Market Round Up: Silk Road’s Journey into Debt 🚆 – Tech Stock Shorts 👖
1. Silk Road’s Journey to Debt
China President Xi Jinping’s Belt and Road initiative, aka the New Silk Road, is running the risk of scaring off potential partners.
At the heart of the superhighway programme that will connect 68 countries and nearly 4.5 billion people from Asia, Africa, the Middle East and Europe are a complex baggage of mega infrastructure projects – which China doesn’t expect to fund itself.
Despite investing something like $60 billion in partner countries, raising trade volumes to $734 billion and creating hundreds of thousands of local jobs, the shear scale is seen as little more than ‘debt book diplomacy’ by partner countries fearing Chinese geo-political dominance. Recently, Australia’s foreign minister, Gareth Evans, warned that Cambodia and Laos were nothing more than “wholly owned subsidiaries of China” having borrowed over $5 billion. Worse, a recent report from the Center for Global Development showed that 23 countries are prone to ‘debt distress’ or, because of the perceived cheapness of the loans, more like a student debt with never-ending repayments.
Still, it may be a price worth paying. Economic progress in the emerging markets requires infrastructure investment, which inevitably means debt. The point is, is it a wise investor who journeys down the Silk Road?
2. Tech Stock Shorts
Short bets on tech stocks have risen by more than 40% to $37 billion as investors hedge against some of the biggest drivers of the global bull market.
Tech stocks, especially the elite FAANG group (Facebook, Apple, Amazon, Netflix and Google), have seen their prices surge all year and, as the old adage goes ‘the greater the rise, the greater the fall’. And so these dominant companies are being targeted as the most favourable to short. And with talk of the record bull market coming to an end, many investors are preparing for the shock dip.
Time will tell if these punters get it right, or whether they loose their shirts as well as their shorts!