Newsletter 2122A | UP Investment Club

Giving you the brief updates on the market

Become a wise investor and trader with the help of Market Updates Team! These are the updates in the market during September to December 2021!

NEWSLETTER 1.1

SEPTEMBER 22, 2021

[PH] PHILIPPINE GOV’T OFFERS FIRST EVER RETAIL DOLLAR BONDS (RDBs)

The initial offering of RDBs was conducted last September 15 where the Bureau of Treasury (BTr) raised up to $866.2 million, more than double from the initial $400 million program. Only investment banks participated in the initial offering and on the same day, the public offering commenced where investors must buy from the said banks. The public offering will run until October 1, 2021 however the BTr has the discretion to shorten the period. Investors can buy the bonds for as low as $300 (or ₱15,063.00 in today’s exchange rates) or higher with $100 (or ₱5021.00) increments. The government is offering coupon rates of 1.375% for five-year bonds and 2.250% for 10 year bonds. It was also assured that the final withholding taxes usually due thereon will be paid by the government, thus enabling investors to receive the coupon in full.

Insights: This will be a good investment product for low to medium risk investors to park their money on. This relatively safe investment is also a good way to diversify one's investments without worrying about the final withholding taxes. The bonds also present an opportunity for investors to help the country with the fiscal crisis countries around the world experience as a result of the COVID-19 pandemic. It would also be a good alternative as National Treasurer Rosalia de Leon said that it will be more accessible to retail investors as traditional dollar bonds usually cost a minimum of $200,000. However, investors must also note that locking in money with this relatively long period of time could pose a risk where the uncertainty on interest rates are still present. At the same time, this can also be seen as the BTr's opportunity to take advantage of low interest rates.

For those who are interested in these types of investments, we could wait for another batch of Premyo Bonds in the future, as the second batch is due to mature in December 2021. Aboitiz Power (PSE: AP) also announced that they will be offering fixed-rate retail bonds amounting to about Php 12 billion by the end of the quarter of 2021. This is another offering to look out for as Aboitiz Power is still working out the coupon rates, final issue amount, etc. As stated in the disclosure, this second tranche will be offered to the general public and will be listed with the Philippine Dealing and Exchange Corporation (PDEx).

References: Gov’t raises $866-M onshore retail bonds from Manila Bulletin, Gov’t plans maiden retail dollar bond sale from Manila Bulletin

Other information: AboitizPower to issue P12 billion bonds

[PH] PHILIPPINE REAL ESTATE INVESTMENT TRUSTS (REITS) JOIN FINANCIAL TIMES STOCK EXCHANGE (FTSE) INDICES

AREIT (PSE:AREIT) and DoubleDragon (PSE:DDMPR) have joined two separate indices of the FTSE. FTSE is a financial organization based in the United Kingdom known for their index products, like the FTSE 100 and several indices catering to the global market.

AREIT joined the FTSE EPRA Nareit Asia ex Japan REITs 10% Capped index. The index is diversified with REITs housing different occupants across different industries like healthcare, industrial, industrial and office-mixed, resorts, residential, and others.

DoubleDragon, on the other hand, secured its place in the FTSE GEIS Asia-Pacific ex Japan, ex China. The index is being utilized globally by several top equity investment fund managers, giving DoubleDragon exposure to more investors.

Insights: Additionally another feat of the Philippine REITs, Asiamoney conducted a poll, 2021 Asia’s Outstanding Companies Poll where AREIT was dubbed Most Outstanding IPO (initial public offering). The recognition of Philippine REITs in the international markets provides us an opportunity to look at their global competitiveness. REITs are just one of the new and exciting investment products in the Philippine market right now. As always, one must always do their due diligence before investing. We could also expect that more REITs will be offered in the future as REITs are not only limited to residential and office spaces. Currently there are four available REITs; AREIT, DDMPR, FILRT, and RL Commercial REIT, with MREIT joining next week with the listing of its recently held IPO.

References: AREIT, DoubleDragon join indices under FTSE from Business World , Financial Times Stock Exchange Group (FTSE) from Investopedia.

[US] S&P 500 DOWN BY 1.7%, DOW LOSES 614.41 POINTS

The S&P 500 dropped to 4357.73 (-1.7%) for its lowest daily performance since May 12. With that, the Dow Jones Industrial Average dropped to 3390.47 (-1.8%), losing a staggering amount of 614.41 points.

The massive market sell-off is caused by, among others, the following:

• The stock price of the Chinese Evergrande Group (SEHK:3333), a Chinese real estate giant, collapsing, with over $300 billion in liabilities.

• The Federal Reserve beginning its two-day meeting which worries investors may indicate the start of pulling away monetary stimulus despite the inflation and job market improvement.

Insights: Some say that this is just a healthy pullback, however, this could also be a sign of an incoming bear market, which is delivered by China’s negative catalyst, a significant factor to the recent market crashes in Nasdaq, PSE, and crypto, so long as the possibility of a bailout is still unlikely.

For more information, see this article here.

[CN] CHINA EVERGRANDE CONTAGION CONCERNS HAUNT GLOBAL MARKETS

Evergrande Chairman Hui Ka Yuan writes to a staff that his company will “walk out of its darkest moment” and will continue delivering property projects in an attempt to boost investor confidence amidst the ongoing turmoil. Meanwhile, Beijing still shows no signs of intervention to prevent worries and a potential impact on the wider economy. Analysts played down the threat of the situation, but regulators have warned that China’s financial system could collapse if debts are not stabilized.

Insights: Huge corrections were seen in several markets last Monday so what we are seeing for the coming days is a technical rebound. However, the outlook is still cloudy as it is still unclear how the Chinese authorities will execute damage control on what seems to be a likely Evergrande default. The second-largest economy in the world being at risk for systemic stability would slow down China’s growth, which in turn could derail global growth as well.

For more information, see this article here.

September 22, 2021

[CRYPTO] US TREASURY PLANS ON STABLECOIN REGULATION

The US Treasury considers stablecoins as the most urgent risks in financial stability. This is according to the Bloomberg report, citing that the US Treasury wants to ensure that investors can move in and out of it. Meanwhile, the Financial Stability Oversight Council is preparing a review and decision whether stablecoins pose an economic threat where consumers are withdrawing their money from banks risking its financial stability. Back in July, US Treasury secretary Jannet Yellen urged the officials to regulate stablecoins since they are not supervised.

Insights: Most stablecoins are centralized. If these centralized stablecoins were to follow the regulators, then they would have to perform KYC (Know Your Customer) to every holder that they have. Performing KYC is contrary to the fundamental principle that cryptocurrencies are permissionless and trustless. Therefore, holders may turn to decentralized stablecoins, which are currently not yet fully established in the crypto markets. This may result in what is called a “run on the bank”, where those who have centralized stablecoins will rush to withdraw all at the same time which may lead to a lack of confidence in the stablecoin.

For more information, see this article here.

September 26, 2021

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NEWSLETTER 2.1

SEPTEMBER 26, 2021

Index TRACKER

PSEI 6,951.53 ▲38.68 ▲0.56% w/w

USDPHP 50.37 ▲0.52 ▲1.04% w/w

SPX 4,455.48 ▲22.49 ▲0.51% w/w

NASDAQ 15,047.70 ▲3.73 ▲0.02% w/w

CRYPTOCAP 1.867,514,846,788 ▼293,455,761,209 ▼-13.58% w/w

[PH] MONETARY BOARD MAINTAINS KEY INTEREST RATES

Last September 23, the monetary policy meeting of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) was held. They announced that the key rates or the interest rate for the BSP's overnight reverse repurchase (RRP) facility will still be at its record low of 2%. Its purpose is to help the Philippine economy recover from the pandemic. “Together with appropriate fiscal and health interventions, keeping a steady hand on the BSP’s policy levers will allow the momentum of economic recovery to gain more traction by helping boost domestic demand and market confidence,” Benjamin E. Diokno, the BSP Governor, said. The BSP also revised its prediction on inflation this year, from 4.1% to 4.4%. Francisco G. Dakila, Jr., one of the BSP Deputy Governors, announced that inflation in September could even reach up to 5% due to higher prices of basic necessities; like food, electricity, and oil.

Insights: The RRP is referred to a monetary instrument of the BSP where they sell government securities to banks and Non-Bank Financial Institutions with Quasi-Banking Functions where the BSP will be in an agreement to buy them back at a later date. With this mechanism in place, the BSP has a handle on the economic situation of the country. With lower rates, banks could lend more money to the general public without paying back the government higher rates. This could lead to increased public spending or more economic activity that could help the country, fiscally speaking. However, it may also lead to increased inflation. With the grappling effects of the pandemic, this mechanism could help the country, however as Diokno has said, medical interventions must also be put in place.

References: BSP holds key rate to boost recovery from Business World, Monetary Operations from Manual of Regulations for Banks

[US] DOLLAR RISES DESPITE UNCERTAINTY IN EVERGRANDE CRISIS

The recent news about China Evergrande Group (SEHK:3333) shook the world into a potential global market crisis. The group owes a staggering amount of $305 billion to their investors, and is running short on cash. It also missed the Thursday deadline of payment of bonds worth 83.5$ to its investors. Because of this, investors are doubting if the company can actually pay what they owe before the expiration of the 30-day grace period. The investors would have to swallow huge losses if the grace period ends without the payment owed.

Despite this bearish news, the US dollar (DXY) rose 0.237% on Friday, now on its third straight week of slowly climbing back up.

Insights: The 30-day period has just started. A lot of things can happen within that period. Rumors, including a possible breakup of the company into four separate ones, have already arisen. While no official statement has been made, caution is the word for the day. The following days would be interesting to look out for as a result.

For more information, see this article here.

[CN] CHINESE ESTATES TO DUMP ENTIRE EVERGRANDE STAKE

The China Evergrande Group (3333.HK) is set to lose its second-biggest shareholder as Chinese Estates Holdings (0127.HK) and its leaders plan their complete exit from their Evergrande stake by selling $32 million worth of shares, after being involved in almost every Evergrande fundraising since its listing in Hong Kong in 2009. "The directors are cautious and concerned about the recent development of China Evergrande Group including certain disclosure made by China Evergrande Group on its liquidity," said Chinese Estates in its exchange filing (in English). The embattled developer continues to struggle to resolve its $305 billion debt and investors worry that the contagion could spread to Chinese banks and creditors abroad.

Insights: This is another sign of vanishing confidence in the world’s most indebted property developer. According to their exchange filing, Chinese Estates Holdings’ share disposal would "provide an immediate liquidity to the group, and allow the group to reallocate the proceeds for other reinvestment opportunities when they arise." Although this disclosure did not hamper Evergrande stocks’ first positive climb after being barraged by two weeks of bad news, investors should still be mindful of several headwinds to the situation’s progress. It was already reported that more than half of Evergrande’s development projects have been suspended due to failure to pay its contractors and suppliers. Analysts predict that the Chinese government will step in to allow Evergrande’s restructuring, but the possibility of company liquidation soon should still not be ruled out.

For more information, see this article here.

[CRYPTO] COINBASE HALTS ITS LENDING PRODUCT PLAN

Coinbase (NASDAQ: COIN) has abandoned its plan in offering a lending product for digital assets due to the US Securities and Exchange Commission (SEC) threatening them with legal action if the plan continues. The said lending product would have allowed USD Coin (USDC) holders to earn 4% interest per year. Brian Armstrong, CEO of Coinbase, expressed his frustration as SEC did not clarify the reasons on why its lending product is a security.

Insights: It seems that the SEC is viewing the Coinbase Lend as an unregistered security. These actions taken by the SEC are disappointing as they are applying the decades old Howey Test in determining whether an asset is a security or not. Moreover, the SEC is refusing to talk with Coinbase about the said product. This is contradictory to the way its chairman Gary Gensler is acting since he was himself asking those in the crypto space to engage and talk with them. These actions taken by the SEC are very frustrating since these are contrary to its mission of protecting retail investors.

[CRYPTO] BITCOIN DIPS AS CHINA CONSIDERS ALL CRYPTO TRANSACTIONS ILLEGAL

Bitcoin (BTC) fell from $45070 to $42363 in just two hours last Friday morning. This is due to China’s central bank declaring that all crypto-related transactions are illegal and must be banned from its country. Beijing also ordered financial institutions, payment providers, and internet firms from conducting crypto trades. With this declaration in place, Beijing wants as little competition as possible with its CBDC (Central Bank Digital Currencies), or the digital yuan, which is ready to roll out by February in time for the Winter Olympics.

Insights: China is showing its authoritarian regime as it bans cryptocurrencies again from its people. This “ban” is not new anymore as China began its firm stand against crypto back in 2013. Thus, those who have been in the crypto space for quite some time understand that this is only temporary and will not affect their respective fundamentals. Moreover, the BTC network is designed to be resistant to censorship by any authority, so banning Bitcoin will not stop people from using it.

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NEWSLETTER 2.2

September 29, 2021

[PH] Jollibee foods corporation (PSE:jfc) to sell preferred shares

The offer period for the first tranche of Jollibee preferred shares began yesterday, September 28, and will end on October 4, with the company having the discretion to extend or to cut it short. A total of Php 12 billion worth of preferred shares will be sold where Php 3 billion will be allotted to Series A and the rest to Series B. The shares will be sold at Php 1,000 per share for both series. The dividend rates are set at 3.2821% per annum for Series A (PSE:JFCPA) and at 4.2405% per annum for Series B (PSE:JFCPB). Proceed of the sale would be used for the buyback of a portion of its USD-denominated senior perpetual securities listed in Singapore and for capital expenditures to be used for new commissaries and store expansion.

Insights: Preferred shares are types of securities commonly known for their fixed dividend rates. Unlike that of common shares, price movements of preferred shares are not usually volatile, however holders of preferred shares do not have the same voting rights or active involvement in management. Preferred shares are also given preference over common shares, but not until after the claims of any bondholders or any other primary creditors are satisfied, in case the issuing company falls into liquidation. This is an opportunity to diversify for investors with a lower risk appetite for stocks. After all, despite the pandemic, it was recently reported that Jollibee continues to expand its presence abroad (i.e Canada, Spain).

See PSE Edge disclosures regarding the enabling resolution, dividend rate, the SEC Permit to Sell of the offered shares, and article about preferred shares from Investopedia.

[US] wall street corrects with rising treasury yields

The market ended Tuesday with a sell-off influenced by the recent climb of the U.S. Treasury yields with the three major U.S. stock indexes sliding nearly 2% or more.

The Dow Jones Industrial Average dropped to 34,299.99 (-1.63%), losing a massive 569.38 points; the S&P 500 fell to 4,352.63 (-2.04%), losing 90.48 points and performing worse than Dow Jones; and the Nasdaq composite dropped to 14,546.68 (-2.83%), performing the worst among them all by losing 423.29 points. In addition to this, half of S&P 500's stocks closed 10% or more below their 52-week highs, which includes 63 stocks that plummeted 20% or more.

Insights: Increasing Treasury yields could mean an expectation of faster economic recovery. Meanwhile the recent indication by the Federal Reserve of an impending bond tapering, gives investors more incentive to place money back to less riskier instruments, pushing money out of riskier instruments and leading to the correction we have observed.

For more information, see this article here.

[JPN] Japan's covid emergency status to be lifted on thursday

Japan plans to lift its COVID-19 state of emergency covering nineteen of its prefectures at the end of September, which would render the country free of its emergency restrictions for the first time in almost six months. Following his discussions about the easing of measures with other ministers, Prime Minister Yoshihide Suga said that a decision will be finalized after consulting with Japan’s government expert panel. As an adjustment to the current measures of requiring restaurants to close early and refrain from serving alcohol, Tokyo considers limiting the opening hours for restaurants and only allowing alcohol to be served on pre-approved eateries.

Insights: Japan’s new daily recorded cases of Covid infections now being at just over 2,000 (far from the 25,000 all-time high daily cases it recorded during the Delta variant surge) and having over 57% of its population being fully vaccinated will surely bode well for their economic recovery. This sentiment is already evident as Japan’s shares rose on Monday with stocks that would benefit the most from the reopening such as airlines, railway operators, and department stores led the strong rally. Soaring shares even on Japanese tour agency H.I.S. Co. Ltd. (TYO:9603) and wedding and banquet organizer Take and Give Needs Co., Ltd. (TYO:4331) are good indications that discretionary consumer activity will continue to pick up.

[CRYPTO] traders going to defi after china crypto ban

After China banned all crypto transactions, Bitcoin was trading at $43000 and is flat over the past 24 hours. Traders remained cautious about regulatory crackdowns from China and other countries. Meanwhile, some traders have shifted their focus into decentralized finance (DeFi) tokens to at least protect themselves from any regulatory uncertainty.

Insights: With recent regulatory concerns pertaining to centralized exchanges, it is worth considering for investors to dive deeper into DeFi. DeFi is one of the forms of finance that does not rely on intermediaries, but on smart contracts. The benefit of joining in DeFi is that users’ deposits are free from any authorities. In short, every user controls his or her assets every time they make transactions.

September 29, 2021

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NEWSLETTER MONTHLY WRAP-UP

SEPTEMBER 30, 2021

Index TRACKER

PSEI 6,952.88 ▲97.44 ▲1.42% m/m

USDPHP 50.96▲0.92 ▲1.84% m/m

SPX 4,307.53 ▼215.16 ▼4.76% m/m

NASDAQ 14,448.58 ▼810.66 ▼5.31% m/m

CRYPTOCAP 1,901,355,530,723 ▼145,435,322,927 ▼7.11% m/m

NUMEROUS PREFERRED SHARES FOR LISTING AT THE PSE

The past two months saw the number of Real Estate Investment Trusts (REITs) listed at the Philippine Stock Exchange (PSE:PSE) double from two to five with the listing of Filinvest REIT Corp (PSE:FILRT), RL Commercial REIT Corp. (PSE:RCR), and MREIT, Inc. (PSE:MREIT). This month, at least three companies are expected to list their respective preferred shares with the bourse: Jollibee Foods Corp. (PSE:JFC), Megawide Construction Corp. (PSE:MWIDE), and A. Brown Co., Inc. (PSE:BRN).

Jollibee expects to raise at least Php 12 billion from the sale of two sets of preferred shares (JFCPA; JFCPB) to be used to redeem a portion of its USD perpetual bonds and to provide capital for expansion.

Megawide expects to raise at least Php 3 billion to redeem its Series 1 preferred shares (PSE:MWP1) and to fund its various public-private partnership (PPP) projects, such as the Mactan-Cebu International Airport (MCIA), the Paranaque Integrated Terminal Exchange (PITX), the Clark International Airport, and the Public School Infrastructure Project (PSIP) Phase II.

A. Brown expects to raise at least Php 1 billion to fund its various real estate development projects, to increase its landbank, and to inject capital into its irradiation facility startup in Tanay, Rizal.

Insights: The influx of preferred share listings on the PSE indicates a rush among various companies to take advantage of low interest rates for purposes of either expansion or reduction of their more onerous liabilities. This can be attributed to an anticipation of increase in interest rates in the following quarters as indicated by various monetary authorities. As to why a preferred share offering, among different ways of raising capital, is considered by companies, this interview by Merkado Barkada with BRN’s VP is instructive and insightful. By tying up debt with an instrument that is not as restrictive as bonds or loans and is not as intrusive to management as common stocks, preferred shares provide a relatively stable middle option.

SGX ALLOWS SPAC LISTINGS

Earlier this month, the Singapore Exchange (SGX:S68) introduced a new set of rules regarding the listing of Special Purpose Acquisition Vehicles (SPACs) on its main board, with at least three firms already reported to consider listing. The SGX is the first major Asian financial hub to diversify into such riskier instruments in the wake of regulatory crackdown across different jurisdictions (although not the first Asian financial market to open its doors to SPACs with South Korea [2010] and Malaysia [2011] doing so within the past decade).

