12th August 2023 – 18th August 2023 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 4,369.71 | 13,290.78 | 17.30 | 34,500.66 | 2,392.72 | 15,750.17 |
| -2.11% | -2.59% | 16.58% | -2.21% | -2.18% | -2.44% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 19,310.15 | $1,918.40 | $22.80 | $84.83 | 83.16 | 90.43 |
| -0.61% | -1.40% | 0.24% | -2.19% | 0.15% | -0.53% |
Source: MarketWatch
Hello Saturday,
This week, China’s economic turmoil raises investor fears, VinFast’s US market debut values it higher than giants like Ford and GM, and Target reports a drop in quarterly sales due to a backlash from conservatives.
- China’s post-COVID economic recovery has proven weaker than expected, marked by declining foreign trade, record-high youth unemployment, a deflating Yuan, and an ongoing real estate crisis.
- Apple users who filed a claim in its ‘batterygate’ class-action suit in 2018 can finally expect to start receiving payouts totalling up to $500 million.
- US brands like Bud Light and Target report a drop in quarterly sales owing to a backlash from conservatives over LGBTQ-friendly marketing campaigns and merchandise.
- VinFast, a Vietnamese electric vehicle maker, is now worth more than global giants like Ford, General Motors, and BMW after being listed on the Nasdaq and seeing its shares surge 68% on the first day.
- Due to volatile markets and global economic uncertainty, 3.5 million people around the world lost their millionaire status last year, but the global median income rose by 3%.
Taking stock | Dragon drag | iSore | Catch 22 | WinFast | Below millionaire line | Invest wisely
Taking stock
All major indices ended the week in the red as investors rethink their July optimism and look toward Fed Chair Jerome Powell’s speech next week at the Jackson Hole Economic Symposium. For the week, the S&P 500 tumbled 2.11%, the Dow fell 2.21%, and the Nasdaq lost 2.59%.
Dragon drag
This Tuesday, China’s central bank cut its key policy rates unexpectedly for the second time in three months. This is the government’s latest effort to ease the monetary policy in a bid to boost the slowing economy. The economic recovery that China expected to see this year after three years of COVID-19 lockdown restrictions has not quite materialised. Both at a domestic and global level, China is displaying massive macroeconomic weakness.
Youth unemployment in China hit a new high of 21.3% in June, the Yuan is undergoing deflation, and the property crisis in the country is worsening. Foreign trade, which has traditionally been central to China’s economic growth, has also been steadily declining. In July, Chinese exports fell 14.5% year-over-year, as rising geopolitical tensions and a slowing global economy is making countries steer away from engaging in trade with China.
Source: Atlantic Council
Why does the health of the Chinese economy matter to the rest of the world? Because for the last two decades, China’s economic growth has been one of the major drivers of global economic growth. Also, several global companies have a high level of exposure to China, and their business and stock prices will take a hit if the Chinese economy continues to slow down. This is because they either have large manufacturing facilities in China (as is the case for Apple and Tesla), or they rely heavily on Chinese consumers (as is the case for Nike and Starbucks).
iSore
In 2018, a class-action lawsuit was filed against Apple, accusing it of slowing down its older iPhone models to prompt customers to upgrade to newer models or buy replacement batteries. This scandal came to be known as ‘batterygate’. While the tech giant denied any wrongdoing, it settled the case in 2020 to avoid litigation costs. According to the settlement, Apple was to pay up to $500 million in total to affected users.
However, despite the settlement, customers haven’t received their payment yet. This long delay was caused due to an appeal filed by two iPhone users objecting to some of the terms of the settlement. Finally, last week, a judge dismissed this appeal, and customers can expect to receive their payments soon.
All iPhone users affected by Apple’s ‘software throttling’ who filed a claim before the case’s October 6, 2020 deadline may be eligible to receive a cheque from Apple. According to the company’s attorney, each user can expect to receive around $65 — this amount may be higher, depending on the number of claims made.
Catch 22
Lately, some brands in the US seem to be caught between conservatives and the LGBTQ+ community in what seems to be a lose-lose situation. When they try to be inclusive in their marketing campaigns and merchandise, they risk a boycott, as happened with Bud Light. And when their response to the backlash is tepid, they face criticism from the LGBTQ+ community, as happened with Target. In both cases, the company’s bottom line gets affected.
In April, Bud Light’s parent company Anheuser-Busch InBev collaborated with a transgender influencer for a TikTok ad that triggered a conservative boycott of its beer. The immediate impact was a drop in the sales of Bud Light and Budweiser by 24.6% and 9.2%, respectively. It also lost its spot as the top-selling beer in the US, which it had held onto for decades, to Modelo Especial, a Mexican lager brewed by Constellation Brands. Bud Light’s US sales in the second quarter were down 10.5%, as reported by the company earlier in the month.
Target has faced a similar fate. The retail giant has been launching pride-themed products to celebrate Pride Month in June for a decade now. But this year, in May, it was forced to remove certain items from its pride collection after facing intense backlash, including threats to employees. But this withdrawal was seen by several LGBTQ+ and human rights groups as an absence of real support for the community. As a result, Target’s second-quarter sales dropped by over 5%.
WinFast
Vietnamese electric vehicle maker VinFast’s market value is now higher than those of the world’s largest automakers, including Ford, General Motors, BMW, and Volkswagen. On Tuesday, the company was listed on the Nasdaq, making its US debut. This came after the completion of its merger with Black Spade Acquisition — a US-listed Special Purpose Acquisition Company (SPAC).
Shares of VinFast closed at $37.06 on Tuesday, 68% higher than its opening price of $22. This values the company at about $85 billion, more than three times its June valuation of about $23 billion. Its market cap is now higher than that of BMW ($69 billion), Volkswagen (also around $69 billion), Ford ($48 billion), and General Motors ($46 billion).
SPACs are a quicker alternative to getting traditionally listed on the stock exchange. They are shell companies that raise capital through an Initial Public Offering (IPO) for the sole purpose of acquiring an existing company. VinFast chose this option after unsuccessfully trying to go the traditional route for almost two years.
Below millionaire line
Apparently, the economic troubles of 2022, which included record-high inflation, global economic uncertainty, and geopolitical tensions, has also had a major impact on high-net-worth individuals (HNIs).
The world lost about 3.5 million millionaires in 2022, out of which 1.8 million were from the US alone. And total global private wealth fell about 2.4% to $454.4 trillion. Nevertheless, there are still about 60 million millionaires globally.
There’s also some good news for the average earner, though, as global median wealth rose by 3% last year.
Invest wisely
The US stock market offers unique opportunities, such as SPAC merger deals like VinFast’s, to earn higher returns. And through Appreciate, you can capitalise on such opportunities in a seamless, timely, and cost-effective manner. Download the App today!
Warm regards,
Another week
in the markets
