WWN#41 – Aussie Stock Market Plunges: Should You Buy, Hold or Sell?

ASX200 February Fall.png

Source:  Yahoo Finance

What’s Been Happening?

At the beginning of February, the benchmark 10-year bond yield rose to a four-year high on the back of positive payroll data being released in America. With wages rising and unemployment falling, the data acted as a signal to many that the U.S. was inevitably about to start increasing interest rates.

A week prior to the news, the Dow Jones Industrial Average had its highest closing record of 26,616.71 set on January 26. This meant investors were already quite cautious of a pull-back and inevitably the release of positive economic data triggered an immediate sell-off in the stock markets there and around the world.

After falling slightly on Monday, the Australian stock market had one of their worst trading sessions with $56 billion in value wiped off the stock market on Tuesday. The S&P/ASX 200 dropped 3.2% which makes it the worst one day fall since September 2015. There was some reprieve on the following day as bargain hunters came in and stabilised the market which recovered about 1.2%.

What Now?

On Thursday night, the sell-off on Wall Street deepened and the Dow Jones Industrial Average lost 4.2%, taking the losses since last Friday past 10 percent, the definition of a correction. That led to renewed selling on Friday for Australian shares, albeit it was only a 0.9 percent drop to finish the session at 5838 points. Over the week, the cumulative losses add up to 4.6% and the total value of the Australia sharemarket has dropped by more than 70 billion.

What’s Next?

Is it time to buy? Focus on the Fundamentals

Head of equities research at Morningstar, Peter Warnes, has commented that: “It’s way too early to go bargain hunting” as there will be reliefs but more downside is likely to develop over the next few weeks. Investors are likely to wary as volatility remains high.

Having said that, stock market pull-backs can be an advantageous time for investors to pick up stock more cheaply. During periods of volatility, individual stocks are more likely to outperform the market especially as the reporting season has begun in Australia and companies have started to report their half yearly earnings.

Is it time to hold?

Currently, we are in correction territory and corrections are generally temporary in nature. Although the U.S. political situation is a mess, the U.S. economy is actually doing fine (higher wage growth and lower unemployment) and therefore there is no definitive cause to be alarmed. Unless you have reason to believe that a stock will never reach that price again, it would be silly to sell now and lock in losses.

Is it time to sell?

Now is not the time to panic sell. Compared to overseas markets, the losses sustained in the Australian stockmarket are mild. It’s still $44 billion ahead of where it was this time last year and $220 billion ahead of where it was three years ago. Furthermore, even if there are a couple of rate rises, the interest rate is still relatively low in historical terms. In Australia, reporting season has only just begun and there are expectations that corporate earnings should rise by about 7% or so which should support stock prices that have not risen as sharply as in the U.S.

In Warren Buffet’s memorable words: “Be fearful when others are greedy and greedy when others are fearful.”

References:
http://www.smh.com.au/business/markets/nowhere-to-hide-as-sharemarket-shakeout-rolls-on-20180208-h0vrsb.html
http://www.abc.net.au/news/2018-02-10/are-australians-exposed-to-stock-market-falls/9417210
http://www.smh.com.au/business/markets/need2know/beware-sharemarket-panic-selling-20180206-p4yzh8.html
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WWN#40 – South Korea Qualifies Ban on BitCoin!

South Korea Ban Bitcoin.png

What’s Been Happening?

In late 2017, the Korean government had been making it very clear that they wanted to bring the speculative activity of cryptocurrency trading under control through its warnings that it would be conducting on-site investigations of exchanges and looking at a “cryptocurrency tax”.

On Thursday, South Korea’s justice minister Park Sang-Ki was reported to have said that the justice ministry is “basically preparing a bill to ban cryptocurrency trading through exchanges”. The announcement sent bitcoin plummeting by as much as 21 percent and nearly all other cryptocurrencies saw significant losses. South Korea is a major hub for virtual currency transactions, where they account for more than 20% of all bitcoin trading and more than one third of South Korean adults hold some form of cryptocurrency.

Just a few days earlier, a popular cryptocurrency price tracker CoinMarketCap removed prices from South Korean exchanges because the coins were trading at a premium of about 30 percent compared to other countries. This likely led to more confusion than necessary and triggered a broad selloff among investors.

What Now?

The statement made by Park Sang-Ki was later moderated by the presidential office on the following day which said a ban was under review but no policy changes had been made as it was only one proposal under consideration. A petition on the website of the presidential Blue House has drawn more than 120,000 signatures opposing the ban.

The Ministry of Justice apparently made the independent announcement without the consent of the Ministry of Finance and Strategy and other government agencies involved in the South Korean cryptocurrency regulation task force.

What’s Next?

