Feb 18: Shein’s valuation dive 📉

Shein faces valuation cut amidst increasing investor pressure

Shein poised to slash valuation in London IPO. Credits: Phil Noble/ REUTERS

Shein is facing investor pressure to slash its valuation to approximately $30 Bn. The company is planning to list in London. The company has been planning its IPO for the past few years but has faced several challenges. The company’s current valuation of $30 Bn is a far cry from its estimated $100 Bn valuation in 2022 and $66 Bn in 2023.

The company has faced increasing regulatory scrutiny over its supply chain practices. The changes in trade policies under President Trump are weighing on the company after the government’s decision to withdraw the de mimis rule, which allowed Shein to import packages under $800 without paying any duties.

OpenAI co-founder’s AI startup seeks $1 Bn

Ilya Sutskever, co-founder of OpenAI, is in discussions to raise more than $1 Bn for his startup. Safe Superintelligence aims to build safer artificial intelligence models and is on track to become one of the world’s most valuable private tech firms. If successful, the funding round would value the company over $30 Bn.

The AI sector is brimming with money flow. Lately, it has seen highly successful funding rounds, including capital raises by competitors like Figure AI ($39.5 Bn valuation) and Musk’s xAI ($75 Bn valuation).

🇦🇺 Australian pension funds shift to local bonds amid global trade tensions

Australian pension funds are increasing their investments in domestic government bonds. The funds view local bonds as a safe haven amidst escalating trade-war risks. Funds such as the Australian Retirement Trust have boosted their Aussie bond allocations to levels not seen since the global crisis in 2008.

The trade war that started after President Trump took office has prompted investors to seek safety. Australian bonds are viewed as particularly attractive due to the expectation of interest rate cuts by the Reserve Bank of Australia. Benchmark 10-year Australian bonds currently yield around 4.43%.

🇧🇷 Brazilian President pushed Petrobras to bypass fuel brokers

Brazilian President Luiz Inácio Lula da Silva is pushing state-run oil producer Petrobras to eliminate intermediaries and sell fuel directly to consumers. Lula criticized fuel brokers and state taxes for inflating gas station amounts. Lula is under pressure with record-low approval ratings as economic frustrations in the country rise.

Petrobras recently raised the diesel fee for the first time since October 2023. The company's stakeholders worry that government intervention could undermine profitability. Petrobras will spend $4 Bn to add 44 newer vessels to its fleet.

🇨🇳 Tencent surges as DeepSeek AI integrates into WeChat

Tencent’s shares surged to their highest level since 2021 after announcing DeepSeek’s integration into WeChat’s search functionality. The move signals Tencent’s growing commitment to artificial intelligence and has boosted investor confidence following a strong year of gaming-related gains.

China’s stock market has been surging, adding around $1.3T in an AI-driven rally. Analysts at Goldman Sachs see AI adoption adding about 2% to earnings per share of Chinese companies over the next decade.

🇳🇬 Nigeria attracts investors as economic reforms restore market confidence

Investors are pouring resources into Nigeria’s markets after key economic reforms. The country’s sovereign risk spread has narrowed to its lowest level in years. The NGX All Share Index has climbed 11% since early December. Foreign portfolio investments are flowing into the country amidst optimism around the country’s rising economic stability and favorable policy shifts.

Citigroup analysts have also expressed their bullish stance on the country’s reform trajectory. Nigeria’s Eurobond yields have declined to 9.69%, and domestic debt auctions have been oversubscribed recently.

China's economic woes

The impact of China’s stimulus packages from 2002 to 2024.

→China’s stimulus struggles: despite multiple economic stimulus efforts, China’s stock market remains sluggish and is unable to break out of historical levels due to structural and external challenges.

→Investor skepticism: persistent doubts over economic stability and policy effectiveness limit confidence.

→Short-term gains: stimulus leads to brief rallies, but stocks fall as issues persist.

→Global pressures: economic slowdowns and geopolitical risks hurt China’s exports.

→Weak consumption: consumer caution limits domestic demand growth.

Crypto

→Musk’s task force seeks IRS easement. DOGE seeks sensitive taxpayer information data, raising concerns over privacy violations and potential political misuse (details).

→Argentina’s Milei faces political fallout ahead of US visit after crypto scandal. The President was involved in promoting a meme coin project that surged past $4 Bn in value before collapsing. This has led to accusations of fraud and insider trading (details).

The paradox of thrift and its impact on recessions

People standing in long queues during the great depression. Credits: Rolls Press/Popperfoto via Getty Images

The paradox of thrift is a concept introduced by John Maynard Keynes that explains a counterintuitive economic reality. It highlights that while saving is beneficial on an individual level, it can lead to slower growth and deep recessions.

Amidst a tough macro environment, businesses and individuals start saving more and cutting back on spending. The reduced spending lowers aggregate demand in the economy, resulting in lower economic output and a recession.

Example: Great Depression of the 1930s

The Great Depression of the 1930s is a classic example of the Paradox of Thrift. Consumers and businesses hoarded currency, leading to a collapse in demand and worsening deflation.