Category: 財務策劃

The Dark Horse: Alibaba

The Dark Horse: Alibaba

Posted on by cheekcheekgi

Chinese Regulators crackdown on Chinese companies 2021

The Chinese government kicked off a sweeping crackdown on its most powerful corporations a year ago, chilling investors and tech industry players alike by signaling that the leeway enjoyed by tech moguls like Jack Ma is coming to an end.

The campaign that started with Ma’s twin giants—Ant Group Co. and Alibaba Group Holding Ltd.—last November soon spread to more companies like Tencent Holdings Ltd.

and Didi Global Inc., as Beijing stepped up oversight on everything from antitrust to data security and wealth redistribution (common prosperity). The crackdown

triggered a selloff that, at its most extreme, erased over US$1.5 trillion from all listed Chinese stocks, which experienced wild swings with every new government probe, rule and warning.

Now at its one-year mark, there are signs that the clampdown may be slowing. But in its wake, the good old days of unfettered growth have given way to a new era where China’s private-sector giants are realigning themselves closer to the Communist Party.

US vs China impact on Chinese global tech companies (losing out on cloud computing and AI in US).

Chinese and American companies are locked in a hard-fought battle for technological primacy.

It has been a tough year for Chinese Tech companies in 2021, in particular “Alibaba”, it is down over 39% Year to Date (YTD) and a whopping 56.3% from all-time highs set back in 2020. Alibaba has lost over US$344 billion in market cap in 2021 (according to Bloomberg article). See data below:

If we compare AliCloud with other global competitiors such as Amazon’s AWS, Microsft’s Enterprise and Google cloud etc. Alibaba is currently ranked 5th in terms of market share in Cloud Computing in the world.

However, in China alone. AliCloud currently has the largest market share in China approx. over 40% of market share. With Huawei ranked 2nd (20%) and Tencent 3rd (14%)

Singles Day > Black Friday
  • Alibaba said that total gross merchandise volume (GMV) reached 540.3 billion yuan (US$84.5 billion) through the first 11 days of November, culminating in the holiday on Thursday. That’s an increase of 8.5% from a year ago
  • “Alibaba (BABA) launched the first Singles Day Shopping Festival on November 11, 2009. The event, which is also known as Double 11, is pegged to China’s informal, anti-Valentine’s Day holiday that celebrates people who aren’t in relationships. The date — 11.11 — was chosen because it is written as four ones, or singles.”
Artificial Intelligence
  • Rated 5th largest AI company in the world 2020
Cloud Business
  • AliCloud history
  • Based on the Business Model of Amazon’s Cloud – Amazon Web Service (AWS) Cloud
  • During 2020 Tokyo Olympics, the streaming was done primarily by AliCloud
  • Currently contributes over 8% of Alibaba’s total sales revenue and we project this to increase even further.

Is Alibaba a Dark Horse Company or Not?

Alibaba Group Holding Ltd. (BABA) is a holding company legally domiciled in the Cayman Islands but which conducts its e-commerce businesses through its Chinese subsidiaries and variable interest entities (VIEs). Its primary business is to offer a digital marketplace where consumers and merchants can connect and buy and sell from each other. Alibaba operates its business through four primary segments, led by its giant e-commerce operations.

Chief among its competitors are other established Chinese e-commerce and Internet companies, such as Tencent Holdings Ltd., as well as global and regional e-commerce companies, such as Amazon.com Inc. (AMZN). Since Alibaba also operates in the cloud-computing business and digital-media and digital-entertainment businesses, it competes with companies specializing in those markets as well.

However, Alibaba stock heads for lowest close since October 2019 amid pressure on China’s tech sector. Shares of Alibaba BABA, -2.25% were down 4.7% in Tuesday trading and on track for their lowest close since Oct. 24, 2019.

If the losses hold through the close, it would mark the first time that Alibaba shares closed below their pandemic low of $176.34 from March 23, 2020, according to Dow Jones Market Data.

Alibaba Cloud provides enterprise customers with a complete suite of cloud services, including database, storage, management and application services, big data analytics, a machine-learning platform, and other services.The company’s cloud computing segment generates revenue from enterprise customers based on the duration and specific usage of the services.

Cloud computing is Alibaba’s second-largest source of revenue at $2.5 billion, or about 8% of total revenue, as of Q1 FY 2022. Revenue for the segment grew 29.1% compared to the year-ago quarter.

