Good afternoon, BM readers 👋
It’s Wednesday, June 26, and here’s your succinct yet insightful weekly briefing 🚀
"Skills can be taught. Character you either have or you don’t have."
Anthony Bourdain
🏁 Quick Quips
Here’s a recap of last week’s headlines
🇵🇭 Philippine Offshore Gaming Operations Under Scrutiny for Espionage Risks (Nikkei)
Analysts have raised concerns about offshore casinos in the Philippines, warning they could pose significant security risks, potentially serving as strategic assets for China in times of conflict. Philippine Offshore Gaming Operations (POGOs), located near military installations, have heightened suspicions of espionage. The relationship between China and the Philippines is complex, with economic ties juxtaposed against geopolitical tensions, particularly in the South China Sea. This concern is shared by Indonesia, which has announced it will cut off access to gambling websites operating out of Cambodia and Davao City, addressing the growing problem of illegal online gambling. Indonesia's Ministry of Communications has instructed service providers to shut down these lines indefinitely, following data showing 3.2 million people engaging in illegal online gambling, with transactions reaching US$36.5 billion in early 2024. This crackdown is part of a broader regional effort to combat online gambling linked to fraud, human trafficking, and other illicit activities, with countries like the Philippines and Singapore also taking significant measures.
🇨🇭 Rising Competition: Global Banks Target Swiss Market Post-Credit Suisse (Reuters)
With Credit Suisse's takeover by UBS, global banks are expanding in Switzerland to tap into business diversification opportunities. BNP Paribas, Deutsche Bank, Citi, and Bank of America are increasing staffing to attract smaller Swiss companies. Despite their growth, challenging UBS's dominance remains uncertain, raising concerns at the Swiss competition watchdog COMCO. Post-Credit Suisse's collapse, firms are engaging with foreign banks, driven by fears of over-reliance on UBS. Citi aims to double its Swiss team by 2028, while Deutsche Bank has expanded its team by 10% since early 2023. Competition is welcomed by industry leaders, anticipating benefits for smaller companies. COMCO urges more effective competition, while UBS continues to dominate the market. Bank of America notes the narrowing window for new banking partnerships. BNP Paribas has grown its team by 50 since 2022, seizing opportunities among smaller exporters and rising to become the number two player in the Swiss franc-denominated bond market.
🇸🇬 New Assessment Reveals High Money Laundering Risk in Singapore’s Wealth Management (Bloomberg)
Singapore's banking and wealth management sectors present the highest money laundering risks, as detailed in a new government report. The assessment highlights the sectors' vulnerabilities due to high transaction volumes and exposure to high-risk jurisdictions. Following a $2.24 billion money laundering bust, the government formed an inter-ministerial panel to enhance anti-money laundering measures. Key threats include cyber-enabled fraud, organised crime, corruption, tax crimes, and trade-based money laundering. Newly identified risk sectors include digital payment token services and precious stones and metals dealers. With assets under management at S$4.9 trillion ($3.6 trillion) in 2022, 76% from outside Singapore, the city-state’s position as an international financial hub exposes it to significant money laundering threats. The increase in family offices, now around 1,400, underscores the need for heightened vigilance and adaptation in combating financial crimes.
🎨 Art Market Shift: South Asian Works Attract High Bids (Artnews)
South Asian art is gaining prominence as an attractive alternative investment in the global market. Historically undervalued, Indian, Bangladeshi, and Pakistani art is now experiencing a surge in prices. Sotheby’s South Asian modern and contemporary art sale during Asia Week New York in March achieved $19.8 million, a significant increase from $7 million the previous year and $4.8 million in 2020. Key factors include the entry of high-quality lots, an expanding collector base, and a reduced supply of works by the Progressive Artists Group. Major sales include S.H. Raza’s "Kallisté" at $5.6 million and F.N. Souza’s "The Lovers" at nearly $4.9 million. Institutional efforts by museums like the Guggenheim and MoMA to study and acquire South Asian art have also contributed to this momentum. Auction houses are leveraging this trend through educational outreach and curated exhibitions. With the significant presence of Indian billionaires in the global market driving demand, South Asian art is becoming a compelling option for investors seeking to diversify their portfolios.
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Global news and Market moves
🇪🇺 EU launches formal accession negotiations with Ukraine and Moldova.
⚖️ WikiLeaks founder Julian Assange released from prison after US plea deal.
🇵🇭 Former Philippine President Rodrigo Duterte and his two sons eyes Senate seats in midterm elections.
🇸🇱 Sierra Leone outlaws child marriage in historic new legislation.
🇮🇩 Indonesia's Pertamina to invest $6.2bn in clean energy business.
🛍️ Target and Shopify partner to expand its third-party marketplace.
📱 Apple becomes first target of EU's new digital competition rules.
✈️ Korean Air Boeing flight to Taichung descends 21,000 ft with 13 injured.
