How Much Asian Venture Capital Is Plowing Into Bitcoin And Blockchain Technology?

Asia is increasingly investing into blockchain technology

Asia (AAXJ) (VPL) scores high when it comes to investment flow into blockchain technology and its product offerings. Venture capital deal financing into Bitcoin (ARKW) (ARKK) and blockchain technology in Asia rose from $37 million in 2015 to $119 million in 2016. Several large Chinese (FXI) (YINN) and Indian (EPI) companies are serving as venture capital investors in the development of the technology.

  • Baidu (BIDU) invested in U.S.- based bitcoin payments startup Circle
  • Huiyin Blockchain Ventures invested in US-based Purse.io
  • Indian UniCoin and Crefir China FinTech invested $30 million in US/Dutch BitFury.

Chinese blockchain/bitcoin-based startups such as Juzhen Financials, OkCoin, BTC China, and AntShares Blockchain have also raised significant funding over the course of the past 2 years.

The Chinese yuan commanded 96% of Bitcoin trading volume

Up until the beginning of this year, the Chinese yuan dominated the Bitcoin trading market with about 96% of all Bitcoin trading taking place in Chinese yuan. However, the regulatory crackdown on the rapid rise of cryptocurrency trading such as the ICO ban in China has lowered the country’s trading volume share to about 16%, according to data from bitcoinity.org.

From a currency perspective, Bitcoin trading, as of September 1 was dominated by the US dollar (59.6%), followed by the Chinese yuan (15.8%), the euro (10.5%), and the Japanese yen (10.3%) (chart above).

Asian economies are at the forefront of adopting blockchain technology

Nonetheless, Asian economies have been at the forefront with regard to the adoption and development of blockchain technology. Key initiatives taken in this regard include:

  • Japan (EWJ) and South Korea (EWY) already have regulated cryptocurrency environments, and are now in the process of licensing exchanges.
  • China (FXI), Hong Kong (EWH), and Singapore are leading countries in testing blockchain technology and investing into it.
  • China, whose appetite for blockchain goes beyond cryptocurrencies, is working towards developing a robust Internet finance industry supported by blockchain-enabled alternatives. For example, the Postal Savings Bank of China is testing a blockchain-based asset custody system.
  • In China, large Internet players are incorporating blockchain into their business models. AntFinancial (a subsidiary of AliBaba (BABA) is introducing a Bitcoin mobile wallet, and Tencent (TCEHY) is planning to use the technology to offer digital asset management, authentication, and “shared economies” through a new platform, TrustSQL.
  • India (EPI) has witnessed the rapid adoption of electronic payments and the rise of new market entrants. M-banking transactions have surged over the past few years as new entrants offering m-wallets continue to attract more consumers.

Asia’s Share of Blockchain Deals Is Booming While North America’s Is Shrinking

Why are blockchain applications practical emerging markets?

The Bitcoin surge has put blockchain or distributed ledger technology on every investor’s radar. While market participants remain divided on the Bitcoin boom continuing or going bust, there are very few contesting the growth and potential of the blockchain technology behind it.

While the United States and Europe dominate the blockchain innovation landscape, the scale for its future growth potential could tilt towards emerging markets (EEM) (VWO).  With higher banking risks and lower banking penetration, developing economies offer the perfect setting for adoption of blockchain-based financial solutions. In fact, blockchain technology is already impacting the provision of financial economies in selected regions of Asia (AAXJ) (VPL), Africa (EZA), and Latin America (ILF).

Asia has emerged as a key player in blockchain technology

Asia has emerged as a key player in this regard (chart above). The region, for its part, brings together regulatory activism, a dynamic technological/fintech ecosystem, the collaboration of industry and entrepreneurial players, and sustained access to venture capital, which is key for any economy that wishes to leapfrog on innovation. Over the years, Asia’s share of global Bitcoin (ARKW) (ARKK) and blockchain deals has risen from 8.5% (2013) to 22.7% (2016), according to data provider CBInsights.com. At the same time, North America’s dominance has reduced from 78.7% to 49.2% over the same period.

Moreover, an increasing number of emerging and frontier (FM) (FRN) market companies are now dominating the Bitcoin and blockchain space (see chart above). Asia especially, with its forward-looking regulatory environments, is steadily emerging as a leader in the testing of, and investment into, blockchain technology.

Leading the blockchain-based solutions for the financial services industry

Asia is currently the leader for emerging markets in blockchain-based solutions for the financial services industry. Markets such as China (FXI) (YINN) and India (EPI) in particular have facilitated the adoption of the technology by massive digitization of payment solutions. Cryptocurrency is already being tested and adapted to facilitate trade finance, and the technology is being levered to improvise on processes such as e-proxy voting, land registry management, and supply chain management.

In the next article we’ll take a quick look at the current state and future potential of blockchain technology in emerging economies such as Asia, Africa, and Latin America.

