The steep selling in U.S. markets has felt relentless in the first half, and even the best Asian stocks got caught in the tide.
Despite already falling into a bear market territory, the U.S. indices still trade above fair value. When considering interest rates have further risen as the Federal Reserve battles rampantinflation, investors should diversify geographically. And the best Asian stocks, already at a deep discount, also have strong growth prospects ahead.
Worldwide, all but one of the central banks are raising interest rates. China’s central bankis the exception. This suggests that the country is willing to continue an accommodating monetary policy. It wants to stimulate economic growth while the world tightens credit conditions.
In Singapore, the online retailer and gaming firmSea(NYSE:SE) is popular.
Sea (SE)
Sea(NYSE:SE) runs Shopee and SeaMoney. In the first quarter, the company highlightedefficiency gains due to scale. If it can keep that up, it will capture market share, strengthen its position and benefit from operating leverage. For example, it achieved synergies for its two businesses in Southeast Asia and Taiwan.
In the gaming segment, Garena underperformed as growth slowed post-Covid. Sea offset the weakness by improving its user engagement in its popular gameFree Fire. Monthly user trends are stabilizing. In the long-term, investors will need to monitor the user momentum without the benefit of the Covid-related lockdown.
Increasing user engagement is Sea’s priority. It is currently focused on increasing the longevity ofFree Fireby adding more diversified content including more game modes. Users will also get user-generated content (UGC) tools.
In the first quarter, Sea posted an 80-cent-per-share loss. Revenue grew by 64.4% to $2.9 billion. SE stock is unattractive to cautious investors. Investors may consider a position from here before the company reaches profitability.
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