With inflation at elevated levels unseen in decades, partly caused by Russia’s invasion of Ukraine, and partly a result of continuous heightened tensions between the US and China, events in the global political and economic scenes in 2022 may lead one to question the appropriateness of past strategies in such an unfamiliar and chaotic economy. Investors are faced with unprecedented challenges as we enter a new regime where substantially higher interest rates and inflations may become a new normal. But with the right understanding and some twists in strategies, this changing environment will also bring opportunities that only happen once in a few generations.
In this special report, we take you through the developments that have been happening since we introduced our two newly identified megatrends – Indonesia 2.0 and Web 3.0.
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Published: Nov 04 2022
With inflation at elevated levels unseen in decades, partly caused by Russia’s invasion of Ukraine, and partly a result of continuous heightened tensions between the US and China, events in the global political and economic scenes in 2022 may lead one to question the appropriateness of past strategies in such an unfamiliar and chaotic economy. Investors are faced with unprecedented challenges as we enter a new regime where substantially higher interest rates and inflations may become a new normal. But with the right understanding and some twists in strategies, this changing environment will also bring opportunities that only happen once in a few generations.
In this special report, we take you through the developments that have been happening since we introduced our two newly identified megatrends – Indonesia 2.0 and Web 3.0.
Admin heyokha
Feedback for Us
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labor.
The aftermath of Luna and its stablecoin TerraUSD is no doubt more devastating than one would have imagined. The fallout reminded us about financial crises and how leverage could be a detrimental double-edged sword: while your investment return is maximised, so is your risk. In this aspect, DeFi is no difference than TradFi, but the mechanism, hiding behind all the ‘smart contracts’, is much less understood. We try to explain what happened and the implications in this blog.
The domino effect of the Luna fiasco began as Celsius, a cryptocurrency lender, froze customer withdrawals on their platform in mid-June and subsequently declared insolvent. On that same day, Binance, one of the largest crypto exchanges, also halted withdrawals from their exchange for a few hours before resuming them later in the day. While all eyes were fixated on the crypto lenders and exchanges, few noticed the looming of a bigger victim.
Singapore-based crypto hedge fund Three Arrows Capital (3AC) transformed into an almost exclusively crypto focused fund in 2018, 3AC initially focused on trading Bitcoin and Etherum in the derivatives markets. Over the years, 3AC has diversified its investment strategy and has become a force in DeFi by backing some of its most important platforms. It has invested in Solana, Ethereum, Avalanche, Aave and Terra, as well as GameFi names such as Axie Infinity and NFTs.
Being one of the largest investors in Luna (seeking for its attractive staking yield), 3AC suffered large losses on the back of its collapse. Industry report said that 3AC has bought 10.9 million locked LUNA for $559.6 million, which by June 2022, was worth $670.45. The firm failed to meet margin calls from its lenders as the market was facing massive selloffs, triggering unforeseen liquidations for the firm.
Source: @FatManTerra, Twitter
The chain effect of 3AC’s insolvency has led to multiple crypto lenders halting withdrawals from their platforms. Amongst the sufferers is Voyager Digital, which wears the broker, custodian, and lender’s hat at the same time. The demise of 3AC, which was one if Voyager’s biggest borrower, has ultimately led to the firm filing bankruptcy shortly afterwards.
The Money or Cryptocurrencies Flow Chart
But there can be more domino effects along the way as the complicated relationships reveal themselves through the epic centres of Terra and 3AC. Source: Coindesk, Bloomberg Intelligence, Three Arrows Capital, Heyokha Brothers
Source: Q2 2022 Cryptocurrency Report, CoinGecko
Lessons learnt
What happened in this collapse echoed past financial crises. The dependence on assets that were overvalued or at massive risk of large price corrections, and more importantly, the greed and fear that overtook the market players, have been the same forces at work this time round. Greed led 3AC along with other crypto lenders to misjudge systematic risks and entered highly levered positions in assets the values of which are highly correlated with each through engineering supply and demand. So when one falls, all have brought to their knees.
Not only is this poor risk management, but also a reflection of the opaque world of DeFi (that can also be said for TradFi). Like any centralised crypto fund, 3AC does not share much about its inner workings, this means that market participants have no insights as to where, when and how these funds invest and leverage. For instance, the Monetary Authority of Singapore (MAS) has reprimanded 3AC for misleading information and exceeding asset under management (AUM) threshold. The fund’s asset holding was estimated range between $4-10bn, which exceeded more than 22-fold the permitted AUM of SG$250 million under its status as a registered fund management company (RFMC).
Bringing transparency to crypto market
All the events contributed to the crash reveal just how opacity could lead to massive losses for consumers – two trillion dollars of crypto asset’s market cap have been wiped out. As a result, a call for consumer protection is crucial, and decentralisation could be a solution to the problem. The crisis occurred over the past few weeks tell us how reckless some institutions can be in pursuit of high returns. As a result, a call for consumer and investor protection is crucial, and decentralisation could be a solution to the problem. Decentralisation, such as a decentralised fund, offers market participants transparency. Imagine if everything is run on-chain with real-time reporting, meaning anyone can audit and analyse these funds anywhere, at any time, would fund managers continue to take on huge risks? Or would investors have pushed back on some of the risks had they known? Transparency mitigates moral hazard, it allows the market to differentiate high quality from low quality, effectively imposing self-regulation to the market.
Regulations spell the end of algorithmic stablecoin
In the wake of the catastrophic collapse of TerraUSD (UST), hedge funds and crypto lenders, one after the other, regulators are now in a sprint to formulate regulatory frameworks, particularly for stablecoins. For instance, just three days after 3AC was ordered to liquidate, EU officials secured an agreement on the Markets in Crypto-Assets (MiCA) proposal which covers issuers of stablecoins, as well as trading venues and wallets where crypto-assets are held. Under the new rules, stablecoins will be required to maintain sufficiently liquid reserves to meet redemption requests in the event of mass withdrawal. The stablecoins will also be supervised by the European Banking Authority (EBA). This law implies the consensus that algorithmic stablecoins are the weakest among the four types of stablecoins we discussed in a previous blog post (link). For fulfil the requirements under the new law, algorithmic stablecoins will require legal tender backing. Despite a bumpy road ahead, we see the new rules as a positive movement overall, not only does it provide regulatory clarity and assurance, but also lowers the risk for abuse. Indeed, following the agreement, Shiba Inu and Aave both announced their plans to launch a stablecoin for their respective ecosystem. This shows that effective regulation is paramount.
Defi will evolve, but it will not go away
We have long been a proponent that it will be years until Web 3.0 or crypto economy to truly take off. What we are currently observing are many proofs of concept. Therefore, there are bound to be successes and failures along the way. The crypto winter we are facing now may be the perfect opportunity to clear the underbrush that could be kindling for the next firestorm.
Reference:
MAS Reprimands Three Arrows Capital for Providing False Information and Exceeding Assets Under Management Threshold. Monetary Authority of Singapore.
Crypto hedge fund Three Arrows fails to meet lender margin calls. Financial Times.
Digital finance: agreement reached on European crypto-assets regulation (MiCA). The Council of the European Union.
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Published: Jul 15 2022
The aftermath of Luna and its stablecoin TerraUSD is no doubt more devastating than one would have imagined. The fallout reminded us about financial crises and how leverage could be a detrimental double-edged sword: while your investment return is maximised, so is your risk. In this aspect, DeFi is no difference than TradFi, but the mechanism, hiding behind all the ‘smart contracts’, is much less understood. We try to explain what happened and the implications in this blog.
The domino effect of the Luna fiasco began as Celsius, a cryptocurrency lender, froze customer withdrawals on their platform in mid-June and subsequently declared insolvent. On that same day, Binance, one of the largest crypto exchanges, also halted withdrawals from their exchange for a few hours before resuming them later in the day. While all eyes were fixated on the crypto lenders and exchanges, few noticed the looming of a bigger victim.
Singapore-based crypto hedge fund Three Arrows Capital (3AC) transformed into an almost exclusively crypto focused fund in 2018, 3AC initially focused on trading Bitcoin and Etherum in the derivatives markets. Over the years, 3AC has diversified its investment strategy and has become a force in DeFi by backing some of its most important platforms. It has invested in Solana, Ethereum, Avalanche, Aave and Terra, as well as GameFi names such as Axie Infinity and NFTs.
Being one of the largest investors in Luna (seeking for its attractive staking yield), 3AC suffered large losses on the back of its collapse. Industry report said that 3AC has bought 10.9 million locked LUNA for $559.6 million, which by June 2022, was worth $670.45. The firm failed to meet margin calls from its lenders as the market was facing massive selloffs, triggering unforeseen liquidations for the firm.
Source: @FatManTerra, Twitter
The chain effect of 3AC’s insolvency has led to multiple crypto lenders halting withdrawals from their platforms. Amongst the sufferers is Voyager Digital, which wears the broker, custodian, and lender’s hat at the same time. The demise of 3AC, which was one if Voyager’s biggest borrower, has ultimately led to the firm filing bankruptcy shortly afterwards.
The Money or Cryptocurrencies Flow Chart
But there can be more domino effects along the way as the complicated relationships reveal themselves through the epic centres of Terra and 3AC. Source: Coindesk, Bloomberg Intelligence, Three Arrows Capital, Heyokha Brothers
Source: Q2 2022 Cryptocurrency Report, CoinGecko
Lessons learnt
What happened in this collapse echoed past financial crises. The dependence on assets that were overvalued or at massive risk of large price corrections, and more importantly, the greed and fear that overtook the market players, have been the same forces at work this time round. Greed led 3AC along with other crypto lenders to misjudge systematic risks and entered highly levered positions in assets the values of which are highly correlated with each through engineering supply and demand. So when one falls, all have brought to their knees.
Not only is this poor risk management, but also a reflection of the opaque world of DeFi (that can also be said for TradFi). Like any centralised crypto fund, 3AC does not share much about its inner workings, this means that market participants have no insights as to where, when and how these funds invest and leverage. For instance, the Monetary Authority of Singapore (MAS) has reprimanded 3AC for misleading information and exceeding asset under management (AUM) threshold. The fund’s asset holding was estimated range between $4-10bn, which exceeded more than 22-fold the permitted AUM of SG$250 million under its status as a registered fund management company (RFMC).
Bringing transparency to crypto market
All the events contributed to the crash reveal just how opacity could lead to massive losses for consumers – two trillion dollars of crypto asset’s market cap have been wiped out. As a result, a call for consumer protection is crucial, and decentralisation could be a solution to the problem. The crisis occurred over the past few weeks tell us how reckless some institutions can be in pursuit of high returns. As a result, a call for consumer and investor protection is crucial, and decentralisation could be a solution to the problem. Decentralisation, such as a decentralised fund, offers market participants transparency. Imagine if everything is run on-chain with real-time reporting, meaning anyone can audit and analyse these funds anywhere, at any time, would fund managers continue to take on huge risks? Or would investors have pushed back on some of the risks had they known? Transparency mitigates moral hazard, it allows the market to differentiate high quality from low quality, effectively imposing self-regulation to the market.
Regulations spell the end of algorithmic stablecoin
In the wake of the catastrophic collapse of TerraUSD (UST), hedge funds and crypto lenders, one after the other, regulators are now in a sprint to formulate regulatory frameworks, particularly for stablecoins. For instance, just three days after 3AC was ordered to liquidate, EU officials secured an agreement on the Markets in Crypto-Assets (MiCA) proposal which covers issuers of stablecoins, as well as trading venues and wallets where crypto-assets are held. Under the new rules, stablecoins will be required to maintain sufficiently liquid reserves to meet redemption requests in the event of mass withdrawal. The stablecoins will also be supervised by the European Banking Authority (EBA). This law implies the consensus that algorithmic stablecoins are the weakest among the four types of stablecoins we discussed in a previous blog post (link). For fulfil the requirements under the new law, algorithmic stablecoins will require legal tender backing. Despite a bumpy road ahead, we see the new rules as a positive movement overall, not only does it provide regulatory clarity and assurance, but also lowers the risk for abuse. Indeed, following the agreement, Shiba Inu and Aave both announced their plans to launch a stablecoin for their respective ecosystem. This shows that effective regulation is paramount.
Defi will evolve, but it will not go away
We have long been a proponent that it will be years until Web 3.0 or crypto economy to truly take off. What we are currently observing are many proofs of concept. Therefore, there are bound to be successes and failures along the way. The crypto winter we are facing now may be the perfect opportunity to clear the underbrush that could be kindling for the next firestorm.
Reference:
MAS Reprimands Three Arrows Capital for Providing False Information and Exceeding Assets Under Management Threshold. Monetary Authority of Singapore.
Crypto hedge fund Three Arrows fails to meet lender margin calls. Financial Times.
Digital finance: agreement reached on European crypto-assets regulation (MiCA). The Council of the European Union.
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As the world become increasingly reliant on the connection to the Internet to function, the current infrastructure such as cellular, Wifi, and Bluetooth coverage could be suboptimal, especially when many places today still do not have a reliable mobile network (if at all), let alone the high costs faced by users.
According to a report released by GSMA in February 2022, there are 4.2 billion mobile internet subscribers worldwide by the end of 2021, representing 53% of the world’s population. Around 450 million people globally still live in areas without access to internet services. In addition, data collected by SpendMeNot shows that people in the world, on average, spend $8.53 for 1GB of mobile data. In some countries in Africa, a gigabyte of data can cost a staggering $50!
Source: SpendMeNot.com
As an increasingly commoditized business, telecom operators are facing decreasing revenues from voice services and increasing costs due to the high bandwidth demands, there is a need for them to both reduce costs and find new sources of revenue. As a result, these operators have reduced their efforts at expanding coverage to underserved communities in disconnected areas – in semi-rural regions and urban outposts.