Alibaba reported adjusted EBITA of $53 million for its cloud computing segment in Q1 FY 2022, compared to a loss in adjusted EBITA in the year-ago quarter. The cloud computing segment makes up less than 1% of overall adjusted EBITA.

More reasons:

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  1. Alibaba buy back US$15b announced Q1/2? – “Alibaba Group said on Tuesday it has upsized its share repurchase program to US$15 billion from US$10 billion through 2022, the largest in the tech giant’s history demonstrating confidence in its long-term sustainable development and value creation.”
  2. Then a 97 years old legendary investor Charlies Munger (well known for Warren Buffett’s long time business partner) double down on investment to Alibaba. Munger boosted its long position in Alibaba by over 80% during Q3 of 2021, to over 302,000 shares
  3. Another one, Tom Hayes, chairman and managing member of Great Hill Capital quotes “For starters, successful people do what unsuccessful people won’t. He’s willing to take some short-term pain for long-term gain. Not on the basis of wishing or hoping, but on the basis of facts and data,”
  1. On the recent Q3 announcements, revenue increased over 29% year on year plus active users increased to over 1.2billions users?
  2. Lastly, this 2021 Singles Day break new record high!

History

  • In a recent CNBC interview by Joseph Tsai (co-founder of Alibaba along with Jack Ma) talks about how he first Jack Ma and how it all began…bunch of nerds using handwritten notes to record users and a very confident Chinese guy who was a former English Teacher and translators from Han Zhou…
  • One of the 1st question Joe Tsai asked Jack was, where is Alibaba incorporated. He replies, “what does that even mean…” Joe reiterate by asking, where is the company registered. Jack replies, “this is the company, what you see now”.
  • With the support of SoftBank Group (majority shareholder), Alibaba became the largest IPO in the world on September 2014, raised approximately US$25 billion…In fact the top 3 largest IPOs ever in the world are all Chinese companies. They are 1) Alibaba 2) Agriculture Bank of China and 3) Industrial and Commercial Bank of China.

Is Alipay better than PayPal?

A key difference is Paypal also charges for foreign (cross border) FX exchange fees whereas Alipay only charges a transaction fee. Another key difference is Paypal assists the wire of funds between users’-bank accounts, but Alipay qualifies and then moves funds between buyer-and-merchant-Alipay accounts.

Ant’s IPO puts the company’s valuation at dizzying heights. At about $315 billion, Ant is worth more than the gross domestic products of Egypt, Chile or Finland. For corporate comparisons, it’s bigger than JPMorgan Chase & Co., the biggest U.S. bank. Ant is larger than payment rival Paypal Holdings Inc., media giant Walt Disney Co. and dwarfs Bank of America Corp. It’s three times bigger than tech giant IBM Corp. and four times larger than Goldman Sachs Group Inc.

Note: Ant Group is not merely an online payment system like PayPal or Wepay.

Ant Group has also over US$173B Assets Under Management, Micro-Lending of over US$290B and Insurance division of approx. US$1b in annual premiums and contributions

Quick comparison between Ant Group and PayPal:

Transaction volumes:

Total Revenue and Fees per transactions:

  • Although Ant and PayPal’s revenue are very similar at approx. US$17b to $18b
  • The amount of transaction volume by Ant is almost 23 times more than PayPal’s
  • Ant charges approx. 0.11% per transaction whereas PayPal at over 2.50%…
  • This means Ant could easily increase its overall revenue by raising its per transaction fee basis points.

What do we expect in the FUTURE for Alibaba?

  1. RMB/CNY transactions
Note, Alibaba’s main customer are based in China and all transactions are in RMB. Currently RMB is not open to public and the currency is constantly controlled by the People’s Bank of China. If in the next decade, we foresee that China will increase its opening of its RMB currency. We shall see potentially the currency will appreciate relative to USD and this may improve the financial performance of Alibaba as a company based in China.
  1. Future of China

    ( GDP, Technology, Population, RMB digital currency using blockchain technology backed by People’s bank of China)
  1. “Two payment services—Ant Group Co.’s Alipay and the pay function within Tencent Holdings Ltd. ’s WeChat app—have already transformed urban China into a seemingly cashless society in which the convenience of digital financial technology has largely neutralized worries about digital payments being inherently trackable.”

