Novum Alpha - Daily Analysis 25 August 2021 (10-Minute Read)
U.S. stocks and futures are steady ahead of a key conclave of central bankers and the movers-and-shakers in the world of finance, otherwise known as Jackson Hole, the American cousin of Europe's Davos.
|
Wonderful Wednesday to you as stocks moving into the midweek hump, not quite charging and not quite sinking either (which is a relief!).
In brief (TL:DR)
|
In today's issue...
|
Market OverviewU.S. stocks and futures are steady ahead of a key conclave of central bankers and the movers-and-shakers in the world of finance, otherwise known as Jackson Hole, the American cousin of Europe's Davos.
Against that backdrop, an initial rebound in Chinese tech shares has since lost steam as investors come to the realization that a good quarter for one e-commerce firm does not an industry save.
Asian stocks were a mixed bag, as investors await policy guidance from Jackson Hole with Tokyo's Nikkei 225 (+0.14%) and Sydney’s ASX 200 (+0.19%) higher while Hong Kong's Hang Seng (-0.55%) and Seoul's Kospi Index (-0.24%) were lower on Wednesday's morning trading session.
|
Did you miss us at VC Headstart 2021 by Wholesale Investor?
|
|
|
 |
1. Chinese Tech Rebounds on Earnings, Time to Buy?
There’s no stopping the march of e-commerce, not even if you’re the omnipotent Chinese Communist Party.
Or so it would seem, as a strong set of quarterly earnings from e-commerce group JD.com (+5.07%) helped to assuage investor concerns over Beijing’s purge of its tech sector.
Yet investors wondering if now would be a good time to wade back into Chinese waters again must consider that the earnings reflected by JD.com are from the last quarter, before two significant things started happening, a slowing in Chinese consumption and Beijing’s purge.
The key quarter for e-commerce companies and tech companies in general in China will be the one that we’re in as of right now and not the one that we left behind.
While Alibaba Group Holdings (-0.48%) drew most of the flak, JD.com was busy minting money off its competitor's misery, but e-commerce does not an entire tech sector make, and Beijing has had its knives out for some time.
From questions over how customer data is treated, to a crackdown on China’s tech monopolies, a good quarter of earnings hardly means that the heat is off of China’s (till recently) lucrative tech sector.
Beijing is continuing to crackdown on sectors from education to gaming, recently restricting the time that younger Chinese gamers can play games and causing an almost instantaneous 10% fall in Tencent (+1.69%), which owns many popular gaming titles.
Nonetheless, investors were back out in full force on Tuesday, soaking up the shares of Chinese tech companies from delivery platforms to Tencent and Alibaba Group Holdings.
Even Ark Investment Management, which had been dumping Chinese tech stocks had repurchased shares in JD.com, punch drunk off the bullish sentiment.
But it’s not as if JD.com’s results were unassailable – take for instance the precipitous plunge in net income, from US$2.53 billion to US$115.78 million, which the e-commerce firm attributed to higher marketing spend.
JD.com has also gained from a Chinese ban on vendors selling on multiple platforms, which led to an influx of sellers dedicating efforts on the e-commerce site.
Some Chinese sellers were also wary over Beijing’s crackdown on Alibaba and shifted to JD.com as well.
But what is sauce for the goose in this case, isn’t sauce for the gander.
And just because JD.com has benefited from these circumstances, doesn’t mean that the fundamental challenge for Chinese tech stocks from Beijing has dissipated.
If nothing else, it looks as though Chinese authorities are just getting started, in which case investors either need to be very discerning in their purchase of Chinese tech shares, or have a strong constitution for the volatility that is almost inevitable.
|
Did you miss us at the Super Crypto Conference 2021? Watch it here...
|
|
|
 |
2. Playing for all the Chips
In March this year, Intel’s announcement that it would be spending US$20 billion in new U.S. chipmaking plants was heralded as a major coup for the company that was doubling down on Making Chips American Again.
But Intel’s investment looks like pocket change when measured alongside Samsung’s plan to increase investments in chip manufacturing by US$205 billion over the next three years.
Part of Samsung’s renewed push to double down on sectors that it has gained an edge in over the last decade has been the release from prison of Lee Jae-yong, Samsung’s de facto leader, earlier this month.
Some suggest that Samsung (+0.13%) was hamstrung in charting bold courses as Lee was behind bars, delaying investments while competitors from Taiwan Semiconductor Manufacturing Company (+2.27%) and Intel (+1.09%) forged ahead.
With the global shortage of chips showing no signs of abating, and as governments increasingly view chip manufacturing as a strategic industry, the U.S. and China are in a heated race to gain an edge.
Some 80% of the world’s chips are manufactured in Northeast Asia, with the bulk of that production between two major contract chipmakers, Samsung Electronics and TSMC.
