Macro Dragon WK # 31: The Fed, China Tech [DIDI -42%, Tencent -12% but Weibo +44%!], Earnings from TSLA, AMZN, FB, MSFT plus Robinhood IPO [HOOD]

Macro 8 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Quasi-Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon WK # 31: The Fed, China Tech [DIDI -42%, Tencent -12% but Weibo +44%!], Earnings from TSLA, AMZN, FB, MSFT plus Robinhood IPO [HOOD]


Top of Mind…

  • TGIM & welcome to WK #31
  • Hope everyone had a restful wkd & for those on full blown summer vacays… enjoy!
  • Looks like these summer Fridays are giving us some pretty big spikes, as we saw off the back of those PMIs… real rates took a big leg lower.


    33  OG gold vs real rates
  • Suggesting that gold could have an easy pop to the $1850 to $1900 lvl from the c. $1800 Fri close… if these real rates lvls hold or go lower.
  • Earnings: Big earnings wk for some of the household tech names, including Tesla, Microsoft, Apple, Alphabet Facebook, Amazon, AMD as well as other non tech names like Caterpillar.
  • Our equity strategist Peter Garnry is away on some well deserved vacay, so KVP will be QBing on some of the earnings previews, as well as the upcoming robbing the poor to feed the HFTs & Citadels of the world Robinhood IPO. Worth noting Garnry already touched on the Robinhood IPO earlier in the month. Value vs Growth, earnings season, and Robinhood IPO.
  • Speaking of Tech, SNAP $77.97 had a monster up session last wk with a full +24% on Fri (+32% for the wk). Contrast that with DIDI $8.06 that cratered -21% on Fri & -33% for the wk. The name is now down -42% from its IPO strike of $14 & -56% from its high of $18.01. As the China regulators continue to keep the name in their sights, as we previously flagged in the Dragon. There is going to be a LOT of lawsuits, because there is no way that senior DIDI executives, backers & the banks involved in this IPO “did not know” that this was not greenlighted by China regulators. If you play with the Dragon, you cease to play.
  • On separate note, yet similar theme this Asia Mon morning, regulatory overhand continues to push HK shares lower & once again the China tech names, even those without ADRs like Tencent 509 -4.1% (post -6% last wk to 531), Baidu 165.60 -3.6% (post -4.2% last wk to 171.80) & JD.COM 274.60 -5.2% (post -3% last wk to 289.80).
  • This despite weekly charts showing that we once again, were trying to make a low. Hard to see what is going to be a catalyst to change the sentiment in the space for now, outside of earnings. Its easy to take a “why are the regulators slamming down on these names” approach, but the bottom line is, these names would not be the dominant players they are if not for the regulations & entry to barriers to foreign players in the first place.
  • Tencent is now c. -35% from its ATH of 773.39, at some point the space is a buy, so far we’ve been dead wrong on timing on the Dragon… yet still plenty of time left for 2H21. At some point would also expect some form of regulatory support in the form of language & guidance, i.e. these names are also held by domestics. Still on ADRs & education names, KVP would steer clear – some of these names dropped by -70% (TAL $6.00) & (EDU $2.93) -54%,
  • Kudos to my man JT calling this beautifully… that’s a homerun trade right there. For context $17.50 strike puts purchased on Fri 16 of Jul for c. $1.50, would have yielded you a c. +8x rtn to $11.70. So say 25bp of risk on $10m book, for a premium outlay of $25K, which would have leaped to $195K or c. +2% of one’s overall capital in sub 2wks.
  • Again, there are always profitable opportunities. And the best thing about trading, investing& life in general – unlike Pokémon – you don’t have to catch them all.
  • Meanwhile the screaming dislocated outlier that is Weibo [WB $59.20 -1.8%], continues to stay aloft in a vacuum… still up +44% YTD at $59.20, despite significantly lower volume. Feels like someone/s are upholding this castle in the sand, or knows something that KVP does not. Still feel we’ll close the gap discussed in: Macro Dragon Reflections: Divergence in China Tech Names, WB +47% YTD vs. range of -6% to -18% to -27% on Tencent, JD.Com & DiDi
  • Updated chart below shows the howling dislocation of outperformance of Weibo vs. the rest of the China Tech space. For context against something like Baidu, the relative outperformance is close to +80%, on Tencent closer to +55%.