Referring the JP Morgan’s Guide to the Market, it is forecast that by 2030, China’s GDP will exceed US overall HDP and China would contribute approx. 31% of total world’s GDP growth. This means in 9 years time we may witness China’s economy covering over 1/3 of world’s economy!!!

If you want to learn more about investing in the China market and not sure where to begin, please contact me to discuss further.

聯絡我們

Disclaimer: This publication contains the opinions and ideas of its authors. It is not a recommendation to purchase or sell the securities of any of the companies or investments herein discussed.

Neither the authors nor the publisher can guarantee the accuracy of the information contained herein. The authors and publisher specifically disclaim any responsibility for any liability, loss, or risk, professional or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this article.

Sources:

https://www.youtube.com/watch?v=KveMLJNhwkc

https://www.cnbc.com/2021/06/15/cnbc-exclusive-cnbc-transcript-alibaba-co-founder-executive-vice-chairman-brooklyn-nets-owner-joe-tsai-speaks-with-cnbcs-squawk-box-today.html

https://www.barrons.com/articles/charlie-munger-alibaba-stock-51633627243

https://www.marketwatch.com/story/theres-a-lesson-from-charlie-mungers-increased-bet-on-alibaba-11633689533

https://www.fool.com/investing/2021/10/07/charlie-munger-just-doubled-down-on-alibaba/

https://www.alizila.com/alibaba-boosts-share-buyback-to-us15b-q1-revenue-surges-34-yoy-powered-by-multiple-growth-engines/

https://edition.cnn.com/2021/11/10/business/china-singles-day-intl-hnk/index.html

https://seekingalpha.com/article/4321013-alibaba-swot-analysis

https://www.bloombergquint.com/global-economics/ant-ipo-by-the-numbers-bigger-than-finland-s-gdp-lucky-eights

https://www.bloomberg.com/news/articles/2020-12-27/china-asks-ant-to-return-to-origin-of-payments-service

https://www.wsj.com/articles/chinas-digital-currency-challenge-winning-hearts-and-minds-11638441000

“Bubble Burst leading to Financial Tsunami” or The Big Short 2?

“Bubble Burst leading to Financial Tsunami” or The Big Short 2?

Posted on by cheekcheekgi

The central bank has been referred to as the “lender of last resort,” which implies it is giving away free money to those “Too Big to Fail” companies that require an immediate boost of funding to prevent from collapsing. To put it another way, the central bank keeps the country’s banking system from collapsing.

However, the fundamental purpose of central banks is to use monetary policy to manage inflation and provide stability for their countries’ currencies. A central bank is also the sole provider and printer of notes and coins in circulation, as well as the regulatory authority over a country’s monetary policy.

Sadly in 2008, the Great Financial Crisis (GFC) happened when American real estate market collapsed from the Subprime Mortgage Bonds and Securitization.

So, what happened during the Great Financial Crisis?

Bear Sterns was bought out by JPMorgan Chase, AIG was bailed out by the Federal Reserve and Lehman Brothers was announced close of business…The crisis not only showed severed economic uncertainty within US economy but rapidly spread into a global economic shock, resulting in a collapse of the global financial system.

In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in the US as a response to the crisis to “promote the financial stability of the United States. A new capital and liquidity standard called Basel III was introduced to increase lower risk-weighted assets to be adopted by financial institutions around the world. To further increase the confidence in the market and stimulate the economy, the central bank artificially lowered the interest rates. This has much higher risk in borrowing and lower returns for savers in the economy. The interest rate has been that low, practically zero, for past 13 years, beginning in 2008.

What happens when interest rates continue to decrease?

Lowering rates makes borrowing money cheaper. This encourage consumers and businesses to continue spend and investment and boost overall asset prices. Lowering rates, however, can also lead to problems such as inflation and liquidity traps, which undermine the effectiveness of low rates.

And now, as inflation rises and we fear hyperinflation, just because we issued money, their currency surged in value, making paper money value worth “less”.

Earlier this year, US President Joe Biden signed a massive Covid-19 stimulus bill into law this year touting provisions that will put money into the pockets of millions of Americans.

But the bill is more than stimulus payments and jobless benefits. It also includes a litany of programs: health insurance subsidies, a cash-for-kids allowance to slash child poverty, state, and local aid (which can’t be used to cut taxes) and money for schools, restaurants, pensions, homeowners, renters, farmers and funerals.