The 13 Chinese Companies That Listed On US Stock Exchanges In 2017

2017 has so far seen 13 Chinese companies list on the US stock exchanges

With about $2.4 billion raised in IPOs on US exchanges by Chinese companies so far this year, other China-based firms are increasingly vying for US investors and exchanges. Robust US investor demand for fast-growing Chinese companies (FXI) (YINN) has added wind to the string of IPOs that companies based out of this Asian nation (AAXJ) (VPL) have made in the US (SPY) (IWM). The year 2017 has so far seen 13  IPOs completed by Chinese companies on the US stock exchanges. These are:

  1. RISE Education Cayman Ltd (REDU)

The Beijing-based leader in junior English language training company, RISE Education Cayman Ltd. is the latest Chinese company to list on the US exchanges. On October 20, the consumer sector firm listed on the NASDAQ GM stock exchange under the ticker REDU. The company is a pioneer in the “subject-based learning” teaching philosophy in China. The IPO, which became effective as of October 19, bagged $159.5 million at an initial offer price of $14.5 a share.

REDU closed at $15.14 on October 23 with a market capitalization of $832.7 million.

  1. Qudian Inc (QD)

On October 18, Chinese online micro-credit provider Qudian Inc listed on the NYSE, raising $900 million in an IPO that was priced at $24, in the biggest ever US listing by a Chinese fintech firm. The financial sector firm’s stock, trading under the symbol QD, closed at $33 as of October 23. The stock commands a market capitalization of $8.8 billion in the US stock market.

Year-end Forward P/E for the depository receipt is estimated at 21.47. Estimated earnings-per-share stand at $8.21.

  1. RYB Education Inc (RYB)

Beijing-based RYB Education, Inc. is the largest and leading early childhood education and care provider in China. It operates kindergarten and preschool services. The company raised about $166 million in an initial public offering on September 27, listing the company’s stock on the NYSE with the ticker RYB at $18.5 a share. RYB closed at $26.01 a share on October 23. The stock commands a market capitalization of $745.5 million in the US stock market. Year-end forward P/E for the depository share is estimated at 78.82. Estimated earnings-per-share stand at $0.33.

  1. Secoo Holding Ltd (SECO)

Secoo Holding is Asia’s largest luxury e-commerce company. The Beijing-based e-retailer listed on the NASDAQ GM stock exchange on September 22nd under the symbol SECO. The IPO raised $110.5 million for the company at an offer price of $13 per share. The stock was down to $8 as of October 23 with a market capitalization of $411 million.

  1. TDH Holdings Inc (PETZ)

TDH Holdings, through its subsidiaries, manufactures pet food products, as well as, canned vegetables and chews. The company recently listed its shares on the NASDAQ CM stock exchange on September 21, raising $6.5 million at $4.25 a share. The shares of the company now trade under the symbol PETZ on the US exchange at $25.25 a share (as of October 23) with a market capitalization of $230.6 million.

  1. BEST Inc (BSTI)

On September 20th, Alibaba Group (BABA) backed logistics firm, Best Inc. raised $517.5 million at $10 a share in an IPO. The stock now trades on the NYSE at $10.94 (as of October 23) under the symbol BSTI. The stock commands a market capitalization of over $4 billion in the US stock market. The Hangzhou-based company offers logistics and supply chain management solutions in China.

  1. Zai Lab Ltd (ZLAB)

The Pudong-based biopharmaceutical company, Zai Lab, is built on a vision that China would be the next destination for the pharmaceutical and healthcare industry. The company raised $172.5 million in an IPO on September 20, marking its listing on NASDAQ GM stock exchange under the ticker ZLAB. The shares initially offered at $$18 a share, now trade at $26.5 (as of October 23) with a market capitalization of $1.3 billion.

  1. ZK International Group Co Ltd (ZKIN)

ZK International Group Co., Ltd, a subsidiary Zhejiang Zhengkang, is an industrial sector firm engaged in the designing and production of pipes and fittings. The company’s stock listed on the NASDAQ CM stock exchange under the symbol ZKIN on September 1 via an IPO, at $5 a share raising $5.3 million for the company. The stock commands a market capitalization of $103 million in the US stock market and closed at a price of $7.88 on October 23rd.

  1. China Internet Nationwide Financial Services (CIFS)

This Beijing-based financial sector firm, trades under the ticker CIFS on the NASDAQ GM stock exchange, is engaged in providing financial advisory services in China. The company’s stock listed on the US stock market on August 8 at an initial offer price of $10 a share, raising $20.2 million for the company. The stock, trading at $31.5 (as of October 23rd), commands a market capitalization of $693 million in the US stock market.

  1. Newater Technology Inc (NEWA)

Newater Technology, Inc. operates as a wastewater purification treatment company. The Yantai-based industrial firm listed on the NASDAQ CM stock exchange on July 28th under the symbol NEWA. The IPO raised $8.05 million for the company at an offer price of $5 per share. The stock closed at $9.77 as of October 23rd with a market capitalization of $103.6 million.

  1. Bison Capital Acquisition Corp (BCACU)

Bison Capital Acquisition is engaged in services such as share exchange, amalgamation, acquisition, share reconstruction, asset management, and other financial services. On June 20, the blank check company listed on the NASDAQ GM stock exchange under the ticker BCACU. The IPO bagged $52.5 million for the company at an initial offer price of $10 a share.