Given operators in this oligopolistic industry have no commercial incentives to invest in disconnected areas, and together with the emergence of blockchain technologies, groups of individuals have taken the matters in their hands and attempt to democratise mobile network service.
Helium is one of the blockchain protocols building a decentralised wireless network. It expands a crowd-sourced, self-funding global LoRaWAN infrastructure, where data transactions are immutable in blockchain ledgers. The LoRa technology in the sub-GHz unlicensed spectrum (beneath the GSHA licensed spectrum of 3G, 4G and 5G) allows for a wide range for very small data transfers. The Helium network applies this technology to a multitude of peer-to-peer ‘hotspots’ that allows users to host wireless devices on their network and earn cryptocurrency (HNT, Helium’s own currency). The more a hotspot is used, the more HNT tokens it generates. In just two years, Helium has expanded to over 850,000 hotspots in around 64,000 cities in 177 countries. And for consumers who use the Helium network, they pay for use in data credits that are valued in HNT.
Despite trying to democratise internet connectivity, Helium does come with its limitations. Right now, most hotspots are in high density cities, making it less useful for people in more remote areas where the coverage gap remains. A Helium miner cost varies depending on its make, region, and provider. The price point of most hotspots rests in the $500-$1,000 range. Therefore, it can be a major investment for an individual consumer, profitability may only come in the long term.
Our thoughts on how telecom operators can leverage blockchain technology
Helium is a proof of concept that blockchain can be applied to mobile network and solve some of the long existing problems faced by consumers. With such evidence, we wonder if, with the right economic incentives, would telecom operators be able to better capitalize the blockchain technology and more effectively resolve the mobile bandwidth coverage gap issue? Therefore, we let our imagination to run wild and propose another idea of how blockchain and mobile network can be combined.
Image credit: Lasani Logistics, Pinterest
Consider a mobile device embedded with micro mining capability to host hotspots, where there are nodes that simultaneously mine tokens for building and securing permissioned network, while providing connectivity to nearby devices. In return for purchasing the device and contributing to the network, users may enjoy free (or much cheaper) mobile network service. With the broad customer base that telecom operators already own today, an extensive network can be established swiftly, as compared to a blockchain protocol which requires building a network from scratch.
From operators’ perspective, in addition to taking advantage of a more robust and secured network, operators may also benefit from substantial costs reduction by eliminating intermediaries. For example, roaming settlement costs can reach 15% of operating profits from providing communication services for a telecom operator, mostly spend on data clearing house and also on roaming software solution. With blockchain technology, every pair of operators with a roaming agreement could be connected peer-to-peer via two nodes on a network, eliminating the need for a clearing house and for licensing end-to-end roaming software. Overall, this creates a win-win situation for both the operators and end users by reducing costs faced by both parties.
Besides providing cheap and secured mobile network using blockchain, there are other use cases for the telecommunications industry. They include:
Fraud prevention
There are many ways in which a subscriber’s identity can be compromised. Public-private cryptography which is inherent in a blockchain can be used to identify a device and link that device to a subscriber’s identity. As such, a subscriber can be uniquely identified by a public key generated by the device. This public key can be used to authorize the device on the network while keeping the private key information confidential. In this way, the services can only be used by the subscriber who has subscribed to the mobile network services and the ID cannot be easily stolen.
Identity-as-a-service
A blockchain can be used as a shared ledger that stores identity transactions. A telecom operator can create a virtual identity for its subscribers when they open an account, every time the subscriber wants to visit a partner website, e.g., an e-commerce site, a copy of the ledger entry can be sent to the e-commerce site, the site can use the public key from the virtual identity to obtain the information related to the identity. Not only does Identity-as-a-service creates an additional revenue stream for the telecom companies, but it also provides a secure transfer of data with third parties as well as convenience to customers.
Although the proposed idea remains to be theoretical, it demonstrates the vast amounts of applications that blockchain technology may deliver across the telecommunications industry, enabling operators to offer utilities which were previously non-viable without blockchain technology. Comment below to let us know your thoughts on the application of blockchain in the telecom industry!
Reference:
The Mobile Economy 2022. GSM Association
Petrov C. (2022). Mobile Data Cost Around the World. SpendMeNot.
Helium Explorer
Helium Network: How much does a Helium Miner Cost? Emrit.
Blockchain @ Telco: How blockchain can impact the telecommunications industry and its relevance to the C-Suite. Deloitte.
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Published: Jun 17 2022
As the world become increasingly reliant on the connection to the Internet to function, the current infrastructure such as cellular, Wifi, and Bluetooth coverage could be suboptimal, especially when many places today still do not have a reliable mobile network (if at all), let alone the high costs faced by users.
According to a report released by GSMA in February 2022, there are 4.2 billion mobile internet subscribers worldwide by the end of 2021, representing 53% of the world’s population. Around 450 million people globally still live in areas without access to internet services. In addition, data collected by SpendMeNot shows that people in the world, on average, spend $8.53 for 1GB of mobile data. In some countries in Africa, a gigabyte of data can cost a staggering $50!
Source: SpendMeNot.com
As an increasingly commoditized business, telecom operators are facing decreasing revenues from voice services and increasing costs due to the high bandwidth demands, there is a need for them to both reduce costs and find new sources of revenue. As a result, these operators have reduced their efforts at expanding coverage to underserved communities in disconnected areas – in semi-rural regions and urban outposts.
Given operators in this oligopolistic industry have no commercial incentives to invest in disconnected areas, and together with the emergence of blockchain technologies, groups of individuals have taken the matters in their hands and attempt to democratise mobile network service.
Helium is one of the blockchain protocols building a decentralised wireless network. It expands a crowd-sourced, self-funding global LoRaWAN infrastructure, where data transactions are immutable in blockchain ledgers. The LoRa technology in the sub-GHz unlicensed spectrum (beneath the GSHA licensed spectrum of 3G, 4G and 5G) allows for a wide range for very small data transfers. The Helium network applies this technology to a multitude of peer-to-peer ‘hotspots’ that allows users to host wireless devices on their network and earn cryptocurrency (HNT, Helium’s own currency). The more a hotspot is used, the more HNT tokens it generates. In just two years, Helium has expanded to over 850,000 hotspots in around 64,000 cities in 177 countries. And for consumers who use the Helium network, they pay for use in data credits that are valued in HNT.
Despite trying to democratise internet connectivity, Helium does come with its limitations. Right now, most hotspots are in high density cities, making it less useful for people in more remote areas where the coverage gap remains. A Helium miner cost varies depending on its make, region, and provider. The price point of most hotspots rests in the $500-$1,000 range. Therefore, it can be a major investment for an individual consumer, profitability may only come in the long term.
Our thoughts on how telecom operators can leverage blockchain technology
Helium is a proof of concept that blockchain can be applied to mobile network and solve some of the long existing problems faced by consumers. With such evidence, we wonder if, with the right economic incentives, would telecom operators be able to better capitalize the blockchain technology and more effectively resolve the mobile bandwidth coverage gap issue? Therefore, we let our imagination to run wild and propose another idea of how blockchain and mobile network can be combined.
Image credit: Lasani Logistics, Pinterest
Consider a mobile device embedded with micro mining capability to host hotspots, where there are nodes that simultaneously mine tokens for building and securing permissioned network, while providing connectivity to nearby devices. In return for purchasing the device and contributing to the network, users may enjoy free (or much cheaper) mobile network service. With the broad customer base that telecom operators already own today, an extensive network can be established swiftly, as compared to a blockchain protocol which requires building a network from scratch.
From operators’ perspective, in addition to taking advantage of a more robust and secured network, operators may also benefit from substantial costs reduction by eliminating intermediaries. For example, roaming settlement costs can reach 15% of operating profits from providing communication services for a telecom operator, mostly spend on data clearing house and also on roaming software solution. With blockchain technology, every pair of operators with a roaming agreement could be connected peer-to-peer via two nodes on a network, eliminating the need for a clearing house and for licensing end-to-end roaming software. Overall, this creates a win-win situation for both the operators and end users by reducing costs faced by both parties.
Besides providing cheap and secured mobile network using blockchain, there are other use cases for the telecommunications industry. They include:
Fraud prevention
There are many ways in which a subscriber’s identity can be compromised. Public-private cryptography which is inherent in a blockchain can be used to identify a device and link that device to a subscriber’s identity. As such, a subscriber can be uniquely identified by a public key generated by the device. This public key can be used to authorize the device on the network while keeping the private key information confidential. In this way, the services can only be used by the subscriber who has subscribed to the mobile network services and the ID cannot be easily stolen.
Identity-as-a-service
A blockchain can be used as a shared ledger that stores identity transactions. A telecom operator can create a virtual identity for its subscribers when they open an account, every time the subscriber wants to visit a partner website, e.g., an e-commerce site, a copy of the ledger entry can be sent to the e-commerce site, the site can use the public key from the virtual identity to obtain the information related to the identity. Not only does Identity-as-a-service creates an additional revenue stream for the telecom companies, but it also provides a secure transfer of data with third parties as well as convenience to customers.
Although the proposed idea remains to be theoretical, it demonstrates the vast amounts of applications that blockchain technology may deliver across the telecommunications industry, enabling operators to offer utilities which were previously non-viable without blockchain technology. Comment below to let us know your thoughts on the application of blockchain in the telecom industry!
Reference:
The Mobile Economy 2022. GSM Association
Petrov C. (2022). Mobile Data Cost Around the World. SpendMeNot.
Helium Explorer
Helium Network: How much does a Helium Miner Cost? Emrit.
Blockchain @ Telco: How blockchain can impact the telecommunications industry and its relevance to the C-Suite. Deloitte.
Admin heyokha
Feedback for Us
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Throughout history, the world witnessed game changing and disruptive technologies, which when combined, could reshape industries and change the world completely. While these technologies raised the overall prosperity of societies, they nonetheless suffered from the inherent risk of exploitations which leads mistrust and discontent. With the emergence of the blockchain technology, we believe that it will be the foundational technology that may once and for all transform the trust based model. In this report we will walk you through our hypothesis and how we got here.
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Published: Jun 02 2022
Throughout history, the world witnessed game changing and disruptive technologies, which when combined, could reshape industries and change the world completely. While these technologies raised the overall prosperity of societies, they nonetheless suffered from the inherent risk of exploitations which leads mistrust and discontent. With the emergence of the blockchain technology, we believe that it will be the foundational technology that may once and for all transform the trust based model. In this report we will walk you through our hypothesis and how we got here.
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As the name implies, stablecoins always aim for one goal: stability. They bridge the gap between fiat currencies and cryptocurrencies by letting crypto users to make transactions easily and quickly without needing to leave the digital asset ecosystem or rely on intermediaries whilst worrying about the value of their coins fluctuating.
There are four primary types of stablecoin, classified by their underlying collateral structure.
1. Fiat-backed
2. Crypto-backed
3. Commodity-backed
4. Algorithmic
#1 Fiat-backed stablecoins
Fiat-backed stablecoins are the most popular type among the four. They are fully backed by fiat currency such as US dollar and short-dated US government obligations which are always redeemable at 1:1. Fiat collateral remains in reserve with a central issuer or financial institution, and it must remain proportional to the number of stablecoin tokens in circulation. The most prominent fiat-backed stablecoins include Tether (USDT), USD Coin (USDC).
#2 Crypto-backed stablecoins
Crypto-backed stablecoins are backed by another cryptocurrency or a basket of cryptocurrencies as collateral. This process occurs on-chain and employs smart contracts instead of relying on a central issuer. When purchasing this kind of stablecoin, you lock your cryptocurrency into a smart contract and obtain tokens of equal representative value in return. To redeem, you can swap the stablecoin back into the same smart contract for the original collateral. An example of this type of stablecoin is DAI. What gives some crypto-back stablecoins a layer of robustness is that they don’t solely depend on one single cryptocurrency, for instance, Maker Protocol (the Dai stablecoin system) accepts any Ethereum-based asset that has been approved by MKR holders as collateral.
#3 Commodity-backed stablecoins
Commodity-backed stablecoins are collateralized using physical assets such as precious metals, oil, and real estate. Tether Gold (XAUT) and Paxos Gold (PAXG) are examples of gold-backed stablecoins. Different from the other three types of stablecoins, commodity-backed stablecoins also provide investors access to these assets which may otherwise be out of reach as well as a fractional ownership.
#4 Algorithmic stablecoins
Algorithmic stablecoins rely on specialized algorithms and smart contracts to manage the supply of tokens in circulation. An algorithmic stablecoin system will increase or reduce the number of tokens in circulation depending on the token price in relation to the price of fiat currency it is pegged to. A case in point would be the TerraUSD (UST).
The Terra protocol consists of two main tokens: UST and LUNA.
UST uses LUNA to maintain its 1:1 peg to the US dollar which could be swapped for UST and vice versa to keep the price of UST where it should be.
To make it easier to understand, imagine that the price of UST is currently above $1, let’s say $1.01. A LUNA holder can then swap 1 USD worth of LUNA for 1 UST. In this case, the market, using an algorithm, will burn 1 USD worth of LUNA and mint 1 UST. The holder can sell 1 UST for $1.01 – profiting $0.01 from the arbitrage mechanism. The logic works the same for the opposite – when 1 UST is trading at $0.99, a UST holder can swap 1 UST for 1 USD of LUNA. The swap will result in the burning of 1 UST and minting of 1 USD of LUNA, holder profit $0.01 from the swap.
Mayday! Mayday!
