This week I talk TikTok and Tokopedia, why being in diversified ETFs is probably best for your portfolio, and vaping in Singapore.
Macro in Asia
TikTok close to e-commerce deal with Indonesia’s Tokopedia
TikTok is reportedly close to a deal with leading Indonesian online platform operator GoTo Group, to work with its e-commerce service Tokopedia.
The deal could apparently close as early as this month and could see the two join forces to take on competitors such as Sea Ltd’s Shopee.
Why it’s happening
- TikTok Shop had to suspend its retail operations in Indonesia in October after the government announced regulations that forced the video content provider to split is shopping feature from its video service.
- A potential tie-up with Tokopedia – one of Indonesia’s largest e-commerce platforms – could revive the TikTok Shops concept in one of Asia’s most exciting online retail markets.
- Looking for international growth, TikTok has expanded into e-commerce (via TikTok Shops) and is now testing its new model in the Southeast Asia region.
Why it matters
- TikTok parent – ByteDance – is under scrutiny in the US due to geopolitical tensions and, like many Chinese-owned companies, is looking to ASEAN for its next leg of expansion.
- Indonesia’s e-commerce scene is fiercely competitive with Tokopedia, as well as Shopee, Bukalapak, Shopee, and Alibaba-owned Lazada, all competing for a highly lucrative growth segment.
- Whatever deal does get announced, it will be interesting to see what regulators say about the tie-up as both companies have said any agreement could still fall through.
With hundreds of millions mindlessly scrolling content on TikTok every month, it made complete sense to integrate an e-commerce component into the video service.
And that’s exactly what TikTok has done so successfully with TikTok Shop.
According to estimates, the gross merchandise value (GMV) of TikTok’s Southeast Asia business – basically the value of all goods sold on its platform – increased from just US$600 million in 2021 to US$4.4 billion in 2022.
Of TikTok’s 325 million monthly users in the region, one in four have bought items through TikTok Shop, according to the company.
All this is causing concern among the big e-commerce players in the region, particularly Sea Ltd (NYSE: SE), which has seen its shares respond when TikTok-related news comes out.
That’s mainly because TikTok is a serious competitor that has managed to grab meaningful market share in nearly all of Southeast Asia’s key markets.
The company will still be disappointed about the regulatory onslaught in Indonesia – which came after complaints from local merchants.
Indonesia’s sizeable market has always been a big prize but barriers have been placed in front of TikTok. Given its rapid rise, don’t bet against the company finding a way to make it work.
Tim's Money Tip of the Week
When we think about our aversion to losing money in investing, it’s better to focus on what goes right over the long term.
That’s because “loss aversion” is real and it can damage your investing experience. The main thing to remember is that the pain of loss is more intense than the joy of gains.
Perhaps that’s a big reason why so many people are put off investing after they happen to lose money.
But if you’re invested in “the market”, which basically means a diversified ETF of global stocks, then over the past 120 years the average annual return you would have received is 9-10%.
And it makes sense for the majority of our invested assets to be in diversified, low-cost ETFs. It just takes mental discipline to stay invested in them when times are tough.
Of course, that doesn’t mean you can’t own a collection of individual stocks alongside it but the mental security of knowing that the market always recovers eventually stands in stark contrast to the fortunes of individual stocks – which sometimes might never rebound.
Story of the Week
Partygoers at Singapore’s annual music and dance festival ZoukOut were caught out by a strict crackdown on “vaping” devices that saw 176 people fined.
Vaping is illegal in Singapore, in all its forms, despite the global popularity of the new craze. It seems that in addition to levying huge taxes on tobacco consumption, Singapore is also intent on ensuring that its residents don’t get the opportunity to turn to any vaping alternatives.