Chronicle - Aug 6, 2023
Macro stories and how to fish ideas
There were two significant macro stories last week that dominated the headlines, but their impact on the stock market was muted. These are best described as non-events. Nevertheless, history can be a valuable teacher, even though it does not necessarily repeat itself.
Japanese Central Bank Tighten Monetary Policy
The Bank of Japan has decided to increase its tolerance level by 0.5% and will now offer to purchase 10-year Japan government bonds at a 1% yield.
Many see this as the end of Japan's loose monetary policy of the past two decades. Low interest rates and a weak currency made carry trades popular: borrowing from Japan to buy assets elsewhere. Concerns arise that if carry trades become less profitable, investors will reverse the trade, selling assets to unwind Yen borrowing. But finance is not exact science. In just three days, the Bank of Japan did an unscheduled bond purchase to control the yield again.
U.S. Credit Rating was Downgraded
Fitch, a U.S.-based credit rating agency, downgraded the U.S. credit rating from AAA to AA+. Despite this, the U.S. remains one of the wealthiest nations with a strong tax base and military force, and AA+ is still considered an investment grade. Back in 2011, when S&P downgraded the U.S. credit rating, the stock market briefly crashed but recovered by year-end. However, 2011 was a different case, marked by a debt crisis in Europe.
China Official Asked Brokers How to Boost Stock Market
Unlike in the U.S., everything in China seems to be in order, from top to bottom.
The China Securities Regulatory Commission gathered several brokerage houses and asked for suggestions on how to boost stock prices. The feedback received includes suggestions like cutting stamp duty on stock trading and slowing down IPOs to enhance liquidity for existing stocks.
One might wonder why a cut in stamp duty on stock trading could help boost stock prices.
Fishing Pond of Ideas: IPO
While brokerages in China are advising to slow down IPOs, hundreds of IPOs take place every year in the U.S., and stock prices there appear to experience limitless boosts. Past IPOs can be a good source of stock ideas.
Here are the latest IPOs:
HRYU 0.00%↑ Hanryu Holdings, Inc., a media-tech company and creator of Fantoo, an all-in-one social media experience connecting Korean culture fans globally, announced closing of $8.8 million on Aug 3, 2023.
CTNT 0.00%↑ Cheetah Net Supply Chain Service Inc., a one-stop service solution for warehousing, logistics, international trading, and supply chain finance based in North Carolina and New York.
BVFL 0.00%↑ BV Financial, Inc., originally formed in 1873 as Light Street Saving and Building Association of Baltimore City, offers personal and business credit cards, checking & money market accounts, CD, savings, and also personal & commercial lending, equipped with online banking services.
PXDT 0.00%↑ Pixie Dust Technologies, Inc. In 2014, Dr. Yoichi Ochiai (CEO) and Dr. Takayuki Hoshi (Chief Research Officer) developed “Pixie Dust”, a three-dimensional acoustic levitation technology, which enables the movement of objects in three dimensions by using ultrasonic control. On Aug 3, 2023, it has closed its IPO with approximately $11.2 million net proceeds.
MIRA 0.00%↑ Mira Pharmaceuticals, Inc., an early pre-clinical-stage pharmaceutical company focused on the development and commercialization of a new molecular synthetic THC (Tetrahydrocannabinol) analog under investigation for the treatment of adult patients with anxiety and cognitive decline typically associated with early-stage dementia.