BCACU closed at $10.31 on October 23 with its market capitalization standing at $82.3 million.

  1. Bright Scholar Education Holdings Limited (BEDU)

Bright Scholar education Holdings, listed as BEDU on the NYSE, provides bilingual, kindergarten, training, and other educational programs and services through its subsidiaries in China. The company raised over $181 million in an initial public offering on May 18, listing the company’s stock on the US stock market at $10.5 a share. BEDU closed at $25.55 a share on October 23. The stock has a market capitalization of about $3 billion in the US stock market.

  1. China Rapid Finance Ltd (XRF)

Listed since April 28th on the NYSE stock market, China Rapid Finance Limited operates one of China’s largest online consumer lending marketplaces.  The company caters well to China’s 500 million EMMAs (Emerging Middle-class Mobile Active consumers), and has facilitated over 20 million loans to more than 2.7 million borrowers. Back in April, the company raised $69 million in an IPO, marking its listing on the US stock exchange under the ticker XRF. The shares initially offered at $6 a share, and now trade at $9.06 (as of October 23) with a market capitalization of $586.2 million.

Electric Vehicle Battery Makers Are Disrupting Global Mining of These 3 Metals

World’s top battery makers have a plan…

With cobalt prices soaring, the world’s top battery makers, a majority of which are based in emerging Asia (AAXJ) (VPL), are looking to tweak the ratios of raw materials used in the manufacture of lithium-ion batteries. More specifically, they’re attempting to reduce the amount of one of the more expensive components, cobalt, being used in the production process. The rare metal has more than doubled in price over the past year on strong demand accompanied by a supply shortage. We’re now seeing car giants rushing to lock in supply deals with cobalt miners. The Volkswagen (VLKAF) (VLKAY)-CATL-Glencore (GLNCY) (GLCNF) deal in just one example.

…with the demand for EVs to jump 20x by 2025

With the demand for electric vehicle batteries predicted to jump 20-fold from 2015 to 2025, emerging market  (EEM) (VWO) battery makers are currently testing a new recipe.

Panasonic (PCRFF) (PCRFY), the world’s leader in battery production, is working on reducing cobalt consumption in its battery production process. With customers including Tesla (TSLA), Panasonic currently employs NCA (nickel-cobalt-aluminum) technology in battery production. The two companies are now together working to develop a battery with 85% nickel composition.

South Korea (EWY) based Samsung SDI (SSDIF) and LG Chem (LGCLF) are developing new power packs that use more nickel and less cobalt. Samsung SDI expects the industry-wide amount of cobalt per battery unit to decrease to about half of current levels over the long term.

Change is good

Currently, the more popular NMC (nickel-manganese-cobalt) formula employs a 6:2:2 ratio; that is, a ratio of 60% nickel to 20% cobalt and 20% manganese. SK Innovation, another of South Korea’s top battery makers, is working to change the composition of these cathode materials to 80% nickel, 10% cobalt and 10% manganese; so an 8:1:1 ratio.

Consequently, depending on the success of efforts to change the ratio of lithium-ion batteries inputs from the current 6:2:2 to 8:1:1, the demand for nickel may grow by 10-40% from its current level by 2025 (according to a UBS report).

Meanwhile, China’s (FXI) (YINN) EV battery producers such as BYD (BYDDF) (BYDDY) are focused on cheaper lithium-iron-phosphate (LFP) batteries that don’t use either nickel or cobalt.

Cobalt Prices Are Up 80%, Emerging Market Miners Gear Up To Address Shortage

Cobalt prices up 80% YTD, no reversal yet

Cobalt prices are up over 80% in the year so far. They’ve recorded a 112.5% rise over the past one year, thanks to the rapid rise in the adoption and usage of electric vehicles and consequently, the global lithium-ion battery market. Cobalt is a critical input in lithium-ion cell production accounting for 20% of its composition. The battery industry consumes over 40% of global cobalt production.

What led the price so high?

With the global lithium-ion batteries poised to become a $40 billion market by 2025 (Goldman Sachs (GS) estimate), demand for cobalt should continue to rise. According to estimates, the demand for cobalt is set to increase by 34% per year until 2026. However, the supply side of this key ingredient seems low, with battery makers struggling to secure supplies. This has driven prices up to where they are now (see chart above), affecting battery makers such as Tesla (TSLA), BYD (BYDDF) (BYDDY), CATL, and Tianjin Lishen, LG Chem (LGCLF), Samsung SDI (SSDIF), and SK Innovation, among others.

The price hike has been driven by higher demand and a supply shortage on account of the unstable political situation in the Democratic Republic of Congo (DRC), which accounts for nearly 60% of the world’s cobalt production. In 2016, DRC produced 66,000 metric tons of cobalt, more than eight times more than its closest competitor, China (FXI) (YINN).

Rising demand for EVs to add to demand cobalt

Macquarie Research has predicted that trouble in the DRC and rising demand for electric vehicles will lead to a four-year-long cobalt shortage. However, since approximately 97% of the world’s supply of cobalt comes as a by-product of nickel or copper, as long as the demand for nickel and copper remains sufficient, so would cobalt production.

