Comment of the Day
15th May 2023
Eoin Treacy
May 16
Video commentary for May 15th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Japan firm, Thailand weak, China rebounds, India banks breaking out, UK banks firm, US breadth narrows, soft commodities continue to firm on weaker dollar and adverse weather conditions.
Turkey Set for Runoff as Erdogan Falls Just Short of Victory
This article from Bloomberg may be of interest to subscribers. Here is a section:
Turkey will hold a runoff election, with President Recep Tayyip Erdogan just failing to secure enough votes for a first-round victory.
The 69-year-old, looking to extend his two decades in power, will face Kemal Kilicdaroglu, 74, in another vote on May 28 after doing better than polls predicted.
Turkish stocks and bonds dropped, while the cost of insuring the government’s debt against a default spiked, as the results wrong-footed investors betting on a quick end to Erodogan’s unconventional economic policies, which include keeping interest rates well below the level of inflation.
“This is a major disappointment to investors hoping for a win for opposition candidate Kilicdaroglu and the reversion to orthodox economic policy he promised,” said Hasnain Malik, a strategist at Tellimer in Dubai.
Erdogan won 49.5% of the votes, while Kilicdaroglu secured just under 45%, with nearly all the ballots counted, Turkey’s High Election Board said on Monday. Another contender, Sinan Ogan, received 5.2% and was eliminated from the race.
Eoin Treacy's view
Turkey has a population of 85 million and a median age of 33. It’s no longer a very young country and is stuck squarely in the middle income trap. Erdogan’s domestic policy of promoting Islamic nationalism and international policy of boosting the country’s regional footprint have gained geopolitical points but has also been expensive.
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Thai Pro-Democracy Groups Dominate Vote in Rebuke of Military
This article from Bloomberg may be of interest to subscribers. Here is a section:
Under a constitution promulgated in 2017, the military-appointed senators get to vote alongside the 500 elected lower house members to decide on the next prime minister.
Political parties affiliated with Thaksin, 73, have won the most seats in every national vote dating back to 2001, only to be unseated from power by dissolutions or coups.
Whether Thaksin’s planned return to Thailand in July will exacerbate tensions with the military elite is another question. The telecoms magnate has been living in self-imposed exile after fleeing to avoid prison over a corruption conviction that followed a coup that toppled his own government in 2006.
Eoin Treacy's view
Thaksin Shinawatra’s plan to return to the land of smiles in July is certainly going to represent a flash point in democrats’ relationship with the military. Quashing the corruption charge could easily be a precondition for successful negotiation of a coalition agreement to form a civilian government. The challenge will be in how a new administration will further their aims, without running headlong into opposition from the military/royalty-aligned status quo.
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Sea's Path to Profit Paved With Layoffs, Single-Ply Toilet Paper
This article from Bloomberg may be of interest. Here is a section:
Li’s shock treatment paid off. In March, Sea reported the first quarterly profit in its 14-year history, $427 million in GAAP-sanctioned net income. Its stock soared 22%. Last week, it said it would hand out 5% raises to most staff. Sea has now more than doubled its market value since November.
Like so many tech startups of its generation, Sea had bled red ink for years. In fact, it lost more than $8 billion since its founding to pay for growth in its e-commerce, games and finance operations. For now at least, Sea is setting a different kind of example: It’s demonstrating that if your underlying business is sound and substantial, you can pull back on subsidies and expansions to break even.
That’s proving a challenge for rivals. Among Sea’s regional competitors, Singapore’s Grab Holdings Ltd. is still losing more than $300 million a quarter, while Indonesia’s GoTo Group’s losses exceed $250 million. Sea may also cause trouble for global tech giants like Alibaba Group (NYSE:BABA) Holding Ltd. and Amazon.com Inc (NASDAQ:AMZN)., which are both seeking growth in emerging markets.
“What you’re seeing is a separation of proper, monetizable business models from something that is a work-in-progress,” said Amit Kunal, managing partner of Growtheum Capital, a private equity firm in Singapore, speaking broadly about the tech industry. “Sea read the market much earlier, took appropriate steps — and delivered.”
Eoin Treacy's view
In the Big Picture video on Friday I spent a good deal of time talking about the winnowing process currently underway in the high growth markets that dominated performance during the pandemic. Higher rates and tight credit mean tough decisions have to be made. Only the companies capable of both rising to that challenge and simultaneously making money are likely to survive.
Eoin's personal portfolio: commodity long breakeven stop triggered April 19th 2023
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
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© 2023 Eoin Treacy