However, an analysis of how the fiscal package would affect the overall economy is instructive, although subject to a great deal of uncertainty. In all, with the $1.9 trillion package, government project that cumulative real GDP between 2020 and 2023 would end up close to its pre-pandemic projection; over the next two years households and businesses would make up some of the economic activity foregone during the pandemic.

By late 2021, it would likely see the economy operating above its maximum sustainable level. That positive output gap would likely put upward pressure on inflation, which the Federal Reserve has said would be welcome. A risk worth noting is that the return of GDP back to its maximum sustainable level may create a difficult economic period after 2021.

So, from all these things, all these factors contribute to the economy in America has affected the whole world with inflation.

To be able to control this, the central bank tightened monetary policy, which essentially implies that the central bank must stop producing money and begin rising interest rates.

Predictions by Michael Burry – The Big Short 2:

A well known investor named Michael Burry from the blockbuster movie called “The Big Short named” – he is an American investor, physician, and hedge fund manager.

Michael Burry made his name during the financial crisis of 2008 by making shorting the subprime mortgage bonds suing credit default swaps and made huge profits during a time when most of his peers suffered heavily.

He made over US$750 million in profits for his investors and approx. US$100 million personally when his bet against subprime mortgages paid off in 2007 and 2008. He was portrayed by Christian Bale in the movie adaptation of Michael Lewis’ book.

Now, Michael Burry is making a move again for another prediction of potential investment opportunity for those who follow closely. He expects the post-pandemic economic recovery and another round of stimulus to drive up prices…

“Prepare for #inflation,” Burry said in a now-deleted tweet: “Re-opening & stimulus on the way. Pre-COVID it took $3 debt to create $1 GDP, and it is worse now. In an inflationary crisis, governments will move to squash competitors in the currency arena. $BTC #gold.”

Burry highlighted passages from the book about the recurrence of inflation throughout history, how it’s usually preceded by an economic boom and a spike in overnight fortunes, and how it leads to soaring crime, surging living costs, and poverty.

The investor compared Germany’s path to hyperinflation in the 1920s to America’s current trajectory.

“Germany [the US] started by not paying adequately for its war [on COVID and the GFC fallout] out of the sacrifices of its people – taxes – but covered its deficits with war loans [Treasuries] and issues of new paper Reichsmarks [dollars]. ‘ #doomedtorepeat,” Burry tweeted.

He added “#History is not useless,” he said in another tweet. “This text explores the 1970s American #inflation, which is more relevant today than one might think.”

(Reference: https://markets.businessinsider.com/).

So, what’s the relevance of this? How should you prepare for another potential upcoming catastrophic financial crisis. If you wish to understand this crisis and better prepare your overall investment portfolio. Please contact me now for a quick 1 to 1 free consultation!

Contact me for more details!
Upcoming Inflation Tsunami shaken by the US economy

Upcoming Inflation Tsunami shaken by the US economy

Posted on by cheekcheekgi

In economics, Inflation means that there is a general increase in prices. It is one of the driving forces in an economy, because inflation means a rise in the price consistently. It’s a good thing for business owners because they make a better profit, but if the consumer doesn’t have inflation in their wages or salary, that’s also not a good thing.

Meaning to say, inflation has a good and bad effect in the economy.

However, if inflation gets out of control, that becomes dangerous. For example, in 1923 in Germany during the First World War, the exchange rate of the mark against the US dollar steadily devalued from 4.2 to 7.9 marks per dollar, a preliminary warning to the extreme postwar inflation. The debt problem was exacerbated by printing money without any economic resources to back it.

Germany began to buy foreign currency with marks at any price, but that only increased the speed of the collapse in value of the mark.

Same in 1973 in the United States, the first casualty of the Nixon shock was the gold standard. The U.S. would no longer redeem dollars for gold, and the price of the precious metal fell 28% within days, dropping to $35 an ounce by February 1975. The press had a field day with puns like ‘Nixon breaks with gold’ and ‘Nixon shocks the gold market’.
What’s the lesson here
US dollar is similar with what happened in Germany. Because US dollar now has no backing of any gold standard and up until now US bank has continuously printing too much money.
What is the US market at now?

As of 30 Nov 2021, the S& P 500 index tracks the top 500 stocks in the US stock market and the NASDAQ Composite, which tracks the top technology companies in the US. Both are currently at an all time high! When we talk about inflation, capital assets are not included in the “baskets of good” that is calculated. Therefore, how can rely on the current inflation rate reflect the impact on capital assets such as stock prices?