Insights: Compared to the traditional IPO process, SPAC listings involve less costs, more flexibility, and a shorter timeline. Therefore, offering such an opportunity in southeast Asia provides the numerous startups therein a cheaper and closer alternative to the United States. The introduction of the SPAC rules on the SGX provides a good opportunity for Asian markets (1) to limit the loss of potential capital migrating to other more prominent SPAC jurisdictions, such as the US, and (2) to maximize the opportunity to capture those which are yet to consider raising capital in such a manner. It must be noted that Grab, the largest tech company in the region, is expected to merge with a SPAC listed on Nasdaq within this year.

CHINA IN PROPERTY AND ENERGY CRISES

The past few months have kept China on the headlines with its crackdown of various industries, and the upcoming month seems to do so as well. The past month saw China’s second largest property developer, Evergrande Group (SEHK:3333), default on its interest obligations to its domestic and foreign bondholders. Although a deal was reached with domestic bondholders, nothing remains certain as to its offshore dollar bonds as of writing.

At the same time, a shortage of coal supplies brought about by reduced coal output by Chinese coal mines and exacerbated by Beijing’s boycott of Australian coal, which is believed to be its retaliation to Australian support for an international probe on the origins of the ongoing coronavirus pandemic, and a rise in the price of coal prompted power shortages across China. Crucially, factories in various provinces were asked to limit power usage or to lower production output.

Insights: Considering that a great portion of the ruling Chinese Communist Party’s legitimacy (and popularity) is attributed to its ability to generate consistent (and double-digit, for quite some time) economic growth since its opening to global trade in the mid-1970s, the resolution of the present crises is a priority. These problems arose partly out of its attempts to control the means (debt) that enabled its unprecedented growth and to convert this new-found economic power to political power. These goals, however, seem to contradict with its political and geo-military goals, for integration into the global trade rendered it dependent on other powers and the other powers on it. Its political system, which can allow for an expedient resolution of these issues, ironically causes uncertainty due to its inherent lack of transparency. Therefore, a constant observation of the situation remains and is necessary.

THE SPECTRE OF REGULATION HAUNTS CRYPTO MARKETS

This month also saw stringent regulations come into effect across various jurisdictions, such as China (again) and South Korea. South Korea, the world’s third largest cryptocurrency market, required the registration of cryptocurrency exchanges with the Korea Internet and Security Agency (KISA) and the Financial Services Commission (FSC), following an amendment to the law regulating cryptocurrency in the country was passed early in the previous year.

Meanwhile, China has banned cryptocurrencies (once again). It previously issued similar bans back in 2013 and in 2017, but this time the ban extended to cryptocurrency mining. In the United States, efforts by numerous government bodies to rein in cryptocurrency, especially stablecoins, which are pegged to mainstream, fiat currencies, are underway.

Insights: Being a relatively new “thing”, cryptocurrencies lay within the gray area of the regulators. As regulators continue to study them, more rules will eventually be issued further regulating them, shaking its foundational idea of decentralization to the core. Despite being contrary to its nature, cryptocurrencies would eventually be forced into and under regulation. In a world whose medium of exchange is dependent solely on trust, it is in the interest of the authorities to keep that trust intact, and as perfect as possible. Across jurisdictions, numerous reasons are cited as to why cryptocurrencies ought to be regulated and, for most of the time, these reasons are valid under the police power enjoyed by these authorities. Nevertheless the challenge brought about to those authorities by the nature of these things show that we are going into more interesting times.

OCTOBER 2021 CALENDAR

[Oct 01, Fri] PH PSE:MREIT IPO (PH PSE).

[Oct 05, Tue] PH headline inflation for Sep 2021 (PH Philippine Statistics Authority PSA).

[Oct 08, Fri] US employment data for Sep 2021 (US Bureau of Labor Statistics BLS).

[Oct 13, Wed] US inflation data for Sep 2021 (US Bureau of Labor Statistics BLS).

[Oct 14, Thu] PH PSE:JFCPA and PSE:JFCPB IPO (PH PSE).

[Oct 18, Mon] CN GDP 3Q (CN National Bureau of Statistics NBS).

[Oct 22, Fri] PH PSE:MWP4 IPO (PH PSE).

[Oct 28, Thu] PSE:BRNP IPO (PH PSE).

[Oct 28, Thu] US GDP 3Q advance estimate (US Bureau of Economic Analysis BEA).

[Oct 28, Thu] EU interest rate (EU European Central Bank ECB).

[Oct 28, Thu] JP interest rate (JP Bank of Japan BOJ).

[Oct 29, Fri] PH bank lending data (PH Bangko Sentral ng Pilipinas BSP).

September 30, 2021

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NEWSLETTER 3.2

OCTOBER 3, 2021

Index TRACKER

PSEI 6,923.60 ▼27.93 ▼0.40% w/w

USDPHP 50.88 ▲0.51 ▲1.01% w/w

SPX 4,357.04 ▼98.44 ▼2.21% w/w

NASDAQ 14,566.70 ▼481.00 ▼3.20% w/w

CRYPTOCAP 2,067,240,181,716 ▲199,725,334,928 ▲10.69% w/w

[PH] MEGAWORLD DEBUTS ITS OWN REIT

After a one-day delay of its scheduled listing, MREIT Inc. (PSE:MREIT) debuted on the PSE last Friday, October 1. On its first trading day, the REIT closed at Php 16.70, and even reached an intraday high of Php 17.00 per share. Currently MREIT’s portfolio consists of Grade-A PEZA accredited buildings that mostly cater to Business Process Outsourcing (BPO) companies and multinationals companies (MNCs) in three prime locations of office space: Eastwood City in Quezon City, Bonifacio Global City’s (BGC) McKinley Hill, and Iloilo Business Park in Mandurriao, Iloilo City. The projected dividend yield would be about 5.65% for this year. The MREIT aims to be the “fastest growing REIT” in the Philippines, promising that additional office and commercial spaces will be injected to the portfolio in the upcoming years.

Insights: These are exciting times for Filipino investors who would want to invest in real estate but do not have the financial capital or time to do so. MREIT closed at a higher price which could be attributed to its Net Asset Value, which is about Php 19.92 per share, or the fact that it was offered at a discounted price, from the initial Php 22 per share. It could be working its way up. Additionally, there is also a stability fund in place. The purpose of this fund is to not let the price per share of the REIT dip below the IPO price. With this fund, we have yet to see how accurately will the public perceive this REIT, i.e. if it is with optimism and growth potential or the opposite. Nevertheless, another thing to note would be that the company disclosed that it also aims to be the largest REIT in Southeast Asia in terms of floor size, to a total of 500,000 square meters by 2024 and eventually 1 million within the next five to ten years.

To learn more about MREIT and the townships included, check out their website.

[US] OPTIMISM INFLUENCES WALL STREET’S EARLY OCTOBER RALLY

Wall Street stocks rallied to a higher close last Friday entering Q4 2021 with a bullish sentiment.

The Dow Jones Industrial Average rose to 34,326.45 (1.43%), gaining 482.54 points; the S&P 500 climbed to 4,357.04 (1.15%), obtaining 49.5 points; and the Nasdaq Composite reached 14,566.70 (0.82%) earning 118.12 points and ending its 5-day losing streak.

The market rally is caused by, among others, Merck & Co Inc’s (NYSE:MRK) experimental oral drug for COVID-19 lowered risk of death and hospitalization by around 50%, and an insistence by the U.S. President Joe Biden to push through the proposed infrastructure spending bill.

Insights: The recent rally prices in the aforementioned for (1) the approval of the infrastructure bill means that $550 billion would be spent over five years in modernizing roads, bridges, and transit systems which could improve employment rate, increasing productivity, and in turn impact economic growth, (2), the COVID-19 experimental oral drug lowers the mortality rate signifying greater productivity and possibly a foreseeable end to the restrictions brought about by the pandemic., Additionally, the ‘ber’ months just started. It is possible to consider that an upside in this consumption-driven economy is considered in anticipation of the holidays

For more information, see this article here.

[VN] VIETNAM SETS RECORD GDP SLUMP, DOWN 6.17% IN Q3 2021

Vietnam’s gross domestic product dropped by 6.17% in the third quarter of 2021, posting its sharpest quarterly decline on record due to stringent lockdowns in key areas including the country’s economic and commercial hub of Ho Chi Minh City. According to the country’s General Statistics Office report, the economy shrank after increasing by 6.57% in the past three months. The new GDP figures showing negative growth emphasizes the country’s switch from having a pandemic-resilient economy to being a hard-hit victim. After successful efforts of containing the virus for most of the previous year, Vietnam is currently struggling with the rise of infections, with 770,000 total cases and 18,936 deaths which mostly came from central production cities and neighboring industrial provinces.

Insights: This announcement would severely impact the chances of the Vietnamese government in reaching their target of 6.5% GDP increase for this year, as several international banks have downgraded its 2021 growth forecast for Vietnam. Due to the country’s sluggish 3Q performance and a potential prolonged impact of the COVID-19 outbreak, investors should be wary and consider several downside risks especially if authorities continue to impose strict lockdowns and prompt companies to suspend production. The resumption of economic activities will largely depend on the government’s plans to “gradually” ease restrictions in Ho Chi Minh City but even that should be expected to move slowly due to vaccine procurement delays. The impending exodus of workers from the city will also cause a setback for the economy’s recovery.

[CRYPTO] FED: NO INTENTION TO BAN CRYPTOCURRENCIES

Jerome Powell, chairman of the Federal Reserve (FED), said that the U.S. has no plans to ban cryptocurrencies. He said that having a digital dollar means that there is no need to have stablecoins and cryptocurrencies. However, he emphasized the need for tighter regulation over stablecoins.

Insights: It seems that the FED knows little about cryptocurrencies. The mere fact that they can “ban” crypto is absurd. Look at how China “did” it numerous times. China has tried it over fifty times, but they cannot “do” it right. As the use of cryptocurrencies increases over time, it would become much harder to ban them. It is, therefore, safe to say that cryptocurrencies are here to stay.

October 3, 2021

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NEWSLETTER 4.1

OCTOBER 6, 2021

[PH] NATIONAL HEADLINE INFLATION DOWN BY 0.1% TO 4.8% IN SEPTEMBER 2021

Yesterday, the Philippine Statistics Authority (PSA) reported that the headline inflation from the 4.9% last August has decreased to 4.8% in September. It could be mainly attributed from the slowed down inflation in the following commodity groups: Transport, 5.2% (7.2% in August), Food and non-alcoholic beverages, 6.2% (6.5% in August), Furnishing, household equipment, and routine maintenance of the house, 2.4% (2.5% in August); Communication, 0.2% (0.3% in August); and Education, 0.9% (1.1% in August). However, all other commodity groups have increased inflation except for Health which stays at 3.1%. From an interview with BusinessMirror, according to Karl Kendrick T. Chua, Socioeconomic Planning Secretary, the biggest threat to the high inflation was increasing oil prices as the Philippines can be classified as an oil importer. The Bangko Sentral ng Pilipinas (BSP) also released a statement where it was seen that weather disruptions and the continued impact of African Swine Fever were also causes of these upticks.

Insights: As defined by the PSA, headline inflation measures changes in the cost of living based on movements in the prices of a specified basket of major commodities. Currently the average inflation from January - September 2021 is 4.5%. It is still within the projected inflation of the BSP for this year. However, consumers must be wary as it could still go up to the 5% levels.

To read more about the September inflation, check out the PSA’s Summary Inflation Report.

[US] BIG TECH BOUNCES FROM PREVIOUS DAY’S SELL-OFF

Wall Street ended on a higher close on Tuesday, where Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) rose more than 1% after its previous day's sell off, which was caused by the continuous rise in treasury yields.

The Dow Jones Industrial Average climbed to 34,318.49 (+0.93%), gaining 315.57 points; the S&P 500 rose to 4,345.69 (+1.05%), obtaining 45.23 points; and the Nasdaq Composite ended at 14,433.83 (+1.25%) earning 178.35 points.

Insights: The upcoming release of employment data later this week would likely show better employment numbers, leading to better economic productivity. This may have prompted the market to rebound.

For more information, see this article here.

[CN] EVERGRANDE RIVAL ALSO MISSES REPAYMENT DEADLINE

One of the smaller rivals of the debt-saddled China Evergrande Group, Fantasia Holdings Group Co. Ltd (1777.HK), said it had missed a $206-million bond payment deadline last Monday, October 4. The missed deadline adds to worries that a credit crunch among Chinese developers could drive a broader crash in a sector that comprises about a quarter of the Chinese economy. Fitch estimates Fantasia has nearly $2 billion of international bond payments to make between now and the end of next year as well as almost $1 billion of local bond payments.

Insights: Fantasia should pose a lesser risk to markets than Evergrande due to its smaller size. It ranked only 60th in a list of contracted sales in the first quarter of this year while Evergrande was third -- and its $12.9 billion in total liabilities is dwarfed by Evergrande’s $304.5 billion. Fantasia is also a less prolific bond issuer with about $4.7 billion in outstanding offshore and local debt, Bloomberg-compiled data show, compared to Evergrande’s $27.6 billion. Beijing is unlikely to ease its curbs on the property sector, despite the recent speculation on authorities supporting the industry and limiting damage to the economy. Expect Beijing to maintain its property-related tightening measures that would lead to a rapid weakening of the property sector, leading to a severe blow to headline GDP growth and government revenue.

[CRYPTO] US SEC DELAYS DECISION ON FOUR BITCOIN ETFs AGAIN

The approval of four Bitcoin (BTC) exchange-traded funds (ETFs) was delayed again by the US SEC, citing their need of a longer period to consider the proposed rule change and the issues raised by the companies in connection with the Bitcoin ETF. The deadline was pushed back by sixty days, with the decision likely to be made in late November/December.

Insights: Bitcoin ETFs are seen as significant developments in the crypto industry as they allow investors, especially institutions, to gain exposure to Bitcoin without having to own the digital asset directly. This regulation of exposure to Bitcoin eases concerns on the volatility of Bitcoin as a cryptocurrency and gives confidence to big investors to make positions thereon.

October 6, 2021

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NEWSLETTER 4.2

OCTOBER 10, 2021

INDEX TRACKER

PSEI 6,906.86 ▼16.74 ▼0.24% w/w

USDPHP 50.73 ▼0.15 ▼0.29% w/w

SPX 4,391.34 ▲34.40 ▲0.79% w/w

NASDAQ 14,579.54 ▲12.84 ▲0.09% w/w

CRYPTOCAP 2,304,951,731,475 ▲237,711,549,759 ▲11.50% w/w

[PH] FIRST GEN CORP. OUT OF THE PSEI

Last Friday, the Philippine Stock Exchange, Inc. (PSE:PSE) announced the removal of First Gen Corporation (PSE:FGEN) from the PSEI and its replacement by Wilcon Depot (PSE:WLCON), which was also the most actively traded stock that day. Recently, FGEN concluded a tender offer by global investment firm Kohlberg Kravis Roberts & Co. (KKR). The offer was oversubscribed, with KRR accepting 262.9 million FGEN shares. This reduced FGEN’s free float from 18.74% to around 11.40%, well below the 15% requirement of the PSEI. The removal and the replacement will be effective on Monday, October 11.

Insights: Considering the announcement that the next index review by December 2022 will require companies to have a free float of twenty percent (20%) in line with the requirements imposed Initial Public Offerings (IPO), it is likely that FGEN may not get back on the index any time soon, unless it increases its free float level. The tender offer also provided the possibility of FGEN delisting from the exchange. FGEN’s owners, the politically embattled Lopez family, lost their media corporation ABS-CBN’s application for legislative franchise renewal last year. It is possible, therefore, that this move may be considered to lessen their exposure to political and regulatory risks. At the same time, FGEN’s parent company, Lopez Holdings Corporation (PSE:LPZ), similarly accommodated a tender offer of First Philippine Holdings Corporation (PSE:FPH), another Lopez company, for voluntary delisting last December 2020. However due to the possible complications of the offer in relation to the petition, the delisting was not pursued. We have yet to see with considerable certainty as to what will happen to FGEN’s listing status.

[CN] EVERGRANDE RIVAL ALSO MISSES REPAYMENT DEADLINE

[US] JOBS REPORT FALLS SHORT OF EXPECTED 500,000 POSITIONS

The jobs report released last Friday showed a disappointing 194,000 positions created compared to the expected 500,000. The second wave of COVID-19 cases and heightened pandemic fear influenced this, the worst since February 2020. Despite this, the unemployment rate dropped to 4.8%, which is better than the expected 5.1%. Nonetheless, Wall Street also closed lower following the disappointing numbers.

Insights: The disappointing numbers of the employment data for the second month prompted the US market to correct, and since the weak jobs report may imply a weak reopening, which was further aggravated by a second peak of COVID-19 cases in the country, it is possible that plans by the Federal Reserve for an eventual taper might be delayed.

For more information, see this article here.

[CN] CHINESE ESTATES HOLDINGS, A PROMINENT EVERGRANDE BACKER, LOOKS TO GO PRIVATE WITH $244M INVESTOR BUYOUT

Chinese Estates Holdings, a Hong Kong-based developer and once-major shareholder in crisis-stricken peer China Evergrande Group, has proposed going private in a deal worth about HK$1.9 billion ($244 million). The family of former chairman Joseph Lau, which controls the company, would buy out minority investors for HK$4 per share, according to a disclosure on Wednesday. That represents a 38% premium over the closing price as of Sept. 29, when trading was suspended ahead of the announcement. Chinese Estates was formerly Evergrande's second-largest shareholder but sold off much of its holdings in August and September. Chinese Estates CEO Kimbee Chan Hoi-wan, Lau's wife and the richest woman in Hong Kong, also recently disclosed the sale of some of their Evergrande shares.

Insights: The delisting would reduce the costs and management resources incurred by the company to maintain its listing status and could provide more flexibility in implementing long-term business strategies. While this may not affect the Chinese market greatly, this is a clear sign that the loss of confidence in China's second largest property developer and the effects of this fallout on the Chinese economy has not yet ended.

[CRYPTO] TETHER ACCUSES BLOOMBERG OF SPREADING “MISINFORMATION"

Tether (USDT) slams at a Bloomberg article that casts doubt on whether the company has $69 billion that backs the value of USDT. Tether responded by saying that the article was just another attempt to undermine a market leader and the reporter refused to know the facts. The company also added that all of their tokens are fully backed, and that it is “fostering a revolution in financial inclusion, transforming a model that doesn’t work in a modern world.”

Insights: Tether has been the center of scrutiny among the stablecoin issuers since the U.S through the Securities and Exchange Commission (SEC) started to enforce regulations on stablecoins. Tether has been the main target since for years, the company dodged requests for an outside audit of its finances. The audit was only produced after a lawsuit by New York’s attorney general for $18.5 million. Since we cannot verify whether USDT is fully backed, spreading “misinformation” can cause panic among the investors and this can lead to a sell-off in the cryptocurrency market. As always, knowing the facts is the proper thing to do in navigating this volatile market.

October 10, 2021

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NEWSLETTER 5.1

OCTOBER 13, 2021

[PH] AREIT-AYALA LAND PROPERTY-FOR-SHARE SWAP APPROVED BY THE SEC

A property-for-share swap between AREIT (PSE:AREIT) and Ayala Land, Inc. (PSE:ALI) was approved by the Securities and Exchange Commission last Friday. The transaction includes the Westview Commercial Ventures Corp.’s and Glensworth Development, Inc.’s identified properties that will be exchanged for 483,254,375 primary common shares of AREIT priced at Php 32.00 per share. The commercial properties amount to Php 15,464,140,000. Last Monday, an amendment to Section 4.2 of the Deed of Exchange was also made where October 7 was placed as the date of the transaction, instead of October 8. With this, the properties in the transaction are added to the AREIT’s portfolio on October 1 instead of November 1.