Meanwhile, cobalt-rich economies and cobalt miners are eyeing additional reserves and deposits to address the shortfall in supply.

  • Chile (ECH) is conducting surveys in its Atacama and Coquimbo region in search of cobalt deposits.
  • First Cobalt (FTSSF), a Canadian mining company, is looking to expand its footprint in Cobalt, Toronto.

Prominent cobalt miners include Glencore (GLNCY) (GLCNF), China Molybdenum (CMCLF), Katanga Mining (KATFF).

Meanwhile, to hedge their exposures, battery makers are working on ways to reduce their dependence on cobalt as prices rapidly rise.

Asian Stocks to Watch: Korean and Chinese Electric Vehicle Battery Makers

Chinese and Korean EV batteries makers are poised for growth

A recent Credence Research report estimates the market for lithium-ion batteries to reach $95.9 billion by 2025. No doubt, global electric vehicle (EV) batteries makers are already scrambling for position in this high-growth market. While Japan’s (EWJ) Panasonic is currently leading the world (ACWI) (VTI) in supplying batteries to electric vehicles (EVs) manufacturers; we’re increasingly seeing Chinese and Korean EV batteries makers getting engaged in the battle for dominance in the global automotive lithium-ion battery sector. China (FXI) (YINN) and Europe (VGK) (EZU) are considered the key battle-grounds for EV sales.

 

Chinese batteries makers are already working towards high targets set for 2020 with notable government support. According to Bloomberg New Energy Finance estimates, if Chinese batteries makers deliver on their targets, the economy should be in a position to produce 121 GWh (gigawatt hours) of battery power by 2020; enough to charge over 4.8 million electric cars to each travel 100 kilometers.

On the other hand, South Korea’s three leading EV battery manufacturers, LG Chem, Samsung SDI and SK Innovation, have together pledged to invest a combined $1.77 billion to expand EV and hybrid battery production capacity in South Korea by 2020. With domestic demand limited, these battery makers are expanding their global manufacturing footprints trying to cash-in on Europe’s fast-growing EV market.

For emerging market (EEM) (VWO) investors, here’s a quick list of the top Chinese and Korean EV batteries makers.

China

In China, the list of EV batteries makers is led by BYD, CATL, and Tianjin Lishen Battery. BYD and CATL have seen particular benefit from government support.

BYD or “Build Your Dream” (1211.HK) (BYDDF) (BYDDY) is China’s largest battery maker. The company produced approximately 100,000 EVs or plug-in hybrids in 2016. Consistent with BYD’s strategy of vertical integration, the company currently has 20 GWh of battery cell capacity. The company’s target for 2020 is set at 34 GWh. Warren Buffet’s Berkshire Hathaway has a 10% stake in the company.

CATL or Contemporary Amperex Technology Ltd. focuses on the production of lithium-ion batteries and the development of energy storage systems. CATL currently has 7.7 GWh of battery capacity and plans to reach a battery production capacity of 50 GWh by 2020.

Tianjin Lishen Battery Co., Ltd. engages in the development, manufacture, and sale of lithium-ion batteries. The company plans to have 20 GWh of battery cell capacity by 2020.

To allow electric cars to go further on a single charge, a critical factor for batteries is their energy density. For now, China lags behind Korean makers in terms of the technology to provide greater energy density. South Korean companies have been involved in high-performance batteries manufacturing for over 15 years now, long before China got into it.

South Korea

In South Korea, the list of EV batteries makers is led by LG Chem, Samsung SDI, and SK Innovation.

LG Chem or LG Chemical (051910.KS) (051915.KS) (LGCLF) is the largest Korean chemical company. The company is principally engaged in the manufacture of petrochemical materials. The company also provides lithim-iion batteries for laptops, phones and electric vehicles (EVs). The company has plans to start production at a newly-built EV battery factory in Poland which has a capacity to produce battery packs for 100,000 EVs per year, in addition to existing plants located in South Korea, China, and the USA.

Samsung SDI (006400.KS) (006405.KS) (SSDIF) manufactures and sells batteries worldwide. It manufactures and sells small-sized lithium-ion batteries of various kinds and uses, including automotive batteries. The company has completed the construction of a new EV battery plant in Hungary in May with an initial capacity to produce 50,000 EV battery packs per year. When operative (2018), the new plant will serve to strengthen Samsung SDI’s global EV production network which already includes facilities in South Korea and China.

SK Innovation (096770.KS) (096775.KS) is a Korea-based holding company principally engaged in the manufacture and distribution of petroleum products. It is Korea’s first and largest energy and chemical company, now also engaged in future energy. As an EV batteries maker, it is the smallest of the three in South Korea. Nonetheless, the company’s South Korean production capacity is estimated to rise to about 150,000 EV battery systems per year.

