Daily Analysis 8 November 2022 (10-Minute Read)

A great Tuesday to you as investors are watching for risk of gridlock in US government.


In brief (TL:DR)


  • U.S. stocks closed higher on Monday with the Dow Jones Industrial Average (+1.31), the S&P 500 (+0.96%) and the Nasdaq Composite (+0.85%) all up.

  • Asian stocks steadied on Tuesday. 

  • Benchmark U.S. 10-year Treasury yields was little changed at 4.21% (yields rise when bond prices fall). 

  • The dollar rebounded after a two-day slide.

  • Oil dropped with December 2022 contracts for WTI Crude Oil (Nymex) (-0.94%) at US$90.93 amid China’s renewed commitment to keep strict pandemic controls.

  • Gold continued to trade lower with December 2022 contracts for Gold (Comex) (-0.42%) at US$1,673.40.

  • Bitcoin (-4.59) rose to US$19,751 as FTX ‘bank run’ drains BTC reserves.


today's issue...


  1. Meta Starts Week with Mega Layoffs and Dark Clouds for Tech

  2. Hong Kong Home Prices Plummet Most Since 2016

  3. Meta tries to revive the NFT party 


Market Overview


The inflation reading is coming after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.

 

Bulls have charged back into equity markets over the past two days amid expectations the midterm results could herald a near-term rally. 

 

Thursday’s consumer-price-index data may offer the next cue for traders even as money markets are raising their peak-rate wagers.  

 

Chinese equities halted a rally as traders considered a jump in virus infections and official comments defending Covid Zero.

 

Asian markets were mixed on Tuesday with Tokyo's Nikkei 225 (+1.25%), Sydney’s ASX 200 (+0.36%) and Seoul's Kospi Index (+1.15%) up, while Hong Kong's Hang Seng Index (-0.23%) was down.



1. Meta Starts Week with Mega Layoffs and Dark Clouds for Tech


  • Facebook’s parent company, Meta, is reportedly preparing to begin layoffs this week that will affect thousands of the company’s 87,000 employees globally. 

  • Meta’s cuts will add to already mounting job losses in Silicon Valley. 

 

It’s not just the Crypto Winter which has set in, but the Tech Winter as well. 

 

Facebook’s parent company, Meta, is reportedly preparing to begin layoffs this week that will affect thousands of the company’s 87,000 employees globally. 

 

The job cuts come after US$80 billion was wiped off Meta’s market value last month amid a global economic slowdown. 

 

Last month, Meta CEO Mark Zuckerberg said,

 

“In 2023, we’re going to focus our investments on a small number of high-priority growth areas. So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year.”

 

Meta is not alone in the layoffs and downsizing. 

 

U.S. tech companies have been hit particularly hard by rising interest rates, which make them less attractive compared with other stocks with lower price-to-earnings ratios, and a soaring dollar, which has hit overseas revenues. 

 

Meta has been struggling with growing losses as it invests heavily in developing its metaverse business, even as user and ad revenue growth in its core businesses declines. 

 

Meta reported that its metaverse division, Reality Labs, made a US$3.7 billion loss over the past three months and said these losses would “grow significantly year over year” in 2023. 

 

Amid a tightening ad market, Meta has also said it expects to lose US$10 billion in ad revenue in 2022 as a result of privacy changes by Apple which allow its users to opt out of the company being able to track users across apps. 

 

Meta’s cuts will add to already mounting job losses in Silicon Valley. 

 

Twitter slashed nearly half of its workforce following the takeover of the company by billionaire Elon Musk which is rationalizing the company’s operations. 

 

Other companies, such as ridehailing firm Lyft, payment company Strike and hard drive maker Seagate Technology, have also reduced their workforce or announced plans to trim jobs.



2. Hong Kong Home Prices Plummet Most Since 2016


  • According to data released on Friday, the Centaline gauge of secondary home prices fell 2% in the week ending 30 October, from the previous week, the most since March 2016.

  • The secondary home price index has fallen 14% from its 2021 peak as the Hong Kong economy shrinks and an exodus of residents adds to selling pressure.

 

Rising borrowing costs and a bleak economic outlook have accelerated the slump in Hong Kong’s property market. 

 

According to data released on Friday, the Centaline gauge of secondary home prices fell 2% in the week ending 30 October, from the previous week, the most since March 2016.

 

The drop took the closely watched real estate price index to its lowest level since December 2017, dragged down by rising interest rates and a pessimistic economic outlook for the territory.

 

The secondary home price index has fallen 14% from its 2021 peak as the Hong Kong economy shrinks and an exodus of residents adds to selling pressure.

 

Hong Kong faces multiple challenges both from a slowing Chinese economy that it has grown increasingly reliant on, stop-start Covid policies that has seen the territory lag other financial centers, and what has been perceived as heightened interference in its domestic affairs by Beijing, leading to a large exodus of talent and residents.  

 

Making matters worse, with the U.S. Federal Reserve raising interest rates and the Hong Kong dollar maintaining a peg with the greenback, the territory has been forced to raise borrowing costs at the worst possible time. 

 

Hibor, Hongkong’s one-month borrowing cost, has climbed to its highest level since 2008 due to Hong Kong’s currency peg. 

 

Meanwhile, more than 96% of mortgages are tied to Hibor, according to September data for new loans by the Hong Kong Monetary Authority, meaning that at some stage, mortgagors may no longer be able to make payment on higher rates and possibly leading to forced selling.

