Three Things (September 21st)
Sep 21, 2021
1) Evergrande fears shake global markets, but S&P 500 is only ~4% off its all-time high
- The S&P 500 fell -1.7% on Monday, the index’s worst day in more than 4 months, as fears rose that struggles at property giant China Evergrande would spread more widely into China’s real estate sector and derail the world’s second-largest economy.
- Investors fear Evergrande could miss an $83.5 million interest payment due Thursday, and failure to make this payment within 30 days may constitute a default; Chinese officials have not publicly stated any plans to bailout the troubled giant.
- Shares of U.S.-listed Chinese companies JD.com, DiDi Global, Pinduoduo, Baidu, and Alibaba all dropped more than 4% during Monday’s session. Energy was the worst performing sector in the S&P 500.
Titan’s Takeaway: Words like “contagion” inevitably have some investors’ emotions running high. But we believe some longer-term perspective is warranted: the S&P 500 is just -4% off its all-time high reached on September 2, the index hasn’t dropped more than 5% peak-to-trough all year, and corporate earnings are expected to rise more than 25% in the current quarter. (One cannot invest directly in an Index.) We will continue to monitor the landscape with a cool head and a long-term outlook.
2) Under-14s face limits on TikTok time in China, as regulatory backdrop continues to evolve
- TikTok, known as Douyin in China, will limit Chinese users under the age of 14 to just 40 minutes of app usage per day.
- Additionally, under-14s will only be able to access Douyin between 6am and 10pm.
- These new restrictions come fresh on the heels of the Chinese government’s recently-announced rules limiting video games for under-18s to Fridays, weekends, and holidays.
Titan’s Takeaway: We continue to closely monitor Titan Offshore holding BILI, which saw a slowdown in gaming growth in its most recent quarter. The regulatory backdrop for Chinese social media and gaming companies continues to evolve, and we are closely monitoring the impacts of these changes.
3) Coinbase drops plans to launch lending product, as regulation follows crypto’s rapid growth
- Coinbase abandoned plans to launch a new lending product that would’ve allowed users to earn a 4% annual return for holding its stablecoin, citing regulatory uncertainty.
- The SEC had previously warned it would sue Coinbase if it launched the product, arguing the Lend feature would be considered a security.
- Earlier this month, Coinbase CEO Brian Armstrong publicly criticized the SEC in a series of tweets regarding the agency’s interactions with Coinbase on this product.
Titan’s Takeaway: Growth in the cryptocurrency market will rationally be followed by growth in cryptocurrency regulation. As long-term crypto investors, we monitor both the immediate and long-term effects of these changing rules, as influence shifts in more traditional pockets of the financial industry.
Cash Management
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