Monday 17/02/20

  1. In CORONAVIRUS NEWS, China relaxes taxes to help out
  2. In CONSUMER/SERVICES-RELATED NEWS, UK house prices rise, Strava aims to go the distance and fashion renting looks on trend
  3. In INDIVIDUAL COMPANY NEWS, Alstom offers $7bn for Bombardier and Arm announces strong profits
  4. In OTHER NEWS, I bring you a belated-Valentine’s service and a brilliant Chinese man…



So Chinese authorities relax taxes to help businesses beyond the coronavirus…

In Chinese developers hit by coronavirus sales ban (Financial Times, Don Weinland) we see that local governments are trying to mitigate the effects of the coronavirus outbreak on property developers who have been forced to cease home sales (but still face $100bn of maturing bonds this year) by allowing them to delay payments on land and taxes. The ban was put in place to stop the spread of the disease so this move by authorities is designed to help developers’ cash flow. Just to give you an idea of the scale of the problem, a report from E-House showed that, in the first week of February, fewer than four homes were sold in Beijing – a city that has a population of over 20m people. * SO WHAT? * The longer this drags on,

the tighter things are going to become for developers who traditionally have high debt levels.

China plans to cut taxes to fight virus slump after trade war (Daily Telegraph, Russell Lynch) cites the Finance minister Liu Kun in the Communist Party’s magazine as saying that the government would use “targeted and phased” measures to cut taxes like VAT for firms supplying essentials while putting further funding into containing the disease. * SO WHAT? * The coronavirus is going to end up costing the Chinese government an absolutely enormous amount of money. Not only is it propping up the stock market (it’s suspiciously stable, don’t you think?) but it is also going to have to help out its people and businesses with some kind of compensation for lost earnings/inconvenience either in the form of handouts and/or tax breaks. I would also imagine that it will have to strike a delicate balance between being foreign-company friendly (to stop them from leaving China) whilst also championing domestic companies who will have suffered greatly.



UK house prices strengthen, Strava moves ahead and fashion renting continues to develop…

UK housing boom leads to £2,500 jump in asking prices (The Guardian, Patrick Collinson) cites findings from Rightmove which show that average asking prices have jumped up by over £2,500 in the last month alone to £309,399. Both buyers and sellers appear to have been part of the “Boris bounce” and agreed sales have gone up by 12% versus January last year. Interestingly, Rightmove’s report hasn’t been this positive since 2014-15 and urges hesitant buyers to “jump in”. * SO WHAT? * It’s worth pointing out that Rightmove’s figures are based on ASKING prices, so if you want ACTUAL selling prices you will have to look at data from the Land Registry. However, recent reports from Halifax and Nationwide (who publish mortgage data) seem to bear out Rightmove’s findings. FWIW, I just get the feeling that we are in a bit of a purple patch at the moment and the estate agents are just trying to stoke things up. There will be more uncertainty to come this year as Brexit negotiations continue and like I have said before, I just wonder whether the market average is being dragged up at the moment by people buying in at the high end of the property market because Corbyn didn’t win the election.

With its 50m users, Strava can stay ahead of its rivals (Daily Telegraph, Michael Cogley) highlights the success of the world’s most popular fitness app, Strava. The company avoided hardware in the early days in favour of focusing on

apps and it has branched out from cycling and then to running and swimming as well as hiking, canoeing, ice skating and kitesurfing. The two guys who founded the company, Michael Horvath and Mark Gainey, returned to the company they founded after some time out and now they want it to become the world’s leading subscription business for athletes. * SO WHAT? * When you consider the ongoing trend of the gamification of fitness (Peloton being a recent example of this), it makes a lot of sense for a company like Strava to continue to expand. Given its big user base and its breadth of sports, you would imagine that they have a decent chance of reaching their ambition – especially if they can convert free users to paying subscribers.

Renting has become the latest fashion statement (The Times, Ashley Armstrong) takes an interesting look at the growing area of fashion rental in the UK. My Wardrobe HQ does designer fashion retail rental in the UK which helps women buy or rent top end brands like Gucci, Prada and Chanel for way less than it costs to own – around £100 to rent for a dress for a week that would usually cost thousands. Global Data reckons that the British fashion rental market is expected to rise from £400m last year to £2.3bn by 2029. * SO WHAT? * I think that this is a useful service that pushes back at the “throwaway” fashion that has become so popular over the last few years. Having said that, I do think that it is pretty niche in nature at the moment as it tends to focus on occasionwear BUT I definitely think it has a place. Rentable fashion is something that some American retailers are dabbling with (where you pay a monthly fee to “rent” a certain number of items of clothing) and I definitely think that this feeds nicely into the theme of sustainability. I wonder if more “normal” fashion retailers did this whether it would help them to reduce the problem of expensive returns.



Alstom offers $7bn for Bombardier and Arm puts in a decent performance…

Alstom reaches preliminary deal to buy Bombardier train unit (Wall Street Journal, Jacquie NcNish and Ben Dummett) highlights the French train giant’s offer for Bombardier’s train business as the former tries to boost its scale to take on increased competition from China’s state-owned CRRC, the world’s biggest railway supplier. Conversely, Bombardier has been trying to reduce its business following a number of production issues and order delays. The deal is expected to be in a mix of cash and stock but will have to get past a number of antitrust regulators before going ahead. Alstom was on the wrong

end of this back in 2017 when it tried to merge with the train-making business of Siemens, but the European Commission (the EU’s antitrust group) blocked it, saying that it would lead to higher prices. * SO WHAT? * This sounds like a reasonable deal and would really help Bombardier as it would halve its debt at a stroke and allow it to concentrate on business jets which include brands like Challenger, Learjet and Global. Still, it has hurdles to clear before that.

Strong profit in Arm’s reach (Daily Telegraph, James Titcomb) shows that Britain’s biggest microchip company unveiled its best profit for three years, giving its Japanese owners (Softbank, who bought it for £24bn in 2016) a rare bit of good news. Arm’s designs are used in virtually all of the world’s smartphones and tablets. Its revenues come from licencing its designs to tech companies and then raking in the royalties. The company had fallen into the red in the previous quarter due to its high R&D spend.



And finally, in other news…

I thought I’d leave you today with the very enterprising florist in Florists add note taking blame for late Valentine’s flowers for those who forgot (The Mirror, Luke Matthews and then the altogether uplifting Man runs marathon in apartment as China fights virus with exercise (AFP, Good on him 👍

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Some of today’s market, commodity & currency moves (as at 0728hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq**DAX *CAC-40 *Nikkei **Shanghai **
7,409 (-0.58%)29,398 (-0.09%)3,380 (+0.18%)9,73113,744 (-0.01%)6,072 (-0.18%)23,523 (-0.69%)2,955 (+1.30%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)