Thursday 18/01/24

  1. In MACRO NEWS, geopolitics dominates Davos, global stocks weaken, China has demographic and real estate problems and UK inflation rises unexpectedly
  2. In EV NEWS, Hyundai and Kia take on Tesla, Ola Electric goes for an IPO, UK EV depreciation is big and Chinese EV manufacturers get ready for a UK price war
  3. In REAL ESTATE & CONSUMER NEWS, UK house prices drop fast (but sales rise) and estate agents see reasons for optimism while consumers love leisure and travel
  4. In MISCELLANEOUS NEWS, jet fuel suppliers get nervous and Pearson sees profits
  5. AND FINALLY, I bring you whipped honey 😯. I know, I didn’t know it was a thing either (or maybe I’m the only one)…

1

MACRO NEWS

So geopolitical concerns dominate, global stocks weaken, China has some fundamental issues and UK inflation increases…

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Geopolitical risks overshadow economic optimism in Davos (Financial Times, Sam Fleming) shows that although the overall economic backdrop to the annual gathering of world leaders (and celebs) is better than had been anticipated a year before, the tone of the event has been muted by geopolitical risks that will impact policymaking in 2024. Wars in Europe and the Middle East spilled into this year with the latter one in particular starting to have a major impact on global supply chains. If you overlay that with the fact that eight of the world’s ten most populous countries are holding elections this year, concerns are understandable. The one that people are most concerned about, though, is the US presidential election which is due at the end of this year as a Trump victory could destabilise an already fragile mood.

Then in Global stocks drop as hopes fade for early interest rate cuts (Financial Times, Martin Arnold, Stephanie Stacey, George Steer and Kate Duguid) we see that global stock and bond markets fell yesterday as investors walked back expectations for sooner-rather-than-later interest rate cuts in the US, Eurozone and UK. Strong US retail sales data implied that inflation has not been tamed just yet, the ECB hinted that interest rates would start

coming down in the summer rather than the spring and UK inflation unexpectedly rises as cost of tobacco and alcohol increases (The Guardian, Richard Partington and Phillip Inman) highlighted the surprise rise in inflation to 4% in December – the first increase in ten months – which would suggest that UK interest rate cuts may also be delayed. Tobacco prices increased by 16% on the year and alcohol prices were up by 9.6% which meant that these prices contributed the most to inflation since 2006!

Things are a bit tricky in China at the moment. How China’s birth rate risks Xi’s imperial ambitions (Daily Telegraph, Eir Nolsøe) highlights China’s declining birth rate. The country’s population feel by 2m to 1.4bn last year, marking the second consecutive year of decline after six decades of growth. Fertility rates last year were the lowest on record, births were down and deaths were up. China’s infamous one-child policy that carried on for almost 40 years is now coming home to roost and a lack of future workers will have major economic consequences in decades to come. Who stands to gain from China’s demographic collapse? (Financial Times, Lex) takes a look at what sort of industries and companies will benefit from the fact that 20% of China’s population was 60 or older as at 2022. The “silver economy” is thought to be worth trillions of dollars and health-related businesses – from medical devices to pharmaceuticals – could benefit hugely. Local biotech and pharma groups such as Jiangsu Hengrui, WuXi Biologics, Shanghai Fosun Pharma and Sinopharm are among those who could stand to benefit. Meanwhile, China’s property woes prompt fears for economic growth (The Times, Jack Barnett) shows that although China managed to hit its GDP growth target in 2023 at 5.2%, repeating that this year is going to be a tall order according to analysts. Debts at China Evergrande and Country Garden have had a severe economic and psychological effect on the country and although politicians have tried to make the sector more attractive, people are just avoiding buying properties. Without any big boost/initiative from Beijing it’s difficult to see how this situation is going to change any time soon.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

2

EV NEWS

Hyundai and Kia are Tesla’s biggest US rivals, Ola Electric heads for an IPO and EV prices fall…

Hyundai and Kia Emerge as Tesla’s Biggest U.S. Rivals (Wall Street Journal, Sean McLain) shows that the two Korean makers are emerging as Tesla’s biggest threat as the two (Hyundai is Kia’s parent company) climbed to #2 last year for US EV sales. It looks like they will consolidate their position over non-Tesla rivals this year with new models and competitive pricing. They are also continuing with their expansion plans in the US by building a new plant and battery-making facility in Georgia in addition to doing a $200m overhaul of an existing EV factory in order to boost EV production.

Meanwhile, Ola Electric heads for two-wheeler IPO in India’s first EV listing (Financial Times, Chloe Cornish) takes a look at the imminent flotation of the electric scooter company Ola Electric that will be right up there as one of the biggest Indian IPOs in the last two years. Unfortunately, Ola is fighting headwinds including the lukewarm reception of start-ups at the moment, high staff turnover, tighter competition from established manufacturers (like Honda and Indian makers Hero and Bajaj) and a loss of government subsidies that will make purchasing electric scooters less compelling. Ola Electric is looking to raise $661m in the IPO and the proceeds will be invested in building a battery factory in India, R&D and paying down debts. * SO WHAT? * There have been a LOT of bumps in the roads to get the company to this stage and you do wonder how it will do when more established makers get their act together.

