June 25, 2023

Notable market news this past week (25-Jun-23)

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

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🇺🇸🇮🇳 Deepening US-India collaboration to reduce dependency on China

A lack of investment into infrastructure and education had always been a key stumbling block for India. Yet, today, we see substantial growth and investment opportunity amidst growing US-China geopolitical tensions

Modi's visit to the US: In a bid to strengthen US-India r/s as a counterbalance to China and to support India's ambitions in the tech sector, Indian PM Narendra Modi embarked on a high-profile visit to the US

Expanding ties:

• ‍Modi and Biden unveiled a collection of defense and commercial agreements, including collaborative initiative between GE and India to manufacture F414 engines for Indian fighter jets (note: a big step towards trust/collab as this would involve sharing of military tech)
• Modi met with Elon Musk, who said Tesla is likely to make significant investments into India. More details here ‍

Watch out for India: With mounting apprehensions towards China, the US increasingly views India as a compelling substitute in terms of supply chains, innovation hubs, and JVs. This event further signal future deals/reforms in trade policies, tech transfer, and investment barriers.

A lesson from the Adani saga: Nevertheless, the Adani saga taught us that Indian equities might still be plagued with corporate governance issues and overly optimistic sentiments.

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🇺🇸🇨🇳 US-China relations continue to strain

Straining US-China relations causing a drag in Chinese stock markets
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A dictator: During a Democratic Party donors reception, US President Joe Biden made a comparison between Chinese President Xi Jinping and "dictators," expressing his views to journalists. This undermines US Secretary of State Antony Blinken's efforts during his visit to Beijing, which Xi Jinping issued rare praise for, saying it was "very good"

China's response: China responded by calling the remark a serious violation of “China’s political dignity”, an “open political provocation” and "extremely absurd and irresponsible"

Definitely does not help with investor sentiments surrounding China, especially with news recent pertaining India. This is likely the reason behind the slight drop across Chinese equity indices in the past few days.

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🇷🇺 What's going on in Russia?

A challenge to Putin's authority and the Russian state's foundation, indicating the fragility of the regime
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Background: In the past day, Yevgeniy Prigozhin (a powerful mercenary military leader), the leader of the Wagner Group, turned against the Russian Ministry of Defense. They captured Rostov-on-Don, and headed towards Moscow. However, a resolution was reached through Belarusian President Alyaksandr Lukashenka, leading to the Kremlin dropping its charges against Prigozhin. As part of the agreement, Prigozhin agreed to withdraw his fighters and relocate to Belarus.

Discontent: Swift capture of Rostov-on-Don suggests discontent at the Russian periphery with the Kremlin's war handling

Russia's warfighting capabilities: This will undermine Russia's warfighting capabilities in Ukraine, just as Kyiv is ramping up its counteroffensive

Putin's hold on power: This is a challenge to Putin's authority and the Russian state's foundations, indicating the fragility of the regime. However, there is still a lack of coherent opposition within Moscow and claims of Putin's downfall are grossly exaggerated

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☕️ Quick fire happenings to note

• Crypto: Following lawsuits by US regulators against crypto exchanges, trading volume, worth billions of dollars, has shifted to Asia. Investors and marketplaces are increasingly turning to countries like Singapore, Japan, and South Korea, and more recently, Hong Kong, which recently implemented a new regulatory framework for cryptocurrencies.
• Tech layoffs: Grab is cutting 11% of its workforce. Share price went up by 4.7% premarket after CEO's announcement. Should not come as a surprise given (i) Grab's persisting losses and (ii) no big recent layoffs (last one was 360 jobs in 2020 due to covid-19) vs tech peers such as Sea
• Fixed deposits interest rates decline: Singapore's fixed deposits have seen a sharp increase, rising to S$858b in Apr-23 from S$543b in May-22. Yet, economic slowdown has resulted in reduced loan demand from banks. Thus, banks may find less need to offer high interest rates to entice deposits. For now, alternative risk-free options like T-bills and money market funds remain more attractive.

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