Summary

• Queen Elizabeth’s birthday marked the occasion of Honours List announcement.
• Prime Minister Ardern spoke about the outstanding contribution of people.
• Several contributors through different fields of work were conferred upon awards.

To mark the birthday of Queen Elizabeth, the New Zealand government announced several awards for outstanding performances in various fields. Prime Minister Jacinda Ardern made these announcements and thanked people for their outstanding contributions.

Image Source: © Anizza | Megapixl.com

Ms. Ardern said that the increasing number of the people the honour was bestowed upon simply shows how many of them in the country were ready to serve at their level best without thinking twice, doing the country proud. Referring to the invaluable contribution by Hinewehi Mohi, who besides being an advocate, has had tremendous contribution towards helping people with disabilities by providing them music therapy, she said he had helped change the lives of thousands of people.

Don’t miss: How big is the UK stock market?

In another example, she spoke about Professor Carolyn Burns, who is responsible for extensive research on lakes, their health and ecology, and is something that has helped advancement and growth in the understanding of this subject in the country.

Recognising the work of Mike Daniell or Fisher and Paykell, Ms. Ardern indicated how he had found solutions to various problems and contributed immensely to the field of healthcare across the country.

Also read: Know New Zealand’s First Maori Governor-General

Professor William Denny has been awarded for his extraordinary work in the field of drug research for cancer. Ruia Morisson has been awarded this honour for her extraordinary work in the field of tennis, being the first Kiwi woman and the first Maori to participate in the Wimbledon tournament. Buck Shelford, an extraordinary Rugby player, has been conferred with the award for his contribution to the sport.

Judy Kilpatrik, who has spent 50 years in the field of nursing education, was also honoured on this day.

Late Mayor Dave Cull was remembered and honoured for his local government services work while Sarah Stuart Black received this honour for her contribution to the field of emergency management.

Also read: Prince Philip, Queen Elizabeth II’s Husband, Passes Away At 99

These people were a few of the ones honoured on the occasion of the Queen’s birthday. Prime Minister said there were many others who had displayed extraordinary courage and hard work in their respective fields, and had been awarded for the same.

Each year, the list grows with additions of people who have achieved extraordinarily in their respective fields.

Summary

• PayPal study revealed that 90 per cent of Irish online buyers shopped from international websites.
• Irish online buyers are expected to still favour international sites in the post-vaccine world.
• Buyers resorted to foreign websites for better pricing, variety, and availability.

The pandemic and the subsequent lockdowns have significantly impacted consumer behaviour. Most people are resorting to online shopping from basic needs to ordering a car. In an interesting study by the US-based online payment gateway facilitator PayPal, it was found that nearly 90 per cent of Irish consumers have shopped from e-commerce websites outside of Ireland in the past one year.

Also read: PayPal caps off 2020 in style with record numbers

It was also inferred from the study, which involved more than 1,000 consumers in Ireland that around 80 per cent of shoppers ordered stuff from the UK based online retail websites last year. Also, Irish buyers gave a significant amount of business to the US, European, and Chinese retailing websites last year. On an average, Irish buyers spent €385 online with retailers outside of Ireland, according to the study. Surprisingly, this amount was a bit higher than the average amount spent by Irish consumers on domestic websites during the same period.

The study revealed the major reasons for buying from retail websites outside of Ireland. Most respondents resorted to foreign websites for better pricing, variety, and availability. Meanwhile, a few Irish buyers shopped from domestic websites to support the domestic economy and faster delivery options. In the approaching months, many Irish consumers are expected to return to foreign websites to choose from a wide array of products and at a competitive price, according to the survey.  

Copyright © 2020 Kalkine Media Pty Ltd.

The pandemic has accelerated the demand for online shopping. In a brick-and-mortar arrangement, customers have the option to pick and choose. However, on the online platforms, retailers need to keep variety within a particular product segment to gain traction as competition is fierce. The Irish businesses need to boost their digital offering in line with the competition even in a post-vaccine world, due to lifestyle change caused by pandemic-induced lockdowns.

But all is not lost for Ireland’s economy. US-based multi-retailer Amazon Inc has announced its formal entry in Ireland. The US-based online retail giant has spent nearly €2 billion to build a network of data centres around the greater Dublin area over the past decade. This might change the way Irish buyers shop today and near future.

Summary

• Solar and Wind are making strides in world energy basket. The global installed capacity of renewable energy was 2,537 GW at the end of 2018 as per IRENA.
• The installed capacity of solar and wind power generation surpassed 578,533 MW 622,408 MW respectively in 2019.
• Renewable capacity grew by 7.4% in 2019, of which 90% growth was in solar and wind energy generation.

Back in 2020, when the future prices of crude oil turned negative, it instantaneously became a global phenomenon and was in the trending news category for quite some time. Such is the importance of crude oil in the energy mix of the world. No other commodity commands such geopolitical importance and has the power to mould the country’s foreign policies.

Also Read: What does 2021 hold for Crude Oil?

The Paris Agreement on climate change has put the development of renewable energy capacity generation in full throttle. Governments worldwide are making fundamental policy changes in their energy mix to reduce or become carbon neutral by 2050.

Image Source - ©Kalkine Group 2020

The global war on greenhouses gas emission has led to some massive investments in renewable energy, particularly in the Solar and Wind Energy generation. Currently, India has multi-billion solar projects under construction, and some of them have already acquired the title for being the largest solar power plant.

Recent Update: Crude Oil Rallies to 10-Month High After Production Cut Decision 

Let’s pull some stats from the renewable sector to know the growth of the sector!

Based on the International Renewable Energy Agency (IRENA) data, the world’s installed capacity of renewable energy was 2,537 GW at the end of 2019. Hydropower contributes the largest share, nearly 47% or 1,190 GW among all sources.

Wind and solar contributions were 25% and 23% respectively in the energy basket of renewals. Wind with an installed capacity of 622.4 GW ranks second while solar energy with 578.53 GW stands at third position.

The above all data is from 2019 when there was no COVID-19 or any slowdown in fossil fuels demand.

Global Renewable Energy Mix Group Data Source: IRENA (Image Source: Kalkine Media)

The renewable sector's capacity expansion occurred at a moderate rate of 7.4% during the year 2019. Solar and Wind were among the forerunners of this growth. Out of total increase in capacity of 176 GW, solar led the charge by 98 GW followed by wind at 59 GW. Nearly 90% of the total growth in capacity was contributed by wind & solar.

Does growth in Wind and Solar threaten the Oil Industry?

Battery and storage technology has been in the limelight in recent days. Several countries are making huge investments in technology to achieve their carbon emission target. Electric Vehicle segment is showing huge growth potential.

Read More: Tesla Hits All-Time Highs; Should Crude Players Be Worried?

People are installing solar rooftops on their private properties and witnessing energy independence. The Australian government policy to buy the extra energy from the households or commercial complexes boosts the green energy sector.

Even the major oil companies, including BP, Chevron and Exxon Mobil, invest hugely. The current market price of crude oil does not support the exploration and production of deep offshore projects. Most of the large oil pools are now left in deep offshore basins that require huge investment and technology development.

The energy storage technology in the renewable sector is already receiving grants and funds from the government as well as the private sector.

Most energy industry experts believe that the transition to hydrogen or blue energy goes through fossil fuel. Hydrogen is being used as battery fuel which is charged using solar and wind energy called Blue Energy.

Image Source - ©Kalkine Group 2020

Hydrogen’s largest source is water and fossil fuels. Hydrogen from water is extracted through electrolysis and is a somewhat costlier option. Extraction of hydrogen from natural gas using catalysts is one of the easiest and economical.

It is fairly to assume that fossil fuel and especially gasoline is going to stay with us longer. Many allied industries depend heavily on crude oil.

Finally, it can be said that demand for crude oil in the transportation sector will eventually drop but in industries including aviation, manufacturing and chemical industry demand is assumed to remain stable.

Summary

• The COVID-19 pandemic not only revealed the fissures in the healthcare system but also fast-tracked digitisation in the industry.
• Telemedicine is speedily evolving amid the pandemic to offer enhanced access to superior-quality healthcare services.
• With increasing awareness and preventive assessments, the diagnostics sector is anticipated to see sustainable development.

In 2020, the globe witnessed one of the most challenging health emergencies in the form of the ongoing COVID-19 pandemic. The coronavirus outbreak made 2020 one of the busiest years for the healthcare sector.

While the pandemic exposed the healthcare system’s loopholes, it also led to accelerated digitisation in the industry. The outbreak has forced everyone to switch to online mode rapidly.

The virus-hit, game-changing year for the healthcare sector gave rise to the evolution of digitalisation and accelerated growth. Within the digital healthcare system, telehealth and mobile health application turned into the dominating trends.

The year pushed the limits for improvements in the healthcare industry and gave birth to several innovations. With social distancing and lockdowns measures, most of the people switched to video and audio consultations. Moreover, people also started using fitness and wellness applications for tracking their health and pre-monitoring themselves in case of any indications.

With this backdrop, let us discuss how the healthcare industry has evolved during 2020:

Key Catalysts in Transforming Healthcare Sector

The key factors playing a significant role in transforming the healthcare sector include digitisation and structural advancement, courtesy the COVID-19 pandemic.

Evolution of telemedicine

Telemedicine is speedily evolving amid the pandemic to offer enhanced access to superior-quality healthcare services that are efficient and cost-effective.

The pandemic has kicked the healthcare industry into overdrive to keep up with supply and demands as well as manage overloaded facilities. It has also put an emphasis on advancing and streamlining capabilities of telehealth. The new certainties and realities have established a need to accelerate advances in the field of telemedicine.

©Kalkine Group 2020

ALSO READ: Telemedicine: A Game-Changer to Combat COVID-19

Deep tech and Smart Devices

COVID-19 has forced many companies to look for innovative ways to generate value. Deep tech companies are well-placed to support communities during the pandemic.

These companies have helped produce and distribute personal protection equipment using 3D printing, increased availability of testing options, and created new disinfecting solutions. The research and engineering evolutions amid COVID-19 has led to improved multidisciplinary collaborations, which can serve as a strong foundation for several deep tech commercial innovations across different sectors in the upcoming year.

Deep tech is witnessing increased adoption in several industries, including healthcare, automotive, and industrial sectors.

Lessons from 2020

The most important thing the world understood during the pandemic is the value of collaboration and partnerships. One of the critical aspects of the world’s response to the pandemic has been identifying the requirements for cooperation to meet the demand for more tests, higher distribution of tests and PPE (personal protective equipment).

Image Source: Megapixl^TM

Interestingly, it has been heartening to observe how the pandemic has brought together the governments, industries, scientists, and healthcare specialists worldwide to tackle the challenge at hand.

The best example of working together to fight against the COVID-19 pandemic is COVAX facility. The governments of several countries swung into action to provide support to fight against the pandemic. The US government initiated Operation Warp Speed (OWS), a public-private partnership to fast-track the manufacturing and distribution of COVID-19 vaccines, treatments, and diagnostics.

Additionally, the governments of other countries are also securing COVID-19 vaccines for their citizens by signing deals with vaccine developers.

What is COVAX facility?

Gavi is co-leading COVAX, ACT Accelerator’s vaccines pillar. The COVAX Facility is a worldwide risk-sharing system for the combined procurement and equitable access to COVID-19 vaccines.

COVAX has now signed agreements to secure almost two billion doses of several promising COVID-19 vaccine candidates. Moreover, it has laid the groundwork for additional doses of vaccines to be obtained through contributions from donors.

DO READ: How are developing world economies preparing for COVID-19 vaccine deployment and testing?

Outlook for Healthcare Industry

The COVID-19 pandemic has given a substantial lift to the digital healthcare businesses. The experts believe that the digitalisation in this sector will continue in the upcoming year as well.

The diagnostic sector is likely to witness strategic consolidation. The global diagnostic players are well-placed for sustainable development over the long-term due to increasing awareness, preventive assessments, and higher prevalence of infections.

New technological innovations to emerge

The technological innovation will continue to dramatically and rapidly change how healthcare services are provided, resulting in more personalised care, better clinical outcomes, patient experience, and overall quality of life.

With the improvement and advancement in the digitisation, the scope of malicious cyber activity also started increasing. It begins from online fraud like scams via email, website, or chatroom to sophisticated cyber espionage and even catastrophic disruption of crucial infrastructure, like phone lines or power grids.

In present times, cybercrime is not just limited to the organisation but has become a considerable threat to the nation's security, stability, and prosperity.         

Australia’s Cyber Security Sector in 2020

As per AustCyber's Digital Census 2020, the demand for cybersecurity continues to grow. In 2020, the spending on cybersecurity in Australia was nearly A$5.6 billion from both local and global providers. Experts believe the spending would surpass A$7.5 billion by 2024. The core drivers of the demand are:

• With the increase in digitisation, the exposure to cyber threat in businesses has increased.
• The complete threat environment is rising with numerous high-profile attacks like Toll Group, NSW Government agencies and PayID since 2019.
• Government and regulators need robust security for crucial infrastructure and system of national importance.

Since 2017 till July 2020, the local sector revenue has grown up by A$800 million and is expected to reach by A$3.6 billion by 2020 closure.

What is needed in the next phase of growth?

In the next phase of growth towards digitisation, cybersecurity would play a critical role to support rapid digitisation and capture emerging export opportunities.

The rise of the digital assets and tools allows malicious actors to place their data and information for their benefits. Thus, bringing the privacy and information of the user at risk. Hence, it is essential to have a robust and thriving local cybersecurity sector to aid the digitisation process in the Australian economy. The role of cybersecurity is presently more critical in sectors like energy, healthcare and research or education.

The Australian Government has also realised the importance and criticality of cybersecurity in digital transformation. The Government also feels the need to improve cyber protection.

In the next phase of the growth, it would be vital to adapt to secure by design and complex value chain. Earlier, the concept related to cybersecurity was that the product and services acted as a shield to protect digital assets. Other essential cybersecurity offering is in risk management and forensics and prevents risk and threats and recover losses in case any breach takes place.

Recently a new conceptual approach has come into picture novel technology and systems. In this concept, instead of beating cybercriminals, digital technology would be built in a way that prioritises security and reduces weakness. The idea is known as secure by design and recognises digital system so that security is the main criteria that engineers improve.

Cybersecurity Budget in Federal Budget 2020-21

Australia's cybersecurity capabilities are strong, however, during COVID-19, the number of cybersecurity cases went up significantly because of people were operating from a remote location. In the federal budget 2020-2021, the Government provided an additional budget of A$201.5 million to deliver the 2020 Cyber Security Strategy.

Further, the Government is committing A$300.2 million to the Australian Federal Police to strengthen their capacity to keep Australians safe in an increasingly complex threat environment.

The Government would also invest A$37.7 million in expanding Australia's cybersecurity skills for an industry that adds ~ 20,000 jobs to the economy.

Do Watch: What are the Industry Reviews on Federal Budget 2020? |Kalkine Market Update AUS|

Possible Digital Transformation trends in 2021:

• 5G would be in the mainstream.
• We might see more and more companies moving towards the hybrid cloud.
• Privacy and confidential computing gain momentum. It would be an approach to bolstering cybersecurity, especially when communication and data privacy is addressed.
• Work from home last longer than COVID-19.
• Quantum computing would grow significantly.

Upcoming Opportunities in Cybersecurity space:

In early 2021, a new market information tool would be launched with support from AustCyber. This new market information tool  is known as Cyberseek, and It will provide information on:

• Cyber skills demand by region throughout Australia.
• Qualification and certification need for cyber roles.
• Indicative salaries.
• Transition pathways, as well as role progression.

Collaboration between Australian providers to boost Competitiveness:

Australian cybersecurity is developing a rich network of collaboration, especially in product and service delivery and commercial functions.

In vertical collaboration, cybersecurity providers like Kasada develop offerings on technology platforms such cloud system of Amazon.

In a horizontal collaboration between the providers, there would be matching abilities and can offer a more complete solution to clients.

INTERESTING READ: WHK, AR9, TNT: Cybersecurity shares to keep a close watch on!

Summary

• For the September quarter 2020, an estimated 1.6 million people were unemployed
• Office for National Statistics data shows that the UK’s redundancies climbed to 318,000 in the September quarter.
• Nearly 2.5 million people in the UK are still on the furlough scheme

The coronavirus has seriously hit the United Kingdom as the number of people out of work continues to rise. According to the latest data of the Office for National Statistics (ONS), the UK’s unemployment rate in the three months to September was 4.8%, up 0.3%. The data shows that the country’s redundancies climbed to 318,000, whereas the Q2 numbers were 181,000 less than this. The rising cases of COVID-19 infection and frequent lockdowns across Britain have resulted in the massive dip. 

Several companies laid off their employees, thinking that the furlough scheme would end in October. But the scheme was extended till March 2021 after the second lockdown was declared. Also, the number of jobless people increased by 243,000 in the three-month timeframe, which is the highest since May 2009. The maximum number of layoffs were in the 16 to 24 age bracket. 

Deputy National Statistician at ONS Jonathan Athow told reporters that the firms are seeing a weak job market with fewer people on the payrolls and minimum people being employed. This has led to a rise in unemployment. But the vacancies continued to recover from the very low numbers seen earlier in the year.

The ONS data suggests that the UK is going through an extremely terrible phase, especially in terms of job creations. Now with the imposition of the second lockdown, it appears that the job market is further going to decline in the next quarter. 

Around 2.5 million people are still on furlough and in the coming months, it could be difficult to predict whether the unemployment figures will see any recovery.

Tej Parikh, Chief Economist at the Institute of Directors, said the coronavirus pandemic is continuing to pose a threat to Britain's job market and that the extension of the furlough scheme has given the management room to plan their workforce, but it seems that the change has come too late for some people. 

Also read: Should the UK Government Extend Furlough Scheme to Save Businesses?

Though people are hopeful after the clinical trial of the COVID-19 vaccine developed by Pfizer and BioNTech proved 90 per cent effective. But experts next quarter won’t see much change. Chief economist Jeremy Thomson-Cook of Equals Group said the numbers of redundancies in the last couple of months show that for many people the government job scheme support has come too late to save their jobs. 

Moreover, the Bank of England (BOE) expects that nearly 5.5 million people will need support from the furlough scheme in November in the wake of the second national lockdown across Britain. 

• Budget has given reasons to cheer to retail sector player having turnover of less than $5 billion, but these tax concessions are not for large supermarket chains.
• Supermarket chains like Woolworths Group Ltd (ASX:WOW) and Coles will benefit from wage subsidies, which would provide opportunity to cut wage bills by employing young Australians.
• Small retailers stand to benefit most from the budget. But large supermarket chains can take advantage of lower wage bills, and bringing forward investments is not necessary, which means capital investments will likely remain constant or as per needs.

After the budget, commentary coming out of market participants has been constructive. Since monetary policy across nations has run out of ammunition to some extent, fiscal policies are going to play a crucial role in recovering the output to pre-pandemic levels.

In fact, the budget has been so comprehensive that critics are finding a relatively lesser number of losers compared to winners. This is certainly the type of budget that most anticipate, especially during a recession.

Image Source: © Kalkine Group 2020

Must Read: Is Federal Budget 2020-21 pandemic friendly?

As we have noted earlier, the fiscal position of Australia had been superior to most developed nations beforethe pandemic hit Australian shores. This very reason has partially allowed the Morrison Government to load debt substantially, while also maintaining its AAA rating on sovereign debt.

In order to evade the detrimental consequences of high leverage in the economy, the Australian economy will need to grow at sustainable levels, and certainly better than it has grown over the last decade.

A widely accepted consequence of loading sovereign debt is that the future generations of the nation will need to pay it off through taxes. In the middle of the pandemic, the calls had been louder for tax reforms, specifically goods and services tax (GST) reforms, where the matter is much political than economical.

It is certain that broadening the base of GST will help the Federal Government shore up revenues, and eventually offloading the paramount debt, which is slated to hit $1.7 trillion by the end of the decade, according to budget projections.

But the increasing burden of GST on households during a recession doesn’t seem a wise policy. Politicians are likely to think about any GST reforms after the economy has recovered from the pandemic, and there is certainty in the economic environment.

But now we shall discuss what the budget means for companies in question.

Since the turnover of Woolworths Group Limited (ASX:WOW), Coles Group Limited (ASX:COL), and Wesfarmers Limited (ASX:WES) is well above $5 billion, these large-cap companies will not be the direct beneficiaries of business investment tax concession in the budget.

The personal tax reforms will help shore up spending levels. With interest-rates now at lower bound levels, it also suggests that households with high debt will likely be inclined to accelerate repayments and become less debt-laden.

With lesser debt burden on shoulders, the spending by households with debt commitments may not shot up over the near-term and is expected to increase when debt burden would be reduced.

But households with lesser debt-burden will have some motivation to increase spending levels and buy things that were perhaps looking expensive back in the days. This latest personal tax reforms have come in after the previous personal tax cuts in July last year.

Wage subsidies will help reducing wage bills

The Federal Government has also announced the JobMaker scheme, directed to spur employment for younger Australians, which will help companies like Woolworths, Coles, and Wesfarmers.

Since these companies engage more in casual employment, subsidies announced by the Government will help to reduce wage bills, therefore boosting operating profits for these firms.

Of late, there has been total revelation of wage abuse by corporates, including banks, retailers and conglomerates. Now companies are looking back in the history and compensating employees for the lost wages.

In addition, the Government is providing subsidies for apprenticeships, which would help businesses that need a skilled workforce.

Overall economic boost

The companies will also stand to benefit from the recovery, which will be induced by this budget over the next few years. The budget will boost job creation in the economy that will translate into better financial health of Australians over the years.

In the near-term, unemployment level and wage growth will continue to pose challenges for retailers. But this budget has widely addressed the concerns related to spending, job creation, business investments, infrastructure spending, etc.

All these initiatives taken by the Government place Australia in a sweet spot to recover from the contraction in the economy and its rippling effects on economy such as unemployment, wage growth and uncertainty.

Good Read: Impact of Coronavirus on Australian Economy and Way Forward

On 8 October 2020, WOW last traded at $37.92, COL settled at $17.59 and WES quoted at $46.75.

Summary

• While the Government had been proactive in imposing safety restrictions, people don’t seem to be abiding by the safety norms across nations.
• Hefty fines have been imposed across several countries like England, the UAE, Australia, India and some others to contain the spread of the virus.
• As economies have opened, people and businesses seem to have misunderstood the idea of the same and are not seen following the health safety norms.
• Fines up to A$20,000 were imposed in Victoria, and up to £10,000 were introduced across England depending upon the nature of the offence.

While imposing hefty fines have proven to be a deterrent for people violating the rules and regulations, the Governments across nations are looking up to the same measure to stop people from violating safety norms amid the sprawling COVID-19.

For a moment, it seemed the world would be able to tackle the spread of the mysterious disease earlier than anticipated. However, things did not turn out to as expected, and the countries are witnessing a second wave of infections.

On top of this, we are still waiting on the vaccine development front with leading healthcare companies entering the final phases during the last quarter of 2020. Earlier projections indicated delivery of vaccine by September end.

It had been some time since the global onset of COVID-19, and people have undergone severe restrictions on movement and socialising. Gradually, these restrictions have been eased in phases.

Related: How is COVID-19 Second-Wave Scenario Impacting Businesses and Households?

Although economies have been opened and physical movement restrictions have been lifted, people are still being asked to follow some safety norms like maintaining social distancing and wearing a mask or face covering.

However, people have not been sincere in following the norms and guidelines issued by the authorities to keep them safe from the virus. To some extent, the negligence of people in abiding by the safety norms has led to the second wave of infections across major cities globally.

Back to back increase in cases and negligence from the people have compelled the authorities to make harsh decisions like imposing hefty fines on violators of safety norms.

Fines Up To 10,000 Pounds Introduced Across England

A fine of £1,000 had been introduced across England for the people who did not quarantine themselves after testing positive for COVID-19. However, the fine can increase up to £10,000 for repeat offenders and most serious breaches. These also include people preventing others from self-isolating.

Further, the employers who push their staff to join work during their period of isolation are also liable to pay up to £10,000 as fine.

These fines have been imposed as a legal duty to self-isolate and became effective from 28 September 2020, under which it is necessary for the people in England to self-isolate themselves if they are contacted by NHS Test and Trace or test positive for COVID-19.

Also read: Europe Faces the Threat of The Second Wave

The norms regarding fines were imposed as a small measure like fines has the potential to make a significant difference to curb the spread of the virus. Other than these fines, the Government also introduced a support payment of £500 for the people whose income is lower and cannot work from home while undergoing self-isolation.

Other Countries Stepping into Similar Shoes

However, England is not the first nation to do so. Declaring a war against COVID-19, the Saudi Government had also introduced safety norms to be strictly followed. Further tightening the grip over violators, the Government introduced fines for hosting celebratory gatherings and issued strict guidelines restricting the number of guests at weddings.

ALSO READ: Virus Mutation, Second Wave of Infection and Latest Vaccine Developments

In India, too, public compliance on safety measures had been dealt with negligence, despite the distressing escalation in daily infections. The concerned authorities have imposed fines over people not following the public safety measures and huge sums of penalties have been collected. These fines were imposed over the violators of COVID-19 protocol like those not wearing masks.

These measures are being imposed on violators to ensure they maintain 100% compliance with health safety measures post they pay a high cost for their reckless behaviour.

Australian City Imposes Penalties Up To A$20,000

In Australia too, the Government had introduced hefty fines as much as A$20,000 on anyone violating the COVID-19 isolation orders. These measures were imposed across Victoria, Australia’s second-most populous state, to contain the spread of the virus, when it experiencing a second wave of infections.

Violators of stay at home orders were to be penalised up to A$5,000, while in cases of people repeatedly violating the norms, these fines could go up to A$20,000. It is said that nearly $3 million worth of fine has been collected during the stage 4 lockdown in Melbourne city in August 2020.

Interesting Read: Fear of second wave of COVID-19 forces Tourism Industry to take another hit

Bottomline

It is a matter of dismay that many people are being fined for not wearing masks despite knowing the repercussions of getting infected with the disease. To ensure safety of the nation, the introduction of such fines by the Government demonstrates the need to contain the virus in the best possible way and stop offenders from behaving recklessly during the pandemic.

Summary

• The United Nations Climate Change (UNCC) in its historic Paris Agreement has asked all signing members to intensify their efforts and investments for sustainable development and low carbon emission targets.
• 190 out of 197 signatories have already signed the Paris Agreement.
• Many U.S.A states have mandates to produce 50% of their electricity from renewables by 2030. Germany produces 36% of its electricity from renewables.

The cost of electricity generation from the renewables continues to decline, because of the new innovations from China, India and United States. Development in the field of battery technology, smart charging, EVs and open power market is pushing the Green Energy sector.

The Fukushima Daiichi nuclear disaster of 2011 shocked the world and countries like France who were heavily reliant on nuclear energy have to rethink their energy policy. Nuclear powered power plants are not responsible for global warming directly but post the Chernobyl disaster of 1986 put the policy makers have been extra cautious as far as this sector is concerned.

The renewable energy share is expected to increase to 40% of the total energy consumption of the world by 2040. Renewables contribution to the global electricity generation was 10.4% in 2019.

Let us look at 10 players from this space.

Infigen Energy Ltd (ASX: IFN): Infigen Energy is a leading producer of wind energy in Australia. The company has seven wind farms generating a total of 185 GWh in the month of August 2020 (3% high from the previous year).

The company’s share prices doubled in the last six months. According to the latest press release from the company, Iberdrola has given an offer of 92 cents per Infigen Stapled Security for an off- market takeover bid.

The company’s revenue stands at $296.85 million for the year ended June, 2020. Revenue has increased by 11.24% y.o.y basis. The company has reported a profit of $3.457 million after taxes for the year 2019-2020.

Bluglass Ltd. (ASX: BLG): The company is involved in research and development of laser diodes, LEDs and microLEDs. Blueglass has a patent for low-temperature Remote Plasma Chemical Vapour Deposition (RPCVD) technology which is used to manufacture semiconductors and laser diodes.

The company’s share price has risen by 265% in the last six months. Revenue of the company stands at $ 3.822 millions for the year ended June 2020. The company’s reported a net loss of $5.994 million which is lower than the $ 14.420 million reported in the previous year.

Mercury NZ Limited (ASX: MCY): Mercury is involved in power generation through hydro and geothermal energy. The company will very soon add to its portfolio a 840GWh solar farm at Turitea. Company’s EBITDAF is $494 million, down by $12 million from the previous year.

The company has set $515 million EBITDAF guidance for the fiscal year 2021.

Meridian Energy Limited (ASX: MEZ): The company has 5 wind farms in New Zealand and 2 in Australia. Meridian Energy has reported an increase of 2% to $854 million of EBITDAF. Net profit after tax decreased by 48%, which can be attributed to the higher depreciation values.

The company is planning development of two new wind farms in New Zealand. Meridian has also established a wind farm in Antarctica to provide power for expedition camps.

JinkoSolar Holding Co Ltd. (NYSE: JKS): JinkoSolar is a manufacturing and distribution company of solar panels worldwide. Company’s revenue for Q1 was $1.2 billion, down by 11% on QoQ basis and up by 45.7% on YOY basis.

To meet the demand for the U.S market, the company has launched a fully automated assembly facility in Jacksonville, Florida. The share price of the company has increased by 17% in the past one year.

Enphase Energy INC. (NASDAQ: ENPH) Enphase Energy Inc is a global energy technology company. The company is a leading supplier of solar microinverters, and the microinverter system transforms energy received at each solar module level. The system brings high technology approach to energy generation, storage and management.

The company reported gross revenue of $125.5 million which is down by 37% QoQ basis.

Ørsted A/S (CPH: ORSTED) Ørsted is a Danish company, engaged in construction and operation of offshore and onshore wind farms and solar farms. Ørsted was ranked the most sustainable company in the world in the Corporate Knight 2020 Global 100 index of a most sustainable company.

The company, in its half-yearly report, reported an operating profit of DKK 9.8 billion, 11% higher than the previous year. The operational profit from the wind energy segment rose to 17% from the previous year.

Enel (BIT: ENEL) Enel is an Italian company with operations in more than 30 countries worldwide. The company produced 56TWh renewable power globally for the period H1, 2020. The company has planned to invest 14.4 billion euros in developing new renewable power generation and phase out coal generation.

Enel in its H1 report has report EBITDA of 8.794 billion euros, marginally high from previous year data. Net income increased by 6% to 2.405 billion euros.

EnBW (ETR: EBK) EnBK is a German electric utility company which operates in both segments- Renewables and Non-Renewables power generation. The company currently produces nearly 32% of its installed capacity from renewable sources. EnBK operates one of the largest offshore wind farms in North Sea.

The company reported a drop of 2.9% or 9726 million euro in its revenue for H1 of 2020. The corresponding dip in net profit was observed at 184.2 million euros, 35.6% lower than H1 of 2019. The company is trying to mark a strong presence in United States.

BP Plc (LSE: BP) BP is planning to become a renewable energy giant as a part of their sustainable development process. BP is planning to develop an installed capacity of 50 GW of renewable power generation by investing $ 60 billion.

BP is working in many joint ventures for the development of green energy. Lightsource BP, a subsidiary of BP has recently completed financing 260 MW solar projects in Texas.

Summary

• The furloughing scheme was rolled out in the month of March 2020 when the lockdown was put in place. It helped as many as 9 million people in the country save their jobs, who received up to 80 per cent of their salaries from the government as their employers promised to keep them on the rolls.
• While after opening of the lockdown, most people have joined back work, but nearly three million are yet to find jobs, as several industries are recovering at a slow pace.
• There are fears that several people would go unemployed after the scheme runs its course by the end of October 2020 if a targeted extension of the scheme is not done, prompting the MPs to make this request.

A Treasury Select Committee led by the MP Mel Stride has urged the UK government to go in for targeted extension of the coronavirus job retention scheme or popularly called the furlough scheme. For this, the government should identify those sectors/businesses which will able to survive the economic slowdown with an extended furlough support. Small businesses need hand-holding and laid-off employees across the impacted sectors need re-skilling, the MPs have stressed in the committee report.

The furlough scheme of the British government was perhaps the most dynamic stimulus measure rolled out by any country to deal with wrath brought by the pandemic. The scheme sheltered nearly 9 million British working-class people under its umbrella by protecting their jobs and livelihoods.

However, now that the economy has been re-opened for most of the sectors, it is important that more people are brought back to active employment so that the cost of the scheme on the exchequer may be reduced quickly.

At the same time, there are several industries who have had a slow rate of recovery until now for various reasons and have not been able to bring back much of their staff of their payrolls. If the furlough scheme ends in October 2020 as planned, it could hit these industries very hard, and could throw millions out of their jobs.

How has the scheme helped businesses?

The furlough scheme was Britain’s idea to protect thousands of small, medium, and large businesses in the country from going bankrupt and protect millions of jobs.

When the pandemic first hit the country, it was immediately realized that revenue levels for most businesses would fall as a result of a smaller number of people wanting to come out of their houses, fearful of catching a Covid-19 infection. However, when the lockdown was imposed in the country on 23 March 2020 almost all businesses were shut for an indefinite period.

It was but obvious that businesses who were dependent more on their cash registers will be the worst hit by this lockdown and their employees would face an increased threat of unemployment than other industries. For any country, the small and mid-sized businesses are the backbone of its economy; hence the crumbling down of this segment of the economy could have had long-term disastrous consequences for economic growth.

Also Read: Covid-19 Impact: Higher Than Usual Instances Of Pay Freeze

Since the opening of the economy in May, several industries have been witnessing a strong revival, only because of the lucid loan schemes and the furlough scheme that were rolled out in March 2020. The most important dimension of the furlough scheme, however, was that the employment rate in the country was checked to a reasonable extent, though it is still quite high.

These schemes though costing a lot to the British exchequer, have helped the nation avoid a much bigger financial disaster of business failures.

Also Read: Londoners spent the least during the lockdown

The construction industry saw the best recovery rates since the opening of the lockdown. Most of its furloughed staff is back to work. Similarly, for activities involving water supply, sewerage waste management, and remediation activities about 91.1 per cent of the staff is back in active work.

Arts, entertainment, and recreation have seen the lowest number of people being called back from furlough.

Aviation and hospitality are also two of the worst impacted sectors due to the Covid-19 pandemic and have a large proportion of their total staff still under the furlough scheme.

Let us now take a closer look at the performance of three companies: EasyJet Plc from the British aviation sector, Whitbread plc belonging to the country’s hospitality sector, and Barratt Developments from the housing sector.

Easy Jet plc (LON: EZJ)

The company had grounded its entire fleet and had furloughed thousands of its staff as a result of the coronavirus pandemic. It had announced in May 2020 that it would be slashing up to 4,500 jobs or as many as 30 per cent of its staff in order to ensure that it is fully able to recover by the year 2023. This company is making a very slow recovery in line with the rest of the aviation industry because of the continuing threat of the pandemic as well as the stringent safety precautions imposed by the government. Employees of EasyJet plc will be major beneficiaries of the government extends the furloughing scheme.

The shares of Easy Jet plc have been underperforming at the London Stock Exchange since the beginning of the year. On 2 January 2020, the shares of the company traded on the exchange at GBX 1430.00 per share, and towards the third week of March 2020, they took a sharp turn downwards to reach a low of GBX 494.80 on 18 March 2020. The stocks turned volatile and recovered to GBX 891.20 on 8 June 2020, however since then there has been a downward movement in the prices of the stock, and as of 14 September 2020 the shares of the company were quoted at GBX 599.67 (GMT+1 1:17 PM), up by 3.41 per cent from the previous close.

Source – Thomson Reuters

Whitbread plc (LON: WTB)

Whitbread plc company had also furloughed a significant portion of its employees under the government scheme as most of its properties saw zero guest turnout because of the lockdown. The company had recently announced that it had benefited to the tune of £120 million because of the furloughing scheme and the 12-month business rate cut relief. In line with the airline industry, the hospitality industry has been slow to recover from the pandemic and would be able to use the government scheme for some time.

The shares of Whitbread plc have been underperforming at the London Stock Exchange since the beginning of the year. On 2 January 2020, the shares of the company traded on the exchange at GBX 4206.26 per share, and towards the third week of March 2020, they fell sharply to reach a low level of GBX 1808.45 on 19 March 2020. Thereafter the stock made a recovery to GBX 2790.43 on 26 March 2020. Since then, there has been a sideward movement in the prices of the stock, and as of 14 September 2020 the shares of the company were quoted at GBX 2313.00 (GMT+1 1:22 PM), down by 1.30 per cent from the previous close.

Source – Thomson Reuters

Barratt Developments plc (LON: BDEV)

Barratt developments plc has been one of the strongest recovering housing companies after the lockdown was lifted. By 30 June 2020 all of company’s sites were reopened and it has called back all of its employees from furlough.

The shares of Barratt Development had been subdued after the massive fall witnessed in the immediate aftermath of the decision to impose a lockdown across the nation. The shares of the company were trading at GBX 752.00 per share on 2 January 2020, in the beginning of the year. In March they fell sharply to GBX 364.70 per share on 19 March 2020, since then they have made a slight recovery but have been moving in a sideways direction. On 14 September 2020 they were trading at GBX 510.60 per share (GMT+1 1.34 PM) down by 0.95 per cent against the previous day’s close.

Source – Thomson Reuters

To sum up, through the recommendations made by a treasury select committee, a group of MPs are urging the UK government for a sector specific extension of the furloughing scheme. Several other industry groups have also been making such requests to the government sighting that in some industries nearly 40 per cent staff have not been called back to work, while others risk losing highly skilled staff.