Terra Protocol and its ecosystem have been all over the headline of news for the past week. TerraUSD (UST) – the protocol’s algorithmic stablecoin has lost its peg twice in three days which ultimately led to a permanent de-pegging. At the time of writing, UST fell as low as $0.15. Meanwhile, LUNA – the protocol’s governance token is almost worthless, trading at almost $0 from a high of US$119.18 last month. This has led to the Terra Validators officially halted the blockchain on 13th May.
Source: CoinGecko
The event has sent shockwaves throughout the crypto ecosystem, making one to wonder what caused the blowup. The root cause of the fatal crash has not been confirmed, but speculation laid out by the Onchain Wizard suggests that it could be caused by a coordinated attack which has led to the drop of UST deposits on Anchor protocol from $14 billion to $11.8 billion over the weekend. As the Wizard sees it, the problems for Luna began in March when the Luna Foundation Guard (LFG) began purchasing Bitcoin (BTC) for UST’s reserve pool. And at some point, the attacker began building a BTC short position and a $1 billion OTC UST position, knowing that LFG will be creating a new liquidity pool – the 4pool, and requires transferring liquidity between pools. On 8th May, LFG removed $150 million in liquidity in anticipation of 4pool from Curve. At the same time, an attacker drained $350 million of UST, kick-started the de-pegging. Once LFG began selling its BTC from reserves to save the peg, it put downward pressure on BTC. The attacker also began to offload the remainder of the OTC UST position. With strong UST liquidations, LUNA price starts to collapse because of the Terra’s algorithmic mechanism. The token then went down a “death spiral.”
However, it seems as though fiat-backed stablecoins such as USDT and USDC have managed to kop their head above the water and investor sentiment remains relatively intact. Although USDT briefly dipped to $0.95 last Thursday amid the UST meltdown.
Snowball Effect to DeFi
A chain reaction started a crypto bloodbath, over $350 billion has been wiped off the value of the global crypto market since the UST collapse. And the total value locked (TVL) in decentralized finance (DeFi) protocols has dropped from US$142 billion to US$87 billion, losing over 39% over 7 days. Tokens like Avalanche and Solana that underpin some key DeFi protocols posted over 40 percentage loss at one point. Source: CoinMarketCap
Source: DefiLlama
The Postmortem
UST was a darling of DeFi. The protocol that seeks to power a stable global payment system with affordable and fast settlement amassed a market cap of $18.7 billion and was the fourth largest stablecoin by market value within 20 months since its launch.
A key implication from this fiasco is the vulnerability of algorithmic stablecoins. This type of stablecoin is uncollateralized in nature. It requires a complex engineering to hold its value steady. In addition, its reliance on the Anchor protocol which offered a high yield (a whopping 19.57% APY!!) to UST depositors adds skepticism to the sustainability of the protocol. For instance, the success of UST relies entirely on the belief that LUNA, a token that is created out of thin air, has value. Once a portion of investors begin to lose faith in Terra, a sell-off could trigger FUD (Fear, Uncertainty, and Doubt) which thereafter cause a loop between further selling of UST, which exacerbates the de-pegging of the stablecoin, and thereafter leads to more FUD and more selling – the tokens go down a ‘death spiral’.
What we observe as the flaw that has led to the meltdown of LUNA and UST is that the stablecoin is still prone to bank runs that happen in the traditional world, except there is no reserve backing the UST which made the problem worse. So when everyone try to withdraw their money at the same time, draining liquidity of a token, the token price plummets.
Nonetheless, the search for fiat alternative will continue, stablecoin is just one of the experiments that take advantage of the blockchain technology. Better iterations and new experiments will be attempted. Indeed, during the same week, Economist Nouriel Roubini, who has been a long-term crypto skeptic known as “Dr. Doom,” revealed over the same week that he is developing a tokenized asset called the United Sovereign Governance Gold Optimized Dollar (USG) that will be backed by real assets including U.S. Treasuries, gold and real estate investment trusts. Whether this attempt to create a more resilient dollar will play out or become just another experiment, only time will tell.
Despite being an unfortunate loss to many, Terra was the biggest algorithmic stablecoin that tried to achieve the decentralized mission of crypto. Afterall, any asset-back stablecoin is fundamentally centralized around a financial institution that opened the bank account. The collapse of Terra reinforced the credibility of the underlying blockchain technology and drew the attention of lawmakers and officials. Their call for stablecoins to be regulated may be a positive news to crypto enthusiasts and investors.
Following the devastating fiasco, US Treasury Secretary Janet Yellen cited the incident during a Senate Banking Committee hearing on the Financial Stability Oversight Council’s (FSOC) annual report, reiterated the importance for robust regulation.
“There was a report this morning in the Wall Street Journal that a stablecoin known as terrausd [UST] experienced a run and had declined in value.” Yellen said.
“I think that simply illustrates that this is a rapidly growing product and there are risks to financial stability and we need a framework that’s appropriate.”
As blockchain and crypto are unprecedented technology and asset, policymakers have been careful trying to understand and develop rules for the sector while leaving the industry guessing. Although the outcome of any new regulation is unclear, the terra meltdown becomes a catalyst to speed things up and would ultimately more stability to the market. The elimination of uncertainty surrounding cryptocurrencies could potentially entice a wider range of investors, particularly cash-rich institutions, providing a boost to innovation.
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Published: May 16 2022
Stablecoins: /ˈsteɪblkɔɪn/
As the name implies, stablecoins always aim for one goal: stability. They bridge the gap between fiat currencies and cryptocurrencies by letting crypto users to make transactions easily and quickly without needing to leave the digital asset ecosystem or rely on intermediaries whilst worrying about the value of their coins fluctuating.
There are four primary types of stablecoin, classified by their underlying collateral structure.
1. Fiat-backed
2. Crypto-backed
3. Commodity-backed
4. Algorithmic
#1 Fiat-backed stablecoins
Fiat-backed stablecoins are the most popular type among the four. They are fully backed by fiat currency such as US dollar and short-dated US government obligations which are always redeemable at 1:1. Fiat collateral remains in reserve with a central issuer or financial institution, and it must remain proportional to the number of stablecoin tokens in circulation. The most prominent fiat-backed stablecoins include Tether (USDT), USD Coin (USDC).
#2 Crypto-backed stablecoins
Crypto-backed stablecoins are backed by another cryptocurrency or a basket of cryptocurrencies as collateral. This process occurs on-chain and employs smart contracts instead of relying on a central issuer. When purchasing this kind of stablecoin, you lock your cryptocurrency into a smart contract and obtain tokens of equal representative value in return. To redeem, you can swap the stablecoin back into the same smart contract for the original collateral. An example of this type of stablecoin is DAI. What gives some crypto-back stablecoins a layer of robustness is that they don’t solely depend on one single cryptocurrency, for instance, Maker Protocol (the Dai stablecoin system) accepts any Ethereum-based asset that has been approved by MKR holders as collateral.
#3 Commodity-backed stablecoins
Commodity-backed stablecoins are collateralized using physical assets such as precious metals, oil, and real estate. Tether Gold (XAUT) and Paxos Gold (PAXG) are examples of gold-backed stablecoins. Different from the other three types of stablecoins, commodity-backed stablecoins also provide investors access to these assets which may otherwise be out of reach as well as a fractional ownership.
#4 Algorithmic stablecoins
Algorithmic stablecoins rely on specialized algorithms and smart contracts to manage the supply of tokens in circulation. An algorithmic stablecoin system will increase or reduce the number of tokens in circulation depending on the token price in relation to the price of fiat currency it is pegged to. A case in point would be the TerraUSD (UST).
The Terra protocol consists of two main tokens: UST and LUNA.
UST uses LUNA to maintain its 1:1 peg to the US dollar which could be swapped for UST and vice versa to keep the price of UST where it should be.
To make it easier to understand, imagine that the price of UST is currently above $1, let’s say $1.01. A LUNA holder can then swap 1 USD worth of LUNA for 1 UST. In this case, the market, using an algorithm, will burn 1 USD worth of LUNA and mint 1 UST. The holder can sell 1 UST for $1.01 – profiting $0.01 from the arbitrage mechanism. The logic works the same for the opposite – when 1 UST is trading at $0.99, a UST holder can swap 1 UST for 1 USD of LUNA. The swap will result in the burning of 1 UST and minting of 1 USD of LUNA, holder profit $0.01 from the swap.
Mayday! Mayday!
Terra Protocol and its ecosystem have been all over the headline of news for the past week. TerraUSD (UST) – the protocol’s algorithmic stablecoin has lost its peg twice in three days which ultimately led to a permanent de-pegging. At the time of writing, UST fell as low as $0.15. Meanwhile, LUNA – the protocol’s governance token is almost worthless, trading at almost $0 from a high of US$119.18 last month. This has led to the Terra Validators officially halted the blockchain on 13th May.
Source: CoinGecko
The event has sent shockwaves throughout the crypto ecosystem, making one to wonder what caused the blowup. The root cause of the fatal crash has not been confirmed, but speculation laid out by the Onchain Wizard suggests that it could be caused by a coordinated attack which has led to the drop of UST deposits on Anchor protocol from $14 billion to $11.8 billion over the weekend. As the Wizard sees it, the problems for Luna began in March when the Luna Foundation Guard (LFG) began purchasing Bitcoin (BTC) for UST’s reserve pool. And at some point, the attacker began building a BTC short position and a $1 billion OTC UST position, knowing that LFG will be creating a new liquidity pool – the 4pool, and requires transferring liquidity between pools. On 8th May, LFG removed $150 million in liquidity in anticipation of 4pool from Curve. At the same time, an attacker drained $350 million of UST, kick-started the de-pegging. Once LFG began selling its BTC from reserves to save the peg, it put downward pressure on BTC. The attacker also began to offload the remainder of the OTC UST position. With strong UST liquidations, LUNA price starts to collapse because of the Terra’s algorithmic mechanism. The token then went down a “death spiral.”
However, it seems as though fiat-backed stablecoins such as USDT and USDC have managed to kop their head above the water and investor sentiment remains relatively intact. Although USDT briefly dipped to $0.95 last Thursday amid the UST meltdown.
Snowball Effect to DeFi
A chain reaction started a crypto bloodbath, over $350 billion has been wiped off the value of the global crypto market since the UST collapse. And the total value locked (TVL) in decentralized finance (DeFi) protocols has dropped from US$142 billion to US$87 billion, losing over 39% over 7 days. Tokens like Avalanche and Solana that underpin some key DeFi protocols posted over 40 percentage loss at one point. Source: CoinMarketCap
Source: DefiLlama
The Postmortem
UST was a darling of DeFi. The protocol that seeks to power a stable global payment system with affordable and fast settlement amassed a market cap of $18.7 billion and was the fourth largest stablecoin by market value within 20 months since its launch.
A key implication from this fiasco is the vulnerability of algorithmic stablecoins. This type of stablecoin is uncollateralized in nature. It requires a complex engineering to hold its value steady. In addition, its reliance on the Anchor protocol which offered a high yield (a whopping 19.57% APY!!) to UST depositors adds skepticism to the sustainability of the protocol. For instance, the success of UST relies entirely on the belief that LUNA, a token that is created out of thin air, has value. Once a portion of investors begin to lose faith in Terra, a sell-off could trigger FUD (Fear, Uncertainty, and Doubt) which thereafter cause a loop between further selling of UST, which exacerbates the de-pegging of the stablecoin, and thereafter leads to more FUD and more selling – the tokens go down a ‘death spiral’.
What we observe as the flaw that has led to the meltdown of LUNA and UST is that the stablecoin is still prone to bank runs that happen in the traditional world, except there is no reserve backing the UST which made the problem worse. So when everyone try to withdraw their money at the same time, draining liquidity of a token, the token price plummets.
Nonetheless, the search for fiat alternative will continue, stablecoin is just one of the experiments that take advantage of the blockchain technology. Better iterations and new experiments will be attempted. Indeed, during the same week, Economist Nouriel Roubini, who has been a long-term crypto skeptic known as “Dr. Doom,” revealed over the same week that he is developing a tokenized asset called the United Sovereign Governance Gold Optimized Dollar (USG) that will be backed by real assets including U.S. Treasuries, gold and real estate investment trusts. Whether this attempt to create a more resilient dollar will play out or become just another experiment, only time will tell.
Despite being an unfortunate loss to many, Terra was the biggest algorithmic stablecoin that tried to achieve the decentralized mission of crypto. Afterall, any asset-back stablecoin is fundamentally centralized around a financial institution that opened the bank account. The collapse of Terra reinforced the credibility of the underlying blockchain technology and drew the attention of lawmakers and officials. Their call for stablecoins to be regulated may be a positive news to crypto enthusiasts and investors.
Following the devastating fiasco, US Treasury Secretary Janet Yellen cited the incident during a Senate Banking Committee hearing on the Financial Stability Oversight Council’s (FSOC) annual report, reiterated the importance for robust regulation.
“There was a report this morning in the Wall Street Journal that a stablecoin known as terrausd [UST] experienced a run and had declined in value.” Yellen said.
“I think that simply illustrates that this is a rapidly growing product and there are risks to financial stability and we need a framework that’s appropriate.”
As blockchain and crypto are unprecedented technology and asset, policymakers have been careful trying to understand and develop rules for the sector while leaving the industry guessing. Although the outcome of any new regulation is unclear, the terra meltdown becomes a catalyst to speed things up and would ultimately more stability to the market. The elimination of uncertainty surrounding cryptocurrencies could potentially entice a wider range of investors, particularly cash-rich institutions, providing a boost to innovation.
