Wednesday 04/11/20

1. In CORONATRENDS NEWS, we see why Lockdown 2.0 may not be so bad and consider more winners and losers
2. In FIN/TECH NEWS, Ant Group’s IPO gets a kick in the teeth and Nvidia/Arm is getting Chinese resistance
3. In INDIVIDUAL COMPANY NEWS, Ikea says it’s ready for lockdown, BNP benefits from trading revenues and Deloitte grows its legal arm
4. AND FINALLY, I show you why you need to put the lid down…

So we look at how Lockdown 2.0 may not be as bad and identify some winners and losers…

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Why the UK’s second wave is likely to cause less economic pain than the first (Financial Times, Chris Giles) contends that the level of Covid infections are likely to be lower than March as recent data suggests that “cases have not spiralled out of control”, death rates haven’t increased and there is some evidence to say that the growth rate of the virus is actually slowing. Economists believe that although the effects of a second lockdown will be bad, the consequences will be less damaging than they were the first time around as it’s not a complete shutdown and because restrictions are supposed to end in December, it is thought that consumers are more likely to postpone rather than cancel their spending plans. * SO WHAT? * You always have to take what economists say with a pinch of salt because they are always adjusting their forecasts. However, I would agree with the view that this lockdown won’t be as damaging as the first because a) we have the benefit of more experience of lockdown and how to cope with it, b) not everything has shutdown like last time and c) because there is a concrete spending catalyst on the horizon in the form of Christmas. I believe that IF this second lockdown does not extend, consumers will spend once more before Christmas because that is all many of us can look forward to at the moment! 

Meanwhile, Up to 18,000 high street premises could be vacant amid Covid crisis (The Guardian, Sarah Butler) cites Local Data Company (LDC) analysis which estimates that another 18,000 high street premises could be empty in 2020 as a result of the imminent month-long lockdown. This would mean that 14% of the high street would be vacant – the highest level since the LDC started the survey

in 2013. So far, a net 7,834 outlets closed in the first half of this year. Retailers in last-minute bid for sales (The Times, Alex Ralph) shows that the likes of John Lewis, Dixons (which owns PC World, Currys and Carphone Warehouse), Waterstones and The Entertainer are all opening late into tonight in order to get in as many sales as possible. Pubs are also cutting their beer prices to reduce the amount they are going to have to pour away. Primark boss eyes 24-hour trading push for Christmas (Daily Telegraph, Laura Onita and Simon Foy) shows that Primark, which does not do any online sales, is pushing for 24-hour trading in December to make up for lost sales under lockdown.

On the other hand, Iceland sales jump 22% during pandemic (Financial Times, Jonathan Eley) shows a potential winner under Lockdown 2.0 as it turns out that sales were up by almost a quarter in the six months to September as consumers rediscovered the joys of frozen food while The surprise success stories ready to ride second wave (Daily Telegraph, Marianna Hunt) highlights other winners including Match Group (benefited from introducing new features such as video dating), Pets At Home (consumers wanted pets and stuff to pamper them with under lockdown), Etsy (people were getting crafty under lockdown) and Pinterest (makes money from advertising and has attracted more eyeballs for its creative idea boards). HelloFresh doubles revenue as consumers snap up meal kits (Financial Times, Alice Hancock) shows that consumers are looking at alternatives to takeaways and Pandemic sets off a scramble to snap up outdoor heaters (Financial Times, Harry Dempsey and Alice Hancock) shows that some people (and businesses) are desperately trying to get hold of outdoor heaters in order to be able to socialise outside. The likes of AEI Corporation and Herschel Infrared Heaters are seeing demand go through the roof but distributors like Heat Outdoors are saying that the sudden nature of demand is resulting in long lead times as manufacturers catch up. Meanwhile, Prices surge as buyers retreat to the country (Daily Telegraph, Melissa Lawford) shows that country houses in the £3-4m price bracket are selling at their fastest rate since 2016, according to Knight Frank, as millionaires seek out agreeable escapes from the city (they spiked in 2016 because they were all trying to beat a stamp duty surcharge on second homes). * SO WHAT? * I have to say that I think that Primark’s push for 24-hour trading when this lockdown ends could be quite a good idea as I’m pretty sure workers would be on for it (to earn money) and it could result in less of a crush, which would be good from a social distancing point of view. Any beneficiaries from the first lockdown are likely to be better prepared this time around and could potentially do even better IMO.

Ant Group gets a bloody nose and Arm/Nvidia faces resistance…

In a rather shocking turn of events, Beijing squashes Ant Group’s mega-listing on the market (Daily Telegraph, Matthew Field and James Cook) shows that the world’s biggest IPO has been snuffed out (for the time being, anyway) by Chinese regulators following a meeting with Jack Ma to address concerns regarding risky lending practices. The Shanghai Stock Exchange suspended Ant just 48 hours before it was to go public. They have told Ma that the IPO cannot go ahead until Ant Group complies with new capital requirements that came into force for financial companies from November 1st. Alibaba, which originally spawned Ant Group and still owns 9% of it, saw

its share price fall by 9% in trading yesterday. Ant IPO/CCP: party pooper (Financial Times, Lex) says that a restructuring of the IPO now looks likely. * SO WHAT? * This just goes to show that Jack Ma overstepped the line once too often in his criticisms of regulation and that the ruling party is giving him a slap. Given all the prestige involved with what will be/would have been the world’s biggest IPO of a true Chinese winner, you would have thought that this is just an annoying bump in the road for an unstoppable juggernaut.

Battle at Arm China threatens $40bn Nvidia deal (Financial Times, Ryan McMorrow, Qianer Liu and Henny Sender) shows that Nvidia’s proposed purchase of Arm Holdings from SoftBank is facing holdups in China as it turns out that the disgruntled head of Arm Holdings’ Chinese venture controls almost 17% of its shares via an investment fund. * SO WHAT? * This could put a major spanner in the works for any deal and so negotiations are ongoing.

Ikea gets ready for lockdown, BNP benefits from trading and Deloitte grows its legal capability…

It’s interesting to see Ikea says second round of lockdowns will have less impact on its business (Financial Times, Richard Milne) as this shows that the flat-pack supremo is confident going into lockdown. It says that it has learned from its mis-steps in the original lockdown and tightened up its supply chain and production in order to keep going. Ikea, which is the world’s biggest funiture retailer, has asked suppliers to work extra shifts over the last few months to catch-up with pent-up demand under the first lockdown. As people have kitted out their home offices, average spend has jumped from €93 to between €118 and €120. It sounds like they are getting ready!

Then in Trading revenues surge at BNP Paribas (Financial Times, David Keohane and Owen Walker) we see that France’s biggest bank reported higher trading revenues and lower-than-expected bad loan provisions, which came together to boost profits above analysts’ expectations. * SO WHAT? * This goes to show that it pays to have diverse revenue streams as a bank. It also confirms the trend seen at other banks with significant trading divisions (e.g. Goldman Sachs, Morgan Stanley etc.) that market participants are benefiting from volatile markets under Covid.

I thought I’d mention Deloitte acquires Kemp Little in UK legal services push (Financial Times, Tabby Kinder and Kate Beioley) because the big four accountant has, at a stroke, doubled the size of its UK legal practice by buying tech-focused law firm Kemp Little. There has been a trend over the last few years for accountants to stray out of their accountancy playpen and dabble in law as they try to broaden their offering on the professional services front. It’ll be interesting to see whether more of this happens and/or whether law firms start to dabble in accountancy…

…in other news…

I thought I’d leave you today on a note of caution with Gross images show why you should always close the toilet lid when you flush (The Mirror, Luke Matthews). Yuck 🤢!