Insights: A property-for-share swap is an exchange of property used for business for shares of stock between parties (sec. 40 (C)(2), NIRC). In the case above, Ayala Land’s commercial properties were exchanged for AREIT shares. This allowed AREIT to increase its gross leasable area to 549,000 square meters. This also allowed the inclusion of the properties effective at an earlier date, such that investors could expect an increase in AREIT’s income (and dividend payout) in the 4th quarter of this year. AREIT’s current price, however, may have already priced in the value that these additional properties will bring into the REIT.

[US] US DOLLAR INDEX RISES AS FED’S TAPER PICKS UP PACE

The US dollar index (DXY) hit a one-year high on Tuesday with the expectation of the beginning of Federal Reserve’s tapering as early as next month. It touched 94.563, its highest since late September last year. This influenced the investors to dump on the Japanese Yen (JPY), dropping 4% in three weeks, and holding near its three-year lows.

Insights: The DXY measures the value of the US Dollar (USD) relative to global currencies - Euro (EUR), Swiss Franc (CHF), Japanese Yen (JPY), Canadian Dollars (CAD), British Pound (GBP), and Swedish Krona (SEK). A strong DXY implies that the dollar has become more valuable than other currencies before, and can possibly signal expectations of good US economic growth.

Three policymakers from the Federal Reserve mentioned that the economy has healed enough, indicating that bond tapering is imminent. Because of this, the underlying economic optimism that came with these indications gave investors more incentive to invest in the US Dollar (USD) prompting them to dump on other foreign currencies, which, as said, was observed recently with the Japanese Yen (JPY).

For more information, see this article here.

[HK] HONG KONG’S OFFICE RENTAL MARKET SHOWS SIGNS OF RECOVERY FOR THE FIRST TIME IN TWO YEARS

Hong Kong’s office rental market is showing signs of recovery after being battered by social unrest since 2019 thanks to the proposed amendment to Hong Kong's extradition law and Beijing's National Security Act and by the ongoing COVID-19 pandemic. The three months prior to September saw “net absorption” for the first time in two years, meaning more space was taken up than left empty, according to Cushman & Wakefield. Meanwhile, the average rent per square foot in Hong Kong has sunk 26.4% from a peak of HK$75.9 in April 2019, to HK$55.9 in the third quarter of this year.

Insights: There was a resurgence of transaction activity in the third quarter of 2021 with several notable deals concluded by tenants from within the banking and finance, insurance, and business center and co-working sectors. This increase of white-collar working population may stimulate the local retail and food and beverage sector. Thus, the Hong Kong real estate market remains one of the strongest, if not the most expensive, in the Asia-Pacific region.

[CRYPTO] JPMORGAN CEO: “BITCOIN IS WORTHLESS”

Jamie Dimon, CEO of JPMorgan (NYSE: JPM), described Bitcoin (BTC) once again as a “worthless” asset. However, his clients disagree with him. As such, America's largest bank still provides its wealthy clients access to crypto funds. Nonetheless, Dimon warned that government regulation will come to ensure that cryptocurrency is not used for any criminal purposes.

Insights: This only means that the trend in cryptocurrencies is too big of an opportunity for big banks and institutions to let go easily. As more investors pile in, cryptocurrencies would reach a level of adoption never seen before, since the current situation brought by the pandemic and by a fragile economy shifted them to expose more on to riskier assets.

October 13, 2021

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NEWSLETTER 5.2

OCTOBER 17, 2021

INDEX TRACKER

PSEI 7,213.46 ▲306.60 ▲4.44% w/w

USDPHP 50.61 ▼0.12 ▼0.24% w/w

SPX 4,471.37 ▲80.03 ▲1.82% w/w

NASDAQ 14,897.34 ▲317.80 ▲2.18% w/w

CRYPTOCAP 2,440,233,028,397 ▲135,281,296,922 ▲5.87% w/w

[PH] MWIDE’S PERPETUAL PREFERRED SHARES OFFERING APPROVED BY SEC

The Securities and Exchange Commission (SEC) approved the Series 4 preferred shares offering of Megawide Construction Corp. (PSE:MWIDE) The offer will be for 30,000,000 shares with an oversubscription of 10,000,000 shares. The shares are priced at Php 100.00 per share with an initial dividend rate of 5.3% p.a. The company is confident that they will maintain a comfortable debt-to-equity ratio with the option of future capital raising. The offer is available until October 19, 2021. The proceeds of the sale will be used to redeem the Series 1 Preferred Shares, whose step-up provision will take effect on December 3, 2021.

Insights: Perpetual preferred shares are a kind of preferred shares that do not mature but instead will perpetually give the investor fixed dividends as long as the company stands. Megawide will use these shares to redeem the Series 1 to avoid the step-up rate. The Series 1 has a dividend rate of 7.025% per annum and a maximum step up rate of 487.5 basis points. This means that the dividend rate will be adjusted by adding 4.875% p.a. if the company doesn’t buy them back.

See the final prospectus of the Series 4.

[PH] ALLDY CUTS IPO PRICE BY 25%

Last October 12, AllDay Marts Inc. (PSE: ALLDY) released the final prospectus for their Initial Public Offering (IPO), indicating the offer price at Php 0.60 per share, which is 25% lower than the initial maximum offer price of Php 0.80 per share. The minimum subscription would be Php 600.00 (for 1,000 shares) and a maximum of Php 300,000 (for 500,000 shares). The primary offer will account for 6,857,143,000 shares with an overallotment of 685,714,000 shares. The proceeds of the sale will be used for debt repayment and store network expansion as the company plans to have 100 stores by the end of 2026.

Insights: This IPO is targeted for Local Small Investors (LSI’s) or the so-called retail investors. The Philippine Stock Exchange (PSE) Electronic Allocation System or the PSE EASy is utilized as a program to facilitate their subscription thereto. Subscribing to an IPO has become more accessible to Filipinos thanks to this platform, since June 2019. However, this accessibility presents higher risks as it is open to the general public, both versed and uninformed investors. IPOs are dependent on either the narrative of the listing (see PSE:MM back in 2020) or on the pricing of the stock (see PSE:MREIT earlier this month). For the issuing company to maximize this capital-raising opportunity, the two must be used efficiently. In this case, it seems that the low price per share may seem to be a good bet to attract more investors. However, this same price remains at a premium compared to the declared book value, which is Php 0.1211 per share. Look also at the timing of the IPO. Could it be possible that this capital-raising opportunity be a campaign fundraising opportunity?

[US] US BANKS REPORT POSITIVE Q3 PERFORMANCE

The four biggest U.S. banks - Morgan Stanley Inc (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE: BAC), and Goldman Sachs Group Inc.(NYSE:GS) - all reported outstanding performance, all reporting double-digit growth in revenues.

Morgan Stanley reported $14.75 billion in revenue, climbing 25% from a year ago, while JPMorgan revenue rose by 2% from the previous quarter to $30.4 billion. On the other hand, the Bank of America showed a 12% climb to $22.87 billion; and Goldman Sachs revenue increased by 26% or $13.61 billion.

Insights: Despite the COVID-19 pandemic, the Boston Consulting Group reported the soaring of global financial wealth to a record high of $250 trillion in 2020, increasing both the value of assets managed by the brokerages and the demand for money managers. With more money flowing into investment portfolios as a result of the bull market immediately after the COVID crash, clients are more incentivized to borrow against these gains in order to take advantage of the low interest rates. Assuming minimum defaults, there would be no problem for the banks, which may see stable or even greater earnings as a result thereof in the near future.Despite lingering issues that still remain, such as supply chain problems and the pandemic (of course), the returning confidence and opportunism outweigh the said underlying issues.

For more information, see this article here.

[CN] EVERGRANDE'S $1.7B HK HQ SALE FLOPS AS BUYER WITHDRAWS

Chinese state-owned Yuexiu Property (0123.HK) has pulled out of a proposed $1.7 billion deal to buy China Evergrande Group's (3333.HK) Hong Kong headquarters building over worries about the developer's dire financial situation. This failure of the landmark building's sale is another setback for cash-strapped Evergrande which has been scrambling to divest some assets to repay creditors knocking on its doors. It has already missed three rounds of interest payments on its international bonds. The deal faltered after Yuexiu's board opposed the move over worries that Evergrande's unresolved indebtedness would create potential complications in completing the transaction smoothly.

Insights: Evergrande still faces a mountain of short-term borrowings totalling about CNY240 billion (US$37.3 billion) due by the end of June next year. In comparison, the developer’s property portfolio had CNY 144 billion-worth of completed properties ready for sale as of June 30. That means, even without considering any other expenses, Evergrande would not have enough finished property projects in its entire portfolio to generate the cash to meet its financial obligations. It has been actively selling assets since June as it tries to stave off a liquidity crisis. Between the end of June and August 27, the company sold properties to suppliers and contractors to offset about CNY25.2 billion in outstanding payments as it tries to convince suppliers who have struggled to get paid for months to continue to work with it. Although looking at the broader macro environment, the real estate sector has done well this year – property investment was up 11% year on year as of August, while property sales were up around 16% year on year. The average home price growth in seven major Chinese cities has ranged between 3.4% and 4.5% year on year in 2021. Beijing will not likely allow the property giant China Evergrande Group to collapse as the government devises a way to get tough on the company without inducing sector-wide turmoil. They would rather “reconstruct” a way to scare the property market away from further from debt-fueled growth.

[CRYPTO] BTC HITS $60K AS ETF APPROVAL IMMINENT

Bitcoin (BTC) is primed to beat its previous all-time high as it hits USD60,000 for the first time since April. Prices accelerated sharply as investors are betting that the US Securities and Exchange Commission (SEC) would allow the Bitcoin ETF to trade next week. According to Bloomberg, unnamed resources say that the SEC will not likely block the Proshares Bitcoin Strategy ETF that would allow institutional investors to have an indirect exposure to BTC since it is backed by BTC futures contracts. Meanwhile, a physically backed Bitcoin ETF, i.e. one based on BTC itself, is not expected until later this year.

Insights: It will be a big milestone for the cryptocurrency community once a Bitcoin ETF is approved by the SEC. For context, the SEC has rejected numerous Bitcoin ETF filings since 2013. Meanwhile, the upcoming Bitcoin ETF will only be backed by BTC futures contracts, so we could expect that this will cause little effect on the BTC’s price. As some investors are waiting for a physically backed Bitcoin ETF, we might see a surge of demand for the leading digital asset since BTC is now considered as a hedge against inflation and an ETF therefor would be a sufficient safeguard for institutional investors.

October 17, 2021

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NEWSLETTER 6.1

OCTOBER 20, 2021

[PH] LISTED EDUCATIONAL INSTITUTIONS SUFFER QUARTERLY LOSSES

Far Eastern University, Inc. (PSE:FEU) reported last Monday that for the first quarter of their fiscal year they incurred losses amounting to Php 40,354,447. Meanwhile Centro Escolar University (PSE:CEU) incurred losses of about Php 80,893,643. Both institutions end their fiscal year in May. They also reported increases in gross expense, with that of FEU increasing by about Php 62,880,571 and that of CEU by about Php 109,279,489. FEU’s stock price dropped by about Php 25 last Monday, closing at Php 555, while CEU closed at Php 6.66 yesterday.

Insights: The prohibition against face-to-face classes due to the pandemic brought fiscal challenge to educational institutions as this requires a digital learning infrastructure to be set in place to continue operations. FEU reported that license and subscriptions expenses rose by about 654% for the license of software and programs for the digital learning infrastructure of the students. Employee benefit expenses also rose by about 74% as medical benefits and other payable benefits last year were availed. For CEU, repairs and maintenance expenses arose from Php 180,696 to Php 3,665,738. However, given that the Philippines is the one of the last two countries yet to open their schools, fiscal recovery for educational institutions may not yet be expected.

See the 2021 Q1 reports of FEU and CEU here.

[US] TECH AND HEALTHCARE SECTORS ADVANCE AS INDICES CONTINUE WINNING STREAKS

The technology and healthcare sectors received the biggest boosts as Wall Street closed higher again on Tuesday as major companies continue to report strong Q3 earnings.

Johnson & Johnson (NYSE:JNJ) advanced 2.3%, contributing to the S&P 500 boost after the raising of its 2021 adjusted profit forecast; Netflix Inc. (NASDAQ:NFLX) closed up 0.2%, when its quarterly results showed that the Korean thriller Squid Game pulled in more customers. Meanwhile, Walmart Inc. (NYSE:WMT) climbed 2% after being added to Goldman Sachs’ (NYSE:GS) conviction buy list.

As of close of October 19, the S&P 500 (SPX) and Nasdaq Composite (IXIC) climbed 0.75% and 0.71%, respectively, both in their fifth straight day of gains, the longest winning streak since late August. On the other hand, the Dow Jones Industrial Average (DJIA) advanced 0.56%, its third positive session in the last four days.

Insights: Strong Q3 earnings so far has boosted stock market prices. This is despite the lingering supply chain problems triggered by the pandemic. Once the hype of the earnings season is over, it is possible to expect a healthy pullback.

For more information, see this article here.

[CN] ALIBABA EXPANDS CLOUD BUSINESS IN ASIA, STEPPING UP RIVALRY WITH AMAZON

Alibaba (SEHK:9988) plans to open its first data centers in South Korea and Thailand in 2022 as the Chinese technology giant looks to expand its cloud business further overseas. The e-commerce giant is the number one cloud computing player in China but has focused on expanding its footprint internationally, particularly into other areas of Asia, including Singapore, the Philippines and Indonesia, pitting itself against U.S. giants like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). Local data centers can help businesses in those countries access Alibaba’s cloud services. They can also help Chinese companies expand their presence overseas. Alibaba announced the plans on October 13 at its Apsara Conference along with a number of other new cloud products. On Tuesday, Alibaba also launched a new chip called Yitian 710 that will go into servers called Panjiu. The aim is to power artificial intelligence applications on Alibaba’s cloud.

Insights: Cloud computing is seen as a key profit driver for Alibaba over the long term. Alibaba’s cloud business will grow from the needs of its massive online shopping operation. However, its expansion might be affected by the rise of competition from fellow Chinese companies, Tencent (SEHK:0700) and Huawei Technologies Co.. According to the general manager of Alibaba Cloud Intelligence’s international business unit, their strategic roadmap would likely target Southeast Asian consumers, aiming to facilitate the digital transformation of local businesses within the region.

[CRYPTO] FIRST US BITCOIN ETF BEGINS TRADING

ProShares Bitcoin Strategy ETF (NYSE:BITO), the first Bitcoin ETF launched in the US, began trading yesterday, October 19. It tracks Bitcoin (BTC) prices through futures contracts traded at the Chicago Mercantile Exchange (CME). ProShares CEO Michael Sapir said that the ETF will provide exposure in the leading digital asset to investors who have a brokerage account or to investors who are concerned on the crypto exchanges that may be unregulated and subject to security risks.

Insights: This is a big milestone for the cryptocurrency market as the trading of BITO allows for the injection of massive amounts of money into the asset class by institutional investors. However, an ETF based on Bitcoin futures prices may provide a pricing that is distorted compared to Bitcoin’s spot price. The difference between the spot price and the futures prices, which is influenced either by a forward-looking market optimism or pessimism, depending on the underlying circumstances, allows for this anomaly. The approval and launch of BITO is also a crucial step towards the launching of a fund based on Bitcoin spot prices, which, if approved, would have allowed for the making of more accurate positions in the cryptocurrency market.

October 20, 2021

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NEWSLETTER 6.2

OCTOBER 24, 2021

INDEX TRACKER

PSEI 7,289.61 ▲76.15 ▲1.06% w/w

USDPHP 50.82 ▲0.21 ▲0.41% w/w

SPX 4,544.90 ▲73.53 ▲1.64% w/w

NASDAQ 15,090.20 ▲192.86 ▲1.29% w/w

CRYPTOCAP 2,528,051,465,002 ▲87,818,436,605 ▲3.60% w/w

[PH] CENTURY PACIFIC PURSUES PET FOOD SECTOR

Century Pacific Food, Inc. (PSE:CNPF) announced on Wednesday its intent to establish its presence in the pet food industry. Being one of the largest branded food and beverage companies in the Philippines, Century Pacific is home to famous household brands such as the Century canned tuna brand, Argentina corned beef brand, and 555 sardines brand. For the pet industry, specifically the cat food range, CNPF intends to introduce the newly developed brand ‘Goodest’ to pet owners. “Pet Food is one of the fastest growing consumer goods categories in the Philippines and around the world. With long-term trends such as rising incomes as well as demographic trends of people staying single longer or having children later, as well as people spending more time at home due to the pandemic, we see pet ownership on the rise…,” Christopher Po, CNPF’s Executive Chairman said.

Insights: From being successful in the export tuna manufacturing sector, CNPF is now expanding its portfolio of brands. Christopher Po also stated that “…the penetration of pet food is still very low in the Philippines versus our more affluent ASEAN neighbors. We expect this category to continue growing going forward.” According to the US Department of Agriculture - Foreign Agricultural Service, the Philippine market for the pet food industry is the largest market for the export of U.S. cat and dog food manufacturers in 2017. Some of the well known brands include Mars, Inc.’s Pedigree Petfoods and Whiskas. This planned inroads by a local company seems to have been taken well by the market, with CNPF on the rise, closing at Php 26.80 last Friday, up by Php 1.30.

[US] GERMAN SOLAR CAR FIRM FILES FOR U.S. IPO

Sono Motors GmbH filed a registration with the U.S. SEC for an Initial Public Offering on Friday as they look for investors in a greener transport. The German solar car company would be listed under the ticker SEV in the Nasdaq Exchange. Its solar electric vehicle (SEV) is a self-charging vehicle that harnesses the power of the sun. In September, it surpassed 14,000 reservations of its product, the Sion, equivalent to around EUR350 million in net revenue.

Insights: The IPO of Sono Motors is in great timing with the recent stock market rally from the technology sector, possibly giving the needed push for greater market confidence. Being a startup, expanding into the industry may pose an interesting challenge for the company against the well-established original equipment manufacturers (OEM), such as Volkswagen Group (ETR:VOW3), Daimler AG (ETR:DAI), BMW AG (ETR:BMW), Renault SA (EPA:RNO) and the other electric vehicle makers, such as TSLA.

For more information, see this article here.

[SK] SOUTH KOREA JOINS SPACE RACE WITH LAUNCH OF FIRST HOMEGROWN ROCKET

South Korea has conducted the first test launch of its domestically built rocket, joining the ranks of advanced space-faring nations. The three-stage rocket, emblazoned with South Korea’s flag and carrying a dummy satellite, blasted off from a launch site in Goheung at 4pm (15:00 GMT+8) on Thursday. Informally called NURI, which means “world”, the rocket weighs 200 tonnes, is 47.2 metres (155 feet) long, and is fitted with a total of six liquid-fuelled engines. It is designed to put 1.5-tonne payloads into orbit 600km to 800km (373 miles-497 miles) above the Earth and has been 10 years in development at a cost of 2 trillion won ($1.6bn). The test of the NURI rocket is a milestone for firms such as Hanwha Aerospace (KRX:01245), which makes rocket boosters and other launch components, and Korea Aerospace Industries (KRX:047810), which oversaw assembly of the launch vehicle. An analyst said Hanwha built the engine and KAI was responsible for assembling about 300,000 components of the rocket. Since March 2010, South Korea has invested about 2 trillion won ($1.70 billion) in the NURI development project, while annual investment in space projects has more than doubled, to 616 billion won ($524 million) in 2020 from 305 billion in 2013.

