Hong Kong enters recession as protests continue
Hong Kong has been declared to be in recession as it has been hit by five months of anti-government protests which have resulted in violence, flames and financial stagnation.
Demonstrators have resulted to throwing petrol bombs and using napalm as a means to protest against Chinese suppression, whilst police have responded with tear gas, water cannons and rubber bullets.
“The blow (from the protests) to our economy is comprehensive,” Paul Chan said in a blog post, adding that a preliminary estimate for third-quarter GDP on Thursday would show two successive quarters of contraction – the technical definition of a recession.
“The government will be announcing its advance estimates for the third quarter on Thursday. After seeing negative growth in the second quarter, the situation continued in the third quarter, meaning our economy has entered technical recession,” he wrote.
Chan added that it would be extremely difficult to achieve the government’s pre-protest forecast of 0-1% annual economic growth.
Protestors continue to be riled as they oppose increasing interference by Beijing authorities in Hong Kong.
Hong Kong returned to Chinese rule in 1997 under a “one country, two systems” formula intended to guarantee freedoms not seen on the mainland.
However, protestors are no longer happy with the status quo as the battle of political and geographical sovereignty continues to ignite.
China denies meddling. It has accused foreign governments, including the United States and Britain, of stirring up trouble.
As protests reach their 21st week, no progression has been made. Both British and American businesses operating in Hong Kong have faced trouble. Firms such as Starbucks (NASDAQ: SBUX) have also had shop fronts torched.
Tourist numbers have plummeted as the protests worsen, seeing tourist numbers fall by over 50%.
Internal Hong Kong business has also slumped, where malls and local businesses have been forced to close amidst tensions.
Chan concluded “Let citizens return to normal life, let industry and commerce to operate normally, and create more space for rational dialogue,”
Whether China and Hong Kong will give any ground for negotiations is yet to be seen.
However, if Hong Kong continues in this trend then a longer term can be expected with low revenue growth and a major slump in economic output.
In political affairs news there have been updates, the FCA has expressed concerns over institutional and retail investors. The London Stock Exchange (LON : LSE) reported strong third quarter trading figures and Facebook’s (NASDAQ: FB) Libra currency is still facing stern tests.
AT&T unveil long term strategy following Elliot Management pressure
AT&T Inc (NYSE: T) have unveiled their long term strategy that included adding two new board members and selling up to $10 billion worth of non core business next year.
Additionally, plans to pay of all their debt from the purchase of Time Warner following pressure from activist investor Elliott Management.
Elliot Management revealed a $3.2 billion stake in the company in September. Since then, Elliot have been pressing AT&T to cut costs, make management changes and scale back expansion plans.
The company added that they expect Randall Stephenson to remain chief executive during 2020.
In a letter to shareholders, Elliot said that AT&T would evaluate all potential CEO candidates whilst separating the Chairman and CEO positions.
“We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott said in a statement.
In an attempt to reduce its debt costs valued at $153.5 billion at the end of Q3, AT&T have sold off assets in Puerto Rico to Liberty Latin America (NASDAQ: LILA) for $1.95 billion.
Another sale was announced over the weekend. Investment group PPF owned by Petr Kellner agreed to buy broadcaster Central European Media Enterprises Ltd (NASDAQ: CETV) in a cash deal valued at about $2.1 billion. As AT&T was CME’s largest shareholder, this means that CME & AT&T will part ways when this deal is completed.
The company expects to generate $14 billion through asset sales and other plans by the end of 2019. So far this year, it reduced its net debt by $12.7 billion.
Total operating revenue fell to $44.59 billion from $45.47 billion. Analysts were expecting about $45 billion, according to IBES data from Refinitiv.
AT&T announced 100,000 new mobile subscribers, which was a positive note for the technology giant.
Currently, shares of AT&T are trading at $36.91 seeing a 0.11% rise. 28/10/19 13:45BST.
