Brits wary of investing emerging markets despite regularly using their goods and services

Liam Roche
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Brits wary of investing emerging markets despite regularly using their goods and services

Evidence suggests that investing in emerging markets could deliver favourable returns and opportunities for greater portfolio diversification longer-term

Goods and services from emerging market economies are vital to the every day lives of people across the UK. However, despite this being the case, UK investors are not actively investing in companies from these economies. This is according to research from Templeton Emerging Markets Investment Trust (TEMIT).

The research shows that 38% of consumers reported ‘positive feelings’ towards emerging markets, while a mere 11% actively invest in emerging markets. This is despite 93% of people confirming that they use at the least one product from an emerging market on a daily basis.

TEMIT provided examples including a TV or washing machine made by Samsung in South Korea, or a 5G chip for their mobile phone manufactured in Taiwan.

Detailed research concluded that usage of emerging market products found that 27.3m UK adults watch a Samsung TV (based in South Korea), while 19% of adults use Beko products in their home (a company based in the emerging market of Turkey).

ProductDaily Users of ProductNumber Hesitant to Invest in Emerging Markets
Samsung TV (South Korea)41%56%
Samsung Phone (South Korea)36%52%
Apple Phone (EM exposed)37%59%
Beko tumble dryer (Turkey)19%60%

Chetan Sehgal, Lead Portfolio Manager at Templeton Emerging Markets Investment Trust, commented on the opportunity cost of not investing in emerging markets: “Not actively investing in emerging markets could mean consumers are missing out on significant growth potential for their investments. Investing in emerging markets offers many benefits compared to their developed-world competitors. The strength in their economies is driven by innovative, high technology companies and strong consumption patterns, meaning that their growth potential is far superior.”

“But looking under the hood into what consumers think of emerging markets, we’ve found that perceptions are holding them back from investing in them. As a result, many opportunities to participate in the projected growth in some of the world’s fasted growing economies, while taking advantage of global diversification, are often overlooked.”

To provide additional context, TEMIT the returns on a cash savings account, the FTSE 100 and the passively managed MSCI Emerging Markets Index. With a monthly investment of £50 over a period of 18 years, equalling a total investment of £10,800, a cash savings account would return £11,176. While over the same period of time, TEMIT said the FTSE 100 would have returned £18,987, while the MSCI Emerging Markets Index would have returned £27,859.

“Overall, the evidence suggests that investing in emerging markets could deliver favourable returns and opportunities for greater portfolio diversification longer-term, in large part because of their exposure to innovation and a growing middle class, and thus growth potential,” Seghal said.

Construction sector growth at highest point in 24 years

Liam Roche
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Construction sector growth at highest point in 24 years

A number of firms reported supply shortages

The construction sector grew at its fastest rate in 24 years in June, as demand for new build homes and commercial property continued to soar.

That is according to the latest PMI data, which closely follows the construction industry.

The IHS Markit/CIPS construction PMI surpassed expectations, rising to 66.3 in June, up from 64.2 the month before.

With anything above 50 representing an increase in activity, it was the highest recording since 1997.

Survey respondents drew attention to a rapid turnaround in demand for new construction work, especially residential building and commercial projects related to the reopening of the UK economy.

A number of firms are finding it difficult to meet raised levels of demand. Shortages of raw materials and bottlenecks in supply chains are causing costs to pile up and adding to concerns over inflation.

Tim Moore, Economics Director at IHS Markit, which compiles the survey, commented further on its findings:

“June data signalled another rapid increase in UK construction output as housing, commercial and civil engineering activity all expanded at a brisk pace. The headline index signalled the fastest rise in business activity across the construction sector for 24 years. Total new orders expanded at one of the strongest rates since the summer of 2007, mostly reflecting robust demand for residential projects and a boost to commercial work from the reopening UK economy,” said Moore.

“Supply chains once again struggled to keep up with demand for construction products and materials, with lead times lengthening to the greatest extent since the survey began in April 1997. Survey respondents widely reported delays due to low stocks of building materials, shortages of transport capacity and long wait times for items sourced from abroad.”

