2020 has been a very different year. There have been major themes in the markets, I took some time during the Christmas break to reflect on them.
Not in any particular order, here they are:
Tesla
Probably the hottest word of the year. The stock has been a favourite among investors / speculators / traders / Robinhooders as the share price gained 669% ytd (Christmas). Makes people wonder if Covid-19 actually happened (I thought people are working from home so why buy a Tesla?)
Elon Musk shot to fame and the rise in Tesla shares propelled him past Zuckerberg, Gates and Arnault to become the second richest man in the world – behind Jeff Bezos.
Musk tweeted in May 2020 to say that Tesla was overvalued but also said that Tesla would be worth more in 5 years time. To cash in on the high valuations, Tesla did two capital raises (or rights issues as we would call them in Singapore) – $5 billion in Sep 2020 and another $5 billion in Dec 2020. Tesla believers have deep pockets and kept pouring money into Tesla stock.
SEA
Shopee jingles anyone? The ecommerce arm of Sea came late to the game but managed to capture market share from Lazada in the Southeast Asia market. Its gaming arm remained strong and a recent digital banking license win added to its accolades in 2020.
Sea share price went up more than Tesla (+880% between Jan 2019 and Jul 2020) and was named the best performing large cap by Bloomberg. Sea has also surpassed DBS as the most valuable listed company in Singapore. It is unstoppable at the moment.
Covid-19
I bet this is the most used word in 2020.
The pandemic has taken away 1.74 million lives at the time of writing. Besides that, it has grounded planes, emptied hotels, closed restaurants and bars, killed businesses, reduced road traffic, brought oil price to a negative territory, widened the rich-poor gap, increased government spending, increased money-printing, ballooned jobless rate, and contracted economies.
But on the positive note, Covid-19 has also brought the best out of biotech, accelerated the adoption of technology, increased health consciousness, inspired people to move to suburbs, created more opportunities for family time and reduced carbon emissions. There’s always a silver lining.
Oil
Crude oil price crashed below $0 in Apr 2020. This has never happened before and few people know what happens when you buy at a negative price – does it mean you get paid for buying?
Covid-19 had retarded the demand for crude oil all of the sudden and the world ran out of storage space. Companies couldn’t simply dump crude oil as it would be devastating for the environment (plus it’s also illegal). You are paid if you can store the oil. Luckily it was temporary and the oil price recovered back to positive territory quickly.
REITs
REITs was sold down more than blue chips during the Covid-19 crash. In fact, REITs also crashed more during 2008 financial crisis. It seems like REITs aren’t that defensive during crises. One of the common explanations is that many investors take leverage on REITs to boost dividend yields and thus had to dump the stocks during a crisis due to margin calls.
But the worst is over, REITs have traded higher than their lows in Mar 2020. Congrats to those who went against the fear and picked up the REITs at ridiculous prices.
Eagle
I am referring to Eagle Hospitality Trust. Probably the worst REIT ever listed on the SGX. It turned out that the managers weren’t honest with their disclosure. Basically they ran into financial troubles – turns out they didn’t have the money to fix a retired old ocean liner which was turned into a hotel, and were defaulting on the rents. Read the whole saga here.
It became a police case and an investigation was convened. Monetary Authority of Singapore (MAS) had to step in (rarely) to order the removal of the REIT manager. The managers tried to appeal but it was unsuccessful. And the stock remained suspended from trading.
SIA
Our national airline and the pride of Singapore was battered by Covid-19. It had too much capacity and too many staff, after most of the flying activities halted as countries locked their borders. SIA had to quickly raise billions of dollars via a complicated deal (underwritten renounceable rights and renounceable convertible zero-coupon callable bonds). DPM Heng even pledged to save the airline and Temasek came in with the necessary financial commitment.
But the funding wasn’t enough to prevent retrenchment, secondment and storage of unused aircraft in Australia. It was recently reported that SIA has used up about 80% of the funding. As borders remain closed, it is possible that SIA may need to tap on the second tranche of Mandatory Convertible Bonds (MCBs).
Gloves
Namely the glove stocks; Top Glove (SGX:BVA), Riverstone (SGX:AP4), and UG Healthcare (SGX:8K7), had a tear this year thanks to Covid-19. The demand for protective gears such as gloves has shot through the roof around the world. The glove companies had to ramp up production and even build more capacity to cope with the increased demand. Their share prices had gone up several times and easily were the best performing stocks trading on the SGX.
But the share prices have since fallen from their peaks as the news of vaccine have dampened their prospects.
Zoom
2020 is the year where Zoom became a verb.
Dr Wealth is also a user of Zoom for our public webinars and online classes. I believe many other businesses have gone onboard too, even if it is for internal meeting and coordination.
Zoom share price has zoomed up 446% in 2020 ytd (Christmas) and made founder Eric Yuan a multi-billionaire.
