Off the Charts! $8 trillion Aussie housing, the internet for sale and Didi's IPO fears

A long-awaited IPO Didi Chuxing, the Uber of South East Asia, has been derailed by the CCP. Didi would be the largest US listing of the year, with a valuation upwards of US$100 billion, if it goes ahead. So what happened? Well, before you think about this new IPO, how about something old for sale? The latest NFT brings the internet full circle. 

This week was another big week for the Fed. Powell looks to be hiking interest rates much earlier than previously forecast. We look at the charts behind the signs of inflation, wage growth and interest rate hikes and what this means for investors. 

First up, we have a new sign of the hot local housing market as half of all housing in NSW tips over the $1million mark. We take a look at how it compares with the rest of the world. 

Let's jump in...

#1 NSW HOMEOWNERS-TURNED-MILLIONAIRES

“You get a million! You get a million! You get a million!”

If Oprah were here in Australia, that’s what she would holler at homeowners in the streets of NSW after the average price of residential property in the state topped $1 million for the first time. 

Head of Prices Statistics at the ABS, Michelle Marquardt said that the total value of residential dwellings in Australia surpassed $8 trillion for the first time. NSW accounted for approximately 40% or $3.3 trillion of Australia's total value of dwellings.

“The average price of residential dwellings in NSW rose to $1.01 million. This was the first time any state or territory had seen the average price of dwellings rise above $1 million."

While the median house price in NSW has been over $1 million for the past few years, this is the first time the average has hit this mark. Melbourne just recently hit the median price of $1 million for the first time this year. 

Some of our property-owner readers may rejoice at this (enriching) data, while the bears and renters might think: “This is insane! How can people afford this?”

Yet a recent analysis by Bloomberg Economics shows that we Aussies aren’t even in the top 10 when it comes to the world’s frothiest housing markets. In fact, with a home price-to-income ratio of 134.6%, Australia sits at #15. The leaderboard medalists – the Kiwis, Canucks, and Swedes – are at above 150%, and their credit growth has run even harder.

Click to enlarge image

Source: Bloomberg. 

This scribe suggests that as long as low-interest rates remain, the sobering reality is that Australians have more room to stretch themselves into debt, meaning house prices have room to keep growing and that's bad news for aspiring first-time buyers.

#2 CHINA HITS THE BREAKS ON DIDI'S US IPO

After the Chinese ride-sharing app Didi Chuxing's IPO plans were made public last week, Reuters reports that China's regulator has begun an antitrust investigation into the tech giant.

The State Administration for Market Regulation (SAMR), is investigating whether Didi conducted any anti-competitive practices that unfairly "squeezed out smaller rivals" and if transparency around the firm's pricing practices must be changed.

The move by SAMR adds to the wave of CCP crackdowns on Chinese tech firms getting too big for their boots. Regular readers of Off the Charts! will remember SAMR's intervention into Ant Financial's attempted IPO last year. A similar anti-trust investigation resulted in the firm's IPO being pulled and a record US$2.75 billion fine against parent Alibaba.

If the listing does go ahead, Didi's IPO is expected to be the largest US listing of the year, with the firm seeking a valuation upwards of US$100 billion -- four times the size of Ant Financial's listing. We can only wait and see what comes of this investigation as the decidedly regulation-happy administration complicates another Chinese-US listing. 

#3 POWER POWELL PRICES IN RATE HIKE

Okay, I know we just covered US 10-year Treasury notes last week, but this time it's different! US Federal Reserve Chair Jerome Powell has brought forward the expected interest rate hike to 2023. This could have huge implications for markets and could mean the end of easy money.

The dot-plot shows the median forecast from U.S. policymakers on the Federal Open Market Committee. It's a way for the Fed to signal to markets when interest rates are expected to rise. 

We've been living in a "lower for longer" interest rate environment for a while now, this hike could be the beginning of the end for overvalued growth stocks, but a bounty for other sectors of the market which benefit from inflation and interest rates (think: financials). 

To bring it all home...the Australian market received its unemployment data this week. And the labour market is getting tighter than expected. This week also saw the Fair Work Commission raise the minimum wage by 2.5% (more on this below). We wonder if it's enough to see the wage growth targets (and inflation targets) the RBA want for a similar rate hike to take place. 

