Indholdsfortegnelse for Issue 941 i MoneyWeek

Chinese stocks have staged an impressive rally, outperforming every other national index in the world in the first quarter of 2019. The CSI 300 Index, which covers the biggest equities in Shanghai and Shenzhen, has gained nearly 30% in 2019, its best quarterly performance since late 2014. Investors have cheered up after last year’s 25% slump. Beijing has decided to tackle the economic downturn by encouraging more bank lending, while tax cuts and spending increases should bolster growth too, as Standard Chartered points out. The bank expects the Chinese business cycle to bottom out in the first quarter of this year. That implies further upside in the market bounce as earnings gradually improve. Reasonable valuations also bode well, as Stanley Chan of Hong Kong brokerage Emperor Securities told the South…

Africa’s first unicorn (a privately owned start-up worth over $1bn - see page 7) plans to list in New York. Jumia, launched in 2012 in Lagos, is an e-commerce platform selling everything from household furniture to gadgets such as smartphones, says Euan Jones on Seeking Alpha. It has been compared to Amazon or China’s Alibaba; its services include an online marketplace connecting companies (the business-to-business, or B2B, division). Jumia’s sales are rising, but it has yet to make a profit. There should be ample scope for growth, however. McKinsey, a consultancy, estimates that Africa’s e-commerce market should be worth a “whopping” $75bn by 2025.…

Bonds are IOUs. You lend the bond issuer money for a set period (term). In return, you get a regular interest payment (coupon) and your money back at the end of the term. Once the bond has been issued, it trades on the open market, which means the price can go up or down depending on how attractive the coupon is (and how creditworthy the issuer is deemed to be). Calculating the coupon as a percentage of the bond’s price gives you the yield (there are various measures of yield, but this will suffice here). The yield curve compares the yield on bonds that have the same credit quality, but different maturities (so, for example, the Treasury yield curve charts the yields on everything from three-month US government debt to…

• Birgitte Bonnesen has been fired as CEO of Swedbank after claims the bank laundered $135bn of money from Russia on her watch, says Richard Milne in the Financial Times. Her departure will be eased by the knowledge she is entitled to a payment of SKR22m (£1.8m), the equivalent of 18 months’ salary. Police raided the bank last week as part of an investigation into “aggravated fraud and breach of insider information laws”, says Milne. Bonnesen (pictured) is unrepentant, telling Swedish newspaper Expressen she is “proud of everything” she has done. The bank’s shares fell by a third in the last six weeks. • Bob Dudley, CEO of BP, took a pay cut of $400,000 last year – but still pocketed $14.7m (£11.3m), says Jillian Ambrose in The Daily Telegraph.…

“Money is the reason most people don’t look as thin and young as celebrities.” British model, DJ and actress Jameela Jamil (pictured), quoted on Buzzfeed “Journalism’s a dying industry, broadcasting’s fragmenting and desperately insecure, but they’re still fashionable careers for our gilded youth. You have to have wealthy parents with contacts to support you, preferably living close to central London.” BBC presenter Michael Buerk, quoted in The Sunday Telegraph “FONGO, or the fear of not getting out before prices fall further.” The Australian Financial Review highlights a new phenomenon as the downturn in the local property market gathers pace “Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy.”…

Shares in US home-goods retailer Bed Bath & Beyond surged a “whopping” 22% last week, after three activist hedge funds urged sweeping changes, says Teresa Rivas in Barron’s. And “there’s no question that Bed Bath & Beyond was ripe for an intervention”. Although the stock is down some 80% from its all-time highs, initiatives to revamp shops have been “largely theoretical” for years, while comparable sales have been “drifting lower”. It’s unusual for an activist to suggest an entirely clean slate, but the “magnitude of value destruction at the company necessitates wholesale board and leadership changes”, said the trio of activists – Legion Partners, Macellum Advisors and Ancora Advisors – in a letter to the board.…

