as cobalt and nickel that are used in EV batteries and other green technologies. Estimates show that the country’s seabed contains large stores of cobalt, and other rare earth metals, with copper reserves alone projected to be 38m metric tons, nearly twice its annual global production of the metal.
- The World Faces a $270b Traffic Jam in Panama: The Panama Canal moves roughly $270b worth of cargo annually, a crucial trade route taken by 40% of all US container traffic alone. The waterway faces a crippling drought, worsened by climate change and infrastructure constraints. Low water levels are restricting the number of ships that can pass through each day, causing some shippers paying to jump the line to cross the strait. Similar to the Red Sea incident, higher freight rates and delayed shipments are to be expected, adding significant costs to imported goods, straining the global supply chain.
- Japanese Equities Experiencing A Robust Start in 2024: Gains in Japan’s 2 main indexes outpacing other major markets, reaching fresh 34-year peaks. The Nikkei 225 Stock Average is predicted to potentially gain almost 10% this year, nearing its all-time record from the 1989 bubble economy. Valuations, as measured by price-to-book and price-to-earnings ratios, are far more reasonable now compared to sky-high valuations in late 1980s.
- US Inflation Rose More than Expected in December: with the consumer price index (CPI) rising by 3.4% compared to the previous year. The acceleration in inflation was driven by largely by higher energy and housing prices. Despite the pick-up in inflation, investors remain hopeful of an interest rate cut in March. According to the CME Fedwatch Tool, the probability of a Fed rate cut in March rose to 77% as of 13 January 2024.
- US Strikes Houthis Upset Global Trade: A US–UK-led coalition recently struck over 70 military targets controlled by Houthi rebels in Yemen. It was the most decisive action yet aimed at getting the Iran-backed group to stop disrupting global trade in the Red Sea. As a result, from those strikes, oil prices rose by 1% and large shipping companies such as Maersk were instructed to take a longer alternative route around Africa.
🏦 Individual stocks/companies
- Microsoft Overtakes Apple in Market Value: Microsoft has surpassed Apple to become the world's most valuable publicly traded company. Microsoft's market valuation reached $2.89t, while Apple's value stood at $2.87t. Microsoft's growth is attributed to strong execution and clear roadmap to accelerate growth, particularly in AI. In contrast, Apple faced concerns over its smartphone demand, leading to a 3.4% decline.
- JPMorgan Posts Record Net Interest Income: JPMorgan closed out the most profitable year in US banking history. Net interest income came in at $24.2b in Q4’24. The bank’s outlook for 2024 expects sequential, quarterly declines with the Federal Reserve’s dovish pivot.
- Citigroup to Cut 20,000 roles in Cost-Saving Move: CEO Jane Fraser cuts 20,000 jobs to enhance the bank's return, saving up to $2.5 billion. The firm expects firmwide expenses to drop to $51-53b by the end of 2026. Despite a disappointing fourth quarter, marked by the lowest fixed-income trading revenue in five years, shares rose over 1.5%. The restructuring includes simplification, divestitures, and reducing management layers. Citigroup's goal is to achieve a return on tangible common equity of at least 11% by 2027, and the restructuring is set to save $1b annually.
- Apple Shut Down AI Team in San Diego: Apple is closing its 121-person AI team, with plans to relocate them to Austin, Texas. The team is responsible for enhancing Siri's performance by evaluating voice queries. Employees have until the end of February to decide on relocation, with termination scheduled for 26-Apr for those unwilling to move. The reorganization aims to consolidate the US-based team in Austin, where most employees are already located.
- BlackRock Buys Infrastructure Firm GIP for $12.5 Billion: The acquisition of GIP, which manages $100b, is a major step by CEO Larry Fink to transform the firm into a key player in the rapidly growing market for private and alternative assets. Infrastructure has been a growing corner of the alternatives market as investors see opportunities in energy-transition projects and data centres.
- Amazon’s Twitch to Cut 35% of Staff: The cuts come amid concerns over the business remaining unprofitable for >9 years since Amazon’s acquisition. The live-stream company will also cease operations in South Korea due to high costs.
🇸🇬 Singapore related
- Singaporean firms and Indian state, Tamil Nadu have signed MOUs worth S$5b: Singapore is strengthening economic cooperation with Tamil Nadu, aiming to expand investments in India’s high-growth sectors such as sustainability and infrastructure. For example, CapitaLand have announced its growth plan to deploy over S$500 million to develop business parks, logistics, warehouses, and a data centre in Tamil Nadu. Tamil Nadu, as the second-largest contributor to India's GDP, is a key region for Singaporean companies in South India to set up their investments.
- Singapore passed new Bill to introduce new investment management regime: Significant Investments Review Bill (SIRA), requires entities designated as critical to notify or seek approval for ownership or control changes. Designated entities must notify MTI of becoming a 5% controller within seven days and seek approval for other controlling thresholds (12%, 25%, 50%). The law also covers approval for key appointments and prevents voluntary winding up without ministerial consent. SIRA aims to scrutinise investments and complement current sectoral safeguards.
- Singapore has achieved more than half of its solar power deployment target by 2030: The country has doubled its solar power deployment since 2021, reaching over 1,000 megawatt-peak currently. The Energy Market Authority (EMA) stated that solar energy will eventually contribute to about 10% of Singapore's projected electricity demand in 2050. The private sector has played a significant role in driving the growth of solar deployment, accounting for 63.5% of the total installed capacity.
- Singapore and Malaysia signed MOU to establish a new Johor-Singapore Special Economic Zone (SEZ): The SEZ aims to enhance cross-border economic connectivity between the two countries. Among the early initiatives being explored are passport-free clearance on both sides of the border and digitised processes for cargo clearance at land checkpoints. The SEZ framework will determine economic sectors for cooperation and the geographical coverage of the zone.
- Port of Singapore achieved record highs in ship arrivals and bunker sales: Container throughput rose by 4.6% to a record 39.01m 20-foot equivalent units (TEUs). Bunker sales rose to 51.82m metric tonnes, with biofuel bunker sales tripling. MPA attributed the strong performance to regional trade recovery and robust cooperation. However, slower growth is to be expected in 2024 due to geopolitical uncertainties and climate change.
