Investors probably won’t see it coming, but big losses are likely on the way for FANG stocks. The bank says that the group of companies is about to be “smacked down” by regulators. Savita Subramanian, Head of US equity strategy at BAML, says that the risk for investors is heavily skewed to the downside. “These companies are about to be smacked down from a regulatory perspective … Look at the fact that Mark Zuckerberg was testifying before Congress a year ago. That’s exactly what all the financial CEOs were doing 10 years ago”. Subramanian likens the coming losses to what happened to financial stocks in 2008-2009.
FINSUM: We doubt any forthcoming losses will be Financial Crisis-like but the regulatory risk is surely a big one. Will new regulations be related to anti-trust or data protection? Or both?
One of the trade war’s big victims could be Apple. While much of the trade war panic has been focused on other products, Apple could be the biggest victim to suffer. The the reason why may have more to do with sentiment than with tariffs. While there is much talk of Chinese “national champions”, Apple is undoubtedly an American national champion in China, and with sentiment souring against the US in the face of the trade war, it is likely that Chinese consumers will move towards purchasing domestic smart phones. Apple will be forced to raise prices because of tariffs, which would accelerate the trade. China accounts for about 18% of Apple’s revenue and a higher percentage of its profits.
FINSUM: There could be a big hit to Apple’s top and bottom lines here. China could also take measures to specifically wound Apple the way Washington has done to Huawei. Anything seems to be fair game right now.
The panic over Trump’s blacklisting of Huawei was reaching a fever pitch. The fall out had gotten so bad that it looks like the President decided to take a step back. Trump has now granted a three-month reprieve on the blacklist to give companies time to adjust. The stay is not a cancellation of the decision, just a window for adjustment. Huawei says it “doesn’t mean much”.
FINSUM: This is smarter than a sudden blanket ban as it will give a little adjustment period which may make it a bit easier for companies and markets to digest.
Make no mistake, the US’ new blacklisting of Huawei is going to have a serious effect on American tech companies. Huawei is deeply integrated with many US suppliers of technology components, so the import and export restrictions will be significant. Here is a lit of US companies with major relationships with Huawei: Qualcomm, Broadcom, Xilinx, Synopsys, Marvell Technology, Seagate Technology, Western Digital, Texas Instruments, and Micron technology.
FINSUM: The impact on the top and bottom lines of all these companies will take some time to figure out, but for now we thought it would be useful to know which ones are at risk.
Stocks woke up to a volatility explosion this morning. President Trump made a surprise announcement that he was considering boosting tariffs on China. Specifically, the president threatened to raise tariffs to 25%. Beijing is reportedly infuriated. The comments come towards the end of what seemed to be a smooth negotiation with Beijing about a new trade package. Therefore, they riled markets to a major extent. Headline indexes shed a couple percent at peak (so far) and sectors like technology and industrials sold off sharply. The trade delegation from Beijing is still expected to attended a planned tariff meeting this week.
FINSUM: It is very hard to know how significant this is (whether Trump actually wants to do this), or whether this is just a negotiating tactic.
In what comes as a really eye-opening turn of events even for someone as outlandish as Masayoshi Son, SoftBank has announced a plan to IPO its $100 bn Vision Fund. The fund is already legendary, having invested $100bn in just two years in some of the world’s biggest startups. It currently holds positions in WeWork and Uber, for instance. Masayoshi Son is now raising for capital for another fund, so wants to access some liquidity from this first one, thus the plan to IPO.
FINSUM: This is a bonkers plan, but honestly, and interesting opportunity for investors to own pieces of some very exclusive private companies. This is like an early stage Berkshire Hathaway.