“Purchasing prices and sub-contractor charges both increased at a survey-record pace in June, fuelled by supply shortages across the construction sector. Escalating cost pressures and concerns about labour availability appear to have constrained business optimism at some building firms. The degree of positive sentiment towards the year- ahead growth outlook remained high, but eased to its lowest since the start of 2021.”

UK house prices drop for the first time since January

Liam Roche
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UK house prices drop for the first time since January

The average price of a home is now £260,358

House prices in the UK fell by 0.5% in June compared to the month before, according to Halifax, the mortgage lender.

It is the first time since January that house prices dropped.

The yearly rate of growth is down to 8.8% from 9.6% in May, which was a 14-year high. This comes stamp duty will gradually be phased out until September.

The average price of a home is now £260,358, down by £1,284 from the month before.

Russell Galley, managing director at Halifax, commented on the phasing out off the stamp duty holiday:

“With the stamp duty holiday now being phased out, it’s was predicted the market might start to lose some steam entering the latter half of the year, and it’s unlikely that those with mortgages approved in the early months of summer expected to benefit from the maximum tax break, given the time needed to complete transactions.”

“That said, with the tapered approach, those purchasing at the current average price of £260,358 would still only pay about £500 in stamp duty at today’s rates, increasing to around £3,000 when things return to normal from the start of October.”

Chris Hutchinson, CFO & Co-Founder of Canopy, says the stamp duty holiday was never going to be a permanent solution:

“House prices couldn’t keep on rising forever, and it seems that some of the heat is finally coming out of the market as the stamp duty holiday comes to an end. But while the temporary tax freeze got some buyers on the front-foot, it was never a long-term solution and barriers to homeownership remain. What’s more, we’re now at a point where the disparity between average salary and average asking price has led Generation Rent down an incredibly difficult path to future homeownership.”

“Nobody should feel that they are compelled to face a lifetime of renting. But with renters plugging thousands into the rental system each year, this money can feel like a waste. We should be making rent payments count towards people’s credit rating, to make it easier and quicker to secure an affordable mortgage when the time comes to buy. Instead of propping up first-time buyers with temporary support measures, it could make far more difference if we get Generation Rent equipped to buy from the very beginning of their rental journey.”

FTSE 100 has a spring in its step on Wednesday

Liam Roche
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FTSE 100 has a spring in its step on Wednesday

The FTSE 100 made ground during the morning session today, up by 0.43%, or 30.77 points, to 7,131.65.

“Resources stocks helped lift the FTSE 100 on Wednesday morning despite a mixed showing from Asia and last night in the US,” says AJ Bell investment director Russ Mould.

“A positive update from Royal Dutch Shell and oil prices touching six-year highs contributed to gains for these index heavyweights and helped outweigh any fears over the inflationary pressures the recent spike in commodity prices may create.”

“This might change if meeting minutes from the US Federal Reserve, published this evening, sound the alarm on inflation,” Mould added.

FTSE 100 Top Movers

Shell (2.5%), along with miners BHP (2.47%) and Antofagasta (2.39%), are heading up the FTSE 100 on Wednesday.

Trailing the pack at the other end is Entain (-2.3%), Flutter Entertainment (-1.91%) and Rolls-Royce (-1.65%).

Shell

Shell today announced its intention to increase shareholder payouts as the world economy continues on its path to recovery. The FTSE 100 company confirmed that, as of its Q2 announcement at the end of July, its will raise its dividend to within the range of 20% to 30% of cash flow from its operations.

Shell put its decision down to a “strong operational and financial delivery” on the back of what it considers to be an improving outlook of the global economy. The oil giant said that “in the second quarter, Shell expects to have further reduced its net debt, although the extent of the reduction will be moderated by working capital movements”.

Shell to raise dividend on the improving outlook of the global economy

Liam Roche
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Shell to raise dividend on the improving outlook of the global economy

Shell confirmed that higher oil prices have reduced debt burden

Shell (LON:RDSA) announced on Wednesday its intention to increase shareholder payouts as the world economy continues on its path to recovery.

