Back in the Picture
Investors let out a $58 billion sigh of relief after Alibaba Group founder Jack Ma appeared in public for the first time in months.
His brief comments on philanthropy at a live-streamed event to honor rural teachers sparked an 8.5% share-price rally in the e-commerce giant. Ma had not been seen since late last year when Chinese regulators scuttled the planned $35 billion IPO of his Ant Group.
Then came a sharp reminder that China’s regulatory crackdown on its tech giants is far from over. Shortly after Ma’s appearance allayed concerns about his fate, the central bank announced new plans to curb monopolies among non-bank payment companies. Ant’s Alipay service controls about 55% of the mobile-payments market. Shares in Alibaba, which holds a stake in Ant, fell 2% on Friday.
What’s next? Ma’s appearance is “likely a sign that his relationship with Beijing’s regulatory authorities has stabilized,” said Brock Silvers, managing director at private-equity fund Kaiyuan Capital in Hong Kong. “But Ant Group still looks likely to be dis-aggregated and regulatory restrictions will almost surely take a significant bite out of Ant’s former valuation.”
With Bitcoin’s meteoric rally stalling this year, attention has turn to the alternative digital coin Ethereum. Bitcoin accounts for about two-thirds of cryptocurrency market value, followed by Ethereum at about 13%, according to CoinGecko data.
Reaching a record high earlier this week, Ethereum has outperformed Bitcoin so far in 2021 and analysts have flagged the risk that trend-following investors may jump ship to Ethereum if Bitcoin drops further.
Ethereum’s backers claim it is different from other alt-coin rivals because of its relationship to the Ethereum blockchain. The most-actively used blockchain in the world, Ethereum is used for decentralized finance applications. A planned network upgrade would allow the platform to complete a similar number of transactions as Mastercard Inc. and Visa Inc.
What’s next? Fundstrat Global Advisors is bullish, predicting Ethereum can climb to $10,500 (It’s currently at about $1,200). The cryptocurrency is “the best risk/reward investment play in crypto,” analyst David Grider said, adding that “blockchain computing may be the future of the cloud.” Others aren’t so sure. “Ethereum is much more speculative than Bitcoin,” BI commodity strategist Mike McGlone said, adding there is the chance it “can get lost in the 8,000+ alt coins.”
Covid lockdowns created a banner year for Netflix. The streaming giant reported 8.51 million new subscribers in the final three months of the year, passing the 200 million mark for the first time and boosting its shares to record highs Wednesday. User growth was far better than analysts — or management — had projected.
Netflix also said it would no longer need external financing to fuel its growth. The firm also suggested it will consider stock buybacks. That — and the fact the company thrived in 2020 despite increased competition from the likes of Disney+ — helped ease investors’ fears about its long-term success.
What’s next? “Once feared for its endless cash burn, Netflix has become self-funded and is now turning into a free cash flow story,” said Geetha Ranganathan of Bloomberg Intelligence. “Meanwhile, subscriber momentum continues to be strong and price increases suggest that the service is very compelling value proposition for consumers.”
Spare a thought for first-time homebuyers in the U.K.’s capital. The average home in London climbed above 500,000 pounds ($685,000) for the first time — more than double the national level. That’s despite a pandemic-induced recession and the increasing trend of city dwellers moving out for more space.
There’s not much relief outside the capital either. Buoyed by temporary tax cuts, price growth reached a four-year high in November, with prices 7.6% higher on an annual basis, according to official statistics.
A new tax on foreign buyers that comes into effect in April and the decision to offer special travel documents and a path to citizenship for many Hong Kong residents may also be fueling overseas demand. Meanwhile younger buyers are struggling as banks become less wiling to lend against smaller deposits.
What’s next? “The current robustness of housing-market activity and the strength of prices will prove unsustainable sooner rather than later,” said Howard Archer, chief economic advisor to the EY ITEM Club, pointing to likely rising unemployment and fading pent-up demand. However, with record-low interest rates supporting the market, he’s predicting a dip not a crash.
Traditional inflation hedge gold is back in the spotlight. The yellow metal was given a boost after Joe Biden’s Treasury Secretary nominee Janet Yellen said spending was needed to fight the pandemic, while playing down concern over debt levels. That fueled expectations of a big spending package that some think could boost inflation. Then in a partial reversal, the metal later dipped on better-than-expected U.S. jobs numbers, which could indicate the economy is doing better than feared.
Gold’s cheaper cousin, silver, is also in focus. Global holdings in silver-backed ETFs are at their highest ever, according to Bloomberg data. Silver is also used in solar panels and other industrial applications, meaning it could benefit if industrial output improves.
What’s next? “We expect gold to find a floor at its current level, as the increasing inflationary pressure suggests lower real rates will remain in place,” Australia & New Zealand Banking Group analysts including Daniel Hynes said in a report. “If the U.S. approves more stimulus, the U.S. dollar will remain depressed.”
— With assistance by Coco Liu, and Krystal Chia