Luck is when opportunity meets preparation. After a painful decade of underperformance, we see the stars are aligned for Indonesia to outperform. Commodity supercycle, the rotation from growth to value stocks, investors pivoting to other markets after China tech clampdown, and rising geopolitical tension are favourable backdrops for Indonesia. Having Indonesia as our home turf allows us to see internal reforms happening at the margin that will amplify this external tailwind. Indonesia 2.0 is a rediscovery that will surprise you in many ways.
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Published: Apr 21 2022
Luck is when opportunity meets preparation. After a painful decade of underperformance, we see the stars are aligned for Indonesia to outperform. Commodity supercycle, the rotation from growth to value stocks, investors pivoting to other markets after China tech clampdown, and rising geopolitical tension are favourable backdrops for Indonesia. Having Indonesia as our home turf allows us to see internal reforms happening at the margin that will amplify this external tailwind. Indonesia 2.0 is a rediscovery that will surprise you in many ways.
Admin heyokha
Feedback for Us
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labor.
Everyone has a plan ‘till they get punched in the mouth. This frequently cited quote by Mike Tyson gains more relevance today. Politicians may aspire with plans to increase their odds of being elected. Greening economy projects, waging war against inequality, exerting political dominance over other countries, and other populist policies are some of the examples. However, all these means nothing if their leadership fails to bring food on the table.
In our past blog (link), we pointed out how supply chain issues, tight agriculture market, energy crisis, and geopolitical tension crystallised in the great rally of ammonia and fertiliser prices. If we consider the factors at play, this might be the warning shot of an upcoming food crisis.
Skyrocketing food prices have been associated with social unrest and we are at all-time high
Source: Lagi, et al. (2011)
It is pretty straight forward why high and volatile food prices could destabilise a society. Food is both essential and have a significant share of our daily spending. Based on 2018 Euromonitor data, food on average accounted for 28.7% of consumer spending in 51 countries throughout the globe. For some countries like Bangladesh, Myanmar, Kenya and Ethiopia, this figure can be as high as 53% to 59% .
There are anecdotal evidence in the past whereby food problems led into social unrest. In 1789, the famine led French peasants to storm the Bastille prison and ended up overturning the French empire. In the modern era, the high food prices in 2008 and 2011 sparked numerous civil unrests in the Middle East.
Before the recent boom, commodities were the sucker’s bet of the last decade. At the start of its gracious fall in the 2010s, the substantial commodity investments in the 2000s left the world with abundant stocks of commodities. This time around, the prolonged relaxed financial conditions and minimum investments in this sector drift the world into the opposite setting. There is a lot of liquidity, yet so few goods.
If we consider commodity as a currency of its own, we are seeing where Gresham’s rule of bad money drives out good money in action. The rapid expansion of liquidity without a respective production expansion of commodities led to the appreciation of the latter.
Today, food prices already exceeded the highs of 2011 and are yet to lose their steam.
Source: Bloomberg
Countries are taking food protectionism measures to stabilise domestic food prices
We find the severity of the potential food crisis cannot be underestimated. Case in point would be the magnitude of Russia-Ukraine war in escalating this matter.
Both Russia and Ukraine play significant roles in the agriculture or fertiliser market. Russia is the biggest exporter of wheat (18% of global export) and a major exporter of sunflower oil (18% of global export) and fertilizers (20% of global ammonia export). On the other hand, Ukraine is also a major exporter of wheat (15% of global export) and the biggest sunflower oil exporter (37.5% of global export).
The prolonged Russia-Ukraine conflict adversely impacts both near and long-term supply. Near-term supply has been affected because of the logistical hurdles made by the war. The future supply is at risk because Ukraine might miss this spring planting season. The ramifications of sudden drop in food exports at a time of tight stock will be painful and costly to bear by the rest of the world.
For some countries, such as those in the African continent, food affordability and availability will become major issues. From the following graph, we could see how Russia and Ukraine war could jeopardise the procurement of wheat in Africa.
Source: UNCTAD (March 2022)
This concern over food insecurity gained the spotlight in the world’s most populated country, China. During the 13th National Committee of the Chinese People’s Political Consultative Conference on 7 March 2022, China President Xi Jinping underscored the importance of food security and ordered greater self-reliance in its production. Below was his speech as quoted by South China Morning Post:
“Vigilance in food security must not slacken, we must not think that food ceases being an issue after industrialisation, and we cannot count on international supplies to solve the problem… We must plan ahead by adhering to the principles of domestic production and self-reliance while ensuring an appropriate level of imports and technology-backed development… the rice bowls of the Chinese people are filled with Chinese grain”
There is no smoke without fire. The mounting food security risk is even more visible with the spreading food protectionism measures. China, Russia, Ukraine, Algeria, Hungary, Moldova, Turkey, Egypt, Serbia, and Indonesia are growing list of countries that curbs food or fertiliser exports.
A resource-rich country like Indonesia may fare better in facing a food crisis
Source: World Bank & United Nations
Indonesia has adequate resiliency in the mounting food insecurity globally. In terms of food production, the country is well-known to have a 59% share in global palm oil production. This vegetable oil is extremely efficient. Palm oil supplies 40% of the world’s vegetable oil demand with only 6% of land used for vegetable oils. These economics made the commodity simply irreplaceable.
Furthermore, the USDA ranked Indonesia as the fourth biggest producer of rice with a 7% global market share. This country is also ranked the twelfth largest producer of corn with 1% global market share.
Given this natural advantage, Indonesia is inherently a net exporter of foods. The skyrocketing price of global food prices would suggest that the country will see its surplus widen. As such, Indonesia should benefit from either relative resiliency in inflation or a widening trade surplus.
According to The Economist’s research on the food security index 2021, Indonesia ranked 37th of 113 countries globally in terms of the availability of food supply. Ample land for production, low volatility of production, and strong food security policies and agency are reasons why Indonesia fared well on this subject.
Furthermore, Indonesia’s food security improvement between 2012 and 2021 ranks 24th among world countries. Based on our past on-the-ground observation, infrastructures development and strengthening of food security policies and enforcement are the reasons for the improvement. We discussed more detail about Indonesia infrastructure development in our Q1 2019 report (link).
We think that Indonesia’s resiliency in food security is pretty much reflected in the marginal food cost increase relative to the global average from 2010-to 2021.
Source: Global Food Security Index (2021)
In the world of commodities shortage and abundant liquidity, those who own the former will stand to benefit. Besides food, Indonesia produces lots of commodities and has been regarded as resource-rich land for decades. How will the booming commodity market affect Indonesia? How it be different this time? Stay tuned to our blog!
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Published: Apr 21 2022
Everyone has a plan ‘till they get punched in the mouth. This frequently cited quote by Mike Tyson gains more relevance today. Politicians may aspire with plans to increase their odds of being elected. Greening economy projects, waging war against inequality, exerting political dominance over other countries, and other populist policies are some of the examples. However, all these means nothing if their leadership fails to bring food on the table.
In our past blog (link), we pointed out how supply chain issues, tight agriculture market, energy crisis, and geopolitical tension crystallised in the great rally of ammonia and fertiliser prices. If we consider the factors at play, this might be the warning shot of an upcoming food crisis.
Skyrocketing food prices have been associated with social unrest and we are at all-time high
Source: Lagi, et al. (2011)
It is pretty straight forward why high and volatile food prices could destabilise a society. Food is both essential and have a significant share of our daily spending. Based on 2018 Euromonitor data, food on average accounted for 28.7% of consumer spending in 51 countries throughout the globe. For some countries like Bangladesh, Myanmar, Kenya and Ethiopia, this figure can be as high as 53% to 59% .
There are anecdotal evidence in the past whereby food problems led into social unrest. In 1789, the famine led French peasants to storm the Bastille prison and ended up overturning the French empire. In the modern era, the high food prices in 2008 and 2011 sparked numerous civil unrests in the Middle East.
Before the recent boom, commodities were the sucker’s bet of the last decade. At the start of its gracious fall in the 2010s, the substantial commodity investments in the 2000s left the world with abundant stocks of commodities. This time around, the prolonged relaxed financial conditions and minimum investments in this sector drift the world into the opposite setting. There is a lot of liquidity, yet so few goods.
If we consider commodity as a currency of its own, we are seeing where Gresham’s rule of bad money drives out good money in action. The rapid expansion of liquidity without a respective production expansion of commodities led to the appreciation of the latter.
Today, food prices already exceeded the highs of 2011 and are yet to lose their steam.
Source: Bloomberg
Countries are taking food protectionism measures to stabilise domestic food prices
We find the severity of the potential food crisis cannot be underestimated. Case in point would be the magnitude of Russia-Ukraine war in escalating this matter.
Both Russia and Ukraine play significant roles in the agriculture or fertiliser market. Russia is the biggest exporter of wheat (18% of global export) and a major exporter of sunflower oil (18% of global export) and fertilizers (20% of global ammonia export). On the other hand, Ukraine is also a major exporter of wheat (15% of global export) and the biggest sunflower oil exporter (37.5% of global export).
The prolonged Russia-Ukraine conflict adversely impacts both near and long-term supply. Near-term supply has been affected because of the logistical hurdles made by the war. The future supply is at risk because Ukraine might miss this spring planting season. The ramifications of sudden drop in food exports at a time of tight stock will be painful and costly to bear by the rest of the world.
For some countries, such as those in the African continent, food affordability and availability will become major issues. From the following graph, we could see how Russia and Ukraine war could jeopardise the procurement of wheat in Africa.
Source: UNCTAD (March 2022)
This concern over food insecurity gained the spotlight in the world’s most populated country, China. During the 13th National Committee of the Chinese People’s Political Consultative Conference on 7 March 2022, China President Xi Jinping underscored the importance of food security and ordered greater self-reliance in its production. Below was his speech as quoted by South China Morning Post:
“Vigilance in food security must not slacken, we must not think that food ceases being an issue after industrialisation, and we cannot count on international supplies to solve the problem… We must plan ahead by adhering to the principles of domestic production and self-reliance while ensuring an appropriate level of imports and technology-backed development… the rice bowls of the Chinese people are filled with Chinese grain”
There is no smoke without fire. The mounting food security risk is even more visible with the spreading food protectionism measures. China, Russia, Ukraine, Algeria, Hungary, Moldova, Turkey, Egypt, Serbia, and Indonesia are growing list of countries that curbs food or fertiliser exports.
A resource-rich country like Indonesia may fare better in facing a food crisis
Source: World Bank & United Nations
Indonesia has adequate resiliency in the mounting food insecurity globally. In terms of food production, the country is well-known to have a 59% share in global palm oil production. This vegetable oil is extremely efficient. Palm oil supplies 40% of the world’s vegetable oil demand with only 6% of land used for vegetable oils. These economics made the commodity simply irreplaceable.
Furthermore, the USDA ranked Indonesia as the fourth biggest producer of rice with a 7% global market share. This country is also ranked the twelfth largest producer of corn with 1% global market share.
Given this natural advantage, Indonesia is inherently a net exporter of foods. The skyrocketing price of global food prices would suggest that the country will see its surplus widen. As such, Indonesia should benefit from either relative resiliency in inflation or a widening trade surplus.
According to The Economist’s research on the food security index 2021, Indonesia ranked 37th of 113 countries globally in terms of the availability of food supply. Ample land for production, low volatility of production, and strong food security policies and agency are reasons why Indonesia fared well on this subject.
Furthermore, Indonesia’s food security improvement between 2012 and 2021 ranks 24th among world countries. Based on our past on-the-ground observation, infrastructures development and strengthening of food security policies and enforcement are the reasons for the improvement. We discussed more detail about Indonesia infrastructure development in our Q1 2019 report (link).
We think that Indonesia’s resiliency in food security is pretty much reflected in the marginal food cost increase relative to the global average from 2010-to 2021.
Source: Global Food Security Index (2021)
In the world of commodities shortage and abundant liquidity, those who own the former will stand to benefit. Besides food, Indonesia produces lots of commodities and has been regarded as resource-rich land for decades. How will the booming commodity market affect Indonesia? How it be different this time? Stay tuned to our blog!
Admin heyokha
Feedback for Us
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labor.
While China’s push in technology is hardly news, its rising tensions with the West have sped up their need to become less dependent on foreign technology. In its 14th Five-Year Plan on Digital Economy, China’s leaders emphasise, once again, their ambitions for the country to seize the leading position in the global technology race. The plan highlights China’s intention to boosts its global competitiveness in advanced technologies such as semiconductors and artificial intelligence. And blockchain was listed as a “key digital technology” alongside AI and cloud computing, which we coined as the “ABC”.
China’s Ambition in Blockchain Begins with Digital Currency
Over the past decades, China’s technological advances have mixed performance. While leading in 5G deployment, it lags behind western countries in technologies with more strategic positions, such as artificial intelligence and semiconductors. The catch up race has been painful and costly. However, China may have indeed established a strong head start when it comes to blockchain.
While the initial concept of blockchain technology is underpinned by its decentralised nature, China’s version is different. It is a centralised operation which guarantees complete state control over the development and application of the technology. China’s drive for blockchain technology goes beyond economic ambitions. The technology essentially allows for effective government surveillance capabilities at both micro and macro levels.
The Chinese government has been investing in the financial application of the blockchain technology. The development of the digital yuan is among the core strategic priorities. The large scale domestic rollout of the digital yuan would align with Beijing’s push for financial security. The use of its CBDC not only increases its ability to monitor financial activity and tackle illicit activities, it provides Beijing an independent source of valuable customer data, meaning they will no longer need to obtain customer information from payment companies to monitor citizens’ transaction.