In light of the government’s announcement that cryptocurrency will not be banned in the near future, it is likely that the South Korean government will move towards regulating and fostering the local cryptocurrency market.

A spokesperson last year said that regulatory roadmaps set by other countries such as Japan and U.S. are likely to be followed so it is unlikely that a cryptocurrency trading ban will be imposed in the long-term as well. With more and more investors seemingly jumping in to cryptocurrency craze in Korea from college students to housewives, there needs to be a push for stronger regulatory requirements especially from the exchanges that foster cryptocurrency trading (e.g. Coinone and Bithumb in Korea).

References:
https://www.reuters.com/article/us-southkorea-bitcoin/uproar-over-crackdown-on-cryptocurrencies-divides-south-korea-idUSKBN1F10YG
http://www.news.com.au/finance/money/investing/bitcoin-plummets-as-south-korea-announces-plans-to-ban-all-cryptocurrency-trading/news-story/27c5845fa9315d6b07d51adca46fa29d
https://www.bloomberg.com/news/articles/2018-01-11/cryptocurrencies-retreat-amid-south-korea-clampdown-concerns?cmpid=BBD011118_MKT&utm_medium=email&utm_source=newsletter&utm_term=180111&utm_campaign=markets
https://thenewdaily.com.au/money/2018/01/11/south-korea-bans-bitcoin-trading/?utm_source=Responsys&utm_medium=email&utm_campaign=20180111_PM_Update

WWN#39 – Apple To Buy Mobile App Shazam

What’s Been Happening?

Founded in 1999, Shazam is the company that invented an app by the same name that can identify music, movies, advertising and television shows by using the microphone on a smartphone or computer based on a short sample played. It then sends information such as the artist, song title and album back to the user and directs them to services where the full song or sound clip can be found such as ITunes, Spotify or YouTube.

Since 2013, it has consistently maintained a top ten spot in ITunes’ most downloaded list and has exceed 1 billion downloads to date. It also has more than 175 million monthly active users globally across IOS and Android. The US is the largest single market with about 20 million active users in November this year while the UK had about 4 million in the same month.

What Now?

Apple has acquired Shazam to the tune of about $US400 million ($AU531 million) for the UK-based start-up.

The deal was announced on Monday and would come as a disappointment for some of Shazam’s investors as the company was previously valued at about $US 1 billion when it closed its last funding round in 2015.

“Apple Music and Shazam are a natural fit, sharing a passion for music discovery and delivering great music experiences to our users”, Apple said in an emailed statement.

What’s Next? It’s all about the data

The acquisition of Shazam will be a potential benefit to Apple’s upcoming HomePod speaker.

However, the real opportunity isn’t just about adding music recognition capabilities to Apple’s existing product pipeline, it’s the provision of a wealth of Shazam user data that Apple can analyse and utilise. It can act as an early warning system to identify music trends or discover which songs are starting to get popular. It can also now potentially use the data from Shazam to see which songs lead to an Apple Music subscription or other subscriptions.

It’s therefore highly unlikely that Apple will discontinue the standalone Shazam app. The fact that there is a 3.5 billion internet-connected consumers who aren’t paying for music streaming means that there is a very large untapped market for Apple Music. Shazam could prove to be the mainstream audience accelerator that Apple Music obviously needs.

References:
http://www.afr.com/technology/technology-companies/apple/apple-pays-us400m-to-buy-shazam-songrecognition-mobile-phone-app-20171211-h02v7j
https://www.businessinsider.com.au/apple-shazam-deal-sneak-attack-hit-spotify-where-it-hurts-2017-12?r=US&IR=T
http://www.abc.net.au/news/2017-12-12/apple-is-buying-shazam-for-half-a-billion-dollars/9248750

WWN#37 – SendGrid’s IPO Soars on Debut

SendGrid.jpg

What’s Been Happening?

SendGrid, a Colorado tech company in the United States, was founded in 2009 by three developers: Isaac Saldana, Jose Lopez and Tim Jenkins. Only one of its three founders (Saldana) still has a big enough stake in SendGrid to be among the shareholders who own 5% or more of the company.

It is a cloud-based email delivery service that assists over 55,000 paying customers (e.g. Uber, Spotify & Airbnb) to send more than 30 billion emails every month.

SendGrid manages transactional email such as purchase receipts, password resets, account creation in addition to email marketing in the form of promotions and email newsletters.

In November 2016, they had a venture capital raising that amounted to $33 million, bringing its total venture funding to $80 million.

What Now?

SendGrid IPO Debut

On the 16th of November, the company made its public debut on the New York Stock Exchange (NYSE: SEND). SendGrid said earlier this month that it planned to sell 7.7 million shares, priced between $13.50 and $15.50 per share. Prior to going public, it increased both those figures, ultimately offering 8.2 million shares at $16. The stock popped 14% to $18 on its first day of trading, giving the company a market capitalisation of $734 million.

