20 Jan: Tiger Market Watch - Netflix

US stocks sank afterUS PPI and retail sales came in below expectation, however, the weak figures were interpreted as a forewarning of an impending recession. The initial jobless claims dropped to 190k, signaling that the labor market continue to remain strong which backs up the Federal Reserve’s hawkish tone. Some policymakers also highlighted the need for rates to be raised above 5.0% leading to the $S&P 500(.SPX)$  falling by -0.8% while $NASDAQ(.IXIC)$  fell by -1.0% overnight.

China banks maintained their benchmark lending rates, avoiding easing of monetary policy as it gauges the economy’s recovery. China shares rose ahead of the Chinese New Year holidays after the blistering year to date returns of the $HSCEI(HSCEI)$  by almost 10.6%. Vice Premier Liu He declared the country’s reopening at the World Economic Forum and remarked on the significant improvement in the Chinese economy in 2023 as well as the continued proactive fiscal and prudent monetary policy. China’s 2022 GDP grew by 3% and we expect overall full year GDP growth to recover to 5.0% in 2023. WTI crude also continued its trend of recovery to US$80.8 per barrel on rising Chinese demand.

Japnese equities rose slightly during the week as the Bank of Japan announced not to increase to its yield curve control policy. The interest rate has also continued to be kept at an ultra-dovish level at -0.1%. This comes amid December’s core CPI growing at a 4.0% yoy, twice that of its 2.0% target. However, wage growth has been still tame compared to the rise seen in goods and will be keenly watched by the central bank before it shifts to tighten its monetary policy. Yen has been appreciating against the dollar in anticipation of the expected inflection in policy.

$Netflix(NFLX)$ reported subscriber grew by 7.7 million to over 230 million strong, backed by a slew of original content over the holiday season. This was well over the 4.5 million subscribers anticipated by the market. Netflix successfully rolled out its new Basic ads tier subscription last November, priced at $6.99, an almost 55% below its Standard subscription. This would mean that average revenue per subscriber would most likely continue to fall as subscriber mix shifts towards the new Basic ads tier. Founder Reed Hasting have also ceded it role as CEO to Chief Operating Officer Greg Peters and Ted Sarandos. Netflix trades at 29.7x/23.4x of FY23/24 consensus price to earnings ratio, after recovering to its mean valuation.