Please find below our Investment Market Update as at 11th December 2020.
Blue Sky Investment Market Update
Summed up perfectly
I though this morning’s headlines on Bloomberg online summed things up perfectly:
Boris Johnson warned Brexit trade talks may fail, while the EU and US are pressuring Turkey. Airbnb surged on its debut, and HSBC and other British banks can pay dividends again. London is bracing for more Covid curbs.
So, there are two bits of good news in here, one being that dividends are once again payable on British bank shares and the other, is that in these troubled times there is a real appetite for Initial Public Offerings (IPO’s), in this case,Airbnb.
Dividends are back
The Bank of England sanctioned the payments of dividends once again, after they were suspended earlier in the year when the pandemic hit. Interestingly, it appears as though the suspension of dividends will last a while longer in Europe.
Bank shares of HSBC and Standard Charter rose overnight in Hong Kong by over 2 and 3% respectively, but today here in the UK, they have started slightly weaker in harmony with the markets in general and because much of the expectation around the share announcement was already factored in the price of such shares.
It’s interesting to note the different stance of the regulators which perhaps is an indication of the divergence of policy between Europe and the UK.
The rising confidence of investors
Airbnb shares launched on Thursday of this week and subsequently rose by 114.7% in one day! The previous day a company called DoorDash in the US also had an IPO which resulted in a daily rise of more than 80%.
Such rises reinforce the appetite of investors to take on risk as the outlook for the global economy continues to improve, even if economic data suggests otherwise. Remember, such economic data is backward looking whereas investment markets are forward looking.
Not so good news
It has been widely reported that the chances of a deal with Europe are now looking flaky and quite slim, if we are to believe what we hear. We wait with bated breath!
If this uncertainty wasn’t enough, it now looks like London will pitch into tier 3. If we didn’t have positive news on the vaccine, then this would be a perfect storm.
What are the indicators?
I was asked twice this week a version of the same question; “what are the indicators we need to see before moving money from cash towards investments”?
The questions came from a business who have been holding lots of cash on deposit and an individual who inherited money many months back but has been awaiting the right opportunity to invest. Neither are existing clients.
I referred them to my recent communications which stated that the indicators have already happened. Again, an example of how easy it is to become anchored in the doom and gloom perpetuated by news bulletins. Make no mistake, a recovery is underway.
The green revolution
Frequently, I post updates on how the protection of the environment is now centre stage when it comes to how investment houses and trustees choose assets for their portfolios. It’s encouraging to see that the investment world is making companies more accountable.
Governments also have a major role to play and it’s encouraging to see more good news on this front. Policy makers in the EU plan to increase measures to cut greenhouse emissions and meet new climate targets. They will force thousands of plant and industrial sites to pay more for emissions.
Even China is making progress!
I mention China because I was asked another question this week by a potential investor, when talking about how governments around the world were committing to the climate change agenda. A question which understandably challenged this general statement by mentioning China’s poor record in matters environmental.
Amongst many things, China has struggled for years to deal with the waste its 1.4 billion residents generate. China’s largest rubbish dump, the size of 100 football fields has become full 25 years ahead of schedule!
China is now forcing restaurants, e-commerce platforms and delivery services to report their use of single plastic. The Ministry of Commerce says it has established a nationwide system for retailers to report their plastic consumption. This is part of a wider push to deal with China’s waste problem.
The China National Recycling Association reports that the country produced 63 million tonnes of plastic in 2019 with a recycling rate of around 30%.
In September, the Ministry said that single use plastic bags and eating utensils would be banned from major cities by the end of the year, while single use plastic straws would be banned nationwide. Okay, they may have had their hand forced on this one due to their own logistical issues but, of course, these measures are part of the education and behavioural framing which is required.
Have a great weekend and, think of your recycling when you unwrap those presents in 14 days’ time!
Have a lovely weekend.
Gary and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.