Tencent Holdings Ltd (0700)

[dreamybear]

To be honest, as a parent, some of Xi's policies to abolish for-profit education institutions and reduce game addiction, are actually welcomed by me. But of course, as an investor, not much.

I have the same view and I think we have to see things in a bigger context - China is like a big country made up of many different countries. It is simply not easy to manage.

The following is extracted from the Corporate Governance section in one of the ARs of a SGX listed company - "Directors are fiduciaries who act objectively in the best interests of the Company".

Going by this, logically, wouldn't governments run countries in the best interests of the countries just like the head of the company ?

Now, whether best interest of the company is equivalent to best interest of minority shareholders are open to discussion. Imho, if one wants to benefit from WB's type of investing rewards, one shd look at the US market which probably has the most capitalist type of investing environment or perhaps buy and own a great company at a fair price outright(controlling stake).

Sometimes, I wonder whether is it more accurate to say making "smart bets" than "value investing" when investing as OPMI ? Afterall, for those who buy and own a residential property in your own name, wld u buy a similar property(even if severely undervalued) with multiple co-owners and owning just a tiny stake ? Is the latter considered in the same breath as investing in undervalued property ?

[Choon]

Some financial metrics of gaming business in this article.

"Royalty fees of 15 per cent to 20 per cent of sales are typical, the people said, while Apple's App Store takes a 30 per cent cut and marketing and user acquisition can cost another 30 per cent to 40 per cent, leaving slim profit margins."

https://www.channelnewsasia.com/business...es-4094396

[Wildreamz]

hi Wildreamz,

As a history buff, I am afraid I have to take umbrage with your statement "tested throughout history".

As a matter of fact, capitalism is only a recent phenomenon compared to our thousand years of civilized history. Even if we start modern age with the Renaissance era (1600-1700s), Capitalism took half of that period (~150 years since 300years ago) to evolve. For comparison, Communism took about a third of the time (~100years since 300years ago) to evolve. Not really an "apple to apple" comparison.

That said, the dichotomy that we experienced post WW2 between East Berlin and West Berlin - does seem to suggest that Capitalism has the upper hand. The people are the same, just separated by a wall. Capitalism seems just fine for the Germans.  However, in the first 20years after WW2, the Soviets seemed to have the upper hand over the Western world! After all, the Communists were the 1st ones to send something up in orbit in 1960, before the competitive spirit of the Western world overcame communal spirit (human nature is weak and corrupted after all) and sent man to the moon by 1969. That decade was probably the pivot point in history between 2 idealogies - concidentally also the start of semiconductors, imagination (Steve Jobs, Bill Gates and Jeff Bezos were teens then - right person at the right place at the right time!) and Nifty Fifty.

So what is my point after regurgitating all these?‎

My point is that it is dangerous to take lessons from history, if we do not apply the correct context or look at longer periods.

Would a non-command and control economy have taken China to its current state? Of course we don't have an alternate history to compare. But I would like to think that another big democracy, ie. India with comparable population/land mass can be used as a potential apple-to-apple comparison here.

GDP per capita (2021)
India: 2,256.59 USD (Independence: 1947)
China: 12,556.33 USD (Independence: 1912 if you are nationalist or 1949 if you are communist)

Mind you, India had the Victorian system inherited from the British and came off relatively unscathed from WW2. But just comparing the GDP per capita, China looks way ahead of India. In our lifetimes, what is the probability of the Indians overtaking the Chinese?

Finally, Is the Red Dot's story a history of a relatively "command" economy?

P.S. This world is much more murky and grey, than shades of black and white.

Many things to take apart. 

Firstly, my bad for saying "throughout history" what I meant to say is, since the concept of communism is conceived, it has been tested again and again, and a free economy always had the upper-hand.

A big part of China's success is Deng's opening China's economy up in the 80s and 90s ( 改革开放 ) following Singapore's lead. Ever since 2020, it has been the gradual reversal of that. And the resulting impact on the economy is for all to see. 

Regarding the Soviet and American system, we all know how that turns out in the end. It's all about the long term, right?

Regarding India vs China, they have different challenges, different systems, history, politics, leaders, fragmentation (in terms of languages etc.) one must be cautious before drawing direct comparisons.

[karlmarx]

Both market and command economy, in their pure form, have their flaws. That is why there are elements of both in most countries, and there is always a swing between one and another from time to time.

SG has been swinging towards command with more government mandated minimum salaries and handouts, since the pandemic and massive inflation, and will likely continue to do so until income inequality returns to acceptable levels.

