Tencent’s profit drops as Chinese government freezes game approval. Due to a temporary suspension of game monetisation approval and a regulatory restructuring of the government,Tencent’s share plunge for a fourth day. And now it falls to about HKD 325 dramatically.
Tencent was always supposed to be the star that goes no wrong. However, it surprised the investors with the first profit drop after a freeze on the new game approval in China. It’s also a reminder for the investors that the Chinese government can really break some of these major technological companies like Tencent. No one really knows when the approval will start again. As Tencent’s revenue is really relying on gaming in the recent years, the regulatory restructuring really hurts.
Furthermore, like I said in my previous post, the major investors of Tencent have already offloaded their shares and they are shifting their funds from Tencent in the previous months. Tencent is no longer a sure bet for individual investors.
Tencent holdings Ltd just slumped nearly 3.4% now. The biggest tech company in China seems to be getting crushed. So many Hong Kong and mainland individual investors still believe that Tencent will get a rebound, however, they are feeling frustrated that Tencent loses the support at 350 today.
Since early this year (March), the major investors of Tencent kept selling off the their stakes. Tencent has already give up its rising dynamics of stock.
Federal Reserve must raise the interest rates or the recessions and deflation will come.
The low inflation is a signal of economic problems and related to weak economy. Global inflation rates have been low since the financial crisis of 2008. The too-low inflation makes unemployment high and makes the consumer confidence low. People and business may be less willing to make investment and spend on consumption, and then it may bring the economic to recessions and deflation.
Even though Donald Trump keeps inciting trade wars with Canada, EU and China, it has not sparked any increase of inflation yet. Economic history has shown that economies perform best with slightly higher levels of inflation, such as 2-3%. If the inflation too low, the companies may not have leeway to raise prices and that may force them to cut costs or cut back on hiring. And low inflation often come along with lower wages. Lower wages may cause consumers become less motivated to spend.
So I am looking forward to two more hikes in 2018.
The Yuen has fallen greater than expected. It seems that China’s government is facing a huge price in fighting a defensive war. Feeble yuen affects stock markets, commodity prices and property bubbles in both Hong Kong and China. And due to the ‘one country, two systems’, Hong Kong is in the same boat. The fleeing and the devaluation of RMB not just have impacts on Hong Kong-owned factories in China, but also the Hong Kong property prices.
Who said we should buy precious metals such as gold and silver when gold was at USD 1280 and silver was at USD 15:90. For gold, the spot price have slumped dramatically from USD 1300/ozt to USD 1228/ozt within one month. For silver, the spot price dropped from USD 17/ozt to USD 15.52/ozt during this month. And the spot prices haven’t found any support to rebound. Beware of the dead cat bounce.
We are stuck in the trade war and no one seems to foresee any clear path. Actually, before the US-China trade war was on everyone’s mind, the biggest fear facing the global investors should be rising interest rates.
Federal Reserve Chairman Jerome Powell emphasised that the economy is doing very well in June 2018. Some say that the Fed is going to act because of the US job market and inflation instead of the political news. In other words, if the trade wars have no impact on the US job market and inflation, the Fed will keep rising interest rates and two more hikes in 2018 are coming. Furthermore, the Fed has so many reasons to keep rising interest rates gradually. And I believe that the Fed plans to keep hiking even though the risks of trade war mount.
We are going to see that rising interest rates and trade wars will happen at the same time! Are you well prepared for that?