Insights: South Korea sees its rocket program as bolstering its competitiveness in next generation 6G communications and helping it place more eyes in the sky as neighboring North Korea adds to its arsenal, including intercontinental ballistic missiles. The country will most probably focus on launching surveillance satellites for civilian and military application. South Korean officials have said it looks to partner more closely with a single firm on assembly and launch processes, similar to the way in which NASA works with SpaceX in the United States.

[CRYPTO] BITCOIN DIPS TO $62K AFTER REACHING ATH

Bitcoin (BTC) witnessed its pullback after reaching its all-time high. Although some investors fear that the current dip may continue this weekend, several analysts are confident that the latest breakout could further BTC to the upside. On the other hand, the Proshares Bitcoin Strategy ETF (NYSE:BITO) is on track to break its limit on the number of futures contracts it is permitted to hold by the Chicago Mercantile Exchange.

Insights: A healthy correction is needed to shake out the greed and weak hands if the bulls want to see more green days in the coming months ahead. Meanwhile, BITO hit $1.1bn in assets under management (AUM) in just two days. This shows the demand is very high for the Bitcoin ETF to the point that the limit on the number of futures contracts for Proshares to hold is breaching. Thus, there is an urgency to have additional ETFs to be approved by the SEC to meet the demand.

October 24, 2021

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NEWSLETTER 7.1

OCTOBER 27, 2021

[PH] SYNERGY GRID TO CONDUCT FOLLOW-ON OFFERING

Yesterday, Synergy Grid & Development Phils., Inc. (PSE:SGP) began its follow-on offering (FOO) of more than 1 billion common shares at Php 12.00 per share. A quarter of these shares (263,375,000 shares) is offered to retail traders, or local small investors (LSIs). SGP will use the proceeds of the sale to subscribe to the non-voting preferred shares to be issued by the National Grid Corporation of the Philippines (NGCP). NGCP will then use the proceeds therefrom to finance its capital expenditures for the next few years. NGCP is the sole and exclusive operator of the Philippines’ transmission network, linking power generators and distribution utilities to deliver electricity to end-users nationwide across Luzon, Visayas, and Mindanao.

Insights: An FOO is a public offering of shares subsequent to an IPO. In SGP’s case, the FOO is being conducted for the purposes of complying with the listing requirement imposed on NGCP by its legislative franchise (See Rep. Act No. 9511, sec. 8). This is also being conducted to increase SGP’s public float, which was reduced to 0.25%, or below the minimum percentage of 20%, after SGP’s share-swap deals with subsidiaries OneTaipan Holdings, Inc. and Pacifica21 Holdings, Inc. The FOO is priced lower than the estimated book value per share of about Php 13.47 according to its prospectus. This also gives LSIs an opportunity to invest in a monopoly. However, the corporate relationship between SGP and NGCP is too complicated with separate corporate layers placed in between them (See Group’s corporate structure, page 11). We need to note that SGP is an investment holding company with the only operating asset being the NGCP. For yield seekers, the uniform dividend policy of this network is a double edged sword since while they are uniform in the sense that the corporate network has the same dividend policy, the same policy however allows for a dividend policy of "'up to' 100%". This policy does not guarantee a stable yield, and can be further complicated by regulatory risks (See Flow of Dividends, page 77).

[US] CONSUMER CONFIDENCE INDEX BOUNCES AFTER THREE STRAIGHT MONTHS OF DECLINE

The Consumer Confidence Index (CCI) increased from 109.8 points to 113.8 points after three straight monthly declines. The CCI, a survey conducted by The Conference Board, is a measurement of how optimistic or pessimistic the consumers are vis-à-vis their expected financial situation. Despite this small optimism, the index still remains below its peak of 128.9 back in June.

Insights: Since consumer spending is integral to a country’s economic health, the CCI is one of the most closely monitored economic indicators. Its slight bounce may slightly contradict individual responses such as the fact that 21.1% of the surveyed consumers expect business conditions to worsen, which is a significant increase from the previous 17.6%. This contradiction may be answered by the upcoming holiday season, which has almost always boosted consumption, so while there may be a short term optimism, the medium to long term outlook on the economy still remains to be seen.

For more information, see this article here.

[CN] PROPERTY DEVELOPER MODERN LAND DEFAULTS ON BOND PAYMENT

China’s Modern Land (SEHK:1107) defaulted on a bond payment, the latest Chinese property developer to do so, adding to worries about the wider impact of the debt crisis at behemoth China Evergrande Group (SEHK: 3333), and weighing on shares in the sector. Modern Land (China) Co Ltd said in a filing last October 26, 2021 (Tuesday) that it had not repaid principal and interest on its 12.85% senior notes that matured on October 25, 2021 (Monday) due to "unexpected liquidity issues". The bond has an outstanding principal of USD 250 million. The missed payment comes days after the company, a smaller developer, scrapped plans to seek investor consent to extend the maturity date of its bond by three months, saying doing so was not in the best interests of it and its stakeholders. Ratings agency Fitch earlier this month cut Modern Land's rating to "C" from "B" over the consent solicitation to change bond terms, saying it considered the move a distressed debt exchange. Modern Land's 11.8-percent February 2022 bond was down 1.6% at a discount of over 80% from its face value, yielding about 1,183%.

Insights: The prospect of contagion and more defaults have weighed on the sector in a major setback for investors. Assessing companies’ willingness to pay, and not just their ability to do so, could become a much more important factor when analysing the Chinese property sector than it was in the past. Lower property demand and tight government policies are likely to depress pricing and impact funding for homebuyers and developers.

For more information, see this article here.

[CRYPTO] TESLA MAY ACCEPT CRYPTO AGAIN FOR CAR PAYMENTS

Tesla (NASDAQ: TSLA) has suggested that it may start accepting crypto again as a payment for its cars. A few months ago, Tesla CEO Elon Musk said that the company would only start accepting Bitcoin (BTC) again if the leading digital asset could prove that at least 50% of the energy used by the blockchain comes from renewable sources. Moreover, Tesla has filed with the US Securities and Exchange Commission (SEC) so that it may restart this again in the future.

Insights: At the time when Tesla had bought USD1.5 billion worth of BTC and had first announced that it would start accepting BTC as a payment for its cars, BTC’s price rallied as enthusiasts viewed it as a significant milestone for adoption. However, it declined sharply after the company halted its transactions with BTC over environmental concerns. Now that the company hinted at possible acceptance of cryptocurrencies again, it may start a new wave of adoption for BTC as other companies may want to clear the environmental concern over Bitcoin first before accepting it as a payment. Note also that the general public’s perception on BTC in line with environmental standards is not well, so Tesla accepting BTC once again may temper that perception.

October 27, 2021

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NEWSLETTER 7.2

OCTOBER 31, 2021

INDEX TRACKER

PSEI 7,054.70 ▼234.91 ▼3.22% w/w

USDPHP 50.77 ▼0.04 ▼0.09% w/w

SPX 4,605.38 ▲60.48 ▲1.33% w/w

NASDAQ 15,498.39 ▲408.19 ▲2.71% w/w

CRYPTOCAP 2,659,213,026,643 ▲131,161,561,641 ▲5.19% w/w

[PH] PRIME MEDIA HOLDINGS, INC. ASKS FOREIGNERS TO DISPOSE OF ITS STOCKS

The company Prime Media Holdings, Inc. (PSE:PRIM) announced that they will acquire 99.9% of the outstanding stock of Philippine Collective Media Corporation (PCMC). Consequently, it is requesting that all foreign stockholders sell their PRIM shares to qualified Filipino citizens by November 15, 2021. This is because the acquired company PCMC is engaged in mass media. Under the Constitution, ownership and management of companies engaged in mass media are limited to Philippine citizens and wholly-owned Philippine firms (Art. XVI, sec. 11, par. 1) . Presently, the company is seeking approval of the Securities and Exchange Commission to amend its Articles of Incorporation to prohibit foreign ownership of the company.

Insights: As a company owning a subsidiary engaged in mass media, PRIM must ensure that ownership of its shares of stock should similarly be limited to Filipino citizens and wholly-owned Philippine firms, making it similar to other mass media companies, such as ABS-CBN (PSE:ABS) and GMA (PSE:GMA7). Considering what happened to Rappler and ABS-CBN, PRIM must ensure that this limitation is strictly observed.

[PH] ALLDY IPO OVERSUBSCRIBED, TO ISSUE REFUNDS TO AFFECTED LSI’S

PNB Capital announced that AllDay Marts, Inc. 's (PSE:ALLDY) IPO oversubscription prompted the issuance of refunds to affected Local Small Investors (LSI’s). An oversubscription of about 62% of the maximum allocation occurred. Per the LSI Guidelines, refunds will be allocated in ascending order without interest. Starting November 2, 2021, affected LSI’s can pick-up their check refunds at the Philippine National Bank – Trust Banking Group, PNB Financial Center, President Diosdado Macapagal Boulevard, Pasay City. By December 2, 2021, if the refund is not claimed, the check will be mailed to the affected LSI Applicant’s registered address at the affected LSI Applicant’s risk.

Insights: While an oversubscription indicates enthusiasm on the upcoming IPO from the market, the fallout thereof exposes a system that remains inconvenient for retail investors. Affected LSIs, from those living in Metro Manila to those living outside of Metro Manila and Luzon will have to come all the way to Pasay to get their checks. If for those living in further areas of NCR, going to Pasay is already a chore, what more for those living further away, like the Visayas or Mindanao? The inconvenience of travelling (in this time of pandemic) just to get the money they wanted to grow is unnecessary. Similarly, crucial time is lost because instead of earning interest, the money would just be sitting with PNB. Surely there must be a more sustainable way of distributing refunds?

[US] 10-YEAR TREASURY YIELD FALLS WITH PERSISTING BOND MARKET VOLATILITY

The 10-year U.S. Treasury yield (TMUBMUSD10Y) was down 0.6 basis points (1.563%) after trading higher than 1.6% earlier Friday. The bond market has been volatile over the past week as investors receive conflicting signals from corporate profits and economic readings. Global central banks like the National Bank of Georgia (NBG) and the Monetary Authority of Singapore (MAS) also carve their own courses towards tighter policies.

Insights: Treasuries are backed by the U.S. government, making them low-risk investments, but these can also be used as an economic indicator. The 10-year Treasury yield, among others, gets the most attention because short-term rates are heavily influenced by the actions of the U.S. Federal Reserve, while long-term rates like the 30-year bonds have greater uncertainties. In other words, it is the stable middle ground that allows it to influence other markets more than the short and long term treasuries. A decreasing Treasury yield means that lending rates for consumers and businesses also decrease. This pushes investors to invest in riskier instruments like the stock market. In this case, it seems that investors are yet to leave the stock market for safer havens.

For more information, see this article here.

[JP] NISSAN AND TOYOTA TO SLASH AUTOMOTIVE PRODUCTION DUE TO CHIP SHORTAGE

Nissan (TSE:7201) is slashing its planned global production for October and November by 30%, as it struggles with the semiconductor shortage caused by the COVID-19 pandemic. Like other carmakers, Nissan has been forced to curtail production despite a rebound in demand in key auto markets, including China and the United States. The pandemic has both squeezed output at component suppliers and stoked demand for electronic devices that has intensified competition for chips. This month, Toyota Motor Corp (TSE:7203), the world's biggest car manufacturer, also announced a 15% cut to its November output, following reduced global production in September and October, due to a slowdown at component plants in Malaysia and Vietnam.

Insights: The semiconductor shortage has caused backlogs for various companies in different sectors. The automotive industry is the forefront of this suffering, in part because it only accounts for 10% of the revenue of chip makers and, therefore, has less bargaining power than the consumer electronics market, which accounts for about 70% of chip foundries’ revenues, according to a management consulting firm Bain & Co, which specialises in the semiconductor industry. Supply problems in the chip manufacturing industry are so deep-seated and systemic that a worsening shortage won’t be over until 2022 at the earliest, industry analysts have warned.

For more information, see this article here.

[CRYPTO] ETHEREUM HITS NEW ATH

Ethereum (ETH) has reached a new all-time high of USD 4,400 after reaching a major milestone in its ongoing transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism. Meanwhile, transaction rates, as well as the number of new active addresses, are increasing in the Ethereum blockchain. Furthermore, the number of ETH being burned on a daily basis has been increasing steadily.

Insights: Confidence on the second leading cryptocurrency is up in the market. After all, several analysts say that a shift to PoS is very achievable, and that this shift will go smoothly. There is also a growing speculation that an Ethereum ETF could be approved in the U.S. next year. Interest in ETH is growing as it allows smart contracts to be used and decentralized applications to be built thereon and be run without third parties.

October 31, 2021

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NEWSLETTER MONTHLY WRAP-UP

NOVEMBER 3, 2021

INDEX TRACKER

PSEI 7,054.79 ▲101.82 ▲1.46% m/m

USDPHP 50.77 ▼0.19 ▼0.37% m/m

SPX 4,605.38 ▲297.85 ▲6.91% m/m

NASDAQ 15,498.39 ▲1,049.81 ▲7.27% m/m

CRYPTOCAP 2,659,213,026,643 ▲757,857,495,920 ▲39.86% m/m

ON MALAMPAYA AND NATIONAL ENERGY SECURITY

From October 2-22, the Malampaya Gas Field was closed for preventive maintenance. It was extended due to the onslaught of Typhoon Maring. The new plant’s flare tip, which was lifted by 55 meters during Maring’s onslaught, was the core purpose of the said maintenance. Consequently, plants reliant on Malampaya were forced to close. Others, such as Santa Rita and San Lorenzo facilities of First Gen (PSE:FGEN), were forced to switch to liquid fuel, an expensive alternative. These led to a decrease in average supply to about 13,376 megawatts (MW) as opposed to the demand of 10,250 MW during the said period.

While electricity demand is generally lower in October due to the rainy season, and hence the preferred schedule for plant maintenance shutdowns, the demand for this October reached summer season levels 10,803 MW for the Luzon grid and 2,145 MW for the Visayas grid. As a result, the Independent Electricity Market Operators Philippines (IEMOP) noted that in October (until October 20, 2021), higher average prices of about Php 6.75/kWh were observed as compared to September’s average prices of about Php 3.30/kWh.

On the other hand, last October 18, concerned citizens filed a criminal complaint against the acquisition by UC Malampaya Philippines Pte. Ltd., a Udenna Corporation subsidiary, of the shares of Chevron Malampaya LLC in Malampaya, which is about 45% of the total shares in the natural gas field. The Department of Energy (DoE) approved the deal last April 2021 and is currently reviewing another one, this time between Shell Philippines Exploration B.V. (SPEX) and Malampaya Energy XP Pte Ltd, another Udenna unit. SPEX also has a 45% stake on the project. The remaining 10% belongs to the government-owned Philippine National Oil Company - Exploration Corporation (PNOC-EC).

Insights: Malampaya is the country’s lone significant source of oil and gas supply, providing 30 percent of Luzon’s power requirement, or 20 percent of the country’s total electricity requirement. And this was not the first time such a shutdown took place. Back in 2013, Malampaya also closed down due to maintenance, prompting a rate increase of about P4.15/kWh to the December 2013 bill of Meralco (PSE:MER) consumers. This, however, was questioned by the Makabayan bloc in Congress and by several groups. Thereafter, the increase was blocked by the Supreme Court, and recalculated by order of the Energy Regulatory Commission (ERC). With the shutdown, the Meralco rates increased by Php 0.0283/kWh. However, with the decreasing reserves and reservoir pressure of the oil field and mix in with the increasing world oil prices, what’s to say that in the future such price hikes won’t happen again especially since consumers are the one’s paying the increased generation charge?

Another issue to be looked at is how Udenna Holdings, a corporation still racked with millions of losses in the last quarter, from subsidiaries Chelsea Logistics and Infrastructure Holdings Corp. (PSE:C) and Phoenix Petroleum Philippines, Inc. (PSE:PNX), would administer the majority of what is currently the lone significant source of oil and gas in the Philippines. If the Udenna-SPEX deal pushes through, the company will end up owning 90% of stake in the gas field. The impact of the misuse of this precious resource does not just affect a small group of people but practically everyone, from big companies to simple households. Udenna Corporation up until recently has been aggressively acquiring several companies from different sectors and they have yet to disclose its 2020 financial report. With this we do not have a clear picture whether the company can fiscally handle the oil field. At the same time, Udenna chief Dennis Uy’s connections with Chinese state-controlled firms raises questions on matters of energy and national security given Malampaya’s location, while that with the Duterte administration raises those on unfair, preferential treatment.

BIDEN ADMINISTRATION HOPES TO RESOLVE SUPPLY BOTTLENECKS BY CHRISTMAS

The COVID-10 pandemic, which led to massive disruptions in the workplace, caused widespread supply chain blockages and labor shortages. As such, President Joe Biden called on the private sector to help address the issue, following merchant's warnings that certain products may not make it to store shelves in time for the U.S. holidays.

The following retail companies plan to extend nighttime hours to increase operations by a significant amount.

Walmart (NYSE:WMT) - Increased nighttime hours at the ports to increase the volume of merchandise that can be moved by 50% over the next several weeks

Target (NYSE:TFT) - Increased movement of its shipping containers by 10% during the next 90 days

Home Depot (NYSE:HD) - Increased shipment of up to 10% additional containers per week at the Ports of Los Angeles and Long Beach.

Samsung (KRX:005930) - 24/7 operation to increase output by 60%

UPS (NYSE:UPS) - enhanced data sharing and increased operations to 24/7 for an additional 20% containers

FedEx (NYSE:FDX) - Trucking and rail use changes and increased operating hours.

Insights: The backlogs in the ports, if not mitigated, will cause further delay in the shipment of supplies and goods, increasing demand for the same and driving up prices. While this effect is merely contributory and not the sole cause of inflation, the combined effects will affect consumers in the form of weaker purchasing power and producers in the form of decreased revenues, and potentially decreased profits.

It may be possible to reduce the delays and shortages with the help of digital transformation, where we can apply electric vehicles, artificial intelligence, and drones to potentially enhance delivery and make the processes more efficient and economical in the long term. However, the main challenge lies in how to implement these in the existing supply chain of retail companies.

For further reading, see this article here.

BUSINESSES FIND THE ‘GREEN DOLLAR’ AT THE UN COP26

The 26th United Nations Climate Change Conference of the Parties (UN COP26) summit that starts in Glasgow, United Kingdom this first week of November 2021 has been billed as a make-or-break chance to save the planet from the most calamitous effects of climate change. Delayed by a year because of the COVID-19 pandemic, COP26 aims to keep alive a target of capping global warming at 1.5-degrees Celsius above pre-industrial levels - the limit scientists say would avoid its most destructive consequences. Being once a domain dominated by scientists and bureaucrats, climate conferences such as the COP26 are increasingly attended by big business delegations eyeing off the "green dollar". Over the last few years, carbon commitments have been a big topic in corporate boardrooms and executive suites. And, businesses have responded quickly and decisively.

Various companies will be sending representatives to Glasgow. For them, the implications for whatever negotiation would be made in the conference are massive. Australia's largest independent fossil fuel supplier, Ampol, Ltd. (ASX:ALD), is part of a business delegation called the Climate Leaders Coalition — which also includes other fossil fuel companies like the BHP Group Ltd. (NYSE:BHP) and Coles Group Ltd. (ASX:COL) — who will be attending the conference. Holcim AG (SWX:HOLN), the world's largest cement and building material producer, is a member of the US climate envoy John Kerry's First Movers Coalition, a group of emissions intensive industries also attending COP26.