This year marks the 130th anniversary of the formation of The Merchants Trust. And whilst the Merchants of today is very different to the one that was set up in 1889 its aims are remarkably similar: to deliver healthy growth of both capital and income for the ordinary investor, just as it did at launch. The Trust’s initial focus was on railway expansion in the US, Canada and South America. Right from the start, however, the Trust diversified its portfolio across continents, countries and industries and this approach has been fundamental to its longevity – the ability to adapt to a changing world. Merchants has endured innumerable global crises and market crashes over its life but its spread of investments and its evolving strategy has enabled it to weather such…

Most people’s household bills will have gone up recently owing to price hikes on everything from council tax to broadband. For example, all of the “Big Six” energy firms put up their prices in response to regulator Ofgem increasing the energy-price cap. In the region of 15 million customers will see bills rise by more than £100 a year. The good news, though, is that this doesn’t have to be the case. In fact, if you switch to a cheap fixed-rate deal, you could save £329 per year compared with the typical “Big Six” standard tariff, according to a round-up of the cheapest dual-fuel deals by comparison site Money Saving Expert. The cheapest fixed-rate deal available at present is from Outfox the Market. The people who will feel the full…

The start of the 2019-2020 tax year on 6 April gives pension savers access to a new set of contribution allowances, and will also mean more generous employer contributions for many. First, the annual allowance, capping the maximum that savers may pay into their pensions while qualifying for tax relief, runs on a tax-year basis, so the clock is reset on 6 April. For most people, the allowance is set at the lower of their annual earnings or £40,000 – but even non-earners get an allowance of £3,600 each year (so you can contribute up to that amount on behalf of a non-earning partner). Higher earners, with incomes above £150,000, get a reduced allowance. Contributions above this will be added to your other income and taxed at your marginal rate.…

Greene King (LSE: GNK) is a pub chain and brewery based in Bury St Edmunds, Suffolk. It operates almost 3,000 pubs, restaurants and hotels and its beer brands include Morland, Ruddles and Belhaven. The first half of 2018 saw profit before tax rise by 3.2% to £127.7m, boosted by the hot summer and football World Cup. That was followed by a good Christmas, with like-for-like sales up by more than 10%. The group has also reduced its debt load. Impressed investors have marked the share price up by 50% in the last 12 months.…

Born in Louisiana in 1959,  Samuel Israel came from a stockbroking family. His grandfather founded a commodities firm that was sold for $42m in 1981. Despite failing to graduate from university, Israel’s family connections ensured he got a job as a junior trader at several Wall Street firms, including a minor role at the hedge fund Omega Partners, run by the billionaire Leon Cooperman. In 1996 he set up the Bayou Group, a hedge fund that claimed it had developed a unique trading system that could turn $300m into $4bn within a decade. How did it work? It seems that initially Israel legitimately tried to beat the market using his system. However, poor performance meant that the firm made substantial losses in its first year of operation, despite the fact…

What can be reevaluated up in value, can also be devalued by the art detectives. That was the unfortunate experience of St Mary’s church in Hadleigh, Suffolk, in the 1950s. The church had long believed itself to be the owner of a valuable painting (pictured) by Canaletto – a gift from the artist resulting from a visit to Hadleigh. In the mid-1700s, Canaletto had stayed with the rector of St Mary’s, Thomas Tanner, who was also a wealthy patron of the arts. But the local legend was dispelled last century, when art historian WG Constable visited the church, and declared  the work to be not by Canaletto. He said it was worth just £100. Constable was half right, it turns out. In 2015, art appraiser James Glennie’s suspicions about the…

Nasa and the European Space Agency are offering to pay volunteers €16,500 (£14,000) to lie in bed for two months to study how artificial gravity affects the body. Researchers want 12 women and 12 men, who must speak German, to spend 60 days lying down in a facility in Cologne with their heads angled down by six degrees, occasionally being spun in a centrifuge at 30 revolutions per minute. It’s not all snoozing, though. Participants must do everything, including eating and going to the toilet, without lifting their shoulders off the beds, while scientists monitor how their bodily functions deteriorate. The findings will later be validated on the International Space Station, says The Independent. Good week for: Conservators for English Heritage have found a genuine 15th-century masterpiece beneath layers of…