In the technology sector there have been updates. Castleton’s (LON: CTP) shares have sunk following poor trade reports, Blue Star (LON: BLU) have expanded into the Esports market and Huawei sales have increased in their third quarter update.
Invesco announces access to Kuwait equity market
Invesco Ltd (NYSE: IVZ) has launched a UCITS ETF that offers investors access to the Kuwait equity market.
This comes as a development of the inclusion in the MSCI Emerging Markets Index planned for 2020.
The Invesco MSCI Kuwait UCITS ETF provides exposure to approximately 85% of the market capitalisation in Kuwait, including companies involved in the nation’s various economic and cultural development projects.
With more than half of total GDP coming from petroleum export revenues, the Kuwait government has started a seven pillar program called the “New Kuwait Vision 2035”.
The purpose of this program is to diversify the economy and transform Kuwait into a financial, cultural and institutional leader in the region.
This includes creating more sustainable housing, developing infrastructure, improving health care services and education, and making the government more transparent and efficient.
Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, said: “With an index comprising financials, communication services, industrials, real estate and materials sectors, our new ETF offers investors the opportunity to gain exposure to those companies at the heart of the long-term transformation taking place in Kuwait. In the shorter term, the inclusion into the MSCI Emerging Markets Index could drive significant inflows from asset managers needing to maintain benchmark weights.”
However a few key investment risks were outlined in the Invesco trading statement released this morning, they are as follows:
- The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
- This fund enters into transactions which expose it to the risk of bankruptcy, or other types of default, by the counterparties to those transactions.
- As this fund invests in companies from a single country, investors should be prepared to accept a higher degree of risk than an ETF that is geographically diversified.
- This fund enters into swap agreements which provide the performance of the Reference Index. These imply a range of risks including the possibility of an adjustment to, or even the early termination of, the swap agreement.
Autins end year in line with expectations
Autins Group PLC (LON: AUTG) have updated their trading figures for the year, concluding that it was expecting to produce results in line with 2019 financial expectations.
The Rugby based firm had outlined plans to significantly cut costs and operational efficiency.
Autins works with the likes of Aston Martin, Bentley, Jaguar Land Rover and Porsche.
The automotive acoustic and thermal insulation company seemed optimistic about 2019 trading despite both political and economic uncertainties.
The AIM listed firm said that “extensive” management actions employed to reduce costs and increase operational efficiency had successfully delivered improved profit margins.
Autins said they were “well-placed” with sufficient capacity to take advantage of the “many opportunities” in its pipeline, to grow and diversify the business.
External sales to customers outside the UK also have grown, and boosted performance from lightweight high-performance material ‘Neptune’ in securing multiple new business client wins, and with production levels ramping up towards the end of the 2019 financial year, which had continued in the new year.
This has been a challenging year for both the industry and the Group, but it has also been a year of repositioning, recovery and new business wins,” said chief executive officer Gareth Kaminski-Cook.
Kaminski-Cook also added ““The positive momentum is encouraging and, combined with a stronger balance sheet following the successful placing in the summer, gives cause for optimism for the year ahead.”
Autins have made an active effort to grow and diversify following strategies to pursue work on new vehicle platforms with new and existing manufacturers.
Autins are set to release their annual results ending in September on December 11th.
After such hopeful predictions it will only be seen whether this optimism can be justified.
Currently, shares of Autins Group Plc are trading at 19p per share. 28/10/19 12:27BST.
In the manufacturing industry there have been updates for the following companies. Nissan (TYO: 7201) have moved Juke operations to the UK, Pipehawk (LON: PIP) had a strong second half trading period and Georgia Capital (LON: CGEO) have experienced their share value slip.
FCA advises to keep retail and institutional investors separate
Financial Conduct Authority (FCA) chief executive Andrew Bailey said in an interview with the Times that he did not think mixing institutional and retail investors in funds is ‘“is necessarily a good idea” and the matter will have to be examined “when the dust settles” after the saga.