#4 I GOT A RAISE! THANKS UNCLE SAM (OR IS THAT UNCLE SCOTT?)

Fund managers and analysts may need to recalibrate their assessment of inflation and rate-change expectations, and their knock-on effects on company valuations and earnings forecasts after the Fair Work Commission (FWC) bumped up the minimum wage.

The 2.5% increase to $20.33 per hour – covering many of those workers who (thankfully) provided us food, groceries, and other essential services during the pandemic – was met with outrage from business groups, with one lobbyist proclaiming in a press release that the decision is “tempting fate” (really? And here we thought journalists sensationalised headlines!).

The argument is that the quantum of pay rise is too much for businesses to bear considering the uncertain outlook, and that the increase actually works out to be 4.6% when the FWC decision is viewed in conjunction with the upcoming SG rate increase to 10% as well as personal income tax changes. Not to mention, Australia already has the highest national minimum wage in the world.

But we suspect that RBA Governor Philip Lowe viewed this development with a beaming grin given it will aid the central bank in achieving an inflation rate of 2-3%, a goal which it has undershot for the better part of the last decade. 

#5 THE INTERWEBS IS FOR SALE!

If you’ve ever dreamed of owning the World Wide Web, your chance has finally arrived (sort of)! Next week, British computer scientist Sir Tim Berners-Lee, dubbed the "Father of the Web" will auction the original source code for the World Wide Web as – you guessed it – a non-fungible token (NFT).

The files referenced by the NFT contain code with approximately 9,555 lines, whose contents include implementations of the three languages and protocols invented by Sir Tim that remain fundamental to the World Wide Web today; HTML (Hypertext Markup Language), HTTP (Hypertext Transfer Protocol), and URIs (Uniform Resource Identifiers), as well as original HTML documents that instructed early web users on how to use the application.

“NFTs, be they artworks or a digital artefact like this, are the latest playful creations in this realm, and the most appropriate means of ownership that exists. They are the ideal way to package the origins behind the web.” - Sir Tim Berners-Lee

ORIGINAL SOURCE CODE FOR THE WORLD WIDE WEB

Sotheby's, who is managing the online auction from 23 to 30 June, the bid for the NFT will start at $1,000 so that “as many people as possible to take part in the sale” (that’s a gimmicky way to phrase it indeed).

Judging by the prices achieved at other digital auctions this far this year – U$4 million for the image of the dog featured on the cyrptocurrency Dogecoin, and a JPG file which sold for US$69 million – “NFT-mania” is well and truly alive and a mind-warping sale figure is guaranteed.

Contributor stories of the week

• WAM Analyst Forum: buy, hold sell - Livewire's James Marlay sits down with the analysts of Wilson Asset Management for a rapid-fire round of Buy Hold Sell.
• A microcap the global auto giants can't go without - Spheria's Aimee Jordan let's in on a London based micro-cap that has become indispensable to new vehicle technology.
• A deep dive into Zip Co - In the latest episode of Market Matter's podcast 'Direct from the Desk' James Gerrish takes a deep dive into BNPL giant Zip.
• Get ready to pivot! - Watermark Funds Management's Justin Braitling outlines the case for why he thinks it's time to pivot out of the reflation sectors and into defensive growth.
•  LIC benefits in a world of chasing popularity - Investment consultant Dominic McCormick lays out why he believe LICs and LITs should be receiving more attention from diligent investors.

Coming up next week...

• On Buy Hold Sell next week, we have guests Justin Braitling from Watermark and Ben Clark from TMS Capital. They'll be sharing the best stocks to beat the bond market. 
• Glenn Freeman wrap up up a new collection on Quality stocks. What opportunities arise when you move away from the Value vs Growth competition? 
• Patrick Poke interviews Matthew Haupt from Wilson Asset Management for a top-down look at large-cap Aussie equities. Which stocks and sectors best placed for the months ahead?
• And don't forget to check out Livewire's Top-Rated Funds Series. We have exclusive interviews from some of the best fund managers around, as rated by Lonsec, Morningstar and Zenith. We have fresh content this week including interviews with Ben Griffiths, Catherine Allfrey, and Aman Ramrakha. 

- Mia Kwok, Vishal Teckchandani and Nicholas Plessas. 

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• The full list of Australia’s 100 top-rated funds.
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