Summary

• General Motors (GM) announces partnering with tech startup Nikola to produce electric-pickup vehicle model.
• Both companies’ share price rose substantially after the surprise announcement.
• GM is taking another critical step towards fulfilling its vision of a zero-emission future by applying its electrified technology solutions to the heavy-duty class of commercial vehicles.

General Motors Company’s (NYSE: GM) share price jumped to a six-month high, post announcing buying US$2 billion equity stake in a startup called Nikola Corporation (NASDAQ: NKLA). General Motors intends to manufacture a new electric-pickup vehicle model. To amplify its alternative-fuel vehicle strategy, Detroit-based automaker GM will contribute its technology and manufacturing by providing engineering, homologating, validating and manufacturing the Nikola Badger battery electric and fuel cell versions.

Both companies' shares jumped after the surprise announcement. GM shares saw a steep 8% rise to hit the highest levels since February when the coronavirus pandemic struck the market down. Nikola’s share price jumped by more than 40%.

The GM released a statement on the day of announcement stating that it would receive 11% stake in Nikola and a board seat in exchange. There will be no cash exchange as the deal is mutually beneficial. The statement further highlighted that the startup Nikola is yet to generate any meaningful revenue. Hence, the deal with established player GM is an immediate boost for Nikola's legitimacy. The GM expects to receive more than US$4 billion in perks from this partnership.

Nikola, on the other hand, will exchange US$2 billion in newly issued common stock for in-kind services from GM and access to GM’s global safety-tested and validated parts and components. Common stock received by GM is subject to a staged lock-up provision that begins in one year and ends in June 2025.

Nikola Founder and Executive Chairman Trevor Milton said that Nikola is one of the most innovative companies globally. At the same time, GM is leading the engineering and manufacturing space in the world. He said that none could dream of a better partnership than this. He further added that joining two teams together, Nikola gets access to GM's validated parts for all their programs.

Also read: US Auto Majors Outlook: General Motors & Ford Motor

Ultium battery technology and a multi-billion dollar fuel cell program of GM is ready for manufacturing. Therefore, Nikola will immediately get a legendary supplier and manufacturing knowledge. Milton stated in the release that Nikola is receiving a validated and tested production-ready EV propulsion along with world-class engineering and investor confidence. GM has a vested interest to see Nikola succeed, said the Nikola Founder and Executive Chairman Trevor Milton.

General Motors Chairman and CEO Mary Barra said in the statement that this strategic partnership with an industry-leading disrupter such as Nikola would continue the broader development of GM's all-new Ultium battery and Hydrotec fuel cell systems. Barra said that the GM is also growing its presence in multiple high-volume EV segments. Building scale to lower battery and fuel cell cost is also on top priority to the GM, and the Company will increase in profitability. Barra mentioned GM taking another critical step fulfilling its vision of a zero-emission future through applying its electrified technology solutions to the heavy-duty class of commercial vehicles.

The agreement allows General Motors to utilise Nikola’s fuel cell technology to the Class 7/8 semi-truck market. The deal will also represent high-volume commercialisation of its leading Hydrotec fuel cell system. The partnership will also complement the Company's battery-electric propulsion. The Company is highly investing and focusing on battery development. The Ultium battery technology plan includes silicon anodes and lithium metal anodes. Both will improve vehicle's range, affordability, and most importantly reduce dependence on rare and costly metals, a way ahead with clean energy and zero-emission future. General Motors' new battery technology is currently showcasing automotive-grade durability and significantly higher energy density.

Also read: General Motors made the difficult decision in both Australia and New Zealand to drop the Holden brand

In the future, fuel cells will grow to become an essential component of the semi-truck market, as they have shown to be more efficient than other fuels such as gas and diesel. Apart from a battery technology, GM sees added growth prospects in various other end markets such as transportation, stationary and mobile power.

As per the agreement made between two companies, Nikalo will take responsibility for the sales and marketing of the vehicle, which is called Badger. The tech startup will also retain the Nikola Badger brand. Two companies plan to begin truck production by late 2022. The truck was announced in February 2020. Nikola expects to make its public debut in December at a launch event Nikola World 2020 in Arizona. A pre-event party is also organised a day before the launch and Badger consumers will be able to see and test drive the model on the next day of the launch, according to the young Nikola Founder and Executive Chairman Trevor Milton announced on Twitter. He also shared the pictures of the vehicle and announced his excitement in partnering with General Motors.

Also read: Stocks in Auto Space: Is the long-due revival nearing - AMA, BAP, CAR

(All currencies in USD unless or otherwise stated)

Summary

• Tesla’s share price experienced an 11% rebound on Wednesday after a 21% fall on Tuesday, between a wider bounce back in the technology sector, reflected through Nasdaq Composite index ending the trading session, with a rise of 2.71% from its last close, as on 9 September.
• In the last few months, Tesla shares witnessed a rally, which could be attributed to the hopes pinned on Tesla to be included in the S&P500 index. The non- addition of the Company disheartened the investors and led towards the sell-off.
• In the future, the Company wants to become affordable than before so that more people could switch to their sustainable cars. Due to the accelerated effect of global warming, moving towards sustainable energy has been more important than ever.

Tesla Inc (NASDAQ:TSLA) share price experienced an11% rebound on Wednesday after a 21% fall on Tuesday, which was the worst day on record since the multi-billionaire company was launched.

Owing to the surprise non-inclusion of Tesla in the S&P 500 index, the shares of the Company noted a plunge of 21.06% from its previous day close and ended the day’s trade at US$330.21, after hitting a low of US$330.01 intra-day, as on 8 September 2020.

This drop led to erasing of US$16 billion of Tesla’s market capitalisation within 24 hours on Tuesday.

Do watch; Why is Tesla Stock doing so well?

In the last few months, Tesla shares witnessed a rally, which could be attributed to the hopes pinned on Tesla to be included in the S&P500 index. Also, the addition to the index would have called for portfolio managers who replicate the index to purchase more shares. The non- addition of the Company disheartened the investors and led towards the sell-off.

Must read; Tesla Q2 2020 Profit Paves Way to S&P 500

On 9 September 2020, Tesla share price was quoted at US$366.28, noting an increment of 10.92% from its last close. The market capitalisation of the Company was noted at US$341.30 billion.

An increase of 11% in Tesla’s share price occurred between a wider bounce back in the technology sector, reflected through Nasdaq Composite index ending the trading session, with a rise of 2.71% from its last close. Also, the tech giants like Microsoft, Apple and Amazon settled the day rising by 4.26%, 3.99% and 3.77%, respectively.

The performance of the Elon Musk’s clean-energy-car company has been good despite the economic crisis caused by the COVID-19. This year has brought a 340% increase in the Tesla’s total worth.

What was Tesla’s mission?

Launched in 2003, the engineering team behind Tesla had an idea of a better energy sustainability.

Due to the accelerated effect of global warming, moving towards sustainable energy has been more important than ever – hence Tesla’s agenda was to show that people do not need cars fueled by petrol to enjoy driving. The plan was to make electric cars more attractive and driving them more fun.

Interesting Read: Tesla Surpasses Toyota, Becomes the Most Valuable Global Car Maker

Innovative technology

Five years later (in 2008), Tesla came up with the innovative high-tech battery and electric powertrain.

With the new technology, Tesla managed to create the very best car in its class – Model S. It was the first luxury sedan that was completely powered by an electric battery, which then became the best car in its class and across all other categories.

According to the measurement by Motor Trend, Model S only took 2.28 seconds to the 0-60 acceleration, setting high standards for cars in the 21^st century. The new model was the first car that had the over-the-air technology, meaning the car’s software would get updates over time and become even better than it was after being purchased. Apart from that, Model S offers performance, efficiency, safety, and fancy looks making it the most desirable car of this day and age.

2015 brought a new sustainable car, Model X, a sports vehicle that brings the outmost safety, at the same time – National Highway Traffic Safety Administration gave it a 5-star grade.

In 2016, Tesla’s co-founder and CEO Elon Musk completed Secret Master Plan, presenting a new car Model 3, which was put on the market a year later. Model 3 offered sustainable perks for the cheaper price.

Tesla did not just stop on manufacturing cars, but revealed their first semi-truck Tesla Semi, not too later. Tesla Semi was created as a cost-effective vehicle that would save up to US$200,000 for fuel only.

The most recent car, Model Y, was introduced in 2019 as an SUV with the maximum of seven seats and Cybertruck, is a no ordinary vehicle that got the best of both worlds – a better performance than a truck and a sports car.

Safety first

Tesla takes safety very seriously and has mandatory training programs for all the employees before they come to the factory. They also want to have constant improvements; therefore, they are offering regular trainings so that their employees can improve their skills swiftly and perform better in future

Energy solutions

New solutions namely Powerwall, Powerpack and Solar Roof allow ordinary people and businesses to participate in creating a more sustainable energy. In Gigafactory-1, Tesla creates thousands of job opportunities, and have introduced a new battery technology, which is getting more popular and wanted day by day.

Good Read; Elon Musk Ramps Up Tesla’s Pace, Says California Production Will Restart Amid Pandemic

Future awaits

Tesla showed that their only limit is their imagination. In the future, the Company wants to become affordable than before so that more people could switch to their sustainable cars. Tesla has been only showing growth and a high drive to make the world a better and cleaner place to live in.

Must Watch; Find out how Tesla has reported a quarter net Profit amid covid19!

Summary

• The United States President Donald Trump raised an idea of decoupling the US and Chinese economies.
• China officials hit back saying the US is a bully and it needs to be opposed.
• Experts believe that the decoupling is impractical as the economies are intertwined.

The US elections are due in a few months, and President Donald Trump stated separating the US and Chinese economies. The president suggested the idea of decoupling the United States and Chinese economies, highlighting that the US would not experience any monetary loss if the world's two biggest economies part ways and discontinue the business.

On 7 September 2020, during the Labour Day press conference at the White House, Trump communicated to the media that he finds the word decouple interesting. During the media interaction, he also vowed to bring back jobs to America from China. He said that Americans would not lose billions of dollars if the US stops doing business with China. This route is called decoupling.

Trump is acting tough on China as a critical deliverable of his campaign for re-election, which will be held on 3 November 2020.

During the press conference, Trump announced his opponent, Joe Biden, of being soft towards Beijing. Currently, Biden is leading most of the opinion polls. He said that if Biden wins, China will win and China will eventually own the United States.

Also Read: Trump to take action on Chinese software in coming days

Biden also criticised Trump's Phase 1 trade deal with China, stating it is "unenforceable". Biden continued saying the trade deal is "full of vague, weak, and recycled commitments from Beijing." Apart from taking stringent actions on China, Trump vowed that when re-elected, his administration would forbid contracts with companies that outsource to China. He emphasised on holding Beijing accountable for the coronavirus pandemic which initiated in China and spread in most parts of the world.

In order to turn America into the manufacturing superpower of the world, Trump plans on ending the country's dependence on China. Trump said that, whether by decoupling or by enforcing massive tariffs which he has already done, his administration will ensure ending reliance on China. Trump says that the US cannot rely on China. Trump further said that the companies that desert America and create jobs in China and other countries would also face tariffs.

Did you read; Cyber Espionage Campaign: Strings that tie China, Australia and the US

China hits back at the US

The US-China tensions are rising day after day as each state accuses each other of various allegations. Recently Chinese tech giant ByteDance was under pressure to sell its video-sharing app TikTok to Microsoft. Now weeks after watching the story unfold, Beijing has struck back at the US using export controls, as a choice of weapon. The list of controlled exports of Middle Kingdom’s has been extended by Chinese authorities to include algorithms, TikTok’s main asset.

Chinese authorities are keen on avoiding the on-going tension between the two countries before the November elections. But China's moves suggest that not just the United States but also China is moving to decouple its technology sector.

Also Read: Huawei Banned from the UK’s 5G Mobile Phone Networks - UK China Lock Horns

According to Gavekal Dragonomics/Macrobond data, other emerging countries present a broader export marketfor China. Belt and Road Initiative and trade-based policies have let China explore markets in Africa and the Middle East. The rise of digital yuan is making it easier for China to increase its exports to other countries than the US.

In recent times, the Trump administration is emphasising on blocking tech companies like Huawei and famous Chinese apps like TikTok and Wechat, stating they pose threats to national security. Recently a Chinese researcher was also arrested in similar allegations. After which China has claimed that the US government is bullying them and it should be rejected and opposed. China's State Councillor Wang Yi suggested Chinese companies to not create any backdoor as the company's secret access to its data and network. The US government accused tech giant Huawei of having a backdoor in its equipment.

Also read: Chinese Arrest Escalates the US-China Tensions, TikTok Ban Also on the Cards

Conclusion:

The United States Treasury Secretary Steven Mnuchin expressed back in June that a decoupling of both countries' economies would result in the US companies not being allowed to compete on a fair and level basis in China's economy. Other officials and analysts have stated that the US and China economies are intertwined, making this move impractical. But they believe Washington will continue to pressure Beijing to level the playing field.

Also read: Trump Cuts US ties with ByteDance and Tencent

Summary

• After a significant increase in exports to the U.S., the Chinese Yuan gained against USD. Since May this year, the appreciation in CNY has been notable, but we could also say USD has depreciated during the period.
• China is doing all it can to prevent the scars left by the epidemic, which turned into pandemic after inadequate control by Chinese Authorities. And the world is increasingly looking to diversify supply chains from China.

The Chinese Yuan has been appreciating against USD since the beginning of this year. The initial spread of the virus within China was controlled effectively, and the Chinese economy started functioning again much before many countries could.

When lockdowns peaked in most of the world, the economic activity in china resumed gradually and since then it has been growing swiftly. In the second quarter, the Chinese economy grew by 3.2% while most of the countries have reported drastic contraction.

On 07 September 2020, Chinese Yuan gained further against USD after China released trade data. China recorded a trade surplus of over $34 billion, following exports to the US registering $44.4 billion – an increase of 20% compared to a 1.5% increase in imports. The U.S has remained one of the major buyers of Chinese goods, despite the sour bilateral relations between the two countries.

In August, China has recorded an overall trade surplus of $58.93 billion compared to $62.33 billion in the previous month.

Yields and geopolitical isolation of China

Chinese debt is also yielding higher than most of the developed markets. Given it is an emerging market, the interest rates are likely to remain elevated compared to the developed markets. Market participants are pegging that Yuan-denominated financial assets will be in demand over the next decade.

It is being reckoned that Chinese Yuan will account for a substantial part of global foreign exchange reserve assets by the end of next decade. Although this seems rosy, it could be quite possible driven by larger trade share of Chinese goods.

But it is also important to note that the world has grown uneasy with China since the epidemic broke, and the response by Chinese policymakers was not enough to prevent the epidemic taking the shape of a pandemic.

With Australia leading the proposal for an independent enquiry in the origination of COVID-19, following which China and Australia relationship have been in troubled waters.

Australia was not alone in the proposal for an independent enquiry, and several nations around the world also moved the proposal. President Donald Trump also raised concerns on the handling of the epidemic by the World Health Organisation in China.

China’s geopolitical situation continues to remain volatile as countries are increasingly turning agnostic. Large foreign manufacturers in China have presented their consent to leave manufacturing zones.

Over the past years, the manufacturing base of China has also shifted towards other South Asian nations like Thailand and Vietnam. Businesses are inclined to find suppliers outside China even before the pandemic broke driven by China-US trade disputes.

Policymakers around the world have been proposing to manufacture goods domestically instead of importing from other nation. A precipitate supply chain shock inflicted by the pandemic has now given more reasons for businesses to move away from China.

As a result of tariffs imposed by China and the US on their respective goods, the margins of businesses have suffered as importing for both nation’s firms have become dearer. Trade war has disrupted the pricing and cost for many businesses in both countries.

Japan is running a subsidy program to enable Japanese companies to move out of Chinese manufacturing hubs. Regionally, the incumbent policymakers of the Indo-pacific region are inclined to have a resilient supply chain by lowering dependence on Chinese goods.

Earlier last week, trade ministers from Japan, Australia and India met to discuss supply chains and stressed on the need for resilient supply chains that are fair and free. They also urged other countries to join the force.

It is well seen how the US has been threatening China to impose sanctions in the wake of increasing domestic tensions in the country like nationalisation of Hong Kong, human right violations in Xinjiang province etc.

Chinese policymakers, on the other hand, have been focused on developing Shanghai as a Yuan-denominated financial hub, incorporating cross border payments systems, and introduction of digital currency.

Despite Yuan designated as nominal international status by IMF in 2016, the volume of and application of the Yuan has been minimal. However, Yuan has gained market share for international trade, but it lags USD by a wide margin.

Given that China is growing unlike most of the world, the funds are finding inflows to the Chinese economy. Moreover, the market participants are witnessing optimism in the Chinese market, driving up its exchange rate.

More importantly, a rising CNY against USD is not favourable for importers of Chinese goods since they are required to pay more. Over the past, it is well known how Chinese policymakers can depreciate CNY to support exports.

This recent appreciation of the Chinese currency is somewhat reflective of the comparatively low growth world against China’s pick-up in economic activity after the pandemic. But the medium-term picture continues to remain bouncy given the increasing stress on supply chains originating from China.

(All currencies in USD)

Summary

• With the COVID-19 pandemic showing no signs of slowing down, the degree of hospitalisation required in COVID-19 disease yelps for both treatment and vaccine to treat patients and help control the spread of the virus.
• According to the World Health Organization (WHO), there are 34 candidate vaccines under clinical evaluation with a further 142 candidate vaccines in preclinical evaluation.
• Moderna, AstraZeneca-Oxford University and BioNTech-Pfizer are some of the frontrunners with their respective vaccine candidates under Phase III clinical trials. The developers are anticipating a filing before the end of 2020.
• If approved, vaccines may hit the market in early 2021, prompting healthcare companies to scale up manufacturing capabilities.

As on 8 September 2020 (at 10:39 AM CEST), there were 27.03 million COVID-19 cases in the world with 881,464 reported deaths according to WHO.

At present, the mortality rate is much lower than at the onset of the pandemic. The pandemic, which has witnessed a colossal number of deaths during the initial phase, is currently experiencing clinically milder COVID-19 cases. While one explanation may include that the virus is losing its malignancy, the healthcare systems have also come up with better treatment modalities.

DO READ: COVID-19 Vaccine Race Continuing at War Time Speed, Who will Pull Off?

However, with the pandemic showing no signs of slowing down, the degree of hospitalisation required in COVID-19 disease yelps for both treatment and vaccine to contain the spread of the virus and treat patients.

According to the World Health Organization, there are 34 candidate vaccines in clinical evaluation and 142 candidate vaccines in preclinical evaluation. There are nine candidate vaccines which are currently part of the COVAX initiative. This global initiative that aims to assist vaccine manufacturers in providing safe and effective vaccines to countries worldwide post the candidate vaccines are licensed and approved.

INTERESTING READ: Coronavirus Vaccine - ‘Silver bullet’ OR NOT as per WHO

Selected manufacturers with advanced stage (Phase III) candidate vaccines

On that backdrop, let us cast an eye on a few Phase III candidates.

mRNA-1273 by Moderna / NIAID

Moderna, Inc. (NASDAQ:MRNA) has collaborated with National Institute of Allergy and Infectious Diseases (NIAID) and Biomedical Advanced Research & Development Authority to study the safety and immunogenicity of the vaccine candidate, mRNA-1273 to prevent COVID-19 in adults aged 18 years and older. The candidate vaccine is currently in Phase III clinical trial.

The study evaluates the efficacy, safety, and immunogenicity of mRNA-1273 to thwart COVID-19 for up to 2 years post mRNA-1273’s second dose. The study started on 27 July 2020 and is expected to finish by 27 October 2022. As on 4 September 2020 at 5:00 PM ET, 21,411 participants were enrolled in the COVE Phase III Study.

DO READ: Up ~484% in a year, More Boost for Moderna with Late-stage Trial of COVID-19 Vaccine

Since March 2020, over 300 people have been administered with the vaccine with no serious side effects. More than 1,900 participants have been recruited in Moderna’s infectious disease vaccine clinical studies in the US, Europe, and Australia.

AZD1222 by AstraZeneca / University of Oxford

UK-based Biopharmaceutical Company, AstraZeneca PLC (LON:AZN) and the University of Oxford have collaborated for the development and supply of the Oxford University’s potential recombinant adenovirus vaccine, known as AZD1222, to prevent COVID-19 infection from SARS-CoV-2. The agreement allows AstraZeneca the rights of worldwide manufacturing and distribution of the vaccine. The candidate vaccine is currently at Phase III clinical trial in the US. Trial centres across the world will enrol almost 50,000 adults aged 18 years with 30,000 for US-based trial. Late-stage Phase II/III trials for the candidate is ongoing in the UK and Brazil and a Phase I/II trial in South Africa. There are trials planned in Japan and Russia.

AstraZeneca is looking at manufacturing partners to support the global rollout of its COVID-9 candidate vaccine dubbed AZD1222. The Company has signed agreements with New York-based Albany Molecular Research and UK's Oxford Biomedica to support the production of the vaccine through 2021.

DO READ: Next move on Vaccine: Government's agreement with AstraZeneca catering 25 million Australians

The Phase III trial is estimated to complete by November with mass production anticipated by 2021. The US phase III trial is a part of US’ “Operation Warp Speed” program that intends to supply 300 million doses of an effective vaccine by January 2021. The program is also supporting building medical countermeasures for COVID-19.

BNT162b2 by BioNTech / Pfizer

Pfizer Inc. (NYSE:PFE) and BioNTech SE (NASDAQ:BNTX) have collaborated to evaluate RNA-based COVID-19 pandemic candidate vaccines to select a single candidate vaccine and identify the dose level for a critical global safety and efficacy trial. The companies are focusing on two lipid nanoparticle–formulated, nucleoside-modified RNA candidate vaccine known as BNT162b1 that encodes the SARS-CoV-2 receptor-binding domain (RBD), and BNT162b2 that encodes the SARS-CoV-2 full-length spike protein to escalate its potential for stimulating virus-neutralising antibodies.

GOOD READ: Trump Goes COVID-19 Vaccine Shopping, Pumps ~US$2 Billion in Pfizer/BioNTech candidate

Across all populations, BNT162b2 administration was well tolerated with mild to moderate fever in fewer than 20% of the participants in a Phase I study in the US. These results led to the selection of the BNT162b2 candidate for the pivotal Phase II/III global study that started in July 2020. The study aims to enrol 30,000 participants, of which more than 11,000 participants have been enrolled.

If the clinical trials end up as per expectation, Pfizer and BioNTech may seek regulatory review of BNT162b2 in October 2020. Post-approval (if any is obtained), the companies intend to supply up to 100 million doses globally by 2020 end with ~1.3 billion doses by 2021 end.

INTERESTING READ: It's all about the Vaccine Game: Gears that can put ASX 200 into a transition

Summary

• The US stocks ended lower before recovering on 4 September due to a sell-off of technology stocks that overshadowed the improved unemployment rate data.
• The US unemployment rate improved after falling to 8.4% in August compared to 10.2% in July due to hiring of new employees at some firms, and temporary hiring for US census supported job figures.
• The US added 1.4 million jobs in August, but the pace of recovery has slowed down substantially as the federal stimulus aid expired.
• Economists have stated that an increase in hiring is not sustainable as substantial uncertainty remains to surround coronavirus situation.

The main indices of Wall street, Dow Jones and S&P 500 fell sharply on 4 September due to technology stocks sell-off, which outshined the unemployment rate data for August reflecting a steeper fall than anticipated. The stocks had initially opened higher after the release of August jobs data, but the market quickly turned negative thereafter.

Did you read; Why NASDAQ Composite index plunged 5%?

The Dow Jones Industrial Average Index fell 0.56% on 4 September, closing at 28,133.31. On the same day, S&P 500 slid 0.81% to 3,426.96, and the tech-heavy Nasdaq Composite lost 1.27% to 11,313.13.

Investors continue to measure the time the economy will take to recover from COVID-19 and how high the stocks can go from here. Further move on stimulus aid package is anticipated widely amongst investors amid fragile recovery.

The 10-year Bond Yield soared after the better than expected jobs report released on 4 September. Further, there have been reports of job losses in a lot of companies. American Airlines Group and United Airlines Holdings to Ford Motor Co. have declared their plains to slash their staff.

US unemployment rate drops

The US Department of Labor released an employment report on 4 September showing that the jobless rate fell from 10.2% in July to 8.4%, sharper than the market prediction of 9.8% while the number of jobless people decreased by 2.8 million to 13.6 million. However, the number is still on the higher side as compared to February.

Source: US Bureau of Labor Statistics, dated: 4 September 2020

Some of the highlights of how the household survey and its measures were affected are as follows:

• The number of people who have been temporary laid-off fell by 3.1 million compared to July to 6.2 million in August, but the number of permanent job losses increased by 534k to 3.4 million indicating that the labour market is still in doldrums
• The labor force participation rate rose by 0.3 percentage points to 61.7% in August
• Unemployment rates are lowest for the white Americans at 7.3%, but stayed above 13% for Blacks, 10.5% for Hispanics and 10.7% for Asian workers showing conflicting outcomes due to COVID-19
• The jobless rate for those who do not have a high school diploma stood at 12.6%, while those with a bachelor’s degree or higher was at 5.3% during August 2020
• The number of Americans who are looking for work or working increased to 61.7% in August from 61.4% in July, which is positive for job growth and economic recovery

The report also revealed that the average hourly earnings increased 0.4% or by 11 cents to $29.47 in August, as compared to July, while the unemployment rate fell, but remained at a high of 14.2% from 16.5%.

Addition of 1.4 million jobs in August

The US economy added a greater than anticipated number of payrolls in August. The US nonfarm employment increased by 1.37 million in August, following the rise of 1.76 million in July, with the numbers being in line with the expectations of economists. The improving numbers showed that economic activity has been resuming continuously after it had been restricted due to COVID-19 induced lockdown.

Source: US Bureau of Labor Statistics, dated: 4 September 2020

The rise in government employment numbers was due to temporary hiring of 2020 census workers, whose rolls grew by 328,000. Noteworthy job advances happened in retail trade (+249,000 jobs), leisure and hospitality (+174,000), professional and business services (+197,000) and education and health sectors (+147,000).

Despite the addition of new jobs in August, the economy still stays about 11 million jobs down from February, before COVID-19 began to disrupt the economy.

ALSO READ: A Discord on the US Recovery: When Optimism Collides with Fear

Economists stated that the hiring might be difficult to maintain as there was substantial uncertainty for employers on the virus situation. Though the daily case count has reduced, still the viral caseload stays on a higher side. Dining out, air travel and many other activities still remain far below the levels before coronavirus.

The data showed inconsistent recovery in the labour market, putting pressure on Congress. The recovery is decelerating as many stimulus actions from the CARES Act like the Paycheck Protection Program for small businesses, and $600 weekly federal unemployment supplement have expired in the past 2 months period. The withdrawal of stimulus has left many Americans sans the additional support that also helped the economy to stay buoyant amid such challenging times. Lawmakers stay stuck over the next stimulus package.

Jerome Powell, Chairman of Federal Reserve, appreciated the August jobs report but stated that the economy would need low-interest rates for years.

DO YOU KNOW: How is the US Election Race Faring? Does it impact your portfolio?

The speed with which more job gain would take place remains contingent on if the US is able to better control the coronavirus situation, and if there comes an end to the deadlock in Congress over another stimulus package. Democrats and Republicans stay at odds over how large the other instalment of relief would be, and what will be its content and on measures of further unemployment aid.

Summary

• The US Centers for Disease Control and Prevention has issued notices to the states, urging them to be ready for a potential COVID-19 vaccine as early as November.
• Reportedly, Pfizer is all set to roll out its COVID vaccine before the presidential elections.
• The vaccination rollout timing has raised questions related to the effectiveness and safety of the vaccine.

History will never forget the unprecedented COVID-19 pandemic, a shock to society, health systems, governments, and economies, globally. Ever since its onset, leaders are making decisions to manage its impact and consequences.

Given the pandemic challenges, number of businesses have shut their operations, while few sectors such as tourism, travel, hospitality and aviation are struggling to remain relevant in the age of social distancing and figuring out how to adapt to these new challenges.

That said, when the world is waiting for a medical breakthrough in the form of an effective vaccine, here comes the news. The US Centers for Disease Control and Prevention (CDC), the nation's health protection agency, has urged state authorities to be ready for a potential COVID-19 vaccine, two days before the Presidential election. The CDC has issued notices to the states in this regard, urging them to plan for the vaccine distribution as early as 1 November 2020.

Must Read: How is the US Election Race Faring? Does it impact your portfolio?

Pfizer to Fast-Track the Vaccine Rollout

There are speculations that US-based drug company, Pfizer Inc. is all set to roll out its COVID vaccine before the US Presidential election. The Company has established that by end-October, it would know whether its COVID-19 vaccination is a success. If successful, the Company will quickly submit it for approval.

Pfizer is developing the vaccine with German partner, Germany's BioNTech. The company is set to conduct a live video webcast of its virtual Investor Day over two days on 14 and 15 September 2020, providing updates on its progress regarding R&D pipeline and product candidates.

The Vaccine Timing Raised Many Eyebrows

Experts are raising their concerns over the timing of the vaccination. Several pertaining questions are arising - what if the company has fast-tracked the process due to pressure from President Donald Trump's administration? Is the company risking people's health by compromising with the standard procedures for ensuring effectiveness and safety of the vaccine?

The other company in the vaccine race with Pfizer is Moderna. Both these companies started final third phase trials during late-July 2020, using the same technology based on messenger RNA. Until now, a technology focused on messenger RNA has not been proven in any vaccine. Pfizer's vaccine needs two doses within 21 days, whereas Moderna's vaccine requires double dose in 28 days.

Another prominent candidate for COVID-19 is being developed by the Oxford University and AstraZeneca, which is undergoing third phase testing in various countries.

Good Read: COVID 19 Vaccine Game Who will Pull Off?

Vaccination testing data will be reviewed by the Food and Drug Administration (FDA), which has hinted that a vaccine might be given emergency permission before the end of trial procedures. However, the FDA is receiving massive criticism from the medical fraternity for this hurry, as the pandemic situation is a health emergency, a too serious condition to mix with the politics.

For a detailed understanding on Clinical Trails, read here.

Pfizer, BioNTech Share Promising Early Data on Lead mRNA COVID-19 Vaccine

On 20 August 2020, the partners shared additional data on their vaccine candidate BNT162b2 being developed for COVID-19.

As per Pfizer, in its 1st phase study in the US, when the second dose of 30μg, BNT162b2 elicited SARS-CoV-2–neutralizing geometric mean titers (GMTs) was administered to young and older adults, after seven days, it demonstrated strong immunogenicity in these participants.

Kathrin U. Jansen, Ph.D., Senior Vice President and Head of Vaccine Research & Development, Pfizer, stated that this early data highlights the promising safety and immunogenicity profile of the vaccine candidate from the study conducted in the United States. In the near term, the company sought to sharing T cell immune response data from the trial being undertaken in Germany.

Among the volunteers for the vaccine, BNT162b2 was found to be well-tolerated with 20 per cent of them developing mild to moderate fever. The outcomes pushed the vaccination for 2/3 phase global study, which started in July 2020 and aimed to enrol a maximum of 30,000 participants between 18 and 85 years of age.

As per the partners, they are on track to seek regulatory review for the vaccine candidate by October 2020. If everything goes as per the plan, Pfizer will supply up to 100 million doses, globally, by the end of the year 2020. Moreover, the company expects to deliver nearly 1.3 billion doses by the end of 2021.

A Glance at Pfizer's Q2 Report

In the second quarter, the company reported:

• Revenues of USD 11.8 billion, representing a decline of 9 per cent. Furthermore, it reported 6 per cent operational growth from biopharma, primarily driven by Ibrance, Inlyta and Xtandi, Vyndaqel/Vyndamax, Eliquis. Thirty-one per cent operational decline from Upjohn due to the loss of exclusivity of Lycra in 2019. It was somehow balanced by 17 per cent Operational Growth in China.
• Reported Diluted EPS of USD 0.61 for Q2
• During the first half-year of 2020, the company paid USD 4.2 billion of dividends, including dividends of USD 0.38 per share of common stock in Q1 and Q2, respectively.

The company raised midpoint of 2020 financial guidance for revenues by USD 0.1 billion to USD 48.6-50.6 billion and for adjusted diluted EPS by USD 0.03 to USD 2.85-2.95.

Dr Albert Bourla, Chairman and Chief Executive Officer at Pfizer, highlighted that the company remains fully committed to developing a treatment for health challenges posed by the COVID-19 pandemic. Pfizer's robust performance during challenging times shows business resilience, he added.

Summary

• Lord & Taylor, the oldest US retail store chain has filed for bankruptcy.
• The brick-and-mortar retailers are facing the brunt of the crisis, along with other industries like travel & tourism and hospitality.
• J Crew, J.C. Penney, Brooks Brothers and Owners of Ann Taylor, Loft also filed for bankruptcy amid coronavirus pandemic.

As the world battles with coronavirus pandemic, the retail industry is tumbling into the crisis. With no optimism for the near future, many retail stores are closing down businesses.

Lord & Taylor, the oldest U.S. department store chain has filed for bankruptcy. The department store company announced an end to the legendary retail chain, which has its roots since 1826. A nearly 200-year-old department store chain has announced the closing of stores in all locations.

ALSO READ: U.S. Chaparral Energy Files for Bankruptcy Protection

Lord & Taylor closed its Fifth Avenue flagship store last year.

In 2019, Lord & Taylor was acquired by an online clothing-rental startup called Le Tote. Francisco-based Le Tote bought Lord & Taylor for $100 million from Hudson's Bay Co.

Le Tote took over the 38 stores and also its online operations. Hudson's Bay continued to own Lord & Taylor's real estate properties and cover Le Tote's rent at the properties for three years. Both the companies hoped to revive its relevance to new, younger shoppers.

Le Tote and Lord & Taylor are now seeking Chapter 11 protection from their creditors. While applying for Bankruptcy both the companies stated that that they operated in total 38 locations which are temporarily closed since March 2020 due to the health crisis.

Novel coronavirus pandemic has wreaked havoc on retailers, especially brick-and-mortar retailers. Though Amazon is an exception, driven by the new normal of digital trends. The pandemic restrictions led people to spend months at home, which resulted in clothing sales callable across the globe.

RELATED READ: Australia’s Retail Confidence Crashes in August amid Level 3 restrictions

What led to the downfall of Lord & Taylor?

English-born Samuel Lord started business in Manhattan, New York in 1824. His wife's cousin, George Washington Taylor, joined the firm in 1834. The company was then named Lord & Taylor. Back then the shop sold hosiery, misses' wear, and cashmere shawls.

In 1859, Lord & Taylor opened a second store in the present-day SoHo neighbourhood, keeping the older store open. With this started the expansion of their business.

Its legendary Fifth Avenue store and headquarters opened in 1914. The famous architectural firm of Starrett & Van Vleck designed the iconic building, which is called Lord & Taylor Building. The Fifth Avenue store had a concert hall with a built-in pipe organ and several dining rooms as well.

A step for revival failed?

Lord & Taylor was sold to a 7-year-old startup Le Tote, but before the sale, its flagship store on Manhattan's 5th Avenue was sold to WeWork.

In 2018, Lord & Taylor's previous owner Hudson's Bay sold the landmark building to add needed liquidity to the company. After which he continued to operate Lord & Taylor in the building at a smaller scale. Now the customers have to say goodbye to the shop as well.

Hudson's Bay, the owner of Saks Fifth Avenue, mentioned that the company is struggling. Its chief executive had said that the retail chain was stuck in the "middle" space among competitors. Lord & Taylor neither sold high-end luxury apparel nor a discount brand.

Le Tote envisioned transforming Lord & Taylor business and targeting Lord & Taylor brand loyal customers along with the city-dwelling customers. Lord & Taylor’s target customers typically comprise suburban women around the age of 50, and Le Tote target customers range is city-centric women in their 30s.

The revival plan was knocked down at the sudden coronavirus outbreak. The brick-and-mortar retailers are facing the brunt of the crisis, along with other industries like travel & tourism and hospitality. The retail stores which were forced to close down because of the restrictions in order to avoid the spread of coronavirus are particularly suffering.

Miseries of other retail brands

Since the start of the outbreak, many companies have filed for Chapter 11 bankruptcy. They want to shed debt and get out of costly leases.

Fashion firm J Crew filled for bankruptcy protection in the month of May.

Ascena Retail Group, the owner of various clothing labels, including Ann Taylor, LOFT, Lou & Grey, Lane Bryant, Catherines, Cacique, and Justice have filed for Chapter 11 bankruptcy. The company announced the closing of several stores. Ascena is also a tenant of major malls and shopping centres. The group said it plans to close 'a significant number' of stores for the young girls' brand called Justice.

It will close "a select number" of Ann Taylor, Loft, Lane Bryant and Lou & Grey locations and the group will close all Catherines stores along with all stores of all of its brands in Puerto Rico, Canada and Mexico.

J.C. Penney filed for bankruptcy and declared that it would permanently shut down its 242 stores across the U.S. The 118-year-old retailer has been struggling for many years.

Brooks Brothers, the 200-year-old company known for dressing up nearly every U.S. president also declared bankruptcy.

Another century-old women's apparel brand New York & Co. has also filed for bankruptcy protection. The company plans to liquidate all the stores as it had to forcefully close the stores because of the coronavirus pandemic effects. New York & Co. also faced supply-chain issues because of the discrepancies amid the health crisis.

