Weekly Market Wrap | 9 December 2022

China eases Covid restrictions

The double whammy of supply shortages and the country’s strict Covid rules in the past few months have challenged the narrative that China is the world’s factory. In November 2022, exports took a hit, contracting 8.7% compared to the same time last year – over double what economists were expecting. Unfortunately, imports also fell 10.6%, the biggest drop in over 2 years. This resulted in China’s trade surplus falling 2.5% lower than last year. The poor development of trade surplus is precisely what triggered a relaxation in China’s rules this week. 

Why does it concern us investors? This shows that the Chinese government is now prioritizing the economy over its Covid battle. Many investors have taken this as the green light to invest into China’s tourism, catering and F&B stocks as these are likely to benefit in the short-term from easier Covid rules. On the other hand, lax Covid-19 regulations could also spell a surge in infections, affecting domestic consumption and production. Suffice to say the road to recovery will be a bumpy journey for China, but for now they are on the right track. 

International Energy Agency places prediction on solar energy

The oil energy market is at a junction and both roads appear to end with a future that is made up of renewable energy. In light of recent G7’s imposed price cap on Russian oil, International Energy Agency published a report on solar power predicting that renewables are set to account for over 90% of global electricity expansion over the next five years, overtaking coal. 

Currently, demand for oil is falling and despite the combined effects of OPEC’s supply restrictions and the Russian embargo, prices of oil are still falling. 

Despite all this, ExxonMobil announced on 8th December that it will be pumping in more capital in the oil industry, taking advantage of low prices to extract more oil.

Microsoft’s long awaited acquisition of Activision blocked by FTC 

The drama-filled acquisition has faced yet another hurdle: US regulators are suing to block Microsoft’s deal to buy Activision Blizzard, an American video game publisher. Their primary concern is that this acquisition will further reduce competition in the gaming industry as Microsoft will be able to restrict titles such as Call of Duty from rivals like Sony.

This $70 billion deal to acquire Activision would be the biggest ever acquisition for the old-school tech giant, which would see it become the third-highest revenue from gaming globally. This deal would therefore enable Microsoft to engage in price manipulation and even withholding content from competitors. 

Why should you care? The FTC means business and has promised to take on Big Tech’s market power in an attempt to reduce anti-competitive practices in the US. 

IndexLevel1 Week1 MonthFrom Jan 1 2022
S&P 500 (US Stocks)3,770-2.9%-0.58%-17.97%
Nasdaq 100 (US Tech Stocks)10,857-2.83%-1.18%-29.93%
CSI-300 (Chinese Stocks)3,7670.62%4.2%-19.61%
Bitcoin (in USD)21,2560.74%1.10%-64.46%
Source: Google Finance, as of December 9th, 2022.

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