Insights: National emissions goals stand at the center of domestic policies that will see spending head to sustainable sectors, while key developments at COP26 over carbon markets are set to create challenging new dynamics for fossil fuel producers. Given the domestic nature of these goals, many of the impacts on companies will be felt on a country-by-country basis.

Morgan Stanley’s view is that there are many stocks set to benefit from the trend of decarbonization, including sectors such as renewables; energy storage; hydrogen power; sustainable alternative fuels; carbon capture, utilization and storage; electrification of transport; green mobility; and renovation and energy efficiency. It is bullish on companies like Siemens Energy (ETR:ENR), FirstEnergy (NYSE:FE), SolarEdge (NASDAQ:SEDG), Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM), Enbridge (TSE:ENB), Johnson Mathey (LON:JMAT), NIO (NYSE:NIO), Stellantis (BIT:STLA), and Tesla (NASDAQ:TSLA), among others. Meanwhile the sectors facing headwinds from decarbonization, still according to Morgan Stanley, include energy; power and utilities; cement; chemicals; coal; metals and mining; industrials; automobiles; airlines; and shipping.

The Philippines will also be sending delegates at the conference with representatives from the country’s Finance, Foreign Affairs, Environment and Energy departments. No other member of the Climate Change Commission (CCC) is part of the delegation except Climate Change Commission Chairman-Designate and Finance Secretary Sonny Dominguez who will also lead the country’s delegation.

MORE UPSIDE AHEAD FOR CRYPTO?

The end of September saw the cryptocurrency market in red as Bitcoin (BTC) logged losses for the fifth straight year. However, things turned around at the start of October as BTC rallied from USD 43,000 to USD 48,000 all the way to reaching a new all-time high of USD 66,000. The rally was caused by multiple factors such as the rising inflation rates experienced by several countries as well as the approval of the first Bitcoin ETF in the United States.

Partly as a result of the Federal Reserve’s policy of quantitative easing that brought in more money into the economy, the inflation rate has increased to 5.4%, as of September in the U.S. Meanwhile, the long-awaited approval of the U.S Securities and Exchange Commission (SEC) for a Bitcoin ETF has finally arrived. The Proshares’ Bitcoin ETF (NYSE: BITO), the first crypto ETF ever approved by the SEC, was followed by Valkyrie’s Bitcoin ETF (NASDAQ: BTF). These ETFs were futures backed and more applications from other companies such as the Galaxy Digital and Grayscale are currently pending.

Insights: BTC’s price had been in a consolidation phase since May until October arrived, when it reached a new all-time high. The approval of the two Bitcoin ETFs was a big milestone for the cryptocurrency market, increasing confidence from and enabling access to the big investors. This is also a crucial step that would lead to a mass acceptance of cryptocurrencies. Consequently, investors, especially the institutional ones, gained exposure to BTC as inflation from different countries continue to rise, and they see this leading digital asset as an inflation hedge. Note also that BTC is up 300% since May 2020, making it an attractive investment among institutions and retail investors, while gold, a usual asset of refuge in times of high inflation, is down 5.06% year on year.

NOVEMBER 2021 CALENDAR

[Nov 01, Mon] PH All Saints’ Day [trading holiday].

[Nov 03, Wed] PH PSE:ALLDY IPO (PH PSE).

[Nov 03, Wed] US Federal Reserve policy decision (US FED).

[Nov 05, Fri] PH headline inflation for Oct 2021 (PH PSA).

[Nov 05, Fri] US jobs report (US BLS).

[Nov 10, Wed] PH PSE:SGP FOO (PH PSE).

[Nov 10, Wed] US inflation data for Oct 2021 (US BLS).

[Nov 11, Thu] MSCI re-balancing announcement.

[Nov 15, Mon] JP GDP 3Q 2021 (JP Economic and Social Research Institute-Cabinet Office ESRI-CO).

[Nov 16, Tue] EU GDP 3Q 2021 (EU European Commission EC).

[Nov 19, Fri] PH PSE:KEEPR FOO (PH PSE).

[Nov 24, Wed] US GDP 3Q (US Bureau of Economic Analysis BEA).

*[Nov 26, Fri] PH PSE:SLI FOO (PH PSE).

[Nov 30, Tue] PH Bonifacio Day [trading holiday].

November 3, 2021

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NEWSLETTER 9.1

NOVEMBER 10, 2021

[PH] PSA RELEASES 3Q GDP, INFLATION, AND UNEMPLOYMENT FIGURES

For the past few days, the Philippine Statistics Authority (PSA) released the most recent figures for the third quarter (3Q) 2021 Gross Domestic Product (GDP), the October 2021 headline inflation and the September 2021 labor force statistics.

GDP growth for 3Q 2021 is posted at 7.1%, as opposed to 12% last quarter and -11.6% for 3Q 2020. This is mainly attributed to Wholesale and retail trade; repair of motor vehicles and motorcycles, 6.4 %; Manufacturing, 6.3 %; and Construction, 16.8 %. Positive growth at 7.9% and 8.2% was also recorded for the Industry and Services sectors respectively, while Agriculture, forestry, and fishing recorded contractions of about -1.7%.

Meanwhile, the country’s headline inflation for October 2021 is recorded at 4.6% as opposed to 4.8% back in September 2021. This is mostly attributed to the food and non-alcoholic beverages index where a slower annual increment was registered at 5.3%, in comparison from 6.2% in September 2021. Other commodity indices that contributed to lower inflation would be Alcoholic beverages and tobacco, 9.8%; Education, 0.7%; and Restaurant and miscellaneous goods and services, 3.8%.

On the other hand, the September 2021 Labor Force Survey (LFS) reported the unemployment rate at 8.9%, the highest for this year. This is roughly equal to 4.25 million people, up from the 3.88 million in August 2021. The average weekly work hours of an employed person from the September survey are posted at 40.2 hours per week, higher than what was reported in August 2021 at 39.6 hours. According to the survey, Agriculture and forestry suffered the biggest drop in the workforce of about 862,000 people, followed by Manufacturing, Information and communication, Mining and Quarrying, and Real estate activities.

Insights: The surprising GDP figures and lower headline inflation indicate a recovering economy. However, the LFS tells another story. While the average weekly work hours posted were higher, giving room for greater productivity as may be allowed by the relaxing quarantine restrictions, the unemployment rate shows that the effects of economic recovery do not reach the working population just yet. However, with the relaxed quarantine restrictions and high vaccination rates especially in the NCR, we can expect relatively higher Q4 figures.

[US] CONSUMER INFLATION EXPECTATIONS AT RECORD HIGH

According to the October Survey of Consumer Expectations issued last Monday by the Federal Reserve of New York, consumers' short-term inflation forecasts hit a new high in October, the highest since the Fed began conducting the survey in June 2013. The heads of households that were surveyed expected consumer prices to increase by a median of 5.7% over the short term.

Insights: The Fed pays careful attention to inflation expectations, especially long-term expectations for assessment of future price increase. It sees the rate of inflation at 2% per year, as the one most consistent to sustain maximum employment and price stability, and their job is to control it through various policies. It seems that inflation fears still prevail despite the gradual reopening of the economy across different countries. The specter of the COVID-19 pandemic still remains, and with it, concerns about the fragility of economic recovery. Indeed, just as the Fed Vice Chair had said, “[t]here is no doubt that it is taking much longer to fully reopen a $20 trillion economy than it did to shut it down”.

For further reading, see this article here.

[JP] SOFTBANK PLANS WIRELESS POWER GRID TO CHARGE SMARTWATCHES, EARBUDS

Japanese cellphone carrier SoftBank Corp. (TYO:9984) is planning to replace 200,000 4G base stations with 5G alternatives in Japan, but they will come with an extra feature: wireless charging for your wearables gadgets. As Nikkei Asia reports, rather than just offering a 5G connection for smartphones, SoftBank will allow anyone who stands within 10 meters of these new base stations to recharge their devices. If one is wearing a smartwatch or earbuds, or is carrying a smartphone capable of wireless charging, no cable will be required to facilitate charging. Initially the power transfer will be limited to 1 milliwatt and the charging radius to 10 meters. In the future, SoftBank hopes to extend that range to 100 meters.

Insights: SoftBank, however, needs regulations to catch up first and the general public to get used to the idea of this charging method. One problem Softbank may face is compatibility with other devices. Back in January, Chinese tech company, Xiaomi (HKSE:1810), also unveiled its Mi Air Charge technology. It is capable of charging multiple devices regardless of where they are in a room, but each device needs to be equipped with an array of "beacon antennas" for recharging to work. If Softbank's solution were to use a similar technique, then the majority of existing devices would probably not have been compatible without some form of accessory attached. They have to solve that otherwise it would just be another trial-and-error for this kind of emerging technology.

[CRYPTO] NEW YORK CITY GOVT READIES ITS OWN CRYPTOCURRENCY

Eric Adams, the incoming New York City mayor, is planning to get on board the city’s own cryptocurrency. The new digital asset, known as NYCCoin, will be powered by Stacks (STX). Those who mine or stake in this cryptocurrency will end up keeping 70% of the reward, with the remainder going to the city, which will decide how the same should be spent.

Insights: It is worth noting that the project above is in the early stage which means that revenues for local governments are not guaranteed. Meanwhile, with mass adoption well underway for cryptocurrencies, some governments begin to be keen on taking advantage of the benefits of using it. While skepticism still remains on these digital assets, it is worth considering for governments across the world on how to use blockchain in their services. Government can use blockchain to facilitate certain services such as payment of taxes and other fees and employee payrolls. Furthermore, it is imperative for the government to adapt not just for the sake of modern innovation trends but also of regulatory necessity as more people are getting familiar with cryptocurrencies.

November 10, 2021

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NEWSLETTER 9.2

NOVEMBER 14, 2021

INDEX TRACKER

PSEI 7,382.84 ▲ 42.07 ▲ 0.57% w/w

USDPHP 50.19 ▼ 0.38 ▼ 0.75% w/w

SPX 4,682.85 ▼ 14.68 ▼ 0.31% w/w

NASDAQ 15,860.96 ▼ 110.63 ▼ 0.63% w/w

CRYPTOCAP 2,769,170,941,984 ▲ 77,549,136,468 ▲ 2.88% w/w

[PH] BUREAU OF TREASURY TO SELL NEW TRANCHE OF RTBs

Last Friday, the Bureau of the Treasury (BTr) announced its plan to raise at least Php 30 billion through Retail Treasury Bonds (RTBs) in their 26th tranche (RTB-26). The coupon rate will be determined through a Dutch auction to be participated in by Government Securities Eligible Dealers. The planned RTBs have a term of 5.5 years and would be sold for Php 5,000 per bond, with a swap offer for bonds falling due in 2022. The offer period is scheduled to run after the auction starting on November 16 up to 26. To provide for a clear market for the auction of the RTBs, the Bureau also announced last Friday the cancellation of the scheduled auction for the 5-year and 7-year Treasury Bonds.

Insights: Proceeds from the sale of RTBs recently are meant for injection into the national budget to meet the needs of the country’s COVID-19 pandemic response. This recent offering will, of course, also add into the country’s standing national debt, which is last recorded at a total of Php 11.92 trillion as of the end of September 2021. Considering however, the recent uptrend in the Philippine 5-year bond and 10-year bond, it is likely that RTB-26 may provide for a greater yield than the two most recent RTB offerings to date.

[US] US WORKERS QUITTING AT RECORD HIGH AMIDST RECORD-HIGH INFLATION

The Job Openings and Labor Turnover Summary (JOLTS) released last November 12 by the US Bureau of Labor Statistics showed that a record 4.4 million people quit their jobs in September. Meanwhile, the October 2021 Consumer Price Index (CPI) released last November 10 increased by 0.9%, with inflation year-on-year increasing by 6.9%.

Insights: Persistent labor shortages indicate less productivity. The prospect of less productivity prompts businesses to increase wages to attract more workers, but often at the expense of product variety, quality, or quantity. Raised wages increase spending, thereby creating a possibility of contributing to inflation in the price of goods and services. This is best shown by fast food stores, which are forced to cut back on operating hours and on some menu items due to lack of staff, to be able to offer increased pay and better perks to attract potential employees.

For further reading, see this article here

[JP] TOSHIBA TO SPLIT INTO THREE UNITS

Last Friday, Toshiba Corporation (TYO:6502; NAG:6502) presented its plans to split into three companies by spinning off its core businesses into two companies: one focused on its energy and infrastructure business and the other focused on its semiconductor and data storage business. The original conglomerate will continue holding its 40% stake in chipmaker Kioxia and other remaining assets. In a statement released on the same day, the company hopes that the restructuring would better unlock shareholder value “in a much more credible and effective way”. The restructuring is targeted to be completed by the second half of Fiscal Year 2023.

Insights: Earlier this year, the company faced issues because of a buyout offer from a British private equity fund, raising questions of conflict of interest with then-CEO Nobuaki Kurumatani, who later resigned. It is also speculated that the restructuring was made to encourage activist shareholders to exit from the company. However, the company is not totally inaccurate in pointing out its goal of maximizing shareholder value. Conglomerates tend to be undervalued by the markets, especially where there are divisions or subsidiaries that are not performing as well as the overall conglomerate. But where there are no such businesses, it is possible that the breakup might just create three “lackluster midsize companies”.

[CRYPTO] BITCOIN DECLINES FURTHER FROM ITS ALL-TIME HIGH

Bitcoin (BTC) has continued to decline from its all-time high of around USD 69,000, remaining in a tight range between USD 63,000 and USD 65,000. Many analysts believe that the latest pullback is healthy because it allows the cryptocurrency to grow more sustainably, but also warning investors that further decline may lie ahead.

Insights: The latest correction is needed for the cryptocurrency market to grow at a steady pace. When BTC hits an all-time high, the funding rates tend to get higher also as seen in the chart below. Funding rates are periodic payments to long or short traders based on the difference between the perpetual contract market and the spot price.

When the funding rate is positive, it means that the long position is more dominant, and traders are more bullish. As a result, they overleverage themselves as seen in the chart below.

November 14, 2021

Note also that the crypto fear and greed index is at the 72 level. Thus, greed is in play, and the market is becoming overheated. Because of this, the latest correction is timely to shake out greediness from the market.

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NEWSLETTER 10.1

NOVEMBER 17, 2021

[PH] MERRY MART ACQUIRES STAKES ON LOCAL PHARMACEUTICAL CHAINS

Last October 12, Merry Mart (PSE:MM) acquired a 75.08% equity stake in Carlos Drugs-Lucena Inc. (Carlos SuperDrug), the biggest pharmacy chain in Quezon Province. The Carlos family sold 287,856 shares representing 71.56% of Carlos SuperDrug and had Merry Mart infuse Php 50 million into the company in exchange for another 50,000 shares. The company will also acquire a minimum of 51% stake in ZC Ramthel Corporation (“Cecile's Pharmacy”), the biggest pharmacy chain in Zamboanga City.

"While the MERRYMART Group continues on with its organic expansion, MERRYMART will continue to keep its eyes open for M&A opportunities in both the grocery and pharmacy space that would accelerate its growth to capitalize on the continued consolidation from traditional to modern retail in the Philippines," said Mr. Edgar “Injap” Sia II, MERRYMART Chairman.

Insights: With the goal of Merry Mart for its Vision 2030, to have a total of 1,200 operational branches nationwide would really mean not only expanding through traditional means but with aggressive acquisitions. This move of Merry Mart is interesting as it is tapping into well established stores across the country. We might see more of this news as Merry Mart nears its goal. With these expansions, we also have yet to see how it would reflect on the company’s books but one thing is certain: investors are still not too keen with the news given that it closed at Php 3.18 yesterday, one of the all time lows for the year.

[US] US DOLLAR INDEX AT 16-MONTH HIGH WITH MONTHLY RETAIL REPORT

The US Dollar Index (DXY) rose to a 16-month high on Tuesday after the monthly retail report indicated that American consumers shrugged off rising expenses and drove retail sales higher than forecast last month, while the euro sank amid concerns about growth and an increase of COVID-19 cases in Europe.The retail sales surge is caused by Americans shopping early for the holidays, wanting to avoid high possibility of unavailable goods influenced by supply chain issues.

Insights: It is a given that retail sales may continue climbing as more and more Americans start to prepare for the Holidays along with the companies’ efforts to mitigate the current supply chain issue. The recent aforementioned report is also a sign of economic optimism with slight gains from the three major U.S. market indices. However, considering the recent surge in COVID cases in other countries, especially in Europe, caution remains paramount for both manufacturers and consumers. This just shows how fragile economic recovery can be in these times.

For further reading, see this article here.

[SG] GRAB'S Q3 NET LOSS WIDENS, REVENUE SLIPS AHEAD OF US LISTING

Pandemic restrictions weighed on Grab’s ride-hailing business, causing its revenue to drop 9% to US$157 million for the third quarter ended September. This comes ahead of Grab’s plan to list in the US. The company is on track to close its merger with Nasdaq-listed special-purpose acquisition company (SPAC) Altimeter Growth Corp (NASDAQ:AGC) in Q4 of 2021, it announced in its Thursday’ earnings release.

Amid the fall in revenue, Grab sank further into the red. On an adjusted EBITDA basis, its loss for the quarter stood at US$212 million, deepening 66% from a year ago. Including non-cash items, Grab’s net loss stood at US$988 million, 59% more than the year-ago loss of US$621 million. The Q3 non-cash items of US$748 million included some US$443 million in interest expenses from Grab’s convertible redeemable preference shares, which will cease upon listing. Another US$217 million was attributed to stock-based compensation and fair-value losses on investments. Grab’s Q3 revenue drop comes even as its gross merchandise value (GMV) has grown 32% to US$4 billion.

Insights: The net loss would not directly affect Grab’s US listing as it is due to the recent mobility suspensions particularly in Southeast Asian countries, like the Philippines and Vietnam, brought by COVID-19 spikes around late September 2021. However, Grab is also seeing rising competition in the space from other “super apps” that provide a host of services under one app like Gojek in Indonesia which also plans to go public this year.

[CRYPTO] US SEC REJECTS VAN ECK’S BITCOIN SPOT ETF

The U.S Securities and Exchange Commission (SEC) has rejected VanEck’s application for Bitcoin (BTC) Spot ETF due to potential for fraud and market manipulation. This comes with an order issued on November 12 that the application to list and trade shares in the VanEck Bitcoin Trust had not proven enough that it is "designed to prevent fraudulent and manipulative acts and practices'' and "to protect investors and the public interest."

Insights: Investors have been waiting for a physically-backed Bitcoin ETF as it would help the cryptocurrency market go mainstream. However, the SEC rejected it as they are skeptical of market manipulation on the spot Bitcoin ever. For US investors, it is very disappointing to have that kind of decision as many countries such as Australia and Canada launched their own Bitcoin ETF. Fortunately, something is better than nothing since the SEC already approved a Bitcoin ETF which is futures backed, but several critics said that the approved ETF is inefficient and expensive. Meanwhile, investors should expect that an approval of Bitcoin spot ETF will not happen anytime soon.