While the Biden administration has unveiled an ambitious US$52 billion plan to spend more on chipmaking research and support American companies to onshore chip manufacture, decades of leaving it to Intel to do it alone has put a toll on the semiconductor industry.
Given the geopolitical tension and close proximity with China, some chipmakers are considering setting up foundries in the U.S., with Samsung said to be considering sites in Texas, New York and Arizona since earlier this year.
TSMC already has a US$3 billion chipmaking facility in Nanjing, China, but the firm looks set to increase production in the U.S. and Japan as well, pledging to spend US$100 billion.
As competition in the chipmaking business heats up, Intel will continue to come under pressure, especially given its far smaller war chest, and continued difficulties in manufacturing chips to the 7 nm process, while competitors at TSMC and Samsung have both already achieved 5 nm chips.
An “nm” refers to the length of a transistor gate, the smaller the gate, the more processing power can be packed into a given space.
The Return of the King has given the world’s biggest maker of memory chips and a giant in the global chip-foundry business renewed confidence and Samsung looks set to push ahead even more strongly than competitors, which could spell trouble for the likes of Intel, regardless of its “Made in America” branding.
|
 |
3. This NFT Cost US$150,000
As one of the world’s biggest payment processing networks in the world, Visa (+0.043%) has maintained a relatively open approach towards cryptocurrencies, teaming up with Facebook’s abortive Libra (now Diem) cryptocurrency project initially, before branching off to do its own thing.
And in a show of support for a burgeoning area of investment in the cryptocurrency space, Visa has purchased an NFT or non-fungible token for some US$150,000 in Ether.
CryptoPunk #7610, one of a slate of digital avatars originally distributed free to anyone with an Ethereum wallet, was bought by Visa last week with 49.5 Ether.
Speaking with Bloomberg, Visa’s cryptocurrency lead Cuy Sheffield said the company wanted to “signal (its) support” for people involved in the NFT market, adding,
“We think NFTs will play an important role in the future of retail, social media, entertainment and commerce.”
NFTs have grown in popularity in fits and starts since the US$69.3 million sale of Beeple’s “The First 5000 Days at a Christie’s auction.
NFT transaction volume surged on a speculative wave as investors bought into all manner of NFTs earlier this year, but volumes thinned out when Bitcoin crashed to less than half its value after hitting an all-time-high or around US$64,000 in April this year.
Visa is said to be working with Anchorage Digital Bank, a federally chartered digital asset institution, which sold the CryptoPunk to Visa on behalf of a third party seller.
CryptoPunk #7610 is one of only 696 CryptoPunks with “hot lipstick,” the bright-red lip color for which makes it somewhat unique.
For the uninitiated though, NFTs are not “unique” in the traditional sense, being digital, they can be copied.
In fact, you could save the image of CryptoPunk #7610 in this email if that floats your boat, but you wouldn’t technically own it.
While the digital image of the avatar is infinitely replicable, the ownership of an NFT is tied to a specific Ethereum wallet address, meaning that a search on the blockchain will demonstrate that it is a wallet which Visa owns and controls that is tagged to the image.
Although the concept of NFTs has been challenging for those in the art world to wrap their heads around, it hasn’t stopped rampant speculation.
In June, an avatar created in 2017 by Larva Labs and given away for free was sold by Sotheby’s for US$11.8 million and even the cheapest CryptoPunk is listed for around 67.67 Ether or around US$215,000 at the time of writing.
NFTs are just one of the latest innovations from the Ethereum blockchain, but are still highly speculative and untested.
Buying an NFT, an owner owns the certificate of authenticity, backed up by the blockchain of that NFT, but it’s unclear if the rights to the image are owned by the holder of the NFT, which can be replicated digitally and infinitely.
|
Interested to find out more about NFTs?
|
|
|
 |
What can Digital Assets do for you?Novum Alpha is proud to announce the launch of our flagship Novum Alpha Global Opportunity Digital Asset Fund ("the Fund"), a capital growth fund that offers a regulated and familiar investment vehicle for accredited and institutional investors to participate in the digital asset universe.
With almost a decade trading both digital assets and financial instruments, the Fund represents a blend of our best quantitative strategies melded with a discretionary overlay that provides investors with the most comprehensive and holistic approach to digital assets on the market today.
If this is something of interest to you, or if you'd like to know how digital assets can fundamentally improve your portfolio, please feel free to reach out to me by clicking here.
|
 |
|
Looking to trade cryptocurrency yourself? Then why not try CryptoHero, a member of the Novum Group.
Enjoy some of the high performing algorithms that Novum Alpha uses, absolutely free!
Because you can't be up 24 hours trading cryptocurrency markets, CryptoHero's free bots do the trading for you.
Simple and intuitive for crypto beginners to set up and run, CryptoHero is currently available on the Web, iOS and Android.
|
|
Aug 25, 2021