As we wish everyone a Happy Chinese New Year with the Wood Dragon roaring, we are faced with the continuing drop of Chinese equities and the first shock to Paytm in India that rattled their stakeholders. We added the recommendations section where we highlighted the Asian Century Stocks substack by Michael Fritzell and the Tech in Asia's new Glass Wall where VCs are being rated by anonymous founders who encountered them.
What we are reading this week:
- Fraud in Asia by Michael Fritzell from Asian Century Stocks: Tan Chin Hwee and Tom Robinson’s Asian Financial Statement Analysis. The book is from 2014 and discusses real-world examples of fraud and misrepresentation across Asia, for example, Satyam and Sino-Forest. Our Take: If you are into Asian equities, you should read his analysis of individual stocks and thematic reports about the companies in Asia.
- Tech In Asia Glass Wall: The things anonymous founders say about VCs. Our Take: In Southeast Asia, we have heard things both good and bad about the VCs and this is a reflection of the state of venture capital in Southeast Asia. What I would like them to do is to expand the glass wall to China, India and East Asia as well. Of course, given that the reviews are anonymous, we have to be critical of which feedback is not personal.
- Chinese equities rebound on hopes of support from Beijing: Regulators release a series of announcements in a bid to stabilise markets by Cheng Leng from Financial Times. Our Take: Of course, when China sneezes, the rest of Asia also takes a beating with most Asian markets dropping.
- US lawmakers urge commerce department to put TikTok-parent ByteDance on export control list from South China Morning Post. Our Take: Will the US ban TikTok? There are many attempts going on but it will absolutely solve nothing. The issue is that social media platforms are no longer neutral platforms but their algorithmic feeds are responsible for the polarization happening in several countries. Pinning TikTok alone will not stop the problem for the US.
- Huawei’s French Offices Searched by Financial Prosecutors by Benoit Berthelot and Valentine Baldassari from Bloomberg. Our Take: This reflects the intensifying global scrutiny of Chinese tech firms. Initiated by France's financial prosecution service, the investigation aims to uncover potential misconduct, such as corruption or influence peddling. This development is significant, considering Huawei's substantial footprint in France's telecommunications market and its plans to build a factory in Alsace, marking its first outside China. From a business perspective, this incident underscores the growing challenges faced by Chinese tech companies in global markets, particularly in regions wary of potential security risks associated with Chinese technology. The suspicions against Huawei, a dominant player in the 5G equipment market, align with broader geopolitical tensions, notably the US-China standoff over espionage allegations, which Huawei denies. The European Commission's warning about Huawei and ZTE further compounds the situation, suggesting a shift in the EU's stance towards Chinese telecom equipment providers.
- Paytm Bank Lesson for RBI by Menaka Doshi from Bloomberg. Our Take: The Reserve Bank of India's restrained communication left Paytm's stakeholders inadequately prepared for their recent crisis. This is the first fintech crisis in India. Of course, SoftBank managed to exit earlier and cut down most of Paytm's stake before RBI's announcement to freeze most of Paytm's banking operations.
- Grab, GoTo Are Said to Revive Talks for Ride-Hailing Mega Merger by Olivia Poh, Elffie Chew, and Manuel Baigorri Bloomberg. Our Take: Everyone from investors to key employees has their exits now but the stock prices are all below water. So, the best way to do this is to merge and get economies of scale. Of course, that also means job cuts from both sides to achieve synergies. They have tried many times to do this and let's hope they get it right this time.
- Shopee lawsuit against ex-employee dismissed by Singapore judge by Putra Muskita from Tech In Asia. Our Take: Non-compete clauses are often placed into employee contracts but they are difficult to enforce. Unless the employee committed breaches of security, for example, downloading the former company data with a trail that can be shown as evidence, it is very hard to sue someone with the knowledge and know-how. The broader question is whether it is fair to insert such a clause into the employee contract given that everyone needs to work for a living and you cannot stop someone from moving on to a greener pasture.
Japan, Korea and Taiwan
- Japan's Rapidus and universities aim for 'beyond 2nm' chip tech by Ryotaroh Satoh from Nikkei Asia Review. Our Take: The collaboration between Japan's startup Rapidus and various research institutes to develop 'beyond 2nm' chip technology represents a strategic move by Japan to reclaim its leadership in the semiconductor industry. Supported by a government investment of 45 billion yen, this initiative underscores Japan's commitment to reviving its technological prowess in a competitive market. The project's focus on cutting-edge chip manufacturing and edge AI applications, with plans to commence production as early as 2027, highlights a forward-thinking approach aimed at re-establishing Japan as a semiconductor powerhouse.
- Taiwan's Acer and Asustek double down on 'Make in India' by Lauly Li from Nikkei Asia Review. Our Take: This reflects a shift in the global tech manufacturing landscape. Driven by India's tightening import restrictions and incentivized by the government's push for local production, these Taiwanese tech giants are not just responding to policy changes but are actively participating in India's ambitious goal to bolster its technological self-reliance. Acer's expansion, spurred by India's burgeoning market, and Asustek's deepening manufacturing integration signify a broader trend of global tech companies diversifying their production bases. This pivot towards India, aligning with the country's production-linked incentive schemes, illustrates a concerted effort by major players to adapt to the changing dynamics of global supply chains, positioning India as an emerging hub in the tech industry and potentially reshaping regional economic balances.
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