    310 DIDI
  • Only pathways that currently ‘make sense’ to KVP for the price to be up here are three:

      1. Pigs are flying outside & WB is “different this time” & does not fall under any regulatory concerns of China nor data issues, despite it being a social media & advertising firm.
      2. Someone knows something we don’t around the false take-over rumours, actually being true: Weibo denies report of plans to take company private. Or from Weibo’s own website & press release:

        “BEIJING, July 6, 2021 /PRNewswire/ -- Weibo Corporation ("Weibo" or the "Company") (NASDAQ: WB), a leading social media in China, noted a Reuters article issued today saying the Company's chairman Charles Chao and a state investor are in talks to take the Company private.  In response to the Company's inquiry, Mr. Chao informed the Company that the above information is untrue and he has had no discussion with anyone regarding privatization of the Company.”
      3. Weibo is going to have the mother of all earnings beats on Aug 13, when it is expected to announce results. The earnings & revenue expectations of 0.623 cents (+24% QoQ) & $524M (+35% QoQ) are going to be blown straight out the water, fully vindicating the stocks 19x fwd P/E valuation.  
  • As always, could be dead wrong on this… yet still think the easy move is to close the gap & head to well under $50 from these c. $60 lvls. When names can drop by -20% to -70% on a session, you know the potential is there.

 332 DIDI chart

  • Lastly big baller session Mon morning in Crypto land – still think we are in bear market price action until a significant break of the $40K lvl – as Bitcoin 38,395 +11% this morning & c. +20% over the last 5 trading days. Can expect to see the likes of MSTR $539.71 +3.2% & COIN $224.92 -0.0% to fly in the US session, if these gains hold.
  • Narrative seems to be more tech CEOs tweeting bullishness on the space, with Twitter & Squares’ Jack Dorsey say Bitcoin to be a ‘big part’ of Twitter – folks, a bull market does not need tweets & talking heads to support it… let’s just leave it at that. For now, its all about respecting the price action if we managed to break out of this $40K to $29K trading range, that has been a series of steadily lower lows & lower highs… until today at least.

333 Bitcoin

  • Central Banks: Really all about the Fed’s FOMC meeting this Wed – again it will be about the statement, tone in the Q&A press conference with a focus around tapering.
  • Worth noting that since last FOMC the breakout & concerns around the Delta variant have only climbed, plus we have seen a pullback (likely natural post super-hot numbers) in US economic activity. 2Q & almost certainly the 1H21 is going to capture peak growth & the Fed is going to have to measure the risks of restrictions coming back-on, as well as potential bigger than expected pullback in economic data, yet still persistent inflation figures [US Core CPI last months: Apr +3.0% May +3.8%, Jun +4.5%] & improving jobs numbers [over same months +269K, +583K & +850K].
  • On the flipside, one could argue that at some points bad news = positive risk-on price action… i.e. the more concerns around the delta & the more restrictions we get globally (e.g. Sydney whose pop of 5.3M is c. 21% of Australia’s pop, is almost certainly going to extend restrictions that were set to expire this Fri… with some of our peers anticipating at least another month), the highest the probability of more fiscal stimulative measures, as well as a curb on hawkish central bank pivots.
  • Econ data: Most key are likely inflation figures out of Australia 3.7%e 1.1%p, Canada 3.2%e 3.6%p,  & Russia on Tue. With the first 2Q GDP reading out of the US on Thu & the Fed fav. Core PCE index on Fri.
  • Holidays: No major holidays on the radar.
  • Other: Enjoy the Olympics folks & watch out for any potential tail-risks out of the US Debt ceiling discussions (check out US treasury Yellen letter to Congress).
  • Plus also start to do the work on the rebuilding theme for a flooded Europe & other parts of the globe, any good German infra/builders come to mind? Ping the Macro Dragon.
  • Have a great close to the month & wk ahead folks.

 

Recent Works to Keep In Heavy Rotation

-

Start<>End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.

This is The Way

Namaste,
KVP

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zurich
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved, we have put together a general Risk Warning and a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed here or within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.