November 17, 2021

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NEWSLETTER 10.2

NOVEMBER 21, 2021

INDEX TRACKER

PSEI 7,280.57 ▼ 102.27 ▼ 1.39% w/w

USDPHP 50.30 ▲ 0.11 ▲ 0.22% w/w

SPX 4,697.96 ▲ 15.11 ▲ 0.32% w/w

NASDAQ 16,057.44 ▲ 196.48 ▲ 1.24% w/w

CRYPTOCAP 2,580,820,354,301 ▼ 188,350,587,683 ▼ 6.80% w/w

[PH] BSP STILL KEEPS KEY RATE AT AN ALL-TIME LOW OF 2%

The Monetary Board of the Bangko Sentral ng Pilipinas’ (BSP) announced last Thursday that it will keep key rates or the interest rate for the BSP's overnight reverse repurchase (RRP) facility from the previous months at 2%. Average inflation is forecasted to slightly exceed the target range of 2-4% for the current year. Projected inflation for the years 2022 and 2023 would be on the midpoint range of the target range for 2021. The Board also observed that recent lower-than-expected inflation outturns had offset the rising global crude oil prices, stronger economic activity, and slight depreciation of peso.

Risks to inflation outlook for the next year are closely associated with potential impact of weather disturbances on the prices of key food items, petitions for transport fare hikes, and the possibility of a prolonged recovery of domestic pork supply. The Board is fairly on the upside of the spectrum regarding this. At the same time, possible delays in the lifting of quarantine measures and emergence of COVID-19 variants were also seen as hindrances and could affect inflation.

Insights: The Board observed economic growth within the past month due to increased mobility and consumer sentiment as a result of the relaxed quarantine restrictions and government’s vaccination program. While keeping the key rate at 2% would help our recovering economy, monetary policy by itself cannot provide for a sustainable economic recovery. This must also be coupled with the necessary fiscal and public health considerations. At this point, it seems that the rates will remain as they are for the medium-term, absent any sudden developments that require an immediate reaction from policymakers.

[US] NASDAQ AT NEW RECORD HIGH AMIDST EUROPEAN LOCKDOWNS

Despite the negative market sentiment influenced by European lockdowns with rising COVID-19 cases in Europe, the Nasdaq Composite Index (IXIC) is an exception, hitting another record high of 16,057.44 (+0.72%) points. Meanwhile, the S&P 500 Index (SPX) and the Dow Jones Industrial Average (DJIA) closed at 4,697.96 and at 35,601.98, dropping by 0.14% and 1.40% from their previous close respectively. The banking, energy, and airline sectors all fell on expectations that other European governments, faced with rising COVID-19 cases, might follow Austria's lead and impose a complete national lockdown.

Insights: Nasdaq is an outlier as it is mostly composed of tech stocks that have an advantage from the “new” normal stay-at-home lifestyle. Among these are Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), and Netflix (NASDAQ:NFLX).

Moreover, the growing unease brought about by the European lockdowns triggers worries given the trade relationship between the United States and the European Union. The EU is the US’ second largest importer of US goods. If not properly mitigated, the restrictions being placed again within various EU member-states may dampen the usually positive expectations the US market may have for this year’s Q4.

For further reading, see this article here.

[CN] CHINA'S GAC BREAKS 1,000-KM RANGE BARRIER WITH NEW EV

Chinese automaker Guangzhou Automobile Group Co., Ltd., or GAC Group (HKG: 2238) stole the spotlight at the opening of Guangzhou International Auto Show, unveiling an electric vehicle that can travel over 1,000 km on a single charge last Friday, November 19. GAC’s Aion LX Plus is being billed as the EV with the world's longest range in mass production. The traveling distance is unusual among high-end Chinese EVs. For comparison, the Aion LX only runs between 520 km and 650 km on one charge. GAC will put the Aion LX Plus on the market in January. GAC has developed silicon sponge electrode technology, allowing battery volume reduction while boosting energy density.

Insights: China's new energy vehicles failed to break 10,000 units in sales in 2011. Almost a decade later, 1.37 million units were sold, increasing the number of EVs sold by 16,691%. For the first ten months of the year so far, the figure stands at 2.54 million, with the 3 million figure - three times more than 2020 - possible to be reached for this year. The China Society of Automotive Engineers expects that new energy vehicles will account for 30% of new passenger vehicle sales by mid-decade. While the market for affordable EVs is growing, high-end products are competing on technological prowess.

For more information, see this article here.

[CRYPTO] STAPLES CENTER TO BE RENAMED AS CRYPTO.COM ARENA

Cryptocurrency exchange Crypto.com has agreed to pay an astounding USD 700 million to put its name on the Los Angeles sports stadium Staples Center. The Staples Center will be renamed as Crypto.com Arena on December 25 with the Los Angeles Lakers hosting a game with the Brooklyn Nets. The naming rights will last for 20 years, making it one of the biggest stadium naming rights deals ever.

Insights: After news of the deal broke, the Crypto.com coin (CRO) spiked to around 30% from its then-current price, breaking its all-time high. At the same time, another crypto exchange, FTX, also acquired a 19-year naming rights deal with Miami Heat over the former American Airlines Arena in Miami, Florida at USD 135 million. These are efforts by the cryptocurrency market to establish itself to the public at large. Consequently, the publicity generated by these deals may serve as a gateway to further the mass recall and, eventually, the adoption of cryptocurrencies.

November 21, 2021

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NEWSLETTER 11.1

NOVEMBER 24, 2021

[PH] CONVERGE’S 2ND LARGEST SHAREHOLDER SELLS A THIRD OF ITS STAKE

Last Friday, Coherent Cloud Investments of the private equity investment firm, Warburg Pincus, sold a third of its shares through a block trade. About 420 million shares were sold for Php 30 per share. The firm is the second largest shareholder of Converge ICT Solutions Inc. (PSE:CNVRG) with its stake reduced to 10.25% from 15.80%. From an interview with Rappler’s Business Sense, Converge co-founder and president Grace Uy stated that with the sale their public float will increase from about 20% to 26%, leading to their goal of being included in the next index review for the Morgan Stanley Capital International (MSCI) indices.

Insights: A block trade is just a sale between two parties involving large quantities of shares for a pre-set price. With this block trade, it will give Converge a chance to be included in yet another index. It must be noted that Converge is already included in other indices, such as the Financial Times Stock Exchange Renaissance IPO Index and FTSE ASEAN All-Share Index last June and the Philippine Stock Exchange Index last August. The MSCI Emerging Markets Index is used to measure the performance of key companies in emerging countries from around the world. Thus, inclusion in the index would boost investor confidence (and stock price). At the same time, opportunities to indirectly invest with the company arise through exchange-traded funds that track the said index. The next MSCI index review is scheduled on February 2022.

[US] OIL PRICES RISE FOLLOWING U.S. PLANS TO RELEASE 50M OIL BARRELS FROM RESERVE

Oil prices rose after the United States announced plans to release at least 50 million barrels of oil from its Strategic Petroleum Reserve. At the same time, other countries have made similar plans, with both India and Japan agreeing to release 5 million barrels of crude oil, Britain to release 1.5 million barrels from privately-held oil reserves, and South Korea to release around 4% of its reserve or around 3.8 million barrels. This is their strategic attempt to combat the recent rising gas prices that affects consumers over the world. With this announcement, the Organization of the Petroleum Exporting Countries (OPEC), run by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, considers to lower their production to offset the release of oil barrels.

Insights: Oil prices contribute to inflation since oil is used as a fuel to enable the production and transport of raw and manufactured goods. Consequently, increases in oil prices can increase the prices of goods. The tension between oil-producing countries and the major powers is evident in the recent announcements. Oil producing countries stand to lose potential profit, but the other major powers fear more the effect of inflation. At the same time, there are also environmental considerations that governments have to consider. Nevertheless, this tug-of-war ultimately ends to the detriment of ordinary consumers, who would have to bear the consequences either way in the form of more expensive goods.

[JP] JAPANESE CONSORTIUM PLANS TO INTRODUCE JPY-BACKED DIGITAL CURRENCY BY 2H 2022

A consortium of more than seventy Japanese firms announced this Wednesday of its plans to introduce a digital currency, tentatively called “DCJPY”, with test runs planned as early as this year, with release as early as the latter half of 2022. DCJPY is backed by bank deposits in Japanese Yen (JPY) and is supported, among others, by the big three, Mitsubishi UFJ Financial Group, Inc. (TYO:8306), Mizuho Financial Group, Inc. (TYO:8411), and Sumitomo Mitsui Financial Group, Inc. (TYO:8316), and by other firms, including the East Japan Railway Co. (TYO:9020) and the Kansai Electric Power Co., Inc. (TYO:9503). The Japanese government’s Financial Services Agency (FSA) and the Bank of Japan (BoJ) are also on board as observers.

Insights: The rise of cryptocurrencies, a type of digital currency, prompted governments to make studies for plans to issue their own respective digital currencies. Given the centralized nature of a State’s financial system, these digital currencies are expected to be issued by their respective central banks in the form of Central Bank Digital Currencies (CBDC). An example includes the digital yuan announced by the People’s Bank of China earlier this year. The Bank of Japan, prior to this announcement, was also conducting its own studies and has indicated that such development would need to co-exist with private-sector payment services. The announcement of the DCJPY confirms the need for such a relationship. With the country’s central bank, major banks, and major business firms on board, the announcement is a welcome development in a country where transactions are still being completed in traditional cash and coins and is something other jurisdictions should keep an eye out with respect to developing their own digital currency policies and regulations.

[CRYPTO] RETURN TO USD 60K SEEN AS CRUCIAL FOR BTC

Bitcoin (BTC) continues its sideways action leading several analysts to warn that the leading digital asset needs to recapture USD 60,000 for the next leg of any bull run to continue. Last Monday, BTC climbed from USD 56,766 to USD 58,941 in the span of 25 minutes and then dipped again in the hours that followed.

Insights: The latest Fear and Greed Index indicates a score of 42-Fear. This means that traders are hesitant to make a position in the current state of the market. Looking at the on-chain, BTC All Exchanges Reserve continues to decline as seen in the chart below.

This means that investors are not keen to sell their BTC at the current price. It can also be supported by BTC All Exchanges Netflow. As seen in the chart below, the value of the netflow remains negative indicating that more BTC is flowing out from the exchanges. Thus, investors have bullish conviction in the coming months ahead for BTC.

November 24, 2021

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NEWSLETTER 11.2

NOVEMBER 28, 2021

INDEX TRACKER

PSEI 7,278.44 ▼ 2.13 ▼ 0.03% w/w

USDPHP 50.46 ▲ 0.16 ▲ 0.32% w/w

SPX 4,594.62 ▼ 103.34 ▼ 2.20% w/w

NASDAQ 15,491.66 ▼ 565.78 ▼ 3.52% w/w

CRYPTOCAP 2,456,817,450,702 ▼ 124,002,903,599 ▼ 4.80% w/w

[PH] SPNEC SETS FINAL IPO PRICE AT PHP 1.00 PER SHARE

Solar Philippines Nueva Ecija Corporation (PSE:SPNEC), a subsidiary of Solar Philippines, released to the exchange that for the upcoming offer period of their initial public offering (IPO) on December 1-7, the final price will be Php 1.00 per share. The upcoming IPO will involve up to 2.7 billion shares, or about a third of the company’s outstanding shares, and the proceeds thereof will be used for the construction of the Phase 1A and transmission lines of the solar power project in Nueva Ecija that will generate 50 MW and general administrative purposes. Any excess funds will be allocated for land for future expansion.

Insights: The SPNEC IPO is the first IPO launched following the Supplementing Listing and Disclosure Requirements for Renewable Energy (RE) Companies first issued by the PSE back in 2011. Similar to the listing regulations for REITs, it took almost a decade before a listing was made pursuant to these. Numerous causes can be attributed to this, such as the initially restrictive requirements, which were later amended. However the trend for Environmental, Social, and Governance (ESG) investing worldwide allowed this to happen. Hesitation may also be observed here given the more optimistic or liberal valuations employed pursuant to the rules. It must also be noted that more than half of the country’s energy consumption is generated from coal and natural gas. With the current crisis on climate change, projects such as these are needed. PSE President and CEO Ramon S. Monzon said in a statement, “I am pleased that PSE can support a renewable energy (RE) company with its fundraising requirements. The need for RE is more amplified now as more companies are turning to RE as part of their climate action program.” At the same time, this IPO also adds to the exchange’s goal of increasing the number of listed companies to keep ours, which has the least thereof, in line with our regional peers.

[US] OIL FALLS 13% WITH NEW COVID VARIANT

The newly-discovered COVID-19 Omicron variant triggered global alarm and prompted market sell-offs, including that in oil last Friday. The U.S. West Texas Intermediate crude oil (WTI Crude), one of the three main benchmarks in oil pricing, settled at USD 68.15 (-13.06%) per barrel, dropping down to its lowest level in more than two months, but well above the March 2020 low of USD 18.00. Health experts are heavily concerned with its unusual mutations which are connected with improved antibody resistance that may potentially reduce vaccine protection.

Insights: In addition to the drop in WTI Crude, the two other oil benchmarks, Brent Crude in Europe and Dubai Mercantile Exchange (DME) Oman in the Middle East, experienced similar drops to USD 72.72 (-9.50, -11.55%) and USD 71.39 (-10.21, -12.51%), respectively. This may influence the decision of the US government to postpone the release of oil barrels from its Strategic Petroleum Reserve as was previously announced earlier this week.. However, despite the uncertainty brought about by the Omicron variant, it remains possible that the U.S. government may continue holding these assets in reserve instead of releasing them into the oil market, considering the public interest behind the creation of the Reserve as written in the 1975 Energy Policy and Conservation Act, i.e. the reduction of the impact of severe energy supply interruptions (Sec. 2(2) and Sec. 151(a)).

[UK] FTSE 100 SUFFERS BIGGEST ONE-DAY LOSS IN ONE YEAR BROUGHT BY OMICRON VARIANT FEARS

The Financial Times-Stock Exchange 100 Share Index (FTSE 100), which tracks the 100 largest companies by market capitalization in the United Kingdom, closed 3.7% down at the close of the last trading week, together with the stock market indices in Germany (Deutscher Aktienindex, or DAX), France (Cotation Assistée en Continu quarante, or CAC 40) and the US. Shares in airlines and travel firms were hit hard, with British Airways-owner IAG (LON:IAG) and Wizz Air (LON:WIZZ) down 15%. The UK and other nations have introduced a ban on flights from six southern African countries. UK Health Secretary Sajid Javid said scientists were "deeply concerned" about the new Covid strain and its potential to evade immunity. This is the index's biggest drop in more than a year. The biggest FTSE 100 riser was food delivery firm Ocado (LON:OCDO), up 4.5% in anticipation that online firms could be a beneficiary if tighter restrictions are reintroduced. Cruise operator Carnival (LON/NYSE:CCL) suffered a 15% slide making it the biggest faller in the index.

Insights: According to the head of European equity strategy at French bank Societe Generale, Roland Kaloyan, if the variant is serious, it could “change the macro scenarios altogether”. He further added that the Bank of England “will not hike rates in a period where we can enter lockdown and put serious burden on the economy." Meanwhile, the fact that there is little known about this new variant causes uncertainty in the market, says Brewin Dolphin wealth manager and chief strategist Guy Foster. Supply-chain worries and inflationary pressures have kept the FTSE 100 under pressure, with the blue-chip index lagging its European peers so far this year. Ultimately, whatever happens next would be an interplay of different factors and causes.

[CRYPTO] BTC DIPS BELOW USD 55,000, CRYPTO MARKET CAP DOWN DUE TO NEW COVID VARIANT

Bitcoin (BTC) declined by as much as 7.8% last Friday along with the stock market after news broke of the discovery of the new coronavirus variant in South Africa. The Total Cryptocurrency Market Cap, which monitors the total market capitalization of all cryptocurrencies, also suffered a drop of USD 124 billion (-4.80% week-on-week) to USD 2.456 trillion, as a result of this global selloff. There are reports that this new variant, known as the Omicron variant, is more transmissible and offers greater resistance to COVID-19 vaccines.

Insights: The selloff that happened last Friday suggests that uncertainty is growing in the cryptocurrency market. Investors are dumping their riskier assets in anticipation of possible economic disruptions any future quarantine restrictions may cause. Consequently, the upside for Bitcoin is likely limited, and the market could expect further losses in the short term. The ongoing pandemic continues to show how volatile markets may become because of these developments, despite efforts by different countries worldwide to introduce policies that aim to live with COVID.

November 28, 2021

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NEWSLETTER MONTHLY WRAP-UP

DECEMBER 1, 2021

INDEX TRACKER

PSEI 7,200.78 ▲146.08 ▲2.07% m/m

USDPHP 50.46 ▼0.31 ▼0.61% m/m

SPX 4,567.00 ▼38.38 ▼0.83% m/m

NASDAQ 15,537.69 ▲39.30 ▲0.25% m/m

CRYPTOCAP 2,621,989,807,680 ▼37,223,218,963 ▼1.40% m/m

LANDBANK MERGER AND REORGANIZATION AHEAD?

There are two interesting developments underway for the country’s largest state-owned bank, the Land Bank of the Philippines (LBP), namely: (1) its merger with the United Coconut Planters Bank (UCPB) and (2) the amendment of its charter.

Pursuant to Executive Order No. 142, a merger is underway between the two banks, which are both government-owned and -controlled corporations (GOCC). LBP is the surviving entity after the completion of this process. With the merger, a wider network of about 722 branches and units in the country, especially in the provinces, would provide more convenient banking services to the agricultural sector: farmers and fishers, including the coconut farmers. LBP President and CEO Cecilia Borromeo stated,“Our goal is to ensure that we are able to efficiently manage and protect government resources in these banks for the ultimate benefit of the Filipino people. With the merger, we will be in a better position to grow our loan portfolio in order to meet the needs of the people, especially the unbanked and underserved Filipinos.”

On the other hand, House Bill 10440, which seeks to amend LBP's charter, is presently pending in the House of Representatives. Section 3 (13) of the proposal allows the bank to offer and issue common and preferred shares of stock, subject to the Secretary of Finance’s approval upon the Bank Board’s recommendations and to other applicable laws, rules, and regulations, provided that (1) the National Government maintains two-thirds (⅔) ownership of the total outstanding common voting shares of the Bank and (2) no individual or group shall vote more than five percent of the bank’s total outstanding capital stock. “Amending the LandBank Charter to institute a standalone legal and operational framework for the bank will place it in a stronger position to pursue further the developmental objective of the bank while keeping up with a constantly shifting financial landscape, sustaining its institutional viability amid a highly competitive banking industry,” LBP President and CEO Cecilia Borromeo said during the House Banks committee hearing last November 10.

Insights: This is not the first time LBP undertook a merger. The last time was in 2016 with the Development Bank of the Philippines (DBP), but the same was ditched given the different mandates and markets the two banks cater. LBP serves the agricultural sector, while DBP the industrial sector. Finance Secretary Carlos Dominguez III stated that, “Both were created for different purposes, I don’t see any rational reason to put them together.” The LBP-UCPB merger presents another opportunity as both cater to the agricultural sector, with the UCPB specifically catering to coconut farmers. This could benefit the banks’ intended markets with the expanded agricultural loan portfolio the merger would bring. However, Fitch Ratings reported a downside to the merger. It pointed out that LBP’s financial strength could be weakened by UCPB, with its existing liabilities. According to the report, UCPB has about Php 22 billion non-performing loans at the parent level at the end of 2020. This is where Senate Resolution No. 771 comes into play as Senator Leila De Lima seeks an investigation on the credit rating for the upcoming merger.

LBP’s privatization also presents an opportunity considering its proposed ability to be listed in the PSE subject to the limitations mentioned on the bill. The listing of a state-owned bank can be an attractive pick considering the sovereign guarantees that come with such GOCCs. However, when it is in the stock market, it also is subject to underlying risks, considering that it is part of the banking sector. When the pandemic hit the country, the lockdowns which affected economic activity affected the ability of borrowers to pay their existing loans, one of the main sources of income for banks, increasing default risks. In a period of low interest rates, banks get less profit from the loans they give out. Nevertheless, these are exciting developments that can be looked forward to in the following months.

