BTT (8th) - North Korea sends troops, LA Port & Vietnam Property Tycoon

As I sit down to write this week's newsletter, I'm reminded of how quickly the world can change. The past week has been filled with significant events that not only shape our global landscape but also impact our daily lives and investment decisions. From geopolitical shifts to economic challenges, there’s a lot to unpack.

In this edition, I'll recap three key news stories that caught my attention: North Korea's military maneuvers, the ongoing congestion at the Port of Los Angeles, and a high-profile corruption case in Vietnam. I’ll also highlight two stocks I believe are worth watching this week: Boeing and Netflix. With Boeing navigating labor strikes and upcoming earnings, and Netflix showcasing impressive subscriber growth despite market competition, both companies present intriguing narratives for investors.

[Asia] North Korea sends troop to aid Moscow

North Korea's troop deployment to Ukraine represents a critical development in the military alliance between Pyongyang and Moscow. Reports indicate that approximately 1,500 North Korean special forces soldiers have already arrived in Russia, with estimates suggesting that this number could swell to as many as 12,000 (Channel News Asia, 2024; The Moscow Times, 2024). This unprecedented move solidifies the military pact established during a meeting between North Korean leader Kim Jong Un and Russian President Vladimir Putin in June, which included a mutual defense clause. Analysts assert that this alliance not only enhances Russia's military capabilities but also poses a significant threat to regional stability, particularly on the Korean Peninsula (Times of India, 2024). The deployment allows North Korean troops to gain experience in modern warfare while simultaneously bolstering Russia's manpower amid ongoing losses in Ukraine. This shift could lead to a more integrated military deterrent between North Korea and Russia, mirroring the U.S.-South Korea alliance and potentially escalating tensions further (BBC News, 2024).

The impact of this deployment extends beyond immediate military considerations; it raises questions about North Korea's foreign policy realignment. By positioning itself within the Russian war economy as a supplier of weapons and labor, North Korea may be distancing itself from its traditional ally, China (RFERL, 2024). This could result in a prolonged state of tension not only on the Korean Peninsula but also in broader international relations as both nations appear to be increasingly isolated from Western powers.

[USA] Los Angeles Port facing congestion

The Port of Los Angeles is currently experiencing significant cargo rail congestion, with delays affecting supply chains just ahead of the holiday season. This congestion has been exacerbated by labor shortages and increased shipping volumes, leading to concerns about timely deliveries and potential price hikes for consumers (CNBC, 2024). The average shipping costs from Asia to Los Angeles have also been impacted by these logistical challenges. Recent data indicates that the cost of shipping a 40-foot container from Shanghai to Los Angeles has risen to approximately $6,025 (Drewry, 2024). This figure reflects a broader trend of increasing shipping rates, which have recently topped $6,000 for several key routes due to ongoing port congestion and global supply chain disruptions (Business Times, 2024).

In addition to shipping costs, storage rates at the Port of Los Angeles are also critical for understanding the overall economic impact. For example, storage rates for general cargo in a 20-foot container are set at $12.55 per day, while a 40-foot container incurs a daily charge of $25.11 (Port of Los Angeles, 2023). These costs can accumulate rapidly for businesses facing delays in cargo movement due to port congestion. The financial burden on companies can lead to increased prices for consumers as businesses pass on these additional costs.

[ASEAN] Property Tycoon sentenced to life

Vietnam has been rocked by the sentencing of a prominent property tycoon to life in prison for fraud linked to his bank's collapse (Channel News Asia, 2024). This high-profile case has drawn attention to issues of corruption and regulatory oversight within Vietnam's rapidly growing real estate sector. The conviction serves as a stark reminder of the potential risks associated with unchecked financial practices and emphasizes the importance of maintaining robust governance frameworks. Analysts suggest that such legal actions may deter similar misconduct in the future but could also impact investor confidence in Vietnam's economic stability. As Vietnam continues to develop its financial markets, ensuring transparency and accountability will be crucial for sustaining growth and attracting foreign investment.