Vaccine
We all have heard the good news – Covid-19 vaccines are ready. The bad news – not everyone wants it, at least not everyone wants to be the initial batch to be vaccinated. Regardless, the vaccines came earlier than expected. What normally took years was delivered within a year (paywall). You can have get better understanding of the pharma industry here.
This is also the first time that a mRNA type of vaccine was used. This is a testament of human progress and I strongly believe we will find ways to combat viruses in the future. Best news? Singaporeans get the vaccines for free!
The news of vaccines has boosted some of the beaten down stocks such as airlines, transport and hotels. I think the worst is over for the affected industries unless the new strain cannot be tackled by the current vaccines.
Sembcorp
Sembcorp Industries did a demerger with Sembcorp Marine which was announced in Jun 2020. These two stocks used to be the darlings in the Singapore stock market as they prospered during the years when oil prices were much higher. But the wheel of fortune turned and Sembcorp Marine suffered a lot more because of its exposure to oil industry while Sembcorp Industries fared better with infrastructure and utility businesses. Again, Temasek had to be the saviour to both of them.
Ant
Ant was supposed to be the biggest IPO until it wasn’t. It was all that sudden when the IPO was pulled out just within a few days of the listing date. Some blamed Jack Ma’s big mouth. Some said it was inevitable as fintech posed systemic risks. Here are some explanations. Here’s another post if you want to understand more about Ant.
But Ant’s calamity didn’t deter its competitors – Lufax (NYSE:LU) went on to list in the US while JD Digits are planning an IPO. Also, it is no longer an Ant issue. The problem has escalated to its parent company as the Chinese officials has embarked on an investigations on Alibaba, causing its share price to tank almost 10% in a day. Even Covid-19’s influence wasn’t that impactful.
Regulations
Regulating the big tech is a foremost theme in 2020. And not just in China.
The U.S. has been summoning the bosses of Apple, Alphabet, Amazon, Facebook, Microsoft and Twitter for anti-trust hearings. Facebook is the first victim as numerous U.S. states filed lawsuits against the social media giant.
IPOs
Market is hot, 2020 was a great time for IPOs. And boy, they really came in truckloads.
We have found that the IPO value in 2020 is the highest in the last 20 years! Management teams are cashing it in on the unrelenting interest. There were many IPO first day pops too – Snowflake (NYSE:SNOW) jumped 112% on first day of trading and Airbnb (ABNB) opened 115% higher than its IPO price.
SPACs
Here’s a concise primer on Special Purpose Acquisition Companies (SPACs). Many rich individuals have jumped on the SPAC bandwagon – examples are Richard Branson, Richard Li, Peter Thiel, Bill Ackman and Chamath Palihapitiya. Many exciting tech companies have also merged with the SPACs and their share prices have done extremely well – examples are QuantumScape, Luminar Tech, Opendoor and Virgin Galactic.
There will be more SPACs launched and mergers done as long as the music keeps playing.
Bitcoin
Bitcoin broke all time high as it crossed $20k in Nov 2020. It went on to break new highs and it was around $24k at the time of writing. I wrote about going into Bitcoin (the second time after 2014) in Aug 2020 this year and here I explained why I think this is not a bubble (yet).
Companies like PayPal, Square and DBS have announced their involvement in cryptocurrencies one way or another. So this is a lot more legitimate than the hype in 2017. I believe cryptocurrency will be more acceptable in the near future. But I hope people don’t get too hyped up about it and push the price up too much too fast such that it turns into a bubble again.
Digital Bank
Yes, this is two words. Cut me some slack please.
The long awaited digital banking license has been announced. The full digital banking licenses were won by Grab-Singtel and Sea. I discussed the impact on them as well as the losers and the current incumbent banks. TL;DR Don’t get too excited and think that the local banking industry is going to be disrupted immediately.
Ark
Ark Invest is the hottest ETF manager in 2020. More investors have taken notice of their superb performance – 3 ETFs under their management were up more than 100% this year. Ark invests in disruptive technology stocks and has a big position in Tesla. I have covered their big 5 bets here (may change from time to time).
Elections
Singapore held her elections in Jul 2020. The whole nation was very much focused on it and everything else (including investing) took a backseat.
Although PAP won the majority, the party lost another GRC to the opposition. The first time that an opposition party has taken up more seats than ever before.
The US election got the entire world’s attention too. It took so long to finalise the votes and for Biden to be officially declared as the winner. What would Biden fight for in the next four years?
App
I reserved the last word for a Dr Wealth plug – we launched our Dr Wealth app this year!
The Dr Wealth App has been decommissioned.
Not sure if you have used it. You should find it useful if you pick stocks. It allows you to do quick checks on company fundamentals (we let you customise 50 over financial metrics with 5 year history), use advanced stock screeners like Magic Formula and follow news on the stocks in your watchlist.
It is a webapp which means you can access it primarily using your web browser and save it on your phone home screen as an app. Most importantly, it is free.
That’s all folks. 20 words. Hope you have enjoyed it.