Image credit: TechNode/Jiayi Shi
But the Ambition Goes Far Beyond Digital Currency
The digital yuan is positioned to serve as the infrastructure for the country’s international economic agenda which is underpinned by the expansion of a China-centric digital ecosystem that encompasses technologies such as 5G, IoT, AI and big data. And since blockchain run on the internet, it is imaginable that China will try to control the underlying communication protocol, domestic national cloud infrastructure and AI at the same time. However, the government is having a difficult time censoring and controlling the exchange of information between computers due to the distributed nature underpinning TCP/IP (transmission control protocol/internet protocol), the communication protocol that governs how data moves around the Internet.
Noting this stumbling block, Huawei proposed the “New IP” to replace TCP/IP. The New IP proposal emerged at a 2019 meeting of the International Telecommunication Union, a UN agency responsible for all matters related to information and communication technologies. The New IP is designed to offer more efficient addressing and network management than the existing TCP/IP standard, but it is likely to come with hooks that allow authoritarian nations to censor and surveil their residents, including features such as a “shut up command”. The new model is said to replace current centralised parts of the internet, such as Domain Name system (DNS), with Distributed Ledger Technology (DLT) solutions. However, as aforementioned, the blockchain technology proposed by China is likely to differ from commonly known definition of the technology, decentralisation is out of the question in China, but advanced adoptions of the ABC can be expected in areas ranging from energy conservation to urban management and law enforcement.
Cities of the Future
The government sees blockchain as a key pillar of its smart city infrastructure initiative that is currently being built across China. A smart city is an ideological term that refers to the development of cities that utilises advanced digital technologies including the likes of blockchain and IoT, as well as robotics and AI to optimise urban management and services including road network management, public health, energy generation, communication and food safety. Local tech giants including Alibaba and Tencent are also heavily involved in supporting the development.
At present, there are 11 regions in China using blockchain technology to build a smart city system. Among them, the Xiongan New Area (possible future capital) was the first to be transformed into an intelligent city prototype. In 2018, Ant Financial, serving as the core blockchain technology provider, launched the blockchain rental application platform in Xiongan. This means that individuals will have their own credit score based on their rental related record. Blockchain also became an integral part of Shanghai’s smart city program, where it helps to collect and store vast quantities of data to assess optimisation levels for garbage classification management. The blend of blockchain with other technologies within the smart city ecosystem is likely to expand as China’s ambitious aspirations to take the lead on blockchain meets its equally ambitious aspirations to accelerate itssmart city development.
Xiongan Railway Station of the Beijing-Xiongan intercity railway in Xiongan New Area, north China’s Hebei Province.
Image credit: Xinhua/Xing Guangli
Invest in the ABC Before They Change the World
The above are only a few examples among the many use cases of blockchain in China. The Chinese government’s approach towards blockchain and its integration with other cutting-edge technologies provides it a first-mover advantage over other countries that are yet to make a move in this field.
Having said that, it may be many years till the country reaches notable success in the advance technology sphere given it is still far from technological self-sufficiency and remains reliant on foreign technologies such as chips design and manufacturing. China will likely face stiffer challenges in acquiring foreign technologies such as on semiconductors due to growing western consensus to curb its access. Its roadmap to becoming a global leader in critical technologies of the future will require the integration of advanced technologies which will be crucial to the development of other advanced industrial sectors. As such, the ABC strategy may present profitable opportunities in years to come as countries increasingly dedicate resources in technology sector as part of their national strategic plans.
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Published: Apr 15 2022
While China’s push in technology is hardly news, its rising tensions with the West have sped up their need to become less dependent on foreign technology. In its 14th Five-Year Plan on Digital Economy, China’s leaders emphasise, once again, their ambitions for the country to seize the leading position in the global technology race. The plan highlights China’s intention to boosts its global competitiveness in advanced technologies such as semiconductors and artificial intelligence. And blockchain was listed as a “key digital technology” alongside AI and cloud computing, which we coined as the “ABC”.
China’s Ambition in Blockchain Begins with Digital Currency
Over the past decades, China’s technological advances have mixed performance. While leading in 5G deployment, it lags behind western countries in technologies with more strategic positions, such as artificial intelligence and semiconductors. The catch up race has been painful and costly. However, China may have indeed established a strong head start when it comes to blockchain.
While the initial concept of blockchain technology is underpinned by its decentralised nature, China’s version is different. It is a centralised operation which guarantees complete state control over the development and application of the technology. China’s drive for blockchain technology goes beyond economic ambitions. The technology essentially allows for effective government surveillance capabilities at both micro and macro levels.
The Chinese government has been investing in the financial application of the blockchain technology. The development of the digital yuan is among the core strategic priorities. The large scale domestic rollout of the digital yuan would align with Beijing’s push for financial security. The use of its CBDC not only increases its ability to monitor financial activity and tackle illicit activities, it provides Beijing an independent source of valuable customer data, meaning they will no longer need to obtain customer information from payment companies to monitor citizens’ transaction.
Image credit: TechNode/Jiayi Shi
But the Ambition Goes Far Beyond Digital Currency
The digital yuan is positioned to serve as the infrastructure for the country’s international economic agenda which is underpinned by the expansion of a China-centric digital ecosystem that encompasses technologies such as 5G, IoT, AI and big data. And since blockchain run on the internet, it is imaginable that China will try to control the underlying communication protocol, domestic national cloud infrastructure and AI at the same time. However, the government is having a difficult time censoring and controlling the exchange of information between computers due to the distributed nature underpinning TCP/IP (transmission control protocol/internet protocol), the communication protocol that governs how data moves around the Internet.
Noting this stumbling block, Huawei proposed the “New IP” to replace TCP/IP. The New IP proposal emerged at a 2019 meeting of the International Telecommunication Union, a UN agency responsible for all matters related to information and communication technologies. The New IP is designed to offer more efficient addressing and network management than the existing TCP/IP standard, but it is likely to come with hooks that allow authoritarian nations to censor and surveil their residents, including features such as a “shut up command”. The new model is said to replace current centralised parts of the internet, such as Domain Name system (DNS), with Distributed Ledger Technology (DLT) solutions. However, as aforementioned, the blockchain technology proposed by China is likely to differ from commonly known definition of the technology, decentralisation is out of the question in China, but advanced adoptions of the ABC can be expected in areas ranging from energy conservation to urban management and law enforcement.
Cities of the Future
The government sees blockchain as a key pillar of its smart city infrastructure initiative that is currently being built across China. A smart city is an ideological term that refers to the development of cities that utilises advanced digital technologies including the likes of blockchain and IoT, as well as robotics and AI to optimise urban management and services including road network management, public health, energy generation, communication and food safety. Local tech giants including Alibaba and Tencent are also heavily involved in supporting the development.
At present, there are 11 regions in China using blockchain technology to build a smart city system. Among them, the Xiongan New Area (possible future capital) was the first to be transformed into an intelligent city prototype. In 2018, Ant Financial, serving as the core blockchain technology provider, launched the blockchain rental application platform in Xiongan. This means that individuals will have their own credit score based on their rental related record. Blockchain also became an integral part of Shanghai’s smart city program, where it helps to collect and store vast quantities of data to assess optimisation levels for garbage classification management. The blend of blockchain with other technologies within the smart city ecosystem is likely to expand as China’s ambitious aspirations to take the lead on blockchain meets its equally ambitious aspirations to accelerate itssmart city development.
Xiongan Railway Station of the Beijing-Xiongan intercity railway in Xiongan New Area, north China’s Hebei Province.
Image credit: Xinhua/Xing Guangli
Invest in the ABC Before They Change the World
The above are only a few examples among the many use cases of blockchain in China. The Chinese government’s approach towards blockchain and its integration with other cutting-edge technologies provides it a first-mover advantage over other countries that are yet to make a move in this field.
Having said that, it may be many years till the country reaches notable success in the advance technology sphere given it is still far from technological self-sufficiency and remains reliant on foreign technologies such as chips design and manufacturing. China will likely face stiffer challenges in acquiring foreign technologies such as on semiconductors due to growing western consensus to curb its access. Its roadmap to becoming a global leader in critical technologies of the future will require the integration of advanced technologies which will be crucial to the development of other advanced industrial sectors. As such, the ABC strategy may present profitable opportunities in years to come as countries increasingly dedicate resources in technology sector as part of their national strategic plans.
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One of the wake-up calls during the still on-going Russia’s invasion of Ukraine is how the market witnessed the US and EU utilising the powerful tool of economic warfare by barring Russia from accessing its billions of foreign reserves (except using the reserves for energy payments.) As a result of this sanction imposed against Russia, calls have been raised for the need for alternative holdings.
Being the top holder of foreign currency reserves with $3.22 trillion as of January 2022, with over two and a half times more than the second-largest reserve holder, as well as a friend of Russia, it will come as no surprise if China decides to unshackle itself from the dollar-dominated system in order to reduce their reliance on US dollar.
De-dollarisation is not only limited to China, it is reported by The Wall Street Journal that “Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan,” a move that could further erode US dollar reserve currency’s status. And one should also notice that the Middle East, led by Bahrain and the UAE, is setting up some of the world’s largest crypto exchanges spearheaded by FTX (who have decided to leave HK) and Binance.
No matter how the war of tragedy unfolds, it has signalled to some countries the need to reduce their reliance on SWIFT – the global messaging system between banks to ensure financial security. In fact, Russia’s central bank has developed its own alternative to Swift called the System for Transfer of Financial Messages since 2014, when the US government threatened to disconnect Russia from SWIFT. But it is nowhere near as big as the former.
Having said that, with cryptocurrencies becoming more mainstream, the long race to catch up may not be necessarily if blockchain technology is here to provide a powerful alternative to the legacy global messaging system in the coming years.
Blockchain as a backbone for global finance may still be remote, but we have witnessed how crypto has marked its place in the war.
With Ukraine’s central bank limiting its citizens from withdrawing foreign currency, some Ukrainians have turned to crypto as an alternative. Crypto trading volume on Ukraine’s Kuna Exchange had surged 200% in the last week of February, reaching its highest level since May 2021. The country has also raised over $50 million in crypto donation, as indicated on its official donation website.
Source: CoinGecko
On the other hand, crypto could also be used as an escape route for Russia.
The fact that cryptocurrencies cannot be frozen (let’s rule out centralised crypto wallets for now), has made these tokens an extremely important tool. The Bank of Russia has been developing the digital rubles and has already started the pilot stage of its CBDC before the war began. The call to ban selective Russian banks from the international payment system may have motivated the Russian government to speed up the progress.
Despite no clear evidence of Russians rushing to crypto for a safe haven as information is limited about the country lately, we are witnessing regulators around the world ramping up their efforts in the cryptocurrencies space. Perhaps one of the motives behind this could also be the attempt to close any potential loopholes in the sanctions. While we hope that the conflict can be quickly resolved, if sanctions have become a norm rather than exception, we should all think about what self-sovereignty means to our wealth.
The global CBDC race
On 9th March 2022, US President Joe Biden signed an executive order on digital assets, including cryptocurrencies. While the order did not specifically launch any new policies, but only guidelines for the upcoming steps, it marked the first official strategy on digital assets set forth by the US government and has given the crypto industry the regulatory clarity that has been long sought after.
The executive order outlined a number of policy priorities and risks related to the implications brought by digital assets, first and foremost is customer and investor protection, followed by financial stability and systematic risk, national security, energy demand and climate change, etc. The executive order contains a well balance of discussion on both the opportunities and risks.
No commitments were made to a US Central Bank Digital Currency (CBDC), but the executive order specifically called for the “urgency” for the Fed to double down their research on CBDC. We see this as a pursuit to put the US on a level playing field with China who has launched its CBDC pilot last month.
Just days after the executive order was signed, the European Parliament voted to advance a draft of the Markets in Crypto Assets bill, or MiCA, which is a regulatory framework for crypto assets that has been in development since 2018. A lot of similarities could be found between the executive order and the MiCA.
The uniform framework for the EU’s 27 member states also covers rules on supervision, consumer protection and environmental sustainability of crypto assets. An earlier addition to the bill that aimed to limit the use of cryptocurrencies powered by the energy-intensive consensus mechanism known as proof-of-work, which essentially means banning crypto such as Bitcoin and Ethereum in the EU, was voted down by the committee.
Alternatively, the committee voted in favour of a proposal to include crypto-assets mining in EU taxonomy for sustainable activities by 2025 to reduce carbon footprint. The EU has begun its digital euro project since July 2021 and the current investigation phase is expected to take two years. One thing to note is that the MiCA will not be applied to CBDCs.
While the US and the EU have just started with the entrée, China is enjoying the dessert. After eight years in development, China has debuted the digital yuan, its version of CBDC, during the Beijing Winter Olympic Games last month, subsequent to its trial launched in late 2019. According to the data released by the Chinese government, the digital yuan was accepted by more than 8 million merchants and over RMB 87 billion in transaction value was reached as of the end of last year. The next step for China would be to follow its plan outlined in the 14th Five-Year Plan, further expanding the development of the digital currency alongside its digital economy.
Image Source: Kyodo
Last but not least, the Hong Kong Secretary for Financial Services and the Treasury released a letter through his blog yesterday, announcing the government’s latest development in regulating the virtual asset industry. Although there is no explicit timeline for the next steps, the letter highlighted the government’s consideration to introduce a new licensing regime for virtual assets service providers in accordance with the requirement imposed by the Financial Action Task Force which requires all virtual assets exchanges to apply for a license from the Securities and Futures Commission.
If 2021 was marked as the year that made crypto and NFT broke out of their niche, 2022 would be the year of crypto regulation. And with over 80 countries currently exploring a CBDC, we think digital currencies are here to stay and disrupt the traditional financial system. These are still early days for CBDCs and we do not know how fast and far they will go.
