Finimize - 😳 China comes crawling back

Sorry about the “crackdown” thing | UK inflation beats the rest |

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Today's big stories

  1. Tencent reported a weaker-than-expected batch of quarterly earnings
  2. There are two indicators suggesting we’re about to slip into a bear market, and potentially even a recession – Read Now
  3. UK inflation hit a 40-year high in April

Game Over

Game Over

What’s Going On Here?

Chinese gaming giant Tencent reported its slowest quarterly revenue growth on record on Wednesday.

What Does This Mean?

Tencent is a bit of an outlier among Chinese tech companies, having escaped the government’s otherwise unforgiving attack on the sector. But it was still burned by the fallout: the company’s online advertising revenue fell 18% last quarter from the same time last year, as companies that were directly affected – like online tutors and insurers – wound back their ad spending. TikTok-owner ByteDance didn’t help either, poaching plenty of its would-be advertisers for itself. To add insult to injury, growth in Tencent’s gaming division practically stalled, as the company waits for regulators to approve new game releases. That led the company’s overall revenue to grow by just 0.1% – the smallest uptick since it listed on the stock market 18 years ago.

Why Should I Care?

For markets: The tortoise and the hare.
Tencent is still China’s most valuable company, but its market value has more than halved from around $930 billion in February 2021 to around $450 billion today. That’s a pretty pronounced turnaround, given that for years it was one of the fastest-growing companies in the world. Things are so bad, in fact, that it’s now growing slower than even utilities companies: the top ten firms in this notoriously lethargic sector grew 8.6% a quarter on average last year.

The bigger picture: Look who’s come crawling back.
The Chinese government said this week that it would now be going out of its way to support its tech companies, which helped an index tracking some of the country’s biggest to rally this week. As for why it’s chosen now – the precise moment its economy has started to flag – to cozy up to the biggest driver of its economic growth in the past decade, it’s a mystery.

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Analyst Take

First A Bear Market, Next A Recession

First A Bear Market, Next A Recession
Photo of Reda Farran

Reda Farran, Analyst

If we look at all the recessions since World War II, most of them had four things in common.

A rate-hiking cycle by the Fed. Check. An inverted yield curve. Check. Geopolitical tensions. Check. And… a bear market.

That’s the last one left, and we’re not far off: the US stock market is on a six-week losing streak, and two indicators suggest it’s going to drop even further.

And judging by the historical relationship between bear markets and economic slowdowns, there could be a recession to come too.

That’s today’s Insight: what you can expect if we fall into a recession, and a really top-notch picture of a bear waving, apparently.

Read or listen to the Insight here

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Inflatable You

Inflatable You

What’s Going On Here?

Data out on Wednesday showed that inflation in the UK is now the highest of all the G7 countries.

What Does This Mean?

The prices of goods and services in the UK climbed 9% last month versus the same time last year – well up on March’s 7%, and the fastest rise since 1982. Around 2% of that uptick was down to higher energy prices, but there were rapid rises across the board: food and drink was up around 7%, furniture and household equipment up 11%, and the cost of recreation and culture up 6% – the biggest increase since 2006. That means that the UK’s inflation rate is now higher than that of America, Germany, and the rest of the Group of Seven, and only just shy of a handful of other places.

Why Should I Care?

The bigger picture: Mo’ money, mo’ problems.
While the most recent US update suggested its inflation might’ve peaked, that doesn’t seem to be the case for Britain. Data out this week also showed that UK unemployment fell to its lowest in nearly 50 years last quarter, and that job vacancies outnumbered those looking for work for the first time on record. That’s got some economists worried that the country could slip into a so-called “wage price spiral”, in which companies raise prices even more as workers demand higher salaries.

Zooming out: This doesn’t seem fair.
Bloomberg Economics has worked out that inflation will add around £2,400 ($3,000) to the bills of the average UK household this year (tweet this). But analysis from the Institute for Fiscal Studies (IFS) has shown that the billionaires will be hit the hardest. Just kidding: it’ll be the poorest members of society impacted most, since they spend a higher proportion of their incomes on food and energy – both of which are most to blame for the rising prices. In fact, according to the IFS, inflation for the poorest 10% of households was actually 10.9% last month, compared to 7.9% for the richest 10%.

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💬 Quote of the day

“I’d far rather be happy than right any day.”

– Douglas Adams (an English author and screenwriter)
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🌎 Finimize Live

🎉 Coming Up This Week

All events are in UK time.

🚗 The Leaders Of The EV Revolution: 5pm, May 19th
♻️ How To Pick Winning ESG Stocks: 5pm, May 20th
🧐 A Guide To Investing In Derivatives: 6pm, May 23rd
📈 How To Invest Thematically: 12pm, May 24th
🎨 How To Build And Manage A Balanced NFT Portfolio: 5pm, May 24th
⚡️ How To Invest In The EV Revolution: 1pm, May 25th
😎 The Blockchain And Real Estate Revolution: 6pm, May 25th
📈 The Future Of The M&A Market: 5pm, May 26th

💪 And Then After That…

📱 How To Hedge Against The Chip Shortage: 1pm, May 30th
📉 A Guide to Automated Crypto Trading: 6pm, May 30th
♻️ How Green Bonds Can Fuel A Sustainable Future: 1pm, May 31st
🏆 Peer-To-Peer Vs. Crypto Exchanges: 5pm, May 31st
🎉 De-Mystifying Refi: 5pm, June 1st
🌿 How To Get The Green With Cannabis ETFs: 12pm, June 9th
🎮 How To Invest In Video Games: 5pm, June 9th
🌍 How And Where To Invest In Africa: 5pm, June 14th
🚀 Finimize NFT Fest: 12pm, 15th June
🤗 Investing In Metaverse Opportunities: 5pm, 23rd June
🏘 How To Diversify Your Crypto Investments Through Commercial Real Estate: 6pm, August 3rd
🏡 Tokenizing Real Estate: 6pm, September 13th

🎯 On Our Radar

  1. Celebrities can’t handle the heat. That hasn’t stopped them taking on the internet’s spice.
  2. There’s no Misery here. Stephen King’s novels just keep giving.
  3. We have some news. Our very own Anthony will fill you in here.
  4. You’ll never have to read that boring document again. Google’s keeping it short and sweet.
  5. Coinbase has your crypto. It might just keep it.
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