N-Evergrande's Bitcoin out of China and why Nike is Running Late.
Hey, Hisa fan,
The week was filled with lots of adrenaline! Headlines from the east over China Evergrande Group cash crunch and news over the United State’s Federal Reserve two day meeting. Let’s start from where we left…
The N-Evergrande.
China’s real estate giant Evergrande group failed to make interest payments which were due on Thursday to offshore investors. The company was due to make $83.5 million in payments of the dollar-denominated bond which was due to offshore investors. Evergrande however said in a statement that it had privately negotiated with onshore bondholders (Chinese investors) to settle a separate coupon payment on a yuan-denominated bond.
But it’s not only the bond that is scary for Evergrande. Other subsidiaries of the company could be facing the same challenge, Evergrande’s eclectic vehicle (EV) unit on Friday said it would face an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer's liquidity crisis is worsening in other parts of its business.
Other subsidiaries of the company are now opening up about the liquidity crisis, a step which analysts are hoping that Beijing will come in and help.
On Wednesday, China’s central bank injected the highest short-term liquidity in eight months into the financial system. A total of $17 billion (110 billion Yuan) of cash with seven- and 14-day reverse repurchase agreements was pushed into the economy. This was the largest addition by People’s Bank of China (PBOC) through open-market operations since late January.
Is this still important?
Analysts across various markets have been seeking ways in which the collapse of China Evergrande could cause a ripple effect on the Chinese financial system, a cause which could jump back into the global financial system, backed by the amount owed to offshore investors.
So, is it going to be Evergrande or “Nevergrande”?
Earnings
Various companies released their financials during the week, Nike, Costco and FedEx topped the news and were the large-caps that were releasing their financials during the week.
Nike said it had lost 10 weeks of production in Vietnam so far and it would take several months before the company fully ramps back activity in Vietnam to full production.
The footwear company’s revenue rose to $12.25 billion from $10.59 billion posted in the first quarter ended Aug. 31.
Net income grew to $1.87 billion, or $1.16 per share, compared with $1.52 billion, or 95 cents per share, a year earlier. That topped analysts’ expectations for $1.11 a share.
Revenue in North America rose 15% to $4.88 billion. That was short of the $5.05 billion that analysts polled by FactSet were looking for.
Nike shares led the decliners on the Dow Jones, closing at about 6% lower despite the upside of a 10% year to date performance.
FedEx posted a 7% drop in quarterly profit and cut its full-year forecast even as the company’s revenue posted a 14% rise to $22.0 billion.
FedEx lowered its full-year forecast for earnings, excluding items, to $19.75 to $21.00 per share
FexEx’s adjusted net income fell to $1.19 billion from $1.28 billion posted a year earlier.
The Earnings per share was effectively down to $4.37 per share for the first quarter ended Aug. 31 from the $4.87 per share the company posted a year earlier.
Costco, the world’s third-largest retailer posted upbeat earnings, beating analysts estimates.
The retailer’s revenue rose 17.5% for the fiscal fourth quarter to $62.7 billion.
Earnings per share was up at $3.76, rising from the $3.13 the company posted a year earlier.
Shares climbed 3.3% to 467.75 rebounding from its 10-week line in double normal volume.
Off the earnings was a similarity in statements by Nike, FedEx and Cosco that the holiday season which has been a darling for companies could be hit by supply chains hampered by the pandemic and the also inflation concerns.
Coffee Break…Bitcoin
Seems like no funds are leaving China! Beijing on Friday banned Crypto for the “millionth” time announced that all crypto-related activities are illegal in China. The illegal activities include crypto services like offering trading of digital assets, order matching, token issuance and derivatives. In addition, overseas crypto exchanges providing services in mainland China are also illegal, the People’s Bank of China (PBOC) said during a Q&A session on its website.
Following the news, the price of Bitcoin (BTC) fell by about 5% to $42,496.12, according to Coin Metrics data. Ethereum (ETH), the second-largest digital currency, dropped 7% to $2,921.53.
Nevertheless, China is planning to introduce its own central bank digital currency (CBDC). So, you ban crypto only to see how your own CBDC will perform.
How’s this important?
Adoption is very important in decentralized finance (DeFi). China started banning crypto in 2013, and with every year passing, the country has tried stopping cryptocurrency trading but it looks like citizens always figure a new way of trading and mining cryptocurrencies.
The question: Will communist China finally get a grip of Crypto? And if the 1.4 billion population country doesn’t, who will?
Markets
Major markets globally remained mixed over the week. The MSCI’s gauge of global stocks headed south by 0.15%.
Wall Street’s benchmark indices were slightly changed during the week. The S&P 500 was up 0.5%, the Nasdaq was flat for the week while the Dow Jones Industrial Average chucked 0.6% during the trading week.
Local - Here in Nairobi, the markets were largely on the red. The NSE All-share index (NASI) decreased by 2.7% to close the week at 177.81 points from last week’s 182.75 points. Similarly, the NSE25 and the NSE20 share indices were similarly down by 2.41% and 1.05%, respectively.
By activity, the market turnover edged up by 28% to Kes 3.22 billion from the Kes 2.51 billion posted a week earlier. However, the volume of shares exchanging hands on the bourse was lower by 5.06% to 72.4 million shares from the 76.3 million shares transacted a week earlier.
What cowries are we collecting this week?
Facebook Inc. [NASDAQ:FB] - Your favourite social media seemed to have had a rough week. Well, the company announced that CTO Mike Schroepfer will leave that post in 2022 and become a part-time adviser, while longtime engineering executive Andrew Bosworth will assume the role.
The CTO post is one of the most important positions in a tech company and investors are keen on the transition phase, coming at a time when Facebook is scaling up its hardware ambitions. FB shares were down during the week and closed at $352.96 per share on Friday.
Nation Media Group Plc [NSE: NMG] - East Africa’s largest media company closed its share buyback program on the Nairobi Securities Exchange on Friday. NMG was buying the shares from the market at Kes 25.00 per share, exactly where it closed on Friday.
NMG has until Wednesday to publish the results of the buyback. We will be checking this week on how the share will perform post buyback.
Nation Media Group Plc - one-year technical performance [Chart: CC] Microstrategy Inc. [NASDAQ: MSTR] -With China’s total clampdown on cryptocurrencies, Microstrategy is a top one company to watch. The company has the highest corporate holding in bitcoin and just how long can the stock hold with sustained volatility.
PS: Other key cryptocurrency trading and investing companies like Coinbase Global and Tesla Inc are part of a larger list we are watching.
How about you, what stocks are you watching for the week? Let us know on the Hisa App.
Disclaimer: This article does not constitute any investment recommendations. Investors and the general public are advised to do their own research before making any investment decision..