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David Fuller and Eoin Treacy's Comment of the Day
Category - Global Middle Class

    Worst Korean Jobs Figures in Nine Years Undermine Moon's Agenda

    This article by Jungah Lee for Bloomberg may be of interest to subscribers. Here is a section:

     

    South Korea’s jobless rate hit the highest level in nine years, adding to evidence that President Moon Jae-in’s minimum wage hikes are doing more to harm employment growth than they are to raise incomes.

    The seasonally-adjusted unemployment rate reached 4.4 percent in January, the worst figure since January 2010, when it was 4.7 percent. The median forecast of economists was for 3.8 percent. Meanwhile, jobs growth slowed to 19,000, down from 34,000 jobs in December.

    Moon’s administration hiked the minimum wage by 11 percent this year, following a 16 percent increase last year.

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    Thorburn Quits as National Australia Bank CEO After Inquiry Lashing

    This article by Jackie Edwards for Bloomberg may be of interest to subscribers. Here is a section:

    The yearlong inquiry uncovered a litany of wrongdoing across the industry, from charging dead people fees to advisers pushing customers into bad investments to meet bonus targets. National Australia staff accepted cash bribes to approve fraudulent mortgages and misled the regulator over a fees-for-no-service scandal.

    “I acknowledge that the bank has sustained damage as a result of its past practices and comments in the Royal Commission’s final report,” said Thorburn, who will leave Feb. 28. “I recognize there is a desire for change.”

    His replacement will have to restore customer trust in the lender and steer it through a tougher landscape of falling earnings, a sinking housing market and rising funding and compliance costs. The nation’s big-four banks also face more muscular regulators intent on punishing wrongdoers in court.

    In further fallout from the inquiry, National Australia said it will delay the planned IPO of its MLC wealth management unit as fee income and commissions come under pressure.

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    BAT Upgraded to Overweight at Piper; Risks Look Priced In

    This note by Lisa Pham for Bloomberg may be of interest to subscribers. Here it is in full:

    Philip Morris’s patent lawsuit against British American Tobacco in Japan, which is seeking a sales injunction of BAT’s Glo heated tobacco product, is still a risk, but BAT has “several methods of defense” and the earnings impact would probably be modest, Piper Jaffray analyst Michael Lavery writes in a note.

    Risk on possible U.S. menthol cigarette ban looks priced in and Piper doesn’t see any operational impact “for years and years”

    Also notes that consumers can adapt

    Piper doesn’t see any risk to dividend growth, allaying concerns from investors; says BAT’s cash flows don’t seem to be at risk in a way that would hurt the dividend

    Upgraded to overweight from neutral; PT kept at GBP30

    NOTE: BAT shares down 51% in last 12 months vs 19% drop for Imperial Brands, 31% decline for Philip Morris and 35% fall for Altria

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    GMO Quarterly Letter Q4 2018

    Thanks to a subscriber for ths report which may be of interest. Here is a section on the outlook for 2019:

    Email of the day on reliable dividend companies

    Your copy on global pay-out ride is coming back to earth is timely. The well-regarded fund manager Neil Woodford has given Imperial Brands a significant 8% asset allocation in his flagship income fund. Imperial pays a hefty dividend, growing at 10% rate. It generates good cash, but has huge BBB+ debt outstanding. It has come down quite a bit from its peak, but it’s valued at 17 times earning which may roll back to the 10 times earnings it had around 2000. Is there a case for holding Imperial Brands as primary source for dividends for the long run? I wonder if you could review some good dividend paying companies, net cash global companies with strong balance sheets, that will not get caught in the pending investment grade bond crunch. Thanks!

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    Email of the day on the Rand and governance:

    Hello Eoin, First of all I would just like to say I have no problem with the way you have organised your video commentaries. I find them very perceptive and thought provoking. I would hazard a guess that 95% of your subscribers are of the same opinion.

    On your comments on South Africa, having spent the past 16 years here, I would advise investors not to hold their breath as regards the new president Cyril Ramaphosa instituting much in the way of improved governance here. Corruption in this country is all pervasive and is now penetrating certain personnel in the judiciary. I know this from various contacts I have with regards to the Rhino poaching problem. The Zuma faction still wields huge influence within the ANC. The black economic empowerment policy has led to totally unsuitable and unqualified people being placed in key positions both in government and in the private sector. Given the current state of the world economy, I would indeed be surprised if the ZAR is not the currency to lose most in value among the emerging markets over the next year.

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    The $1.8 Trillion Global Payout Ride Is Coming Back to Earth

    This article by Ksenia Galouchko for Bloomberg may be of interest to subscribers. Here is a section:

    In the new era of prudence, shareholders who’ve enjoyed fatter and fatter dividend checks can rest easy no longer.

    IHS Markit Ltd. last week projected a “significant slowdown” in global dividend growth this year, at 5.9 percent, totaling $1.8 trillion, according to a bottom-up analysis of over 9,500 firms. Thanks in part to mounting geopolitical risks, that’s a shift from the 14.3 percent boom in 2018 and 9.4 percent the year before.

    The business-information provider reckons about 11 percent of firms will announce a dividend cut this year -- an uptick of almost 100 names relative to 2018.

    “I believe that dividends of leveraged companies can suffer more,” said Willem Sels, a London-based chief market strategist at HSBC Private Bank. “The excessive focus on the shareholder
    value at the expense of bondholder value will be more muted.”

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    Musings from the Oil Patch January 23rd 2019

    Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. Here is a section:

    Asking Prices for London Homes Slump to Lowest Since 2015

    This article by Lucy Meakin for Bloomberg may be of interest to subscribers. Here is a section:

     

    London home asking prices fell to their weakest level in 3 1/2-years in January as sellers spooked by
    Brexit held off putting their properties up for sale.

    Asking prices in the capital slipped 1.5 percent from December to 593,972 pounds ($765,000), the lowest level since August 2015, according to Rightmove. New listings in the first two weeks of the year were 10 percent lower than in 2018 as owners were deterred by the cost of moving and concern about the political backdrop, the property website said.

    After years of outsize gains in home values, London and its surrounding areas have so far borne the brunt of Brexit, with a lack of clarity over the future relationship with Europe causing both households and firms to hold off on investment decisions.

    Listing prices in the capital have declined from a peak of almost 650,000 pounds in May 2016, the month before Britons voted to leave the European Union.

    Nationally, values rose 0.4 percent to 298,734 pounds, with the biggest gains in the north of England. Rightmove’s data is compiled from 70,068 properties put on sale by agents across the country from Dec. 9 to Jan. 12.

    A separate report by Acadata, which incorporates all house transactions, showed national home prices rose 0.6 percent in the year to December. Excluding London and the south east, values climbed 1.4 percent.

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    Brazil Is Back in the Game, New Leader Will Tell Davos Investors

    This article by Raymond Colitt for Bloomberg may be of interest to subscribers. Here is a section:

    “Brazil is a hot topic for foreign investors,” said Fabio Alperowitch, portfolio manager and founder of Fama Investimentos, a Sao Paulo-based fund manager. “But no one will change their opinion just because of his speech. Investors’ level of skepticism with emerging markets is still high.”

    On his long flight to Davos, Bolsonaro will carry the most crucial plan to tackle a budget deficit that hovers around 7 percent of gross domestic product -- a draft proposal to cut pension outlays and save as much as 1 trillion reais over 10 years. Whether he will attract enough congressional support for the bill when lawmakers reconvene in February will be a make or break moment for his administration.

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