Bottomline

The retail scenario has changed since COVID-19 pandemic struck the world. The recent Bureau of Economic Analysis reports data showed that the personal consumption in the second quarter dropped 10.5%. The era of department stores may be dying, but the brand loyal consumers hope that the century-old retail businesses may persist in the new post-COVID world.

Besides, online shopping has been defining the new charter for retail businesses amidst growing social distancing norms and digital trends.

Summary

• On 3 September 2020, the Nasdaq Composite lost 5% of the profit, with the S&P 500 and the Dow indices following the similar poor situation.
• With this backlash, The Wall Street share market has faced the worst drop in shares since June this year.
• A couple of reasons seem to be the most logical for the Nasdaq drop – investors have been running away from the tech market because of the US-China relationship and overbought shares in the technology industry.
• Compared to the tech shares, cyclical sectors have had more sales due to the economic recovery.

Lately, the Wall Street tech stocks experienced the worst backlash since June, as the Nasdaq Composite dropped by 5%, followed by other indices like Dow that lost more than 800 points and the S&P 500 that fell by 3.5%, as on 3 September 2020.

Did you read; Dow Jones, Nasdaq, and FTSE 100- What Are the Chartists Looking At?

Source: Google, dated 3 September 2020

For Better Understanding: Nasdaq Composite Index

Just earlier this week, the Nasdaq saw a rise close to 1%, securing more than 12,000 points. Following the Nasdaq, the S&P 500 similarly made a new record on Wednesday, before stocks erased the whole profit.

What is Nasdaq?

Nasdaq is essentially a marketplace where investors can spend their money for shares within the electronic and technology department.

It was created on 8 February 1971 by the National Association of Securities Dealers (NASD).

The idea behind Nasdaq was to create a transparent marketplace that could be accessed via computer in a fast and efficient manner.

Microsoft, Apple, Amazon, and Google are some of the most successful businesses who sell their shares on the Nasdaq Composite, an index with more than 3,000 stocks.

Why did this happen?

Nothing similar happened to the Nasdaq in its history.

Since the beginning of this year, the Nasdaq has been doing a lot better than its two competitors, the Dow, and the S&P 500.

The Nasdaq continues to be 28% up since the beginning of 2020, leaving the competitors far behind. The Dow remains to stay in the negative numbers, even though 2020 made some positive numbers for the stock market.

DO READ: Understanding Investment Strategy - 'Dogs Of The Dow'

Experts think that the investors saw the opportunity to run away from these stocks, as they appeared to be overbought to them.

Tech issues

Another assumption why this plunge happened are disputes between the USA and China.

It is thought that the investors oversaw the very public issue between the two powerful nations, believing it would be the best to leave the tech stocks behind, which would be affected the most in case of a rise in costs.

INTERESTING READ: China Stories: Renewed Tensions with US and Increasing External Debt

As a result of a slow economic recovery, shares within the cyclical sectors are getting more popularity.

Do read; A Quick Review of Cyclical Industry

Overall, the drop in tech shares was expected, as the stock markets in general never have a straight line of either success or a downfall. Long-term expectations remain positive for the market because the interest and support for technology has not altered, even though the performance of the technology shares was amid the worst on Thursday (3 September 2020).

Summary

• Zoom reported Q2 total revenue of US$663.5 million, up 355 per cent YoY.
• Number of customers contributing more than US$100k in TTM revenue marked 112 per cent YoY uptick.
• The communication giant expects 281 to 284 per cent YoY increase in FY21 revenue.

Zoom Video Communications, Inc. (NASDAQ: ZM), a leading provider of videotelephony and online chat services, has released a remarkable financial update for the Q2 ended July 31, 2020. The communication player posted a tremendous increase in the profit, cash flow and GAAP income.

Zoom reported Q2 total revenue of US$663.5 million, up 355 per cent YoY. The communication giant expects 281 to 284 per cent YoY increase in FY21 revenue.

As most parts of the world transitioned online to promote social distancing and avoid the spread of COVID-19 virus, Zoom saw a significant boost in the market value.

Zoom founder and CEO, Eric S. Yuan said that the organizations are addressing their immediate business continuity needs to support a different digital future. Companies and individual users are increasingly accepting the new structure of working anywhere, learning anywhere, and connecting anywhere with the help of a video-first platform, Zoom.

Zoom believes that the company has strived to deliver a world-class, frictionless, and secure communication experience for its users. The company has customers of various locations, devices, and use cases across the globe.

ALSO READ: Lens Through Zoom’s Growth Story Amidst Growing Digitisation Trend

Eric S. Yuan has been among the highest-earning billionaires throughout the coronavirus pandemic like Jeff Bezos and Elon Musk.

CEO Eric Yuan stated that revenue growth of 355 per cent YoY is primarily because of the company's ability to keep people around the world connected.

RELATED READ: Zoom Video Communications is up ~2x this year, do you know why?

2QFY21 Financial Highlights

Zoom’s GAAP income from operations for the quarter was noted at US$188.1 million, compared to US$2.3 million in the Q2 FY20. At the same time, its non-GAAP income for the quarter was US$277.0 million, up from US$20.7 million in the Q2 FY20.

Total cash, marketable securities, and cash equivalents at the quarter end stood at US$1.5 billion.

Addition of new customers and expansion across existing customer base let to the growth in total revenue. At the end of the second quarter, Zoom had approximately 370,200 customers with more than ten employees, marking an increase of about 458 per cent from the same period last fiscal year.

Outlook

Zoom stands positive in its outlook for the third quarter as well for the full fiscal year 2021.

Kalkine image: source SEC filling dated August 31, 2020

The company believes that the revenue viewpoint is reported considering many businesses are increasing the demand for remote work.

Also read: COVID-19: Bigtincan’s share price with better emergence on ASX tech company space

Zoom shares performance:

Video conferencing platforms have become an essential part of day-to-day life for most of the people stuck at home because of coronavirus restrictions. This technology was once used mostly as an alternative to one-on-one meetings. Today be it for work or school or staying connected with a group of friends; Zoom is being used. Its rival platforms Microsoft Teams and Cisco's Webex have also reported increased usage by customers.

As on September 2, 2020, Zoom stock ended the trading session at US$423.56. The San Jose, California based company released results stating a rise in its annual revenue forecast. In many countries, international travel is still restricted or entirely on pause. But the domestic markets have started to reopen; it will be interesting to see the Zoom performance once the businesses get back to the pre-COVID era. Till then the Zoom and other such technology companies are undoubtedly benefiting from COVID-19 pandemic restrictions.

Also read: Saga Accelerated by 31.96% at Close of Trade

Summary

• The public debt levels of the British government are set to cross £360 billion, by the end of this year, which is one of the highest the country has seen in its modern history.
• Several conservative MP’s had raised queries regarding the manner in which the government intends to raise its taxes and are concerned that higher tax rates might harm businesses.
• The Bank of England is estimating that most of the furloughed workers should be back at their jobs by the end of the year

In an address to the conservative party, MP's the British Prime minister has stated that the economic outlook of the country is going to get tougher in the coming few months before things begin to improve. Several of the senior conservative party leaders had recently expressed their displeasure on how the government has been handling the economy, which was the precursor for this meeting. Chancellor Sunak who also addressed the MP’s at the meet stated that tough the situation is going to get tough in the short run, but the government will take all possible measures to ease the burden on the businesses. There have been increased concerns in the country regarding a massive rise in tax rates after a report by OBR (Office of Budget Responsibility) released a report last month stating that the government needs to increase its tax rates by at least 50 per cent or £60 billion a year if the fiscal situation has to be brought under control within the next decade.

Why raising taxes has become unavoidable?

The British government has taken in massive borrowings in the past few months to support the various stimulus schemes, which were announced to support business in the country fight off the adverse trading conditions ensuing out of the coronavirus pandemic. The present levels of unemployment in the country are close to 3.9 per cent, and the debt levels of the government are also expected to rise to a high of £370 billion for the full year in 2020. These borrowing levels are extremely high, and any further increase in it could very well make things unsustainable.

How prepared is the British economy to withstand a rise in tax rates?

Though the pandemic conditions continue to prevail , there is some sign of recovery in economic activity in the country, with momentum picking up in important sectors like housing construction sector already getting back to expansionary levels. The government had also started to give relaxation on the workplace social distancing measures it had recommended when the first unlocking was done in the first week of May. Excepting for a few, most industries are now in the recovery mode with the Bank of England (BOE) estimating that most of the furloughed workers should be back at their jobs by the end of the year.

Most of the government’s existing tax revenue streams are transaction-based, for example, transfer of salary from employer to employee, sale of goods, sale of property manufacturing, imports, etcetera. During this period, when the business activity levels in the country are at their lowest levels, the transaction levels on most of these heads has also come down. The stimulus packages the government had rolled out earlier this year has helped these transactions not to fall sharply and the economy is bouncing back at a faster rate. However, a hasty imposition of taxes could result in the recovery process, getting impeded and hurting the economy as a result. Thus the government will have to be very careful in how it goes about its policies in this regard.

What are the major challenges before the British economy for the next year?

There are many challenges in front of the government; however, four important risk factors that need to be mindful. First, and one of the most crucial is the risk of a resurrection of the pandemic during the winter months in the last quarter of the year. If the situation does worsen, then the government might be forced to impose a lockdown again which will undo most of the reform, if not all of the economic recoveries that have happened since May.

Second, is the delay in the availability of the vaccine, beyond the due date its manufacturers have envisaged. Under such a situation, the government would be forced to increase its borrowings to continue funding its stimulus programmes than what it had originally estimated, in order to protect businesses and livelihoods in the country. This will lay an additional burden on the exchequer.

The third is the withdrawal of the furloughing scheme, which could result in the unemployment rates in the country shooting up suddenly and significantly. A high unemployment rate will make people more jittery about the recovery, and they will become wary, resulting in a cyclic effect of less spending by the general public which will slow down the recovery process even further.

Fourth, and the most critical risk element is the failure of the Brexit talks. The UK and the EU while they parted ways on 31 January 2020, they had given Brexit deal negotiations time till 31 December 2020, to arrive at a suitable agreement to protect the interests of businesses on both sides. In the event the talks don’t work out a new regimen of taxation would come to be imposed, let alone the massive amount of new bureaucratic hurdles businesses would have to face.

Conclusion

The Boris Johnson government has been repeatedly stating that it would not opt the austerity route to retire off the debts it has piled up till now. The government is of the opinion that increased public spending will stimulate high growth in the economy which will create a large base for it to collect taxes and repay its debts. However, given the battering that the economy has taken in the recent past, the base for the existing tax structures has actually shrunk. Hence the only room now left before it is to explore the possibility of widening the tax base if it wants to fill the exchequer in the short run. This will not only result in avoiding the existing tax rates exorbitantly but will also create the possibility for it to earn more taxes in the future.

Summary

• The Federal Reserve declared a change in its policy decision-making approach to achieve maximum employment and stability in prices.
• The new strategy aims to allow for higher inflation and additional job growth over time.
• Fed has taken significant steps to help the economy recover from the economic fallout of coronavirus through its emergency lending programs and increasing liquidity.
• The Fed plans to reset the market and household psychology to anticipate higher prices and act out in directions that will help bring them.

On 27 August, a major policy change was declared by Federal Reserve Chairman Jerome H. Powell to achieve maximum employment and stability in prices as well as willingness to allow inflation to be higher than the normal to support the US labour market. The new plan was disclosed at the beginning of the annual central banking conference which promises to deal with the shortfalls arising from the wider objective of full employment.

The central bank has consented to a policy of average inflation, implying that it will allow inflation to run moderately above the 2% target for some time. The modifications were codified in a policy framework, first adopted in 2012, called the "Statement on Longer-Run Goals and Monetary Policy Strategy, which guided the Fed's approach to interest rates and general economic development.

The new policy indicates that the Fed is less likely to adopt the policy of increasing interest rates in response to a low rate of unemployment, so long inflation does not rise. The move indicates that the official overnight interest rate of the US central bank, which is now close to zero, will sit there for possibly years to come while policymakers attract higher inflation.

Traditionally, there has been a belief amongst central bank officials that low unemployment levels result in a higher rate of inflation. Nonetheless, Powell's speech given to a virtual gathering of the Fed's annual Jackson Hole, Wyoming, symposium and complementary documents that codified the new policy, marked a different approach from the conventional philosophy. All the modifications were unanimously approved by the policymaking Federal Open Market Committee.

Economic implications and risks of the new strategy

Inflation has run below 2% target for years, but the new approach adopted by Fed indicates that Fed officials will not consider increasing interest rates until inflation overshoots their objective of 2% for some time. The thought process behind this approach is that if households, as well as businesses, are assured that their buying power will reduce in future due to higher inflation, they will begin to spend, invest and borrow now.

The rise in spending in the crisis period will assist in creating jobs and strengthening demand, dragging the economy out of the coronavirus induced economic blues. Further, steps taken by the Fed to push unemployment lower can help in lifting up the labour market.

The conventional system showcases a fall in unemployment to quite low levels as an initial warning gauge for undesirable inflation. However, such a situation was never seen. The US unemployment rate had dropped to nearly 50-year lows prior to the coronavirus pandemic struck, and there was no evidence of an inflationary increase. This lesson has been taken into consideration in the new framework, making space for the Fed to hold policies loose even though jobs grow.

For the strategy to be a success, households and businesses must believe that Fed policymakers have switched their focus on making a stronger labour market from being inflation fighters. They must also understand that a bit of inflation is good for the economy. Further, holding interest rates down for a prolonged time period leans towards lifting the bond markets, helping possibly the rich section of Americans more than the less-privileged section.

ALSO READ: Federal Reserve Turns Cautious Signals ‘Long Road’ to Recovery, Markets Jittery

The path ahead still remains blurry

The comments made by the Fed policymakers showed their thinking for the longer term, which is created not to force decisions at individual Fed policy meetings but to structure how the central bank is establishing its goals. Gaining acceptance from people that the strategy will make a difference will occur with time. However, this would require weathering all developments in the economy and unavoidable shifts in Fed personnel that includes the possibility of a new chief after Presidential elections on 3 November.

The new approach by the Fed is both recognition of economic changes that started before the coronavirus pandemic happened and a path to conducting policy in future. Nevertheless, the strategic journey remains quite blurry. There is no clarity on the duration of time up to which the federal may keep low rates or how high the federal may allow inflation to go. Indeed, Powell stated that the Fed's new approach towards inflation could not be supported by an unambiguous quantitative model.

The central bank is anticipated to pursue outcome-based guidance for its key federal funds rate in September, pledging to keep it near 0 until inflation reaches a certain threshold. Hence, investors will have to wait until September for more specific guidance.

Also read: A glimmer of hope in US economic recovery? Stock Markets indicate towards it

Summary

• The nickel price surge is drawing ASX-listed nickel mining companies out of hibernation with many such as Nickel Mines Limited (ASX:NIC), Western Areas Limited (ASX:WSA) unveiling development plans to lock-in the high prices.
• Western Areas has now completed a pre-feasibility study (or PFS) of its AM6 tenement at Odysseus prospect and plans to integrate the deposit with key production area to boost the productivity and provide an impetus to the total return profile.

Nickel prices are showing a strong recovery on the global front, prompting many ASX-listed stocks to develop their key assets over improved investors’ sentiment, especially around the base metals space in the status quo.

To Know More, Do Read: Nickel Mines Fasttrack Debt Repayment Over Recovery in Base Metals Prices

While some ASX-listed nickel miners such as Nickel Mines Limited (ASX:NIC) is fast-tracking debt repayment over improved outlook concerning the nickel market, some such as S&P/ASX 200 listed Western Areas Limited (ASX:WSA) are focusing and prioritising the development of key assets for production in the coming future.

At present, the Company is focusing on the development of its Odysseus prospect to bring it into the production; however, WSA suggested that the current DFS and PFS concerning various tenements at the prospect suggests better returns via integration, which the miner is planning to take up post its Odysseus prospect reaches production phase.

Western Areas Limited (ASX:WSA)

Western Areas Completes PFS and Announces Maiden Ore Reserve

The Integration of AM6 Deposit With Odysseus production

On October 2018, WSA made the final investment decision on the Odysseus project and gradually proceeded to a definitive feasibility study (DFS), demonstrating a strong financial return, and a robust 10-year operation based on mining the Odysseus North and South deposits.

• At present, the priority of the Company is to reach commercial production of those deposits with the first concentrate expected for late 2022.
• For aligning the target of commercial production, WSA completed a pre-feasibility study (or PFS) at the AM6 deposit, which is located 600m southwest of the Odysseus deposit at a vertical depth of 900–1,200m, to optimise and integrate the additional production from AM6 into the current Odysseus production profile.
• The integration of the AM6 deposit to determine the best combination of production from the three ore bodies, i.e., Odysseus North & South, AM6, is currently underway, which also include the potential for increased annual production tonnages compared to the original mine plan.
• However, the Company anticipates that the deposit would be without production for the first few years of Odysseus production.

AM6 Resource Profile

WSA has now upgraded its Mineral Resource profile of the AM6 deposit with total resource now reaching 2,764,924 tonnes at an average grade of 2.43 per cent of nickel, hosting 67,235 tonnes of contained nickel.

AM6 Deposit Updated Resources Profile (Source: Company’s Report)

AM6 Ore Reserve Profile

Western Areas have updated ore reserves of the deposit as well and suggested that the Probable Ore Reserve has been estimated using only tonnes within the mine design that have been categorised as Indicated in the resource block model.

The deposit now holds total reserves of 2.1 million tonnes at an average grade of 2.2 per cent of nickel, hosting 47,100 tonnes of contained nickel.

The Current Mining Plan

The Company now plans on accessing the AM6 deposit as a single decline development, commencing from the base of the existing AM5 decline which is located directly above the deposit. Additionally, rehabilitation and dewatering activities would be required within the AM5 portion of the decline post commencing fresh rock development.

As per the Company, AM6 – which is the part of the Cosmos System of orebodies adjacent to Odysseus, would leverage most of the Odysseus infrastructure which is currently in development.

For example, AM6 could leverage the new decline access ramp to the loading station, the hoisting shaft, the expanded Cosmos mill, and new paste fill plan; thus, allowing it to leverage the capital investment in Odysseus, which in turn, further improves the returns for both Odysseus and AM6.

WSA mentioned that the mine operation would be supported by the existing Cosmos surface infrastructure, including the existing office and accommodation complex.

The mining method selected for AM6 in the PFS is single-lift, long hole open stoping, with pastefill.

AM6 PFS Production Profile

The PFS production profile is yet to be optimised and would require further work; however, the Company stated that further work would be carried out in conjunction with the evaluation of combined Odysseus-AM6 production scenarios.

As per WSA, the optimisation studies would incorporate a number of options, which include the potential to incrementally increase the hoisting and milling capacity above the 900kt capacity.

At present, the Odysseus development is the key priority of the Company; thus, the Company suggests that it is likely that the AM6 fresh airway intake will commence after the critical underground infrastructure for Odysseus has been completed.

Furthermore, the optimisation work would determine the ultimate sequencing of AM6 ore tonnes; however, WSA believes that AM6 would commence production post Odysseus is in production.

AM6 Estimated Production Profile (Source: Company’s Report)

Capital Cost Estimates

WSA anticipates the total cost for AM6 development (PFS) to stand at $111 million, comprising of 30m of pre-production capital and $81m of sustaining capital, based on a combination of rates from existing group contracts, quotes from established Western Australian suppliers and current costs from the Odysseus development.

Furthermore, the Company anticipates that the estimated cost would not be incurred until the completion of Odysseus development.

Development Cost Estimates (Source: Company’s Report)

Likewise, the Company anticipates the total operating cost to stand at $133 per tonne along with a total cash cost (C1) of $3.95 per pound.

Operational Cost Estimates (Source: Company’s Report)

The stock of the Company last traded at $2.270 (as on 2 September 2020 15:11 AEST), up by 4.12 per cent against its previous close on ASX.

Just like nickel miners, ASX-listed copper miners are also currently super active on the development front to lock-in the high base metals prices.

Also Read: Copper Miners Ballooning on Exchange As Copper Surge Lifts Market Sentiments

Summary

• The UK Treasury Chancellor to announce the schedule for public spending review and budget soon
• Speculations are doing rounds that taxes will be raised during the autumn budget
• Corporation tax, fuel duty, online retail tax, and pension tax relief rates could be tempered with

The British government is faced with the tough task of balancing its finances during the autumn budget, after giving away a lot of sops during the period of March to August 2020 to revive the country’s economy. This has already shot up the public sector net debt to an unsustainable level of £2,004.0 billion by the end of July 2020. In percentage terms, this value was more than 100 per cent of the UK GDP (gross domestic product), and close to 20 per cent higher than during the corresponding time last year in 2019.

Paul Johnson, director, Institute for Fiscal Studies, an independent research institute, has said that growth of the British economy could be slower than earlier expected, at least in the medium-term. Till the time this contracted economy comes back to its pre-corona size, public spending needs to be kept under control. If the expenditure continues to remain high, the government would need to support it by upping its revenue sources.

Public sector finances

According to government estimates, the net public sector borrowings in the UK during the period of April to July 2020 totaled £150.5 billion. This was almost thrice the amount borrowed during the entire last year of FY 2020 (£56.6 billion), which explains that the government had to really blow its expenses out of proportion as a result of the coronavirus pandemic.

Public sector net borrowing (April to July 2020)

(Source: Office for National Statistics, UK)

Also Read: UK Quarterly Borrowings A Cause For Concern

Also Read: Government Borrowings At An All-Time High, To Touch Five Times Its Last Year Value During Current Fiscal

For the month of July 2020, the British public sector borrowed a sum of £26.7 billion, which was £28.3 billion higher as compared to the public borrowings recorded during last year for July 2019. Generally, the borrowings for the month of July tend to be low, but for the year 2020, this high value has come around as a result of the ongoing government policies to fight the coronavirus pandemic.

Central government receipts

(Source: Office for National Statistics, UK)

The central government receipts have been consistently falling short of their 2019 levels for all the months of the financial year 2020 till now (April to July). For instance, the July 2020 monthly current receipts were £56.6 billion, as against a higher collection value of £67.9 billion during the corresponding period in they previous year 2019.

UK’s tax levels lower than many other nations

According to the IMF (International Monetary Fund) statistics, the revenue for the UK government as a percentage of its GDP was 37 per cent for the year 2019. The corresponding value was much higher for many other European nations such as Norway (58), Denmark (55), Finland (54), France (51), Italy (46), Germany (45), and the Netherlands (45).

Therefore, from this stand-point at least, there is enough room to raise the total amount of government revenue and lower the UK government’s fiscal deficit.

Opinions differ on when to raise taxes

While there is no doubt that the government would have to raise taxes somewhere or the other to collect more revenue and lower its fiscal deficit, however, some economists differ on the timing of levying the higher tax rates.

For instance, Julian Jessop, fellow, Institute of Economic Affairs explained that raising taxes now could slow down the economic recovery process. With a lot of uncertainties prevailing around the eradication of the coronavirus led pandemic, the coming autumn might not be the best time to undertake fiscal tightening measures, he opined.

In fact, even with just a tax announcement coming in, people would plan their personal finances and companies their strategic decisions accordingly, which may or may not be line with the desired economic recovery being planned out by the government.

Even if one accepts that this many not be the right time to increase the taxes, as the economy continues to struggle to reach its pre-pandemic levels of output, however, the government can at least start a healthy debate around the best ways to raise taxes in Britain, which will be least detrimental to the economy’s growth. This should definitely prepare the ground for future tax shocks to come.

Which taxes could rise?

Media reports indicate that the corporation tax could be raised by 5 per cent which could provide additional £12 billion revenue to the British government exchequers.

The rates for income tax, national insurance, or VAT (value added tax) could also be tempered with, according to sources. These variables have the potential to raise the government revenue by as much as 2 per cent of the country’s economic output.

Reforms in the existing pension tax relief system to raise taxes could also be considered, and is under discussions.

Another move could be raising the capital gains tax and equating it with the prevailing income tax rates. A fuel duty rise could also be on the cards along with a tax on online retailers.

The British economy had contracted by almost one fifth of its pre-pandemic size during the first quarter of the year 2020 (April to June period) due to the devastating impact of the coronavirus led crisis. This led the government to push up spending and extend critically required support across various industries and to individuals through its popular furlough scheme which expires in October 2020.

Also Read: What Next For The Ailing UK Economy?

Also Read: British Economy To Rebound In Q3

It is pertinent to note that during April 2020, Rishi Sunak, Chancellor, UK Treasury had imposed a new digital services tax on foreign firms. However, this tax could be dropped in the forthcoming budget since not much money has been raised under this head till now. Further, this tax is seen to be hindering the progress of the ongoing UK-US trade negotiations. This tax was projected to garner close to £500 million per annum for the British government.

Government is also considering lowering its foreign aid to contain its expenses, according to media sources. The inheritance tax could also be revamped.

Also Read: Early Vaccine Hopes May Put A Life to The Dried Dividends for The UK Investors

Finally, despite conflicting expert views on the timing of tax hikes, Sunak has indicated in the past that some taxes might need to rise in the medium-term itself, considering the dire state of the British economy’s public finances. The public sector borrowings have crossed 100 per cent of the UK GDP and cannot continue to grow forever. Therefore, probably it is the need of the hour and the British citizens would have to bear the brunt of higher taxes. While there are speculations around various types of taxes, duties, or levies that the government might tinker with, but more clarity with come during the next few weeks when government decides to formally announce the same.

Summary

• The much-awaited 4-for-1 stock split of the Apple stock to make it “more accessible to a broader base of investors” had whet investors’ appetite on 31 August 2020, the day when Apple’s shares trading commenced on a split-adjusted basis.
• The Company had garnered the attention of investors, and Apple’s shares closed the day’s trade at US$129.04 on 31 August 2020, indicating an uptick of 39 per cent from the previous close of US$499.23 (pre-split price) on 28 August 2020.
• Apple, a company with a market capitalisation of over US$2.29 trillion (as on 1 September), has been sweeping the market, with its massive growth trajectories and soared earnings.
• Despite COVID-19 headwinds, Apple noted a record June quarter primarily due to double-digit increase in both products and services, as well as growth in all its geographic segments.

Amid COVID-19 market mayhem, the prominent technology companies (i.e., Facebook, Amazon, Apple, Netflix, and Alphabet) constituting FAANG family have been talk of the Wall Street. If one must say, the tech market darlings, FAANG stocks are together the core of modern technology sector that deliver innovative technologies, products and services.

Also read; Technology Space in the face of COVID-19; Investment Tips for Tech Stocks

Notably, one of the FAANG companies, which is renowned for its massive progress trajectories and soaring earnings multiples, Apple Inc. (NASDAQ:AAPL) has witnessed an uptick of 3.39 per cent in its share price and closed the day’s trade at US$129.04 on 31 August 2020 from the previous close of US$499.23 (pre-split price) on 28 August 2020.

Also, on 1 September 2020, Apple share price settled the day’s trading session at US$134.18, up by 3.98% from its previous close.

Do watch; What is happening with Apple Shares?

The soared share price of Apple was ascribed to the iPhone and Mac giant’s four-for-one stock split that garnered the attention of investors and noted enlarged buying of Apple’s shares.

It is worth noting that Apple's market capitalisation has surged more than US$2 trillion, and it has surpassed Saudi Aramco as the world's most valuable public listed company.

Did you read; What is driving Apple to Hit All-time High? Rub-off on ASX 200 Tech Stocks?

There might be numerous questions popping up in your mind concerning why the Company undertook stock split? How does this 4-for-1 stock split actually work?

Let us skim through each of these questions one by one.

Undertaking of Stock split

Apple has opted for a stock split to spur further gains by making its stock more accessible to a diverse range of investors.

Noteworthy, Apple had undertaken stock splits in the past as well, and most recently, it undertook the same in June 2014 on a 7-for-1 basis. The recent 4-for-1 stock split was Apple’s fifth stock split since its listing in 1980.

Effective dates of the split

There have been three key dates this year:

The Record Date – 24 August 2020 determined which shareholders were entitled to secure additional shares owing to the split.

The Split Date – 28 August 2020 represented shareholders whose shares were due for a split after the close of business on the same date.

The Ex Date – 31 August 2020 was established as the date when Apple common shares traded at the new split-adjusted price on the technology bellwether index, and Nasdaq Composite index.

Do read; Tech boom & FAANG Stocks: Investors look for another wave of high stock price levels

The way 4-for-1 stock split functions

A 4:1 stock split made sure that equity investors of Apple, as of 24 August 2020 received three additional shares for each share held. Furthermore, Apple’s shares officially started trading at the new split-adjusted price at the opening of Nasdaq’s trading session on 31 August 2020.

Moreover, Apple had first announced its plan for the stock split on 30 July 2020 in its earnings report for 3Q FY20 ended 27 June 2020.

Did you read; Apple Announces 4 for 1 Stock Split, Posts Record Quarter Despite Pandemic Disruptions

Apple’s financial performance

On 30 July 2020, Apple’s quarterly results for the third quarter ended 27 June 2020 were published, and the Company reported robust revenue growth of 11 per cent (pcp) to US$59.7 billion.

The swelled revenues echoed double-digit growth in products and services, as well as growth in all its geographic segments.

Furthermore, Apple’s total net sales in the services segment and wearables, home and accessories inflated to US$13,156 million and US$6,450 million for Q3 FY20 versus US$11,455 million and US$5,525 million noted in Q3 FY19, respectively.

Following are some of the other Q3 FY20 highlights:

• Earnings per diluted share noted inflation of 18 per cent and was recorded at US$58.
• International sales comprised of 60 per cent of the Q3 FY20 revenue.
• Operating cash flow of Apple stood at US$16.3 billion.
• Total cost of sales for Q3 FY20 was US$37 billion, delivering a gross margin of US$22.7 billion on total net sales of US$59.7 billion.
• Furthermore, Apple’s Board of Directors had declared a cash dividendof US$0.82 per share of the Company’s common stock.

As per Luca Maestri, CFO of Apple, the June quarter performance of the Company validated its ability to innovate, as well as execute amid difficult times.

Must read; Investing Tips: 4 Reasons Big Techs can always stay your best pal

Summary

• RBA Board announced to maintain the targets for the cash rate at 0.25% on 1 September 2020.
• Under the expanded Term Funding Facility, ADIs shall have access to additional funding at a fixed rate of 25 basis points for 3-years.
• The Board would keep extremely accommodative settings, as long as, it is necessary and persists to contemplate on how further monetary measures could support the recovery.
• On 1 September 2020, the benchmark S&P/ASX 200 index dropped 1.77%, by more than100 points, to settled at 5,953.4 points.

The Reserve Bank of Australia (RBA) made a decision to retain the targets for the cash rate and the yield on 3-year Australian Government bonds of 0.25% bps (basis points) during its meeting on 1 September 2020. The Board also agreed to raise the size of the Term Funding Facility and make the facility available for extended period.

ADIs able to draw on this extra funding until June 2021

After the Term Funding Facility is expanded, authorised deposit-taking institutions (ADIs) will gain access to more funding, corresponding to 2% of their outstanding credit, at a fixed rate of 25 bps for 3-years duration. ADIs would be able to receive this additional funding until the end of June 2021.

With this extension until June next year, all ADIs continue to have access to the Term Funding Facility after September ends.

ADIs will have access to the Facility once the window for drawings as per the initial allowance of 3% of outstanding credit ends. Further allowances that are related to an ADI's growth of business credit will now be accessible till June 2021. RBA notified that additional details are given in the accompanying notice.

So far, ADIs have received A$52 billion as per the Term Funding Facility, and further drawings are anticipated over the forthcoming weeks. This switch was announced by the RBA on 1 September 2020, and it would aid in maintaining low-interest rates for borrowers and support the credit provision by offering greater certainty to ADIs related to constant low-cost funding access.

GOOD READ: RBA's Projection: What if the Cash Rate stays at 0.25 per cent for 3 years?

Australian Economy Facing the Highest Contraction Since the Great Depression

Currently, the Australian economy is going through an extremely challenging time and is confronting the greatest contraction since the great depression experienced in the 1930s.

However, this decline is not as acute as was anticipated earlier, and revival is now in progress in majority of Australian regions. Though, this recovery is expected to be uneven as well as bumpy, with the ongoing market turmoil induced by COVID-19 in Victoria, causing a significant impact on the Victorian economy.

ALSO READ: Impact of Coronavirus on Australian Economy and Way Forward

Fiscal Policy is Playing Important Role to Support Australia’s Economy

The economy of Australia is receiving support from the organised, considerable, and exceptional policy easing throughout the previous 6-months. Public sector balance sheets in Australia remains in decent structure, which enables continued support. Undeniably, economic along with monetary assistance would be required for the certain time given the economy outlook and the possibility of high unemployment.

Furthermore, backing for the recovery is being given by the financial institutions of Australia, which also have resilient balance sheets and access to increased levels of liquidity.

The RBA Board stated that it will not raise the cash rate target until any improvement is being made towards full employment. Moreover, it is confident that inflation shall be sustainably within the 2-3% target band.

Notably, the board shall keep highly accommodative settings as long as it is necessary and persists to ponder on how further monetary measures could help the recovery.

DO READ: How increased spending support & cash rate at 0.25% would help the Australian economy?

How ASX Performed Post RBA Announcement On 1 September 2020

As a result of the ongoing COVID-19 turmoil, Australia’s economic downturn is likely to extend into the 3^rd quarter, making it an extensive recession in almost 40 years. Private banks in Australia anticipate a slow recovery in GDP that will drag on until the 2^nd half of the year 2022.

The Australian share market was notably lower on 1 September 2020 as investors turned vigilant on the day RBA’s monetary policy meeting was taking place.

By the end of the trading session, the benchmark S&P/ASX 200 index had lost 1.77%, and above 100 points, to settle at 5,953.4 points. Majority of the sectors including energy, information technology and financial sector stocks contributed to the drop.

The major banks along with metals and mining stocks also closed in red, including National Australia Bank Limited (ASX:NAB) (dropped by 2.956%), Westpac Banking Corporation (ASX:WBC) (down by 2.794%) and BHP Group Limited (ASX:BHP) (fell by 1.082%) post the market session ended on 1 September 2020.

The lower interest rate would be helpful to provide support to house prices and the property market in general; however, the increasing rate of unemployment and uncertainty can prove to be negative for housing price growth in the country. Also, S&P/ASX 200 Real Estate (Sector) fell by 2.18% to 2,948.5 points, on 1 September.

HAVE YOU READ: Are negative interest rates being considered for a long haul - ASX 200 Shares to watch?

Some economists stated sense of economic stability, as a reason the RBA has held the cash rate. The decision of RBA to hold cash signifies that the rate of interest on loans will remain steady, which will help several households as well as businesses to oversee their cash flow.

Summary

• Berkshire Hathaway has disclosed over 5% stake in each of five leading trading companies of Japan, which include Mitsubishi, Mitsui, Marubeni, Sumitomo and Itochu.
• Warren Buffet intends to maintain a stake of less than 9.9% while further stake could be acquired after the Board approval from the five companies.

Sogo Shosha is a Japanese term referring to a general trading company. These conglomerates reflect the economic development of Japan over centuries. In the latter half of the 19^th century, Japan tasted rapid industrialisation and commercialisation during the Meiji Restoration.

After World War II, Japan underwent a rigorous overhaul propelled by the development of infrastructure and industry. Sogo Shosha also developed rapidly after the World War, helping Japan to transform into a superpower.

These large businesses in Japan have a presence in diversified sectors, including food, appliances, clothing, resources, and automobiles. With an extremely diversified business through products and services, the Sogo Shosha also offer geographical diversification due to global reach.

Over the years, these conglomerates have emerged as large-scale sophisticated businesses that are hard to replicate. They play a defining role as an intermediary in Japan’s import of raw materials and export of finished goods through multi-industry upstream and downstream supply chains.

South Korea, with the introduction of Chaebol, also followed a similar approach to economic prosperity through industrialisation and exports. In these lines, companies like Samsung and Hyundai emerged from South Korea.

The Sogo Shosha may not have name attached to the business, but they would control substantial stake in the business. Because they were established to mobilise the upstream-downstream supply chain of industries, the Sogo Shosha are usually wholesalers, distributors, suppliers, etc.

With large capital deploying capabilities, the conglomerates generally have strong relationships with the governments and overseas investment facilitation boards.

Warren Buffet Has Been Picking-Up Stakes in Big Five Sogo Shosha

On Monday, 31 August 2020, Berkshire Hathaway revealed that it has been buying Japanese Big Five Sogo Shosha over the past twelve months. It has now notified the Kanto Local Finance Bureau about slightly over 5% stake in each of five leading Japanese trading companies.

These five companies in order of the latest Global Fortune 500 ranking include Mitsubishi (42), Itochu (72), Mitsui (172), Marubeni (173), and Sumitomo (238).

Good Read: Billionaires Of Two Different Generation: Warren Buffett & Mark Zuckerberg

The press release by Berkshire Hathaway highlighted the long-term passive investing spanning around two to three decades in successful American businesses like Moody’s, Coca-Cola, and American Express.

Berkshire Hathaway is inclined to maintain investments in Big Five Sogo Shosha for long term. It may raise its stake in these five businesses to up to 9.9% on its own discretion. It was also highlighted that the equity stake of above 9.9% could be acquired after Board approval of the five companies.

In September last year, Berkshire Hathaway issued JPY 1.7 trillion of debt in the Japanese Corporate Bond market. Its highly-rated bonds were issued across maturities ranging 10-year, 15-year, 20-year, and 30-year.

