Thursday 28/01/21

1. In MACROECONOMIC & MARKETS NEWS, Vietnam shows how it’s done, Asian markets  follow US lead and GameStop trading shows pros getting their &rses kicked
2. In VACCINE & CORONATRENDS NEWS, the EU gets nasty, “no jab, no job” needs clarification while city centre rents fall, shop vacancies rise and car production hits lowest level since 1984
3. In FINANCIALS NEWS, Ant has some big news and JP Morgan is set to launch a new digital bank in the UK
4. In INDIVIDUAL COMPANY NEWS, Apple, Tesla and Samsung all report decent results
5. AND FINALLY, I bring you some “unique” examples of interior design…

So Vietnam rises, markets weaken and Gamestop gives the pro’s a bloody nose…

📢 It’s Thursday – so it’s time for my 30-minute Instagram Live At Five where I will run through the week’s key stories AND the one hour weekly ZOOM call for paying subscribers where I will do the same but in more detail and with much more interaction 👍 The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

*** ALSO, Watson’s Daily is publishing a new product today called “Quick Bites”. These are a series of short articles written by some of my Watson’s Daily ambassadors that are approved by me. At the moment, the only way you can access the full articles is by opening and then scrolling down the daily e-mail that I send subscribers. We are testing this new format out at the moment, but if you like it we will continue! Let me know what you think! ***

In these trying times, it’s always good to read about some countries getting it right on coronavirus! Asia’s Covid recovery: Vietnam’s breakout moment (Financial Times, Lien Hoang) shows that Vietnam has managed to avoid prolonged painful lockdowns (after the very strict one imposed initially), loads of deaths and overrunning hospitals by keeping a tight control of the borders and being very tough on breaches. Now it has one of the fastest GDP growth rates in the world (+2.9%) and is aiming for 6.5% this year on the ongoing attraction of high quality foreign investment and rising exports. * SO WHAT? * It’s amazing to see how this country has managed to keep a lid on things! As such, it is now being seen as the world’s second most likely M&A destination for 2021 behind the US, according to a Euromonitor list. The country is looking to focus on the tech sector and has managed to attract investments from Pegatron, which supplies Apple and Samsung, and LG Electronics. By the end of this year, almost all of Apple’s major suppliers in Asia have either established operations in the country or plan to do so. It has definitely benefited from companies trying to shift their supply chains away from China as well as its handling of the virus and the limited impact on its economy. I really recommend that you read this article in full if you can – it is fascinating!

Meanwhile, Asia stocks drop after Wall Street suffers biggest sell-off of 2021 (Financial Times, Thomas Hale and Tabby Kinder) highlights market weakness across Asia as Wall Street had their biggest off day since October (have a look at the figures in the table at the bottom of Watson’s Daily) and came despite the Federal Reserve reiterating that it would continue with its loose monetary policy (i.e. it will be keeping its interest rates at close to zero). Markets were weaker, however, on increased fears of the damaging effects of new coronavirus variants, the varying rates of vaccine rollouts and delays to Joe Biden’s proposed stimulus package.

Then in GameStop mania reveals power shift on Wall Street – and the pros are reeling (Wall Street Journal, Gunjan Banerji, Juliet Chung and Caitlin McCabe) we see that there is something strange happening as stocks that had been suffering – like GameStop and AMC Entertainment (up by 135% and 301%) respectively – are benefiting hugely from a high stakes game of chicken being played between professional investors shorting the stocks on the one hand and amateur investors banding together to go the opposite way and buy stocks by exhorting each other to keep buying using platforms such as Reddit, Discord, Facebook and Twitter. GameStop, AMC and Blackberry have, as a result, become some of the most traded stocks in America due to all the social media buzz. Pro investors have had to close out short positions due to retail investors engaging in a feeding frenzy. Things have actually got so bad that White House ‘monitoring GameStop share surge’ (The Guardian, Mark Sweney and Dominic Rushe) shows that concerns about such movements are going right to the top. Hedge fund Melvin Capital Management has lost 30% of its $12.5bn funds under management so far this year, having taken a pounding from a load of Reddit users on the “Wall Street Bets” forum. A tweet by Elon Musk earlier this week about the company and its Reddit fans reportedly helped its share price shoot up in after hours trading on Tuesday! * SO WHAT? * This is a very dangerous game. While momentum investing is a very well-trodden path, getting on the wrong side of an options trade is every bit as frightening as it is euphoric when you get it right. For all those gloating now, there will be many nursing catastrophic losses on the way down. Fundamentals or not, I always say that the skill in investing is not necessarily getting it right or wrong (although you definitely want to get it right more than you do wrong!) – it’s spotting the trend just before it changes and putting your bet in first. You don’t have to be fundamentally right – you “just” have to pinpoint the time moments before everyone’s sentiment changes. And that is DIFFICULT!

