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China’s fight to control the pandemic’s latest wave is becoming a source of concern for markets. Beijing has begun mass testing for COVID-19 that will cover 20 million people, in a bid to identify cases early and prevent wider outbreaks. The fear is that lockdowns imposed in cities such as Shanghai could be imposed in the capital city as well, upending economic activity. Meanwhile, the People’s Bank of China is pledging more support to the economy and financial markets. On Monday, it had taken steps to shore up the yuan which has turned weak in recent days.
China’s vulnerability poses a risk to global growth turning uneven, with the major western economies reporting better growth numbers, but China may see a growth slowdown. Moreover, the lockdowns threaten to revive some of the supply chain logjams that had sent input prices soaring. The heat is being felt by commodities, as markets brace for lower demand.
Prices of industrial metals such as copper, aluminium and iron ore have weakened in recent days, although the PBOC’s show of support has seen them turn steady today. How long and severe China’s COVID-19 restrictions are and the impact they have on demand and supply of commodities will be closely watched by investors. The near term may continue to remain volatile, as a result.
However, the global experience so far suggests that eventually the situation will return to normalcy, at which time economic activity will recover. While markets may have turned jittery about the China situation, it won’t be a longer term overhang. By then, it’s likely that attention would have shifted to interest rate hikes in the developed economies and their effect on growth.
You would not have missed the heightened news and social media activity over Twitter’s board accepting Elon Musk’s offer to acquire and take the company private. Despite all the noise, in the world of social media, Twitter is relatively small in size, with 436 million monthly active users, putting it ahead of Reddit and Quora, but behind Pinterest, Telegram, Tiktok (a billion users), Instagram (1.5 billion users), and Facebook is in the lead with 2.9 billion users.
The acquisition has raised several questions about what Musk plans to do with Twitter, which no doubt he will reveal after he completes the acquisition. Some of these pertain to the platform’s business model, a problematic issue for the company but one on which no concrete answers have been found yet. Twitter’s ex-CEO and founder Jack Dorsey tweeted that he believes Twitter should be a public good and no single person should own or run it. But in the same breath, he also said, “Solving for the problem of being a company however, Elon is the singular solution I trust.”
Will Musk be able to run a media company? This Bloomberg columnist does not think so, writing, “Yes, it’s compelling to watch Musk do his thing and interesting (and often disturbing) to see how much he breaks along the way, but media companies matter. They shape public dialogue and private conversations. The price of buffoonery and delinquency is greater than $43 billion.”
But Twitter’s fate is also an outcome of its inability to convince investors of the greatness of its business model. Why, there were apparently no counters to Musk’s bid, leaving the Twitter board with no choice but to accept the bid. Another view is that while it may seem like Musk’s personal project, it may simply have been a case of a move by an activist investor, who will now proceed to whip the company’s business model into shape, improve its financials and generate enough cash flows to repay debt taken for the acquisition and still have more left over. If Musk manages to multiply the value of his investment in Twitter, his fans will have another reason to believe that everything he touches turns to gold.
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Ravi Ananthanarayanan Moneycontrol Pro