In the press release, the company acknowledged little exposure to JPY/USD movement and 625.5 billion yen-denominated bonds with maturities beginning in 2023 and ending in 2060.

Mitsubishi Corporation

Mitsubishi is the largest among the big five trading companies in Japan. Mitsubishi has over 130 business units, around 1,400 companies in ~90 countries and regions worldwide, according to its integrated report 2019.

Its segment businesses include automotive & mobility, petroleum & chemicals, industrial infrastructure, power solution, natural gas, mineral resources, industrials material, urban development, and food and consumer industries.

In the year ended 31 March 2020, the conglomerate reported revenue of ¥14,779 billion and profit for the year attributable to owners of the parent of ¥535.35 million. Mitsubishi recorded free cash flow of ¥349 billion.

Itochu Corporation

Itochu Corporation is present in the textiles, machinery, metals & minerals, energy & chemicals, food, general products & realty, and ICT & financial business. In the year ended 31 March 2020, the company recorded consolidated net profit of ¥501.3 billion. Its core profit was ¥485.3 billion, after excluding extraordinary gains and losses of ¥16 billion.

Mitsui & Co.

Mitsui operates in the field of mineral & metal resources, energy, machinery & infrastructure, chemicals, mobility, healthcare, nutrition & agriculture, and retail & services. In the year ended 31 March 2020, the company recorded a gross profit of ¥839.4 billion and net profit attributable to owners of the parent was ¥391.5 billion.

Marubeni Corporation

Marubeni operates 14 divisions, which include lifestyle, ICT & real estate business, forest products, food, Agri business, chemicals, power, energy, metals & minerals, plants, aerospace and ship, finance & leasing, construction, and auto & industrial machinery.

In the year ended 31 March 2020, the company had revenue of ¥573.6 billion and net loss of ¥197.5 billion, largely due to impairments.

Sumitomo Corporation

Sumitomo Corporation operates segments in the areas of metal products, transportation & construction systems, infrastructure, media & digital, living related & real estate, and mineral resources, energy, chemical & electronics.

Summary

• The British economy can lose up to half a million pounds, if work from home continues: CEBR study
• Total impact of the reopening of schools in the UK will sum up to be £70 billion for a year
• YouGov/CEBR consumer confidence index fell showing pessimism among British households about economic recovery
• Bank of England has options to aid the economic recovery, going forward: Andrew Bailey
• UK government considering raising additional taxes worth more than £20 billion per annum
• Many workers reluctant to return to offices and employers leaving office premises to contain costs

A recent study conducted by the Centre for Economics and Business Research (CEBR) has estimated that it would cost £480 billion to the British economy in case the country’s employees do not resume going back to their offices for work.

CEBR is a UK based consulting organisation that provides independent economic forecasting and analysis services.

Douglas McWilliams, deputy chairman, CEBR has warned that the British economy shall not return to its pre-pandemic levels till the year 2025 in case the work from home practice continues as it is.

The UK government is well aware of the fact that for the country’s economy to get going fast, people need to resume working from offices. Stephen Barclay, chief secretary, UK Treasury has emphasized that the government is keen on people ceasing to work from home and joining back offices, wherever it is safe to do so.

According to the data from Office for National Statistics (ONS), UK, 46.6 per cent of the total employees in the country worked from home during the month of April 2020. These are the latest government statistics available around this parameter.

Low YouGov/CEBR consumer confidence index for August 2020

In a separate survey jointly done by CEBR and YouGov, the consumer confidence index plummeted to a reading of 99.5 during the month of August 2020, after steadily rising for three months consecutively before that (May to July 2020). A reading below 100 signifies pessimism while a one above 100 signals optimism. The survey records monthly readings from around 6000 households across the UK.

YouGov is a market research and data analytics firm, based out of London.

The survey results pointed out that British households are losing confidence in the economic recovery process and are increasingly concerned about their job security.

Schools reopening to aid economic recovery

CEBR said that the reopening of schools in the country will benefit the recovery process in more ways that one. Apart from directly contributing to the growth of the Britain education industry itself, which contributes for 7.2 per cent of the nation’s gross domestic product (GDP), it will also enable millions of Britishers to return to their offices, adding to the growth of economic output. Apart from that, high streets will be full of life once people start to commute to offices daily. Therefore, the total impact of the reopening of schools in the UK will sum up to be £70 billion for a year, as per CEBR estimates. This amount is equivalent to 3.3 per cent of the nation’s total GDP for the year 2019.

If the economic recession continues across the nation, its main impacts are expected to be a rise in unemployment, fall in income levels, rise in poverty & inequality, more government borrowings, firm closures, and loss of economic output.

Bank of England has options to aid recovery, going forward

Andrew Bailey, governor, Bank of England has stated that the central bank still has a lot of options to fight the economic recession caused by the coronavirus pandemic, if required. It said that its quantitative easing program has been working well, which was initiated during March 2020 and extended during June 2020.

In August 2020, the central bank had issued a guideline explaining that it will not resort to tightening the monetary policy till the nation’s inflation targets are met.

The Bank of England had earlier lowered the bank rate to an all time low of 0.1 per cent to boost private investment and fight the pandemic.

Also Read: British Economy To Rebound In Q3

UK government considering raising taxes

According to media reports, the UK government is contemplating on increasing the corporation tax, the capital gains tax and the fuel tax rates, in the forthcoming November 2020 budget. The plan is to raise additional taxes worth more than £20 billion every year.

However, raising tax rates at a time when the British economy is contracting, may put pressure on its growth, warn experts. The British economy had contracted by close to 20 per cent during Q1 2020, which has been a major area of worry for the Boris Johnson government.

However, the British government is running high public borrowings and is in a dire need to raise its revenue sources.

Rajiv Biswas, chief economist (Asia-Pacific), IHS Markit, has lamented that if the UK government raises its corporation tax rate, it could dissuade the Asian companies to enter the country, in a scenario when Brexit has already made Britain a less attractive destination as compared to the European Union.

Many workers reluctant to return to offices

With the persistent fear of catching corona infections, many employees are still reluctant to return to offices in the UK. Employee unions are requesting companies to remain flexible, understand that the world has changed, and embrace this change.

Some employers have already understood this fact and have announced that they will not be returning to work from office at least till the mid of 2021. For example, 50,000 employees of the NatWest Group are continuing to happily work out of the comfort of their homes. Another company Standard Life Aberdeen has announced the same policy for most if its workers.

Also Read: Is it Still Relevant to own Banking Sector Stocks like Lloyds & NatWest Group?

Many other banks such as the Lloyds Banking Group, Virgin Money, and the UBS Bank have also instructed their employees to not to expect coming back to offices to work in the near future.

Moreover, a recent report revealed that Capita, the government contracting firm, is planning to permanently close more than one third of its 250 offices spread across the UK. The main aim of the company to go in for this move is to cut its operations cost and better handle the ongoing economic crisis. It will save the company close to £20 million by the end of the year 2020. To this end, Capita is not renewing its leases on 25 of its commercial property spaces.

Also Read: Work from Home Leading To Ravaging Sales of Pret a Manger and Wahaca

To sum up, the clear direction of the UK economy would only be known once the coronavirus pandemic is completely over. The government is trying its level best to aid the economic recovery by encouraging people to go back to offices and reopen the schools on the one hand, and raise the sources of its tax revenue to lower its fiscal deficit on the other hand. The battered companies are trying to cut their costs and sail through the struggling period without collapsing. The people are planning to keep spending less than normal, with fears looming large over their job stability and income streams. One would probably need to wait till a vaccine comes around for mass distribution, to clearly know the shape of things to come.

Summary

• A breakthrough on tariffs for British cheese to be exported to Japan raises hopes for a trade deal between the UK and Japan.
• If the total import value of the British blue cheese by Japan at the end of a specific year turns out to be lesser than the agreed amount, the British suppliers would receive back the duty on exports.
• The import tariffs on the blue cheese from Britain would not change from the existing agreement between the EU and Japan.
• A potential trade deal between the UK and Japan holds specific significance post-Brexit as it would be the first trade deal that Britain has negotiated on its own or without the EU in 47 years.

It is most likely that September 2020 would see the UK and Japan reaching a trade deal at least in principle as a breakthrough has been attained on cheese tariffs. As part of a settlement in the trade deal between the two countries, the tariffs on the export of British blue cheese to Japan is set to be refunded later to the suppliers in case the total import amount at the end of the year remained lower than an agreed level.The participants in the negotiation from the British side pressed to completely remove the tariffs to prove that Britain could succeed in achieving a better trade deal on its own. The import tariffs on the blue cheese from Britain would not change from the existing agreement between the European Union (EU) and Japan.

In a recent development, Liz Truss, the UK’s trade secretary spoke to ToshimitsuMotegi, Japan’s foreign minister on 26 August 2020 and gave consent on majority of the core elements of the deal. It is to be recalled that Ms Truss had insisted earlier that she would not be in a hurry to finalise a deal with Japan until it meets Britain’s ambitions.The trade talks between the two nations got held up as Ms Truss included the blue cheese in the negotiations. It seemed that the Tory MP was interested on having a better free trade agreement with Japan for agricultural exports and Stilton cheese was a stumbling block. She insisted on an improved deal structure in comparison to the deal that the UK had with the EU, especially for similar products.

The trade secretary stated that the two countries had reached a consensus on majority of the deal’s elements and both the countries would agree on the principles of a trade deal by September 2020. However, given the assurancesfrom both the partners, tariffs on automotive goods and agricultural products remained a contentious issue in the negotiations.

A potential trade deal between Britain and Japan is specifically important post-Brexit as it would be the first deal that the UK has negotiated on its own or without the EU in 47 years. It is known that in majority of the trade agreements between any countries, agricultural aspects remain as a hurdle till the final leg of the negotiations. It was expected earlier that a deal would be reached duringMotegi’s two-day’s planned visit to London in August 2020. However, the reports that the two countries could not reach a consensus regarding imposition of tariffs on exports of blue cheese to Japan ruined the hopes. As per market estimates, in 2019 Japan had purchased £102,000 worth of the total £18 million of blue cheese that the UK had exported.

Also read: Post Brexit-Trade Talks Stall Again; Making Headway Seems Difficult Before the End of Transition Period

Also read: UK-Japan Trade Deal and Its Impact on Different Businesses

Also read: All you need to know about Australia- Britain Trade deal

The duty on automotive products is likely to fall incrementally

Another impediment in the trade deal between the two countries was the tariffs on export of automotives from Japan. The duty on automotive products is likely to fall incrementally as per the accord reached between the EU and Japan. It is expected that some tariffs on components for cars and railways would be completely eliminated,benefiting the manufacturers from Japan.Japan had hoped to remove tariffs on automotive products including automotive components previously than in the current agreement between Japan and the EU, which will stage out the import duties on automobiles from Japan by 2026.

Digital services would see lesser government interventions

In the new agreement, there would be lesser involvement of the government as compared to the interventions seen within the EU-Japan framework with regards to the digital services. According to the new agreement, the companiesfrom both the nations would not be required to reveal details about algorithms and cryptography. This could possibly lead to a relaxation on the rules and regulations on the flow of data in addition to storage of data. Some experts believed that the UK-Japan trade agreement in this form would be a great achievement. The competencies of the British firms would improve substantially if more digital companies from Japan come to the UK.

Some other benefits of the UK-Japan trade deal

According to government forecasts, a trade agreement between the UK and Japan would add less than one per cent to the country’s gross domestic product (GDP) in the longer-run. Additionally, there would be 21 per cent increase in British exports of goods and services to the Asian country with a trade deal reaching between the UK and Japan. Many experts had emphasised their opinions on including the services segment in the trade deal.

Will the UK-Japan trade deal meet its deadline?

Earlier the UK Prime Minister’s official spokesperson had informed the media that the UK’s PM Boris Johnson expected the trade deal to be completed by its deadline of first week of September 2020. However, the Department of International Trade, a UK government’s department responsible for striking and extending trade agreements between the Britain and non-EU nations, besides encouraging foreign investment and export trade, feared that the deadline could get extended.At the same time, officials from both sides have stated that in all probability, the deal will conclude by the end of September 2020.

The UK-Japan trade deal is a crucial component of the government’s post-Brexit agenda of global Britain. The UK-Japan negotiations are happening along with other trade talks such as with the EU, the US, New Zealand, and Australia. The department of international trade highlighted that while Japan was under pressure to wrap up the agreement by the end-August 2020, it was important for the UK to finish the process before the post-Brexit transition period of 31 December 2020. In June 2020, the chief negotiator from Japan had stated thatthe deal was required to be closed by the end of summer season in order to get ratified in Japan’s parliament before end of this year.

Let us now take a closer look at one of the leading British companies into digital services Maintel Holdings plc, listed at the London Stock Exchange.

Maintel has recently installed its EMEA-wide cloud-based telephony system for Avon Worldwide, one of the world’s leading direct sellers. The switch to Maintel’s ICON platform is aimed towards transforming the systems at Avon. ICON is useful for staff and salespersons as it facilitates easier interaction and collaboration with each other, besides being integrated with various voice platforms, including the Microsoft Teams. This system would help the employees of Avon to communicate across multiple devices as well as make them completely flexible and mobile.

Maintel (LON: MAI) is a cloud and managed services company that focuses on communications related solutions and services to both the private and public sectors. On 28 August 2020, the company’s stock closed at £212.00. The 52-week low high range was recorded as 148.50 and 432.00. With a market capitalisation (Mcap) of £30.39 million, the stock provided a negative return on price, which was minus 47.91 per cent on a year to date (YTD) basis.

Conclusion

Any trade deal between two countries takes time to be completed due to the negotiations involved in reaching a consensus that suits both the countries. The agreement between the UK and Japan looks similar to the trade deal between the EU and Japan that was agreed in 2019. However, there would be additional important settlements on some crucial aspects, including agriculture or the blue cheese specifically, digital services, and automotive products, among others. Several experts agreed that it was a significant trade off to achieve a breakthrough on blue cheese exports, besides agreeing to permit increased access to the digital services companies from Japan.

Summary

• Australia’s trade relations with China made headlines due to conflict regarding an independent review of the origin of COVID-19.
• China had imposed 80% tariffs on the Australian barley exports, as well as suspended beef imports into China due to different reasons.
• Lately, China had announced an anti-dumping investigation into wine exports of Australia amid escalating trade tensions.
• Proving the dumping allegations generally takes time, and this investigation is likely to complete in a year’s time and might extend till 18 February 2022 under certain conditions.

The news about deteriorating Australia-China’s relation might have sounded like a bag of wind for many, but things have started getting serious with back to back developments that can potentially have a significant impact on Australia, especially its agriculture sector. Starting with barley, followed by beef; off late, China has got Australian exporters anxious over allegations of selling wine below the cost of production.

The relationship between Australia and its largest trading partner China look like going down the drain, and the latest wine-dumping allegation might be another nail in the coffin.

China Launches Investigation Into Australian Wine Exports

The freshest development might be sour grapes for Australia as its significant importer of wine has laid allegations that the winemakers of Australia are dumping their product to China.

Furthermore, the Government of China has warned students as well as tourists to not travel to Australia amid souring Australia-China relationship.

The move from the Chinese Government had the Australian makers in a state of anxiety as China alleges that winemakers from Australia knowingly dumped wine bottles into China at lower prices targeting to claim a bigger market share.

Related: Latest Developments Shaping up Australian Wine Sector's Future

Dumping generally entails the act of selling an exporter’s products into the export market at a price lower than the price in the domestic market. This might unfold into the exporter, gaining a larger share of the market by offering lower prices. If it is proved that the exporter has been “dumping” his/her product, there can be tariffs imposed by the governments to level the field for players in the market.

Australian winemakers are believed to bestow decades in building their brands in China and gradually establish their presence in the country. Moreover, it is reported that Australian wines have been sold in China at prices that are higher than what they have been in Australia.

Australian Exporters Deny Allegations

However, it is said that there exists significantly less evidence to support China’s allegations and the Australian Government as well as winemakers and farmers have denied these allegations.

One of the biggest wine exporters to China, Treasury Wine Estates Limited (ASX:TWE) has responded that it shall co-operate with any requests received for information from Australian or Chinese authorities.

Subsequent to the investigation issued by the Chinese Government, the shares of TWE were placed in trading halt after plunging 15%.

Furthermore, TWE shared its intention to stay committed to China as a priority market and shall remain progressive towards establishing premium and luxury brands, while working with stakeholders to improve the wine category and expand its contribution to China.

In addition to TWE, Australian Vintage Limited (ASX:AVG) also shared its intention to extend its cooperation in connection with the information required as part of the investigation, after China launched an anti-dumping investigation into Australian wine exports into China.

Imposing tariffs might be a blow for winemakers in Australia as well as the government. Australian Government has already put out a considerable amount in the name of COVID-19 stimulus to support the businesses.

Interesting Read: A Toast For You! How are Australian Wine Exporters Placed Amid Pandemic?

China’s Ministry of Commerce believes that the investigation into the dumping of wines into China might be completed before 18 August 2021. However, investigation for proving the dumping generally takes time and, in this case, the investigation period could extend till 18 February 2022 under certain conditions.

Increased Barley Tariffs and Cancelling Beef Import Licences

It all began with China raising the tariff on Australian barley to 80% and barring the import licences of some major Australian beef producers. This impacted almost one-fifth of Australian exports as China is a crucial trading partner of Australia. Ever since these developments, the tensions have kept on mounting between the two nations.

Amid the trade war between the US and China, the US Government made direct payments of around US$32 billion to its farmers in 2020 in response to the tariffs imposed by China on the US agricultural goods.

Australia is heavily dependent on foreign investment, and China is among the top investor in Australia, and this investment had grown significantly over the years. However, things have started tasting sour for Australia after Australia demanded an enquiry into the handling of the novel coronavirus in China, adding pressure on China that was raised by the US initially.

In June 2020, the Australian Government had announced that the UK had entered formal negotiations over a free two-way agricultural trade deal between Australia and the UK, which is projected at approximately $1.5 billion in value.

Related: Treasury Wine Estates seeks to deliver shareholder value

In the case of dumping wine, things may take time to unfold, and it is too early to jump to a conclusion at this time.

Bottomline

As the diplomatic relations between Australia and China continue to unravel, China has taken a quick step targeting Australian winemakers in their latest allegations. Presently, key Australian exports of wine have denied the allegations and intend to offer full cooperation as the investigation progresses. However, there remains significant uncertainty for the Australian winemakers as China is a substantial importer of Australia made wine.

Summary

• Super funds’ returns are expected to stay at the lower end of the curve for some time.
• The prospects of weak economic fundamentals and the rush for early withdrawals are heightening fears of a huge fall in superannuation contribution levels in the near future.
• Instead of losing calm, fund members can recall the unprecedented performance delivered by super funds since the Global Financial Crisis.
• Remember, super is a long-term play!
• One can stay invested in a low-fee quality fund with the right investment strategy to reap the benefits of super funds.

While superannuation funds managed to recoup losses triggered by the coronavirus pandemic by the end of FY2020, funds’ returns are expected to stay at the lower end of the curve for some time.

The possible coronavirus-induced recession seems to be casting dark clouds over the Australian super funds industry that has been demonstrating a robust growth over the past decade. It’s all about fund managers staying patient and strategising smartly on the long-term prospects of their super!

The prospects of weak economic fundamentals in the coronavirus-driven market downturn are heightening fears of a considerable fall in superannuation contribution levels in the near future.

The Australian Treasurer has recently warned that the nation’s unemployment rate could peak to 13 per cent by the end of September 2020. Besides, the Federal Government’s latest economic and fiscal update projects consumer price inflation and wage growth to remain subdued at 1.25% through the year to June 2021 quarter.

Besides weak economic projections, the rush for early withdrawals (allowed up to $20,000) from super accounts under Government’s Superannuation Early Access Scheme is expected to add further strain on the super balances already reeling from the virus crisis.

As per the latest stats from APRA (Australian Prudential Regulatory Authority), $31.7 billion redemptions have been made under the scheme as on 16^th August 2020. Initially slated to end in September, the super waiver has now been extended to 31 December.

Are There Any Emerging Green Shoots?

Though uncertainty encircles the future of super industry amid potential economic threat, fund members need not lose calm and recall the unprecedented performance delivered by super funds since the Global Financial Crisis.

Must Read! Fund Managers and Super Funds Walking a Tight Rope, While Market Recovers

Australia’s superannuation funds have grown like a shot in the past few years, performing extremely well across the globe.

Moreover, these funds have rebounded to positive territory after experiencing negative returns during COVID-19 early stages. As per APRA’s recent statistics on super funds, the industry wide rate of return (ROR) for entities with over four members stood at 6 per cent for the June 2020 quarter. This marked a partial recovery from the negative 10.3 per cent return attained in the March 2020 quarter.

Know About Superannuation - A Low-Hanging Fruit in Investment Space

At the time when others try to chase the height and the green, a wise investor first picks the low hanging fruit. As Australians are now living much longer than ever before, certainly superannuation becomes an alluring investment opportunity, which is also easiest to grab.

Also referred to as the company pension plan, it is an organisational pension plan created for the benefit of its workforce. The government puts in place superannuation arrangements to encourage countrymen to accumulate funds to support their financial needs during retirement.

Funds added by the employer are reserved in a superannuation fund or a super fund, which is managed on employee’s behalf. One of the biggest misconception people generally have about superannuation is that it’s an investment; however, it’s a type of trust containing a pool of investments.

Do Not Miss! Superannuation industry all set for super glory!

In other words, it invests in a broad range of asset classes, from shares and cash to government bonds and property, to produce the best possible retirement wealth. Doesn’t it look like a one-stop shop for all investments an investor usually desires?

Pros of Utilising Superannuation as a Retirement Strategy

Though an investor can invest within super in a similar manner as outside of super, the biggest drawback of not utilising it as a retirement strategy is paying more tax throughout the life and thereby having less for retirement.

However, what makes superannuation a tempting deal for retirement savings is its tax saving treatment. In comparison to the average individual tax rate of about 20 per cent in Australia, the maximum tax rate on earnings in superannuation is just 15 per cent in the nation.

Moreover, Australians’ super funds can become 100 per cent tax free source of income when they reach over 60 years of age. Isn’t it captivating?

Besides its tax-saving attribute, super is comparatively less risky and requires less investment expertise than many other investment options (subject to multiple factors though). This owes to the fact that it is managed by a fund, which decides how to invest an employee’s money. However, one can also have his/her own self-managed super funds (SMSFs), in which every aspect of the fund is self-managed.

One key thing to be taken care of to reap the benefits of super fund is start contributing as early as possible to earn potential returns.

“Even a 1% difference in expense ratio can make all the difference between a comfortable retirement and financial distress.” – Robert Rolih (The Million Dollar Decision)

Guide to Invest in Superannuation Funds

While switching between super funds to tap lower fees and better quality requires extra due diligence amidst the current crisis, escaping hasty decisions and sticking to the long-term strategy can perhaps help fund holders wade off some volatility in the financial market.

Those holding multiple funds can consolidate them into one in a recession-pro scenario, to avoid paying a different set of fees that may be biting their returns.

Additionally, investors with their super invested in Australian or overseas equity markets may choose to retain their investment in shares instead of switching to the low-risk cash option.

This strategy will not possibly let them miss on potential returns delivered by the equity market, which will eventually rebound from the market downturn. Notably, the S&P/ASX 200 index has recovered by over 30 per cent since March lows (As on 28^th August 2020).

Remember, Super is a long-term play, wherein staying invested in a low-fee quality fund with an appropriate investment strategy should be the key motto for planning your retirement funds well in advance.

Summary

• Lloyds Bank’s business barometer rose from -22 to -14 per cent in August 2020
• South east of Britain was the only region across the nation showing a positive value of the barometer for the survey period
• Firms surveyed are expected to lay-off staff once the furlough scheme expires
• Retail sales were 27 per cent less as compared to the pre-pandemic levels for the month of August 2020 – CBI survey
• Regional income inequalities to rise as a result of job losses – Labour party

The business barometer index by the Lloyds Bank, that measures the economic optimism and business prospects across the UK, displayed an improvement of 8 points but continued to remain in the negative territory (-14) per cent for the period of 3 to 17 August 2020. This figure is much below the long-term historic average for the barometer, quoted the bank.

The survey recorded that the business trading prospects rose by 9 points, to reach a value of (-14) per cent for the survey period, which was the largest reported monthly rise since the past three years.

In terms of the regional break-up, all the regions were showing negative value for the business barometer, except South East, where the business confidence shot up to a positive value of 1 per cent for the period. Its corresponding value in the month of July 2020 was (-31) per cent.

62 per cent of the total firms surveyed by the bank reported that the demand for their products/services has been negatively impacted as a result of the coronavirus pandemic.

The findings also revealed that only 18 per cent of firms using the furlough scheme are expected to retain their entire staff once the scheme expires by the end of October 2020. This implies that more job cuts are in the pipeline.

Retail employment also expected to shrink

In a separate survey released by the CBI (Confederation of British Industry), it was revealed that the retail firms across Britain laid off employees during the period of June to August 2020. The survey was titled ‘Distributive Trades Survey’ and was released on 25 August 2020. It was conducted on 128 firms which found out that retail sales were 27 per cent less as compared to the pre-pandemic levels for the month of August 2020.

Respondents also informed that they had no plans to make any business investments in the near future, given the surrounding uncertainties prevailing in the economy’s revival.

Alpesh Paleja, lead economist, CBI said that in case the consumer demand continues to be low, prolonged government support might be required to avoid further business and job losses. Probably, if the existing business relief rates are continued, it would help the British retail sector, explained Paleja.

Jobs in the British retail sector shrunk by (-45) per cent in August 2020 as compared to the previous month of July 2020, according to the CBI survey findings. It was recorded as the steepest monthly fall since February 2009. An even sharper fall is expected in job losses during the next few weeks across the country’s retail sector, added the survey findings.

Another reason for falling employment in the retail sector is a shift in consumer preferences towards buying through online platforms. Sales via web platforms have rise by almost 50 per cent from February to July 2020, according to the latest UK government statistics.

Rich-poor divide to rise with uneven distribution of job losses

The Labour party has requested the government to come up with a plan to save jobs. It has pointed out that apart from playing a havoc on the social and economic fabric of the British community, ending the furlough scheme will raise the rich-poor divide across the nation, which is undesirable.

A recent study conducted by the Labour party mentioned that around 10 per cent of the total workforce in north-west England is employed across the retail sector, while 13 per cent of the employed people in the east Midlands area currently work for the manufacturing sector. Therefore, any important redundancy decisions by these sectors will impact the fortunes of a sizeable proportion of the affected region’s population. So, such decisions should be carefully deliberated.

As a stark variation to the east Midlands region, only 2.2 per cent people of the total city workforce are employed by the manufacturing sector in London.

Recent job loss announcements

BMW – On 26 August 2020, BMW announced that it will lay off 400 employees at its mini car factory in Oxford, since the consumer demand has been severely hit as a result of the pandemic. The plant will be going in for two instead of three shifts beginning 15 October 2020. The lay-off decisions shall be conveyed to the respective employees by middle of September, according to company sources.

Pret a Manger- The sandwich seller chain is slashing 2900 jobs across the UK since the food outlets have seen plummeting sales, as a result of the coronavirus pandemic. Sales in August 2020 have dropped by 60 per cent as compared to the same period a year back in 2019.

Gatwick Airport- The airport is planning to slash close to 600 jobs as the total number of passengers to the airport have dropped by 80 per cent. This number is around 25 per cent of the airport’s total staff strength. Almost two-thirds of the airport’s total workforce was put on the government’s furlough scheme. The airport’s trade union is still trying to negotiate with the management to minimise the total number of redundancies, as much as possible.

To sum up, even though the Lloyds Bank’s business barometer rose for August 2020 as compared to the previous month of July, but the worrying part is that it is still negative. Consumer demand continues to be much lower than desired levels, and companies across sectors are being forced to close outlets, reduce operations, and lay off staff. Labour party has urged the government to reconsider its decision of not extending the furlough scheme, which could bring devastating consequences for the British society at large. Apart from cutting-off the regular income stream of the affected people, redundancies across the most impacted sectors could also increase the income-inequality across the UK.

Summary

• In the first week of September 2020, Boris Johnson is likely to launch a public campaign to get the Britons to return to their workplaces.
• The campaign is a result of the fears raised by some ministers that working from home would make employees increasingly susceptible to being fired.
• Rishi Sunak has been concerned about more job losses in the country, besides the financial burden of operating near-empty public trains and buses.
• The decreased footfall in high street and city centres is a concern for small businesses that rely on the trades generated by the office goers.

The coronavirus pandemic is rapidly changing the way people and governments look at many things. In the ongoing fight against the pandemic, the larger focus of the government now rests at a greater balance between life and livelihoods. After months of easing the lockdown restriction, in the first week of September 2020, Boris Johnson, the UK’s Prime Minister (PM) would launch a public campaign to get the Britons to return to their workplaces. The planned movement is a result of the fear raised by some ministers that working from home would make employees increasingly susceptible to being fired.

The drive by the PM would praise the merits of returning to the office, besides offering the encouragement that British offices are safe during the coronavirus pandemic. Reportedly, the government sources have stated that the campaign would have three main messages. The PM’s campaign would show the Britishers that the workplace is a safe place to return to by stressing on the aspects of social benefits and emotional angle for returning to the office. In addition, the drive would motivate the Britons to plan how they could return to office by being confident about rejoining the workplace.

It is to be noted that Rishi Sunak, the UK’s Chancellor of Exchequer has been concerned about further job losses in the country, in addition to the financial burden of operating near-empty public transport, including trains and buses.

Lots of measures are being implemented to encourage the commuters, to help them follow social distancing norms, the national rail’s “Alert Me” app would provide up-to-the-minute information about which trains are busy. The train operators stated a couple of day’s back that they are increasing their services to normal levels with capacities to reach above 90 per cent in the second week of September 2020. The train operators would do this to accommodate the increase in the number of commuters because of schools reopening and parents rejoining offices.

According to one of the cabinet ministers, besides the economic factors, the government’s efforts are also driven by the mental health aspect of some workers. The shutdown due to the coronavirus pandemic would have some cost attached to it. The companies would understand that some of their workforces was not as dedicated as they had thought, necessitating a review on productivity. After reopening of the schools, the government would now focus on getting people back to their workplaces, informed another minister.

Also read: Back to office: How prepared are the companies and staff?

Also read: Work from Home Becoming the New Norm for More Than Half of Britons

It is to be recalled that in July 2020, Johnson encouraged the Britishers working from home to rejoin their workplaces in order to help the UK economy recover from around 20 per cent contraction registered for April-June 2020 period. This decline was the largest among big developed economies of the world. In mid-August, the footfall in high streets, retail parks, and shopping centres was 70 per cent of the 2019 levels, according to a recent estimate by the Office for National Statistics (ONS). By early August 2020, only 17 per cent of the British workforce returned to their workplaces, as per the statistics from the Centre for Cities, an independent, non-partisan think tank involved in understanding and improving the economies of the UK's largest cities and towns. The data from the think tank based on mobile phone signals presented no rise in the footfall of workers travelling to city centres between late June 2020 and the week starting 3 August 2020.

These figures highlighted the importance of the challenge that the UK government is facing in addition to the desperation for getting the Britishers back to work, which is likely to increase the spending in towns and cities. Highlighting the costs of office closures, The Confederation of British Industry (CBI) stressed that the empty city centres during the pandemic have made the local businesses, jobs, and communities suffer.

What do the companies think about staff returning to the office?

Many companies are still giving priority to the health of their staff. WPP Plc (LON: WPP), multinational communications, advertising, public relations, technology, and commerce holding company with headquarters in London, was expecting that the numbers of its staff members rejoining the office would rise as more offices are reopened. However, the media firm underlined the fact that health and safety remained the priority. WPP informed that only 3 per cent of their workforce in the UK regularly reported to the office after the lockdown restriction was lifted. The company that employs around 10,000 people in the UK has taken a guarded approach to health and safety while encouraging work from home system.

WPP stated that though it understands that many of the small businesses are dependent on office goers for their trading prospects, it is important to provide the necessary confidence to the workers on safety front so that more people rejoin offices. Stressing that it would be more flexible in its approach, it did not believe that it would be sustainable in the long-term to see 99 per cent of the people working from home. However, the media company also felt that it does not consider the same number of workforce rejoining office.

Also read: Work from Home and Changing dynamics of the Banking landscape

Also read: Suburbs Lead Recovery in The UK As More And More People Work from Home

Also read: Companies Spend Millions Of PoundsTo Make Offices Safe For Employees

On the other hand, in Germany, WPP has witnessed around 17 per cent of staff returning to the office. In its other locations like the United States (US) where the headcount is around 19,000, people working from office remained at one per cent. All of the 8,000 staff at WPP’s India office are still working remotely. The guidelines at WPP have limited office capacities at 20 per cent. With the improvement in health and safety measures, the capacity could be raised to 30 per cent in coming times. The company has made it voluntary for employees to rejoin office. Most of the staff who is working from office are generally the younger team members with difficulties in remote working mainly due to lack of space at their homes. Many other companies have kept it voluntary for the staff to rejoin office.

Conclusion

Amid the government’s various efforts to revive the economy, the persistent fear of contagion is restricting people to come out of their homes and meaningfully engage in economic activities, including returning to the workplace. The decreased footfall in high street and city centres is a big concern for small businesses that rely on the trades generated by the office goers. While the spending by office goers helping the small businesses to an extent cannot be denied completely, it is unlikely that their survival and profit would depend only on the trade generated by this crowd during the pandemic. It is important to bring in more support measures and other schemes to increase customer demand. The technological intervention by the rail network on social distancing seems to be an effort in the right direction; it cannot be a safeguard from the coronavirus infection. Given the health advisory on social distancing from the health experts, many companies have made it voluntary for the employees to start working from the office and are planning to slowly increase their office capacities. It remains to be seen how the PM’s campaign to bring back the Britons to their workplace would unfold and the outcome that it would generate.

Summary

• Amid COVID-19 pandemic, technology sector has been experiencing strong tailwinds and outperforming the benchmark index ASX200. Likewise, the technology sector ETFs are also witnessing boosted performance, consistent with their respective indices.
• Technology ETFs are noted to provide low risk and low-cost exposure to a diverse range of technology entities.
• ETFs can be traded like any other stock in the market, and they also pay semi-annual or annual distributions to the holders.

Exchange traded funds (ETFs) are believed to be one of the magnificent investment vehicles to accomplish the investment goals of an investor. ETFs are akin to index mutual funds, but they trade like stocks. Furthermore, ETFs’ popularity has skyrocketed over the last few years with low risk and low-cost access to almost every corner of the market to the investor.

Did you read; Equities vs Bonds vs ETFs: Trends You Should Not Miss

ETFs primarily follow the performance of a given index and generate a return on that index and are contingent on management fees and expenses. ETFs offer numerous benefits such as rich liquidity, the extensive choice for making an investment, low fees, diversification across assets, low expense ratio and many more.

To Know More, Do Read: Mastering the Basics of Investing in ETFs

Furthermore, amid COVID-19, the technology space has taken leaps, as the adoption of new technologies has soared, and digitisation has accelerated, explicitly, in technology-enabled segments such as connectivity, data centres, cloud computing, retail, supply chain and many more.

Numerous ASX listed technology players are also outperforming benchmarks and hitting record highs. This can be exemplified by the launch of S&P/ASX All Technology Index (ASX:XTX) in February 2020. Notably, the index was launched to promote technology sector players in Australia. On 27 August 2020, XTX closed the day’s trade at 2,517, reflecting a marginal rise of 0.21 per cent from its previous close.

Did you read; Australian All Technology Index Looks Promising, Starkly Outperforming Benchmark Index

In the wake of rising tech index, numerous technology sector ETFs are booming, generating impressive returns.

Must Read; Tech ETFs Post Astounding Returns as Technology Sector Makes Moolah

In a nutshell, they are worth watching on ASX.

With this backdrop, let us quickly skim through few ASX-listed ETFs.

BetaShares Asia Technology Tigers ETF (ASX:ASIA)

ASIA seeks to track the performance of Solactive Asia Ex-Japan Technology & Internet Tigers Index (before fees and expenses), consisting of Asia’s (excluding Japan) fifty largest online retail and technology stocks.

The fund provides access to the high-growth Asian technology sector, which is anticipated to keep up with the growth momentum. Notably, the fund charges an annual management fee of 0.57 per cent and expenses (estimated) of 0.10 per cent per annum.

As of 31 July 2020, China was the most allocated country with 54.4 per cent share, followed by other countries mentioned below.

• Taiwan:22.7%
• South Korea:16.5%
• India:5.9%
• Hong Kong:0.3%
• Other:0.3%

Furthermore, as of 26 August 2020, the largest allocations in the fund were;

Source: BetaShares website

On 27 August 2020, ASIA closed the day’s trade at AU$10.00, noting a surge of 1.112 per cent.

Did you read; Active ETFs’ Market – Investment in the ‘FOMO’ World

ETFS FANG+ ETF (ASX:FANG)

ETFS FANG+ ETF tracks the performance of NYSE® FANG+™ Index before fees and expenses. It has stocks from numerous industry verticals such as technology, consumer discretionary, and companies that are highly tech-enabled.

Noteworthy, FANG includes players such as Google or Alphabet, Netflix, Facebook, Amazon, and many more.

Furthermore, FANG is rebalanced quarterly and is equally weighted throughout all the entities. Additionally, for investors, FANG provides simple and low-cost access to leading global innovation leaders, in addition to exposure to megatrend themes like electric vehicles (EV) and digitisation.