The FTSE 100 company confirmed that, as of its Q2 announcement at the end of July, its will raise its dividend to within the range of 20% to 30% of cash flow from its operations.

Shell put its decision down to a “strong operational and financial delivery” on the back of what it considers to be an improving outlook of the global economy.

The oil giant said that “in the second quarter, Shell expects to have further reduced its net debt, although the extent of the reduction will be moderated by working capital movements”.

“In conjunction with the increased distributions, Shell will retire its net debt milestone of $65 billion and will continue to target further strengthening of its balance sheet and AA credit metrics. 2021 cash capex will remain below $22 billion,” the statement added.

During the Wednesday morning session the Shell share price is up by 2.44%.

Oil prices were hovering around their highest price since October 2018 as attention turned to the OPEC+ ministerial meeting last week.

Upon the conclusion of the meeting Opec+ postponed a decision on whether or not to ramp up oil production as major players within the cartel have failed to reach an agreement on supply levels.

“Today’s teaser from Royal Dutch Shell ahead of second quarter results will be getting its investors as excited as James Bond fans are by the trailer for the latest film in the series,” said Russ Mould, investment director at AJ Bell.

“The company has unveiled plans to return more cash to shareholders in the second half as the recent surge in the oil price benefits cash flow and helps with debt reduction.

“This news is an interesting coda to the recent court decision in the Hague which effectively forced Shell to reduce its emissions more quickly than planned. This is likely to require significant investment and for this reason Shell is likely to be wary of overstretching itself in terms of dividend commitments.

Octopus Renewables Infrastructure Trust outlines results of share issue

Liam Roche
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0
Octopus Renewables Infrastructure Trust outlines results of share issue

ORIT confirmed that demand for the issue exceeded both the target issue size and the maximum issue size

Octopus Renewables Infrastructure Trust (LON:ORIT) announced on Wednesday the result of its issue, raising £150m, thereby achieving another oversubscribed fundraise.

Having considered ORIT’s investment pipeline and investor demand, the company’s board was ‘determined’ to increase the size of the issue by £50m to around £100m, issuing a total of 144,927,536 of ordinary shares at the price of 103.5p per share.

ORIT confirmed that demand for the issue exceeded both the target issue size and the maximum issue size.

“All valid applications received in respect of Qualifying Shareholders’ Open Offer Entitlements under the Open Offer will be met in full, and applications under the Placing, Excess Application Facility, Offer for Subscription and Intermediaries Offer have been scaled back,” the company said in a statement.

The Issue of Ordinary Shares will be split as follows:

  • 64,130,932 Ordinary Shares under the Placing
  • 67,979,280 Ordinary Shares under the Open Offer (including the Excess Application Facility)
  • 6,278,618 Ordinary Shares under the Offer for Subscription
  • 6,538,706 Ordinary Shares under the Intermediaries Offer

Phil Austin, Chairman of Octopus Renewables Infrastructure Trust plc, commented:

“I am delighted to announce the results of the Issue, achieving another oversubscribed fundraise. On behalf of the Board I would like to thank existing shareholders for supporting us through the first 18 months as a listed entity and allowing us to demonstrate our Investment Manager’s exceptional track record and expertise within the sector. I would also like to welcome new shareholders and to thank them for their support as ORIT enters into its next phase and continues to execute on its pipeline of investment opportunities,” said Austin.

The ORIT share price is up by 0.38% during the morning session on Wednesday and is down by 0.01% since it first listed.

Wetherspoons sales remain down amid reopening

Liam Roche
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0
Wetherspoons sales remain down amid reopening

Wetherspoons warns against increase in food prices

JD Wetherspoons (LON:JDW) confirmed on Wednesday that sales at its pubs haven’t risen as they would have hoped even though it has been able to reopen the majority of its locations.

Wetherspoons said that out of its 860 pubs, 850 were open, with the closed pubs being located by airports.

Between April 12 and May 16 bar and food sales dropped by 49% as guests were free to dine outside.

The pub company said its sales were down by 14.6% between May 17 and July 4, the period when the government said pubs could reopen for indoor dining.

Wetherspoons also warned that food prices would naturally rise towards the end of the year as the reduction in VAT rates will finish.

