4 min read

Asia Tea Time - Cup 15 ☕

This week, I cover news on Japanese ETFs, Trip.com, and Binance.

Macro in Asia

China investors stampede into Japanese ETFs

As China’s stock market disappoints post-pandemic, Chinese retail investors are piling money into Japanese exchange-traded funds (ETFs).

According to Mizuho Securities, various Chinese ETFs that track the Japanese stock market benchmark – Nikkei 225 – saw their assets under management (AUM) more than double in May.

Why it’s happening

  • Remember that China’s stock market and economy seem to be going into reverse after that brief “revenge rebound” post-Covid.
  • Disappointing data for China’s economy on a number of fronts is making Chinese investors pause as to whether they should be investing in their home market.

Why it matters

  • China and Japan are two of Asia’s (and the world’s) largest stock markets. But it looks like the latter is getting the love right now from investors.
  • That’s mainly a function of Japan having support from improving corporate governance and better economic data but it also highlights how the country is benefitting from the “not-China” trade.

What’s next?

  • China’s stock market, and particularly tech stocks, can’t seem to catch a break. The country’s tech-focused ChiNext Index recently hit a three-year low.
  • In Hong Kong, reopening gains for the stock market have faded and investors are anticipating when there’ll be light at the end of the tunnel.  

Tim’s Take

  • China’s stock market seems to be well and truly “down in the dumps”. That’s after a post-Covid rally that has now fizzled out.
  • Meanwhile, in Japan the stock market is reaching new multi-decade highs. So, what gives?
Mainly, Japan in benefitting from the fact that international investors are focusing on the market as their preferred Asia exposure.

That’s been highlighted by Tokyo Stock Exchange data this week that showed foreign investors were net buyers of Japanese stocks for a ninth straight week.

For Japan’s stocks, it seems like “not being China” is a good enough reason for investors to be in its market right now.

Company spotlights

Trip.com swings to adjusted profit in Q1 2023

Hong Kong-listed Trip.com (SEHK: 9961) (NASDAQ: TCOM), a large Chinese online travel portal, saw its revenue more than double in the first quarter of 2023 as travel returned with a vengeance.

It also swung to a profit, posting a RMB 3.4 billion net profit for the period whereas it had posted a RMB 1 billion net loss in the same period in 2022.

Why’s it news?

  • Travel is back in China. I mean, are you surprised after the whole population was effectively locked down for three years?
  • The main thing to note is that while China’s economy is weak in certain areas, travel spending isn’t one of them.

Why it matters

  • Trip.com had a tough few years during the Covid-19 pandemic but it looks to be finally cashing in on the travel rebound.
  • Its share price is actually up so far in 2023, in stark contrast to other large Chinese companies, and it’s risen by nearly 60% over the past 12 months.

What’s next?

  • How much longer can the “revenge travel” trend continue? That’s the million-dollar question that a lot of travel services companies in China will be asking.

Tim’s Take

Trip.com has been a mainstay of the online travel market in China for years now, given that it owns popular sites local sites like Ctrip. However, it also owns popular international travel sites like the eponymous Trip.com and SkyScanner.

One of the dichotomies in the Chinese economy is that Chinese consumers’ spend on goods has disappointed but their spending on services (like travel) have continued to see strength.

While the consumer in China may not have the power to spend on material goods, they may also have spent enough during the pandemic lockdown to tide them over for a while.

Yet travel, as an experience, remains a top money spinner and it’s not only international travel. It was interesting to see that same-city staycation hotel bookings for Trip.com grew faster than overall revenue for the quarter, surging by 150%.

Tim’s money tip of the week

It’s all in the head. That’s what successful long-term investing comes down to at the end of the day.

The importance of human psychology in long-term investment returns is often underappreciated.

That’s because investing successfully for the long term is a boring process that requires patience. As one famous investor put it:

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas”.

So, by staying disciplined and, crucially, invested in the market through the ups and downs, we can better prepare ourselves to reach our financial goals.  

Story of the week

First, we had the FTX bankruptcy and now we have the US regulator, the Securities and Exchange Commission (SEC), questioning whether crypto exchanges are even legal.

Earlier this week, a lawsuit was filed against crypto exchange Coinbase Global (NASDAQ: COIN) that alleges the exchange skirted SEC rules by letting users trade crypto tokens that were actually unregistered securities.

The next punch came to Binance and its CEO Changpeng Zhao (also known as just CZ) as the SEC filed 13 charges against it.

It kind of looks like cryptocurrencies are in fact viewed as “securities” by the SEC now. That spells trouble for the likes of CZ and his fellow crypto bros.