As of 27 August 2020, the sector fund allocation was noted at 43.8 per cent to communication services, followed by consumer discretionary at 35.3 per cent and information technology at 21.0 per cent.

On country basis (as on 27 August), the exposure was dedicated as follows:

Source: ETF Securities Australia website

Some of the top constituents of the fund (as of 27 August) include:

• Tesla:15.9%
• Apple:10.7%
• Nvidia Corporation:10.2%
• Alibaba Group:9.8%
• com:9.5%
• Facebook:9.4%
• Twitter:9.1%
• Netflix:9%
• Alphabet:8.6%
• Baidu:7.7%

Established in February 2020, ETFS possess a semi-annual distribution frequency.

Notably, ETFS charges a management fee of 0.35 per cent per annum. Also, ETFS paid a distribution of AU$0.11 per unit on 15 July 2020.

On 27 August 2020, FANG closed the day’s trade at AU$15.150, up by 2.782 per cent from its previous close.

Must Read; Looking to invest in ETFs? 5 Tips for ETF investors

BetaShares S&P/ASX Australian Technology ETF (ASX:ATEC)

ATEC seeks to match the performance of the S&P/ASX All Technology Index before fees and expenses. The fund administers exposure to the entities listed on the Australian stock exchange ranging from information technology, medical technology, online retail, consumer electronics, and many other tech-related market verticals.

Notably, ATEC extends a cost-effective (no active manager fees involved) exposure to leading Australian tech companies at one place and furnishes diversification with a heavy weighting large-cap financials and resource stocks in the portfolio. The fund distributes income annually, charges an annual management fee of 0.48 per cent.

Furthermore, ATEC paid a distribution of AU$0.27 in July.

As of 26 August 2020, the largest allocations in the fund were as follows;

Source: BetaShares website

On 27 August 2020, ATEC closed the day’s trade at AU$20.120, up by 0.299 per cent compared to its last close.

Summary

• The scheme which started on 3 August 2020 to help the hospitality industry following the pandemic induced lockdown, has so far seen 64 million meals dished out
• 84,000 restaurants across the country participated in the scheme, serving out meals that are discounted fifty per cent up to a maximum of £10
• There has been a concern as well as the hospitality businesses amongst the highest risk businesses as far as the spreading of the pandemic virus is concerned.

The British exchequer has given the indication that it might not give any extension to the "Eat Out to Help Out" programme that was rolled out earlier this month to help out the restaurants in the country. The programme which was only restricted to customers visiting restaurants for meals, and not towards take away' has seen a massive response in the three weeks it has been in implementation. The sales data collated by the treasury over this period shows that as many as 64 million meals have been served during the period meaning that almost one discounted meal has been claimed by all the citizens of the country under this scheme. Chancellor Sunak while speaking about the scheme expressed his happiness at its success, appreciated how the country has come out in solidarity with the hospitality industry and supported the jobs of nearly two million people who work in it. This scheme, however, comes to an end on 31 August 2020, and the government so far has not given any indication of extending it.

According to treasury estimates so far 84,000 restaurants across the country have registered for this scheme, who are serving out meals that are discounted fifty per cent up to a maximum of £10. Data collected since the beginning of the scheme show that even when serving only three times a week, the customer turnout has been 61 per cent higher for the industry than what it was at the same time last year.

The details of this scheme and the various schemes rolled out to help the restaurant industry.

The “Eat Out to Help Out” scheme was rolled out on 3 August 2020 after the government allowed the restaurants to reopen following the lockdown that was imposed in the month of March. The scheme which was aimed at achieving multiple objectives of bringing back people from furlough, alleviate peoples fear from coming out of their homes and give a boost to the hospitality industry to jump-start after nearly three months of inactivity seems to have been achieved the goals to some extent.

Prior to this programme, the government had rolled out two other stimulus measures to help out the hospitality and similar other industries to navigate through the tormentuous lockdown period. The coronavirus small loan scheme was announced by the government immediately after the lockdown was imposed, to help these businesses to pay for their essential expenditures while most of their revenues had dried up. The second was the furloughing scheme which helped the affected businesses place several of their employees under the benefit of the scheme, ensuring that their jobs were protected. Both of these schemes thus helped most of these businesses from disintegrating and their employees from getting dislocated. The schemes are, however, still in existence and continue to provide support. The furloughing scheme, along with the Eat Out to Help Out schemes, are however coming to an end on 31 August 2020.

The state of the restaurant and hospitality industry since the lockdown

The restaurant and the larger hospitality were some of the most affected industries because of the coronavirus pandemic. Most of these businesses which are more often than not dependent on their cash registers were given a jolt as their revenue streams stopped suddenly and they did not have many resources to support themselves beyond a few days.

These businesses are also amongst the highest risk businesses as far as the spreading of the pandemic virus is concerned. A higher number of footfalls in these businesses usually means more revenues for them and is also the yardstick with which its success is measured. On the same time, higher footfall also means a greater number of people meeting each other and consequently the chances of getting infection also increase by several degrees of magnitude. Thus when the government decided to open up the lockdown in the first week of May, it did not give preference to open up this sector in the first phase but instead allowed it to open in subsequent phases in June.

One of the characteristics of the restaurant and hospitality industry is that it employs a very large number of young, unskilled, and semi-skilled people whose jobs were at risk because of the lockdown. The government, though allowed the industry to open, has put in place strict social distancing and safety measures. These restrictions, which also prescribe how many people can enter these establishments at a time is not only making their operations difficult than before but is also slowing down their recovery.

The vaccine silver lining

The withdrawal of most of the social distancing measures as well as more people feeling confident about coming out of their houses can only happen when the threat level of the pandemic comes down. As of now, the pandemic continues to spread across the country unabated, though at a significantly slower pace, however, till a majority of the population do not get inoculated, it is unlikely that the threat level will go down. On the latest development on the vaccine front, the much-hyped Oxford University- AstraZeneca vaccine candidate is expected to meet its deadline and be available by September after which the vaccination process will start.

The last quarter of the year is usually the most important part of the year for the restaurant and the hospitality industry. It is the holiday season when most people come out and spend. If the government is able to complete a majority of the inoculation process by then, then this industry could see a similar state of recovery, as has been seen in the month of August. The Eat Out to Help Out has given a good head start to the restaurant and the hospitality industry, with the holiday season around the corner, it should be able to turn the corner on the pandemic slowdown.

Summary

• The UK government denied any plans on dropping tax collection from companies like Facebook and Google.
• Facebook’s French subsidiary announced that is paying €100 million as government taxes.
• Though it has been concerning several governments for long now, the coronavirus crisis has increased the focus of the tax collection from digital giants like Google, Apple, Facebook, and Amazon.

The coronavirus-led economic crisis has compelled the world economy to increase complexities of various kinds. The crisis calls for more cooperation between the economies to speed up the recovery process, but the pandemic has left countries with no choice but to announce big rescue packages for survival and recovery measures. It need not be denied that these are the times of increased gap in tax collection from several potential sources. Amid the recent instances of toughened common grounds between countries to impose taxes on foreign companies, it is likely that the world would need to fight trade war amid the ongoing fight against coronavirus pandemic. Two such recent reports involving technology companies explain the comprehensive scenario in which these companies lower their tax payments to foreign governments and plans of several governments to impose taxes on foreign technology giants. We would discuss the recent announcements and also present the wider scenario around it.

UK government denies earlier reports of dropping tax on Facebook and Google

On 24 August 2020, the UK government denied any plans on dropping tax collection from companies like Facebook and Google. Disagreeing with an earlier report, which stated that the government is planning to drop taxing digital giants, including Facebook and Google, the finance ministry mentioned that it has been clear that it was a temporary tax that would need to be removed once a suitable global solution comes into effect. The UK government would keep working with the global partners to achieve that goal, added the ministry.

It is to be noted that a media report published last weekend said that the UK’s finance minister, Rishi Sunak, planned to drop the digital services tax that was introduced in April 2020. The report cited reasons that the government does not raise enough money, which is in the range of £ 500 million on an annual basis. This small amount could potentially hamper the push for a trade deal with the United States (US). Many of these technology companies being taxed are from the US.

Also read: UK Government Debt Crosses £2 Trillion

Also read: UK is Undergoing Economic Recession

Facebook agrees to pay €106 million as back taxes to the French government

Facebook’s French subsidiary announced on 24 August 2020 that it would pay more than €100 million as part of the back taxes to the government. There would be a penalty payment apart from the tax money. The auditing of its accounts over 2009-2018 period by French tax authorities showed that Facebook’s subsidiary in the country owe a total of €106 million to the French government. Though the social media leader agreed to pay the amount, the details of the agreement made between Facebook and France's tax administration was not made available.

Facebook’s sales income from France almost doubled its total net revenue in 2019 from 2018’s €747 million. In 2019, Facebook had paid €8.5 million of income tax in France, a rise of approximately 50 per cent from 2018. Facebook reiterated that it seriously attends to its tax obligations and pays it all the markets where it operates. The digital giant works in close coordination with the tax authorities of respective countries to ensure that it follows all applicable tax laws and resolve any litigation.

Also read: Facebook Gaming Hops on to Apple’s App Store

Also read: Facebook's Move On Crypto - Can This Harm The UK Financial sector?

Also read: How Anti-Chinese Sentiments Are Shaping Facebook vs TikTok Battle

Also read: CMA Calls to Rein in Market Powers of American Tech Giants Facebook And Google

It is pertinent to know that France is working hard to bring necessary changes to international tax rules for digital companies such as Facebook, Google, Apple, and Amazon. France is of the opinion that these technology companies pay too little tax in the country, despite generating significant sales numbers.

Debate on tax laws and trade war gathered momentum during coronavirus pandemic

It is not new that digital companies like Google, Apple, Facebook, and Amazon (GAFA) have been working around to lower tax payments to foreign countries. These reduced tax revenue has been potentially lowering the tax collection in many countries. In many cases, such foreign companies generally do not require physical infrastructure, factories, or warehouses to operate, making it tough to screen their economic activities. It also makes it easier for them to shift their base.

Though it has been concerning several governments for long now, the coronavirus crisis has only increased the focus of the tax collection from digital giants. Even during the pandemic, many of these tech majors have added to their market shares, substantially eating from local companies and increasing the global tax transformation. Majority of the local retailers suffered on the hands of Amazon not only for profits but also the tax liability to their own governments, Majority of advertisement revenue of the local newspapers during the pandemic went to Facebook and Google. Amid this situation, the governments were needed to fund local recovery and protect jobs, while not being able to receive sufficient taxes from foreign digital companies. It was obvious that the governments looked at the foreign companies to support their deficits, if not completely at least a part of it.

Also read: UK-Japan Trade Deal and Its Impact on Different Businesses

Also read: Post Brexit-Trade Talks Stall Again; Making Headway Seems Difficult Before the End of Transition Period

Also read: All you need to know about Australia- Britain Trade deal

The European Union (EU) along with 137 countries in the Organisation for Economic Cooperation and Development (OECD) has been working towards finding a solution for more than a decade now. The solution is about imposing a revenue-based tax on digital giants. In June 2020, the US is known to have withdrawn itself from the talks to bring such changes into effect.

After the US withdrew itself from the discussions, many countries have presented their own solutions. For instance, many countries have like Austria, Italy, UK, and India have already imposed a tax on digital advertising revenue, while others like Spain and Canada might soon finalise one, as per media reports.

Since most of these digital giants are US-based companies, the US government responded with its own trade restrictions and tariffs and announced several trade investigations possibly leading to onset of a trade war. The countries that would be impacted are Brazil, Czech Republic, Austria, Spain, Italy, Turkey, India, Indonesia, and the European Union. It is expected that these countries could impose tariffs and measures to impact US exports. It is to be recalled that before the outbreak of the coronavirus pandemic, the US government threatened on imposing a 100 per cent tax on French goods hitting back at France’s revenue-based taxation system. To avoid a trade war, France had said that it would hold imposing these taxes until end-2020, while waiting for the OECD to come up with an effective solution.

Conclusion

Economies take every possible effort to avoid trade wars at any time. Many experts agree that given the economic downturn and slow recovery amid the ongoing fight against the crisis, a trade war would further destablise the uncertain recovery processes. The world is already seeing the challenges brought by the US-China cold war and disruption in global supply chains. The economic recovery process needs innovative and affordable technologies to support demand creation from consumers and revenue growth of the companies, avoiding taxation disputes. Several experts suggest that these times of crisis call for strengthening collaboration and increasing transparency between countries. While it remains to be seen when the US would again participate in the negotiations and play a significant role to smoothen the affairs, foreign countries must also revise the implementation of newly announced taxes for some more time. To support this win-win situation for all, the digital corporations must come ahead to contribute to the global economic well being, thereby adding to their shareholder’s wealth.

Summary

• Amazon has shown steady revenue growth and increasing profit margins in the past few years.
• The Company has demonstrated a capability to outperform in such crisis times with financial ability and superior global infrastructure.
• The tech giant, like other players within the sector, witnessed growing demand amid the pandemic-induced lockdowns reporting YoY sales growth of 26% and 40% in Q1 and Q2 FY20 results, respectively.
• Amazon’s executive Jeff Wilke, who was often considered as a potential successor to Jeff Bezos, is stepping down from the Company in early 2021.

Tech behemoth Amazon Inc (NASDAQ:AMZN), with a market capitalisation of US$1.676 trillion and having multiple business units, is currently generating a steady revenue growth and rising profit margins.

Over the last couple of years, and even during the coronavirus crisis times when most of the companies are struggling to stay afloat, Amazon, a part of FAANG stocks, has been reporting growth after growth and increasing headcount regularly. The Seattle-based e-commerce and cloud computing player could be one of the few companies that seem to be immune to the COVID-19 effects.

INTERESTING READ: Is COVID-19 pandemic the mother of tech Innovation?

As the coronavirus cases rose, people were compelled to stay at home and businesses were shut for many months. Amazon saw an opportunity in this, and instead of cutting down on operations, it took charge and benefited from the consumer behaviour and continued with adequate services. The lockdown saw a surge in sales with Amazon reporting a 26% increase in net sales in Q1 2020, and more recently, a 40% jump in Q2. As a source of entertainment during the lockdown, a lot of customers also joined the Amazon Prime customer reward program. Currently, about 69 million people subscribe to Amazon Prime in the US.

Amazon has shown a capability to outperform in such crisis times with financial ability and superior global infrastructure.

Amazon Inc 6-Month Share Price Movement (Source:Nasdaq)

ALSO READ: Amazon's Jeff Bezos sets a new record as world's richest person, with a net worth above US$171 billion

Amazon share price on the rise:

Amazon, a cloud-computing & e-commerce giant, has most of the sales coming from retailing, and it is usually valued at the discount to revenue. The Company is generating most of its income from warehousing and delivery. The AMZN shares are getting recommendations from the analysts in the market, and investors are also keeping an eye on the stock. Its shares, last month, took a roller coaster ride from high to low in a day.

Earlier, On 16 March, Amazon share price hit a one-year low when health crisis fear struck the stock markets. Currently, the Amazon share price has nearly doubled. Before the pandemic, its shares were stuck in a phase and only moved sideways, a situation which makes investors worry about their significant investments and the e-commerce giant started facing the pressure. However, the pandemic changed the market dynamics resulting in increased demand from the consumers locked at home.

It had a 2-for-1 stock split in 1998 when Amazon was a small company. The second stock split was 3-for-1 in January 1999 after which its share price surged about 755% in just seven months. The Company saw its last split 2-for-1 in September 1999. The share price has witnessed outstanding gains since Amazon’s introduction on the stock market. If one had invested US$10k in the Company back in 1997 at US$18 per share, that investment would have worth more than US$22 million on 25 August 2020.

Amazon share price stood at US$3346.49 on 25 August 2020, up 1.18% from its previous close. Experts believe the stock will hit US$3700 to US$4000 before the year ends.

GOOD READ: Hey, you know what! Amazon is building its first Robotic Fulfilment Centre in Sydney

Opportunities during the pandemic crisis:

When most companies were laying off employees and implementing cost-cutting, Amazon surprised the world with hiring 100,000 more workers and then again added 75,000 workers worldwide. To cope up with the salary of the employees, the Company increased its investment to more than US$500 million from US$350 million.

In 2017, Amazon acquired Whole Foods Markets worth US$13.4 billion, and it also invested heavily in cloud computing, transportation, video content and online video services. Amazon Prime competes against Netflix (Nasdaq:NFLX). It also has a footprint in the smart speakers' industry with a leading product called Echo.

DID YOU READ: Microsoft and Amazon: Titans of 2 different Worlds with Technology as Connecting Thread

Few of its recent successful acquisitions are:

• The Company recently invested US$700 million in an electric truck maker company Rivian.
• It acquired self-driving vehicle technology company Zoox US$1.45 billion.
• Acquired online pharmacy company PillPack under US$753 million.

Recent management changes:

Amazon’s executive Jeff Wilke is stepping down from the Company in early 2021. Wilke has been with Amazon since 1999 and was often considered as a potential successor to Jeff Bezos. The Company’s Retail Operations Senior Vice President Dave Clark will take over Wilke’s position.

The retirement announcement has come as a surprise as he is one of the long-tenured executives. Jeffrey aka Jeff Wilke has headed Amazon’s worldwide consumer unit since 2016.

Jeff Wilke was considered Jeff Bezos left hand and was promoted as chief executive of Amazon's Worldwide Consumer business in 2016. He has overseen Amazon’s massive online marketplace and its operations, technology, and marketing, and led Amazon Prime.

DID YOU READ: Are FAANG stocks still the money-making machines? Jeff Bezos’ net worth surges in 2020

A steady Double-Digit Growth and impressive Q2 Results:

Amazon has been reporting double-digit revenue for a few years now. In 2019, its revenue increased by over 20% compared to 2018 figures, which in turn, were ~31% higher than 2017 numbers.

For Q2 FY2020, the Company recorded adjusted earnings of US$10.30 per share, dwarfing Wall Street’s estimate of US$1.48 per share. Amazon’s reported revenue of US$88.9 billion was also considerably higher than the consensus estimates of US$81.4 billion.

Summary

• Airbnb is launching an IPO and has filed an S-1 to the Securities and Exchange Commission.
• The Company had shared its intention to go for public listing in 2019 and is one of the hot IPOs scheduled for the year 2020.
• Airbnb’s latest round of funding was in April where the Company secured US$1 billion in the form of debt as well as equity.
• The accommodation booking player has seen a significant growth in the number of teachers signing up to use Airbnb to earn extra income, and teacher hosts in the US have mode over US$230 million during 2019.

Yes, it is finally here. Airbnb’s initial public offering (IPO) might be around the corner, and it is official. The news regarding Airbnb’s IPO had been in speculation since last year when the Company shared its intentions to transform into a publicly-traded company during 2020, and it has finally notified to hit the floor.

Do watch: Airbnb files for Initial Public Offering - Airbnb IPO

Off late, Airbnb has declared that the Company has confidentially submitted a draft Registration Statement on Form S-1 to the Securities and Exchange Commission (SEC) in relation with the proposed initial public offering of its common stock.

As of now, no final figure has been determined regarding the number of shares to be offered and the price range for the proposed offering. The IPO is anticipated to take place after the completion of the review process by the SEC, subject to market and other conditions.

Interesting Read: IPO Gamble in a Confidential Way: Uptick in floats and Palantir is under the spotlight

Airbnb was amongst the top pick for IPO scheduled in 2020. However, Airbnb’s plan for IPO was placed on hold as the outbreak of COVID-19 overrode the recent situation in the market.

US Market Zooms On The Back Of Tech Giants

With the emergence of COVID-19, financial markets had turned topsy turvy, and there has been a constant uncertainty surrounding the market. However, the US market has zoomed significantly in recent times after its plunge due to COVID-19. On Friday, 21 August 2020, NASDAQ Composite was up by 0.42%, and Dow Industrials was up by 0.69%.

Moreover, the market has shown positive sentiments, with Apple Inc. (NYSE:AAPL) becoming the first US publicly traded company to crack US$2 trillion market capitalisation and Tesla shares reaching beyond US$2,000 price.

In the past week, the US market closed at an all-time high on Tuesday driven by big tech players and stimulus of trillions of dollars from the Federal Reserve to take hold of the bleak economic condition. Notwithstanding the backdrop of shrinking earnings for businesses, disappointing economic data and record job losses, investors have responded positively, and the resurgence is apparent.

Related: Capital Raising and Share Purchase Plan: Is Bigger, the better?

Airbnb During COVID-19

Airbnb started during the financial crisis, but over its long journey, the Company adopted and overcame criticism and lots of controversy mentioning Airbnb as illegal and that there were illegitimate uses of the service.

Over the years, Airbnb has improvised its business and has implemented actions to enhance background check as well as user verification. Just when the global emergence of COVID-19 was around the corner, significant growth in Airbnb’s revenues was expected during Q4 of FY20 with projections for further growth during the first quarter of 2021.

Unfortunately, the current year has turned out to be a bummer for the world economy and businesses are engaged in restructuring. Airbnb too reduced the size of its workforce in May 2020 with nearly 1,900 teammates leaving the organisation, representing approximately 25% of the Company. The upsetting decision was taken as a result of Airbnb’s inability to afford everything that the Company used to do for its employees and to become a more focused business.

Interesting Read: How are the Unicorns doing?

The Company’s most recent round of funding was in April when the Company secured US$1 billion through a blend of debt and equity. The funding was anticipated to enable Airbnb to continue moving forward as through its investment in the community of hosts and guests spread throughout 220 countries and regions across the globe. Moreover, Airbnb was optimistic to strongly ride out the COVID-19 storm, despite the unknown duration for which the storm lasts.

Recent Developments at Airbnb and Outlook

Recently, Airbnb reached a milestone of more than US$100 billion that hosts have earned since the beginning of Airbnb. Moreover, the earnings of US teacher hosts exceeded US$230 million in 2019, including more than US$81 million earned during June, July, and August.

Airbnb believes that the growth in the number of teachers signing up to use Airbnb for earning extra income may be a possible reason for the upsurge in earnings.

Also read: Airbnb Back to Square One?

With the onset of COVID-19 induced restrictions and shutdowns, Airbnb has been implementing several actions to deal with the pandemic. Tourism has been impacted considerably due to the restrictions, and the recovery in Airbnb’s business depends on the return of tourism. However, there are specific signs of hope emerging for tourism businesses as domestic travel is gradually opening.

Several business aspects have changed for sure, and people have learned to work from wherever they want. These changes are expected to stay in place regardless of whether a vaccine or treatment is discovered. More importantly, vacation rentals are still an affordable option compared to staying at hotels.

Did you Watch: Australian IPO market amidst COVID-19

Despite the uncertainty in the market, there is a lot of buzz in the market that Airbnb can manage to carry out the IPO by the end of 2020. As sentiments look like picking up across markets with some stocks touching fresh highs, it shall be interesting to see how the investors respond to the IPO.

Summary

• London City forecasters project the UK economy’s growth rate of 14.6 per cent for Q3 2020
• Aggregate consumer spending for the first two weeks of August 2020 was 7 per cent higher than observed during the corresponding period a year ago in 2019
• The Barclaycard payments’ SME barometer shot up from 79 to 95 between start of Q2 and Q3 2020 respectively

Various forecasts are coming in to indicate that the UK economy will bounce back with good economic growth during the third quarter of the year 2020. The main reason being citied is a rise in consumer spending.

The average forecast made by the leading economic institutions in London suggest that the UK economy will rebound in the third quarter of 2020, and will showcase a growth rate of 14.6 per cent during the period.

In fact, encouraging results have already started to flow in. According to latest data from Fable Data, a UK based consultancy firm, the aggregate consumer spending for the first two weeks of August 2020 was 7 per cent higher than observed during the corresponding period a year ago in 2019. This calls for a celebration as this is the first time after March 2020 that an year-on-year rise in spending growth has been observed across the nation. Economists suggest that the reasons for this uptick could have been a release of the pent-up demand and re-opening of schools across the nation.

Fable Data also found out that the government’s eat out to help out scheme has been successful and more meals were purchased across restaurants and pubs during the first two weeks of August 2020 than a month back in July 2020.

These pointers indicate that Britons might just be finally ready to spend once again after months of being locked down inside their homes, fearing to catch the Covid-19 infection.

The UK economy officially entered a recession in the second quarter of the year when its gross domestic product (GDP) contracted by almost one fifth, after shrining for 2.2 per cent during the first quarter of 2020. However, it was a reason to be optimistic that the economic output growth of the country was positive at 8.7 per cent for June 2020, the last month of the second quarter.

Boost in optimism among small business enterprises across the UK

The Barclaycard payments’ SME barometer shot up from 79 to 95 (out of 200 points) between start of Q2 and Q3 2020 respectively.

Further, the barometer also showed that the average daily values of the SME transactions grew by 60 per cent during July to Mid-August 2020, as compared to the corresponding values observed during Q2 (April to June 2020).

Barclays Research also found out that four-fifth of SMEs are planning to make a business investment to push their company in the next 12 months period.

The FTSE AIM All Share index, the equity index of smaller sized companies quoted on the AIM (alternative investment market) which slumped to 589.90 points on 19 March 2020, as a result of the coronavirus pandemic, was trading at 962.04 points on 24 August 2020 at 12.10 PM, up by 4.89 per cent from the previous day’s closure. This level is almost similar to the pre-pandemic levels for the index and one can safely infer that this index has been much more resilient as compared to bigger indices like FTSE 100 and FTSE 250.

Retail sales above the pre-pandemic levels

The retail sales for UK grew higher that the pre-pandemic levels for the first time in July 2020. According to the ONS data, July high-street sales were running 3 per cent above the pre-pandemic levels and 1.4 per cent higher than an year-ago levels.

Online sales were up by 50 per cent in early August 2020 as compared to the pre-pandemic levels across the country, according to the retail industry sources.

Recently, the Bank of England also said that the bounce back in consumer expenditure is expected to drive the UK’s economic growth in the third quarter of 2020.

There’s need for a cautious optimism

However, there are few things to watch out for, caution the market analysts. They say that it is difficult to predict the clear direction of the economy given the uncertainties surrounding the coronavirus pandemic, especially after the third quarter of the year 2020. The factors which need to be closely watched out for are: an emergence of a second wave of coronavirus infections, if consumption continues to sustain itself in a rising unemployment scenario, and the need to carry on with social distancing measures.

Samuel Tombs from Pantheon Macroeconomics Consultancy said that a primary reason for the sluggish UK economy was an elongated lockdown period. Later, government was also slow in stopping the virus’s spread from the nation’s hospitals, he added.

The under performance of the United Kingdom’s economy has been rooted also in its characteristic structure. It is an economy which is primarily driven by the services sector (a larger retail, hospitality and travel segments), which his more consumer facing than say manufacturing or farming. Therefore, social distancing measures particularly slowed down the nation’s services sector, which pulled down its economy.

The looming fear of a no-deal Brexit could also delay the economic recovery, as it could lead to higher cost of raw materials, operations etc.

Private business investment, a leading indicator of economic growth, dropped by a hefty 31.4 per cent during the second quarter of 2020, according to latest government statistics. If they do not pick up, recovery may take longer than expected.

And last but not the least – the job crisis is not yet over in Britain. There are worries that post October 2020, when the furlough scheme ends, more job losses could be expected across various industries.

To sum up, London based city forecasters are projecting the UK economy to grow at 14.6 per cent for the third quarter of 2020. While this is a news to cheer, however, many economists caution of growth inhibiting factors like a rise in infections, unemployment, no-deal Brexit, low private investment and the continued need to carry on with social distancing measures.

Summary

• Fewer office workers coming to offices is leading to slower than expected recovery in cities like London and Manchester
• Suburban areas like Southall and East Ham have already reported an upturn in terms of consumer spending on clothing and hospitality surpassing January 2020 levels
• Work from home arrangements is being sighted as the primary reason for the disparity in recovery levels, as most large organisations in the country report at least two-thirds of their employees not returning to offices

Credit card spending patterns of people living in and around London has revealed that the businesses in the suburban areas of London are recovering faster than the businesses in the city. Majority of the consumer spending on food, clothing and hospitality is going to businesses which are in residential neighbourhoods than for businesses which are located in prime business areas. Since the outbreak of the pandemic and the subsequent imposition of the lockdown, most companies have progressively migrated their employees to work from their homes. Even after the lockdown was eased, not many of them have proactively tried to bring back their staff to their offices on account of the continuing threat of the pandemic. This shifting of consumer spending behaviour has come as a boon for business in suburban residential areas like Southall and East Ham, where businesses are seeing growth levels that surpassed the January 2020 growth figures. It is worth noting here, that even people living in cities like London have been increasingly showing interest in moving out of the city in the wake of the pandemic, for safety and a better quality of life.

The disparity in economic recovery in London and its suburbs

People who are not travelling to work at their offices in London are spending more time in their local neighbourhoods. Most of the local, as well as international tourists, are also avoiding city areas for the heightened risk of catching the infection there. As a result, most of the businesses in there are witnessing a very slow state of recovery. Premium locations in London; Bromley, Stratford, Orpington and Ealing have witnessed transaction levels in July that were a third of what they were in the month of January while the restaurant transaction levels were 17 per cent higher in Mid-July compared to January in Southall and clothing spending was 10 per cent high in East Ham during the period compared to January. Credit card spending data of Mastercard for the month of July has revealed that retail spend in central London was down by 60 per cent , restaurant spending was down by 80 per cent while workplace-related travel was down by 50 per cent by the first week of August. People perception regarding their future, livelihoods and quality of life has undergone a transformation since the arrival of the pandemic, which is evident from these above witnessed changes.

Working from home arrangements and how it is transforming the work environment in the UK

The advancement in internet technology has made life easy for everyone; however, its safety angle was emphasised after the outbreak of the pandemic. Working from home arrangement makes it convenient for people to sit in the comforts of their homes, be engaged productively as efficiently and as rewardingly as they would have been working from their offices. This saves them a lot of time and energy that goes into travel while it also gives them ample opportunity to spend quality time with their families. Companies are also finding it convenient as it is saving them a lot on facilities cost while employees are able to devote more time to their work which is saved from travelling. Overall, the net effect of work from the home facility is that the cost of operations for a business organisation has come down significantly both directly as well as indirectly. However, one disadvantage of this arrangement is that it cannot be implemented equally in all industrial sectors. So while areas in a city or country which have a higher concentration of white collared jobs will see a lower attendance level, places, where there are more factories and workshops, will see a larger number of people returning back to work. A similar impact on the perception and livelihoods of people has been brought about by online retailing. People are now able to browse through thousands of merchandises while sitting at one place and not having to spend time and money on travel.

Both of the above, though have been transforming the everyday work and livelihoods for quite some time now, but the pace of transformation that has been witnessed after the outbreak has been disruptive.

The pandemic impact on the general business environment in the country

The outbreak of the coronavirus pandemic in the country and the ensuing lockdown had put a halt on almost all business activity in the country and locked up most of the countrymen in their houses. During the six weeks of lockdown, only those businesses were allowed to function that provided essential services. After the lockdown was opened in the first week of May, businesses which had the least risk of spreading the infection were allowed to open first followed by businesses which posed a considerably greater risk. The government, on its part, issued strict safety guidelines in re-opening businesses for the safety of employer as well as customers who visited those business establishments.

The general public has been worried about their safety since the outbreak. Most people prefer not to travel outside the safety of their houses until it is absolutely necessary. Anyone getting the opportunity to work from home is trying to take full advantage of it and is trying to stay and be safe as long as the general threat levels on the pandemic do not subside. This general threat aversion attitude of the people is preventing much of the recovery process in the country, especially for those businesses which are consumer-facing. In the coming time, when the vaccine is made widely available, people anxiousness are likely to lessen, and they may join back work in greater numbers, consequently increasing the consumer confidence levels in the country.

Summary

• The failure of Brexit deal would hinder the tariff-free movement of goods across borders as they did before the UK parted ways with the European Union
• The EU-UK deal is important for businesses from both sides to ensure that the competitive landscape across the continent is maintained and they can compete with other geographies
• The post Brexit- trade deal talks which were scheduled to have been completed by the end of this year, were hampered due to the Covid-19 pandemic

Emerging out of the latest round of talks, negotiators from both the British as well as the EU side have expressed their disappointment at the progress made so far. The post Brexit-trade deal negotiations which had been stalled recently because of major difference on both sides had restarted this month with high hopes that some headway could be made on the thorny issues that had been stalling the talks time and again. There have been several critical issues on which both sides are not seeing eye to eye upon including the role of the European Court of Justice, fishing rights, and the rules regarding state aid. Last month the EU side had softened its stand on the issue of state aid to ailing businesses, leading the UK to consider expanding its coronavirus loan programme to companies left out previously because of the EU regulations. The successful conclusion of the agreement with a deal is also essential for businesses and the governments on both sides as they will be saved from massive cost on account of new tariffs that could go online post 31 December 2020.

The consequences of a no deal Brexit on businesses on both sides

There were several businesses in the United Kingdom and the European Union who would see their revenues cut down sharply in the event that no headway is made by negotiators on both sides. Particularly at risk would be, the retail industry, the Automobile industry and the hospitality industry. Through the combined European Union years, these supply sources have helped the British car industry to produce vehicles cheaply and become internationally competitive. The British automobile industry is highly dependent on the imports of components from other EU countries who are able to produce them economically and of higher quality than they can be produced domestically.

Should a new tariffs regimen go online from 1 January 2021 then there would also be several implied cost that would have to be borne by both sides. The critical amongst these implied costs would be the infrastructure set up, and the additional customs personnel that will be required on both sides leave alone the mountain of paperwork that would need to be processed on a daily basis. This will implicitly add significantly to the cost of businesses and the administrative setup and will push up the cost of doing business significantly.

The Brexit deal journey so far

When the 2016 referendum in the United Kingdom decided its fate with the European Union, the scope of the massive economic fallout that would ensue had been fully comprehended by many. On both sides, there were several businesses who had expanded their operations in other countries within the Union and had expanded their business very rapidly over a period of forty-seven years the UK had been part of the EU. To break away after so long being together would not be that easy without bringing about massive economic damages on both sides. Thus soon after the Brexit decision was reached in 2016 leaders from both sides lobbied hard with their governments to negotiate a deal so that most of the current tariff structures remain intact and there should be the least amount of disruption of business activity. The negotiation process, however, took way too long and until 2019, it had been stalled many times before the Incumbent prime minister Boris Johnson came assumed the charge. In his poll promises, he had promised the people a withdrawal with or without a deal. Accordingly the process of withdrawal was completed on 31 January 2020, but additional time was allocated to negotiators on both sides to complete the negotiation process by the end of the year, i.e. 31 December 2020, after which the new tariffs would be put into place.

The pandemic, lockdown and other reasons that slowed down the negotiations

Though the year 2020 started on a positive note for the United Kingdom, but by the time March arrived, the threat of the pandemic had spread over the world. When the pandemic actually hit the country, and a lockdown had to be imposed to contain its spread, almost all government work got severely impacted, including the Brexit deal talks. The continent of Europe had come to a grinding halt, and most governments were now handicapped in terms of how they operated, and most of their resources and thought process were directed towards protecting their people and their economies. On the Brexit negotiators front, however, skipping a few scheduled engagements both sides continued their talks via teleconferencing and have been continuing to so engage till now.

There have a lot of other issues as well other than the pandemic, that had been become hurdles in the trade deal on which the negotiators were not able to agree upon. These issues which are core to the business interest on either side were forcing the negotiations to stall time and again, leading to top leaders of both sides directly speaking to each other to break the deadlock. The present delay of talks has come despite the pressure on the negotiators to arrive at an agreement to avoid the imposition of new tariffs, which will be detrimental to both sides.

Conclusion

There is still one round of negotiations left for both sides to arrive at a Brexit deal in time before the 31 December 2020 deadline arrives. The continuity of business as usual is of great importance for businesses as well as the government to concentrate more of their energy and resources in the fight against the pandemic. The entire European continent is in dire economic distress right now, anything that will add to the costs of the businesses will only make the survival of the businesses much more difficult.

Summary

• The coronavirus pandemic has accelerated the online shopping behavior.
• A study by Waitrose showed that the number of buyers at online shopping sites doubled from the 2019 levels.
• Many retailers are strengthening their online shopping platform to increase sales.

Amid the fears of contagion and social distancing norms, there has been a greater preference for online shopping during the coronavirus pandemic. A recent research report by Waitrose & Partners, a British supermarkets brand that sells groceries, showed a tremendous shift in shopping behavior of the Britishers towards online purchasing. We present the details of this report, besides tracking the performance and plans of some prominent retailers such as M&S, Next, and ASDA during the pandemic-led crisis.

Online shopping trend report by Waitrose

A new report on online shopping trends by Waitrose showed a rising shift in shopping behavior of the Britishers towards online purchasing during the pandemic crisis. One in four Britons shopped online for their grocery needs at least once in a week. The number of buyers flocking to online shopping sites doubled from the 2019 levels. The supermarket company saw a similar trend at its own online website for groceries, waitrose.com. In recent past, it added more than 100,000 customer order slots to its website, and at present has in excess of 160,000 slots available on a weekly basis.

Some interesting findings from the Waitrose report

(Source: Waitrose website)

Since the outbreak of the coronavirus pandemic, 60 per cent of people shopped for groceries online at frequent intervals. Out of this, around 41 per cent of people said that it was easier to buy online. In addition, there was a substantial rise in demand for quick delivery. At present, the Waitrose Rapid service boasted of more than 23,000 customers, recording a three-fold rise from the pre-pandemic levels.