Woodford’s flagship Equity Income Fund (WEIF) was frozen in June after becoming overwhelmed by investor withdrawals.
The nail in the coffin appeared to be Kent County Council attempt to withdraw £263m of pension investments from the £3.7 billion fund.
This was unable to meet the redemption request because of the large proportion of illiquid assets in its portfolio.
Bailey commented “That’s why I raise the question of mixing retail and non-retail. That was a relatively big part of the residual fund. Even if technically you could have liquidated holdings to meet that order, you are not satisfying the collective investment test,” he added.
Bailey said the matter will have to be examined “when the dust settles” after the saga. “It has caused me to think, I don’t think [mixing retail and institutional investors] is necessarily a good idea.”
Bailey also defended the FCA’s stance in the Woodford scandal, saying: “the suggestion we did nothing was wide of the mark”.
As a result of the scandal, Woodford closed his investment company earlier this month after being fired as head of WEIF by the fund’s administrators.
In a speech given in the City last week, Bailey said “part of the criticism” faced by the watchdog “is justified”. “The public needs to receive clear meaningful disclosure on the risks they are taking,” he said.
Responding to Bailey’s speech, Investment Association head Chris Cummings said the organization wants “to see the investment management industry and the regulator striking the right balance between investment risk and investor protection”.
In current affairs, there have been updates. Facebook’s (NASDAQ: FB) Libra currency is still facing stern tests, the London Stock Exchange (LON : LSE) reported strong third quarter trading figures and Just Eat (LON: JE) have been caught up in a bidding war between Prosus NV (JSE: PRX) and Takeaway.com (AMS: TKWY).
Hastings Group revenue falls, despite increase in GWP
Hastings Group Hldg PLC (LON: HSTG) have reported that revenue has fallen, despite increase in Gross Premium Writing as a trading update for the year was reported.
GWP for the nine months to 30 September 2019 was £753.1m. This was an increase of 2% from £738.5m in the same period a year prior.
However, reported revenue fell 2% from £574.1m to £563.8m.
Toby van der Meer, CEO at Hastings Group Holdings, commented: “The market remained competitive in the third quarter, with market premium inflation continuing to lag claims inflation. We maintained focus on pricing discipline, applying rates ahead of the market, in line with our stated targets and strategy.”
Hastings group had claimed that it continued to to prioritize pricing by applying rates in line with H1 2019 claims inflation.
However, there was an acknowledgment that Hastings had become less competitive due to claims inflation lagging behind premiums.
The trading update claimed claims inflation rose to between 7% and 8% in Q3.
Additionally, the trading update showed strong growth in home policies to 200,000 saying the group’s in-house underwriting team continued to be embedded.
Analyst Ming Zhu, of Panmure Gordon, commented: “We continue to think that Hastings should focus on its underwriting rather than chasing topline growth.” She suggested that the company could see its competitive edge in the price comparison website market erode over time due to market shifts as new competitors entering the sector.
Hastings have pledged to continue their technological strategy as reported showed a 15% fall in customer service calls per live customer policy.
Van der Meer added “We have successfully transitioned to our new repair partners to benefit customers. The ongoing digitalisation of the business has been continued by the increasing popularity of our mobile app, with 430,000 downloads since its launch.”
Along with Hastings, in the financial services sector there have been updates. Lloyds shares are looking like a good investment (LON: LLOY), Integrafin (LON: IHP) have seen their annual funds rise and Georgia Capital (LON: CGEO) have seen their shares drop.
Shares in Cairn Energy drop as double blow hits
Shares in Cairn Energy PLC (LON: CNE) have fallen on Monday as the disputes over tax claims against the Indian Government continue to stutter.
A decision over its long-running $1.4 billion (£1.09bn) tax claim against the Indian government is now unlikely to be made until next summer.
This acted as a double blow in short succession for one of Europe’s biggest oil and gas exploration firms.
