☀️☕️ TikTok On The Blok?

📊 Also: Russian refinery struck, oil rises; HK’s 4-day streak; Galderma IPO; Amazonian Lilly; Nixing Nippon US Steel 🎓 Profit Margins

📈 Market Roundup [14-March-24]

US large-cap S&P 500 closed 0.19% DOWN 🔻

Tech-heavy Nasdaq Composite closed 0.54% DOWN 🔻

Pan European STOXX Europe 600 closed 0.16% UP ▲

HK/China’s Hang Seng Index closed 0.07% DOWN 🔻

Japan’s broad TOPIX closed 0.33% DOWN 🔻

📝 Focus

  • TikTok On The Blok?

📊 In the Markets

  • Russian refinery struck, oil rises; HK’s 4-day streak; Galderma IPO; Amazonian Lilly; Nixing Nippon US Steel

📖 MoneyFitt Explains

  • 🎓️ Profit Margins

💸 Personal Finance Corner

📝 Focus

TikTok On The Blok?

The US House of Representatives passed a bill with an overwhelming bipartisan majority to stop US app stores from distributing (and updating) TikTok, effectively banning it in the US unless ByteDance, its Chinese parent company, divests ownership within 180 days. The bill will next go to the Senate, which appears more divided, with many expressing doubts over putting limits on free speech and meddling in business affairs. If passed there, President Biden has said he’d sign it… though, in a 180° shift from his position in 2020, Donald Trump has said he won’t (see below). Beijing, of course, has said that it would oppose a forced sale.

Intelligence officials have conducted classified briefings for lawmakers focused on the national security risks from ByteDance's ownership of the popular social video app. The primary concern is that ByteDance would have to hand over American users’ data to Chinese authorities under its national security laws if requested by Beijing.

“This process was secret and the bill was jammed through for one reason: it’s a ban.… The government is attempting to strip 170 million Americans of their Constitutional right to free expression.”

TikTok/ByteDance, in a statement

Despite ByteDance's assertions that the “Protecting Americans from Foreign Adversary Controlled Applications Act” aims to "ban" TikTok, both the White House and lawmakers claim that the goal is not to eliminate the platform entirely but rather to ensure it operates without Chinese ownership, listing China as “a foreign adversary.” 

Calm down, it’s not (exactly) a ban. Yet. - Image credit: TikTok via Tenor

..... ▷ ByteDance is the world's most valuable startup. Late last year it offered to buy back its own shares from employees, valuing itself at $223 billion (though less than the $300 billion it was valued at in the previous buy back offer.) 

..... ▷ As we wrote almost exactly a year ago last March about the Biden administration’s security concerns:

ByteDance of course denies this and (besides sharing that it's 60% owned by global investors) claims with some justification to be way more interested in making money. It has been ramping up its ad business (and undercutting rivals) and is already making e-commerce inroads in China, where last year Douyin (TikTok in China, with the same logo) sold over US$200bn of stuff, a 76% increase from 2021, with similar services already rolling out elsewhere. (And it may have friends in antitrust officials at the US Justice Department and the Federal Trade Commission, which are increasingly concerned with attempts by tech giants to buy out competitors.) [MFM: Time Ticking for TikTok?; ]

TikTok has already spent more than $1.5bn on “Project Texas” over the last three years, to safeguard US user data in a partnership with American cloud software group Oracle, but it seems not to have convinced lawmakers of its effectiveness.

..... ▷ ByteDance owns 100% of TikTok, its main asset outside China, but outside investors control 60% of ByteDance, including stellar names such as Sequoia and General Atlantic. And “secretive high speed trading firm” Susquehanna, with 15% of Bytedance and whose billionaire founder (and, coincidentally, the third-largest Republican donor) just met with Donald Trump just prior to his flip flop on TikTok.

..... ▷ One solution could be for ByteDance to establish TikTok Global or at least TikTok USA as an independent company with its own stock, with ByteDance and its China-based employees owning less than a combined 20%. 

