MoneyFitt

😎🐪Happy Wednesday!

US large-cap S&P 500 closed 0.56% UP  Tech-heavy Nasdaq Composite closed 0.49% UP  Pan European STOXX Europe 600 closed 0.75% UP   HK’s Hang Seng Index closed 0.23% DOWN Japan’s Nikkei 225 closed 1.25% UP

📊 IN THE MARKETS

FTX FTT SBF CZ WTF HODLHK goes all-in on CryptoEven TikTok

📝 FOCUS

Foxconn: PCs and Smartphones now, EVs tomorrow

📖   MoneyFitt EXPLAINS

🎓  Stablecoins

📊 IN THE MARKETS

US stock markets traded up during the Congressional midterm elections, with the generally expected outcome of a Republican Congress (House of Representatives and maybe the Senate as well) and Democrat President seen by the market as a good thing, based on historical performance. The argument, which tells you everything you need to know about the morality of markets, is that gridlock in Washington with a divided Congress and President will limit government spending, new taxes and regulations. 

Meanwhile, the reporting season continues, with forecasts from highly-paid Wall Street analysts miles too high at Lyft, Take-Two Interactive and Tripadvisor leading traders to punish the stocks by selling them down 23%, 14% and 17% respectively.

In other news, Foxconn, the world’s biggest contract electronics maker, will invest US$170m in loss-making electric truck maker Lordstown Motors (RIDE). This is part of its push to supply half the world’s EVs. It already has a market share of more than 40% in information and communications technology, so why not? See our guest Focus article below.

FTX FTT SBF CZ WTF HODL 

“FTX is fine. Assets are fine.”

Much confusion in the crypto space with the collapse of high-profile (still?) billionaire Sam Bankman-Fried’s crypto exchange FTX and its rescue by arch-rival Binance. These are (were) the two biggest crypto exchanges in the world. 

A sudden, massive surge in customer withdrawals led to a liquidity crisis that seems to have been originally sparked by Binance itself. The resulting merged entity will, for now, be the largest crypto exchange by some distance. Bankman-Fried has committed to honour assets on the exchange 1:1, but, quite understandably, traders on FTX are worried.

FTX was recently (not today!) valued at US$32 billion with SBF reportedly worth US$24 billion. In further evidence that professional investors are as prone to hype and error as anyone else, and so needn’t be treated with any special reverence, privately held FTX’s shareholder list is quite the who’s who. Blue-chip investors include BlackRock, Canada’s Ontario Teachers’ Pension Plan and (ahem) SoftBank. (Nasdaq-listed exchange Coinbase dropped 11%, bringing its decline this year to 80%, with a market value of US$11.5 bn.)

Down 75% in a day, 92% from its ATH 14 months ago. (Binance’s BNB has only halved from its ATH.)

Industry bellwether Bitcoin fell 12.5% on the day to about US$18k, the lowest since late 2020, taking it to a drop of 62% so far this year and 72% from its all-time high almost exactly 12 months ago.

HK goes All-In on Crypto

Last week, during its 2-day Fintech Week, Hong Kong moved closer towards clear rules under a new licensing regime for retail investors to trade digital assets. This comes after years of ambiguity, despite (or maybe because of) the outright ban levied on crypto trading in mainland China. Industry participants have been seeking proper regulatory status in a major financial centre.

Rival finance hub Singapore, on the other hand, is going the opposite direction, with the Monetary Authority of Singapore (MAS) tightening regulations for retail investors. Various crypto collapses earlier this year revealed many with ties to Singapore, such as hedge fund Three Arrows Capital, lender Hodlnaut and stablecoin 🎓 terraUSD / Terraform Labs. Bad PR for Singapore, hence the increasing focus on institutional markets away from being a hub for trading. Retail investors may no longer be allowed to borrow to invest in crypto and crypto exchanges will be forced to check that all buyers understand the risks.

Even TikTok 

The two biggest headaches (worth hundreds of billions in lost market value) for the social media digital advertising world have been Apple’s iOS privacy settings, which from last year messed up the ability to track users, and the phenomenal rise of TikTok, which soaks up user time (from META and SNAP etc) though it has not yet managed to monetise it successfully. Now TikTok is showing that it is not immune from macro trends either. TikTok in the US is undergoing a major management restructuring in response to weak digital advertising in a slowing economy. Overall, however, US staff numbers have increased over the past year.

One senior US executive is being moved to the new TikTok Shop, where users buy products from videos and live broadcasts, already a very popular feature in Asian markets, and recently launched in the UK. Sister app Douyin (under common parent ByteDance) has seen e-commerce sales triple year on year and could hit US$423bn this year, according to McKinsey.

📝 FOCUS

Foxconn: PCs and Smartphones now, Electric Vehicles tomorrow

Taiwanese companies are well-known for their expertise in semiconductors and electronics. They don’t usually own their own brands as they typically manufacture for big brands such as Apple, Nvidia and HP.

However, there are also many mid and small enterprises with large market shares in the auto industry, making car seats, car interiors, air cons, connectors, heat radiators…etc. Most of these companies do not draw much international attention.

The traditional auto industry has been disrupted by Electric Vehicle companies such as Tesla and Lucid. This has given hope to the Taiwanese players. Taiwanese companies are known to be very efficient producers of consumer technology products and are now waiting on the sideline to jump onto the EV gravy train. They may revolutionise the way cars are being produced, the same way they came to dominate the production of smartphones, notebooks and PCs.

Foxconn (also known as Hon Hai) is making a high-profile entry into the automotive space. They have plans to build EV and EV components in the US, India and Indonesia. The disadvantage of Taiwanese suppliers would be their language barrier and their idiosyncrasies in building electronics rather than cars, but EVs may be more electronics than automotive. This could be the reason why Foxconn is investing up to US$170 million into EV maker Lordstown Motors, to kick-start its EV ambitions.

Our guest writer is a veteran investment manager with over 25 years of Asia and global market experience.

Thank you for spending a few minutes of your time with us. Remember to take time for yourself and be thankful for what you have.

📖 MoneyFitt EXPLAINS:

🎓 Stablecoin

A cryptocurrency which is pegged, or tied, to the value of another currency, commodity or financial instrument that exists in the real world (like the US Dollar or Gold) through a variety of creative mechanisms which may or may not include holding some of the underlying asset.

In theory, these should be stable (obviously) and therefore provide a link between real world money and traded cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) as well as all the other coins (including “sh**coins”) and NFTs etc.

By being stable, they can also operate as a medium of exchange (like a real currency) far better than coins whose values swing wildly on a day to day basis.

Please do your own research – we create educational and entertaining content so you can start the day understanding the financial and business worlds a little better. However, this is NOT financial advice.

MoneyFitt (Spendolater Pte Ltd) is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. The information contained is not intended to be a source of advice or credit analysis with respect to the material presented. Any ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial, tax or legal professional and independently researching and verifying information. Content is intended to be used and must be used for informational purposes only.

MoneyFit Morning Archive (to 07-Nov-22)