The competition ahead

What remains to be seen is how the above listed Chinese and Korean EV batteries makers will fair compared to their Eastern and Western competitors. In the East, established Japanese batteries makers such as Panasonic, AESC, and GS Yuasa (GYUAF) stand in competition, and in the West, industry giants such as Johnson Matthey (JMPLY) (JMPLF), Bosch, and Johnson Controls (JCI) are also vying to become major suppliers of EV batteries globally.

Moreover, a number of global vehicle manufacturers are now developing their own EV battery capabilities. German Daimler’s (DAI.DE) (DDAIF) (DMLRY) Li-Tec Battery subsidiary and Japanese Toyota’s (TM) Primearth EV Energy are prime examples. Tesla (TSLA) is also building its own multi-gigawatt hours battery plant in partnership with Panasonic (PCRFY) (PCRFF) in the US.

China’s Share Of Global Battery Production To Hit 70% By 2020, But Japan’s Panasonic Still Leads

A $240 billion market opportunity

Electric vehicles makers have a big role to play in the ongoing electric vehicle revolution. Electric vehicles (EVs) are steadily replacing internal combustion engines (ICEs), in light of increasing awareness related to the damaging effects of carbon emissions. Wall Street analysts predict that we’re looking at a $240 billion EV market opportunity in 20 years. According to estimates, EVs will account for as much as 40% of auto sales and 30% of global car parc over the next 20 years.

Rising demand, falling cost

Batteries make-up about 1/3rd of the cost of an electric vehicle. Hence, unprecedented demand for lithium-ion batteries is expected as manufacturers look to keep pace with demand. And, on a macro level, they would help reduce carbon emissions and oil dependence. Goldman Sachs (GS) estimates the lithium-ion battery market to be worth $40bn by 2025 and to be dominated by China (FXI) (YINN). And, given the current and predicted decline in the cost of manufacturing these batteries (see chart above), battery makers should see sunnier days ahead.

China and South Korea are poised to grab their share

The global lithium-ion battery market is expected hit $46.2 billion by 2022, with a CAGR of 10.8% during the 6 years beginning 2016. The demand for lithium-ion batteries in the automobile industry is expected to surge with the increasing demand for EVs. Asia-Pacific (VPL) is widely expected to dominate this market throughout 2015-2022.

Presently, Japan’s Panasonic is the largest supplier of electric vehicle batteries globally. However, China’s BYD (1211.HK) (BYDDF) (BYDDY) and CATL, and South Korea’s Samsung SDI and LG Chem are also taking big strides to grab their fair share in the opportunity lying ahead of them.

China’s global market share in battery production is projected to rise to more than 70% by 2020. With over 140 EV battery manufacturers, the country is expected to lead the way in batteries. In 2016 alone, 507,000 EVs were sold in China, a 53% jump from the previous year figure. While taking the necessary steps to boost supply, China will also be instrumental in creating demand with their target of having 5 million EVs on its roads by 2020, as compared to the 1 million today.

On the other hand, South Korea’s (EWY) EV battery makers LG Chem (051910.KS) (051915.KS) (LGCLF), Samsung SDI (006400.KS) (006405.KS) (SSDIF), and SK Innovation (096770.KS) (096775.KS), are working to establish their manufacturing facilities in Europe (VGK) (EZU), the fastest growing market for electric cars in the world (ACWI) (VTI).

In Part 2, we’ve compiled a list of the key stocks to watch, as Chinese and Korean battery makers position themselves to profit from the electric revolution.

The World’s 5 Largest Solar Power Plants Are In These Two Asian Countries

The 5 largest solar power plants are in the emerging markets

Emerging markets (EEM) (VWO) house the 5 largest solar power plants in the world. India (EPI) and China (FXI) (YINN) in particular have risen to become the leaders in solar power generation globally. The top 5 power plants (by generation capacity) are housed in these two Asian (AAXJ) (VPL) economies. The chart below depicts the top 5 photovoltaic power stations of the world. The 6th, Solar Star, is based in the US and has a solar power generation capacity of 579 -megawatt (MW).

Iran is poised to overtake Solar Star

Iran is now poised to move into the 6th largest slot with its 600 MW plant, scheduled to be built in stages over the next 3 years. Iran’s Energy Ministry recently signed a $600 million financing and development agreement with UK-based specialist renewable energy investor, Quercus, for creating the project together. Lower oil prices and air pollution have been shifting the economy’s focus from natural gas and oil-based power generation to renewables. The project falls in line with the economy’s commitment to develop 5 GW of new renewable energy capacity by 2020. The country’s current installed solar energy capacity stands at 53 MW.

Emerging markets are increasingly investing in renewables

In our recent series, Solar Power in the Lead, as Future Energy Takes Center Stage in the Emerging Markets, we highlighted how emerging markets are currently leading the charts in renewable energy (ICLN) (PBW) (QCLN) attractiveness, with solar energy (TAN) holding enormous potential. Investment flows to the industry are picking up backed by attention and funding from international agencies such as the USTDA, World Bank, and BRICS Bank.

Declining costs of solar panels and wind turbines are making renewable power a more attractive option in the Middle East, Africa, and Asia.