 

By one estimate, new home sales in Hong Kong may reach just 50% of annual completions this year, the lowest over two decades. 

 

Goldman Sachs expects residential property values in the city to plummet by as much as 30% through 2023 from last year’s levels.



3. Meta tries to revive the NFT party 


  • Meta, the company once known as Facebook, said last week that creators will be able to make their own NFTs and sell them directly to fans, both on and off its Instagram platform.

  • Meta’s decision of integrating NFTs was seen as an attempt by the social media giant to lift the firm out of another terrible quarter that has come . 

 

According to data tracker NonFungible.com, while flagship tokens Bitcoin and Ethereum have lost about 70% of their value, the average price observed on the markets of all NFTs traded has dropped a whopping 85% this year alone. 

 

Despite the profound uncertainties of the NFTs market, Meta, the company once known as Facebook, said last week that creators will be able to make their own NFTs and sell them directly to fans, both on and off its Instagram platform.

 

Meta CEO Mark Zuckerberg has spent nearly US$10 billion on building the Web3 and Metaverse so far this year and will spend even more next year despite uncertain monetization from the space and amidst a slowing global economy. 

 

Not to be outdone by cryptocurrencies, Meta shares have fallen 73% this year.

 

Meta’s decision of integrating NFTs was seen as an attempt by the social media giant to lift the firm out of another terrible quarter that has come . 

 

Meta has been experimenting with NFTs on Instagram and Facebook since last year but up until now, Instagram users have only been able to show off their digital collectibles as opposed to creating them. 

 

Now, Instagram will have an “end-to-end toolkit” so creators can make NFT collections and sell them to their fans and followers.

 

The expansion of NFTs on Instagram is part of a broader push by Meta to increase money-making features for the creators in its apps, in an effort to monetize the new technology.

 

Rival social media platform Reddit also launched a “collectible avatar” marketplace this past summer.

 

Whether NFTs become the silver bullet for Meta’s problems remain to be seen. NFT prices have been falling and volumes have grown increasingly thin, but influencers looking for new revenue streams may benefit.

The information contained in this email communication and any attachments is for information purposes only, and should not be regarded as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be in violation of any local laws. It does not constitute a recommendation or take into account the particular allocation objectives, financial conditions, or needs of specific individuals. The price and value of the digital assets and any digital asset allocations referred to in this email communication and the value of such digital asset may fluctuate, and allocators may realize losses on these digital assets, whether digital or financial including a loss of principal digital asset allocations. 

 

Past performance is not indicative nor does it guarantee future performance. We do not provide any investment, tax, accounting, or legal advice to our clients, and you are advised to consult with your tax, accounting, or legal advisers regarding any potential allocation of digital assets. The information and any opinions contained in this email communication have been obtained from sources that we consider reliable, but we do not represent such information and opinions as accurate or complete, and thus such information should not be relied upon as such. 

 

No registration statement has been filed with the United States Securities and Exchange Commission, any U.S. State Securities Authority or the Monetary Authority of Singapore. This email and/or its attachments may contain certain "forward‐looking statements", which reflect current views with respect to, among other things, future events and the performance of a digital asset allocation with the Novum Alpha Pte. Ltd. ("the Company"). Readers can identify these forward‐ looking statements by the use of forward‐looking words such as "outlook", "believes", "expects", "potential", "aim", "continues", "may", "will", "are becoming", "should", "could", "seeks", "approximately", "predicts", "intends", "plans", "estimates", "assumed", "anticipates", "positioned", "targeted" or the negative version of those words or other comparable words. 

 

In particular, this includes forward‐looking statements regarding, growth of the blockchain industry, digital assets and companies, the venture capital and crowdfunding market, as well as the potential returns of any digital asset allocation with the Company. Any forward‐looking statements contained in this email and/or its attachments are based, in part, upon historical performance and on current plans, estimates and expectations. The inclusion of forward‐looking information, should not be regarded as a representation by the Company or any other person that the future plans, estimates or expectations contemplated will be achieved. Such forward‐looking statements are subject to various risks, uncertainties and assumptions relating to the operations, results, condition, business prospects, growth strategy and liquidity of the Company, including those risks described in a separate set of documents. If one or more of these or other risks or uncertainties materialize, or if the underlying assumptions of the Company prove to be incorrect, actual results may vary materially from those indicated in this email and/or its attachments. 

 

Accordingly, you should not place undue reliance on any forward‐looking statements. All performance and risk targets contained herein are subject to change without notice.  There can be no assurance that the Company will achieve any targets or that there will be any return on a digital asset allocation with the Company.  Historical returns are not predictive of future results. The Company is intended to be a specialist digital asset allocation and trading vehicle in the early stage technology sector and digital assets. Allocation of digital assets in early stage technology carry significantly greater risks and may be considered high risk and volatile. There is a risk of total loss of all digital assets allocated with the Company – please refer to a separate set of documents for a details of risks. 

 

By accepting this communication you represent, warrant and undertake that: (i) you have read and agree to comply with the contents of this notice, and (ii) you will treat and safeguard this communication as strictly private and confidential and agree not to reproduce, redistribute or pass on this communication, directly or indirectly, to any other person or publish this communication, in whole or in part, for any purpose.