In an effort to stimulate the industry, hospitality firms were given a 5% rate cut to help them along during the pandemic-induced crisis.

As of September, the rate will rise to 12.5%, ahead of its return to 20% in April 2022.

Tim Martin, the chairman of Wetherspoon, said: “The company continues to expect to make a loss for the year ending 25 July 2021.”

“While pub operators across the UK have cheered on the Euro football championship as it has boosted sales, Wetherspoon is paying the price for not having televisions in its boozers,” said Russ Mould, investment director at AJ Bell.

“This disadvantage is a complete turnaround from last summer when its pubs had a strong advantage in that they were often bigger than rival outlets in the same area and were better placed to accommodate social distancing measures.”

“Wetherspoon also had an established app which meant it could instantly switch to mobile-based ordering from the table, unlike some rivals who had to ship in the technology.”

“As it stands, Wetherspoon is on track to make a loss for the year to 25 July. Apart from having some TVs in its pubs for the football, there was nothing else it could have really done to boost trade beyond what’s already in place, given how disruptive the year has been.”

Tip update: Lok’nStore

Andrew Hore
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Tip update: Lok’nStore

Self-storage sites operator Lok’nStore (LON: LOK) continues to grow at an impressive pace and add new sites that will enhance growth in the future. Declining yields on self-storage assets will help to boost NAV.
The site acquisitions and development spending will be financed through the existing bank facilities. The development pipeline will add 38% to capacity and take the number of sites to 51. It takes time for new sites to build up and the benefit to show through to profit, so sites opened in the coming year will not mature for years.
Contracts have been exchanged on two new freeholds in B...

Three days left for Forward Partners PrimaryBid offer

Andrew Hore
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Three days left for Forward Partners PrimaryBid offer

There are three days left to subscribe for the Forward Partners Group offer via PrimaryBid. The venture capital firm has already secured commitments from BlackRock and AIM-quoted Draper Esprit (LON: GROW) ahead of it joining AIM in mid-July. The offer price is 100p a share and the offer closes on 9 July.
BlackRock is investing £15m and Draper Esprit is subscribing £2m. BlackRock is already a major shareholder, and the other main shareholder is Neil Hutchinson. Forward Partners chief executive Nic Brisbourne was formerly a partner at Draper Esprit.
As part of the flotation, Forward Partners wil...

Research suggests the UK’s average pension pot stands at just £42,700

Liam Roche
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Research suggests the UK’s average pension pot stands at just £42,700

18% of people have adequate pension pot to retire ‘comfortably’

The average pension pot amounts to £42,651, according to a survey conducted by finder.com, the personal finance comparison site.

When only accounting for non-retirees, the figure is lower, as they have £33,809 saved on average.

Experts have recommended that someone retiring at 67 should have a minimum of £237,000 saved in order to retire comfortably, meaning that the average person in Britain has a mere 18% of this amount.

20% of the population have no form of private or workplace pension, while 18% have a workplace pension but no private pension.

Zoe Stabler, Investment Writer at the personal finance comparison site, finder.com, said: “The pandemic has been extremely tough for Brits in many ways, with a lot of people having to take unprecedented steps in order to stay afloat financially. It is understandable that some Brits have reduced, or paused, payments in order to direct money to more immediate priorities.”

Stabler also drew attention of the benefits of compound interest when accruing money over an extended period of time.

“However, if you are someone who has had to do this, it is vital that you look at replacing this money or at least starting to pay into your pension again. The power of compound interest means that what you pay in now could be a life changing amount if you’re able to leave it for decades. As an example, £10,000 paid in now, earning an interest rate of 5% per year, would be worth £25,330 in 20 years, £41,259 in 30 years and £67,207 in 40 years**,” said Stabler.

“Also, if you opted out of your workplace pension in order to save money during the pandemic, you should look to rejoin it as soon as you can. If you contribute 5% of your salary each month towards it, your employer is obliged to pay a minimum of 3% on top of this, which is effectively free money topping up your pension!”

The state pension could rise by up to 8% next year, according to forecasters.

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