While China and India have already established themselves as the dominant players in the renewable energy market, sub-Saharan Africa (EZA) is also showing immense potential in the renewable energy space, particularly in solar.

5 Auto Manufacturers in BRICS Nations Making Major Investments In Electric Vehicles

Electric vehicle manufacturers to rise with the tide

Electric vehicles (or EVs) continue to grab headlines as various governments worldwide announce new legislation and strategies to reduce vehicles powered by gasoline and diesel engines. Indeed, Bernstein research predicts that EVs could represent 40% of auto sales and 30% of the global car market in 20 years. UBS Group (UBS) believes that a growing global electric vehicle fleet will begin to be disruptive to gasoline demand by 2031.

Surprisingly, emerging markets (EEM) (VWO), are in many cases keeping pace with their developed market peers in the drive away from traditional auto engines. Tracking new technology and related products in these markets is an investment theme set to attract major fund flows.

The 5 biggest vehicle manufacturers in BRICS

We ran a filter on all the automakers currently selling products into the electric vehicle space, and originating from the BRICS nations (being the prominent area of focus within the emerging markets due to size and scale), to arrive at 5 largest automakers foraying into the EV space. Here’s the list of the five biggest auto manufacturers (by revenue) from BRICS nations (Brazil (EWZ)-Russia (RSX)-India (EPI)-China (FXI)-South Africa (EZA)) that are currently cashing in on growing demand in the electric vehicle space:

Company Name (Ticker) Country Revenue T12M ($bn) Market Cap ($bn) Total Return YTD (Sep 21) P/E
SAIC MOTOR CORP LTD-A (600104.SS) China 793.7 341.5 36.6 10.4
MAHINDRA & MAHINDRA LTD (M&M.BO) India 740.0 802.7 10.0 18.8
MARUTI SUZUKI INDIA LTD (MARUTI.BO) India 669.2 2452.9 54.6 32.5
HERO MOTOCORP (HEROMOTOCO.BO) India 282.8 770.0 31.2 21.1
AVTOVAZ PJSC (AVAZ.ME) Russia 200.3 48.5 13.8  N/A

 

As is evident from the table above, all of these firms have delivered strong returns to investors so far this year. Maruti Suzuki’s stock is up about 55%, while SAIC Motor and Hero Motocorp have delivered over 36% and 31% returns to investors, respectively.

SAIC Motor Corp (600104.SS)

SAIC Motor Corp is China’s largest automaker. With over $341 billion in market capitalization, the company’s stock is listed on the Shanghai stock exchange under the ticker 600104. The stock has returned 36.6% YTD (as of September 21) and currently trades at a P/E of 10.4.

The company is keen on the plug-in hybrid electric vehicle (PHEV), electric vehicle (EV) and fuel cell technologies. Its electric drive unit (EDU) was awarded first place at the 2016 China Automotive S&T Award Ceremony. In 2016, sales of new energy vehicles under SAIC’s self-owned brands increased 84% year-on-year to surpass 25,000 units. In 2017, SAIC Motor plans to launch more new brands to improve the sales of new energy vehicles to over 80,000 units.

The company has founded the Global Car Sharing & Rental Co Ltd to offer timeshare leasing of electric cars. In 2016, the car-sharing company launched 8,400 new energy cars and built 2,800 charging stations in 20 cities. The service is scheduled to cover 100 cities in 2020, with 300,000 vehicles.

Mahindra & Mahindra Ltd. (M&M.BO(MAHMF)

Currently, Mahindra & Mahindra is the only manufacturer of electric cars in India (INDA) (INDY). The company’s stock is listed on the Bombay Stock Exchange with the symbol M&M and also on the NYSE’s OTC market under the ticker MAHMF. With $802 billion in market capitalization, the India-listed stock of the company trades at a P/E of 18.8 currently. The stock has returned 10% to investors YTD.

Mahindra Electric, the company’s electric vehicles division, has the e20plus, eVerito and eSupro in its stable. The company expects EV sales to triple in 2017. It has already partnered with shared mobility platforms, rental firms (such as Zoomcar) and cab aggregators to promote the usage of electric cars.

The company has a current capacity to make 400-500 EVs/month and seeks to increase this capacity to 5,000 vehicles a month over the next 2 years. Mahindra is also working on a high-end electric powertrain technology, which will allow cars to run for 200-300 km with a single charge from the existing range of 100-140 km. A luxury electric sedan could also come from the M&M stable, targeting international markets.

The company has also entered into a partnership with Ford Motor Co. (F) to cooperate in areas including driverless and electric cars. For M&M, there’s money to be made in a nascent EV sector. “This is not a trade-off. This is the single biggest business opportunity for the next couple of decades,” said Anand Mahindra, the company’s chairman on clean technology, at the Bloomberg Global Business Forum in New York on September 20. The company is also currently looking for a joint venture partner in the world’s biggest EV market, China (YINN).

Maruti Suzuki India Ltd. (MARUTI.BO) (MRZUY)

This Indian automaker’s stock is listed on the Bombay Stock Exchange with the symbol MARUTI and also on the NYSE’s OTC market under the ticker MRZUY. The company boasts of a $2.5 trillion in market capitalization on the Indian exchange. The stock is expensive at a P/E of 32.5 currently. However, the stock has returned 54.6% to investors YTD.