Truong My Lan, chairwoman of the Van Thinh Phat Group, was found guilty of embezzling approximately $12.5 billion from the Saigon Commercial Bank (SCB) over a decade (Channel News Asia, 2024). Her actions have been linked to a total estimated damage of $27 billion, equivalent to about 6% of Vietnam's gross domestic product (GDP) in 2023 (Straits Times, 2024). This staggering figure reflects the scale of the fraud, which has affected around 36,000 victims who invested in SCB bonds, many of whom have been left unable to withdraw their funds or receive interest payments since her arrest in late 2022 (Business Times, 2024).The impact of this case extends beyond individual losses; it has sparked widespread public outrage and protests across Vietnam. Victims have taken to the streets demanding justice and compensation for their lost investments, marking a rare instance of public dissent in a country where protests are typically suppressed (Channel News Asia, 2024). The emotional toll on victims is profound; for instance, one investor shared how her life was shattered after losing savings intended for her family's well-being, illustrating the human cost of corporate malfeasance.

Moreover, the case has prompted a broader crackdown on corruption within Vietnam's political and business elite. The government has intensified its anti-corruption campaign, which has already seen thousands of officials and business leaders indicted since 2021 (Channel News Asia, 2024). This "blazing furnace" approach aims to restore public trust in the Communist Party and its institutions by holding high-profile figures accountable for their actions. However, it also raises questions about the stability of Vietnam's business environment and investor confidence as more cases emerge.

As we examine the investment landscape for the week ending October 20, 2024, two stocks stand out: Boeing (BA) and Netflix (NFLX). Each company presents unique opportunities and challenges that warrant careful consideration from an investment perspective.

BA (NYSE) [Boeing]

Boeing has been navigating a complex landscape marked by significant labor disputes, which have recently culminated in a tentative agreement between the company and the International Association of Machinists and Aerospace Workers (IAM).

After weeks of negotiation and a month-long strike involving approximately 33,000 workers, Boeing and the IAM have reached a tentative deal that aims to end the strike which began on September 14, 2024 (Straits Times, 2024). The new contract proposal includes a pay increase of 35% over four years, along with a one-time ratification bonus of $7,000 for each worker. Notably, this agreement also introduces improved healthcare benefits and job security provisions, addressing some of the key concerns raised by union members (Straits Times, 2024).

The resolution of this strike is particularly significant as it comes at a time when Boeing is preparing to release its upcoming earnings report. Analysts are closely monitoring how the labor disruptions have impacted production rates and financial performance. The strike had resulted in substantial production delays for key aircraft models such as the Boeing 737 and 787 Dreamliner, which could affect revenue projections if not resolved promptly (AP News, 2024).

Moreover, Boeing's recent announcement of approximately 17,000 layoffs in response to ongoing operational challenges underscores the urgency for the company to stabilize its workforce and production capabilities (AP News, 2024). The successful ratification of the new contract could mitigate further layoffs and restore production levels more quickly than anticipated.

NFLX (NASDAQ) [Netflix]

In Q3 2024, Netflix added 5.1 million subscribers, exceeding analysts' expectations by over 1 million and bringing its total subscriber base to approximately 250 million (Channel News Asia, 2024). Although this figure represents a decline from the 8.76 million additions recorded in the same quarter last year, it reflects a strategic shift as the company adapts to a more mature market. The positive reception of its robust content lineup is crucial; with popular titles like the upcoming season of "Squid Game," Netflix anticipates continued subscriber interest in the final quarter of the year (Channel News Asia, 2024).

Financially, Netflix reported profits and revenues that surpassed estimates, indicating effective management of operational costs and a successful pivot away from solely focusing on subscriber growth. The company's revenue for Q3 reached $9.5 billion, signaling its ability to maintain profitability despite a projected slowdown in new sign-ups due to the waning effects of its password-sharing crackdown (Channel News Asia, 2024). Analysts are optimistic about Netflix's pricing strategy; recent increases in subscription fees across various regions have bolstered revenue streams. While no immediate price hikes were announced for the U.S., industry experts suggest that there is potential for future increases as engagement remains strong (Channel News Asia, 2024).