A firm of such size is bound to have international operations, and problems in Mexico and India have seen share prices fall during Monday trading.
Cairn earlier reported that there was a second dry well as operations in Mexico produced no tangible results.
In Mexican operations, the oil and gas exploration and development company said the Alom-1 well will now be permanently plugged and abandoned.
RBC Capital Markets said Alom-1 was a key well in an important new basin for Cairn that could have added around 30p to its valuation.
The bank also said: “The additional clarity on timing on news from India is welcome, as the delay to summer 2020 should enable investors to focus their attention fully on Cairn’s high-impact H2/19 drilling campaign, which started with a well on Chimera in the UK North Sea and continues with a three-well campaign offshore Mexico.”
In a stock market update Cairn said the tribunal has said that while it is not yet able to commit to a specific date “it expects to be in a position to issue the award in the summer of 2020”. Cairn said it continues to have a high level of confidence in the merits of its claims in the arbitration and is seeking full restitution for losses.
The dispute between Cairn Energy and the Indian government dates back to2014. The Indian government froze Cairn Energy’s stake in Cairn India following breaches and changes to tax legislation.
The Tribunal has expected this case to be concluded in June 2020, which halts some operations in India, causing worries for shareholders.
For shareholders, hopefully the Mexican disruptions will only be short term as investors look to gain ground on previous losses.
With the India Tax case, there will be a delay in verdict and operations which could see revenue growth fall and operations slowing.
Currently, shares of Cairn Energy are trading at 174.2p per share, observing a 9.83% drop during the early hours of Monday. 28/11/19 11:26BST
In the energy sector updates have been added. Hurricane Energy (LON: HUR) have exceeded expectations after their interim results, IGAS Energy (LON: IGAS) shares have rallied and Baron Oil (LON: BOIL) shares have dipped following high costs, loss and a reduced cash balance.
Water intelligence shares rise as market predictions are beaten
Water Intelligence PLC (LON: WATR) have announced that 2019 revenue so far has beaten market forecasts, and profits will remain ‘comfortably in line’.
The company also announced figures for the third quarter of 2019. Here, figures were ahead of market expectations showing revenue growth of 34% in the third quarter of 2019 to $24.7 million from $18.5 million.
Within the growth to $24.7 million American Leak Detection franchise royalties increased 4.1% to $5.1 million from $4.9 million.
Look at sales based growth, these were also impressive observing a 45% increase to $6.1 million in the third quarter from $4.2 million the year before.
Water Intelligence reported its net cash at $2.7 million.
Executive Chair Patrick DeSouza said: “Global market demand for solutions to water loss from leakage is strong and continues to grow. We are accelerating our growth plan by building on our base of customers and adding more business lines such as municipal sewer and wastewater diagnostics and consumer sales of water / home services-related products and services via e-commerce. We are confident and have produced another strong set of numbers for both franchise and corporate-run operations across all of our key performance indicators.
DeSouza added “”Moreover, we believe strongly that our technology investments will enable us to sustain our growth trajectory in 2020 and beyond. Given our installed base of service operations, especially across the US, and the strength of market demand for both potable and non-potable water infrastructure solutions, we have a considerable opportunity for realizing significant value for our shareholders.”
Internal US corporate operations increased 47% year on year to $10.7 million from $7.3 million.
International operations increased additionally, to $2.8 million from $2.2 million, seeing a 27% rise.
These include UK municipal operations, UK-managed municipal operations in the US, and full-service operations in Ontario, Canada and Sydney, Australia.
Currently, shares of Water Intelligence are trading at 286p per share. With this news, shares have seen an appreciation of 7.52%. 28/10/19 11:05BST.
Elsewhere in the technological services sector updates have been provided. EVR Holdings (LON: EVRH) have reached a partnership with 02 (NASDAQ: OIIM), Facebook’s (NASDAQ: FB) Libra Currency is struggling to be passed and Blue Star Capital (LON: BLU) are expanding into the Esports market.