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Published: Mar 18 2022
One of the wake-up calls during the still on-going Russia’s invasion of Ukraine is how the market witnessed the US and EU utilising the powerful tool of economic warfare by barring Russia from accessing its billions of foreign reserves (except using the reserves for energy payments.) As a result of this sanction imposed against Russia, calls have been raised for the need for alternative holdings.
Being the top holder of foreign currency reserves with $3.22 trillion as of January 2022, with over two and a half times more than the second-largest reserve holder, as well as a friend of Russia, it will come as no surprise if China decides to unshackle itself from the dollar-dominated system in order to reduce their reliance on US dollar.
De-dollarisation is not only limited to China, it is reported by The Wall Street Journal that “Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan,” a move that could further erode US dollar reserve currency’s status. And one should also notice that the Middle East, led by Bahrain and the UAE, is setting up some of the world’s largest crypto exchanges spearheaded by FTX (who have decided to leave HK) and Binance.
No matter how the war of tragedy unfolds, it has signalled to some countries the need to reduce their reliance on SWIFT – the global messaging system between banks to ensure financial security. In fact, Russia’s central bank has developed its own alternative to Swift called the System for Transfer of Financial Messages since 2014, when the US government threatened to disconnect Russia from SWIFT. But it is nowhere near as big as the former.
Having said that, with cryptocurrencies becoming more mainstream, the long race to catch up may not be necessarily if blockchain technology is here to provide a powerful alternative to the legacy global messaging system in the coming years.
Blockchain as a backbone for global finance may still be remote, but we have witnessed how crypto has marked its place in the war.
With Ukraine’s central bank limiting its citizens from withdrawing foreign currency, some Ukrainians have turned to crypto as an alternative. Crypto trading volume on Ukraine’s Kuna Exchange had surged 200% in the last week of February, reaching its highest level since May 2021. The country has also raised over $50 million in crypto donation, as indicated on its official donation website.
Source: CoinGecko
On the other hand, crypto could also be used as an escape route for Russia.
The fact that cryptocurrencies cannot be frozen (let’s rule out centralised crypto wallets for now), has made these tokens an extremely important tool. The Bank of Russia has been developing the digital rubles and has already started the pilot stage of its CBDC before the war began. The call to ban selective Russian banks from the international payment system may have motivated the Russian government to speed up the progress.
Despite no clear evidence of Russians rushing to crypto for a safe haven as information is limited about the country lately, we are witnessing regulators around the world ramping up their efforts in the cryptocurrencies space. Perhaps one of the motives behind this could also be the attempt to close any potential loopholes in the sanctions. While we hope that the conflict can be quickly resolved, if sanctions have become a norm rather than exception, we should all think about what self-sovereignty means to our wealth.
The global CBDC race
On 9th March 2022, US President Joe Biden signed an executive order on digital assets, including cryptocurrencies. While the order did not specifically launch any new policies, but only guidelines for the upcoming steps, it marked the first official strategy on digital assets set forth by the US government and has given the crypto industry the regulatory clarity that has been long sought after.
The executive order outlined a number of policy priorities and risks related to the implications brought by digital assets, first and foremost is customer and investor protection, followed by financial stability and systematic risk, national security, energy demand and climate change, etc. The executive order contains a well balance of discussion on both the opportunities and risks.
No commitments were made to a US Central Bank Digital Currency (CBDC), but the executive order specifically called for the “urgency” for the Fed to double down their research on CBDC. We see this as a pursuit to put the US on a level playing field with China who has launched its CBDC pilot last month.
Just days after the executive order was signed, the European Parliament voted to advance a draft of the Markets in Crypto Assets bill, or MiCA, which is a regulatory framework for crypto assets that has been in development since 2018. A lot of similarities could be found between the executive order and the MiCA.
The uniform framework for the EU’s 27 member states also covers rules on supervision, consumer protection and environmental sustainability of crypto assets. An earlier addition to the bill that aimed to limit the use of cryptocurrencies powered by the energy-intensive consensus mechanism known as proof-of-work, which essentially means banning crypto such as Bitcoin and Ethereum in the EU, was voted down by the committee.
Alternatively, the committee voted in favour of a proposal to include crypto-assets mining in EU taxonomy for sustainable activities by 2025 to reduce carbon footprint. The EU has begun its digital euro project since July 2021 and the current investigation phase is expected to take two years. One thing to note is that the MiCA will not be applied to CBDCs.
While the US and the EU have just started with the entrée, China is enjoying the dessert. After eight years in development, China has debuted the digital yuan, its version of CBDC, during the Beijing Winter Olympic Games last month, subsequent to its trial launched in late 2019. According to the data released by the Chinese government, the digital yuan was accepted by more than 8 million merchants and over RMB 87 billion in transaction value was reached as of the end of last year. The next step for China would be to follow its plan outlined in the 14th Five-Year Plan, further expanding the development of the digital currency alongside its digital economy.
Image Source: Kyodo
Last but not least, the Hong Kong Secretary for Financial Services and the Treasury released a letter through his blog yesterday, announcing the government’s latest development in regulating the virtual asset industry. Although there is no explicit timeline for the next steps, the letter highlighted the government’s consideration to introduce a new licensing regime for virtual assets service providers in accordance with the requirement imposed by the Financial Action Task Force which requires all virtual assets exchanges to apply for a license from the Securities and Futures Commission.
If 2021 was marked as the year that made crypto and NFT broke out of their niche, 2022 would be the year of crypto regulation. And with over 80 countries currently exploring a CBDC, we think digital currencies are here to stay and disrupt the traditional financial system. These are still early days for CBDCs and we do not know how fast and far they will go.
Who would’ve thought that someone is willing to pay a hefty price for turds? Although some might find this to be stomach-churning, it is a reality. According to Bloomberg, manure is selling for USD 40 to 70 per ton, an all-time high level since 2012.
Major reasoning behind this phenomenon could be traced from the ongoing fertiliser crisis, especially from one of its key ingredients: ammonia.
Ammonia is a compound of nitrogen and hydrogen (NH3). The high nitrogen component, a key macronutrient for plants, makes ammonia an essential feedstock for all nitrogen-based fertilisers. Alternatively, it can be applied directly to the soil as well.
Based on our study, the dynamic of ammonia market is reflecting today’s problems on multiple fronts, namely: supply chain, agricultural, energy, and geopolitical tension. Its price performance is a perfect example of what could happen when an inelastic demand faces a serious setback in supply.
Perhaps, ammonia could be good long exposure for the ongoing problems in the world. Below is our learning on this matter:
The now deep-pocketed farmers could afford the unprecedented upswings of ammonia price
Source: Bloomberg
The soaring price of ammonia has a profound impact on the agriculture market as fertilisers typically contribute up to 20% of in-farm cash costs. The ammonia market, however, is also affected by the agriculture market as the chemical is their essential derivative demand – 80% of ammonia use case comes from fertiliser.
Given such a relationship, ammonia price can only elevate that much for a considerable time because there are people who are willing to pay for it. In this case, it is the farmers who account for most of the demand.
As of 23 February 2022, the Bloomberg agriculture commodity price index was indicated 67% higher than on the end of 2019 level. The favorable agricultural prices certainly have buoyed the fertiliser market as it deepens farmers’ pockets. Nutrien, the world’s largest plant nutrition producer, sees crops producers’ margin to expand by more than two hundred percent for 2021 and 2022 compared to the 2019 level.
Source: Nutrien
We see the outlook for agricultural commodities to remain bright as the tight market is yet to see relief. Global grains stocks-to-use ratio that indicate the carryover availability to fulfill the full-year demand has been in a free-fall in the last couple of years. The weak prices of 2012-2020 might had disincentivized investments in this space and resulted in a weak production capacity to timely respond to demand.
The combination of economic reopening and stimulus packages during the pandemic is also providing strong support for the demand for agricultural commodities.
Source: Bloomberg
Provided by these circumstances, farmers should be well-incentivised to continue applying fertilizers for maintaining or boosting their production. Especially, when they know that in some parts of the world crop yield might be adversely impacted by La Nina.
It is amazing to see this rock-solid demand could afford multiple setbacks on the supply side.
The supply-side problems have dislocated ammonia market by at least 48%
Normally, ammonia plants are built altogether with the downstream fertiliser plants. The statistics of the International Fertilizers Associations (IFA) indicated only 18.4 mn tons of 185.3 mn tons global capacity production in ammonia was traded globally in 2020. Only 10% of global production was intended for trade, causing the merchant ammonia market prone to disruptions.
Based on our estimate, the current ammonia market’s equilibrium faced a dislocation of at least 48% from the 2020 locus due to the following supply-side issues:
Energy-crisis sent one-third of European ammonia plants to shutdown
Ammonia production process requires hydrogen and involved an energy-intense process. Most of the ammonia plants today are using natural gas as their feedstock for their hydrogen rather than coal or water due to environmental and economical considerations. Natural gas as a feedstock could govern 70-90% of the cash production cost of ammonia, excluding energy cost.
According to Bloomberg Intelligence, currently, about one-third of Europe’s ammonia production plants are being shut down due to the pricey natural gas cost. Such supply gap translates into additional demand to the merchant ammonia market and pinched 30% of the merchant ammonia balance.
The reasoning behind the energy crisis was a combination between structural changes and geopolitical tension:
Source: Bloomberg
In Q4 2021, we saw the tight energy market take the spotlight and send costs sky-high. The sector underinvestment over the last five years driven by lackluster prices, ESG scrutiny, and global-wide consolidation jolted fossil fuel prices up when it faces a robust demand from economic reopening. We had written some of these matters in our previous blog post in June 2021 (link).
In the case of natural gas, we saw its energy cost per unit has exceeded brent oil in both Europe (Dutch TTF) and Asia (JKM). Indicating the two regions’ competition to secure supply. This was primarily due to the region’s structural shift of adopting natural gas in their path of decarbonization. This structural shift is expected to result in a shortage of LNG in the future according to McKinsey.
Source: McKinsey
With over 20% gas share in their energy mix, gas demand was amplified because intermittent renewable energy did not work during winter. About 10% to 20% of energy sources had to be switched to ‘dirtier’ hydrocarbon and gas has been the top preference.
This condition is worsened as Russia’s gas flows which account for 40% of Europe’s gas supply are reduced significantly. Russia’s gas flow in December 2021 was 10.3 bcm, about 26% lower than the same period last year.
The recently escalated tension of Russia-Ukraine has resulted in the postponement of the Nordstream II pipeline operation, carving out a significant potential gas supply for the region.
The Dutch TTF’s futures are now trading above USD 20 per MMBTU until mid-2023. This price has priced in the delay of the potential gas supply and implies LNG in Europe won’t be adequate to fill in the gas stock-up in the region for the whole year which starts at a very low base as inventory level is lower than five-year lows.
Warmer winter from La Nina for Europe could help to ease the replenishment of gas production but at this rate, this effect would be rather blunt. With natural gas availability remaining uncertain, we believe that the shutdown of European ammonia producers would take some time and the country will be a dominant buyer in the market.
Missing fertiliser exports from Russia and China
In attempts to control food prices and security domestically, Russia and China have imposed restrictions on fertilisers export to ensure the availability and affordability for local farmers until 1H22. We estimated this resulted in 18% of missing supply from the merchant ammonia market.
The uncertainty looms whether as the policy would be carried as the initial plan since the tight market in agriculture, potash, nitrogen (ammonia), and phosphate market persist. Not to mention the escalating tension between Ukraine and Russia lingering the uncertainty in the already tight agricultural and energy market.
Supply chain constraints kept prices high
Source: Bloomberg
The supply chain problems constraint that was initiated from the COVID-19 pandemic still haunt the economy. The steep freight cost has reportedly caused some producers to switch their inventory policy from just-in-time to just-in-case, stretching up the freight capacity even more.
For Europe and Asia, the steep freight market capped the potential cost savings from importing through LNG freight. Based on the normal calculation, we estimated about half the price of the current LNG price in Europe and Asia is going to the freight.
In addition to supply chain issues, health protocols also delayed the recovery and development of plants. Those factors combined slows down the plant turnaround process from 20 days to 60 days, according to one of our sources in the industry. Another case in point is the development of the Ma’Aden Ammonia-3 plant’s commercialization has been stalled from December 2021 and is expected to be delayed until Q3 2022, a nine-month delay.
Ammonia could be a good long-exposures on today’s world problem
In short, tight agricultural market, energy crisis, geopolitical tension, and supply chain issues are factors that keep ammonia prices high. At the current goldilocks situation, we see European fertiliser companies purchase to set the support price for ammonia as they become the dominant buyer in the market. It still unclear on how long this confluence of problems could be untangled.
So far, the pockets of farmers have been deep enough to pay the high price of ammonia from the tailwind of their commodities. Given the tight relationship of ammonia in the multiple problematic verticals of today’s economy, perhaps ammonia exposure could be a prospective long-exposure towards todays’ world problems?
Admin heyokha
Feedback for Us
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Published: Mar 02 2022
Who would’ve thought that someone is willing to pay a hefty price for turds? Although some might find this to be stomach-churning, it is a reality. According to Bloomberg, manure is selling for USD 40 to 70 per ton, an all-time high level since 2012.
Major reasoning behind this phenomenon could be traced from the ongoing fertiliser crisis, especially from one of its key ingredients: ammonia.
Ammonia is a compound of nitrogen and hydrogen (NH3). The high nitrogen component, a key macronutrient for plants, makes ammonia an essential feedstock for all nitrogen-based fertilisers. Alternatively, it can be applied directly to the soil as well.
Based on our study, the dynamic of ammonia market is reflecting today’s problems on multiple fronts, namely: supply chain, agricultural, energy, and geopolitical tension. Its price performance is a perfect example of what could happen when an inelastic demand faces a serious setback in supply.
