Tech Rebounds as USD Reverses, Macau Recovery Continues...

·The consensus expected a rampant USD this year, but this wasn’t consistent with the Trump trade agenda – the dollar has had its worst January in over a decade.

·That has helped the US tech sector rebound strongly from the post-election selloff, as have the leading Chinese web names – secular growth is back in fashion.

·The Q4 results from Microsoft, Intel and Alphabet indicated that cloud computing is the most significant near-term driver of tech sector revenues but AI will follow soon.

·Alibaba is the Asian play on the cloud trend while Baidu’s challenge will be managing a declining legacy PC search business while building an AI portfolio that can generate offsetting growth.

·As China’s advertising spend booms from very low per capita levels, Tencent remains best placed to benefit and is reinventing itself as a potentially global online entertainment group.

·A key theme remains that portfolio diversification will increasingly be embedded within 15-20 tech ‘conglomerates’ as they disrupt adjacent legacy sectors.

·For instance, Amazon and Uber have both expanded into ocean freight and trucking logistics respectively as they apply their superior data analytics to an inefficient, paperwork intensive industry.

·The ‘buy the dips’ view on Macau casinos since last March was justified in early December when the sector sold off briefly on rumours of strict new ATM daily cash withdrawal limits.

·Subsequent restrictions proved minor, and the Chinese New Year holiday has seen a further improvement in room rates and tourist numbers.

·Curtailing capital outflows remains a crucial policy focus for Beijing less in FX reserve terms than because of their adverse impact on financial system funding dynamics.

·Chinese banks have registered fund inflows of around $13bn via capital account payments in Q4, likely to be sustained in Q1 as the latest restrictions on foreign real estate purchases take effect.