Monday 24/02/20

  1. In CORONAVIRUS NEWS, the IMF warns of global economic vulnerability, Italy and Iran have issues and we look at ongoing effects on private jet demand and toys
  2. In CAR NEWS, we see China’s designs on India and how Tesla’s electronics are ahead of the rest
  3. In INDIVIDUAL COMPANY NEWS, UK estate agents Countrywide and LSL talk about merging, retail parks are about to lose more restaurants and Warren Buffett’s Berkshire Hathaway has a ‘mare
  4. In OTHER NEWS, I bring you an analogue solution to a digital problem plus world record planking…



So the IMF warns, Italy and Iran have problems and we see private jet demand rise and potential disappointment over toys…

‘Fragile’ global recovery put at risk by virus, says IMF chief (Daily Telegraph, Tom Rees) highlights remarks from the IMF’s managing director, Kristalina Georgieva, who said that the coronavirus has “disrupted economic activity in China and could put the recovery at risk”. She added that the IMF would give money for debt relief to the poorest countries via a special trust that covers public health and natural disasters as the effects continued to spread. Even Chinese president Xi Jinping admitted that that the virus would have a “relatively big impact on the economy”. The IMF estimates that China’s growth will slow right down from its original January prediction of 6% to 5.6% and that global growth will be 0.1% slower than it had originally predicted.

Meanwhile, Italy quarantines northern towns in coronavirus outbreak (Financial Times, Miles Johnson) shows that infection is spreading in the country, resulting in the cancellation of the last two days of the Venice carnival and a number of Italian football fixtures while fashion designer Armani held an empty show in Milan yesterday. MIDO, the world’s biggest eyewear trade fair that was due to take place this month has been moved to June. Iran tries to combat public distrust on coronavirus (Financial Times, Namjeh Bozorgmehr) shows that the country’s authorities are shutting down schools, universities and some religious seminaries in order to calm rising levels of public distrust over the containment of the coronavirus as

the death toll increases. Iranians have been panic buying food and other supplies and prices of sterilisers, masks and some food items have quintupled in the last few days alone.

In terms of effects on specific areas and industries, Private jet demand surges in wake of coronavirus outbreak (Financial Times, Tanya Powley) highlights the sharp increase in demand for private jets as companies and individuals look for ways to fly out of Hong Kong (the number of business jet flights between Hong Kong and Australia and North America shot up by 214% last month versus the previous year, according to one company). This comes as airlines have dramatically cut the number of flights in and out of China. Then in MGA boss warns coronavirus could lead to toy shortage (Financial Times, Alistair Gray) we see that MGA Entertainment – which makes LOL Surprise! miniature collectibles (last year’s biggest selling toy, apparently!), Bratz fashion dolls and Little Tikes – thinks that the outbreak will result in a global shortage of popular toys. The toy sector is thought to source around 80% of its products from China and Toy retailers see cold Christmas ahead (The Times, Ashley Armstrong and Callum Jones) provides further evidence of how retailers are bracing themselves for a tough time ahead. Gary Grant, chief exec of The Entertainer, the UK’s biggest independent toy retailer, says that if the outbreak continues for the next few weeks, there could be major issues with Christmas stocks because new ranges are usually marketed in August and September for sale at Christmas. If production issues persist, this will push new toy launches back by a year. * SO WHAT? * The nightmare continues as no-one knows when the spread is going to stop. The momentum of SARS in 2002/3 was said to have slowed down as Spring weather approached and many will be hoping that this will help slow the current coronavirus’ momentum.



Chinese carmakers target India for growth and Tesla’s electronics are years ahead of the competition…

In Chinese carmakers accelerate drive into India (Financial Times, Benjamin Parkin) we see that manufacturers such as Great Wall Motor and FAW Haima are trying to counter sluggish growth in their domestic market with their first forays into India. SAIC Motor started selling MG cars there last year and BYD, which makes electric buses in India, has plans to launch electric vans there. Chinese manufacturers were present in force at this month’s New Delhi auto expo unveiling 10 new models. * SO WHAT? * Vehicle sales fell by 8% in China last year and although sales in India actually fell by 13% in the same time period, the expectation is that they will recover more quickly and then overtake China’s domestic sales in terms of growth rate. IHS Markit reckons that India will overtake Japan as the world’s #3 car market after China and the US by 2025 – so clearly the expectation is there. At the moment, Maruti Suzuki (a subsidiary of Japan’s Suzuki) has a massive 50% market share in the country, with South Korea’s Hyundai also doing well there. Clearly there is room for others.