Gold Price is almost at an all time high too (US1,846.02/ounce). More importantly, Gold has always been a good indicator for upcoming financial crisis, e.g. referring back to 2007-2008 Global Financial Crisis (GFC), we can see a rapid increase in gold price from approx. US$800/ounce to over US$1,800/ounce). If inflation continues to rise and a depreciation in value of US dollar will impact rise in Gold price.

Above diagram shows the global inflation rate displayed in different colors. This is obtained from the quarterly (Q3) JP Morgan Guide to the Markets. The darker the red color the higher inflation rate (above trend) and blue colour shows lower inflation rate (below trend). In 2021, if we compare the inflation rate between the US and China, as highlighted in red box, US inflation since July has been at around 5.4% (above trend) whereas China’s is at around 1.0% (below trend)

Inflation rate has been rapidly rising for the past few months in the US, in October 2021 the US inflation rate jumps to a 31 year high at 6.2%! This is becoming alarming if inflation continues to rise uncontrollably at this level, because the target inflation rate by the Federal Reserve is only around 2-3%.   What does this mean to you?

How can you counter future inflation risk?

If you would like to learn how to counter this inflation risk and take advantage of your investments.

Contact me now at ryan.mow@convoy.com.hk

Why Australia is the hidden Gold Mine of the world?

Why Australia is the hidden Gold Mine of the world?

Posted on by cheekcheekgi

Why Australia is the hidden Gold Mine of the world?

Australia comprises a land area of about 7.692 million square kilometers and is the smallest of the world’s continents. Yet, Australia’s natural wonders and its rich history make it one of the MOST beautiful and diverse countries in the world. Australia is one of the wealthiest countries in the world; it is a country rich in natural resources. Its natural resources are mainly agricultural, mining, and energy include gold, coal, iron ore, copper, silver, uranium, and nickel. These minerals are vital for our everyday lives as they help to power homes with electricity and manufacture products that we use every day like mobile phones and cars. It is also known for its abundant oil, natural gas, and renewable energy sources.
In 1851, the Australian Gold Rush started when gold was first discovered in New South Wales, Australia, and just four years later, the country had already produced 1.5 million ounces of gold worth approx. AUD$29 million. In modern terms, that’s about AUD$15 billion or HK$90 billion. In 1858, there were 154 active mines in Australia, and by 1867, this number had risen to 963. It was the peak of production for gold mining in the nation, and it continued into the 20th century and beyond.
According to an article published in the “Australian Financial Review,” the total worth of Australia’s gold rush is approximately USD $5.3 trillion.

this estimate does not include the value of precious metals that have yet to be mined, nor does it include minerals currently being exploited.
In 2021, Australia became the biggest gold producer in the world, overtaking China for the first time. This abundance has given rise to an active mining industry that exports a variety of minerals to other countries worldwide. The mining activity injects money into the Australian economy as well as making it one of the leading producers of many natural resources.
Australia is also the leader in exporting iron ore to the rest of the world. As shown in the graph above, as of 2020, Australia contributes 56% of the total iron ore distribution in the world. The major iron ore export markets for Australia include Japan (36%), South Korea (27%),
and China (20%).
In 2021, Australia became the biggest gold producer in the world, overtaking China for the first time. This abundance has given rise to an active mining industry that exports a variety of minerals to other countries worldwide. The mining activity injects money into the Australian economy as well as making it one of the leading producers of many natural resources.

Now, how to invest in Australia’s natural resources?

Some of the world’s largest mining companies come from Australia. We are talking about BHP, Rio Tino, Fortescue Metals Group etc. They produce iron ore, coal, petroleum, copper, natural gas, nickel, and uranium, etc.

I’d like to discuss with you this in detail. If you are interested in learning more about how investing in Australia’s natural resources could benefit you or learning more about doing business with Australia, contact me today!

Sources:
https://insiderguides.com.au/brief-guide-history-australia/ https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/australia-to-continue-to-supply-most-of-china-8217-s-iron-ore-despite-trade-tensions-59208917 https://www.statista.com/statistics/300328/top-exporting-countries-of-iron-ore/ https://www.tradingview.com/screener/ https://www.rba.gov.au/qa/gold-holding.html https://www.dmp.wa.gov.au/Investors/Gold-1480.aspx