For many, "capitalism" is the word that is frowned upon.
It is cruel, symbolizing corporate greed, and although it is linked to nation's success, many negative opinions relates it with inequality, corruption, and abuse of power.
Maybe it is just us, but it seems that right now politicians around the globe are treating capitalism as a sort of a taboo or a illegal religion.
Taking cue from speech and clips of Democrats, for instance, whom on Friday countenancing their apology for predatory capitalism. Below is a short clip by Bloomberg :
Joe Biden starts his remarks by saying that although he is a "proud capitalist", he condemns that "capitalism without competition isn't capitalism...
... it's exploitation".
Inequality is a really heated topics topic in current state of affairs. As the issues start to trigger multiple mass protests and unrest, it has become the agenda for the president to crack down the system itself in a bid to solve the problem.
"Without healthy competition, big players can… charge whatever they want and treat you however they want," he went on to lament.
You can read the order (all 31 pages of it) for yourself at the end of article.
Biden is trying to direct the White House, and imagines that the order will make American capitalism to work for the people.
He further issues (or ask nicely) federal agencies to reining in the tech titans, agriculture, or drug industries. For him, the four decades of "Reagan Revolution... [is a] failed experiment [and] letting the giant corporations acquire more and more power...
... [we have to] start revers[ing] these dangerous trends."
Ironically, we think Joe Biden's might be a bit denial and lies on a patent falsehood.
With all due respect to Mr. President, capitalism without exploitation of resources might not be a capitalism either (in fact, the meaning of capitalism is almost synonymous with it).
Without exploiting something (or someone) it is a capitalism that running on its way to peril.
In fact, although it is exploitative by nature, capitalistic system has to run in a totally "free market".
But like I said, Biden might be in denial that US can mimic what China capable of to crack down the home-grown tech giants. Such power was only available for autocrats like Xi Jinping who currently dance with corporate for the likes of Alibaba, Baidu or Tencent, and capable of assaulting them with regulatory 'fire power'.
Indeed, compared to US, China's Xi seems to have the tech titans on the leashed.
It is even rumored that, after what China has done to Baba's ANT Financial, another big step for the parliament to tighten the industry is by restricting overseas listing for some technology firms with more than 1 million user database.
This issue came out last Saturday. Obviously, the market didn't welcome such narrative.
No matter how you look at it, the odds of regulatory crackdown is there for DM countries.
Seems like governments want the 'tech' party to be over soon. As one Hong Kong-based analyst put it accurately, “it’s impossible to determine a reasonable (or acceptable) discount at this stage, given the uncertainties ... of regulatory tightening.”
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Contrary to DM tech issues, EM nations such as Indonesia is in early cycle of Tech Investing
Despite the DM lawmakers (and EM specific on China, for that matter) are preventing market manias with blindsided crack down, we feel that it is time to be alive as Indonesian investors who just started our early stage of tech / growth investing.
As the term that retail investors use to mention these days, thanks to growth stocks, "my portfolio is going to the moon!" For us, the unprecedented rally of tech stocks are just the beginning.
Contrary to overseas example where home-grown giants were 'harassed' (to put it explicitly), Indonesia's government are never been more supportive to take our digital economy on a full gas.
For the first time ever, these next two years will be a defining moments for our tech titans to be listed in stock exchange, BUKA and GOTO. For the later, GOTO's marriage ceremony to be a $40 billion dollar company was entirely welcomed by Indonesian's regulator themselves.
Countless regulatory revision, where negative earnings corporate might be allowed to be listed on stock exchange, as well as the omnibus law to welcome foreign investments indicate that government are giving wide welcomes for investments.
We feel that the smooth consolidation and fundraise trends of Indonesian tech titans may showcase how our regulatory risk is nascent, or to some extent, very low to be problematic for growth investors. Going forward, we read that as policy environment remain friendly for technology firm, there will be plentiful opportunities for investors who want to adopt growth investing strategy.
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Highlighting Bank Neo Commerce (BBYB), Fintech backed firm might find place in Indonesia digital bank ecosystem.
As stock broker ourselves, we feel that there are always under-the-radar opportunities. It becomes our task (and habit) as broker to always find overlooked ideas for you, investors, names that are away from the mainstream.
Outside of much hyped GOTO and BUKA, we also find couple of trade opportunities on Sucor Edward's latest piece, Bank Neo Commerce.
Similar to Bank Arto (currently changed name into Jago after its latest takeover rounds by Gojek), Bank Neo was also came from its brick-and-mortar beginnings as Bank Yudha Bakti.
It was founded in 1989 and since then was focusing on credit or loans and retirement benefits for officials in Indonesia namely TNI/POLRI. For years, the company conduct conventional banking services without much big data / technological adoption.
However, in 2020 the firm underwent a significant revamp of company's controlling structure where ANT's Akulaku is taking the leadership baton inside the company, led the re-branding of the firm as Bank Neo in accordance to its App release.
Akulaku Group, which has worked with various e-commerces including Lazada, Shopee, Bukalapak, etc currently has more than 30 million registered users with more than 10 million active lending customers.
We think that there are two main challenges that faces Indonesia digital banking these days: funding issues, which the bank has to get an affordable cost of capital, and the more challenging one is profitability issues, as the bank has to tackle distribution problem, targeting the (preferably) high yield borrowers.
Hence, the importance of ecosystem within the digital banking business. Contrary to conventional banking, digital banks rely the credit rating system by analyzing the digital tracks of its users: every clicks and purchase that we've made in the Internet determines our credit viability hence leads to said scoring and size of our interest rates.
For Bank Neo, Akulaku plays an important part in the distribution stage and execution risk.
The fintech provides know-how to calculate digitally on how users must be charged based on their digital behavior of its existing ecosystem. Arguably speaking, ANT might be the best fintech firm in the world, learning from China's case. As ANT remain a majority backers of Akulaku team, we feel it is safe to assume that ANTs superior experience in China and its trust over Akulaku can help Neo to prevail in Indonesian market.
As China's tech giants remain in a government's scrutiny list, Indonesia fintech market might provide a good hedge against growth scare investing overseas.
BBYB then makes an interesting case. Edward thinks that the BBYB's depressed valuation (the stock is trading at IDR 3-4 tn market cap, versus BBYB's loan book of ~IDR 2 trillion 21F and Akulaku's Indonesian loan book of ~IDR 8tn) might due to the fact that the firm has yet to successfully tackle its upcoming right issuance.
"BBYB plans to raise around IDR 2 tn from two rights of right this year, effectively boosting its equity level to slightly above IDR 3 tn (above OJK's min. core capital of IDR 3 tb by 2022)... with Akulaku Silvrr as standby buyer." to wit from Edward's latest.
From 30,000 ft view on BBYB, our sales desk thinks the bank might be a heavy contender for the existing tech titans that has already traded on the billionaires club.
On our blue-sky scenarios, we feel that the bank will have much to offer if Akulaku Group and ANT financials can prove their support to the forming of the digital bank, leveraging on Indonesian's friendly tech environment
You may read on Edward's latest piece here
On Biden's controversial speech here
Warm regards,
Boris, the Stock Broker 🐾
Sucor Sekuritas
