Week 2: Housing recovery, economic concentration, Singles Day…
… V shaped indicators, Zillenials, Jal Jeevan
Housing demand is coming back, and that’s a great sign for the economy. October was the 2nd best month ever for HDFC Ltd home loan disbursals, growing 35% YoY (around 22% when adjusted for festival timing). What’s driving this?
According to Keki Mistry of HDFC, this is the best time to buy a house for multiple reasons:
Interest rates are low and unlikely to fall much more incrementally
Developers are willing to negotiate further on prices if buyers are serious.
The affordability of homes is at multi decade highs (prices compared to annual incomes are at 25 year lows)
Stamp duty reductions and other tax benefits are also helping
Economic gains have been concentrated. Check out this chart: the top 5 companies in the S&P 500 have the highest percentage of total S&P500 market cap… ever (even higher than year 2000). However, the valuations of this cohort (Facebook, Apple, Microsoft etc.) doesn’t look anywhere near as outlandish as their early 2000s counterparts. The scary part here is that unlike in the early 2000s, this is not an irrational bubble that is going to burst. This reflects the reality of immense concentration of economic power.
Alibaba’s Singles Day saw total sales of $74bn vs. $38bn last year! That is actually insane. For perspective, India’s total annual e-commerce sales is ~$60bn. We have a long way to go.
The trend in some economic indicators look distinctly V shaped. The Purchasing Managers’ Index (PMI) is a reliable leading indicator of economic activity (first chart below). The PMI summarises whether market conditions, as viewed by purchasing managers of companies, are expanding or contracting. E-way bills recovering (second chart) also indicates that the movement of goods has more or less recovered to pre-covid levels, and is growing vs. same time last year. Both charts are from Kotak.
There have been winners and losers within this overall recovery – some industries are not even close to recovering (hospitality, airlines etc.)
Even within industries, there has been a real churn in market shares. In general, the big have got even bigger
Super interesting article from Bloomberg (quoting BoA) about Generation Z (“zillenials”, born after 1996). India has about 20% of global zillenials, the first generation to be born in an online world. The broad takeaways from the BoA survey:
Majority of Zillenials have a meat restriction of some kind
They welcome new tech in managing finances, from phones to cryptocurrencies. Banks and AMCs better wake up
40% of them would rather interact with friends virtually
21% of them watch e-sports regularly vs. 18% who watch traditional sports (I feel old now… they really prefer watching others play videogames?)
Alcohol and tobacco companies will need to increasingly focus on products seen as healthier -- such as beverages with lower sugar and alcohol contents, or heating rather than burning tobacco
Full article: https://www.bloomberg.com/news/articles/2020-11-19/-zillennials-are-going-to-change-investing-forever-bofa-says
The government’s Jal Jeevan mission is bringing real, tangible benefits to millions of Indians:
It was announced today that 2.6cr incremental families have got access to piped drinking water over the last 18 months
Piped drinking water has obvious benefits and will directly reduce diseases like cholera, typhoid etc, caused by dirty water
Schemes like these change the day to day life of people in meaningful ways, just like the LPG scheme, which increased cooking gas penetration to 97.5% in 2020 from 56% in 2015
Good point re e sports. If only there was a direct way to invest in twitch/YouTube. I am extremely bullish on game streaming. In China, HUYA US which is now owned by surprise surprise Tencent is the leader.