Tim Talks Money
Posts
Asia Tea Time: Cup 2 ☕

Asia Tea Time: Cup 2 ☕

March 10, 2023 • Estimated Reading Time: 6 minutes

This week, we cover news on Apple, Sea, and International Women's Day.

Big Picture in Asia

Vietnam attracting Apple suppliers on US-China tensions

According to Goertek, a Chinese manufacturer of Apple’s AirPods, many Chinese suppliers will likely continue to move manufacturing capacity out of the country on the back of geopolitical tensions between the world’s two biggest economies. Vietnam is one of the top destinations.

Why it’s happening

Remember the trade war and China’s snarled supply chains during the pandemic? Well, that’s worrying companies, like Apple, longer term.
Plus, China labour isn’t exactly cheap. That’s why the country has been installing mad robots in their factories.

Why it matters

The reorg of global supply chains will be taking an axe to margins. I know, I know, global companies surely can’t feel inflation like the rest of us, right? But they do.
Who’s going to benefit? Probably the countries that aren’t vying for global hegemony with the US – think Vietnam or even India.

What’s next?

Apple has apparently decided that it will put more of a focus on India as a sales region. Makes sense if you’re manufacturing the actual things/iPhone/AirPods in the country.

Tim’s Take

There’s a lot of noise about production moving away from China, which it is. But China still accounts for 85% of total iPhone production while India only accounts for 5%. Still a long way to go, peeps.
Who could benefit? It’s obvious it’ll be countries that have cheaper labour costs and don’t piss off either the US or China.

💡

However, remember there is no correlation between economic growth and stock market returns.

Vietnam’s economy regularly grows above 7% annually (if there isn’t a global pandemic messing things up). That’s surely got to mean sick stock market returns, yeh? Nope. The VanEck Vietnam ETF (NYSE: VNM) has averaged an annualised -4.6% return (yes, NEGATIVE) over the past 10 years.

Company spotlights

Southeast Asian e-commerce giant Sea reports a profit

The Singapore-headquartered e-commerce and gaming giant reported its first-ever quarterly profit after slashing costs big time.

Sales & Marketing expenses were down 61% during the fourth quarter of 2022, helping it generate a profit.

Why’s it news?

Sea Ltd (NYSE: SE) is Southeast Asia’s biggest listed tech firm. Granted, it’s actually listed on the New York Stock Exchange (NYSE) but its operations are primarily in Southeast Asia.
After recording a loss of US$616 million in Q4 2021, this swing to a net profit of US$423 million was mighty impressive.
Shares were up big on a down day for the market. The Fed’s Mr Powell couldn’t steal the thunder from Sea shareholders. The stock finished the day up 21%.

Why it matters?

That elusive “path to profitability” is finally in sight. Something that was originally envisioned for 2024 has happened in 2023!
Still, Sea got caught up in the tech carnage of last year. Shares got hammered and fell 75% in 2022. Not pretty.

What’s next?

Can this profitability story be repeated across the ecosystem of Southeast Asian tech players, like Grab and Indonesia’s GoTo? To be or not to be…profitable? That is the question.

Tim’s Take:

💡

Sea’s turn to profitability is a positive indicator for the rest of the region’s tech ecosystem. Sea is also the most obvious option for investors looking for e-commerce exposure to the region, given its size and scale.

Plus, it has proved to people that it can actually make money – wahey! – even if that has mostly come through massive cost-cutting. That’s something the likes of Grab and GoTo can’t claim just yet.

Source: Tech in Asia (h/t Terence Lee for sharing)

Finally, don’t forget that Sea’s Digital Financial Services (DFS) division only made up just over 10% of Sea’s Q4 2022 revenue. Yet it’s the company’s fastest-growing division – nearly doubling its revenue from Q4 2021.

Story of the week

It was International Women’s Day this week. We all know that women have better temperaments than guys. And that they’re particularly suited to long-term investing.

So, it’s not exactly any surprise that their investment performance is better than mens’ over a long-term basis. That outperformance ranges from 0.4% to 1%...not insignificant!

That’s in the US, though. In Asia, women are probably a tad more conservative. According to a UOB ASEAN survey, in mid-2022, women are nearly twice as likely as men to have their money in fixed deposits.