“I’ve spent years arguing that Britain urgently needs to solve its housing crisis, both by building more houses, and finding ways to promote home ownership within the existing housing stock. Whenever you make these points, people will… tell you that Britain needs to get over its weird preoccupation with home ownership and learn to love renting like they do on the continent. But this argument doesn’t hold up… Britain’s home-ownership rates are the fourth-lowest in the EU – it’s the rent-happy Germans who are the outliers with the lowest ownership rates compared with every other nation… And the evidence is crystal clear that home ownership remains a near-universal aspiration. When the Centre for Policy Studies polled young voters... making housing more affordable was the most popular way that government could…

Three to buy Keywords Studios The Sunday Times An arms race between major video-games studios means that the “geeks have never been more in demand”. That is good news for Keywords Studios, one of the biggest providers of third-party services to the industry: it helps developers with everything from visual effects to games testing. The growing complexity of games means that such outsourcing may grow more quickly than the broader market. Google’s recent announcement of new investments in “cloud gaming” also bodes well. 1,156p SimplyBiz Shares Pension freedom reforms have increased the demand for professional financial advice, with independent financial advisers (IFAs) moving in to fill a gap left by big banks in the wake of the PPI scandal. SimplyBiz helps IFAs with compliance and business services. It listed last…

• easyJet’s chief executive Johan Lundgren has “piloted the shares to a lower altitude”, writes Alistair Osborne in The Times: summer ticket sales were unusually weak and a £275m pre-tax loss in the first half of this year is now on the cards. Lundgren says that macroeconomic and Brexit uncertainty are to blame. A torturous EU exit clearly cannot help a pan-European airline, but the big question is why the airline is still increasing seat capacity given such patchy demand. • Senior management at Superdry had described the idea of co-founder Julian Dunkerton (pictured) returning as “highly disruptive”, says Nils Pratley in The Guardian. But after a 75% fall in the share price in a year, investors wanted some disruption. In a shareholder vote this week Dunkerton won 51.15% to…

Turkish local elections have produced a “political earthquake” for President Recep Tayyip Erdogan and “his Islamist coalition”, says Eli Lake on Bloomberg. The president’s AK party lost both the capital Ankara and Istanbul, a city where Erdogan and allies have been in control since 1994, at the weekend. Nationally, AK and its allies won 52% of the vote across Turkey’s 81 provinces, says The Economist, compared with 38% for the main opposition Republican People’s Party (CHP) bloc. Yet defeats in five of the country’s six biggest cities are still a stinging rebuke for the strongman leader, who started his own political career as mayor of Istanbul. Erdogan framed the elections as a “referendum on his personal leadership”, says Simon Tisdall for The Guardian. The president has held “almost daily rallies”…

“I give a business downturn starting this year a two-thirds probability,” writes author and strategist A. Gary Shilling on Bloomberg. Recession warnings are hardly unusual, but it might pay to listen to Shilling: he was among the few investors to correctly predict a lengthy stagnation in the wake of the financial crisis. In his 2010 book, The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation, Shilling warned that the US was set for a prolonged period of slow growth, and outlined ways for investors to profit from it. However, notes Shilling, investors shouldn’t lie awake at night fearing a repeat of 2008. Of the 11 recessions the US has seen since World War II (including the 2007-2009 slump), only three have been the result of…

The “Big Four” accountants – Deloitte, PwC, KPMG and EY – have been bending the rules on entertaining clients and have spent almost £700,000 on hospitality in the last two years, says Tabby Kinder in The Times. Deloitte was the biggest spender, with £217,000 thrown at the companies it audits – or would like to audit. EY came second with £215,000; KPMG spent £142,000 and PwC £94,000. Between them, the four audit 338 of the top 350 listed companies in the country. The Commons business committee, which is undertaking an inquiry into the audit market, forced the “Big Four” to disclose the sums, with MPs accusing the four of being “conflicted at every turn” and being too close to the firms they audit. The Financial Reporting Council, the audit regulator,…