While the company currently does not offer a pure electric vehicle, its product offerings include hybrid cars – Ciaz SHVS and Ertiga SHVS. These smart hybrid vehicle offerings of the company have record cumulative sales of over 100,000 units a month and participate in the government of India’s FAME India* scheme, which aims to promote Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India.

Hero Motocorp (HEROMOTOCO.BO) (HRTQY)

Hero Motocorp is a leading motorcycle and scooter manufacturer based in India. The company’s stock is listed on the Bombay Stock Exchange with the symbol HEROMOTOCO and also on the NYSE’s OTC market under the ticker HRTQY. With $770 billion in market capitalization, the India-listed stock of the company trades at a P/E of 21.1 currently. The stock has returned over 31% to investors YTD.

The company currently offers a range of electric 2-wheelers and 3-wheelers. Hero Electric began developing electric vehicles over ten years ago which resulted in the first electric scooter products launched in the Indian market in 2007. Since then the company has sold over 100,000 vehicles in India. With over 50% market share in the electric scooter market, the company is the dominant player in India’s electric two-wheeler market.

The company has also been very active in promoting the electric vehicle industry through the formation of an industry association and by approaching the government to provide subsidies of up to 20-25% on all electric scooter sales.

Avtovaz PJSC (AVAZ.ME)

AvtoVAZ is the Russian automobile manufacturer formerly known as VAZ: Volzhsky Avtomobilny Zavod, but better known to the world under the trade name Lada. The VAZ factory is the largest car manufacturer in Russia, and one of the largest in the world. The company is the single Russian company pursuing electric cars, with their electric Lada Vesta.

The company’s stock trades on the MICEX exchange under the ticker AVAZ, commanding a market cap of $48.5 billion. The stock has returned 13.8% YTD.

Tata Motors (TTM)

While the above five top the list of BRICS automakers that have forayed into electric vehicles, the overall biggest automaker BRICS nations by revenue, Tata Motors (TTM), is set to zoom into the electric vehicle space as well. There’s talk of Tata Motors launching an all-electric Tiago. The UK-based subsidiary Tata Motors European Technical Centre (TMETC) hinted that the Tiago EV might deliver 100 km on one full electric charge, will accelerate from 0-100 kmph in about 11 seconds in sports mode, and would be capable of a top speed of 135 kph.

Before And After China’s ICO Ban: Which Countries Are Trading The Most Bitcoin Cash?

China’s latest regulatory crackdown: cryptocurrency

In 2013, the People’s Bank of China (PBoC) came out with a guidance specifying that Bitcoin is not to be considered a currency, but neither outlawing nor prohibiting individuals from owning Bitcoin. Since then, China has witnessed an unprecedented rise in unregulated cryptocurrency trading, most recently with Bitcoin Cash. However, the rapid spike in activity got the regulator suspicious of the role cryptocurrencies could play in capital flight and money laundering activities. So, on September 4th, in a statement, the regulator declared cryptocurrency “initial coin offerings” (aka ICOs) “illegal and disruptive to economic and financial stability.”

Ban on Initial Coin Offerings

ICOs are a hybrid between initial public offerings in traditional equity markets, crowdfunding, and venture capital, allowing start-ups to raise funds for new technology projects entirely by virtual money. Although the Chinese ICO market is relatively small compared to the overall economy, it had been gathering speed. According to the Beijing Internet Finance Association, almost $400 million was raised via 65 ICOs from January 2017 to July 2017. In its current state, the ban just means that Chinese start-ups cannot use an ICO to raise money. It does not affect Chinese crypto-currency developers and service providers otherwise.

Top 10 Bitcoin Cash Markets (USD) – September 13, 2017

# Exchange Market Base Currency Pair Volume (24h) Volume (%)
1 Bithumb South Korea BCH/KRW $85,032,300 28.01%
2 Huobi China BCC/CNY $65,127,600 21.46%
3 HitBTC China BCC/BTC $34,972,200 11.52%
4 OKCoin.cn China BCC/CNY $27,310,700 9.00%
5 Korbit South Korea BCH/KRW $12,061,000 3.97%
6 Bitfinex Hong Kong BCH/USD $10,209,700 3.36%
7 Coinone South Korea BCH/KRW $6,078,070 2.00%
8 Bitfinex Hong Kong BCH/BTC $5,449,800 1.80%
9 Poloniex US BCH/USDT $4,963,390 1.64%
10 HitBTC China BCC/USD $4,553,540 1.50%

 *Please note: Ticker symbols BCC and BCH both refer to Bitcoin Cash. Usage of the two tickers varies among cryptocurrency exchanges as reflected in the chart above.

