Chinese Tech Giants Ditch US Markets
Yesterday’s Market Performance 
Nifty: 17,469.75 | +293.05 (+1.71%)
FII Net Sold: INR 579.27 crore
Sensex: 58,649.68 | +1,016.03 (+1.76%)
DII Net Bought: INR 1,735.50 crore
In today’s issue of the Morning Toast, we discuss:
- MPC has made a new move- what do you need to know?
- Chinese Tech giants continue to ditch the US Stock Markets
- An education concept to keep you chugging along
MPC has made a new move, or has it? What’s up and what do you need to know? 🧐
- The RBI Governor Shaktikanta Das has announced that rates will remain unchanged – repo rate at 4%, reverse repo rate at 3.35% and MSF and Bank rate at 4.25%
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With a vote of 5:1, the committee decided to continue its accommodative stance to ensure that growth is sustained, with slack private consumption also included as key reasons behind continued support
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Real GDP growth projection has been retained at 9.5% for this year (6.6% in Q3 and 6% in Q4), while the forecast for next year stand at 17.2% in Q1 and 7.8% in Q2, indicating a gradual return in pre-pandemic levels (numbers wise)
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CPI inflation has been retained at 5.3% for the year (5.1% for Q3, 5.7% for Q4), with limited commentary/comments on the US Fred’s stance on inflation levels no longer being transitory in nature
Interesting! Tell me more? 🤔
- The RBI will continue to use VRRR operations to observe funds – a VRRR auction of Rs 6.5 lakh crore on December 17 and Rs 7.5 lakh crore on December 31 is expected
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The emergence of the Omicron variant has also seemed to be a hindrance in the policy normalisation goal – thus pushing it to February of next year
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In addition, the cuts in excise duty on petrol, diesel etc. should aid in bringing down inflation on a more durable basis and help crowd-in private investment
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The RBI is planning a UPI based feature phones product (to improve financial inclusion further, at an affordable price); also in the works are increased UPI caps for Gilts, IPOs (up to INR 5 Lakhs from present limit of INR 2 Lakhs)
What’s the conclusion? 🤩
- The journey from the current INR 8.5+ Tn system liquidity to a pre-COVID level of INR 2 Tn is most likely to be a long drawn one, with the possibility of the RBI leveraging/exploring newer tools to manage affairs extremely high
- Comparing sequentially, most levels remained unchanged, with the central bank adopting a wait & watch stance (unlike US Fed), with growth being given due importance
- Overall, consumption demand has been improving and rural demand is showing resilience, with economic recovery showing healthy traction through improved government consumption, October onwards
Wait & watch?
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- Financial ties between US & China are coming undone, as political tensions escalate (Uncle Joe & Chairman Xi don’t see eye to eye anymore), with the latest case: Didi (Uber of China), being forced to delist (from NYSE)
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To give you context (thank you very much) – Didi was the largest Chinese Tech IPO since Alibaba (hope Jack is okay :P), yet at the time of listing, the Chinese government (OG Owner) weren’t okay with Didi’s data security & user information protection measures (and asked them to halt proceedings)
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In retaliation, Chinese regulators banned Didi from app stores & started investigations (of-course), leading the company to announce a process to delist from the NYSE and relist in Hong Kong (home-base)
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Of-course investors didn’t take to this kindly, with Chinese stocks beaten, Didi is down >20% since the announcement, while other household names like Alibaba & Nio (“Tesla” of China) suffering in equal measure
Damn! What’s up? Tell me more? 🧐
- Chinese regulators have been in a crackdown mode (since mid-2021), through major fines & implementation of strict anti-monopoly laws –
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Alibaba was fined USD 2.8 Bn, while Pinduoduo and others were fined USD 200k each or improper pricing behaviour
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Fintech giant Ant Group is likely to be overseen by China’s Central Bank, with its mega IPO pushed indefinitely
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Didi’s escalation is huge, with the company now worth USD 31 Bn, which believe it or not, is nearly half its value at the time of IPO (talk about shareholder wealth erosion)
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And they’re not alone- in May, US Stock markets housed ~250 Chinese companies (with a combined MCap of USD 2.1 T); as on date, investors have lost half in value (USD 1 Tn in wealth eroded)
Insane! So now? What next? Any India benefits? 🤩
- The Securities & Exchange Commission (US equivalent of SEBI) has finalised rules to forcibly delist foreign companies that don’t follow local auditing requirements (why wasn’t this there already? Lol)
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Likewise, Beijing is making it tougher for local Chinese Tech giants (& alike) from listing elsewhere, initially by tightening data privacy regulations and eventually through massive fines (& intimidation jk jk)
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Tensions between US & China is likely to continue this wave of delisting, ultimately hurting investors (alike), with the possibility of greater focus towards other Emerging Markets (ie India)
What else caught our eye? 👀
Hyundai Motor bullish on India’s EV landscape
- Hyundai Motor India will invest Rs. 4000 crore to launch six EVs by 2028
- Products to be spread across both mass and premium segments; the first of which will hit Indian roads as early as next year.
- Hyundai has a market share of 16-17%, and enjoys high profitability as well
Reliance enters another JV
- State-owned Chemicals Derivatives Company (TA’ZIZ) based in Abu Dhabi and Reliance Industries are set to start a > $2 billion chemical production partnership
- It aims to export certain producted chemicals to target markets in Southeast Asia and Africa as well as selling them domestically.
- The project will enable the substitution of imports and the creation of new local value chains, while also meeting growing demand for these chemicals globally, quoted TA’ZIZ.
Newbies may lose their support
- Shares of stocks like Nykaa, Paytm, Latent View etc. will be watched closely now that the lock-in period for anchor investors is coming to an end
- Of the ten launched last month, five (Fino Payment Bank, SJS Enterprises, One97 Communications, Sapphire Foods and Tarson Products) are trading below the issue price
- 76% of stocks issued this year have seen selling pressure on the lock-in opening dates with the average decline being 2.6%
What is the Asset Turnover Ratio?
The asset turnover ratio, also known as the total asset turnover ratio, measures the efficiency with which a company uses its assets to produce sales.
The formula for the ratio is as follows:
Asset Turnover Ratio= Net sales/Average total assets