The EU gets nasty, employers need jab clarification, city centre rents fall, shop vacancies rise and car production reaches new lows…

This whole vaccine thing is getting really nasty now. EU demands UK Covid vaccines from AstraZeneca to make up shortfall (Financial Times, Michael Peel, Sam Fleming, Donato Paolo Mancini and George Parker) shows that the EU is now saying that AstraZeneca must take coronavirus vaccines made here to make up for shortages in Europe. Supporters of the British side will say that this is a European **ck-up because they faffed around with AstraZeneca trying to squeeze out a better deal (the UK signed a deal a full three months before the EU did) and that BoJo has a watertight deal with the company – but the Europeans will say that AstraZeneca has both moral and contractual obligations to supply its member countries. * SO WHAT? * Someone has **cked up royally here and the fact is that people are going to die because of it. I think that there is a very real danger here that this issue is going to be used as a Brexit bargaining chip somehow by either side. It does go to show, however, the nastier side of the EU rather than the united and righteous fluffy bunny image it tries to project. The Europeans know that cracks are forming and they will fight to protect the union in order to stop member nations going it alone in exasperation. I have no doubt that the European press will be full of articles pointing at AstraZeneca and the UK as being vaccine-stealers. Who is right? I don’t know. But it won’t be any keyboard warriors. It will be interesting to see whether this leads to a renewed wave of populism across Europe…

You’ll recall that I have referred in the past to jabs for jobs among employers and the debate around the legality of this stance, well Don’t let lawyers stand in way of ‘no jab, no jab’ policy (Daily Telegraph, Matthew Lynn) appeals for more clarity – but from the government. It appeals for Parliament to legislate on this to clarify the position rather than do nothing and see a whole deluge of claims for unfair dismissal, discrimination, violation of human rights etc. * SO WHAT? * Given the fact that businesses are facing so much uncertainty at the moment, making this position clearer will mean that there is one thing less to worry about. And we could all do with that!

All the while, City centre rents plummet as demand for suburbs soars (Daily Telegraph, Melissa Lawford) cites figures from Rightmove which show that rents for the last quarter of 2020 in London, Edinburgh and Manchester fell by 12.4%, 10% and 5.3% respectively as the WFM trend and desire for more space decimated demand. The number of available rental properties also doubled in five major city centres – but this stands in stark contrast to the overall national trend where the number of rental homes has fallen by 9% year-on-year. The Great Coronavirus Exodus continues in earnest.

It’s not much better on the high street either as Vacant shops spread fastest in 30 years (The Times, Louisa Clarence-Smith) cites a survey by the Royal Institute of Chartered Surveyors (Rics) which just puts what we already know into black and white. Office space vacancies are now at their highest level since the financial crisis while industrial property (which includes warehouses) has been the only sector to see positives. Then in Car production plunges to lowest level since 1984 (Daily Telegraph, Alan Tovey) we see more depressing figures, this time from the Society of Motor Manufacturers and Traders, which shows a frightening 30% drop in output last year. Again, I’d say that this just confirms in figures what we already know. I do not expect either of these situations to improve any time soon given ongoing Covid uncertainties.

There’s an update on Ant and JP Morgan eyes the UK for a digital bank…

This is something that we’ve got more about in today’s inaugural Quick Bites (you can only access this by looking at the daily e-mail I send you – you just have to scroll down) BUT Regulators tighten their grip as Jack Ma’s Ant Group undergoes restructure (Daily Telegraph, James Cook) shows that Jack Ma’s fintech business Ant Group is going to restructure its business dramatically following pressure from authorities to wind in its more exotic activities, Ant plans sale of prized US asset as user data scrutiny intensifies (Financial Times, Tabby Kinder and James Kynge) shows that it’s going to sell off its EyeVerify biometric security business to raise capital but Ant Man Ma can celebrate reprieve on float (The Times, Simon Duke) takes a more positive stance saying that by jumping through all these hoops Ma could eventually go ahead with plans to do an IPO for Ant (the IPO originally slated for the end of last year was abruptly cancelled just 48 hours before it was due to float following the intervention of authorities). The governor of the People’s Bank of China, Yi Gang, gave his blessing as long as the company follows “legal procedure”. Tough times for Jack, but the door has not been closed completely…

In JP Morgan to launch digital bank in UK (The Guardian, Kalyeena Makortoff) we see that Wall Street giant JP Morgan is planning to launch a digital-only bank in the UK that could throw the cat among the pigeons, disrupting the existing high street lenders. It has already taken on 400 staff for the bank that will have its HQ in Canary Wharf and be called “Chase”. * SO WHAT? * It’s interesting to see this move and it will be the second big US bank, after Goldman Sachs, to enter the UK retail banking market (remember Goldman’s contender is called “Marcus”) in a relatively short space of time. It’ll be interesting to see what their customer acquisition strategy is, but if they do what Marcus did (offer decent interest rates) it will no doubt get inundated as Marcus had to close to new customers because of the spike in demand last summer. OK so the recent US banking reporting season showed that trading and corporate advisory revenues powered them through volatile markets, but I guess the thinking is that when things calm down there’s more money to be had from the retail business.

Apple, Tesla and Samsung all report solid results…

Finishing on an upbeat note, Apple’s iPhone 12 helped deliver a record $111.4billion quarter (Wall Street Journal, Tim Higgins) shows that Apple had its most profitable quarter ever due to strong sales of iPhones, laptops and tablets, Tesla posts first full year of profitability (Wall Street Journal, Rebecca Elliott) shows that the EV specialist put in a solid performance and announced plans for sharp production increases in the next few years

(around 50% per annum) and Samsung profit rises 26% on continued pandemic-driven demand (Wall Street Journal, Elizabeth Koh) showed a very respectable 26% rise in its Q4 net profit as the world’s #1 maker of smartphones and memory chips continued to benefit from continued demand. A welcome bit of good news from the company following the rather more negative recent news about its senior management. Competition from rivals is ramping up all the time, though!

…in other news…

We can all do with a lift from time to time and although it is never nice to laugh at other people’s misfortunes, I think it is OK to laugh at some incredible design faults in Bizarre flat has squat toilet in kitchen as social media snaps reveal ‘worst properties’ (The Mirror, Joseph Wilkes). Oh. My. God.