June 4, 2023

Notable market news this past week (4-Jun-23)

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

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🇨🇳 Shifting away from Chinese allocations

Intensifying pressure on Beijing to implement policy stimulus to rejuvenate the weakening economic recovery and revive investor confidence

Issues with China: For the past 2 weeks, we've been discussing (i) China's faltering economy w its underwhelming economic performance, (ii) markets being increasingly bearish on China, (iii) heightening geopolitical tensions and (iv) seemingly reluctance on the Chinese govt to deploy large-scale stimulus to boost confidence

Shift away from China: Goldman Sachs' Asia-Pacific asset manager, Stephanie Hui, disclosed that they no longer conduct fundraising in the US, citing North American investors' apprehension regarding investments in Chinese ventures and businesses

Seeking alternatives: Indeed, other Asian stock markets are emerging as more attractive alternatives - As Chinese indices continue to tank, The Kospi index in South Korea came close to entering a bull market, while stock benchmarks in India approached their record highs. Japanese stocks reached their highest level in 3 decades earlier in May

Government to step in?: China announced plan to intro additional measures to boost the property market, following prior unsuccessful policies aimed at reviving the struggling sector.

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📉 SPACs - A lesson learnt from buying into hype

A painful lesson to tread carefully when buying into hype, such as with AI and NVIDA today
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SPAC boom: Between 2020-2021, SPACs became of of Wall Street's hottest trends. It was an easy way for booming tech companies to IPO quickly at a lower cost.

‍Overhyped on hindsight: Bloomberg's analysis reveals that more than 100 companies that underwent SPAC mergers since late 2018 have experienced a drastic decline of >90% in their share prices since going public. Just think of local ride hailing giant Grab, or Adam Neumann's WeWork.‍

Misbehavior?: Multiple lawsuits are now being filed, claiming that investors were misled, with SPAC executives pushing many risky deals to their benefit

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☕️ Quick fire happenings to note

• Finally, a deal: Senate approved legis that suspends the US debt ceiling and imposes spending restraints until 2024 elections, eliminating risk of US default. Consequences of a US default would have been unimaginable. Markets naturally rallied slightly. Nevertheless, this incident highlights the need of long-term structural policies to address the root issue of keeping budget in check, and a potential re-rating if things remain status quo
• Greenwashing: Delta, a self-proclaimed "world's first carbon-neutral airline," is being sued in a class-action lawsuit challenging the validity of this claim. The plaintiffs argue that Delta's carbon offsets, which are used to offset emissions, are of poor quality and misleading. Companies often get a ESG premium on its stock price and this highlights the importance of delving deeper in research.
• News Media Laws: If California passes a law that would mandate tech platforms to compensate publishers, Meta is warning that it might remove news from its social apps in the state, with a similar federal bill awaiting Congress. Could this be a catalyst for traditional media as more states/countries follow suit?
• Metaverse update: Wall Street's enthusiasm for Apple's upcoming mixed reality headset, priced at $3,000, is subdued, while Meta recently revealed a virtual reality product priced at only $500
• SATS update: Announced a decline in net profit for the period ending Mar-23, with a 17% drop vs prev year. Largely attributed to one-off costs assoc w the WFS acquisition. The fall in share price from this news might present an opportune time to buy. Read more here

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