What’s Next?

Despite the success of its IPO, SendGrid is still very much a “show me” story as it isn’t profitable yet. Although its revenues have risen year on year with sales hitting $80.2 million in its first nine months of 2017, net losses also grew to $4.7 million in the same period.

At the current share price, the company’s risk profile is too high and banks too much on the staying power of email, like its competitors MailChimp and SparkPost. But for now, with 54% of the planet (3.7 billion people) still using email, it’s hard to imagine a world that is without email anytime soon.

References:
https://sendgrid.com/http://markets.businessinsider.com/news/stocks/sendgrid-ceo-interview-what-it-takes-to-go-public-2017-11-1008180449
http://www.denverpost.com/2017/11/15/denver-sendgrid-ipo/
https://seekingalpha.com/article/4125853-sendgrid-shares-fly-ipo-upside-limited

WWN#32 – Kenya’s August Election Ruled Invalid! Kenyatta vs. Odinga

What’s been happening?

Kenya President Uhuru Kenyatta was re-elected in August amid accusations of election fraud by the opposition. The opposition leader Raila Odinga has claimed the results were rigged, echoing claims made against Kenyatta in the 2013 elections. In 2013, Kenyatta won with a wafer-thin margin of 50.03 percent, a result that Odinga disputed unsuccessfully but peacefully in court.

Official results this time around show that Kenyatta won by a comfortable margin of 1.4 million votes (54.27%). However, Odinga and his opposition party immediately rejected the results and appealed to the Supreme Court for a new election.

What Now?

Kenya’s Supreme Court has declared Uhuru Kenyatta’s victory in the presidential election last month invalid. The six-judge bench ruled 4-2 in favour of a petition filed by Odinga who had claimed the electronic voting results were hacked and manipulated in favour of the incumbent. A new vote is to be held on October 17 after the Court found there were “irregularities and illegalities” in the election.

Hours after the Supreme Court ruling, President Kenyatta addressed the nation, saying that he respects the court’s decision but personally disagreed with the decision. However, he has called for peace and respect for the rule of law. “Amani, Amani, Amani! (Peace, peace, peace!)” – Kenyatta

Odinga and his party welcomed the decision but said that they preferred the new election to take place later on October 24 or 31 in order to provide the Independent Electoral and Boundaries Commission (IEBC) with enough time to fix its problems.

What’s Next?

More will be revealed when the full judgment of the court is released within 21 days of the ruling. In the meantime, a weakening currency and plunging stock market indicate that the extended political uncertainty will inevitably have a negative impact on the country’s economy.

Organising another election will also be costly. The original vote cost around $500 million and involved more than 300,000 temporary workers. Now the IEBC has to repeat it and under heavier pressure to prove that results are reliable and accurate.

Another election is likely to mean more violence on the horizon. After a flawed presidential election in 2007, more than 1,000 people died and half a million people were displaced in the post-election violence and street protests. If Odinga loses this election as well, it is possible that he may challenge the results again or worse still, incite his supporters to take action through violent means.

References
https://www.theguardian.com/world/2017/sep/01/kenyan-supreme-court-annuls-uhuru-kenyatta-election-victory
https://www.theguardian.com/world/2017/jul/31/kenyan-election-official-christopher-msando-dead-before-national-vote
https://af.reuters.com/article/topNews/idAFKCN1BJ1F5-OZATP
http://www.news.com.au/finance/work/leaders/kenya-election-2017-uhuru-kenyatta-wins-amid-protests/news-story/19ef6bbb5ed664c80e5f33ca20b60125
http://www.bbc.com/news/world-africa-41129919

WWN#31 – An Ongoing Conflict in India: Aadhaar Cards & Privacy

Aadhaar Card ExampleSource

What’s Been Happening?

In 2009, the Indian government introduced identity cards known as an Aadhaar card and rolled out by Prime Minister Narendra Modi in 2014. An Aadhaar is a 12 digit unique-identity number issued to all Indian residents based on their biometric data such as finger prints and eye scans and demographics. It is the world’s largest biometric ID system with over 1.1 billion enrolled members as of 15 August 2017. The Unique Identification Authority of India (UIDAI) is the regulatory body that oversees the Adhaar project and does not charge any money for any stage of the registration.

In 2015, a Supreme Court order had ruled that the registration for Adhaar was a purely optional program and that it could not become mandatory. In 2016 however, parliament passed the Aadhaar Act which allowed the government to require identification for government services.