Meanwhile, back home. Electric cars lose half their value after three years as used prices crash (Daily Telegraph, James Titcomb) cites research from Auto Trader which showed that the rate of depreciation on EVs is faster than that of petrol equivalents. Used prices of EVs have fallen by 23% in the last year alone! The research said that, on average, a £50,000 EV could lose £24,000 in three years versus the petrol equivalent which could fall by £17,000. * SO WHAT? * It is interesting to note that EV prices could fall further this year as thousands of motorists return the vehicles they bought on three-year leases and manufacturers cut prices of new vehicles. In December, car makers were offering average discounts of 10.6% versus 4.8% a year earlier. Also, from this month, EVs will need to account for 22% of every manufacturer’s sales which looks likely to lead to big discounts being offered to tempt customers.

There may be further downward pressure on EV prices according to China set to launch a price war on UK electric vehicle market (The Times, Robert Lea) as the same Auto Trader report predicted that Chinese brands will embark on a price war and take 16% of all UK car sales by 2030 thanks to their stronger pricing power (lower manufacturing costs etc.). * SO WHAT? * Their prices in the UK are way higher than they are in China (for instance, BYD’s Dolphin is on sale in the UK at £25,000 but the price in China is £13,000!), so Chinese manufacturers have loads of room to move on price. BYD is in a particularly good position as it makes its own batteries, which are the biggest cost in the making of EVs. Things are about to get very interesting! Will UK consumers flock to buy Chinese? We’ll see soon enough!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

3

REAL ESTATE & CONSUMER NEWS

UK house prices fall while sales rise, estate agents get chirpier and consumers love leisure and travel…

In news on the UK property market, UK house prices fall at fastest pace in more than a decade (Financial Times, Valentina Romei and Aiden Reiter) cites the latest ONS data which shows that house prices fell sharply in November, with the main driver being a sharp decline in London. Average prices fell by 2.1% in the year to November 2023 versus a 1.3% drop in the 12 months to October but is was the biggest fall since June 2011. This is no doubt a reflection of higher mortgage rates (even though they are coming down). That being said, Mortgage price war boosts property sales (Daily Telegraph, Melissa Lawford) cites the latest RICS survey which shows that newly agreed sales hit their highest level since March 2022 in December. Inquiries were also up for the fourth consecutive month and are now at their highest level since April 2022. Estate agents see light on the horizon despite house price falls (The Times, Tom Howard) shows that estate agents are, on balance, feeling cautiously optimistic for 2024. * SO WHAT? * FWIW, I think that prices will probably be underpinned by the

relative lack of properties on the market for the meantime. The prospect of interest rates falling this year will also result in better mortgage deals which may entice more buyers (and sellers!) as the year progresses.

Then in consumer news, Lloyds Bank is bowled over by spending on leisure (The Times, Hikmat Olufodun) shows that Britons doubled their spending on tenpin bowling in December versus the same month a year ago! Spending in bars and pubs also rose by 14% versus the previous year and holiday bookings were also up, something that we saw more evidence of in Hays Travel profits soar 266% as holidaymakers’ confidence returns (The Times, Helen Cahill). The company saw a whopping 93% increase in turnover for the year to the end of April last year and total transaction value also doubled over the time period! * SO WHAT? * It’s pretty amazing that this kind of spending is continuing apace particularly when we are still in the throes of a cost-of-living crisis but I guess people still want to splash out on leisure while they can – whether that is at the more “affordable” end of the scale with bowling or something more substantial like holidays.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

4

MISCELLANEOUS NEWS

Jet fuel suppliers get edgy and Pearson rolls out the profits…

In a quick scoot around some of today’s other interesting stories, Jet fuel supplies put at risk by Red Sea Crisis (Daily Telegraph, Melissa Lawford and Luke Barr) shows that the wars in the Middle East and subsequent avoidance of the Red Sea trade route is causing concerns among airline bosses who may well have to whack airfares up if current disruption results in an increase in the cost of fuel. Shipping and insurance costs are rising and when that happens – you’ve guessed it – they then get passed on to customers! Still, it seems that demand is still high so that would imply that customers can absorb this.

Then in Pearson learns the value of online education as profits grow (The Times, James Hurley) we see that the education specialist had a strong 2023 as it continues its transformation into a tech business. The trading update highlighted how pleased the company was about students engaging with AI-powered study tools. Full year results are due out in March, but it’s looking good at the moment!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

5

...AND FINALLY...

…in other news…

Apparently, whipped honey is a thing! I never knew this! So here’s how you make it…but can you be bothered?!?

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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