Tag: Investing

One thing that might happen after additional US tariff is a weaker RMB, which can make Chinese export more appealing.

This may diver export from US to other counties, which gives pressure to producers globally.

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What to do if you have rmb?

– buy houses in China

especially given that rmb borrowing rate is low, and housing prices have declined for 3 years, if you have confidence in chinese macro, buying a property in good locations is not a bad choice.

– buy overseas companies that are making money overseas

then the earnings power is not priced in rmb, and the value of the company should be rather uncorrelated to rmb.

 

If people still remember what happened 4 years ago..

For the past 5 years,

Regeneron has outperformed its $IBB peers (except for Moderna, which is an outlier) by a wide margin.

Eli Lilly has outperformed its $PPH peers by a wide margin.

The two companies are now ranked the No.1 weight in $IBB and $PPH respectively.

 

Trump won’t be banning Tiktok in the US, if there is a divestment or other sorts of legal structure change, as he indicated earlier this year. And he has set up an official account on TikTok.

Trump’s main argument is to create competition for Meta, which could be bad for the company (people’s time spent, ads dollar, and tech talents).

Back in 2021, Trump accounts were banned on Facebook and Instagram; the ban was later lifted in 2023 after 2 years, but with “new guardrails”.

Meta said to removed those restriction last week.

On the other side, besides the support for TikTok US, Republican is trying to acquire the stake in TikTok US. Steven Mnuchin is leading a potential buyer group. He served as US Treasury Secretary from 2017 to 2021 for Trump.

Liberty Strategic Capital, is led by Steven Mnuchin, and is invested by SoftBank, which holds a stake in ByteDance.

In short, Meta could be getting a permanent and potent/aggressive competitor in the US.

Earlier this year, Biden has signed a law that would ban Chinese-owned TikTok unless it is sold within a year. The deadline would be January 19, 2025, 1 day before the next US presidential term.

Plus, read this..

Politics matters I guess.

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I believe in good people.

Where is alpha = where are the good people? + Can they achieve their best with the right culture?

The second the part is equivalently important. Can companies keep their talents? And when two companies both have top talents, one may do better over the other in the long run.

Culture includes many things, like process, organizational structure, physical environment, incentives etc.

Overtime, a company with the best talents can decay.

Overtime, even a company didn’t start with the best people, it can develop their people, and attract the best people over time, if the culture is right.

Over the weekend, Mideo Real Estate announced a spin-off for its property developer business (PD&S) as a private enterprise; minority shareholders can receive HKD 5.9 per share in cash for each share of HK.3990.

The listed co traded at HKD 3.75 per share last Friday. So the cash payout is 57% more than the share price. The remaining listed co will focus on property management etc.

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Is this applicable to many other developers and thus putting a floor?

I doubt it.

3990 is relatively small and controlling shareholder has over 80%. The max cash payout needed is ~1.6bn HKD, or $205mn – this is a small amount and can bed easily handled

Midea Group (a major electrical appliance manufacturer in China) itself is strong and cash-generating, with 33.7 billion rmb profit in 2023. The founder, He Xiangjian, has ~29.6% ownership of Midea Group.

Midea Group is paying over 20bn rmb in cash dividend in 2023. He Xiangjian can get ~6bn rmb, more than enough for the 1.6bn HKD payment calculated in above.

Even there is a price, that’s around 0.33x p/b.

And when 3990 stock was trading at HKD 3.75 per share, it’s at around 0.2x p/b,

This is hilarious.

Yes.. we hate biotech this much.

Anyone who bought biotech during covid is just speculative lol.

As 5-year return is 24%, annualized return is just 4.4%!

Buy US treasury instead!

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Disclaimer: The above is for fun and should not be taken seriously. It is intended as sarcasm.

Before getting into financials, some may ask the question of “why bother”?

My thoughts below:

 

1/ These companies are customers of other global companies. 

e.g. gaming companies or PDD shall purchase ads on Meta & Google

e.g. internet companies shall purchase general server chips like Intel, AMD.

 

2/ These companies serve a market that US firms are not directly serving

Debatable. But the current reality is that Chinese internet space is mostly Chinese companies.

 

3/ Sanctions?

I view it less likely than before. US and China are trying to stablize ties.

It’s hard to have direct monetary impacts as they mostly serve the domestic market. What to gain from more sanctions?

Some companies are very careful overseas and do comply with local laws, e.g. Tencent’s subsidiary Supercell did pull out of Russia market.

 

4/ Domestic regulations?

Less likely in the near-term. Most previous restrictions are no longer there. Didi back to app stores, some after-school education is back, draft on more game regulation is stopped.

Weak macro protects these companies. Less disruption is good.

 

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Plus, they do have growth, have become leaner, and are not expensive.