Citizens have been notified that they will need to prove their identity using this card to be eligible to use certain services such as:

  • Filing income tax returns and having a permanent account number (PAN). This is similar to Australia’s requirement of a unique tax file number (TFN) for every individual that is lodging their tax return.
  • Subsidised fuel services
  • Hassle-free passport services
  • Concessional rail ticket booking
  • Hassle-free pension services

As the card was rolled out, concerns arose about privacy and data security, with the former becoming a hot topic as the government argued that privacy isn’t protected by India’s constitution in its attempt to make the national identity cards mandatory. The matter was taken to the Supreme court of India in 2012.

What Now?

A nine-member bench of India’s Supreme Court announced that individual privacy is a fundamental right, a verdict that will impact the way companies handle personal data and the roll out of the Adhaar card.

The court ordered that two earlier rulings by large benches that said privacy was not fundamental in 1954 and 1962 be overruled and declared privacy as “an intrinsic part of the right to life and liberty” and “part of the freedom guaranteed” by the constitution.  Those opposed to the growing demand for Aadhaar data cheered the ruling.

India’s Law Minister Ravi Prasad stated that the ruling was an affirmation of the government’s stance that privacy is a fundamental right but subject to reasonable restrictions. He said that it was not a setback to the government’s plans for Aadhaar and notes that the court is separately looking into the legality of the Aadhaar Act.

What’s Next?

The latest ruling means that the government may not have as much leeway to make signing up for the ID program mandatory. While the validity of the Aadhaar Act is still being challenged, this latest verdict will empower those already challenging the biometric platform by petitioning for a stay on the various ways in which Aadhaar is currently being used and where the government is trying to compel the use of Aadhaar (e.g. opening bank accounts with Aadhaar).

Apart from Aadhaar, the government’s power to collect and handle data will consequently be diluted and subject to change. Although a battle has been won, the war is far from over.

References:
http://aadhaarcarduid.org/aadhaar-frequently-asked-questions/  
https://www.theguardian.com/global-development/2017/mar/21/no-id-no-benefits-thousands-could-lose-lifeline-india-biometric-scheme-aadhaar-card
https://www.reuters.com/article/us-india-court-privacy-idUSKCN1B40CE

WWN#29 – Sydney’s Tent City is coming to an end

What’s Been Happening?

In June, police and council workers dismantled a homeless camp in Martin Place, Sydney CBD which houses about 50 people in tents. The so-called “tent city” has been a subject of debate between the State Government and Sydney Council for months as both sides have accused the other of shunting responsibility over tent city (State vs. Local).

Since then, many residents have returned with some of them having been on the streets for a few months while for others it has been decades. NSW Premier Gladys Berejiklian claims that the homeless people have been offered accommodation and are simply refusing to help themselves. The residents have countered that the offered accommodation is “not safe, nor affordable, nor acceptable”. Some of them say that the accommodation is only offered on a temporary basis as well. So far negotiations between the City of Sydney and the homeless tent dwellers to vacate the Martin Place campsite have failed.

What Now?

A bill that was introduced by the government on Tuesday was passed in the upper house without amendments on Wednesday evening. The bill authorises police to remove people from crown land if the land minister deems there to be a public safety issue. The legislation only affects crown land within City of Sydney and does not extend to other councils. It effectively resolves the long-running stoush between the government and the city albeit by employment of force.

Following the change in legislation, the residents of the controversial tent city in Martin Place prepared to leave the site today. The NSW Police are monitoring the exodus which has remained peaceful although some residents admitted that they are “traumatised by what’s going on, and had no idea of where they would go”.

What’s Next?

Although the bill is seen as progress towards a solution, it is certainly not the end solution with more steps to come. The lack of affordable housing in the city is the underlying issue here and forcing the tent city dwellers to leave Martin Place will only result in them relocating to another public place.

It is also likely that some residents will remain opposed to leaving a place that has been known to them as a safe haven for many months or years. Some residents will have to be forcibly evicted by police, a move which the Premier said she was reluctant to do.

Lanz Priestly, dubbed the “mayor of tent city”, has said that they are considering all options, including the lodgement of a last minute legal appeal to allow the residents to stay. Having consulted three different groups of lawyers, the law introduced to NSW Parliament was reviewed as weak and therefore they might decide to challenge the law.

References:
http://www.smh.com.au/nsw/they-should-be-gone-police-government-plan-to-dismantle-martin-place-camp-20170803-gxow4l.html
http://www.smh.com.au/comment/governments-need-to-listen-to-the-homeless-residents-of-martin-place-20170801-gxniq4.html
http://www.theaustralian.com.au/news/police-given-power-to-tear-down-sydneys-tent-city/news-story/298df81eb9daff1d228745946535a9a8
http://www.dailytelegraph.com.au/news/nsw/martin-place-tent-city-mayor-may-lodge-lastminute-legal-appeal-to-allow-homeless-to-stay/news-story/0547cfe4e39068627e20efaafd7927e6