Another noteworthy development is the performance of Netflix's ad-supported tier. This segment accounted for over 50% of sign-ups in markets where it is available during Q3, showcasing a promising avenue for revenue growth. However, analysts caution that advertising will not become a primary growth driver until at least 2026 (Channel News Asia, 2024).

Following these results, several analysts have raised their price targets for Netflix stock, with the median target now set at $750—up from $706.38—reflecting increased confidence in the company's strategic direction and content offerings (Channel News Asia, 2024). Year-to-date, Netflix shares have surged approximately 41.2%, significantly outperforming competitors like Disney and Warner Bros (Channel News Asia, 2024).

Thought-Provoking Topic of the Week

How do the intertwining dynamics of global military alliances and economic competition shape our understanding of security in the modern world?

In an era where geopolitical tensions are escalating and economic interdependence is more pronounced than ever, the balance between military power and economic stability becomes increasingly complex. With North Korea's troop deployment alongside Russia, and the challenges faced by major economies like the U.S. and Vietnam, it raises critical questions about what true security looks like in our interconnected world.

Are we prioritizing military might over economic resilience, or is there a way to harmonize both to foster a more stable global environment? As we navigate these intricate issues, I invite you to consider how these factors influence not only international relations but also our personal and professional lives.

Authored by: Lin Haoying

Thank you for taking the time to read the 8th edition of this newsletter! I created this platform as a personal initiative to stay informed about market news and general affairs. My hope is that you will gain as much insight from this journey as I have while compiling it. Currently, I am a student at the National University of Singapore (NUS) Business School, where I am pursuing a Bachelor of Business Administration with a major in Finance and a minor in Information Systems. My interests lie at the intersection of finance, technology, and environmental, social, and governance (ESG) issues. Future editions of this newsletter will focus on these three topics, providing deeper insights and analyses as I continue to learn and grow in these fields.

References

- Channel News Asia. (2024). North Korea troop deployment locks in Russia military alliance. Retrieved from https://www.channelnewsasia.com/east-asia/north-korea-troop-deployment-ukraine-locks-russia-military-alliance-4689466

- The Moscow Times. (2024). North Korea Troop Deployment Locks in Russia Military Alliance. Retrieved from https://www.themoscowtimes.com/2024/10/19/north-korea-troop-deployment-locks-in-russia-military-alliance-a86748

- Times of India. (2024). North Korea deploys troops to support Russia; say Seoul and Ukraine; Pentagon unable to confirm reports. Retrieved from https://timesofindia.indiatimes.com/world/europe/north-korea-deploys-troops-to-support-russia-say-seoul-and-ukraine-pentagon-unable-to-confirm-reports/articleshow/114381721.cms

- CNBC. (2024). Port of LA cargo rail congestion hits two-year high ahead of holidays. Retrieved from https://www.cnbc.com/2024/10/18/port-of-la-cargo-rail-congestion-hits-two-year-high-ahead-of-holidays.html

- RFERL. (2024). U.S. 'Highly Concerned' About Reports Of North Korean Troops Joining Russians In Ukraine. Retrieved from https://www.rferl.org/a/russia-north-korea-troops-us-concern/33164931.html

- Channel News Asia. (2024). Netflix hits record high as strong subscriber additions ease growth worries. Retrieved from https://www.channelnewsasia.com/business/netflix-hits-record-high-strong-subscriber-additions-ease-growth-worries-4687251

- Straits Times. (2024). Boeing and workers reach tentative deal to end strike. Retrieved from https://www.straitstimes.com/world/united-states/boeing-and-workers-reach-tentative-deal-to-end-strike

- AP News. (2024). Boeing makes new offer to union in hopes of ending strike. Retrieved from https://apnews.com/article/boeing-strike-contract-offer-pay-increase-e86e43bcbbf3e140e89d33c901766554