Perhaps, ammonia could be good long exposure for the ongoing problems in the world. Below is our learning on this matter:
The now deep-pocketed farmers could afford the unprecedented upswings of ammonia price
Source: Bloomberg
The soaring price of ammonia has a profound impact on the agriculture market as fertilisers typically contribute up to 20% of in-farm cash costs. The ammonia market, however, is also affected by the agriculture market as the chemical is their essential derivative demand – 80% of ammonia use case comes from fertiliser.
Given such a relationship, ammonia price can only elevate that much for a considerable time because there are people who are willing to pay for it. In this case, it is the farmers who account for most of the demand.
As of 23 February 2022, the Bloomberg agriculture commodity price index was indicated 67% higher than on the end of 2019 level. The favorable agricultural prices certainly have buoyed the fertiliser market as it deepens farmers’ pockets. Nutrien, the world’s largest plant nutrition producer, sees crops producers’ margin to expand by more than two hundred percent for 2021 and 2022 compared to the 2019 level.
Source: Nutrien
We see the outlook for agricultural commodities to remain bright as the tight market is yet to see relief. Global grains stocks-to-use ratio that indicate the carryover availability to fulfill the full-year demand has been in a free-fall in the last couple of years. The weak prices of 2012-2020 might had disincentivized investments in this space and resulted in a weak production capacity to timely respond to demand.
The combination of economic reopening and stimulus packages during the pandemic is also providing strong support for the demand for agricultural commodities.
Source: Bloomberg
Provided by these circumstances, farmers should be well-incentivised to continue applying fertilizers for maintaining or boosting their production. Especially, when they know that in some parts of the world crop yield might be adversely impacted by La Nina.
It is amazing to see this rock-solid demand could afford multiple setbacks on the supply side.
The supply-side problems have dislocated ammonia market by at least 48%
Normally, ammonia plants are built altogether with the downstream fertiliser plants. The statistics of the International Fertilizers Associations (IFA) indicated only 18.4 mn tons of 185.3 mn tons global capacity production in ammonia was traded globally in 2020. Only 10% of global production was intended for trade, causing the merchant ammonia market prone to disruptions.
Based on our estimate, the current ammonia market’s equilibrium faced a dislocation of at least 48% from the 2020 locus due to the following supply-side issues:
Energy-crisis sent one-third of European ammonia plants to shutdown
Ammonia production process requires hydrogen and involved an energy-intense process. Most of the ammonia plants today are using natural gas as their feedstock for their hydrogen rather than coal or water due to environmental and economical considerations. Natural gas as a feedstock could govern 70-90% of the cash production cost of ammonia, excluding energy cost.
According to Bloomberg Intelligence, currently, about one-third of Europe’s ammonia production plants are being shut down due to the pricey natural gas cost. Such supply gap translates into additional demand to the merchant ammonia market and pinched 30% of the merchant ammonia balance.
The reasoning behind the energy crisis was a combination between structural changes and geopolitical tension:
Source: Bloomberg
In Q4 2021, we saw the tight energy market take the spotlight and send costs sky-high. The sector underinvestment over the last five years driven by lackluster prices, ESG scrutiny, and global-wide consolidation jolted fossil fuel prices up when it faces a robust demand from economic reopening. We had written some of these matters in our previous blog post in June 2021 (link).
In the case of natural gas, we saw its energy cost per unit has exceeded brent oil in both Europe (Dutch TTF) and Asia (JKM). Indicating the two regions’ competition to secure supply. This was primarily due to the region’s structural shift of adopting natural gas in their path of decarbonization. This structural shift is expected to result in a shortage of LNG in the future according to McKinsey.
Source: McKinsey
With over 20% gas share in their energy mix, gas demand was amplified because intermittent renewable energy did not work during winter. About 10% to 20% of energy sources had to be switched to ‘dirtier’ hydrocarbon and gas has been the top preference.
This condition is worsened as Russia’s gas flows which account for 40% of Europe’s gas supply are reduced significantly. Russia’s gas flow in December 2021 was 10.3 bcm, about 26% lower than the same period last year.
The recently escalated tension of Russia-Ukraine has resulted in the postponement of the Nordstream II pipeline operation, carving out a significant potential gas supply for the region.
The Dutch TTF’s futures are now trading above USD 20 per MMBTU until mid-2023. This price has priced in the delay of the potential gas supply and implies LNG in Europe won’t be adequate to fill in the gas stock-up in the region for the whole year which starts at a very low base as inventory level is lower than five-year lows.
Warmer winter from La Nina for Europe could help to ease the replenishment of gas production but at this rate, this effect would be rather blunt. With natural gas availability remaining uncertain, we believe that the shutdown of European ammonia producers would take some time and the country will be a dominant buyer in the market.
Missing fertiliser exports from Russia and China
In attempts to control food prices and security domestically, Russia and China have imposed restrictions on fertilisers export to ensure the availability and affordability for local farmers until 1H22. We estimated this resulted in 18% of missing supply from the merchant ammonia market.
The uncertainty looms whether as the policy would be carried as the initial plan since the tight market in agriculture, potash, nitrogen (ammonia), and phosphate market persist. Not to mention the escalating tension between Ukraine and Russia lingering the uncertainty in the already tight agricultural and energy market.
Supply chain constraints kept prices high
Source: Bloomberg
The supply chain problems constraint that was initiated from the COVID-19 pandemic still haunt the economy. The steep freight cost has reportedly caused some producers to switch their inventory policy from just-in-time to just-in-case, stretching up the freight capacity even more.
For Europe and Asia, the steep freight market capped the potential cost savings from importing through LNG freight. Based on the normal calculation, we estimated about half the price of the current LNG price in Europe and Asia is going to the freight.
In addition to supply chain issues, health protocols also delayed the recovery and development of plants. Those factors combined slows down the plant turnaround process from 20 days to 60 days, according to one of our sources in the industry. Another case in point is the development of the Ma’Aden Ammonia-3 plant’s commercialization has been stalled from December 2021 and is expected to be delayed until Q3 2022, a nine-month delay.
Ammonia could be a good long-exposures on today’s world problem
In short, tight agricultural market, energy crisis, geopolitical tension, and supply chain issues are factors that keep ammonia prices high. At the current goldilocks situation, we see European fertiliser companies purchase to set the support price for ammonia as they become the dominant buyer in the market. It still unclear on how long this confluence of problems could be untangled.
So far, the pockets of farmers have been deep enough to pay the high price of ammonia from the tailwind of their commodities. Given the tight relationship of ammonia in the multiple problematic verticals of today’s economy, perhaps ammonia exposure could be a prospective long-exposure towards todays’ world problems?
Admin heyokha
Feedback for Us
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Share
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The Site offers general information exclusively and does not consider the individual circumstances of any person. The data, opinions, and estimates presented on the Site are current as of the publication date and are subject to changes without notice. Additionally, it is possible that such information may become obsolete with time.
Intended Users
The content presented on this website is exclusively intended for authorized intermediaries and qualified investors within Hong Kong, such as institutional investors, professional investors, and accredited investors (as defined under the SFO). It is not intended for retail investors or individuals located outside of Hong Kong.
The products and services mentioned on this website may or may not be authorized or registered for distribution in a particular jurisdiction and may not be suitable for all investor types. It is important to note that this website is not intended to constitute an offer or solicitation, nor is it directed toward individuals if the provider of the information is prohibited by any law of any jurisdiction from making the information available. Moreover, the website is not intended for any use that would violate local laws or regulations. The provider of the information is not permitted to promote any products or services mentioned on this website in jurisdictions where such promotion would be prohibited.
If you are not a qualified investor or licensed intermediary in Hong Kong, you should not proceed any further.
No Investment Advice
The information provided on this Website is for informational purposes only and should not be considered as investment advice or a recommendation to buy, sell, hold, or transact in any investment. It is strongly recommended that individuals seek professional investment advice before making any investment decisions.
The information presented on this Website does not consider the investment objectives, specific needs, or financial situations of any investor. It is important to note that nothing on this Website is intended to constitute financial, legal, accounting, or tax advice.
Before making any investment decision, individuals should carefully consider whether an investment aligns with their investment objectives, specific needs, and financial situation. This should also include informing oneself of any potential tax implications, legal requirements, foreign exchange restrictions, or exchange control requirements that may be relevant to an investment based on the laws of one’s citizenship, residence, or domicile. If there is any doubt regarding the information on this Website, it is recommended that individuals seek independent professional financial advice.
It is important to note that any opinion, comment, article, financial analysis, market forecast, market commentary, or other information published on the Website is not binding on Heyokha or its affiliates, and they are not responsible for the information, opinions, or ideas presented.
Obligations and Resposibilities of Users
Users are solely responsible for protecting and backing up their data and equipment, as well as taking reasonable precautions against any computer virus or other destructive elements. Additionally, users must ensure that their access to the Site is adequately secured against unauthorized access.
Users are prohibited from using the Site for any unlawful, defamatory, offensive, abusive, indecent, menacing, or threatening purposes, or in any way that infringes upon intellectual property rights or confidentiality obligations. Furthermore, users may not use the Site to cause annoyance, inconvenience, or anxiety to others, or in any way that violates any applicable laws or regulations.
Users must comply with any terms notified to them by third-party suppliers of data or services to the Site. This may include entering into a direct agreement with such third parties in respect of their use of the dat
Third-Party Content
This website may contain Third Party Content or links to websites maintained by third parties that are not affiliated with Heyokha. Heyokha does not participate in the preparation, adoption, or editing of such third-party materials and does not endorse or approve such content, either explicitly or implicitly. Any opinions or recommendations expressed on third party materials are solely those of the independent providers and not of Heyokha. Heyokha is not responsible for any errors or omissions relating to specific information provided by any third party.
Although Heyokha aims to provide accurate and timely information to users, neither Heyokha nor the Third-Party Content providers guarantee on the accuracy, timeliness, completeness, usefulness, or any other aspect of the information presented. Heyokha is not responsible or liable for any content, including advertising, products, or other materials on or available from third party sites. Users access and use Third Party content is at their own risk, and it is provided for informational purposes only. Both Heyokha and the Third-Party shall not be liable for any loss or damage arising from users’ reliance upon such information.
Intellectual Property Rights
The content of this website is subject to copyright and other intellectual property laws. All trademarks, service marks, logos, and brand features displayed on the website are owned by their respective owners, except as explicitly noted. Users may use the information on this website and reproduce it for personal reference only. However, reproduction, distribution, transmission, incorporation in any other database, document, or material, and sale or distribution of any part of the contents of the website is strictly prohibited. Users may download or print individual sections of the website for personal use and information only, provided they are legally entitled to access the material and retain all copyright and other proprietary notices.
Any unauthorized use of the content, trademarks, service marks, or logos displayed on the website may violate copyright, trademark, or other intellectual property laws, as well as laws of privacy and publicity and communications. Any reference or link to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favouring by our company.
We provide such references or links solely for the convenience of our users and to provide additional information. Our company is not responsible for the accuracy, legality, or content of any external website or resource linked to or referenced from our website. Users are solely responsible for complying with the terms and conditions of any external websites or resources.
Cookies
In order to enhance user experience and simplify future visits, this website may utilize cookies to track your activity. However, if you do not want to store cookies on your device, you can disable them by adjusting your browser’s security settings.
Data Privacy
Please read our Privacy Statement before providing Heyokha with any personal information on this website. By providing any personal information on this website, you will be deemed to have read and accepted our Privacy Statement.
Use of Website
The information contained on the website is accurate only as of the date of publication and does not constitute investment advice or recommendations. While certain tools available on the website may provide general investment or financial analyses based upon personalized input, such results are for information purposes only, and users should refer to the assumptions and limitations relevant to the use of such tools as set out on the website. Users are solely responsible for determining whether any investment, security or strategy, or any other product or service is appropriate or suitable for them based on their investment objectives and personal and financial situation. Users should consult their independent professional advisers if they have any questions. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment.
Disclaimer of Liability Heyokha makes no warranty as to the accuracy, completeness, security, and confidentiality of information available through the website. Heyokha, its affiliates, directors, officers, or employees accept no liability for any errors or omissions relating to information available through the website or for any damages, losses or expenses arising in connection with the website, whether direct or indirect, arising from the use of the website or its contents. Heyokha also reserves the right to modify, suspend, or discontinue the website at any time without notice. Heyokha shall not be liable for any such modification, suspension, or discontinuance.
×
Data Privacy Terms and Conditions
Personal Information Collection Statement:
Pursuant to the Personal Data (Privacy) Ordinance (the ‘Ordinance’), Heyokha Brothers Limited is fully committed to safeguarding the privacy and security of personal information in compliance with all relevant laws and regulations. This statement outlines how we collect, use, and protect personal information provided to us.
Collection of Personal Information:
We collect and maintain personal information, in a manner consistent with all relevant laws and regulations. We take necessary measures to ensure that personal information is correct and up to date. Personal information will only be used for the purpose of utilization and will not be disclosed to third parties (except our related parties e.g.: Administrators) without consent from the individual, except for justifiable grounds as required by laws and regulations.
We may collect various types of personal data from or about you, including:
Your name
Your user names and passwords
Contact information, including address, email address and/or telephone number
Information relating to your engagement with material that we publish or otherwise provide to you
Records of our interactions with you, including any messages you send us, your comments and questions and any other information you choose to provide.
The Company may automatically collect information about you from computer or internet browser through the use of cookies, pixel tags, and other similar technologies to enhance the user experience on its websites.
Third parties may be used to collect personal data and information indirectly through monitoring activities conducted by the Company or on its behalf.
Company does not knowingly collect personal data from anyone under the age of 18 and does not seek to collect or process sensitive information unless required or permitted by law and with express consent.