In US, Standard Oil, AT&T, A&P, and many companies considered to be monopolistic and earning bountiful profits were broken up. But many decades later, when they came under business pressure they were later allowed to re-merge. In both cases when they were broken up and merged, it just seemed to the politicians/public that it is the sensible thing to do.

Companies in China has had a relatively free rein for many decades since the 80s. Will their current stance of a more command economy become permanent? I don't think so, because the need for the country's economic prosperity (and CCP longevity) will force them to make sensible policy adjustments.

[Wildreamz]

..

Will their current stance of a more command economy become permanent? I don't think so, because the need for the country's economic prosperity (and CCP longevity) will force them to make sensible policy adjustments.

This might be right, if 2 terms is still the max, since a new successor could correct the mistakes of their predecessors.

There is no guarantee now that they would change course (a reasonable estimate: through 2032), and realize a mistakes' been made.

[¯|_(ツ)_/¯]

Happy CNY in advanced to all valuebuddies and I'm even more happy to see posts from some old friends.

Just wanted to says something about China stock market - as a normal market participants.

The series of hammering of "hottest" sectors in last few years was BAU and nothing extra-ordinary to me.

However, when Genesis close shop on mid Jan 2024, the alarm was sounded and when I listen carefully this time: I hear something different. 

No longer BAU.

I did a check on what's my edge investing in China and I agreed with Genesis.  

With this new "Self-discovery", I will not be drastic enough to sold out but definitely halting all buying activities - I tell myself to hold back...

Enjoy: Beyond



Gratitude.

[weijian]

@Karlmarx,
Welcome back. Indeed, this world is about shades of grey and the pendulum is always swinging between extremes.

@Wildreamz,

Regarding India vs China, they have different challenges, different systems, history, politics, leaders, fragmentation (in terms of languages etc.) one must be cautious before drawing direct comparisons.

You are spot on. This is why we also cannot contrast China (command economy) vs US (market driven) as they have different challenges, systems, politics, historical baggage, culture etc - and then conclude as what you did. I could similarly contrast another "non command economy" country with China and make a different conclusion as I just did. Both our conclusions are not robust.

The closest independent comparison I could make, was East/West Berlin but then again, it would be just robust for the Germans, and not for other countries.

[Wildreamz]

@Wildreamz,

Regarding India vs China, they have different challenges, different systems, history, politics, leaders, fragmentation (in terms of languages etc.) one must be cautious before drawing direct comparisons.

You are spot on. This is why we also cannot contrast China (command economy) vs US (market driven) as they have different challenges, systems, politics, historical baggage, culture etc - and then conclude as what you did. I could similarly contrast another "non command economy" country with China and make a different conclusion as I just did. Both our conclusions are not robust.

The closest independent comparison I could make, was East/West Berlin but then again, it would be just robust for the Germans, and not for other countries.

For what its worth, I have not (in this discussion, and probably ever) directly contrast US vs China based on their economic systems alone.

As you said, it's simply not helpful. Too many other confounding factors, that make this comparison practically worthless.

In general, however, the more an economic system approaches a command economy, it can't be good for promoting efficient allocation of capital, and the entrepreneur spirit. As history may suggest.

[weijian]

For what its worth, I have not (in this discussion, and probably ever) directly contrast US vs China based on their economic systems alone.

As you said, it's simply not helpful. Too many other confounding factors, that make this comparison practically worthless.

In general, however, the more an economic system approaches a command economy, it can't be good for promoting efficient allocation of capital, and the entrepreneur spirit. As history may suggest.

Hi Wildreamz,
I apologize if I was over-enthusiastic in swerving towards a country level comparison.

[specuvestor]

Agree that abolishing 2X 5 years term established by Deng is a bad idea. It needs renewal and history suggest those who hold on power over time no longer put the country's interest at top priority. Look no further than Dr M in the north and people forget that Marcos and Putin were also positive to the country in the first 10 years or so

..

Will their current stance of a more command economy become permanent? I don't think so, because the need for the country's economic prosperity (and CCP longevity) will force them to make sensible policy adjustments.

This might be right, if 2 terms is still the max, since a new successor could correct the mistakes of their predecessors.

There is no guarantee now that they would change course (a reasonable estimate: through 2032), and realize a mistakes' been made.

Capitalism is efficient and brutal and short / mid term beneficial to investors. But socialism and command economy done properly can be more effective and positive to the country in the long term and hence also positive to investors in the long term, with SG being a good example.

Even Buffett has a political tilt and indeed in general a good balance of the 2 is optimal, rather than binary.

In general, however, the more an economic system approaches a command economy, it can't be good for promoting efficient allocation of capital, and the entrepreneur spirit. As history may suggest.