Ferrexpo Chief Executive Zhevago set to step down temporarily
Ferrexpo Plc (LON: FXPO) Chief Executive Officer Kostyantin Zhevago will step down temporarily to handle personal matters. Zhevago, said he will need to attend to business in Ukraine about one business he owned till 2015.
The Swiss based mining and commodity trading company has specialized in iron ore trading based in Ukraine.
According to reports, Zhevago holds a 50% stake in Ferrexpo and will take time away from the company within the coming weeks.
However, he will will remain on the board as a non-independent, non-executive director as stated by the company.
FTSE 250-listed Ferrexpo said Chief Financial Officer Chris Mawe has been appointed as acting chief executive.
Earlier this month, Zhevago had made Bloomberg news headlines.
Zhevago was added to an international wanted list after failure to attend for questioning about business commitments.
According to Bloomberg, Ukrainian investigators believe he has committed “large-scale” money laundering and embezzlement.
Zhevago “strongly denies any allegations of wrongdoing”, the company had said in response.
Ferrexpo Chair Steve Lucus said on Monday: “The board, including Zhevago, believes that this temporary change of leadership is necessary and in the interests of all shareholders to enable Zhevago to focus on on-going matters in Ukraine without impacting the company’s operations. Zhevago continues to have the full support of the board.”
This is not the first time that Ferrexpo has been plugged into allegations of unethical corporate practices.
In response, Ferrexpo set up an independent committee to look into allegations that payments made by the company to Ukrainian charity Blooming Land were misused.
The decision to appoint Mawe as a replacement comes swiftly. Ferrexpo have now become very aware of the bad public media image that these allegations cause.
Currently, shares of Ferrexpo Plc are trading at 130.6p per share seeing a 2.2% fall during Monday trading. 28/10/19 10:53BST.
In the mining sector, there have been updates. Hochschild Mining (LON: HOC) have remained confident after a mixed quarterly update, Centamin (LON: CEY) have remained confident on 2019 revenue and Antofagasta (LON: ANTO) are facing supply disruptions.
Sosandar shares rise as interim growth is expected
Sosandar Plc (LON: SOS) are expected to publish their interim results in the next few weeks, seniority are confident for strong revenue figures causing shares to climb.
In the early hours of Monday trading, Sosandar released a statement which stated that sales orders had increased and that this would return strong revenue growth.
For the six months leading up to September, revenue is expected to rise by 53% to £2.8 million.
This would be a significant increase from the previous figure of £1.8 million in the period a year prior.
The numbers of orders rose by 47% year on year from 43,979 to 64,709. While Sosandar’s customer database grew by 76% to 148,884 from 84,500 the prior year.
“Our ability as an online retailer to employ an agile strategy resulted in us focusing our customer acquisition activity on the important Autumn months towards the end of the period and carrying into current trading. As expected, the accelerated investment into marketing and product is producing strong results with record months in September and October,” said Ali Hall and Julie Lavington, joint chief executive officers.
Hall and Lavington added “”We are delighted with the success of our new advertising activity and the board is confident that accelerating our future growth by increased investment in marketing (especially via TV) in this financial year is the right decision for our business,”
Sosandar noted that sales across all sectors had grown even though average order value had decreased due to average unit price falling.
Sosandar have also increased their product offering and in the first half of 2020 plan to bring out some more lines of women’s clothing.
Additionally, with these extra product lines there has been a pledge to increase television advertising, which will drive up marketing costs.
Speculating further, Sosandar expects the average order value to increase on expectations of the cold weather to raise the sales of higher price points items such as outwear.
In the fashion sector, there have been updates. Laura Ashely’s (LON: ALY) Finance Chief has stepped down, Superdry (LON:SDRY) have appointed a new CEO and Boohoo Group (LON:BOO) have seen profits soar.
Currently, shares of Sosandar Plc are trading at 20p per share, seeing a 25% rise. 28/10/19 10:32BST.