Uses of your Personal Data:
We may use your personal data for the purposes it was provided and in connection with our services as described below:
Provide products/services or info as requested or expected.
Fulfill agreements and facilitate business dealings.
Manage relationships, analyse websites and communications, and merge personal data for relevance.
Support and improve existing products/services, and plan/develop new ones.
Count/recognize website visitors and analyse usage.
To comply with and assess compliance with applicable laws, rules and regulations and internal policies and procedures.
Use information for any other purpose with consent.
Protection of Personal Information:
We provide thorough training to our officers and employees to prevent the leakage or inappropriate use of personal information and provide information on a need-to-know basis. Managers in charge for controls and inspections are appointed, and appropriate control systems are established to ensure the privacy and security of personal information.
In the event that personal information is provided to an external contractor (e.g.: Administrator), we take responsibility for ensuring that the external contractor has proper systems in place to protect the privacy of personal information.
Third parties disclosure of Personal Information:
Personal information held by us relating to an individual will be kept confidential but may be provided to third parties the following purpose:
Comply with applicable laws or legal processes.
Investigate and prevent illegal activity, fraud, or violations of terms and conditions.
Protect and defend legal rights or defend against legal claims.
Facilitate business or asset transactions, such as financing, mergers, acquisitions, or bankruptcy.
With our related parties (e.g.: administrators) that are subject to appropriate data protection obligations
Representatives, agents or custodians appointed by the client (e.g.: Auditors, accountant)
Retention of Personal Information:
Disclosure, correction and termination of usage shall be carried out upon request of an individual in accordance with relevant laws and regulations.
Personal information collected will be retained for no longer than is necessary for the fulfilment of the purposes for which it was collected as per applicable laws and regulations.
Rights of the Individual:
Under relevant laws and regulations, any individual has the right to request access to any of the personal data that we hold by submitting a written request. Individuals are also entitled to request to correct, cancel or delete any of the personal data we hold if they believe such information is inaccurate, out of date or we no longer have a legitimate interest or lawful justification to retain or process.
×
Disclaimer
Heyokha Brothers Limited is the issuer of this website and holds Type 4 (advising on securities) and Type 9 (asset management) licenses issued by the Securities and Futures Commission in Hong Kong.
The information provided on this website has been prepared solely for licensed intermediaries and qualified investors in Hong Kong, including professional investors, institutional investors, and accredited investors (as defined under the Securities and Futures Ordinance). The information provided on this website is for informational purposes only and should not be construed as investment advice, nor an offer to sell or a solicitation of an offer to buy any security, investment product, or service.
Investment involves risk and investors may lose their entire investment. Investors are advised to seek professional advice before making any investment decisions. Past performance is not indicative of future performance and the value of investments may fluctuate. Please refer to the offering document(s) for details, including the investment objectives, risk factors, and fees and charges.
Heyokha Brothers Limited reserves the right to amend, update, or remove any information on this website at any time without notice. By accessing and using this website, you agree to be bound by the above terms and conditions.
You must read the following information before proceeding. By accessing this website and any pages thereof, you acknowledge that you have read the following information and accept the terms and conditions set out below and agree to be bound by such terms and conditions. If you do not agree to such terms and conditions, please do not access this website or any pages thereof.
The website has been prepared by Heyokha Brothers Limited and is solely intended for informational purposes and should not be construed as an inducement to purchase or sell any security, product, service, or investment. The Site does not solicit an offer to buy or sell any financial instrument or enter into any agreement. It is important to note that the opinions expressed on the Site are not considered investment advice, and it is recommended that individuals seek independent advice as needed to address their specific objectives, financial situation, or needs. It is the responsibility of the persons who access this website to observe all applicable laws and regulations.
The Site offers general information exclusively and does not consider the individual circumstances of any person. The data, opinions, and estimates presented on the Site are current as of the publication date and are subject to changes without notice. Additionally, it is possible that such information may become obsolete with time.
Intended Users
The content presented on this website is exclusively intended for authorized intermediaries and qualified investors within Hong Kong, such as institutional investors, professional investors, and accredited investors (as defined under the SFO). It is not intended for retail investors or individuals located outside of Hong Kong.
The products and services mentioned on this website may or may not be authorized or registered for distribution in a particular jurisdiction and may not be suitable for all investor types. It is important to note that this website is not intended to constitute an offer or solicitation, nor is it directed toward individuals if the provider of the information is prohibited by any law of any jurisdiction from making the information available. Moreover, the website is not intended for any use that would violate local laws or regulations. The provider of the information is not permitted to promote any products or services mentioned on this website in jurisdictions where such promotion would be prohibited.
If you are not a qualified investor or licensed intermediary in Hong Kong, you should not proceed any further.
No Investment Advice
The information provided on this Website is for informational purposes only and should not be considered as investment advice or a recommendation to buy, sell, hold, or transact in any investment. It is strongly recommended that individuals seek professional investment advice before making any investment decisions.
The information presented on this Website does not consider the investment objectives, specific needs, or financial situations of any investor. It is important to note that nothing on this Website is intended to constitute financial, legal, accounting, or tax advice.
Before making any investment decision, individuals should carefully consider whether an investment aligns with their investment objectives, specific needs, and financial situation. This should also include informing oneself of any potential tax implications, legal requirements, foreign exchange restrictions, or exchange control requirements that may be relevant to an investment based on the laws of one’s citizenship, residence, or domicile. If there is any doubt regarding the information on this Website, it is recommended that individuals seek independent professional financial advice.
It is important to note that any opinion, comment, article, financial analysis, market forecast, market commentary, or other information published on the Website is not binding on Heyokha or its affiliates, and they are not responsible for the information, opinions, or ideas presented.
Obligations and Resposibilities of Users
Users are solely responsible for protecting and backing up their data and equipment, as well as taking reasonable precautions against any computer virus or other destructive elements. Additionally, users must ensure that their access to the Site is adequately secured against unauthorized access.
Users are prohibited from using the Site for any unlawful, defamatory, offensive, abusive, indecent, menacing, or threatening purposes, or in any way that infringes upon intellectual property rights or confidentiality obligations. Furthermore, users may not use the Site to cause annoyance, inconvenience, or anxiety to others, or in any way that violates any applicable laws or regulations.
Users must comply with any terms notified to them by third-party suppliers of data or services to the Site. This may include entering into a direct agreement with such third parties in respect of their use of the dat
Third-Party Content
This website may contain Third Party Content or links to websites maintained by third parties that are not affiliated with Heyokha. Heyokha does not participate in the preparation, adoption, or editing of such third-party materials and does not endorse or approve such content, either explicitly or implicitly. Any opinions or recommendations expressed on third party materials are solely those of the independent providers and not of Heyokha. Heyokha is not responsible for any errors or omissions relating to specific information provided by any third party.
Although Heyokha aims to provide accurate and timely information to users, neither Heyokha nor the Third-Party Content providers guarantee on the accuracy, timeliness, completeness, usefulness, or any other aspect of the information presented. Heyokha is not responsible or liable for any content, including advertising, products, or other materials on or available from third party sites. Users access and use Third Party content is at their own risk, and it is provided for informational purposes only. Both Heyokha and the Third-Party shall not be liable for any loss or damage arising from users’ reliance upon such information.
Intellectual Property Rights
The content of this website is subject to copyright and other intellectual property laws. All trademarks, service marks, logos, and brand features displayed on the website are owned by their respective owners, except as explicitly noted. Users may use the information on this website and reproduce it for personal reference only. However, reproduction, distribution, transmission, incorporation in any other database, document, or material, and sale or distribution of any part of the contents of the website is strictly prohibited. Users may download or print individual sections of the website for personal use and information only, provided they are legally entitled to access the material and retain all copyright and other proprietary notices.
Any unauthorized use of the content, trademarks, service marks, or logos displayed on the website may violate copyright, trademark, or other intellectual property laws, as well as laws of privacy and publicity and communications. Any reference or link to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favouring by our company.
We provide such references or links solely for the convenience of our users and to provide additional information. Our company is not responsible for the accuracy, legality, or content of any external website or resource linked to or referenced from our website. Users are solely responsible for complying with the terms and conditions of any external websites or resources.
Cookies
In order to enhance user experience and simplify future visits, this website may utilize cookies to track your activity. However, if you do not want to store cookies on your device, you can disable them by adjusting your browser’s security settings.
Data Privacy
Please read our Privacy Statement before providing Heyokha with any personal information on this website. By providing any personal information on this website, you will be deemed to have read and accepted our Privacy Statement.
Use of Website
The information contained on the website is accurate only as of the date of publication and does not constitute investment advice or recommendations. While certain tools available on the website may provide general investment or financial analyses based upon personalized input, such results are for information purposes only, and users should refer to the assumptions and limitations relevant to the use of such tools as set out on the website. Users are solely responsible for determining whether any investment, security or strategy, or any other product or service is appropriate or suitable for them based on their investment objectives and personal and financial situation. Users should consult their independent professional advisers if they have any questions. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment.
Disclaimer of Liability Heyokha makes no warranty as to the accuracy, completeness, security, and confidentiality of information available through the website. Heyokha, its affiliates, directors, officers, or employees accept no liability for any errors or omissions relating to information available through the website or for any damages, losses or expenses arising in connection with the website, whether direct or indirect, arising from the use of the website or its contents. Heyokha also reserves the right to modify, suspend, or discontinue the website at any time without notice. Heyokha shall not be liable for any such modification, suspension, or discontinuance.
×
Data Privacy Terms and Conditions
Personal Information Collection Statement:
Pursuant to the Personal Data (Privacy) Ordinance (the ‘Ordinance’), Heyokha Brothers Limited is fully committed to safeguarding the privacy and security of personal information in compliance with all relevant laws and regulations. This statement outlines how we collect, use, and protect personal information provided to us.
Collection of Personal Information:
We collect and maintain personal information, in a manner consistent with all relevant laws and regulations. We take necessary measures to ensure that personal information is correct and up to date. Personal information will only be used for the purpose of utilization and will not be disclosed to third parties (except our related parties e.g.: Administrators) without consent from the individual, except for justifiable grounds as required by laws and regulations.
We may collect various types of personal data from or about you, including:
Your name
Your user names and passwords
Contact information, including address, email address and/or telephone number
Information relating to your engagement with material that we publish or otherwise provide to you
Records of our interactions with you, including any messages you send us, your comments and questions and any other information you choose to provide.
The Company may automatically collect information about you from computer or internet browser through the use of cookies, pixel tags, and other similar technologies to enhance the user experience on its websites.
Third parties may be used to collect personal data and information indirectly through monitoring activities conducted by the Company or on its behalf.
Company does not knowingly collect personal data from anyone under the age of 18 and does not seek to collect or process sensitive information unless required or permitted by law and with express consent.
Uses of your Personal Data:
We may use your personal data for the purposes it was provided and in connection with our services as described below:
Provide products/services or info as requested or expected.
Fulfill agreements and facilitate business dealings.
Manage relationships, analyse websites and communications, and merge personal data for relevance.
Support and improve existing products/services, and plan/develop new ones.
Count/recognize website visitors and analyse usage.
To comply with and assess compliance with applicable laws, rules and regulations and internal policies and procedures.
Use information for any other purpose with consent.
Protection of Personal Information:
We provide thorough training to our officers and employees to prevent the leakage or inappropriate use of personal information and provide information on a need-to-know basis. Managers in charge for controls and inspections are appointed, and appropriate control systems are established to ensure the privacy and security of personal information.
In the event that personal information is provided to an external contractor (e.g.: Administrator), we take responsibility for ensuring that the external contractor has proper systems in place to protect the privacy of personal information.
Third parties disclosure of Personal Information:
Personal information held by us relating to an individual will be kept confidential but may be provided to third parties the following purpose:
Comply with applicable laws or legal processes.
Investigate and prevent illegal activity, fraud, or violations of terms and conditions.
Protect and defend legal rights or defend against legal claims.
Facilitate business or asset transactions, such as financing, mergers, acquisitions, or bankruptcy.
With our related parties (e.g.: administrators) that are subject to appropriate data protection obligations
Representatives, agents or custodians appointed by the client (e.g.: Auditors, accountant)
Retention of Personal Information:
Disclosure, correction and termination of usage shall be carried out upon request of an individual in accordance with relevant laws and regulations.
Personal information collected will be retained for no longer than is necessary for the fulfilment of the purposes for which it was collected as per applicable laws and regulations.
Rights of the Individual:
Under relevant laws and regulations, any individual has the right to request access to any of the personal data that we hold by submitting a written request. Individuals are also entitled to request to correct, cancel or delete any of the personal data we hold if they believe such information is inaccurate, out of date or we no longer have a legitimate interest or lawful justification to retain or process.
×
Disclaimer
Heyokha Brothers Limited is the issuer of this website and holds Type 4 (advising on securities) and Type 9 (asset management) licenses issued by the Securities and Futures Commission in Hong Kong.
The information provided on this website has been prepared solely for licensed intermediaries and qualified investors in Hong Kong, including professional investors, institutional investors, and accredited investors (as defined under the Securities and Futures Ordinance). The information provided on this website is for informational purposes only and should not be construed as investment advice, nor an offer to sell or a solicitation of an offer to buy any security, investment product, or service.
Investment involves risk and investors may lose their entire investment. Investors are advised to seek professional advice before making any investment decisions. Past performance is not indicative of future performance and the value of investments may fluctuate. Please refer to the offering document(s) for details, including the investment objectives, risk factors, and fees and charges.
Heyokha Brothers Limited reserves the right to amend, update, or remove any information on this website at any time without notice. By accessing and using this website, you agree to be bound by the above terms and conditions.
