June 16, 2024

Notable market news this past week (16-June-24)

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

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🔋 The Evolving Energy Landscape: Solar's Intense Competition and Nuclear's Rising Appeal

Intense competition within solar has led to pain for Chinese solar manufacturers: Rapid expansion throughout China's supply chain, responsible for producing approximately 80% of the world’s solar panels, has resulted in significant increases in output and record-low prices.‍

• ‍Fierce rivalry has led to innovations in the solar industry resulting in increased automation, production methods that reduce waste and energy use, and improved equipment designs that boost panel efficiency. As such, the cost of solar has fallen about 90% in the past decade which translates to eroding margins (reduced selling price) for solar producers.
• Many executives have urged Beijing to intervene by regulating new factory construction, setting a minimum price, or promoting industry consolidation.
• Example: Solar giant Longi Green Energy Technology Co. have seen  >80% of its market value erode in the past 2 years. Having said that, it is still 10x bigger than it was a decade ago.

Nuclear; an alternative energy source: As new nuclear reactors come online, the world faces a growing need for additional uranium ore. The price of uranium has climbed 233% over the past five years. Today, there are 61 nuclear power plants under construction globally, with another 90 or so in planning stages and more than 300 proposed

Nuclear is more attractive because of higher Energy Density: Solar panels have a relatively low energy density. On average, solar panels generate about 10-20 watts per square foot (depending on weather conditions). On the other hand, nuclear power has an extremely high energy density. One kilogram of uranium-235 can theoretically produce about 24,000 MWh) of electricity and is able to run continuously, not affected by weather

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☕️ Quick fire happenings to note

🌏 Global macro

• ‍Additional EU tariffs on Chinese EVs: The EU will impose additional tariffs of 38.1% on top of the 10% existing duty starting next month. China’s EV manufacturers have been pushing more aggressively into Europe amid a domestic price war and years of building a lead in the technology. European Commission’s vice president, Valdis Dombrovskis mentioned that the additional tariffs is to restore the level-playing field in the European market. ‍This could prompt Xi's government to retaliate by imposing tariffs on popular European products such as wine and dairy, potentially escalating into a broader trade conflict. Read more in our weekly monitor from 3 weeks ago. ‍
• Fed holds rates, signals one rate cut in 2024: The Fed voted unanimously to maintain its benchmark interest rate between 5.25-5.5%. The announcement suggests that central bank officials remain wary about cutting rates too soon, despite consumer inflation data pointed to a slowdown in the rate of price increases in May at 3.3%, down 0.1% from April
• Barclays see signs of IPO recovery: Barclays sees signs of a gradual IPO market recovery. Despite higher-for-longer interest rates, increased clarity may encourage listings. The bank expects a recovery in the US and Europe, though from a low base.
• US and Ukraine sign security agreement at G-7: Both countries signed a bilateral security pact on the sidelines of the summit and G-7 leaders reached an agreement on unlocking a $50b loan for Ukraine by using the profits from frozen Russian assets‍
• China’s Li visits Australia: Chinese Premier Li Qiang began the first visit to Australia since 2017, signalling improved ties between the two nations since heavy duties on Australian wine exports were lifted in March. Australia has been working to diversify its critical minerals supply chains to avoid a monopoly and conflict developing over critical minerals in the future as these refined materials are vital to high-tech manufacturing and green energy transition

🏦 Individual stocks/companies

• ‍Apple (+11.91% past 1 month) unveils new AI platform and official partnership with OpenAI: The new AI platform, Apple Intelligence will include tools to transcribe phone calls and voice memos, solve advanced math equations, sort through email, etc. Apple’s partnership with OpenAI will revamp its digital assistant and will let customers access ChatGPT via Siri at no extra cost. Shares gained 7.3% to $207.15 after the announcement, marking their first record high of the year‍
• Gates-backed company is breaking ground on nuclear power plant: Bill Gates and his energy company, TerraPower has received approval for an advanced nuclear reactor construction permit. The power plant will be built in Wyoming and is a big step toward safe, abundant and zero-carbon energy ‍
• Ford ends EV dealership program: Ford ends an EV dealership program that initially requires store owners to invest at least $1m to sell its EVs. This is an effort to boost EV sales amid slower than expected demand. Last month, Ford slashed prices for its electric F-150 Lightning pickup truck as its EV inventory balloons ‍
• Hyundai files for India IPO: Hyundai Motor’s India unit sought regulatory approval on Saturday for a stock market listing in Mumbai which could be the nation’s biggest and will sell a stake of up to 17.5%. Sources revealed that the company aims to raise around US$2.5-3b at a valuation of US$30b‍
• Moderna first to release positive phase three data on a Covid and flu combination shot: Moderna said its combination vaccine targeting Covid and the flu was more effective than existing standalone shots for those viruses in a late-stage trial. The company plans to file for regulatory approval for its combination jab and hopes to enter the market by 2025
• Virgin Galactic reverse split: The firm enacted a 1-for-20 reverse stock split to avoid falling under $1/sh for 30 consecutive days - which would have forced the stock to be delisted under NYSE rules.
• KKR (+4.34% past 1 month) joining the S&P500: Shares of the private equity firm surged by 11.2% following the announcement that it will be joining the S&P 500, alongside Crowdstrike (CRWD, up 7.3%) and GoDaddy (GDDY, up 1.9%).
• Delta Airlines to launch premium economy service: Delta is planning to launch its premium economy service on some transcontinental flights in attempts to boost its revenue which can cost twice as much as standard economy for some flights. The added service will start in September with plans to expand its services later this year

🇸🇬 Singapore related

• Malaysia diesel price hike squeezes Singapore tour operators: Malaysian government announced this week that it will cut most of its diesel subsidies, costing US$853m annually. The retail price of diesel will be set at RM3.35 per litre, a 50% increase from the previous subsidised rate of RM2.15. Singapore tour operators are projected to face a 20-30% reduction in profit margins, prompting at least a 20% increase in prices for new packages and agreements in the coming months