Online shopping: Quick look at buyer preferences and future prospects

(Source: Waitrose website)

Stressing on the need for strengthening the Waitrose brand to suit the changing customer behavior, the supermarket invested £100 million in its online division. By end-2020, the online shopping segment is expected to triple in size and become a £1 billion business. The company would increase its order capacity to 250,000 slots per week. Waitrose prepared the report based on the findings of a new OnePoll consumer research of people across Britain and not only the shoppers who visited the Waitrose website.

Also read: The United Kingdom to Enact New Consumer Laws as Online Retailing Expands in The Country

Also read: Two Online Retail Stocks Trending on LSE: Goco Group & Studio Retail Group

Retail sales saw a jump in July 2020

With ease in lockdown restrictions, the July 2020 sales climbed higher than the pre-pandemic times. The retail sales volume increased by 3.6 percent from June 2020, 1.4 percent more than July 2019, according to an estimate by the Office for National Statistics (ONS). This rise was a steep recovery from the double-digit falls recorded in the lockdown months of April and May 2020. In comparison to February 2020, before the country was hit by the infectious coronavirus, sales were almost 3 per cent higher. These encouraging data indicated that Britain’s retail sector bounced back quickly from the impacts of the coronavirus crisis as compared to other sectors of the economy.

In recent past, the UK saw a rise in demand for warehousing space, given the rise in online shopping. In the three months to June 2020, there were greater demands for bigger warehouses that reached up to a record 1.2 million square metres. While online retailers took up almost 50 per cent of this space, traditional businesses too asked for warehousing space to accommodate the shift in consumer behavior towards online shopping. Many of these retailers such as John Lewis Partnership Plc, which planned to close their department stores and cut jobs, mentioned that the projected online sales would account for 60 per cent of total business, an increase from 40 per cent in the pre-pandemic times.

Also read: Retail industry faces ‘COVID-19 hangover’ as consumers spend with caution

Also read: Is The UK Retail Spending Approaching Pre-Pandemic Levels?

Recent sales numbers and plans at M&S, Next, and Asda

Below we present some recent announcements by the UK’s prominent retailers.

Marks & Spencer Group plc (LON: MKS): Due to the coronavirus crisis, the retailer announced around mid-August to off role 7000 jobs after 950 job cuts declared in July 2020. The company that employs 78,000 people in the UK, said that given the recent shift in business, it is too early to put an exact estimate to the new post-pandemic sales mix. Despite a rise in its online and home delivery segment, the clothing and home trading category recorded sales below 2019 levels. The 136-year old retailer is trying to revamp itself once again after several earlier failed attempts. In May 2020, M&S indicated about speeding up its turnaround plans. Stressing on the need for its workforce to carry out multi-tasking, it announced to incorporate more technology for various operations, become a leaner and faster business entity to service the changing consumer needs.

Group sales at M&S fell 19.2 per cent year-on-year (YOY) in the 19 weeks to 8 August 2020. While the sales for clothing and home segment declined 49.1 per cent, food sales dropped 1.1 per cent. It saw a surge in its online sales at 39.2 per cent. The sales at the physical stores reduced 47.9 per cent. M&S traded its food stores during the lockdown periods and recorded an increase of 2.5 per cent in the latest eight weeks. M&S would soon launch an online food service in partnership with Ocado, a British online supermarket company for grocery.

On 22 August 2020, at 10.05 AM, the company’s stock was trading at £ 109.80 up 0.73 per cent from its previous day’s close of 109.80. The 52 week low high range was recorded as 85.04 and 228.90. With a market capitalisation (Mcap) of £2,129.19 million, the stock provided a negative return on price, which was minus 49.14 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 9,681,405.

Also read: Covid-19 Impact: Job Redundancies Continue to Rise in High Street Retail

Also read: Boots and John Lewis Further Aid the Tsunami of Job Losses in Retail Sector

Next plc (LON: NXT): The British multinational clothing, footwear, and home products retailer, saw difficult trading after reopening its stores post lockdown. In the second quarter (Q2) of 2020, the company recorded a 28 per cent fall in full price sales. Over the last six weeks of Q2, total full price sales dropped 8 per cent. Next registered a 9 per cent rise in online sales YOY in Q2 2020. The online sales were estimated to grow further with the warehouses returning to normal capacity. In Q2, the in-store sales fell steeply by 72 per cent. After reopening the stores post lockdown, this fall eased to 32 per cent YOY. Looking specifically at the entire first half of 2020, the company’s overall full price sales plunged 33 per cent YOY. Out of this, the online sales decreased 11 per cent and in-store sales plummeted 62 per cent. The retailer said due to fear of overcrowding at the stores because of social distancing norms it did not focus on advertising. This lack of effort impacted the sales.

Though the sales declined sharply, it said that the company is in a better position than what it expected few months back. The demand from its customers outnumbered its anticipations and its warehouses for online segment were at a higher capacity level than what it thought to be possible. The retailer successfully controlled the costs and undertook steps to guarantee that its balance sheet remains secure.

Though the company spent considerable time and efforts in managing the business through the pandemic, it did not fail to notice that the retail sector was undergoing significant structural changes due to the consumer shopping behavior inclining towards online buying. The retailer observed that this pattern would gather further momentum during the coronavirus pandemic. Next is expected to come out with its full results for the first half of 2020 during mid-September 2020.

On 22 August 2020 at 10.09 AM, the company’s stock closed at £5,960 down 0.70 per cent from its previous day’s close. The 52 week low high range was recorded as 3,390.00 and 7,340.00. With a market capitalisation (Mcap) of £7,979.62 million, the stock provided a negative return on price, which was minus 14.34 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 260,210.

Also read: Retail Sales in The UK Makes Strong Recovery Amidst Sharp Rise in Public Debt Levels

Also read; Is Retail Landscape changing for good?

Asda Stores Ltd: Asda is the UK supermarket arm of the world’s biggest retailer Walmart. In mid-August 2020, the company announced its plans to expand its weekly delivery capacity to around one million slots in 2021 to meet the demand for online grocery shopping. While Asda’s online grocery sales doubled in Q2 (January to June 2020), there was a four-times increase in the click-and-collect sales. Since March 2020, it raised its online capacity by 65 per cent to 700,000 weekly slots, which would be further increased to 740,000 per week by end-2020. Over the next few weeks, the retailer has plans for expanding its delivery partnership trial with Uber Eats to 25 additional stores from 10 stores at present.

Viewing that the coronavirus pandemic has led to a structural shift in customer behavior towards grocery shopping, Asda has speeded up its online capacity expansion plans. The growth in its online segment coupled with high demand for grocery items resulted in a 3.8 per cent rise in Q2 for like-for-like sales. In Q2, the supermarket’s operating income declined due to rise in pandemic-related costs. Though Asda recorded substantial sales growth, it was behind competing retailers like Tesco, Sainsbury’s, and Morrisons, as per some recent industry data.

In July 2020, Walmart restarted talks with potential buyers to sell a majority stake in Asda. In 2019, Britain’s competition regulator upset the effort to sell the supermarket to J Sainsbury plc for £7.3 billion.

Conclusion

Amid the fears of catching the deadly coronavirus infection at retail outlets, online shopping came as a rescue. Several experts believe that the shift towards online shopping would continue in future as well. The pandemic has compelled the retailers to react swiftly to the changing needs of its customers. And, many have realised the need to strengthen their online divisions to increase demand and grow sales. Some retailers with no online presence have planned to start the segment in order to retain their loyal customers as well as add new ones. It remains to be seen if a strong online segment is just a survival strategy or would act as a major growth driver in the near future.

Summary

• The United Arab Emirates has long emphasised the importance of food security in the past few years, and the country plans to build superior agricultural and food skills.
• UAE plans to be amongst the top 10 countries and the world's best in the Global Food Security Index by 2021 and 2051, respectively.
• A number of farms are emerging in Dubai that are joining the innovation drive with strategies of vertical farming, amid current border closures and other restrictions caused by coronavirus.
• Long-term food security and self-sufficiency remain key goals of the country.

Since food security and health are two major concerns worldwide, the UAE (United Arab Emirates) is already a step ahead in securing its own food future and lead the world as the most food-safe nation by 2071, with a roadmap that involves investing in local farms and the newest farming technologies, as well as implementing the most strict food safety requirements.

Over the past few years, the UAE has put the focus on food security, and the nation that is an importer of food and agricultural products is now looking to develop the country's improved agriculture and food capability.

UAE has cultivated a small but rising share of their own organic tomatoes over the past 4 years, with the aim of strengthening food security in an import-dependent country. The food security effort began after the country was affected by food export bans during the financial crisis of 2008-09 as part of a wider drive to produce more home-grown food due to fears that climate change could prompt uncertainty in the global food trade.

The UAE aims to leap into the top 10 list of countries with the most food security. To accomplish these targets, locally grown food must not only accelerate its production promptly, but it must also follow the UAE's uncompromising safety requirements and appeal to the broad community consuming a large range of foreign food.

UAE jumped 10 places in the Global Food Security Index, shifting from 31 rankings in 2018 to 21 number in 2019 and is presently aiming towards a self-set target of capturing number 1 spot in the index by 2051.

Farming innovations amid COVID-19

The COVID-19 pandemic that disrupted global supply chains drove attention towards food security in the UAE. When UAE went into lockdown in April to prevent the spread of the novel coronavirus, people had the same response as millions across the world were panic buying.

ALSO READ: Lockdown Helping Supermarkets Generate Record Sales

As per Ismahane Elouafi, director-general of the International Centre for Biosaline Agriculture (ICBA) stated that the urge to stock up in the country was high as above 80% of the food is imported.

She noted that supermarket shelves, though, have stayed completely stocked up, partially because the UAE has long-established policies in place to ensure reliable food imports from abroad. She also added that the confidence in the country to have enough food is strengthened by its success in growing its own, using innovations like vertical farming and climate-resilient crops. Hence, agriculture is becoming possible in the country even with harsh climatic conditions.

ALSO READ: Climate change- A boon or bane for Australian Stocks

As per ICBA, the Middle Eastern country had 50 hydroponic farms, where plants were cultivated utilising nutrient-infused water and without soil in 2009. Most of the agricultural developments making headway in the UAE include growing crops indoor, in an effort to solve the climate challenges faced by the farmers.

Global warming is predicted to contribute in the UAE over the following 70 years heading towards lower rainfall, fiercer droughts, rising sea levels and more hurricanes, as per a 2019 report. By 2050, the average temperature of the country is likely to rise by about 2.5-degree Celsius.

High-tech farmers transforming Dubai

Badia Farms (2018) became the first vertical farm to open its doors in Dubai, utilising hydroponic technology to cultivate micro-greens and herbs in demand. Al-Badia market garden farm generates a multi-storey formatted variety of vegetable crops, meticulously managing light and irrigation and recycling 90% of the water it uses.

GOOD READ: 4 Agricultural Stocks And Key Investment Thematic: SHV, GNC, BFC, AAC

Since then, many experts and entrepreneurs have agreed that innovative agri-tech has been gaining bases in UAE and Dubai.

A leading manufacturer and supplier of Hydroponic systems for offices to home, GreenOponics Executive Director Smitha Paresh has stated that as per the National Food Security strategy for 2017-21, a massive increase in climate-controlled greenhouses is witnessed throughout the nation.

A number of farms are coming into existence in across Dubai and in less developed areas like Al-Ain and mountainous emirate of Ras-al-Khaimah. Several farms are raising cows in air-conditioned sheds that provide the local market with dairy products, not far from Dubai's coastline. Salmon is being farmed in vast tanks, which are being supervised by a control room that duplicates sunrises and sunsets in Norway.

Challenges ahead

Food supply comes from all over the world by air and at the state-of-the-art port of Dubai, supplying stores in different varieties. However, long-term food stability and self-sufficiency remain crucial priorities in a region where problems with neighbouring Iran are quite regular.

Through infusing the new innovations and farming methods, the UAE attempts to revolutionise its agricultural sector. But, several challenges remain, admits Dr Ismahane Elouafi of ICBA. However, she noted that the country has 3 major natural resources, namely sand, sun, and sea, and ICBA utilise the ability of all 3 to grow food locally and sustainably.

Further, indoor farming can help in growing fresh produce in a desert all year, while reducing the need for pesticides and boosting food health. The growing organic sector in Dubai meets a lot of demand, but the development of local and indoor farming will have to be growing to reach future goals.

Some of the challenges that may arise for the country are mentioned below:

Summary

• IHS Markit / CIPS August PMI for manufacturing and services sectors displays sharp business expansion
• However, the number of new orders were still short of the total production capacity for most respondents
• Consumer demand is up, but still below pre-pandemic levels
• Businesses also continued to lay-off staff during the survey period in August
• Most survey respondents felt that full economic recovery will be delayed beyond a year
• The main areas of concern are falling unemployment, rising government debt, the risk of a no-deal Brexit, and the lack of surety regarding the availability time of a Covid-19 vaccine

Both manufacturing and services sector PMI have grown at a faster than expected pace during the month of August 2020, according to the latest IHS Markit / CIPS Flash UK Composite PMI data.

Lates UK PMI Index Data from IHS Markit / CIPS Survey

(Source: markiteconomics.com)

The data was collected for the period between 12 to 19 August 2020. It revealed that the business activity has improved sharply for the mentioned period, as a result of a rise in consumer demand and business spending. The headline UK Composite Output Index rose to 60.3 in the month of August, as against a value of 57.0 registered in July 2020. It was the fastest rate of monthly expansion in business activity observed since October 2013.

Manufacturing PMI for the month of August was recorded at 61.6 while that for the services was valued at 60.1 for the same month.

PMI or the purchasing manager’s index is a variable that provides the direction of the economic activity in a sector. A level below 50 indicates contraction while above 50 denotes expansion in business activities for the period of the survey. It is usually done on a monthly basis by interviewing supply chain or purchase managers across various industries.

For August, company managers reported receiving a higher number of new orders as compared to July 2020, for both manufacturing and services industries.

With the easing up of the lockdown restrictions, the manufacturing supply chains have restarted for most businesses. The factories are now replenishing their inventory stocks. However, the number of new orders were still short of the total production capacity for most manufacturing respondents.

For services, footfalls have started to rise, though are still significantly below the pre-pandemic levels. Government’s Eat Out to Help Out scheme has benefitted the hospitality businesses by boosting their sales. Spending on staycations was also on the rise due to the ongoing summer holiday season, as per survey respondents.

The managers who responded to the survey also saw a rise in consumer demand across sectors; however, they added that it was still below the pre-pandemic levels.

The PMI survey results revealed that the month of August 2020 also saw job cuts, just like the earlier month of July. In fact, the month of August saw the highest rate of job losses, observed since May 2020. Companies said that they laid off workers to lower their overhead cost, before the government furlough scheme winds down in October 2020.

Moreover, costs were also seen to be rising during the month of August 2020, driven primarily by rising price of fuel and imported raw materials, despite a low level of prevailing inflation rate.

The managers surveyed said that the economic recovery would be slower than earlier expected. The economy might take more than a year to rebound to the pre-corona levels, they added.

Markets fail to cheer with the PMI data

The FTSE 100 index was down by almost 1 per cent to touch 5956 points on 21 August 2020, as the stock markets did not show any encouragement, after the release of the IHS Markit / CIPS PMI survey results for the month of August 2020.

Also Read: A Quick Insight on the Financial Performance of 3 FTSE 100 Stocks Withering the Storm

So how is the road to recovery coming along?

The path to recovery does not seem to be V-shaped and is still full of uncertainties with factors such as rising joblessness, the risk of a no-deal Brexit, high government debt levels, and the lack of surety regarding availability time of a Covid-19 vaccine.

Let us take a closer look at each of these factors.

Rising joblessness – The rate of unemployment is expected to more than double from the existing level of 4 per cent in the UK, and is a constant cause of worry. Businesses are running below capacity and have high operational costs to meet. Therefore, they are under pressure to continue to lay off staff. This factor is further depressing the already low consumer confidence in the nation and people are focusing on saving rather than spending, which is important for reviving the economy at this stage.

The risk of a no-deal Brexit – The UK and EU (European Union) have failed to make any progress regarding a post-Brexit trade deal till now. Both the parties are adamant on their side of negotiation points. Michel Barnier, EU’s chief negotiator has blamed the UK government for wasting their valuable time and said he was apprehensive that there will be no positive outcome of the negotiation talks. The negotiation deadline expires on 31 December 2020. As a result of a no free trade deal between UK and EU, Britain will definitely lose out all the benefits of a single European market.

Also Read: Boris Johnson and EU Chief to Hold ‘High Level’ Virtual Summit to End Post-Brexit Deadlock

High government debt – The coronavirus pandemic continues to put pressure on the British government finances. The national debt for UK has crossed the value of £2 trillion for the first time in the country’s history, according to the latest figures released by the Office for National Statistics (ONS). In July 2020, the British debt totaled £2,004 billion, which equaled 100.5 per cent of the country’s gross domestic product (GDP). Rishi Sunak, Chancellor of the UK Treasury is conscious of this fact and knows that he cannot keep increasing the public debt forever. He has already put his foot down for extending the popular furlough scheme. Private investment is also very low, and the nation is continuing to struggle to push up the economic output.

Also Read: Government Borrowings At An All-Time High, To Touch Five Times Its Last Year Value During Current Fiscal

Vaccine availability – the reality is that unless a coronavirus vaccine is actually made available to the masses in the country, the fear of the infection spread will not really go away so easily, just by government’s re-opening up the sectors one by one. The consumer demand returning to pre-pandemic levels and economy going back to sustainable growth levels is directly dependent on this most crucial factor, and the country shall need to wait for as long as it takes.

Also Read: Precious Metal Prices Go into A Correction Mode on News of Successful Vaccine Launch

To sum up, while it is a good news that the August IHS Markit / CIPS PMI Index has shown noticeable positive improvement and the Flash Composite Output Index has reached a value of 60.3, up from 57 observed in July 2020, but it may not translate into a seamless fast economic recovery for the nation in the months to follow. For the economic output to reach the pre-pandemic levels and start to grow in a sustainable manner, the crucial dampening factors to watch out for are rising joblessness, the risk of a no-deal Brexit, high government debt levels, and the non-availability of a coronavirus vaccine.

Summary

• The United Kingdom’s Gfk Consumer Confidence was recorded at -27 for August 2020
• There has been an improvement in personal finances optimism, but the outlook of the economy has deteriorated, mainly because of the surge in the rate of unemployment
• The latest labour market statistics by the Office for National Statistics has revealed that employment has weakened

Like many other countries battling with the coronavirus pandemic, the United Kingdom has also been in a state of lockdown, brought on by successive measures of social distancing. As a result, the economy has taken a sudden and dramatic hit, perhaps even more severe than the global financial crisis of 2008.

Amid all the prevailing uncertainties, there is some signs of recovery or at least halt in decline. The United Kingdom’s Gfk Consumer Confidence remained unchanged in August 2020, at -27 similar to the previous month, resulting from an improvement in personal finances optimism, but the outlook of the economy has deteriorated, mainly because of the surge in the rate of unemployment.

GfK’s Client Strategy Director, Joe Staton, sees employment as a big issue in the current scenario because years of job security has been hit with the pandemic. Approximately, one in eight workers has been relying on the government’s job retention subsidy scheme, costing 35 billion pounds ($46 billion), which is due to end in October.

The perception of economic recovery remains weak, as the GfK’s measure of how consumers view the economy over the next 12 months fell to -42 from -41 in July. It is to be noted that the British GDP slumped by 20.4 per cent in the second quarter (April-June).

Gfk Consumer Confidence Index

The GfK Consumer Confidence is a leading index used for measuring the level of consumer confidence in economic activity. A high level of consumer confidence represents economic expansion, while a low level drives the economy to an economic downturn.

Consumer Confidence Barometer is the most respected and watched indicators in the United Kingdom. The survey involves varied sectors such as the world of banking, governmental departments, retail and media, focusing on consumers’ opinions about their household finances, the general economy and their views on the current purchasing climate.

Let us closely follow some of the listed financial stocks of the London Stock Exchange.

HSBC Holdings PLC

HSBC Holdings PLC (HSBC) is the banking and financial services company, which manages its products and services through four businesses: Retail Banking and Wealth Management (RBWM), Commercial Banking (CMB), Global Private Banking and Global Banking and Markets, . The company operates across various geographical regions including Europe, Asia, the Middle East and North Africa, North America and Latin America.

Stock Performance

HSBC Holdings PLC (LON: HSBA) stocks were trading at GBX 325.10 on 21 August 2020 at 2:04 PM, down by 1.17 per cent from its previous close of GBX 328.95. The 52-week low/high range was GBX 324.95/630.70. It had a market capitalisation (Mcap) of £66,994.26 million. The volume traded at the time of reporting was 12,428,821. The company recorded a negative return on price, which was 44.72 per cent on YTD (Year to Date) basis.

Barclays PLC

Incorporated in 1896, Barclays PLC is a global financial services provider offering personal and business banking, wholesale and commercial banking, private and investment banking solutions to individuals, SMEs, corporates, and high-net-worth clients. The Company has two business divisions: the Barclays UK division (Barclays UK), and the Barclays International division (Barclays International). Barclays UK offers everyday products and services to retail customers and small-to-medium-sized enterprises, particularly based in the United Kingdom.

Stock Performance

Barclays PLC (LON: BARC) stocks were trading at GBX 106.56 on 21 August 2020 at 2:14 PM, down by 0.95 per cent from its previous close of GBX 107.58. The 52-week low/high range was GBX 80.24/192.46. It had a market capitalisation (Mcap) of £18,662.34 million. The volume traded at the time of reporting was 12,136,711. The company recorded a negative return on price, which was 41.91 per cent on YTD (Year to Date) basis.

Natwest Group PLC

Formerly Royal Bank of Scotland Group PLC, NatWest Group PLC is a financial services company, providing banking products and related financial services. It operates in segments like UK Personal Banking, Ulster Bank RoI, Commercial Banking, Private Banking, RBS International (RBSI), NatWest Markets (NWM) and Central items & other.

Stock Performance

Natwest Group PLC (LON: NWG) stocks were trading at GBX 110.55 on 21 August 2020 at 2:16 PM, down by 0.94 per cent from its previous close of GBX 111.60. The 52-week low/high range was GBX 105.95/120.90. It had a market capitalisation (Mcap) of £13,531.55 million. The volume traded at the time of reporting was 3,966,433. The company recorded a negative return on price, which was 7.69 per cent on YTD (Year to Date) basis.

Economic Condition of the United Kingdom

As per the latest reports of the Office for National Statistics, the recession brought on by the pandemic has led to the biggest fall in the quarterly gross domestic product (GDP), recording 20.4 per cent in Q2 (April to June) 2020.

With the lockdown restrictions easing in June, the economy began to bounce back with shops reopening, factories beginning to ramp up production and house-building continuing to recover. There was an increase in the volume of retail sales by 13.9 per cent in June 2020 in comparison with that of May 2020, driven by the non-food and fuel stores continuous recovery from the sharp falls experienced since the start of the coronavirus pandemic.

The Business Impact of COVID-19 Survey (BICS) for the period 27 July to 9 August 2020 showed signs of businesses emerging from the coronavirus restrictions. Out of the responses recorded from the businesses, 93 per cent said they had been trading for more than the last two weeks; which was up from 90 per cent in the previous wave. A further 2 per cent had resumed trading within the last two weeks after a pause in trading. This resulted in monthly GDP growth by 8.7 per cent in June 2020, but it remained a sixth below its level in February before the UK imposed lockdown.

For Q2 2020, labour productivity, measured in terms of output per hour, declined by 2.5 per cent when compared with the previous quarter (the largest fall since estimates began). The fall in output per worker was steeper at 19.9 per cent compared with the previous quarter because of the impact of the furlough scheme that retains employees as workers even though they work zero hours.

Total actual weekly hours plunged by 18.4 per cent across the economy between January to March 2020 and April to June 2020. Since estimates began in 1971, this has been the largest quarterly decrease. Early indicators for July 2020 suggest that the number of employees in the UK on payrolls is down by approximately 730,000 compared with March 2020.

The latest labour market statistics reveal that employment is weakening (down 0.2 percentage points on the quarter to 76.4 per cent), and unemployment remains largely unchanged at 3.9 per cent, but signs of economic inactivity have been seen rising with people out of work not currently looking for work reflecting perceptions of the jobs market.

Public sector borrowing for the period of April to June 2020 reached £127.9 billion, which is more than double that borrowed in the whole of the last full financial year, as indicated by the provisional estimates. In June 2020, the government receipts also declined by 16.5 per cent in comparison with the previous year (June 2019), while central government spending increased by 24.8 per cent over the same period, reflecting the emerging effects of government coronavirus policies.

How Will the British Economy Adjust to A New Reality Post Pandemic?

Even after the lockdown completely eases and the economy heads into a new reality, the businesses will continue to face uncertainty. Unemployment is expected to rise in the second half of this year as the Job Retention Scheme is supposed to unwind. And as the downturn continues to bite, we could be more business causalities, however, once the vaccine for the virus finally comes into existence, the confidence level will start recovering.

To know more do read: What Next For The Ailing UK Economy?

Summary

• HSBC believes that the British economy could shrink by as much as 10.3 per cent for the year, before it grows by about 6 per cent the year after
• The GDP shrinkage prediction of the bank is 0.8 per cent lower than the prediction of the BoE published earlier this month
• The bank’s estimates are better than the BoE's estimates on the employment front as it expects the unemployment in the country to hit 7.2 per cent by the end of this year against the BoE's estimate of 7.5 per cent.

The largest bank of UK, HSBC in a report published this week on the state of the British economy has predicted a pessimistic picture about the state of recovery. In contrast to a comparatively optimistic picture presented by the Bank of England in its monetary report published earlier this month. HSBC believes that the British economy could shrink by as much as 10.3 per cent for the year before it grows by about 6 per cent the year after. The private lender's reports also call to question several of the central bank's assumptions like the payments data which it had based its predictions on. The chief economist of the bank Elizabeth Martins while speaking on the publication stated that the recent economic data about the economy is far from overwhelming to support BoE's optimism. Regarding the current bleak state of affairs, she pointed out that only about 5.5 per cent of the people who had been furloughed had returned to work by the end of July.

HSBC’s prediction Vs the BOE’s prediction

The data published by the current HSBC report is in sharp contrast not only to the BoE report that was published earlier this month but also to its own numbers published in the previous editions. In its previous report, the bank had painted a much rosier picture of the economy, predicting the economy to shrink at a moderate pace of 7.8 per cent in 2020 followed by a growth of 6.2 per cent in 2021. In contrast, the BoE predicted a slightly gloomier picture in its latest report when it predicted the GDP shrinking by 9.5 per cent for the year followed by a growth of a whopping 9 per cent in 2021 and a recovery to pre-pandemic levels by the end of 2021. On the parameters of recovery by the end of 2021, is where the latest HSBC report differs the most from the BoE’s stand, as it predicts that by the end of 2021 the British economy would have actually shrunk by nearly 4.5 per cent. The New HSBC report thus firmly indicates that it does not believe that the current momentum of recovery is sustainable, and the economy would see a worse performance during the next two quarters of the year.

The state of unemployment and the impact of the withdrawal of stimulus packages

Much of the current state of recovery of the British economy is the result of the pent-up demand forces from the lockdown period and the massive stimulus spending undertaken by the government since the lockdown. However, now that the pent-up demand forces have started to recede and the government is actively trying to curtail its stimulus programmes, the economy will be left to its momentum generated since the lockdown reopening to carry itself forward.

The withdrawal of the furloughing scheme would be one of the most challenging factors that the economy will have to face for the rest of this year. There were nearly 9 million people who were placed under the benefit of this scheme by their employers since the beginning of the lockdown. Now that the scheme is about to be snapped by the end of August, many of the people who are under it will find themselves unemployed at the start of the next month. The real state of unemployment in the country will be visible then, as it had remained hidden all this while because of the scheme.

There are several industries which are witnessing a very slow recovery since the lockdown reopening, and they have a long way to go before reaching a level of sustainability without government support. There is a high probability that the economy might see a lot many business failures in the months to come when the stimulus is withdrawn than was seen during the lockdown.

Factors that could see the economy move as per BoE's predictions.

The biggest factor that would provide support to the BoE's predictions is the demand forces becoming more stronger for the rest of the year that has driven the current state of recovery in the past couple of months. Businesses actively bringing their employees back from furlough will also provide a major boost to the economy as it will support the momentum of the demand forces in the country. The third factor would be the improvement in the threat levels from the pandemic. The much-hyped Jenner institute vaccine for the pandemic is set to be unveiled by September, after which it should take some time before a sizable amount of the country's population is inoculated with it. Once the threat levels of the pandemic reduce, it will induce more people to come out of their home to join work. More companies will bring back their employees from furlough as workplace safety restrictions will be reduced. More customers will visit supermarkets, shops, and recreation establishments while most importantly, the transportation sector, will make a steady recovery. Public transportation systems are an important factor that motivates people joining back to their workplaces. The last quarter of the year is usually the busiest part of the year for most business in the country. It would be interesting to see how most of the above factors play out until that time.

Summary

• Centrica-owned British Gas could face a strike by its employees in coming months after majority of the workers voted in favour of it in response to the energy company’s fire and rehire plans.
• In a consultative ballot by the GMB union that saw participation of more than two-thirds of its total 10,000 members, around 95 per cent voted in favour of the strike.
• Centrica said that its staff has around 80 different employment contracts that need to be modified and made simpler to suit some modern requirements.

In a follow-up to the announcement made by Centrica plc (LON: CNA), an international energy services and solutions company and also the parent company for British Gas, regarding extensive job cuts and change in employment contracts, thousands of employees came forward to support strike at the company. It is to be recalled that in June 2020, the energy giant proclaimed to cut around 5,000 jobs to ramp up its restructuring efforts due to the coronavirus-led crisis. The utility company also indicated to bring into effect new terms and conditions for employment.

What did the union say regarding the strike?

However, viewing that Centrica had made a fire and rehire threat to its workers, the GMB union, a general trade union in the UK, stated that in case of not reaching a deal with the unions, the staff could be notified and re-hired on new terms and conditions. The GMB also informed about a ballot in which two-thirds of its 10,000 members from British Gas and PH Jones participated. As per this voting, almost 95 per cent were in favour of a strike. PH Jones, another company owned by Centrica operates nationally across the UK and provides local delivery through its 15 regional offices.

Though considered to be a consultative poll, it showed dissatisfaction of the employees at large. It further prompted a warning for the union leaders to conduct a formal strike ballot in autumn. Reiterating that the Centrica management threatened to change the contract of its loyal and dedicated workforce, GMB stated that the 19 to 1 vote showed that the GMB members would not accept the fire and rehire threats. The members of the GMB union are firm on having their own insurance policy and it is time for the energy company’s Board to understand the needs of its employees. The union mentioned that Centrica described its fire and rehire plans as an insurance policy. It further added that the energy major issued statutory HR1 and s188 notices, according to which, the company could start the process at the end of November 2020.

Also read: Future of UK Energy suppliers as the furlough scheme ends, Focus on Centrica

Also read: Quick Insights on Two Energy Stocks – Nostrum Oil & Gas & Petrotal Corporation

Also read: How is the needle moving on two energy stocks: TomCo Energy & ADM Energy?

Centrica’s viewpoint and background leading to the decision

The company had informed that its staff had around 80 different employment contracts that need to be modified and made simpler to suit some modern requirements. It is expected that approximately 50 per cent of the job losses would impact the managers. In its latest statement, the energy major said that in order to provide better customer service by offering them affordability in what they want and at a time they need, it is crucial to have a more flexible working practice.

Stressing on the fact that the change could be tough and assuring that the company is continuously working towards supporting its workforce, Centrica highlighted that it urgently needs to strategise and win back customers and grow the business along with protecting more jobs in the long-term. The company is making efforts to have a negotiated settlement in 2020 and urged the unions to agree with the need for change. Reiterating that the modifications in terms and conditions were required, Centrica assured that the base pay and pension of its staff would be protected.

It is important to note that Centrica declared its plans at a crucial time when the energy firm cautioned that its earnings had reduced by around 50 per cent in recent years. Given the increased competition in the sector coupled with the government imposing a price cap in recent years, several domestic energy suppliers are under stress. The government decided on putting a price cap amid argument over the rising cost of household’s energy bills in the 2010s.

Also read: Coronavirus impact: Ofgem reduces energy price cap limit

Also read: Post-Lockdown One in Three British Firms Struggling with Sustainability

Also read: Gauging the Operational Performance of 2 Energy Stocks: Nostra Terra Oil and Gas Company & Touchstone Exploration

In early April 2020, Centrica had announced plans to cut around £400 million from its spending for 2020 due to the impact caused by the coronavirus pandemic. In addition, the energy major put a hold to payment of bonus for its managers, besides cancelling a final 2019 dividend for its shareholders. While in the past couple of years, British Gas lost about 1 million of its customers, in 2019, Centrica registered a loss of £1 billion.

Despite a rise in the domestic energy consumption due to stay-at-home and work from home orders during the coronavirus pandemic, Centrica recorded a more significant decline in energy demand from its business or commercial users due to complete shutdown of economic activities during the lockdown months. The energy firm also feared that there is likely to be an increase in bad debt as declining business revenue and household income would hit its customer’s ability to make the bill payment. The company also observed that its revenues from non-essential services were badly impacted as essential work were given a priority as a step to curb the spread of the Covid-19 infections.

On 21 August 2020, at 8.15 AM, the company’s stock (LON: CNA) was trading at £45.93 up by 0.04 per cent from its previous day’s close of £45.91. The 52 week low high range was recorded as 30.21 and 93.50. With a market capitalisation (Mcap) of £2,680.56 million, the stock provided a negative return on price, which was minus 49.08 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 167,823.

Conclusion

The voting by the GMB union depicted a growing tension between the UK’s leading energy supplier and staff union. As the union charged the company for compelling its large section of workforce to agree on an unacceptable employment contract, it is likely that the employees who would not consent with the modified terms and conditions of employment could suffer a job loss. In the wake of the coronavirus pandemic and increased competition that the utility companies are facing due to the price cap announced by the government in recent past, it is crucial that the companies work towards retaining the old customers and also adding new ones by offering better deals and customer services. Many experts agreed that these measures would help them in recovering from the losses incurred and also grow their businesses, ultimately leading to protecting the jobs, besides offering employee friendly terms and conditions.

Summary

• Rail prices are set to rise by 1.6 per cent from January 2021, meaning an additional expense of around £100 to the cost of several annual season tickets.
• The increase in fare was a result of an unanticipated leap in July 2020 inflation, according to which the RPI rose up from 1.1 per cent to 1.6 per cent.
• The regulators, campaigners, and unions requested the government for bringing an end to the practice of increasing the rail fares on an annual basis.

British commuters would need to pay an extra 1.6 per cent from January 2021 if they opt to travel by railways. This rise in fare would mean an additional expense of around £100 to the cost of several annual season tickets. The increase in fare was announced as a result of an unanticipated leap in July 2020 inflation numbers declared on 19 August 2020. Generally, the rail fares rise in line with the retail prices index (RPI) which moved up from 1.1 per cent in June to 1.6 per cent in July 2020.

This increase also suggests that fares would once again move up well above the consumer price index (CPI), which is usually lower than the RPI. The CPI is considered as a more commonly used indicator of inflation. The upward movement of fares has also exceeded the rise in wages for most of the last decade. It is important to note that the fare rise was announced at a time when fuel duty for motorists had been frozen. The increased rail fare would include season tickets, anytime urban tickets as well as most off-peak long-distance return journeys. The new rail fares would be applicable to all regulated fares in England and Wales, apart from most in Scotland.

After lifting the lockdown restrictions, the UK’s economy is charting its path to recovery and many experts cited the return to normalcy leading to an increase in the annual inflation rates. In reality, the present circumstances are driven by more complex factors. It is known that the UK economy is neither gripped under inflation nor will grapple with it for some time. The data released for July 2020 was just one of its kinds and would soon skid downwards.

However, the downward movement of inflation could be little late for the rail passengers who would have to bear the raised fares announced as per the July numbers. The government’s decision to use the RPI figures for July 2020 would hurt the commuter’s confidence to travel by railways. The estimation of inflation was considered to be somewhat faulty by the ONS to calculate the rise in annual rail fares. Due to the coronavirus-induced lockdown, the ONS faced problems in calculating the CPI rate (government’s preferred measure of inflation). As majority of the businesses were completely shut, it was difficult to collect the prices and also impossible in many cases, most probably leading to a higher inflation number. Post lockdown, when the companies have started reopening, it is expected that the ONS would have more real data to work with. The businesses have been issued stringent social distancing rules to reopen. This could have been a reason to push the prices up and showed its impact on the raised inflation data.

Also read: Impact of Covid-19 on means of Commuting in the UK

Also read: UK GDP To Contract More Than Any Other G7 Nation In The Second Quarter

Call for reduction of rail fares

The passenger watchdog, along with several campaigners, and unions have together raised their request to the UK government for bringing an end to the practice of increasing the rail fares on an annual basis. Many voiced their opinion that it holds an increased significance during the coronavirus pandemic, which has already brought down the numbers of commuters traveling by rail.

Given the jump in inflation figures for July 2020, the National Union of Rail, Maritime and Transport Workers (RMT) suggested that the rail fares could be reduced by 5 per cent by diverting the money that is given to the private operators during the coronavirus crisis. During the coronavirus pandemic, the government has suspended the franchises and underwritten losses on the railway. It is to be noted that the number of passengers using railways for travel purpose is lower than a quarter of pre-pandemic levels.