🤖 AI chip developer Cerebras, an Nvidia challenger, files for IPO confidentially.
⛵ SailGP attracting billionaire investors, to potentially break even by 2025.
📉 Nvidia stock rebounds after falling into a correction, diminishing market value by $430bn.
🇯🇵 Japan sanctions China-based firms in connection with the war in Ukraine,
🏛️ U.S. prosecutors urge Justice Department to file criminal charges against Boeing over 737 Max.
🕋 Death toll at Hajj pilgrimage rises to 1,300 amid extreme high temperatures.
🚙 Berkshire Hathaway accelerates sales of China's BYD.
🌱 FDA approved the first menthol flavoured e-cigarrettes in the U.S.
🇷🇺 Russia bans 81 EU media outlets in retaliatory move.
🔬 Gilead’s antiviral shows 100% efficacy for HIV prevention in groundbreaking phase III trial.
➡️ Forecast and Hindsight 👀
Did foresight meet hindsight?
🌐 Supply chain disruptions and trade policy changes—Shipping disruptions are making headlines but aren't significantly impacting factory activity in major developed economies or causing inflation spikes. Since 2020, the sector has dealt with the Covid-19 pandemic, Black Sea blockages, Panama Canal drought, and Red Sea disruptions.
Global merchandise trade is expected to grow by 2.6% in 2024 and 3.3% in 2025, despite regional conflicts and geopolitical tensions.
Attacks in the Red Sea by Yemen’s Houthi rebels have reduced traffic through the Suez Canal by about 50%, causing shipping diversions and increased delivery times by 10 days or more.
Severe drought at the Panama Canal has reduced daily ship crossings, with a 32% drop in transit trade volume in the first two months of the year.
In Q1, 69% of US manufacturers cited "insufficient orders" as a reason for not operating at full capacity, up from about 50% during the pandemic's low point.
European manufacturers are also increasingly citing a lack of demand as a limiting factor.
Due to supply chain disruptions, Airbus has reduced its jet delivery forecast for 2024 and delayed production ramp-up plans for its A320neo family.
The rise of e-commerce has maintained global trade flows, despite political tensions and trade restrictions.
The sector has become more resilient, offering alternative solutions and adapting to new challenges, including diversification of supply sources.
📈 Central bank decisions— Central banks significantly expanded their balance sheets through large-scale asset purchase programmes during and after the Global Financial Crisis and the COVID-19 pandemic. These purchases aimed to lower long-term interest rates, stimulating economic demand and stabilising inflation. As interest rates rose in 2022-2023, central banks began to incur losses on their bond holdings.
Despite potential losses, central banks like the ECB maintain that they can continue to support price stability without concern for insolvency.
Bank Indonesia has implemented various monetary interventions and issued Bank Indonesia Rupiah Securities (SRBI) to stabilise the rupiah amidst exchange rate volatility concerns.
Bank of Japan is considering a potential interest rate hike amid rising inflation pressures, contrasting with easing measures by other G7 counterparts.
The Philippines' central bank, despite high inflation, is expected to hold rates steady, awaiting cues from the US Federal Reserve's policy decisions.
💥 Geopolitical tension: South China Sea, Israel-Lebanon conflict— The United States Navy and the Royal Canadian Navy conducted joint operations in the South China Sea from 18 to 20 June, reinforcing regional security amidst China-Philippines tensions.
Canada joined Japan and the US in a joint patrol with the Philippines, countering increased aggressive actions by Chinese ships in the South China Sea.
China-Canada relations have further deteriorated due to these military activities, with past incidents of Chinese jets dangerously intercepting Canadian aircraft and accusations of Chinese interference in Canadian elections.
Israeli Prime Minister Benjamin Netanyahu indicated a potential shift in military focus to Israel's northern border with Lebanon, where clashes with Hezbollah have escalated.
He reiterated Israel's commitment to continue operations in Gaza until Hamas is eliminated, despite international calls for a ceasefire.
More than a million Palestinians sought refuge in Rafah before Israel's air and ground operations; around 800,000 have since been displaced under dire conditions described as "apocalyptic" by the UN.
The Rafah border crossing with Egypt, crucial for humanitarian aid, remains closed due to the ongoing conflict.
Protests have erupted in Israel, demanding the return of all hostages and acceptance of the hostage release deal.
What to look out for this coming week?
📊 Global economic indicators: World Economic Forum’s chief outlook
💼 Labour market and shifting demographics
📢 First quarter earnings
📊 The Week in Numbers
The Rise of $3 Trillion Tech Giants
🔔 In an unprecedented achievement, Nvidia, Apple, and Microsoft have each reached market valuations exceeding $3 trillion, underscoring their dominant roles in the technology sector and their significant influence on global financial markets.