OMICRON VARIANT AND FEARS INFLUENCE U.S. MARKET UNCERTAINTY

Last Monday, stocks rebounded after Friday’s sell off following President Joe Biden’s announcement that the new COVID-19 variant is “a cause for concern, not a cause for panic”, stating that lockdowns are not part of the plan, but more vaccinations, boosters, and more. As such, Moderna (NYSE:MRNA) was 11.8% higher on Monday after its 20% climb on Friday. However, on Tuesday, Moderna’s CEO believes that current vaccines won’t be as effective against the new variant as it did on the previous ones. Because of this, global stocks and oil prices are plummeting again.

Insights: The new variant’s existence overwhelms any positive news including Biden’s sentiment and decision not to lockdown cities. It is thus expected that any short term economic optimism may be delayed. According to The New York Times’ U.S. COVID Case Count, the October 31 (see Figure 1) and November 29 (see Figure 2) seven-day average for COVID cases are at 71,686 and 80,684, respectively. The new cases were 80,684 versus a staggering 216,312 cases. In addition to this, it is observed that the CBOE Volatility Index (VIX), a measurement of volatility in the stock market, is increasing (see Figure 3). Because the number of cases and the VIX are both increasing, the market fear and uncertainty we’re experiencing is reasonably expected.

DIDI'S POTENTIAL DELISTING IS A RISK FOR ALL US-LISTED CHINESE COMPANIES

Shares of China’s Didi Global Inc. (NYSE:DIDI) sank sharply, dropping more than 6% last Friday after Bloomberg reported that Chinese regulators have asked the firm’s executives to formulate a plan to delist from the US. Chinese regulators want the Chinese ride-hailing giant Didi to delist from the New York Stock Exchange because of concerns about leakage of sensitive data. Didi reportedly drew the ire of regulators by pushing ahead with an IPO without resolving outstanding cybersecurity issues that the authorities wanted solved. Didi is China’s largest ride-hailing app and holds lots of data on travel routes and users.

The Cyberspace Administration of China has asked Didi to work out the details for a delisting which will be subject to government approval. Didi could either go for a privatization or a listing in Hong Kong after delisting in the US. The risk of this strange outcome seems to be weighing on many Chinese stocks like Alibaba Group (NYSE:BABA) and Nio (NYSE:NIO).

Insights: A state-directed delisting would be an unprecedented move but highlights Beijing’s continued push to rein in technology giants and put them under tighter regulation. Despite the rumors, there are hundreds of Chinese companies listed in the US that Chinese authorities are working to avoid being delisted, according to the Director General of the China Securities Regulatory Commission‘s (CSRC) international affairs department. However, Recent moves from both the Chinese and U.S. governments could have Chinese stocks trading in the U.S. barreling toward delisting in the next three years. If that happens, experts say typical investors of Chinese companies could be left holding the bag when the music ends.

LENGTHENING CYCLE FOR BITCOIN?

Back in the day, Bitcoin (BTC) halving was the prevalent theory on how the cryptocurrency market cycle works. It is a once-every-four-years event that halves the reward for mining a block. However, with the recent price action of BTC, some analysts argue that the lengthening cycle theory is at work today. It assumes that each successive cycle lasts longer, measured from the absolute bottom to the absolute top of the BTC price. If the BTC halving cycle is to be based on, crypto analyst @ByzGeneral noted that the 2017 bull market lasted about 35% longer than the 2013 bull market. He also said that if the current cycle would last the same as the previous one, then the end of Q1 2022 would be the end of the bull market. However, BTC reached a new all-time high of USD 67,000 last 20 October 2021 then retraced back to USD 54,000 range. This further confirms that the current cycle will last longer than the previous cycle.

Insights: If the current market were to be best explained by the lengthening cycle, then there would be several implications. First, Bitcoin established itself as an asset class. Unlike previous cycles where price action was driven by retail investors, the current one is driven primarily by institutions, such as Morgan Stanley, MicroStrategy, and Square, and by nations, such as El Salvador, investing in BTC. Second, BTC needs more time each cycle to reach its absolute peak. This comes as a natural implication from the lengthening cycle. Thus, investors must have more patience in the current cycle. Third, the return on investment (ROI) is lower each cycle since the market capitalization for BTC is growing over time, signalling the market maturity and a volatility reduction. Whether the lengthening cycle is at play or not, investors must have strategies in place to navigate the cryptocurrency market properly.

DECEMBER 2021 CALENDAR

[Dec 02, Thu] US NASDAQ: GRAB listing.

[Dec 06, Mon] PH PSE: Effective new trading hours - 09:00-12:00; 13:00-15:00.

[Dec 07, Tue] PH PSA: November 2021 headline inflation release.

[Dec 07, Tue] PH PSA: November 2021 labor report.

[Dec 07, Tue] PH PSE:MEDIC IPO.

[Dec 08, Wed] PH Feast of the Immaculate Conception [trading holiday]

[Dec 10, Fri] US BLS: November 2021 CPI release.

[Dec 16, Thu] PH BSP: Monetary Board meeting.

[Dec 16, Thu] US Fed: FOMC meeting.

[Dec 17, Fri] PH PSE:SPNEC IPO.

[Dec 22, Wed] US BEA: US Q4 2021 GDP release.

[Dec 30, Thu] PH Rizal Day [trading holiday]

Figure 1. New COVID-19 cases detected in the United States as of Oct 31, 2021.

Figure 2. New COVID-19 cases detected in the United States as of Nov 29, 2021.

Figure 3. Chart of the CBOE Volatility Index (VIX) with its closing values as of Mar 15, 2020 and Nov 28, 2021, respectively.

For further reading, see this article here.

December 1, 2021

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NEWSLETTER 12.2

DECEMBER 5, 2021

INDEX TRACKER

PSEI 7,055.19 ▼ 223.25 ▼ 3.10% w/w

USDPHP 50.40 ▼ 0.06 ▼ 0.12% w/w

SPX 4,538.43 ▼ 56.19▼ 1.23% w/w

NASDAQ 15,085.47 ▼ 406.19 ▼ 2.61% w/w

CRYPTOCAP 2,580,714,444,139 ▲ 123,896,993,437 ▲ 4.73% w/w

[PH] UNIONBANK “PREFERRED BIDDER” IN SALE OF CITIBANK PH

Citigroup has been preparing its exit from its retail banking business in thirteen markets across Asia and Europe, Middle East, and Africa (EMEA) in mid-2021 as it focuses its Global Consumer Bank on the four wealth centers of the said regions, Singapore, Hong Kong, Dubai, and London. “In Asia and EMEA (Europe, Middle East, Africa), we will focus our resources on higher-returning institutional businesses and double down in wealth, where we have distinct competitive advantages and meaningful potential for growth,” Mark Mason, Citi’s Chief Financial Officer said. According to sources from Bloomberg, the “preferred bidder” from the Philippines is the Aboitiz-led Union Bank of the Philippines (PSE:UBP). In a disclosure to the Philippine Stock Exchange, UBP clarified that while they confirm that they are in discussions with Citigroup for the potential acquisition of Citi’s retail banking business in the country, the alleged deal remains in the preliminary stages.

Insights: Being the largest foreign bank in terms of assets in the country, Citibank Philippines would be an attractive acquisition for the big banks, as shown by the interest BDO Unibank (PSE:BDO), Bank of the Philippine Islands (PSE:BPI), and Metropolitan Bank and Trust Co. (PSE:MBT) manifested earlier this year. Aside from the advantage UnionBank has in terms of financial technology, Merkado Barkada also observed that the sale, if pushed through, would substantially enlarge UBP. In its plan, UBP sought to absorb Citibank Philippines’ 1,800 employees. UnionBank, as of 2020, has about 3,500 employees. With this news, UBP’s price closed last Thursday at Php 111, up by more than 6% from the opening price of Php 104.

[US] GRAB PLUNGES AFTER SPAC MERGER DEBUT

Last Thursday, Singapore-based Grab Holdings Inc. (NASDAQ:GRAB) debuted in the Nasdaq Exchange after its merger with the SPAC, Altimeter Growth Corp. (NASDAQ:AGC). Although Grab rose 20% intra-day, its closing price plummeted by 20% at close. The deal was valued at around $40 billion, which makes it the largest IPO by a southeast Asian company in US history.

Insights: The same thing also happened to India’s Paytm (NYSE: PAYTM), crashing down 27% of its value on its first day, which was blamed on its aggressive valuation. Despite this setback, Grab's listing may help highlight the investment opportunities in Southeast Asia, a region with a population of almost 650 million people. However, the $40 billion valuation made for the listing could have been overvalued as Grab reported a net loss of $988 million for Q3 2021 caused by mobility and delivery suspensions brought by COVID-19. Additionally, its business model is linked with the gig economy, which currently faces regulatory pressure in jurisdictions where Grab is present.

[CN] CHINA PROMOTES SHORT-SELLING BY LETTING INSURERS LEND SECURITIES

Chinese banks, brokerages and mutual fund houses can now lend securities holdings to other market players, such as short-sellers, for interest income. This is after China on Friday, December 3, authorized its insurers to take part in securities lending. The China Banking and Insurance Regulatory Commission (CBIRC) published rules on Friday allowing insurers to participate in securities lending. Chinese indices rose despite the slump of other markets last Friday

Insights: This could potentially boost short-selling activities in the country's stock and bond markets. improving China's short-selling mechanism can decrease market volatility, and push market prices of securities closer to their intrinsic value. It will also reduce the chance of market bubbles, while creating additional income for insurers, according to a hedge fund manager at Water Wisdom Asset Management, Yuan Yuwei.

[CRYPTO] ETH A BETTER STORE OF VALUE THAN BTC?

University researchers claim that Ethereum (ETH) could be a better store of value than Bitcoin (BTC) due to recent updates in the Ethereum blockchain. In their paper, they argue that the arrival of Ethereum Improvement Proposal 1559 (EIP 1559) has significantly reduced the supply of new ETH hitting the market because part of the transaction fees paid by users is burned, taking coins out of circulation forever. Moreover, the authors expect the issuance rate of ETH to settle at 0.98%, while BTC's supply will increase by 2% over the same period.

Insights: The recent update on the Ethereum blockchain made the second leading digital asset more valuable to hold due to the volume of ETH being burned exceeds what is created through block rewards in some period. Because of this, investors may be attracted more to ETH than to BTC. While BTC’s price has risen by 94% since January, that of ETH during the same period rallied by more than 540%. Furthermore, ETH’s value proposition derives from several applications involved in decentralized finance (DeFi), nonfungible tokens (NFTs), gaming, and stablecoins.

December 5, 2021

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NEWSLETTER 13.1

DECEMBER 8, 2021

[PH] PSA: INFLATION AND UNEMPLOYMENT EASED IN NOV 2021

The Philippine Statistics Authority (PSA) posted the headline inflation for November 2021 at 4.2% which is lower as opposed to last month’s reported inflation, 4.6%. This downtrend was mainly attributed to the slowdown of the inflation of the following indices: food and non-alcoholic beverages currently at 3.9% (previously 5.3%), alcoholic beverages and tobacco at 7.5% (previously 9.8%), and furnishing, household equipment and routine maintenance of the house at 2.4% (previously 2.5%). However, an uptrend was seen on indices of transport at 8.8% (previously 7.1%) and housing, water, electricity, gas and other fuels at 4.6% (previously 4.4%)

The results of the October 2021 Labor Force Survey were also posted, with the unemployment rate at 7.4%, one of the lowest for 2021. This is translated to 3.50 million Filipinos with the age of 15 years and above that are unemployed. In comparison from last year, construction, transportation and storage, wholesale and retail trade, repair of motor and motorcycles, other service activities, and arts, entertainment and recreation are the industries that showed the largest decline in employment.

Insights: The previous weeks have seen lower COVID-19 infection rates and further economic reopening nationwide. These are expected to provide the needed recovery in national economic figures. However, as opposed to inflation year-on-year or back in November 2020, the inflation rate was far lower at just 3.3%. At the same time, definite recovery remains far from certain. Although the Omicron variant remains to be not detected in the country, its detection here may offset any gains we may have achieved recently. On its current trajectory by Statista, we could note that the high inflation reported last month could just be transitional. As the Bangko Sentral ng Pilipinas noted that food inflation eased down on a year-on-year basis as high prices on meat was reported last year however non-food inflation was just higher due to high electricity rates and domestic petroleum prices. We could see prices leveling out if the economy remains stable as it is.

[US] INTEL PLANS TO IPO ISRAELI SELF-DRIVING SUBSIDIARY

Yesterday, December 7, Intel (NASDAQ:INTC) announced its plans to list its Israeli subsidiary Mobileye on the stock market, hoping to raise more value for Intel and its stakeholders. Mobileye, a company founded in 1999, aims to reduce vehicle injuries and fatalities using collision-avoidance systems on the market. In 2017, Intel acquired Mobileye’s self-driving car technology, with the deal valued at $15.3 billion.

Insights: Intel’s announcement prompted its shares to rise by nearly 6% from December 6’s $50.99 close to December 7’s $54.66 open. Intel’s self-driving unit is focused on developing vision technology for Advanced Driver Assistance Systems (ADAS), which accounts for much of its revenue and growth. Considering however that most of the proceeds of the proposed IPO will go to Intel, this move may possibly be a quick cash out from the increasing popularity of self-driving cars, while retaining control, to obtain funding in alleviating the semiconductor shortage issue and an opportunity for investors to hop in the autonomous vehicle industry. Leaders of the industry include Alphabet’s (NASDAQ:GOOGL) Waymo and General Motors’ (NYSE:GM) Cruise, whose fully autonomous ride services operate in San Francisco. Despite its popularity as an automobile company, Tesla, however, is not yet part of the list of those launching fully autonomous vehicles.

[HK] CHINESE AI STARTUP SENSETIME GROUP TO LIST IN HONG KONG

Yesterday, the Chinese artificial intelligence startup SenseTime Group, Inc. launched its initial public offering in the Hong Kong Stock Exchange, seeking to raise up to USD 767 million from the sale of 1.5 billion shares. Reuters sources indicated that the tranche allotted for institutional investors was already covered within hours of the launch, with eight cornerstone institutional investors subscribing for an amount comprising about USD 450 million, or 58.6% of the deal. According to its expected timetable, SenseTime shares are due to price this Friday and will be listed on the HKSE next Friday, December 17, under the code 0020.

Insights: SenseTime, known for its facial recognition technology, is China’s largest AI startup with the backing of the Japanese SoftBank Group (TYO:9984), the Singaporean government-owned Temasek Holdings, and the Chinese Alibaba Group (NYSE:BABA; SEHK:9988). The timing of SenseTime’s IPO seems to be off with the recent sell-off in Chinese technology stocks as a result of Beijing’s heightened scrutiny of tech companies and their data security practices as shown by Didi’s (NYSE:DIDI) recent announcement to delist from the New York Stock Exchange. Interestingly, SenseTime is among the twenty-eight Chinese tech companies that were placed on a U.S. blacklist back in 2019 on allegations of human rights abuses against Muslim minority groups in China. These hurdles seem to have been the cause of the substantial reduction of the capital sought to be raised, which was reported to be originally at USD 2 billion. Despite the reduced valuation, SenseTime co-founder and chief executive Xu Li believes that the company, which primarily sells licenses to various governments and businesses to use its technology, has “a clear path to profitability” as a result of its buildup of basic infrastructure for the AI industry.

For the SenseTime prospectus, please see here.

[CN] CHINA PROMOTES SHORT-SELLING BY LETTING INSURERS LEND SECURITIES

[CRYPTO] NFT MARKETPLACE OPENSEA PLANS TO IPO

NFT marketplace OpenSea CFO Brian Roberts plans to do an initial public offering (IPO), thinking that the same would be well-received in the public market given the company’s fast growth. He also revealed that the IPO would serve as a vehicle to raise additional funds to be used for acquiring companies, strike partnerships, and joint ventures. Furthermore, OpenSea is talking to investors about raising additional funds and is in the process of determining what type of investor to add to its existing rosters. However, several criticisms arise after the company’s IPO plan was announced, finding the same to be against the free-spirited, decentralized nature that crypto companies embrace.

Insights: Planning an IPO for OpenSea has received a fair share of debate among several of its users. Some questioned the company on why they should not launch a governance token which could be distributed to the users of the NFT marketplace through airdrop. Others argued that just because some users used OpenSea to transact a few times, they are not entitled to receive a free airdrop. Whatever the case here, OpenSea has been successful so far not because of the investors but because of its users, so it is quite logical for the company to consider the insights and sentiments of the users regarding their IPO plans.

December 8, 2021

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NEWSLETTER 13.2

DECEMBER 12, 2021

INDEX TRACKER

PSEI 7,192.17 ▲ 136.98 ▲ 1.94% w/w

USDPHP 50.28 ▼ 0.12 ▼ 0.25% w/w

SPX 4,712.02 ▲ 173.59▲ 3.82% w/w

NASDAQ 15,630.60 ▲ 545.13 ▲ 3.61% w/w

CRYPTOCAP 2,227,741,081,750 ▼ 352,973,362,389 ▼ 13.68% w/w

[PH] CREIT MOVES OFFER PERIOD TO EARLY 2022

Citicore Energy REIT Corp. (PSE:CREIT) have moved their offer period for the upcoming IPO to February 2-8, 2022 as approved by the Philippine Stock Exchange (PSE). Originally, it should have run from November 6 to December 3, 2021 and it was set to be listed in the PSE on December 13. However, according to an interview with Merkado Barkada with CREIT’s parent company, Megawide (PSE:MWIDE), the offering period was moved to early 2022 considering the scheduling conflict with EEI’s preferred shared listings. It was found out that EEI Corp. (PSE:EEI) has submitted their paperwork earlier than CREIT and that PSE handles the scheduling of the IPOs so as to prevent an overlap of “dividend play offerings.”

According to the preliminary REIT plan, the offer price is estimated to be up to Php 3.15 per share. For retail investors that will be purchasing their shares through PSE EASy, about 30% of offered shares will be allocated to them with a minimum subscription of 1,000 shares (at most Php 3,150) and multiples of 1,000 shares thereafter. The proceeds of the sale will be used for the acquisition of properties within the Citicore Group that are owned by subsidiaries Citicore Bulacan and Citicore South Cotabato.

Insights: CREIT so far is the odd-one-out in the present (and upcoming) roster of Philippine REITs as we approach the New Year. Unlike those of the listed ones presently, CREIT's properties are composed of solar power plants, presenting an opportunity for diversification for investors into REITs. MWIDE said that the additional time created as a result of the change in schedule would help educate potential investors about the offering, given that CREIT is the first of its kind among REITs. It was also observed by the company from the interview that there are only two real working weeks in the month of December due to all the holidays, as a result of which most of the fund managers are not in office. Thus, the move of the offering period allows for an uninterrupted book-building process. Indeed, the underwriters of this IPO should ensure that the valuation of this upcoming IPO is one that would be beneficial to both investors (institutional and retail) and management.

[US] NEW CPI DATA FAILS TO DISHEARTEN INVESTORS

Last Friday, the US Bureau of Labor Statistics released the November 2021 consumer price index data. Month-on-month, prices increased by 0.8%, slightly lower than 0.9% recorded in October. Year-on-year, however, the all-items index rose by 6.8%, the highest in almost forty years. In line with this, the day-on-day data of Nasdaq and S&P 500 rose slightly higher by 0.73%% and 0.955%, respectively.