Agreeing with the RMT union, Transport Focus, the passenger regulator for transport passengers and road users in the UK, also pleaded for deduction in rail fair prices in order to attract the commuters to restart using railways as a means of public transport. Requesting season tickets for part-time travelers to mirror the new working patterns and increasing the affordability of rail travel, the watchdog suggested that there should be a similar scheme like the government launched for the restaurants (eat out to help out) for boosting rail travel as well. Such scheme would be an assistance to bring the commuters back to the railways and decrease road traffic congestion, ultimately helping the economy.

Campaign for Better Transport, an advocacy group that promotes sustainable transport, including better bus and rail services, observed that the July inflation number could have been used to convince travelers to restart using trains for commuting. Instead the rise in fares would act as a deterrent in reinstating Britisher’s faith in the railways. The advocacy group stressed that the government needs to incentivise the commuters to begin reusing public transport means.

Views from the experts

Given the significant rise in inflation for July 2020 after the government allowed to open the economy post lockdown, some experts are of the opinion that the rate of inflation for August 2020 would decrease. Many of the analysts agree that the recent schemes and measures announced by the government would help to pull down the cost of living substantially.

The experts particularly highlighted the decrease in value added tax (VAT) for the hospitality sector in addition to the ‘eat out to help out’ scheme that started on 1 August 2020 and would continue till month end. In his July 2020 mini-budget, the chancellor, Rishi Sunak announced a temporary cut in VAT from 20 per cent to 5 per cent as a move to bring down the prices.

It is unlikely that the businesses would pass on the benefits of VAT to the customers and there is uncertainty on how many people would use the discounted meal scheme. Given these situations also, some experts believed that the annual inflation rate for August 2020 could see a fall.

Capital Economics, that provides economic research consultancy predicted that the inflation would reduce by 1.1 percentage points and turn negative, if at least 75 per cent of the businesses pass on the VAT cut to the consumers and a similar percentage of Britishers participate in the eat out to help out scheme. Many experts agreed that in the ongoing fight against the coronavirus pandemic, unemployment is expected to rise in near future. And, this has the potential to further weaken the price pressure.

Highlighting that the coronavirus pandemic has provided a huge deflationary shock to the country’s economy, the accountancy firm Deloitte, observed that the rate of UK inflation has already reduced approximately by almost 50 per cent in 2020 and is expected to decline more. Though the process of recovery has begun, the economy is still operating with huge amounts of spare capacity that could potentially push the present inflation into a negative zone.

Inflation numbers and reasons for its jump

The rate of inflation unpredictably soared in July 2020, regardless of the country facing recession is struggling to overcome the coronavirus-led economic crisis. As per the data from the Office for National Statistics (ONS), the consumer price inflation (CPI) in the UK climbed up from 0.6 per cent in June 2020 to 1.0 per cent in July 2020. This jump in CPI statistics was mainly due to the increase recorded in prices for petrol and clothing items.

Also read: Consumer Price Inflation Surged to 1% in July; FTSE 100 Index up 0.58%

Also read: Business Conditions in The UK Strengthens in August But So Do Apprehensions for Early Recovery

It is to be noted that the petrol prices ascended at its fastest rate in almost a decade. While petrol prices saw an upward movement of 4.9 pence per litre between June and July 2020, the price for diesel rose by 4 pence per litre for the same period. This increase in petrol and diesel prices was attributed to the rise in international oil prices from their earlier lows in 2020. Social distancing and sanitisation guidelines, apart from the need to use personal protective equipment (PPE) weighed on the prices for private dental treatment, physiotherapy, and haircuts, among others, that saw substantial price increase. Prices for clothing and footwear items also added considerably to the higher rates of inflation registered for July 2020. The prices for clothing and footwear were down by just 0.7 per cent between June and July 2020 as compared to decline of 2.9 per cent during the corresponding period in 2019. It is to be understood that the shoppers could not profit from the summer season discounts as well.

Also read: Covid-19 Impact: Job Redundancies Continue to Rise in High Street Retail

Also read: Is The UK Retail Spending Approaching Pre-Pandemic Levels?

Conclusion

During the coronavirus pandemic, people are not confident enough to travel by public transport such as railways. Though the government has eased the lockdown restrictions and businesses have started to reopen, people are fearful of catching an infection by travelling on public transport. Despite the strict guidelines issued for social distancing and sanitisation to be followed by the public transport operators, they are running either empty or with very little passenger counts. Several experts believed that financial incentives could be helpful to encourage people to restart using railways. There is an additional need for ramping up the Covid-19 testing facilities, besides track and trace system to curb the spread of the coronavirus and boost the commuter confidence. In absence of such measures, there would be increased congestion on the roads and rise in pollution levels as people prefer their own cars for any necessity of commuting. Many businesses have raised concerns regarding Covid-19 safe transport options, so that more employees could rejoin offices. Even if the coronavirus pandemic subsides, it is important for the government to implement measures for improving the public transport systems like the rails for better connectivity, making them affordable and self-sustaining in times to come. Given the coronavirus crisis, even if a raise in rail fares is the only viable option, it needs to be carefully re-evaluated based on a realistic inflation data and not something which has been impacted by the crisis itself.

Summary

• The USPS is facing an acute financial crunch due to the COVID-19 health crisis with Postal Service claiming to run out of cash if package volume returns to pre-pandemic levels.
• The Postal Service has also warned states that it might not be able to deliver the last-minute mail-in ballots amid postal service disruptions.
• With fear prevailing that voters’ ballot may not get delivered in time, the agency has sent letters to the states to request residents to order ballots at the earliest to avoid delay in voting.
• The US president has agreed to sign a bill to support the collapsing postal service.

The United States Postal Service, an essential service used by millions of Americans every day, is suffering financial difficulty due to the novel coronavirus (COVID-19) pandemic. The US, which will undergo national elections in November, now fears voters’ ballot may not get delivered in time amid postal service disruptions.

The Postal Service recently warned states that it might not be able to deliver the last-minute mail-in ballots. The USPS general counsel, Thomas J. Marshall, sent letters in July to all 50 states and the District of Columbia that “certain deadlines for requesting and casting mail-in ballots are incongruous with the Postal Service’s delivery standards.”

As per the law in many states, residents can request ballots on short notice period, but Mr Marshall urged those with tight schedules to require the ballots be requested at least 15 days before an election. Amid coronavirus pandemic crisis, many states in the US have turned to vote-by-mail operations to carry out elections safely.

Democrats and voting rights advocates have criticised the Postal Service and the US President Donald Trump saying the president is deliberately inviting baseless concerns that voting by mail will lead to fraud and miscounts and that they are casting doubts about the outcome of the election.

Also Read: November is around the corner, Who is Wall street betting on?

On Thursday, President Donald Trump walked back on his statement that he would reject a hypothetical $25 billion emergency funding grant to USPS. The president announced that he would agree to sign an urgent bill to support the US Postal Services.

How did USPS come to existence?

The United States Postal Services has its roots to 1775 during the Second Continental Congress. The Post Office Department was established in 1792 with the introduction of the Postal Service Act, and then-President Benjamin Franklin appointed as the first postmaster general.

In 1970, getting encouraged by the ongoing Civil Rights Movement, postal workers in New York City organised a strike against the United States Government over low wages and poor working conditions. Slowly it spread across the US, and it gained support from other states, postal workers, as well. Later the union received what they wanted in a contract along with the Postal Reorganization Act signed by President Richard Nixon. A new federal agency, the United States Postal Service came to existence with replacing the cabinet-level Post Office Department, and it took effect on July 1, 1971.

2020 Postal Crisis

This year, the USPS implemented operational changes under newly appointed Postmaster General Louis DeJoy. During the 2007-2008 financial crisis followed by the recession, the services faced a drop in the mail volume, and current coronavirus pandemic has caused similar issues to the services. Upon taking office, DeJoy announced significant changes like banning over the timing or extra trips to deliver mails, to reduce overall costs. It caused widespread criticism, and DeJoy admitted the measures created a delay in delivery. However, he soon assured things would get on the track after some time. But the recent letters to the states over ballots delay has raised concerns in the US.

Also Read: Can stock markets indicate political transitions? S&P500, ASX200 and debate around the presidency

According to the Washing Post, the USPS has $160 billion unfunded liabilities towards pre-paid pensions and health plans. The Postal Service is burdened by 2006 federal legislation under which it requires to fund 75 years of employee pension and health benefits in advance. In 2019 the service saw annual net losses double to $8.8 billion.

The Postal Service now claims that if package volume returns to pre-pandemic levels, it will run out of cash by April 2021. Even if the package volume stays 15% above pre-crisis level, the agency said it would face liquidity crunch in October 2021.

The US Postal Services not just deliver election mail and ballots but also essential documents, packages, medicines and even letters to Santa Claus. The USPS stamps are also very famous amongst the customers as they launch creative stamps regularly and various special occasions like festivals or public holidays. The carrier is considered one of the affordable services than the private ones, as it delivers to the remote areas where it isn’t profitable for other private companies.

Over half a million people, including 100,000 US military veterans are employed at the USPS, and the agency does not work on taxpayers’ money but entirely dependent on its revenue from mail and package delivery services.

Since the 1990s the Republicans are discussing the idea of privatising the USPS. The Donald Trump administration also proposed privatisation plan in 2018, which received firm bipartisan opposition from the Congress.

Current situation amid elections in November:

On average, the Postal Service delivers about 425 million mails, and the agency estimates that the election mails account for less than 2% from all mail volume from mid- September to Election Day. The agency believes that it can handle the increase of election mails due to the COVID-19 pandemic. But it urges residents to do their part by requesting ballot as soon as possible. To have the vote counted, the residents need to order the ballot now and mail it back in advance.

Also Read: https://kalkinemedia.com/news/world-news/a-glimmer-of-hope-in-us-economic-recovery-stock-markets-indicate-towards-it

Summary

• Travel bubbles can potentially rescue hammered travel and tourism industry from the large-scale downturn.
• The concept of travel bubbles was first established in May 2020, when three Baltic countries formulated a trilateral partnership.
• With time, a plethora of travel bubbles has sprouted in countries across Asia and Europe, which are exploring exclusive bilateral agreements to ease border restrictions.
• The second wave of COVID-19 infections budding in Victoria and Auckland has pushed back the plans for trans-Tasman travel bubble until at least end of 2020.
• Risks of bubble burst is also associated with travel corridors if a member country opens up to another nation where COVID-19 risk is high.

With COVID-19 pandemic initiating widespread border closures and leaving thousands of airplanes grounded, the global travel industry has been actively devising means to resume domestic and international travel with appropriate safety measures. Travel bubble is one of these options considered by nations worldwide to salvage battered industry from the large-scale downturn.

The concept of travel bubbles was first established by three Baltic countries, Latvia, Lithuania and Estonia when they formulated a trilateral partnership in May 2020, granting residents of member nations entry into their provinces. Following the trail, two other Baltic states, Slovenia and Croatia also formed a travel agreement in May to enable travel without quarantine restrictions.

Interesting Read! Travel Players Dealing with COVID-19 Crisis: Capital Raising Catches Wave

Peep into Existing International Travel Bubble Arrangements

With time, a plethora of travel bubbles sprouted in countries across Asia and Europe, which are exploring exclusive bilateral agreements to ease border restrictions. The ongoing establishment of travel bubbles seems to be largely driven by the confidence participating countries share over the containment of virus spread in their partner’s domain.

China and South Korea implemented their separate travel corridor in May this year to kickstart revival of their respective tourism industries. The travel bubble is tightly controlled, with movements permitted across selected cities, including Seoul and Shanghai. Besides, the air corridor involves stringent conditions for travelers who must undergo a 2-day quarantine and then a coronavirus blood test upon arrival to China.

May 2020 also observed a tourist border agreement between Norway and Denmark, excluding Scandinavian neighbor, Sweden, reeling from higher cases of coronavirus infections.

Since the end of June 2020, Italy, Spain, Switzerland, Belgium and Germany have also fully opened their borders for tourists from Britain, the European Union and the Schengen Area.

Subsequently, since July 2020, Singapore commenced business travel with around six Chinese provinces, including Chongqing, Guangdong, Jiangsu, Shanghai, Tianjin and Zhejiang. In July, the UK government also approved quarantine-free travel to over 70 countries and overseas territories in Britain.

In addition to these air corridors, Singapore and Malaysia are also planning to reopen their borders in August in one of the first “green lane” arrangements within the ASEAN (Association of Southeast Asian Nations) bloc.

Australia’s ‘Travel Bubble’ Plans

While reopening of Australia’s international borders seems highly unlikely in 2020 post Prime Minister, Mr Scott Morrison’s statement on no plan of overseas travel before 2021, COVID-safe travel corridors can emerge as a rescuer for the hammered travel sector.

For the last few months, Australia has been under discussions with New Zealand (NZ) over the initiation of a trans-Tasman travel bubble between the two countries. While speculations were initially rife over the execution of this travel corridor by September, the second wave of COVID-19 infections budding in Victoria and Auckland has pushed back the plans for the same until at least end of 2020.

NZ PM, Jacinda Ardern recently stated that the prospects of quarantine free travel with Australia seem a long way off amid resurgence of coronavirus cases in Victoria. The latest re-imposition of lockdown in Kiwi Land after the return of COVID-19 cases is further likely to derail NZ’s plans to commence travel corridor with Australia or any other South Pacific countries in 2020.

While the inception of travel bubble with NZ appears to be dubious in the near term, Australians may soon travel Bali possibly by next month as Indonesian officials have been pushing for travel corridor between Australia and Indonesia. Recently, a senior minister of the Indonesian government has strongly backed a travel bubble with Australia, along with South Korea, China and Singapore ahead of Bali’s re-opening plans in September 2020.

Besides, Japan is also preparing to reach an agreement with Taiwan, China, South Korea, along with Pacific partners NZ and Australia for quarantine-free travel.

Must Read! Leaf Through Three Key Factors Defining Travel Space Recovery Scenario

Risks Associated with Travel Corridors

As per International Air Transport Association or IATA, travel bubble or a corridor is a good tool to renew connections between two nations, but it should not be made a permanent practice. IATA believes that permanent travel bubbles can create enormous difficulty in managing various types of corridors, making it hard to dismantle these bubbles when situation turns to normal.

A risk of bubble burst is also associated with travel corridors if a member country opens up to another nation where COVID-19 risk is high. Besides, the bubbles of rich countries can potentially aggravate inequalities with poorer countries, which are excluded from travel corridors.

However, these bubbles still hold considerable potential to unlock the world and get travel sector back on feet, if opened with a sound and sturdy planning.

All in all, high hopes are attached to existing and potential travel bubbles across Australia and rest of the world to restore normalcy and reboot the multi-billion-dollar travel industry. While, much depends on containment of community transmission and second wave of infections that may set the speed of travel sector recovery.

Don’t Miss Zoom Your Lens over Emerging Signs of Recovery in Australian Travel Sector

Summary

• The silver spot has been under a consistent rally for quite some time now with the price even reaching a record value of ISD 29.863 per ounce.
• Currently, the surge in silver spot prices is leading the precious metals space with strong demand from global physical silver-backed ETFs.
• An impeccable rally in silver has fetched ample interest of the global investing community and general public in silver mining stocks.
• Moreover, many industry experts anticipate that the silver spot could average ~ USD 19.0 per ounce in 2020, providing much room for silver mining companies to build a strong financial position and the production line.
• Two ASX-listed silver mining stocks developing assets are Adriatic Metals PLC and Argent Minerals Limited.

Silver spot has been rallying for quite some time on the international front and has inked a record high of USD 29.863 per ounce (as on 7 August 2020). Subsequently, surge in silver spot prices is now leading the precious metals space, backed by strong demand from physical investment and structured products such as physical silver-backed ETFs.

To Know More, Do Read: Silver Catches up With Gold and How!

The fundamentals behind the rally in gold and silver are rather equivalent, i.e., a large capital influx in structured products, leading to a demand surge amidst supply disruptions. However, silver is also deriving its support from an expensive gold, which is now fuelling FOMO buying in silver, prompting the white patina to shine better than the yellow lustre of the gold.

Also Read: Australian Gold-Backed ETFs – Massive Capital Influx, Impeccable Performance, And Record Values

Naturally, the impeccable rally in silver has primarily led the interest of the global investing community and the general public in silver mining stocks, which could be inferred from a strong performance delivered by silver mining stocks in the recent past.

To Know More, Do Read: Silver Mining Stocks Beating Gold Top Guns – Adriatic PLC, Aeon Metals, and Silver Mines Turn Multibaggers

Furthermore, the surge in the silver spot market had rooted many silver mining companies to fast track development and secure funding to increase production and lock-in higher market prices.

Several industry experts anticipate that the silver spot could average around USD 19.0 per ounce in 2020, providing much room for silver mining companies to build a strong financial position and the production line.

In this backdrop, let us cast an eye on two ASX-Listed silver mining stocks developing assets-

Adriatic Metals Plc (ASX:ADT)

During the June 2020 quarter, the Company completed drilling of 4,976m while securing additional permits for additional drill pads in anticipation of further exploration activity during the coming month.

• The primary aim of the ongoing drilling at the Rupice deposit of Vares Project is to convert inferred resources into indicated for the purpose of a Pre-Feasibility Study (PFS), which the miner would incorporate with the test work results for mine planning.
• The Company suggested that ongoing drilling work at the deposit would end around mid-August 2020.
• Expansion drilling will continue at Rupice, Jurasevac Brestic and Borovica during the next quarter.

Additionally, in June 2020 quarter, ADT received significant results from drilling at the Rupice deposits:

• The drill hole identified as BR-02-20 intercepted mineralisation along the strike to the south, extending the known mineralisation with 20m down-dip returning 8.9m @ 2.40 gram per tonne of gold, 398 gram per tonne of silver, and 1.79 per cent zinc.
• At the central part of the deposit, drill holes identified as BR-06-20 and BR-07-20 confirmed continuity of high-grade mineralisation, with results as strong as 5.81 per gram of gold and 502 gram of silver per tonne.

The market seems to be taking a strong interest in the stock with its price rallying from $0.780 (intraday low on 17 March 2020) to the recent high of $2.570 (intraday high on 11 August 2020), marking a price appreciation of over 229.0 per cent while delivering a YTD return of 49.07 per cent (as per the closing on 12 August 2020).

ADT traded at $2.6 on 14 August 2020, up by 1.5 per cent relative to its previous close on ASX.

Argent Minerals Limited (ASX:ARD)

• The Company commenced stage 1 of reverse circulation drilling at Kempfield in late June 2020 while securing the Board’s approval for Kempfield Stage 2 RC and combined diamond drilling program, planned for February/ March 2021.
• The primary aim of Kempfield Stage 2 RC and combined diamond drilling program is to extend current polymetallic resource while allowing diamond drilling over successful assay results from the August 2020 RC drilling.
• During the June 2020 quarter, ARD secured approval from the NSW Government for 2,200m reverse circulation drilling at the Pine Ridge Gold Mine, which is now a high priority project for the miner.
• Moreover, ARD has approved funding for a 3000m reverse circulation and diamond drilling program that will target the new geophysical anomaly adding to the high-grade historic percussion drilling results and assisting in the identification of regional and project size structures.

In April 2020, Argent Minerals fetched $200,000 funding from the NSW Government for drilling at the West Wyalong silver and copper porphyry project.

The miner has approved a 3,000m reverse circulation and 1500m diamond drilling, due to commence in early November 2020.

The market has responded relatively well to the private placement of the miner running oversubscribed. The Company raised $1.15 million from sophisticated and professional investors during the June 2020 quarter, ensuring available funding for high impact drilling programs over all projects.

MD & CEO Mr Karageorge’s Comments (Source: ARD’s Report, 29 July 2020)

The stock of the Company has been under a consistent rally from the level of $0.009 (intraday low on 23 March 2020) to the present high of $0.064 (intraday high on 28 July 2020) to mark a price gain of ~ over 600.0 per cent and a YTD return of 194.12 per cent.

ARD traded at $0.063 on 14 August 2020, up by 8.6 per cent relative to its previous close on the ASX.

Summary

• For numerous countries, the extraordinary life changes brought about by the coronavirus restrictions led to the replacement of FOMO by FOGO – the Fear Of Going Out.
• In the COVID-19 era, individuals have made dogs and cats more significant part of their family, noting a surge in the ownership of pets. This upsurge has garnered the attention of the investors towards the growing pet humanisation trend.
• Two of the US based hot pet stocks such as Chewy and Freshpet are accelerating growth and customer base. Furthermore, the companies are well-positioned to sweep the market with increased sales momentum and an encouraging FY20 guidance.

It is often said dogs are human’s best friend. This statement holds true in COVID-19 pandemic era that has brought people together with their furry friends like never before.

Despite the fact that numerous folks are juggling with their household chores and work from home during the day, they are up for their “stress busters” at any time.

The COVID-19 pandemic has turned individuals into pet-craving souls

Owing to COVID-19 induced shutdown, people are unable to expand their social ‘bubbles’ to reconnect with their family and friends. Individuals are increasingly relying on the love of their four-legged friends to reduce the feeling of loneliness, mental distress and social isolation.

It seems a win-win for both people and pets

During the era of physical distancing, pets have been doing pretty good with the increased attention and belly-rubbing from their owners.

The shelter-in-place phase of the pandemic has made people love their pets, pamper them and spend liberally on their wellbeing.

Did you read; Prescription of Mental Health Medications Surges Amid COVID-19

Numerous reports suggest that these furry friends not only brighten up the day, amid technology-based video calls via Zoom in this remote working phase, but they are also believed to make an individual happy, healthy, less stressed and more productive at work.

Don’t worry if you don’t have a pet at home. You can still boost your day, mood, and energy by simply watching videos of pets available online.

This increasing trend of the fostered relationship between human and a pet has not only soared spending by the individual; it has surged the revenue for numerous businesses selling pet-related products. Additionally, these swelled revenues of the businesses are grasping the attention of the investors.

With this backdrop, let us quickly take a peek at two of the global pet companies:

Chewy, Inc. (NYSE:CHWY)

Owing to COVID-19 induced shutdowns and flocking of the people to e-commerce companies to buy and pay for the stuffs online securely and hygienically, it is easy to see why the business of Chewy, the online retailer of pet supplies is booming.

The Company is making the process smooth for individuals to stock up on pet food, toys, and other necessities with its digital marketplace.

Also read; E-commerce Emerges as Winner from COVID-19 Turmoil

Financial Performance

On 9 June 2020, Chewy unveiled its first-quarter results and noted a robust performance for the period ended 3 May 2020 and highlighted that its business achieved net sales of US$1.62 billion reflecting a y-o-y increase of 46%, driven by swelled customer base and net sales per active customer.

Furthermore, Chewy’s gross margin was enhanced by 50 basis points (bps) y-o-y primarily due to growing sales of the Company’s private label and pharmacy businesses. However, enlarged freight and logistics investments because of coronavirus took a toll on the profitability, declining the gross margin by 120 bps in the quarter.

Chewy’s adjusted EBITDA witnessed an upsurge of 122% y-o-y and stood at US$3.4 million. Notably, the Company achieved a significant milestone by delivering its first-ever quarter of adjusted EBITDA profits.

Moreover, Chewy added a record 1.6 million net active customers in Q1 FY20, fetching total active customers to 15 million. Also, net sales per active customer increased by 6.6% to US$357.

Chewy’s Autoship subscription program offering its customers flexibility to replenish their pet food and treats automatically at set intervals witnessed a substantial y-o-y increase of 48% and reached US$1.10 billion.

Outlook

The Company expects net sales in the Q2 to be in the range of US$1.62 billion - US$1.64 billion, which represents surged y-o-y growth of 40% to 42%. Furthermore, Chewy anticipates FY20 sales to be between US$6.55 billion to US$6.65 billion.

On 13 August 2020, CHWY settled the day’s trade at US$54.62, up by 2.77% from the previous close. Market capitalisation of the Company stood at US$21.34 billion, with ~401.56 million shares outstanding.

Freshpet, Inc. (NASDAQ:FRPT)

The Company produces and markets natural fresh meals and treats for dogs and cats to major retail classes comprising of grocery (including online platform), mass and club, pet speciality, and natural retail throughout the US and other foreign markets.

Financial performance

On 3 August 2020, the Company announced its bolstered business performance, with net sales standing at US$80.0 million, witnessing an increase of 33.2% y-o-y for the Q2 FY20 period ended 30 June 2020. The boosted net sales were driven primarily by innovation, velocity, and distribution gains.

Furthermore, the Company noted a net income of US$0.2 million during Q2 FY20 as compared with a net loss of US$5.7 million during Q2 FY19. The increment in net income was due to swelled net sales and enlarged gross profit, partly offset by surged SG&A of US$33.7 million.

Notably, Freshpet’s adjusted EBITDA witnessed an increment of 833.3% of US$11.2 million for Q2 FY20 in comparison with adjusted EBITDA of US$1.2 million for Q2 FY19.

The Company has bolstered balance sheet with cash and cash equivalents of US$107.7 million and short-term certificates of deposits of US$20.0 million, with no outstanding debt, as of 30 June 2020.

Outlook

Freshpet’s FY20 guidance is encouraging. The Company expects the following for FY20:

• Net sales are anticipated to exceed US$320 million, representing a growth of 30% from FY19.
• Adjusted EBITDA is projected to exceed US$46 million, noting a surge of greater than 57% over FY19.

On 13 August 2020, FRPT settled the day’s trade at US$106.21, up by 3.51% from the previous close. Market capitalisation of the Company stood at US$4.30 billion, with ~40.47 million shares outstanding.

Summary

• Bitcoin prices have gained considerable momentum recently, making its position as the digital safe haven stronger.
• Since the having day on 12 May 2020, the currency has been on a bull run post showing a brief consolidation.
• Now, the currency is showing some strong bullish sentiment and charts setup.
• Be it a consolidation breakout on the daily chart or the weekly three-bar stick pattern of an outside bar followed by an inside bar and a high breach; the charts are pointing that bulls are now taking charge and leading the front.
• What are chartists looking at?

Bitcoin prices have swiftly climbed the ladder with the digital gold surging to a new 12-month high of USD 12,024.0 ( intraday high on 10 August 2020) after breaking a consolidation phase, which marked its presence post the halving day.

To Know More, Do Read: Bitcoin Caught Between Higher Acceptance and Lower Mining Reward Since the Halving Day

In the recent past, the commodity has breached the upper line of the consolidation range, inviting bulls to lead the charge.

Bitcoin on Charts

• Bitcoin on a Daily Chart

BTC Daily Chart (Source: EODHD/Others Eikon Thomson Reuters)

On following the daily chart, it could be seen that the stock broke out of the consolidation range and rose to test the +2 Standard Deviation of the 20-day simple Bollinger band.

• The currency is currently moving in an uptrend with prices trading above the 200- and 50-day exponential moving average, suggesting that bulls are currently dominating the front.
• At present, the bitcoin is testing the mean value of the 20-day simple Bollinger band which should act as immediate support for the price.
• Moreover, the consolidation break has been backed by a large increase in volume, which could be inferred from the increasing slope of the On Balance Volume indicator.
• Furthermore, the 14-day RSI has already taken a correction from the overbought zone and is now sloping upwards, which coupled with some other signals (to be discussed further) is indicating emerging bullish sentiments.

BTC Daily Chart (Source: EODHD/Others Eikon Thomson Reuters)

On further applying directional signals and MACD on the daily chart, it could be seen that the plus directional index (or DI) is trading above the minus DI, reflecting that bullish sentiments are currently prevailing, and the primary trend is an uptrend.

• However, the 12,24, 9 MACD is showing a slight negative indication with the signal line touching the MACD line from above, which might be an early sign of a slight correction.

BTC Daily Chart (Source: EODHD/Others Eikon Thomson Reuters)

The Ichimoku clouding technique is showing some strong positive signals with the conversion line ( or the mean value of 9-day high and low) crossing the base line (dark blue) or the mean value of 26-day high and low from below and above Span A – mean value of the conversion line and the base line.

• Moreover, Span A is trading above Span B – which is the mean value of 52-day high and low, reflecting that the primary trend is an uptrend.
• The primary or immediate support for the currency is at the base line, followed by a decisive sky blue cloud zone.

Furthermore, the 14-day RSI is moving in tandem with the price action with a slight correction in RSI from the overbought zone.

• Bitcoin on a Weekly Chart

BTC Weekly Chart (Source: EODHD/Others Eikon Thomson Reuters)

The weekly chart is showing some interesting development with the currency breaching its long-term horizontal resistance of USD 10,466.

• Apart from a breach of long-term resistance, the currency has also attempted a volatility breakout with prices beaching the +2 Standard Deviation of the 20-week simple Bollinger band while managing to sustain the same.
• Moreover, the 20-week simple Bollinger band is perfectly fitting the long-term consolidation range of USD 6,100.00 to USD 10,466.00, and a breakout above the range along with the long-term resistance could seed long-term bullish sentiments in the currency.
• Furthermore, it should be noticed that an outside bar emerged on the daily chart to breach the long-term resistance, followed by an inside bar, which is considered as a very bullish setup in some of the technical analysis journals and books.
• Also, the high of the inside bar has been breached on the weekly chart, reflecting on rising bullish interest.
• The On Balance Volume is also sloping upwards with the breakout, suggesting that the breakout and the bar stick patten (encircled) (outside + Inside + high breach) is supported with high volumes.

BTC Weekly Chart (Source: EODHD/Others Eikon Thomson Reuters)

On applying the Ichimoku technique on the weekly chart, it could be seen that the conversion line and the base line are showing a positive crossover above Span A and the interpretation of the setup is same as was on the daily chart.

However, the 14-week RSI is moving up and reaching the overbought zone, reflecting on the possibility of profit booking activities once bullish sentiments emerge more strongly.

In a nutshell, the bitcoin seems firmly rooted and bullish sentiments are prevailing on the daily and weekly timeframe. However, one thing which would be worth considering in the future would be the ability of bulls to take the currency above its previous peak high (marked with a dot on the weekly chart), and once the commodity breaches, confirms, and sustain the previous high, it could seed bullish sentiments for the long-term.

Summary

• Property market has begun to exhibit some prominent signs of recovery, charting out optimistic growth trajectory.
• NZ noted a M-o-M surge of 3.4 per cent in nation’s median house prices in July 2020, as per REINZ monthly property report.
• Kiwis returning homes from offshore destinations and pent-up demand post shutdown drove residential auction activity and house sales in July.
• Despite COVID-19-driven travel restrictions and housing market downturn, foreign buyers retained their market share during June 2020 quarter.
• New mortgage commitments improved in June, backed by first home buyers.
• Digitisation is unfurling fresh opportunities in the property space.
• Emergence of fresh COVID-19 cases and latest lockdown imposition remain looming threats to property market revitalisation.

While COVID-19 pandemic initially left the economy in dire straits, NZ appears to have regained much of its momentum lost during Global Virus Crisis, backed by early containment of virus spread and dedicated Government support. Promising revival signs budding in the property market space are telling the same story! While, we cannot be over optimistic, given the resurgence of virus cases and particularly lockdown re-imposition in Auckland.

Creating a fog of uncertainty, the pandemic emerged as a real-time laboratory to test the impact of dedicated fiscal and monetary push and to access if so-called economic experiments result in desired outcomes for the property space.

Simply put, though the pandemic initially wreaked havoc on the NZ property market throwing demand and sales volume out of order, the market has now begun to exhibit some prominent signs of recovery that seem to be charting out optimistic growth trajectory.

1. House Prices: Getting Out of the Woods

A fresh wave of optimism has budged the housing market, with REINZ (Real Estate Institute of New Zealand) monthly property report reflecting a M-o-M surge of 3.4 per cent in nation’s median house prices in July 2020. REINZ Y-o-Y House Price Index grew by 9.4 per cent nationwide and 9.2 per cent in Auckland in July.

A marginal increase of 0.2 per cent was also noted in QV House Price Index for July 2020. The figure denoted a modest rise from June 2020 result, when the index slid 0.2 per cent amid coronavirus shutdown repercussions.

Besides, RBNZ’s recent change in the House Prices Index forecast from 5.49 per cent fall to 1.38 per cent decline by this time in 2021, is offering a beacon of hope towards property market revitalisation.

The robust demand from new home buyers amid low interest rates and improved investors’ sentiment appears to be driving the value of house prices in the present scenario. However, anticipated rise in the unemployment rate and the Government’s financial support potentially running out in September are expected to unroll as the real sink or swim test for the real estate market in the near future. Besides, risk lingers on the recent return of lockdown restrictions in NZ with fresh virus transmission noted after 102-days long virus-free streak.

2. Residential Auctions and Sales Volumes: The Tide is Turning

Marking the recovery trend post lockdown, the number of properties auctioned soared by 71 per cent Y-o-Y in July 2020, with over 900 residential auctions. The property auction activity exhibited its first sign of renewal from the virus crisis in May 2020, from around no auctions in April to more than 240 in May. Since then, residential auction activity has consistently remained buoyant in the Kiwi Land.

Besides, NZ recorded its highest number of properties sold in July 2020 over the last five years, as per REINZ monthly property report. The number of residential properties sold across Kiwi Land rose by 24.6 per cent in July 2020 to 7,854 from 6,303 in July 2019.

The auction market seems to have got some uplift from Kiwis’ return to homes from offshore destinations and pent-up demand post shutdown, potentially inducing a sense of stability in the property space. While revitalisation in consumer confidence levels appears crucial in driving property sales over the near-to-mid-term.

3. Foreign Buyers’ Market Share: An Epitome of Resilience

In spite of coronavirus-driven travel restrictions and housing market downturn, foreign buyers retained their market share during June 2020 quarter. As reported by Stats NZ recently, the number of home transfers plunged by 30 per cent across NZ in June 2020 quarter, while the proportion of home transfers to individuals who do not hold a resident visa or NZ citizenship remained steady at 0.4 per cent.

The early efficient containment of virus spread and better performance of the NZ housing market relative to overseas countries seem to be driving foreign buyers’ interest despite market turmoil. However, fears are looming over NZ’s recent extension of Level 3 lockdown in Auckland and Level 2 restrictions in the rest of the nation, which may hinder sustenance of foreign buyers’ attention.

4. Mortgage Commitments: Rising from the Ashes

RBNZ’s recent statistics revealed a 24.2 per cent M-o-M increase in new mortgage commitments in June 2020 to NZD 5.3 billion. The first home buyers (20.3 per cent) accounted for a larger share of new mortgage commitments than property investors (19.4 per cent) during the month for the first time ever.

A surge in mortgage commitments depicts recovery from economic and financial havoc created by Global Virus Crisis (GVC) initially in terms of squeezed incomes, crushed consumer confidence and sluggish demand. The record low-interest rates and easing LVR (loan to value ratio) restrictions appear to be lending a supporting hand to new mortgage commitments.

5. Another Bright Spot: Digital Era Charting Out ‘New Normal’

The property market revival is expected to be backed by lucrative opportunities offered by growing digitisation trends. For instance, Yelsa’s property app is closely eyed by market participants that may prove to be a gamechanger for real estate agents, vendors and buyers in smoothening the property buying and selling experience.

Must Read! NZ Inks First Ever Digital Economy Trade Deal - Foundation Laid Well!

Bottomline

Despite these promising indications, it will be too early to say that it’s all bearish or bullish for the property market amid mounting recessionary wreckage, emergence of fresh COVID-19 cases and gloomy unemployment rate expectations. Lower anticipated rental income growth and reduced floor space requirements amidst work-from-home and e-retailing culture also deserve closer attention.

Besides, the current challenge is how well and how soon the Government’s emergency spending can be withdrawn, given growing fears of escalating debt levels and second wave of infections. Nonetheless, sundry signs still give a hope, and there may be opportunities worth looking at.

Summary

• S&P 500 index declined by 0.2%, closing at 3,373.43 on 13 August, nearly breaking its all-time record 3,386.15 on 19 February.
• On the same day, European stocks headed lower, pulled down by banking and mining stocks, while most indices closed higher in the Asian stock exchanges.
• The US Unemployment claims declined below 1 million for the first time in 21 weeks, but the detrimental impact of COVID-19 still prevails on the jobs market.
• Amid expiration of $600 per week unemployment aid in July, attempts to restart economic relief negotiations between White House and Democrats ended minutes after it began, with Trump rejecting the deal.
• US President Donald Trump signed an executive order that will provide an additional $400 a week to people, but the order can take months to implement, and states (running out of money already) are anticipated to contribute to the plan.

The benchmark S&P 500 Index closed 0.2% lower to 3373.43 on 13 August after catching investors’ eye, who expected the index to breach its record high level from February. The record high for S&P 500 stood at 3,386.153 on 19 February. The index closed in red on 13 August, after trading briefly above its record closing for the second day in a row.

On 13 August, on S&P 500 index, stocks switched between gains and losses as better than expected unemployment statistics lifted optimism, but ongoing stimulus talks in Washington weighed on the gains. Dow Jones Industrial Average, close on the heels of S&P 500 ended 0.29% lower, while Nasdaq Composite ended the session 0.27% higher at 11,042.5.

Market experts believe that the market recovery from the March lows to hit new all-time peak would be the quickest reversal from a price drop of 30%. However, as many sectors closed in red, more broad market involvement is likely to be required.

ALSO READ: US Economy Charter and Dow Jones: Economy shrivels while stocks are under spotlight

As per Johns Hopkins University data, COVID-19 has infected less than 2% of the US population and killed at least 166,970 people in the US, so far.