This remarkable milestone reflects not only their innovative prowess and strategic leadership but also their ability to adapt and thrive in rapidly evolving industries.
➡️ These tech giants' extraordinary market valuations have far-reaching implications for the broader market and investment strategies. The combined market value of Nvidia, Apple, and Microsoft now exceeds entire national stock markets, highlighting their unparalleled economic influence.
Nvidia (NASDAQ: NVDA)
Market Cap: Surpassed $3 trillion.
Revenue Growth: 262% year-over-year, reaching $26 billion.
Data Centre Revenue: Increased by 427% to $22.6 billion.
Apple (NASDAQ: AAPL)
Market Cap: Approximately $3 trillion.
Q1 Earnings: Over $20 billion.
P/E Ratio: 30.
Microsoft (NASDAQ: MSFT)
Market Cap: Approximately $3 trillion.
Q1 Earnings: Over $20 billion.
P/E Ratio: 33.
Nvidia, Apple, and Microsoft Combined Value: Exceeds the entire Chinese stock market.
Economic Comparisons:
Nvidia is worth 16 McDonald’s.
Microsoft is worth 59 General Motors.
Apple and Microsoft both made more than $20 billion in Q1 alone.
Market Concentration
S&P 500 Influence: Just six stocks have added $3.8 trillion in market cap in 2024.
Big Tech Dominance: Nvidia alone has gained $1.86 trillion, surpassing the combined additions of the rest of the S&P 500.
👉 Nvidia's advancements in AI, particularly with the introduction of Nemotron-4 340B models, continue to drive its valuation and market confidence. These innovations play a crucial role in maintaining its competitive edge and fostering long-term growth.
🎨 Artful Revelations
Here are some of my picks for the week
📚 Exploring books:
The Curse of Bigness: Antitrust in the New Gilded Age by Tim Wu
Tim Wu's The Curse of Bigness presents a compelling case for reinvigorating antitrust enforcement in the contemporary era, drawing stark parallels between the Gilded Age and today’s digital monopolies. Wu, a leading voice in antitrust scholarship, argues that unchecked corporate concentration poses not only economic threats but also fundamental risks to democracy and individual autonomy. His historical context enriches the narrative, providing a clear framework for understanding the cyclical nature of corporate concentration and antitrust intervention. By linking economic power to political influence, Wu extends the debate beyond economics, emphasising broader societal stakes.
One of Wu's key strengths is his skilful comparison between the monopolies of the late 19th and early 20th centuries, such as Standard Oil, and today's tech giants like Google, Facebook, and Amazon. He highlights how past antitrust actions, particularly the breakup of Standard Oil, fostered a more competitive and innovative economy. This historical perspective is particularly relevant, as it underscores the potential benefits of antitrust interventions. Wu also critiques the shift in antitrust philosophy since the 1980s, which has prioritised consumer welfare, often narrowly defined as low prices, over broader considerations of market structure and power. He advocates for a return to a more aggressive antitrust approach that addresses market concentration and its societal impacts.
The book underscores the dangers of corporate concentration, noting that monopolistic power can stifle innovation, exploit consumers, and unduly influence political processes. Wu contends that the scale of modern corporations enables them to wield unprecedented power over markets and politics. His economic and political implications are well-articulated, providing a comprehensive understanding of the multifaceted risks associated with bigness.
Some may critique Wu's solutions as overly idealistic or challenging to implement in the current political climate. The feasibility of breaking up tech giants, for instance, faces significant legal and practical hurdles, not to mention formidable resistance from powerful corporate interests. While Wu’s arguments are compelling, the book occasionally glosses over the complexities and potential unintended consequences of aggressive antitrust enforcement. Despite these critiques, The Curse of Bigness is a thought-provoking and accessible read that revitalises crucial discussions about market power and democracy.
🖼️ Exploring the canvas:
Nemesio Antúnez's "Grand Central," painted in 1968, is a compelling example of abstract expressionism that deftly combines dynamic composition with bold use of color and texture. This monumental artwork captivates the viewer with its sweeping forms and energetic brushwork, embodying the artist's exploration of spatial depth and emotional intensity.
Antúnez employs a vibrant palette of primary colours contrasted against darker tones, creating a sense of movement and tension within the canvas. The interplay of light and shadow further enhances the painting's dramatic impact, drawing the viewer into a dynamic visual dialogue.
The composition is both structured and spontaneous, with rhythmic patterns that suggest a sense of chaos contained within a cohesive framework. Antúnez's gestural brushstrokes and layered textures imbue the work with a tactile quality, inviting closer inspection and revealing new depths with each viewing.
💭 Brainwaves and Whimsy.
“Deal with the stress so you can be well enough to deal with the stressor.”
Peaches on its own and in everything 🍑🌞
Thanks for being here. I'll see you next week with the newest issue of Brevity Margin!
Wishing you a productive week filled with moments of tranquility,
Abigail