This could happen through sale, exchange, or IPO, but any part of TikTok would be enormously expensive, and big tech firms (especially Meta and Alphabet) are unlikely to bid due to antitrust concerns (though former suitors Oracle/WalMart may step up.)

🇸🇬 Singapore: Let’s Get MoneyFitt!

📊 In the Markets

Hong Kong's Hang Seng index rose for the fourth straight day, up by 0.5%. [MFM: “Uninvestable” China? from early February]

HK flag carrier Cathay Pacific posted its highest annual profits since 2010, driven by a sharp jump in post-pandemic travel demand. CX reported a net profit of HK$9.8bn (US$1.25bn) for the year ending December 2023, a massive turnaround from the HK$6.6bn loss the previous year.

Meanwhile, Japan's Topix dropped by 0.3% as annual wage negotiations wrap up, with major firms agreeing to the largest pay hikes in 25 years. The hope is that these increases will help bring an end to decades of deflation, opening the door for Japan's central bank to end its years-long policy of negative interest rates as early as next week

President Biden plans to intervene in Nippon Steel's proposed $14.9bn purchase of US Steel, potentially blocking the deal and straining relations with Japan, one of Washington’s closest allies. Biden aims to issue a statement “expressing serious concern” before Prime Minister Fumio Kishida's state visit on April 18. [MFM: Japanese US Steel]

Ukraine conducted drone strikes on several oil refineries deep inside Russia, according to government officials in Kyiv, hitting refineries in three distinct locations and aiming to disrupt the Russian oil revenue. These strikes are seen as part of a broader strategy to undermine Russia's economic resources and reduce its fuel supply. Oil prices rose in response, along with official figures showing US stockpiles had dropped. The international oil benchmark Brent crude rose 2% to $83.59 a barrel, helping oil stocks and lifting European markets.

Zara owner Inditex, the world's largest fashion group, saw only a modest uptick in sales growth during the critical final quarter ending 31st Jan, with sales rising 8.6% to €10.4bn compared to 6.6% growth in the previous year. But net earnings surged by 23.5% to €1.3bn thanks to effective cost control measures and gradual price increases, pushing profit margins🎓 up and the shares to record highs. [MFM: Mango, Stores and The Shein Defence; Zara Not Fastest Fashion (Shein)

Dermatology group Galderma, owned by Swedish investment group EQT, is gearing up for a SFr2.3bn initial public offering (IPO) in Switzerland next week, valuing the company's equity at SFr11.8bn to SFr12.6bn, making it one of Europe's largest listings in recent years.

The S&P 500 and Nasdaq slipped on Wednesday as investors sold off chipmakers ahead of the Federal Reserve meeting next week. The semiconductor index dipped 2.5%. Intel dropped 4.4% after reports that the Pentagon withdrew a $2.5 billion chip grant. The top performing sector was energy, up 1.8 per cent, following the Ukraine drone strike.

Eli Lilly has entered a partnership with Amazon's online pharmacy to distribute medications, including its popular anti-obesity injection pen Zepbound, marking Amazon Pharmacy's first collaboration with a major drug company since its 2020 launch. Through LillyDirect, launched in January, patients can already access telehealth consultations and get Eli Lilly drug prescriptions. This move pits Eli Lilly, now the world's largest drugmaker by market value, against US pharmacy giants CVS and Walgreens in the prescription and drug delivery space. [MFM: Amazon on Drugs; GLP1ng down Obesity Drugs - more than a 2-horse race]

📖 MoneyFitt Explains

🎓️ Profit Margins

The gross profit margin is the percentage of revenue that remains after accounting for the cost of goods sold (COGS), while the net margin is the percentage of revenue that remains after accounting for all expenses, including COGS, operating expenses, taxes, and interest.

Gross margin is a measure of how efficiently a company manages its production costs.

Net margin is a measure of how efficiently a company manages all its expenses, including production, operating, and financial costs.

A higher gross margin means a company is better at controlling production costs, while a higher net margin means a company is better at controlling all expenses. Both gross and net margins are important indicators of a company's financial health and are closely watched by investors and analysts.

💸 Personal Finance Corner

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