Bitcoin Cash trading markets: China remains the leader

Before the September 4th ICO ban, the top 10 largest Bitcoin Cash markets were dominated by China (FXI) (YINN) with China-based cryptocurrency (ARKW) exchanges accounting for about 40% of all Bitcoin Cash trading as of August 14th. The September 4th ban did impact Bitcoin trading volumes immediately. However, the markets did not take too long to recover. Interestingly, China’s share in overall Bitcoin Cash trading volume has now increased to 43.5% (as of September 13). Huobi, HitBTC, and OKCoin.cn continue to serve as leading venues for Bitcoin Cash trading in China, accounting for 21.5%, 11.5% and 9% of total trading, respectively (see table above).

Meanwhile, South Korea (EWY) (HEWY) has remained the second most popular venue for the trading of Bitcoin Cash, accounting for over 33.98% of overall Bitcoin Cash trading volume (see table). Bithumb, Korbit, and Coinone are among the top trading portals being used in the region. Bithumb alone accounted for over 28% of all Bitcoin Cash market trading volume as of September 13.

Also of note is the declining interest in the United States. In mid-August U.S. trading volumes accounted for over 21% of the ten largest Bitcoin Cash markets, whereas it has now dropped to less than 2% (see table above) just one month later.

The Two Sides of the Bitcoin Civil War

The Bitcoin Civil War

The Bitcoin civil war primarily centers on the issue with Bitcoin’s scalability. Given the rapid rise in popularity and transactions over the past 9 years, its ability to handle a growing number of transactions has now come to test. US (SPY) (IWM) based Kraken and Poloniex, South Korea (EWY) based Bithumb, Japan (EWJ) based bitFlyer, and China (FXI) (YINN) based OKCoin, BTCC, and HitBTC figure among the top 10 trading platforms (by volume) for Bitcoin trading.

Now, Bitcoin (ARKW) has come to a point where it needs to upgrade, fast.

The Bitcoin infrastructure

Under the current Bitcoin infrastructure, bitcoin transactions are verified by Bitcoin miners in batches called blocks. These blocks are then strung together to form the decentralized open ledger known as the blockchain.

Growth potential for Bitcoin’s usage had begun getting limited by the fact that the Bitcoin infrastructure was designed to handle a block size of 1MB (once every 10 minutes on average) mainly to prevent cyber attacks. Now, the increasing number of transactions on the current system has been leading to increases in the average time taken to confirm a deal. The backlog of transactions has been pushing up costs, leading to higher average processing fees.

Discussions around the possible ways of a system upgrade were met with a lot of disagreement leading to the so-called “civil war” between the two main groups essential to the running of the entire Bitcoin blockchain infrastructure.

The two sides of the Bitcoin civil war

The two sides:

  1. The core developers – instrumental in upholding Bitcoin’s bug-proof software
  2. The Bitcoin miners – serve as a backbone to the blockchain process as they verify transactions made over the blockchain network.

The Bitcoin debate

The lack of a central authority or consensus between the two sides is what is the root cause of the ongoing debate within the $67.5 billion Bitcoin market (as of August 14). The two sides of the debate are offering different solutions to Bitcoin’s data overload problem. The core developer’s solution to issue is that the Bitcoin system is to allow side-chains, which is like moving some data off the main network. This side supports the deployment of the SegWit.

However, the miners fear that the move could diminish their importance. They, on the other hand, are proposing a hard fork, that is a straightforward increase to the block size limit to say 2MB, which would amount to an increased number of Bitcoin transactions in each block. Currently, the block size is limited to 1MB. As also evident in the table above, the month of November is critical to Bitcoin holders and investors. The next part of this series explains why.

Bitcoin Civil War Development Timeline: Why November Is Critical To Investors

The two sides to the Bitcoin civil war

As elaborated in Part 2, a lack of consensus between the miners and core developers is what has led to the ongoing Bitcoin civil war. If the two sides fail to strike a compromise, two versions of Bitcoin’s blockchain will likely come into existence – effectively splitting the cryptocurrency. Let’s take a quick look at the developments so far, and those envisaged for the future.

Bitcoin’s development team supports the deployment of SegWit. Meanwhile, Bitcoin miners are focused on the November development which should increase the size of the Bitcoin block from 1MB to 2MB.

Why is November critical?

On August 1, Bitcoin miners successfully deployed the new protocol UASF BIP 148. This Phase 1 deployment of the Segwit2x proposal came around as a result of a compromise reached between the Core Developers (SegWit supporters) and the Miners (Hard Fork), known as the “New York Agreement.” The Bitcoin civil war will take a new turn now in early November when these miners advance towards adopting phase two of their deployment which encompasses the doubling of the size of the block.

Bitcoin Cash

The August 1 deployment led to the creation of Bitcoin cash, an offshoot of Bitcoin. Bitcoin Cash apparently raises the size of the block, which should enable more transactions to go forward at a faster pace, if and when blocks are created. Certain Bitcoin miners have been backing Bitcoin Cash since July. The new cryptocurrency supports block sizes of up to 8 MBs (as opposed to the current 1MB block infrastructure).

This new digital currency has already become a major player in the cryptocurrency market (ARKW) and is trading in the US (SPY) (IWM), China (FXI) (YINN), and South Korea (EWY) based exchanges, as discussed in Part 4 of this series.