Tesla electronics ‘years ahead’ of Toyota and VW (Financial Times, Hideyoshi Kume) is a VERY interesting article which talks about Tesla’s electronics technology. Basically, Nikkei Business Publications (a sister publication of the FT) took a Model 3 apart and got people to have a close look at it. The car’s integrated central control unit, aka Hardware 3, includes two custom-made AI chips with bespoke software that powers the car’s self-driving capabilities and infotainment system. One engineer from a major Japanese car manufacturer took a look and said “we cannot do it” and other industry insiders believe that similar tech won’t become mainstream until around 2025 at the earliest. * SO WHAT? * Systems like Hardware 3 drastically reduces the number of electric control units (ECUs) in cars, potentially decimating suppliers who make these components – and it is thought that car manufacturers are caught between remaining loyal to their suppliers and moving innovation forward at a more natural (faster) pace. This hardware enables “over the air” software updates and is one of Tesla’s key features. Sorry, but I think loyalty is going to have to go out of the window. If carmakers can develop their own Hardware 3 equivalent systems, they will – after all, they have to survive as well. Although this tech is indeed very impressive, the fact is Tesla is still some distance away from being mainstream and the more established manufacturers have the firepower to make big improvements in this area, should they be so minded. Interesting though, no?



UK estate agents talks about getting together, more restaurants look vulnerable and Berkshire Hathaway has a year to forget…

Estate agents Countrywide and LSL ‘in £460m merger talks’ (The Times, Tom Howard) heralds a potentially big merger between the two as Countrywide (which owns Hamptons International and Bairstow Eves among many others) and LSL Property Services (which owns Your Move and Marsh & Parsons) are in early stage discussions. * SO WHAT? * I would have thought that a deal would make strategic sense given that transaction volumes have fallen and the housing market has been weak going into the end of last year. Presumably, logic would suggest that a getting together will result in cost savings (i.e. branch closures and job losses) at the same time as the market is going into an upswing initiated by the general election result. Not nice for those involved, however.

Retail park restaurants facing axe this week (The Times, Louisa Clarence-Smith) shows that the owner of Frankie & Benny’s and Chiquito, The Restaurant Group, is expected to be announcing closures this week of underperforming sites, many of which are in out-of-town retail parks. Some of them will be turned into Wagamama restaurants, but the company did warn last September that at least 50% of its 352 sites could be shut down over the coming years. The Restaurant Group is due to report full-year results on Wednesday. * SO WHAT? * This will just add to the headache that retail park landlords are feeling these days.

Warren Buffett’s Berkshire Hathaway stock underperforms the most since 2009 (Wall Street Journal, Nicole Friedman) highlights a tricky year for uber-investor Warren Buffett’s investment company as its share price only rose by 11% in 2019 versus a rise of 31.5% in the S&P500. He just said that everyone should concentrate on the long term and sung the praises of Ajit Jain and Greg Abel, who are to replace the 89 year-old Warren Buffett and 96-year old business partner Charlie Munger. Bit of a cop-out, but I guess you can just do whatever you want when you are Warren Buffett!



And finally, in other news…

I thought I’d leave you today with the very amusing Woman’s ‘game-changing’ online shopping trick means she always buys right shoes (The Mirror, Courtney Pochin and the very impressive Former Marine planks for over 8 hours, setting Guinness record (USA Today, Joel Shannon This guy is 62!!!

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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 **
7,404 (-0.44%)28,992 (-0.78%)3,338 (-1.05%)9,57713,579 (-0.62%)6,026 (-1.01%)HOLIDAY3,031 (-0.28%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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