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When things look dour, the interconnected nature of modern economies and industries are often put under the microscope. Layoffs across Southeast Asia and the rest of the world are no coincidence, but rather the expected result of interest rate hikes by central banks.
Strong labor markets aren’t exactly conducive to reining in inflation. The global economy is overheating, and federal bankers are looking to put a lid on the spending power of both companies and consumers by raising the cost of borrowing.
The government of Indonesia, Southeast Asia’s largest economy, raised not only interest rates but also the prices of subsidized petrol and diesel. Singapore has tightened lending limits for housing loans, while Thailand, Malaysia, Vietnam, Philippines, and Taiwan have been steadily hiking interest rates.
Even the bravest economists are unlikely to place bets on how high inflation can go from here. In times of such uncertainty, investors are naturally less inclined to park their money in risky assets such as stocks, let alone in loss-making tech companies.
Amid this economic quagmire, Grab (GRAB, NDAQ) has sought to provide clarity on its path toward profitability at its first-ever investor day last week. The headline was that the Singapore-based tech titan is expecting to break even by the second half of 2024.
However, that was not enough to appease jittery investors.
Grab shares have fallen more than 8% since its investor day last Tuesday. The stock is currently flirting with a new record low at US$2.63 a piece, giving the firm a market value of about US$10.1 billion – well below the nearly US$40 billion valuation at which it went public last year.
Nonetheless, as highlighted in today’s featured piece, Grab’s bold move is a chance for the company to build credibility with investors, but comes with risks.
We’ve already witnessed how poorly the market reacts when guidance targets are not met. Sea Group (SE, NYSE) shares tanked after it suspended full-year revenue guidance for Shopee, its ecommerce unit, in August.
See also: Was Sea’s 22% stock plunge after Q2 results an overreaction?
The premium story also sheds light on how Grab, largely known for its ride-hailing and food delivery services, is placing a greater emphasis on GrabFin and how its financial arm keeps the cogs of the firm’s wider ecosystem running smoothly.
Further, my colleague, Simon, touches upon Grab’s shift to an asset-light model in the groceries business and how the company is looking to draw inspiration from China’s Meituan (3690, HKG) to integrate higher-margin businesses into its ecosystem through advertising.
— Shravanth
THE BIG STORY
3 Trends to keep an eye on
2 Eye-popping facts
The ones you didn’t see coming
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