Insights: The news failed to dishearten investors as stocks rose despite the record-high increase in inflation, coinciding also with those in other jurisdictions, such as Norway (5.1%), Germany (5.2%), and Greece (4.8%). It must be pointed out, however, that the Federal Reserve’s current assets are worth $8.664 trillion as of last Monday, December 6, more than 200% compared to $4.311 trillion back in March 9, 2020, just before the first Covid lockdowns were implemented worldwide. On the other hand, the new variant may not be of great worry as the reported cases are mild so far, and studies show that Omicron may be milder than Delta. The upcoming FOMC meeting this week, therefore, is something to look forward to.

[CN] ALIBABA DOUBLES DOWN ON LOSS-MAKING TOUR AGENCY UTOUR

Chinese e-commerce giant Alibaba Group Holding Ltd. (HKSE:9988; NYSE:BABA) is making a second equity investment in local tour operator UTour Group Co. Ltd. (SZSE:002707), which is struggling with the impact of the Covid-19 pandemic, as Beijing heightens its scrutiny of mergers and acquisitions that may lead to a monopoly. According to an exchange filing on Thursday, Alibaba China Technology Co. Ltd., an Alibaba subsidiary, has signed a deal to spend CNY 240 million (USD 38 million) on 54.8 million shares in money-losing UTour from its Chairman Feng Bin and Vice Chairman Guo Hongbin doubling its stake from 5.02% to 11.06%.

Insights: In the first seven months of 2021, Alibaba – excluding its affiliates invested CNY 20.8 billion in 22 deals. The deals included investments in community group buying start-up Nice Tuan and Chinese power bank rental firm Energy Monster (NASDAQ:EM), and a USD 350 million investment in Turkish e-commerce firm Trendyol Group. Fourteen of Alibaba's investment projects had Alibaba as the sole investor. Half were considered "strategic" due to their long-term impact on its future development. Alibaba tends either to let money flow to mature projects, investing huge amounts to gain more say in the projects, or to invest in projects that help it replicate the business that it is the best at, especially overseas. The investment on UTour comes at a time when Alibaba is repositioning itself for future growth after a year of regulatory challenges and ready for a bet on the recovery of the tourism sector from the pandemic.

[CRYPTO] BTC DROPS AS EVERGRANDE WAS DECLARED IN DEFAULT

Bitcoin (BTC) slides down from USD 50,000 as trading volumes continue to slump, hitting lows of around USD 47,000. This is due to Chinese developer Evergrande being declared in default after failing to pay coupons due on its offshore dollar-denominated bonds. Consequently, investors are fearful that its collapse could send shockwaves through the global economy.

Insights: BTC’s price is stuck below USD 50,000 as uncertainty continues to dominate in the crypto markets. With several factors including regulation uncertainty, FED’s tapering, and Omicron variant that caused BTC to plummet, the latest drop may be attributed to Evergrande’s default. However, the company’s default may have been anticipated beforehand by investors, making the drop not as severe. Given this, even though BTC has positioned itself as a hedge against inflation, it is worth noting that it is not immune to movements of other markets and the overall macroeconomic situation. With institutional investors continuing to inject money into the crypto markets, it is expected that BTC would be affected by how the macroeconomy behaves.

December 12, 2021

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NEWSLETTER 14.1

DECEMBER 15, 2021

[PH] FIGARO MOVES IPO TO JANUARY 2022

Figaro Coffee Group, Inc. (PSE:FCG) moves its IPO offer period from December 16 - 22, 2021 with a listing date of December 31, 2021, to January 10 – 14, 2022 with a listing date of January 24, 2022. In its disclosure to the Exchange, the reason for the company to move its offer period is because “in deference to the upcoming holiday season, specifically to ensure the timely completion of the documentary requirements of the investing public for the Offer.”

The IPO is to be priced at up to Php 1.28 per share, with about 1.26 billion shares being offered in total. Pricing date is also moved from December 10 to December 22. The proceeds of the IPO will be used to fund the following plans: store openings and renovations, commissary expansion, debt repayment, IT infrastructure developments, and potential acquisitions.

Insights: Although originally planned as such, listing on New Years' Eve can be indeed taxing administratively. The bourse earlier announced its plan for a half-day trading schedule for the same day, giving traders a shorter opportunity to trade the stock had the schedule gone through as originally planned. However, another reason could be what happened to Mediline, the most recent IPO in the market. Justin T. Liu, FCG’s chairman and director, said in an interview with ANC News’ Market Edge that although what happened to the Medilines (PSE:MEDIC) IPO is a bit concerning, they cannot really say for sure that what happened there will also happen to FCG as they are in different industries. Merkado Barkado observed that if Mr. Liu really did think that MEDIC might negatively affect FGC’s IPO during its own offer period or its stock price performance post-IPO, it should be in FGC’s best interest to delay its offer period. MEDIC is dubbed as having the worst-performing first day of IPO trading in modern PSE history by MB. Although some stocks like Axelum (PSE:AXLM) and Converge (PSE:CNVRG) performed badly on their own first trading days, that of MEDIC with its 30% drop is incomparable, prompting pushes for PSE to investigate the matter.

Watch Justin Liu's, Director and Chairman of Figaro Coffee Group Inc., interview on the receptive investor market and the ongoing economic recovery to buoy its stock exchange debut even during the COVID-19 pandemic here.

[US] STOCKS FALL IN ANTICIPATION OF FOMC MEETING

Last night, stocks fell ahead of the Fed decision, with Nasdaq dropping to 15,237.65 (-1.14%), as tech stocks showed weakness last Tuesday. This included, among others, Microsoft Corp (NASDAQ:MSFT) and Adobe Inc. (NASDAQ:ADBE) closing at 328.34 (-3.26%) and 614.86 (-6.60%). The Federal Open Market Committee (FOMC) is responsible for determining the direction of monetary policy. The committee comprises 12 members: 7 from the Board of Governors, the president of the Federal Reserve Bank of New York, and the last 4 from the 11 Reserve Bank presidents on a rotational basis. The members meet eight times a year to determine any necessary changes to the country’s monetary policy, with the last meeting of the year falling on December 14-15.

Insights: FOMC meetings are not held in public, but the minutes thereof are made public shortly thereafter, thus creating space for speculation on Wall Street in anticipation thereof. If the Feds decide to tighten the monetary policy, interest rates increase, and borrowing money would become more expensive. This gives investors the incentive to put their assets in less riskier instruments, prompting the stock market for a possible correction. Whatever decision the FOMC may make tomorrow would likely consider the recent 40-year high record in inflation last week.

[UK] TRAVEL STOCKS DRAG FTSE 100 LOWER AMID REINTRODUCTION OF RESTRICTIONS

FTSE 100-listed travel stocks were under pressure on Monday, December 13, 2021, as concerns over the spread of the Omicron variant resurfaced. British Airways parent International Consolidated Airlines Group (LSE:IAG) and Premier Inn owner Whitbread (LSE:WTD) were among the UK100’s biggest losers dropping up to -5% and -3%, respectively. Rolls-Royce (LSE:RR), which is a major builder of plane engines, also struggled closing -4.77%. Betting stocks Entain (LSE:ENT) and Flutter Entertainment (LSE:FLTR) were also among the worst-hit yesterday, losing 3.74% and 3.09%, respectively. On the other hand, mining firms Fresnillo (LSE:FRES) and Antofagasta (LSE:ANTO) were a bright spot on what was a disappointing day for the FTSE 100 which closed at -0.83% on Monday, closing at +2.35% and +1.13%, respectively.

Insights: This drop may be attributed to new restriction guidelines in the country. British Prime Minister Boris Johnson on Wednesday announced COVID-19 passes would be mandatory for entry into nightclubs or large venues and urged individuals to once again work from home. Expectations of more restrictions around the globe are weighing on the sector despite the lack of data for the Omicron variant as well as assessments of some vaccine brands like Pfizer (NYSE:PFE) saying they could “neutralize” it.

[CRYPTO] NIKE IS GOING TO METAVERSE

Nike (NYSE:NKE) has acquired a company that makes virtual sneakers in an attempt to enter the metaverse. RTFKT, a start-up company that was founded last year, has been purchased by Nike for an undisclosed amount. Nike’s CEO John Donahoe hopes that the acquisition will extend the brand’s digital footprint, capabilities and presence.

Insights: Metaverse and NFT hype brought several companies on board as they believe that these are the future. Recently, Facebook (NASDAQ:FB) renamed its brand to Meta to represent its brand to the metaverse world. Also, Adidas (FWB:ADS) has also entered the metaverse by collaborating with some of the famous names in NFT, like Bored Ape Yacht Club and PUNKS Comic. With the recent arrival of Nike in metaverse, one thing is certain: these companies are trying to pioneer the future where users live in a digital universe by combining multiple elements of technology.

December 15, 2021

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NEWSLETTER 14.2

DECEMBER 19, 2021

INDEX TRACKER

PSEI 7,297.66 ▲ 105.49 ▲ 1.47% w/w

USDPHP 50.14 ▼ 0.14 ▼ 0.28% w/w

SPX 4,620.64 ▼ 91.38▼ 1.94% w/w

NASDAQ 15,169.68 ▼ 460.92 ▼ 2.95% w/w

CRYPTOCAP 2,163,479,806,868 ▼ 64,261,274,882 ▼ 2.88% w/w

[PH] BSP KEEPS KEY RATES UNTIL END OF 2021

Last Thursday, the Monetary Board of the BSP met for the last time this year and decided to maintain key interest rates, considering that the projected inflation path, i.e. within the inflation target band of 2-4 percent and average inflation is at the midpoint of the target range for 2023, remains the same from its last assessment last month. Upside risks to inflation for the following year include constraints on the supply of essential food items and petitions for transport hikes. While from a global standpoint, strong demand and supply-chain bottlenecks could pose risks for increased international commodity prices. On the other hand, the emergence of new COVID-19 variants could pose a downside risk to inflation, as variants could be more contagious and/or severe, raising the risk of the reimposition of stricter health measures/quarantine restrictions and curbing consumer-side demand, as was discussed in the previous meeting. The Board also observed that economic growth is on firmer ground and that the country is on a manageable inflation environment.

Insights: The Board observed that the signs of increased economic activity are still present as supported by the vaccination program and the relaxation of quarantine protocols. For the past year, the rates are kept at an all time low of 2%. They may still be kept that way for the succeeding quarters to maximize whatever growth in economic output may be realized, given that the Philippine economy is still operating at a relatively higher capacity than in the previous twelve months and in consideration of other issues, including natural calamities, such as the storms affecting various parts of the country the latter half of this year, as well as in the latter half of the previous year, in addition to the public health emergency we are all in because of the pandemic, whose Omicron variant, while already present in small numbers, continues to remain a risk that could lead to a reimposition of stricter quarantine protocols should a surge of such cases take place, considering the colder weather and the holiday season.

[US] STOCKS FALL AS INTEREST RATES EXPECTED TO RISE IN 2022

Last Thursday, US stocks fell following the Fed’s decision to reduce its monthly bond purchases and to increase rates by at most three times next year. The Fed announced that it will be buying USD 60 billion worth of bonds each month starting in January 2022, which is half its level from November’s $120 billion taper. At the close of trading that same day, Nasdaq closed at 15,180.43 points, 2.5% lower than its previous day close of 15,565.58 points, while the S&P 500 closed at 4,668.67 points, dropping by 0.9% from its previous day close of 4709.85 points. Some of the heavyweights that dragged the indices include Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), which dropped by 6.8% and 5.4%, respectively.

Insights: The tighter monetary policies and the reduced buying of bonds are integral in making interest rates increase in order to combat rising inflation. The recently released Consumer Price Index (CPI) summary reported a year-on-year increase of 6.9% (a forty-year record high), which is significantly higher compared to what policymakers believe to be an acceptable inflation rate, i.e.around 2% or below only. Nevertheless, money supply continues to grow, albeit at a slower pace. In anticipation of increased interest rates, which makes borrowing more burdensome (and lower-risk instruments more attractive), price corrections may take place as stocks are priced more conservatively than in the past eighteen months.

[HK] HONG KONG BOURSE ISSUES SPAC LISTING RULES, EFFECTIVE NEW YEAR 2022

Last Friday, the Hong Kong Exchanges & Clearing Ltd. (SEHK:0388), owner and operator of the Stock Exchange of Hong Kong, released a conclusion setting down the rules for the listing of Special Purpose Acquisition Companies (SPACs) in the Hong Kong bourse, effective on January 1, 2022. Notably, retail investors remain barred from investing in SPACs under the Rules, limiting marketing and trading to (institutional and non-institutional) Professional Investors only.

Insights: Hong Kong is the fourth Asian jurisdiction to issue rules regarding the listing of SPACs after South Korea, Malaysia, which is currently reviewing its present framework, and most recently Singapore, which issued its rules just last September. The issuance did not come without challenge, as the initially proposed rules were considered by some investment banks to be too rigid, according to Reuters sources, and, on the other hand, others oppose any move to open up to SPACs, with the Asian Corporate Governance Association saying that, “SPACs are unsuitable for a market such as Hong Kong which has historically suffered from manipulation of shell stocks.”

The strict rules Hong Kong has in place for SPACs may place it at a disadvantage compared to New York and Singapore, but the mainland Chinese listings may find Hong Kong as an advantageous and familiar environment for listing. According to Nikkei Asia, market participants said that the Exchange hoped to attract mainland Chinese investors following regulator scrutiny from both sides of the Pacific that caused a sharp slowdown in Chinese listings, including the planned delisting of Chinese ride-hailing app Didi (NYSE:DIDI), from New York.

[CRYPTO] DEFI “RUG PULL” SCAMS PULLED IN USD 2.8 BILLION THIS YEAR

Over USD 2.8 billion was lost to “rug pulls” in 2021 from crypto investors, according to a Chainalysis report. The rise in scams was attributed along with the general rise of cryptocurrency prices this year according to the said report. Rug pulls accounted for 37% of over USD 7.7 billion in total illicit revenue scams this year. One notable example is from the Turkish crypto exchange Thodex, which pulled over USD 2 billion in client funds in 2021.

Insights: With the rise of cryptocurrency prices and the general trend towards mass adoption or exposure/familiarity with cryptocurrencies, it is expected that scams will only increase over time. As more retail investors enter the cryptomarket, it is important for them to avoid falling into this scheme. There are common signs where the project is a potential rug, namely among others: project appeared overnight, anonymous developers, low effort website, lacking social media presence, etc. To avoid these schemes, always do your own research (DYOR) before trading. One should be able to answer precisely why they are buying that token/coin and supporting that project. By doing one’s own research, one can decide to invest based on a balance between the best available evidence and one’s convictions/beliefs, and not just because someone else said it is worth it.

December 19, 2021

newsletter

TABLE OF CONTENTS

NEWSLETTER 1.1

SEPTEMBER 22, 2021

[PH] PHILIPPINE GOV’T OFFERS FIRST EVER RETAIL DOLLAR BONDS (RDBs)

[PH] PHILIPPINE REAL ESTATE INVESTMENT TRUSTS (REITS) JOIN FINANCIAL TIMES STOCK EXCHANGE (FTSE) INDICES

[US] S&P 500 DOWN BY 1.7%, DOW LOSES 614.41 POINTS

[CN] CHINA EVERGRANDE CONTAGION CONCERNS HAUNT GLOBAL MARKETS

[CRYPTO] US TREASURY PLANS ON STABLECOIN REGULATION

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NEWSLETTER 2.1

SEPTEMBER 26, 2021

Index TRACKER

[PH] MONETARY BOARD MAINTAINS KEY INTEREST RATES

[US] DOLLAR RISES DESPITE UNCERTAINTY IN EVERGRANDE CRISIS

[CN] CHINESE ESTATES TO DUMP ENTIRE EVERGRANDE STAKE

[CRYPTO] COINBASE HALTS ITS LENDING PRODUCT PLAN

[CRYPTO] BITCOIN DIPS AS CHINA CONSIDERS ALL CRYPTO TRANSACTIONS ILLEGAL

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NEWSLETTER 2.2

September 29, 2021

[PH] Jollibee foods corporation (PSE:jfc) to sell preferred shares

[US] wall street corrects with rising treasury yields

[JPN] Japan's covid emergency status to be lifted on thursday

[CRYPTO] traders going to defi after china crypto ban

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NEWSLETTER MONTHLY WRAP-UP

SEPTEMBER 30, 2021

Index TRACKER

NUMEROUS PREFERRED SHARES FOR LISTING AT THE PSE

SGX ALLOWS SPAC LISTINGS

CHINA IN PROPERTY AND ENERGY CRISES

THE SPECTRE OF REGULATION HAUNTS CRYPTO MARKETS

OCTOBER 2021 CALENDAR

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NEWSLETTER 3.2

OCTOBER 3, 2021

Index TRACKER

[PH] MEGAWORLD DEBUTS ITS OWN REIT

[US] OPTIMISM INFLUENCES WALL STREET’S EARLY OCTOBER RALLY

[VN] VIETNAM SETS RECORD GDP SLUMP, DOWN 6.17% IN Q3 2021

[CRYPTO] FED: NO INTENTION TO BAN CRYPTOCURRENCIES

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NEWSLETTER 4.1

OCTOBER 6, 2021

[PH] NATIONAL HEADLINE INFLATION DOWN BY 0.1% TO 4.8% IN SEPTEMBER 2021

[US] BIG TECH BOUNCES FROM PREVIOUS DAY’S SELL-OFF

[CN] EVERGRANDE RIVAL ALSO MISSES REPAYMENT DEADLINE

[CRYPTO] US SEC DELAYS DECISION ON FOUR BITCOIN ETFs AGAIN

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NEWSLETTER 4.2

OCTOBER 10, 2021

INDEX TRACKER

[PH] FIRST GEN CORP. OUT OF THE PSEI

[CN] EVERGRANDE RIVAL ALSO MISSES REPAYMENT DEADLINE

[US] JOBS REPORT FALLS SHORT OF EXPECTED 500,000 POSITIONS

[CN] CHINESE ESTATES HOLDINGS, A PROMINENT EVERGRANDE BACKER, LOOKS TO GO PRIVATE WITH $244M INVESTOR BUYOUT

[CRYPTO] TETHER ACCUSES BLOOMBERG OF SPREADING “MISINFORMATION"

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NEWSLETTER 5.1

OCTOBER 13, 2021

[PH] AREIT-AYALA LAND PROPERTY-FOR-SHARE SWAP APPROVED BY THE SEC

[US] US DOLLAR INDEX RISES AS FED’S TAPER PICKS UP PACE

[HK] HONG KONG’S OFFICE RENTAL MARKET SHOWS SIGNS OF RECOVERY FOR THE FIRST TIME IN TWO YEARS

[CRYPTO] JPMORGAN CEO: “BITCOIN IS WORTHLESS”

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NEWSLETTER 5.2

OCTOBER 17, 2021

INDEX TRACKER

[PH] MWIDE’S PERPETUAL PREFERRED SHARES OFFERING APPROVED BY SEC

[PH] ALLDY CUTS IPO PRICE BY 25%

[US] US BANKS REPORT POSITIVE Q3 PERFORMANCE

[CN] EVERGRANDE'S $1.7B HK HQ SALE FLOPS AS BUYER WITHDRAWS

[CRYPTO] BTC HITS $60K AS ETF APPROVAL IMMINENT

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NEWSLETTER 6.1

OCTOBER 20, 2021

[PH] LISTED EDUCATIONAL INSTITUTIONS SUFFER QUARTERLY LOSSES

[US] TECH AND HEALTHCARE SECTORS ADVANCE AS INDICES CONTINUE WINNING STREAKS

[CN] ALIBABA EXPANDS CLOUD BUSINESS IN ASIA, STEPPING UP RIVALRY WITH AMAZON