Stock markets in Europe plummeted on 13 August as bubbling strains amid the US and China, and elusive US fiscal stimulus forced investors to book profits post four consecutive sessions of gains, while Airbus declined as Washington kept aircraft tariffs unaffected.

STOXX Europe 600 Index declined by 0.63%, pulled down by banking and mining stocks. Dutch insurer Aegon (AS:AEGN) plunged 12% after it missed its revenue estimates, as its earnings were low by 31% for H1 of 2020 triggering the Company to slash dividends by 67%.

On 13 August, Chinese Shanghai Composite and Hong Kong’s Hang Seng index gave mixed performance, up by 0.4% and down by 0.05%, respectively. Japan’s Nikkei 225 index outpaced other indices and was up by 1.78%, as regional investors were faithful to US-China trade deal.

Further, investors have now shifted to Treasuries, comprising the 10-year benchmark note, since yields have soared the most since early June. Yields also weighed on the dollar, pushing it lower for a second day, prior to US jobless claims reports being published. The US dollar index fell by about 0.22% to 93.24 on 13 August, while Gold Spot US Dollar jumped 1.84% to $1,953.03.

Unemployment stays as a huge problem

The US unemployment data released on 13 August showed that the first-time claims for unemployment insurance last week fell below 1 million for the first time since 21 March, suggesting that the labour situation might be strengthening, but signs of the upsetting impact of COVID-19 on the US jobs market stays.

ALSO READ: U.S. Economy Added 1.8 million Jobs in July, and Unemployment Rate Dips to 10.2%

The total unemployment claims for the week ending 8 August, gathered from the labor department stood at 963,000, slightly below the estimated 1.1 million by analysts polled by Dow Jones, and represented a decrease of 228,000 claims from the previous week. The data also showed that the economy had recovered only 9.3 million jobs, out of the 22 million jobs lost between February and April, signalling a long road ahead to achieve pre-pandemic levels.

For the past 2 months, the US jobs market has been picking up. The US gained 1.8 million workers in July, and the unemployment rate dropped from 11.1% to 10.2%. The increases were mainly in pubs, bars, and the leisure industry, which had laid off millions of employees temporarily since the outbreak of the epidemic.

GOOD READ: Pour Yourself a Cup of Coffee and Catch Sight of Global Unemployment Scenario

Unemployment stays as a major problem for the US economy. Though the number of people applying for unemployment protection, including regular and PUA benefits, is dropping gradually as layoffs subsides, but job losses stay incredibly high, way above the pre-pandemic point.

Ending of the Economic Relief bill

Stimulus bill negotiations between the White House and Democrats started on 12 August, ended in just a few minutes with Trump declaring that the deal will not happen.

The motive of the negotiations was to renew key parts of the $2 trillion CARES Act, passed by Congress in March, as the $600 per week jobless aid expired at the end of July. The CARES Act provided greater unemployment benefits to 30 million Americans, increased eviction rights, and contained several measures intended to mitigate the economic effects of the coronavirus pandemic.

Donald Trump has taken an executive action on unemployment that will offer an extra compensation of $400 a week, but it will take months to enforce the initiative and cash-strapped states – some of which are now short of funding – are required to commit to the program.

Further, since negotiations have crumbled between Republicans and Democrats in Washington, the strain of assisting the economy has descended on the Federal Reserve that has poured trillions of dollars into the financial sector to support companies and economies. However, the major instruments of the Fed are lowering the benchmark interest rate and purchasing bonds.

ALSO READ: Stocking up the Stocks: Federal Reserve expanded corporate bond-buying plans

Fed cannot provide people checks, which is why its policies have accomplished only a bit to aid renters facing eviction or small companies on the brink of dying. Fed officials have encouraged Congress to move rapidly before the economic harm becomes irreversible.

Summary

• Index funds and ETFs are passively managed funds
• Can provide an investor with diversification and exposure to many sectors
• Passive investments can lead to better returns in comparison to equity investments when the chips are down
• Important thing to keep in mind: expense ratio, liquidity, quantity, tradability

Index funds and ETF’s (Exchange Traded Funds) are of immense importance when it comes to managing your wealth. For a know-nothing investor, who lacks the understanding of the business and does not have the time to follow the market, it is a good idea to consider taking exposure to the capital markets through index funds and ETF’s.

Index funds and ETF’s are passively managed funds. Investment in these funds provides the investor with diversification as well as exposure to various sectors. An index fund and ETF, both, mimic an index such as FTSE 100. Hence, by investing in these funds, a layman could easily diversify his portfolio without much effort.

Passive investments versus stocks

ETFs/ Index funds are professionally managed, however, one needs to note that big returns can never be guaranteed in any investment, including these. It can be said that the asset/investment managers have professional knowledge, and the returns depend upon the strategy which they deploy. However, the lack of expertise and access to market insights or tools could deter individual investors from reaping benefits.

Another thing to consider for investors seeking regular income is the dividends. A stock might pay or slash/cancel its dividend like many companies have done in the recent times to preserve liquidity and stay afloat during these unprecedented times. However, dividend ETFs/ index funds distribute income consistently based on the earnings by the fund from the stock it holds.

ETFs/ Index funds offer portfolio diversification for the investors, as it has a huge basket of securities. The gains and losses made by each security are offset, resulting in an overall positive or negative return on the investment. Using diversification in stocks is possible; however, it would require comprehensive analysis and expertise; which is not feasible for passive investors.

A stock market index is a snapshot of majority of businesses trading in an economy. These businesses produce goods & services across the economy. With generations passing by, we tend to consume more products & services in comparison to previous generation. Therefore, with passage of time the value of index is likely to rise. Therefore, for a passive investor, investing in index could be a good starting point. This could be done by two investment vehicles: ETF’s and Index funds.

(Source: EODHD/Others, Thomson Reuters)

Passive investments can lead to better returns in comparison to equity investments when the chips are down. The above chart represents the stock price comparison of GDX versus FTSE 100 index during the coronavirus crisis. Since the lockdown in March, GDX has rallied, while the FTSE 100 has plummeted by nearly 17 per cent. As evident from the chart, VanEck Vectors™ Gold Miners UCITS ETF (GDX), which tracks NYSE Arca Gold Miners Index has delivered a price return of more than 30 per cent in the Year to Date basis.

Do read: All about Index Fund; nature, benefits, returns & Top five of UK’s Index Funds

Index funds and ETF’s both work on a similar concept of replicating an underlying benchmark index. However, there are certain things that every passive investor must keep in mind.

• Online share dealing/ trading account

ETF’s trade on stock exchanges just like equities. To invest in an ETF, one would require a share dealing account. These trading accounts could cost investors with some annual subscription charges. For a passive investor, it does not make a lot of sense to open an online share dealing account because he is less likely to make investments in stocks and other asset classes through the account. Therefore, an investor can consider investing in index funds, which do not require a trading account, and could be bought directly from the asset management company. Vanguard and IG Share Dealing are two such online share dealing platforms which provide seamless access to these funds.

Do read: Investors Need Not Miss These Top 5 Online Share Dealing Accounts

• Expense ratio

Expense ratio is the charges levied by the fund managers to finance their expenses for managing the fund. While deciding between an ETF and an index fund, it is important to consider the expense ratio. Usually, the expense ratio of the ETF is comparatively lower than index fund. However, buying an ETF might prove to be costly after considering the brokerage charges levied by the trading account. Notably, brokerage charges are levied while buying and selling both. Moreover, a trading account would also mean periodic account maintenance charges. This ratio can make a huge impact on your capital gains, if you hold your investments for longer period.

• Liquidity

Another important factor to consider while opting between Index funds and ETF’s is liquidity as ETF’s are exchange-traded and could be bought from an exchange. This implies that there is a buyer and a seller. Sometimes there is a gap between the number of buyers and sellers in the market. Therefore, the price of an ETF could fluctuate from the underlying value of its assets under management. Hence, when there is a mismatch between number of buyers and sellers in the market, you might end up buying an ETF at a premium and selling it at a discount. ETF’s daily traded volume could be checked from data available with exchange, so that redeeming your investment is hassle-free. Buying a less liquid ETF does not make any sense, because then you might have to sell it at a lesser price. Therefore, for passive investors it is better to opt for index funds and save on brokerage plus annual maintenance charges.

• Quantity

Another advantage of index funds over ETF’s is that they could be bought/sold in fraction of units held. On the contrary, ETF’s could only be traded in whole number of units. Therefore, index funds could be bought by cash poor investors or people looking to buy in small amounts or instalments.

• Tradability

ETF’s could be traded during market hours. On the flip side, index funds are bought or sold at closing price (NAV). ETF is better in terms of tradability when compared to index funds. However, considering the horizon of your investment, in case it is for the long-term, the benefits of tradability would not make much of an impact on your investment decision.

For a passive investor, investing in ETF’s or index funds could be a great starting point. Regular income seeking investors can opt for dividend paying ETF’s or index funds. Some sectors such as technology, pharmaceuticals, utilities, and essential services had been up and running during the unprecedented times and could be evaluated. Investors who are looking to take indirect exposure into these stocks might consider sector specific ETF’s or index funds. The bottom line is that the investor needs to find a way of investing in index through cost-effective method because as the saying goes: ‘money saved is money earned’.

Summary

• Housing starts have bounced back in July, hitting a two-year high, says Canada Mortgage and Housing Corporation (CMHC).
• A rise in housing starts means the economy is recovering as activities pick up across country amid eased restrictions.
• But analysts are ringing the alarm bells as highly leveraged Canadians access mortgages beyond their reach.
• Rise in house starts is a temporary trend, says the CMHC, further warning that things will go down as monthly government aid halts and unemployment plays catch up.
• Canadian REITs have turned from dividend bearers to risky bets under the throes of the pandemic.

Canadian housing starts, a key economic indicator, has been heating up this summer. The latest July figures, released by Canada Mortgage and Housing Corporation (CMHC) on Tuesday, touched a two-year high as housing starts picked up in multi-family dwellings, apartments and condos in urban areas.

Housing starts refers to the number new residential building and construction projects beginning in a month including footings or foundations.

In the month of July, standalone monthly SAAR (seasonally adjusted annual rates) of Canada’s overall housing starts stood at 245,604 units, up 15.8 percent from 212,095 units in June. This gain was led by increase multi-family starts in Toronto, Vancouver and oil-producing Prairies.

Housing Starts In Canada

(Source: Canada Mortgage and Housing Corporation)

July urban starts SAAR soared 17.4 percent to 231,995 units which includes multiple urban starts surge of 18.8 percent and single-detached urban starts’ 12.3 percent growth.

The CMHC figures come close on the heels of data released by Toronto Regional Real Estate Board (TREB) that showed home sales touched record levels in Toronto and Vancouver in the month of July.

Sales in Toronto, the country’s largest housing market, soared 29.5 percent year-over-year in July with 11,081 properties trading hands.

TRREB Housing Sales Chart (3 Year Comparison)

(Source: Toronto Regional Real Estate Board)

The housing market seems to have shaken off the pandemic-generated setbacks and is beginning to post higher activities in June and July. The national housing agency however expects national starts to trend lower in the second half of 2020 due to negative impact of COVID-19 on economic and housing indicators.

Real Estate Market and Canada’s Economy

Housing starts are a key gauge of Canada’s economic engine. Real estate in Canada was hot stuff till early March, supported by immigration, low unemployment and solid interest rates. With the onset of the pandemic, the once-resilient housing industry stared at a stark reality of rent losses, business shutdowns and low demand for homes.

CMHC, the federal housing agency, had initially predicted a historic recession in 2020, with home sales falling 41 percent in Canada’s six largest markets – Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal.

But the July housing starts figures say a different story.

A rise in housing starts amid coronavirus pandemic means the economy is on the mend – not a surprising fact given the easing of countrywide restrictions. Not to forget, the near zero interest rates maintained by the country’s central bank that have been beneficial for the real estate market and mortgages.

The bigger picture at the moment is the clear rebound in residential construction sector as homebuilders go back to work while observing strict physical and social restrictions over COVID.

The alarm bells, however, have been sounded.

Analysts fear highly leveraged Canadians are accessing mortgages beyond their reach through private lenders, after top banks refused loans on account of new eligibility criteria rules asking for higher credit score requirements and lower debt levels.

CMHC chief Evan Siddall, in a letter on August 10, reportedly asked the private lenders to reconsider approving mortgages to households with negative equity.

Excessive borrowing will expose a dark economic underbelly in this industry and worsen the pain of upcoming economic adjustment, he adds.

Real estate market’s recent spike captures the rush of FOMO-type Canadian home investors trying to capitalize on lack of new listings and low interest rates with lenders support.

This is a micro trend, warns the CMHC, further predicting that things will go down as fiscal deficit piles, monthly government aid halts and unemployment plays catch up.

Housing starts will decline between 51 percent and 75 percent in the second half of 2020 from pre-COVID-19 levels, says the federal housing agency.

Realty and the Stock Market

Canadian real estate investment trusts (REITs) have turned from dividend bearers to risky bets under the throes of the pandemic.

Amid the pandemic triggered economic recession, the S&P/TSX Capped REIT Index has nosedived by over 21 percent this year. In comparison, the broader TSX gauge has shed just 2.86 percent year-to-date (YTD). The composited TSX index has also outperformed the REIT index in quarterly and monthly gains, as shown in table below.

Index Performance Data 2020

SmartCentres Real Estate Investment Trust (TSX: SRU.UN)

Canada’s largest REIT has leased spaces to top retailers such as Walmart and other top supermarkets, stores, fitness centres and restaurants. Walmart stores have done well in the pandemic, raising hopes for this REIT.

Share prices of SmartCentres have dropped over 30 percent year-to-date. It is currently trading at C$ 21.05, paying a monthly dividend of C$ 0.1542.

H&R Real Estate Investment Trust (TSX: HR.UN)

This is one of Canada's largest REITS with assets that include retail, industrial and office properties. Its shares have plunged nearly 50 percent this year. H&R REIT has a current market cap of over C$ 2.7 billion and pay C$ 0.0575 monthly dividend. It has a dividend yield of 6.497 percent and currently trading at C$ 10.62.

Summary

• D-DOCKS – Canada’s answer to FAANG – is made up of Docebo, Descartes Systems, Open Text, Constellation Software, Kinaxis and Shopify.
• D-DOCKS stocks have surged high amid pandemic, forcing investors to take note.
• These respected tech stocks are a captivating mix of skyrocketing valuations, soaring stocks and proven business model.

The last decade was all about big tech and their global dominance. Life as we know it would never be possible without the ubiquity of the digital ecosystem nurtured by FAANG – Facebook, Amazon, Apple, Netflix and Alphabet (parent company of Google). Replace Netflix with Microsoft, and you get FAAMG – another acronym for the powerful big tech league.

American FAANG stocks have mounted high in the last couple of years as big tech scoured for emerging markets while penetrating every aspect of our daily lives.

Come 2020, and big tech smashed its own barriers to surge higher amid the COVID pandemic. Yet, 2020 was also the year when four chiefs of these power tech firms took stand before the US Congressional subcommittee in a historic antitrust hearing.

The dice had been rolled. After big pharma, big tobacco and big banks, the committee was now confronting big tech and their “anti-competitive” practices.

A couple of thousand miles away, another big tech cohort has been taking shape in Canada. This group has been ruffling the markets’ feathers amid pandemic, proving it is no less than FAANG and forcing investors to take note.

D-DOCKS: Canada’s answer to FAANG

The Canadian big tech club initially covered Descartes Systems, Open Text, Constellation Software, Kinaxis and Shopify – better known as DOCKS. Then came Docebo with its stellar stock performance and we, thought why not name it: D-DOCKS.

Collectively, the D-DOCKS tech stocks have contributed to much of TSX’s growth (or rebound) this year.

Unlike its American peer, D-DOCKS maintain comparatively lower profile and are mostly working behind the scenes – powering businesses and enterprises survive in this pandemic. Some are even providing platforms to help smaller businesses go up against FAANG members.

Ecommerce giant Shopify and learning management system Docebo have been the top performers of the D-DOCKS group. This year, shares of Docebo gained an astonishing 192 percent while Shopify stocks surged 154 percent. These two have outperformed Amazon stocks – the greatest year-to-date gainer among FAANG stocks.

FAANG vs DOCK Stocks: Comparative Charting, 2020

(Source: Refinitive, Thomson Reuters)

D-DOCKS do not have a wider global market penetration as FAANG. But all that is bound to change in the COVID era. Together, these highly respected D-DOCKS are a captivating mix of skyrocketing valuations, soaring stocks and proven business model.

Let’s take a closer look at each of these star performers:

Docebo (TSX: DCBO)

Docebo is among the hottest Canadian tech stocks on the Toronto Stock Exchange at the moment. A cloud-based learning management system (LMS), Docebo uses an AI-enabled, intuitive and customizable platform for enterprise learning for small and medium enterprises. It uses SaaS (software-as-a-service) platform to automate the end-to-end learning process.

Docebo’s LMS system have performed well in the homebody or work-from-home economy leading to its stocks beating all market expectations. Its current valuation is around C$ 1.4 billion. The scrips have advanced by a stunning 192 percent this year, while posting 13 percent monthly and 38 percent quarterly gains.

Descartes Systems (TSX: DSG)

Descartes offers logistics network solutions through a technology platform. It allows firms to manage and simplify transaction driven processes like customs filings. Its current market cap is over C$ 6 billion and has a current P/E ratio of 114.3. Descartes stocks have returned over 31 percent yields in a year. It posted C$ 14.5 million revenue in the second quarter this year, an increase of 46.5 percent from same period last year. It’s Q2 gross profit stood at C$ 11.7 million, while cash flow generated is C$ 0.2 million, as compared to C$ 0.9 in Q2FY19.

Open Text (TSX: OTEX)

Open Text can be considered as the weakest link among the D-DOCK, its stock up by just one percent this year. However, this cloud enterprise-management and software maker firm beat all earnings estimates to post $ 827 million in sales in its fourth fiscal quarter.

The company paid quarterly dividends of $0.17 and has a dividend yield of 1.60 percent. Its current P/E ratio stands at 52.4 percent while market cap is C$ 15 billion.

Constellation Software (TSX: CSU)

Constellation is the top firm on the TSX Capped Information Technology Index and currently valued over C$ 32 billion. Its shares advanced by 22 percent this year and the firm announced USD 1 per share dividend. Its current P/E ratio is 73.3 percent and dividend yield is 0.35 percent.

In the second fiscal quarter, the company’s net income was $ 83 million, up 12 percent from Q2 2019. Cash flows grew by 370 percent to $237 million year-over-year.

Kinaxis (TSX: KXS)

This tech giant offers cloud-based solutions to supply chain management, logistics and sales and operations. Kinaxis stocks has returned 92 percent this year. Its market cap is C$ 5.2 billion and has a current P/E ratio is 142.10. In its second quarter financial report, the firm’s SaaS (software-as-a-service) revenue grew by 26 percent YoY to $35.7 million, while total revenue went up 45 percent YoY to $61.4 million.

Shopify (TSX SHOP)

A king among the kings – that’s the right way to define this burgeoning ecommerce giant. Shopify, a one-stop commerce platform helping businesses kickstart online operations, is Canada's most valuable public company. The company helps entrepreneurs, retailers and SMBs go digital and assists their sales through a basket of extensive solutions.

Read: Shopify, the TSX firm that turned into a legend during the pandemic

Since its debut, shares have returned over an astonishing 4405 percent. Shopify was already on a tear before 2020, and with the pandemic the stocks hit the roof. This year, stocks of the ecommerce giant surged by 154 percent, and analysts expect more rally will follow.

Shopify’s bull run has dragged the TSX higher along with it. Some have compared its growth to Amazon’s e-commerce dominance. But Shopify is not a retailer. On the contrary, it helps retailers compete against larger businesses like Amazon.

The Crux of the Matter

Canadian D-DOCKS’ red-hot rally is no less powerful than FAANG’s searing surge amid pandemic. Over time, these companies have carved out dominant position on the TSX, forcing investors to take note.

These companies may not have the ubiquitous digital nature like that of FAANG. But they stand tall behind smaller and larger enterprises, helping them build scale in their industries.

These Canadian tech names are slowly emerging as big winners on the global scale. With clients spread across the world, they may soon re-write the tech story.

Summary

• ByteDance recently came into radar, as leading media reports revealed the Company breaching Google policy to collate the user data without disclosing the same to their users.
• The news came in a moment when Trump administration had been weighing ways to restrict usage of TikTok app and has given the Company time till 15 September to strike a deal regarding divestment of TikTok’s US operations.
• Two tech leaders Microsoft and Twitter have shown interests in the US operations of TikTok with discussions still at nascent stage.
• The White house is troubled from the fact that the data collated of users may be used against the individuals by Chinese government, if procured from TikTok.
• ByteDance had previously paid a fine of US$5.7 million to the Federal Trade Commission for illegally gathering personal data from underage children below 13, without taking any parental consent.

TikTok app has been one of the most popular apps around the world with teens and generation Z glued to their mobile sets, creating, and accessing videos.

In a very short time, the app experienced more than billion downloads. The social media app is owned by China based firm, ByteDance, and was launched in 2016 as Douyin. A year later, the app travelled international borders as TikTok and gained massive popularity in Asia. ByteBance also bought a US based video sharing app Musical.ly and later merged it with TikTok.

Both the apps added millions of users, giving data access of millions of users to the Company ByteDance.

The shocking revelation

Recently, according to media reports, it was revealed that TikTok app had been tracking its users online without allowing its users to opt out, thus violating Google’s policy that restrict apps from tracking people.

The information of tracking the users was not provided by the Company. According to technology experts, an additional layer encryption was hiding this practise, which the company stopped in November 2019. The company had been tracking the data for almost 15 months.

The information came out when many economies around the world were shunning off China made products from their shelves and discussing on prohibiting the use of China based apps.

Furthermore, with Twitter (TWTR) and Microsoft (MSFT) eyeing the US operations of TikTok as potential acquisition, the data privacy contingency has certainly created a hard space for the TikTok parent ByteDance with pressure mounting from the White House. The news is also acting as a damper as ByteDance intends to sue Trump government as a response to save its US business, according to news report.

The White house Concern

The White house is troubled over the fact that the identifiers, also called MAC addresses, collated by TikTok, could be procured by the Chinese government, which may lead to espionage targeting individuals. The identifiers or MAC addresses are in general utilised for advertising purposes. The White House mentioned that it was concerned that users' data might be utilised in creating comprehensive case history of people for blackmailing them.

Trump recently called for an executive order banning "any transactions" between Americans and TikTok or Wechat for 45 Days; however, the legality of the order is still in question.

In July, Trump administration was also assessing steps taken against TikTok including a national level ban on TikTok or divestment of the US operation of TikTok by ByteDance. Trump reluctantly has given ByteDance time till 15 September to finalise an acquisition deal.

ByteDance, in order to save TikTok's US operations, has started to look for US based investors or tech companies, and have received proposals from Twitter and Microsoft. Its US based operations are being valued between $10-$50 billion, with only Microsoft confirming being in talks with ByteDance regarding the acquisition of the US operations of TikTok.

Also Read: The TikTok Talk: Microsoft's Efforts around Pocketing a Big deal

Earlier in 2019 February, TikTok had paid US$5.7 million as fine to the Federal Trade Commission (FTC) as settlement towards allegation that the Company illegally gathered personal data from underage children below 13, without taking any parental consent.

Since the settlement, the advocates representing the children have been accusing TikTok of violating FTC settlement by not changing its policies and denying removing videos and data acquired illegally. This has led FTC and US Justice Department to look at the allegations that defies the 2019 agreement.

A federal investigation commenced through Committee on Foreign Investment in the United States (CFIUS) in November 2019 focusing on ByteDance's acquisition of the US based video sharing App, Musical.ly in 2017. Any decision is yet to be publicly released by CFIUS.

However, the Company has highlighted that the privacy and user’s data will remain safe and that it keeps updating its app to address emerging security challenges. The Company also said that the current TikTok App version does not gather MAC addresses.

Also Read: Trump Cuts US ties with ByteDance and Tencent

Summary

• The lockdown imposed in Victoria is dragging down the nation's jobs market and consumer spending.
• ANZ and CBA data shows a deteriorated spending in Victoria due to stage 4 restrictions, but a rise in spending for the rest of the country.
• While ABS data revealed that payroll jobs fell by 1.2% between 11 July-25 July in Victoria, the NAB business survey indicated that business confidence had taken a hit due to new lockdown in Victoria.

Victoria's shutdown to deter coronavirus transmission is slowing down the labour market and consumer demand nationally, holding back the national economic rebound from the pandemic recession.

While spending growth in Victoria has gone into reverse due to stage 4 restrictions, spending in other regions persists to rise, but at a slower rate than compared to the prior year as shown by latest statistics of major banks and ABS. The data revealed the extent to which lockdown in Victoria is weighing on the rest of the economy.

Let's have a look at the most recent spending patterns in Victoria and the rest of the nation.

Spending falls in Victoria and confidence continues to deteriorate, as per ANZ

ANZ internal card and merchant data highlighted the effect of Victoria on the economy, with expenditure 12% lesser than a year before for the week to 8 August, reflecting Victoria's worst performance since early May. The Melbourne lockdown has hit major parts of Victoria's economy, with spending on dining and takeaway down 59% year-on-year, while fashion spending is 60% lower.

In NSW, which has closed its borders with Victoria, spending was just 3% up on the same week, a year before, while the remaining parts of the nation were 17% more robust.

ANZ-Roy Morgan consumer confidence fell 2.1 points to 86.5 on August 8/9 last week and is at the lowest for over 3 months since April 25/26 2020. While financial and economic conditions demonstrated a mix of good and bad times, current finances gained 2.7%, and future finances fell 1.9%.

David Plank, ANZ head of Australian Economics, stated that the move to stage 4 restrictions in Victoria led to downward pressure on sentiment with confidence dropping to the lowest level since the last weekend of April. He also added that the buoyancy of sentiment towards financial conditions persisted on being a component of the survey, but only in a relative sense as it is still low in absolute terms and speaks to a likely unwillingness on the part of the households to spend.

ABS data reveals a drop in payroll jobs

As per ABS figures released on 11 August, the number of payroll jobs fell 0.1% nationally between 11 July - 25 July, while Victoria witnessed a fall of 1.2% jobs in the same period.

Bjorn Jarvis, Head of Labour statistics at ABS, stated that payroll jobs had stayed 4.5% lower than middle of March, when Australia noted its 100th coronavirus case. He also added that by 25 June, Victoria had regained about 40% of the jobs it had lost since mid-April, but was decreased to 24% by the end of July.

Source: ABS

The accommodation and food services, as well as Arts and recreation services industries, were the most affected ones by payroll job losses amid coronavirus period.

Commonwealth Bank data shows weak spending in Victoria

In an update from 11 August, CBA noted that annual spending growth had eased a bit in recent weeks, with strong spending on goods, however, services spending is still down over the year.

Separate numbers from Commonwealth Bank, covering its card and merchant network proposed that a few Victorians went on spending spree before the stage 4 limitations began, with an uptick in food and liquor buys in the week ending 7 August.

Though spending on household furniture and equipment lifted in Victoria, all other expenditures including clothing & footwear, personal care and recreation, fell in the state. Transport spending has been quite feeble in Victoria and NSW, and other statistics indicate mobility across Sydney and Melbourne, in particular, remain way below usual standards.

ALSO READ: Retail Spending and Stocks That Have Become Dearer

Source: Commsec

CBA likewise found that credit and debit card spending increased 8.4% nationally over the same week (ended 7 August) a year ago, it was being led by a 20.8% bounce in online purchases.

CBA asserted that the full effect of stage 4 restrictions would not be seen until the next week's data as retail stores were permitted to operate until 6 August 2020. Also, the bank does not anticipate services spending to make a full recovery until all restrictions are relaxed.

NAB Survey reflected business confidence taking a hit amid new lockdown in Victoria

Amid the second wave of coronavirus infections in Victoria, business confidence turned sharply negative last month, just as the majority of employers has started to feel optimistic about the future again.

ALSO READ: JobKeeper Scheme to cost an extra $15 billion amid Victoria crisis

NAB survey was conducted from 22 July -31 July prior to the imposition of stage 4 restrictions in Victoria, wherein, business conditions witnessed an improvement.

Some highlights of the survey are as follows:

• NAB's business confidence index plunged by 14 points in July, pulling the index into negative zone at -14.
• Business conditions rose 8 points in July to 0 index points.
• Improvement was seen in trading and profitability, while the employment index rose in July though it stayed slightly negative.
• Business confidence saw a significant deterioration across all industries and in every state (most substantial fall noticed in Victoria and NSW) except SA and WA.

Alan Oster, NAB Group Chief Economist, stated that while the rebound in conditions is promising, the fall in confidence even before the declaration of stage 4 restrictions in Melbourne shows that businesses would remain exceptionally careful given the extraordinary vulnerability around the infections right now. This further indicates that the business sector would require ongoing assistance during the recession period before the economy recovers.

Summary

• Market downturns or recessions can be tapped as once-in-a-lifetime occasion to take gain from prudent investment decision.
• Investors can employ the idea of extremes, tapping stocks of solid businesses in underperforming sectors along with industry leaders in outshining sectors, to wade through different market conditions.
• While it’s not always good to imitate strategies of peers in equity space, cloning great investors can help investors evaluate the stocks that fall within their circle of competence.
• Hunting stocks of high-grade entities trading at undervalued prices can be an attractive option for investors preparing a virus-proof portfolio.

The global economy faces a historic test as the black-swan event ‘COVID-19’ strokes fears of worst recession since World War II. While virus-induced recession can set off significant social and economic impacts, it can potentially yield some of the best opportunities for investors to build wealth in the equity market. Its all about whether you wish to ‘Quarantine your money’ or rely on the strategic ‘Tap-the-dip’ investment strategy.

While investing in a recession seems counter-cultural, legendary investors like Warren Buffett regards market downturns as once-in-a-lifetime occasion to buy fundamentally sound companies at reasonable prices. For instance, at the time when other investors were racing for exits in 2008 economic meltdown, Warren Buffett made substantial investments that paid off well over time.

With several stocks trading at undervalued prices, down markets offer a golden chance for investors to beef up their portfolio with recession-proof stocks of high-grade companies having durable competitive advantages, long-term sustainable profits and robust balance sheets. Such stocks are more likely to survive through recession and recover faster than their peers.

While recession presents rare opportunities to become wealthy, the key to success is to utilise tips and strategies that can deliver profits under sinusoidal market trends, but with caution.

Here are some unique tips for investors to wade through coronavirus-driven recession:

1. Employ the Idea of Extremes

During recession, money flow tends to move towards industry leaders of outshining sectors, which hold the potential to perform better even after the contraction period ends. In the COVID-19 era, investors can possibly seek high-grade companies in technology, healthcare and fintech sectors, dazzling in current market volatility.

On the flip side, tapping stocks of solid businesses in underperforming sectors can help investors sail through the crisis even if the tide turns against outperforming sectors. Investors can perhaps look for hefty businesses in banking and tourism and travel sectors, carrying firm potential to recover once the economic revival kicks in.

While it sounds contradictory, a fusion of such businesses in the stock portfolio can aid investors to survive through varied market conditions. However, setting up an emergency fund for rainy days and escaping herd mentality appear instrumental to leverage the benefit of this idea of diversification. Besides, setting aside emotional drivers like panic and fear can support investors take rational and conscious decisions.

2. Cloning: Track the Smart Money Flow

While it’s not always good to imitate strategies of peers in equity space, tracking the flow of smart money or cloning other great investors like Warren Buffett can help investors evaluate the stocks that fall within their circle of competence.

Mr Buffett followed the ideas of legendary investor, Benjamin Graham to form his initial investing structure. Besides, famous investors like Mohnish Pabrai and Charlie Munger have also harnessed the benefits of cloning for investing success.

The idea is to comprehend the decisions of master investors while avoiding blind cloning investment to mitigate losses in recession. However, investors need to be cautious of modifying their investment strategy in panic and abandoning years of investing principles in a haste while ending up pricing in already digested market news.

3. Remember, Buy-Low-Sell-High Ideology May Still Work!

Though value investing strategy has lagged behind growth strategy over the past few years, the value stocks have proven history of outperforming the growth ones during market meltdown. Hunting stocks of high-grade entities trading at undervalued prices can be an attractive option for investors preparing a virus-proof portfolio.

With several stocks available at underrated prices, investors need to ensure the margin of safety in value stocks by purchasing securities trading considerably below their intrinsic value to make an investment decision with minimal downside risk. Evading false bargains, parking funds in diverse investment avenues and seeking well-managed players appear crucial to reap the benefits of value investing approach.

Although there is no guaranteed formula to become victorious in down markets, staying abreast with market movements and keeping a bird’s eye perspective can chart-out the way forward for suitable equity market returns over the mid-to-long term.

In addition to these tips, investors can incorporate the three D’s – Directives, Demystification and Diversification – to plan their investments amid current market volatility. By Demystifying varying factors driving capital markets, gauging Directives of the equity market and embarking on Diversification strategy, investors can sweep through COVID-19 storm despite pandemic slump.

While there has been official declaration of economic recession in the US by National Bureau of Economic Research, it appears to be the best time for market players in the equity space to rebuild/redesign their portfolio in a bid to capitalise on prospective investment opportunities. However, one needs to decisively handpick stocks in potentially appealing investment avenues embracing a mix of technical and fundamental approach.

Summary

• Lately, numerous technology companies have witnessed negative consequences from the escalated US-China tensions over trade, politics, and security.
• However, investors have showered surprising support for Next Digital, whose share price surged by 331.37% to settle at HK$100 on 11 August 2020 and rose by 183.33% to HK$0.255 on 10 August 2020.
• The inexplicable upsurge came on the heels of the arrest of Hong Kong media tycoon Jimmy Lai Chee-ying, as well as his two sons and four senior executives of Next Digital over accusations of conspiracy with foreign forces.
• The peculiar surge in the share price is believed to be backed by strong support from the social media posts that had urged investors to buy shares of Next Digital; also, there are speculations by few of the traders and analysts that the Company could potentially sell its listed entity as a ‘shell’ for other companies to purchase primarily to attain a back-door listing.

The tensions blazing between the US and China during pandemic, trade, national security and economic damage have taken a toll on the technology companies, which led to plunged share prices over a couple of days period.

Furthermore, it seems that Hong Kong stocks are bearing the brunt of flaring tensions between the US and China concerning jeopardising of national security.

Numerous tech entities have witnessed negative repercussions from the host of measures taken by China and the US amid their fuelled war such as Hong Kong’s new national security law; twin executive order issued for a ban on the US companies transactions with Chinese tech companies, ByteDance that owns TikTok and Tencent that owns WeChat; and excluding of Chinese vendors from core 5G network and many more.

Do read; Trump Cuts US ties with ByteDance and Tencent

However, investors have exhibited some unexpected support for Next Digital Ltd (HKG:0282) whose shares skyrocketed by 331.37% to settle at HK$1.100 on 11 August 2020.

Furthermore, on 10 August 2020, Next Digital closed the day’s trade at HK$0.255, registering a surge of 183.33%.

The parent company of Hong Kong newspaper Apple Daily, Next Digital witnessed a stilted turnaround for its stock in a roller-coaster day during trading session on 10 August 2020, the stock price rebounded after falling to HK$0.075, following the news of the arrest of the founder of the popular tabloid Apple Daily, Jimmy Lai Chee-ying.

The arrest of Hong Kong media tycoon Jimmy Lai Chee-ying was followed by the arrest of his two sons and four executives of Next Digital. Mr. Lai was detained over allegations of collusion with foreign forces (one of the new national security offences under the national security law imposed by Beijing on the city effective from the end of June 2020), and operational fraud earmarking the Next Digital publishing group.

Several Investors were left scratching their heads over the probable cause behind the abrupt soared share price.

This mysterious increase in the share price is believed to be backed by strong support from the social media posts that had urged investors to buy shares of Next Digital.

Furthermore, this surge in the share price also signalled towards the fact that investors were speculating that Next Digital could probably sell off its listed entity as a ‘shell’ for other companies to purchase primarily to accomplish a back-door listing.

The high-profile arrest of a democratic activist against China’s increasingly unfolding new powers in Hong Kong, Mr Jimmy Lai is believed to be one of the most notable and aggressive actions taken under the law (that curtails protest and freedom of speech) so far.

His custody was further followed by ~200 police officers rummaging through desks, and gathering loads of documents to be taken away, as recorded by the paper’s enraged workforce.

Furthermore, this sweep of arrests clearly signals the fact that China wants to fully utilise its new national security regime to suppress free expression, as well as weaken pro-democracy movement of Hong Kong.

Read on!

A 71-year-old activist who is an owner of the pro-democratic newspaper Apple Daily and publishing company, Next Digital had been writing and publishing columns criticising China and Chinese leadership along with being a vital part of Hong Kong’s pro-democracy demonstrations.

Notably, Mr Jimmy Lai was already arrested twice before 10 August in February 2020 concerning illegal assembly charges for earlier protests.

Let us quickly apprise ourselves with the new security law.

The new national security law was passed in Hong Kong on 30 June 2020.

The Beijing government had passed a new security law for Hong Kong on 30 June 2020, making it easier to penalise protesters and diminish Hong Kong’s self-rule.

However, the Chinese government believed that the regime would flare up stability.

Furthermore, the new law criminalises any act that comprises of any act of secession (escaping from the nation); subversion (subvert the central government’s power/authority); terrorism (usage of fear or violence against individuals) and collusion with outer forces.