■ The Investment Association’s (an industry trade body) UK Smaller Companies sector has been the only open-ended UK equity sector to outperform the FTSE All-Share since the EU referendum, says Lauren Mason in Investment Week. The average UK smaller companies fund returned 33.13% between 23 June 2016 and 19 March 2019, relative to 22.27% for the UK All Companies sector, and 18.15% for the UK Equity Income sector, according to data from FE. This outperformance comes despite the fact that UK small-caps have a reputation for being more dependent on the UK economy than their larger, global-facing peers, says Mason. “In theory, these should have been hit hardest”, says Ben Yearsley of Shore Financial Planning. It may be that “while overseas investors have been reducing their UK exposure this has…

A court has ordered the owner of a £49m French chateau to tear it down, says Henry Samuel in The Daily Telegraph. The ruling upholds an earlier decision that the original building permit was obtained fraudulently, and means 3,000 sq metres of accommodation will be torn down, along with a heliport and swimming pool, after a 14-year legal battle. The work was a “pharaonic project, delusional, totally illegal and built in an illegal manner” by someone whose “only concern is money”, said the assistant public prosecutor. The legal action was brought by a neighbouring British couple driven mad by music played “at mind-bending decibel levels” at the “faux chateau”.…

There are four main ways for investors to participate in the success of immunotherapies. The first is to back large biopharma companies that make a substantial proportion of sales from immunotherapies and have promising new ones in the pipeline. Two of these companies – Bristol-Myers Squibb (NYSE: BMY) and Merck (NYSE: MRK) – stand out, with super-blockbusters Opdivo and Keytruda. No other firms at present have even a blockbuster (sales more than $1bn a year) to their name. The FDA approval history of Opdivo shows how its range of application has expanded following first approval for advanced melanoma in 2014. Approvals for lung cancer and kidney cancer followed in 2015, hepatocellular cancer in 2017 and expanded kidney and colorectal cancer indications in 2018. Opdivo/Yervoy combinations have been approved for melanoma…

New research shows more than 1.5 million people are on target to exceed the lifetime allowance (LTA) on pension savings. Many of them are unaware that they could be facing expensive extra tax charges as a result. The research, from pension provider Royal London, warns that the LTA will catch out savers earning much more modest incomes than previously thought. Under the current rules, anyone who builds up private pension-fund savings worth more than £1.03m – including all contributions, tax relief and investment growth – has to pay tax on the excess when they begin accessing their money. The charge is levied at up to 55%. So far, only tiny numbers of savers have been affected by the charge, but a series of reductions in the LTA in recent years…

Campaigners alleging that increases in the state-pension age (SPA) for women were badly managed have won support from the Equality and Human Rights Commission (EHRC). The agency called for the government to introduce transitional arrangements for 3.9 million women affected by the higher retirement age. Campaigners argue that legislation to raise the SPA for women from 60 to 65 was not properly communicated when it was introduced during the 1990s and 2000s. As a result, they say, many women did not plan for the changes, which were completed at the end of last year, so they were caught out when they discovered they would have to wait longer than expected to start claiming their state pensions. The EHRC said such complaints were reasonable and urged the government to offer extra…

Hard as it may be to believe, cleaning is pretty much the most fashionable thing you could be doing right now, says Chris Harvey in The Mail on Sunday. That unlikely-sounding state of affairs is partly down to Mrs Hinch – aka Sophie Hinchcliffe (pictured), a 29-year-old “cleanfluencer” from Maldon, Essex, who has built up a two-million following on social media. As “the figurehead of a cleaning craze that has swept all before it”, Hinchcliffe has “only to pick up a Vileda spray mop or Minky antibacterial pad for it to sell out in practically every shop in the country”. A search of her name on social-media site Instagram reveals dozens of photos of dazzling surfaces and pristine interiors that have gone down a storm. Hinchcliffe has single-handedly rebranded cleaning…

Just Group (LSE: JUST) provides specialist financial services to retirees, including annuities and equity-release mortgages. It was formed in 2016 by the merger of Just Retirement and Partnership Assurance. 2018 was a disappointing year, with a pre-tax loss of £85.5m, down from a profit of £181m in 2017. It scrapped its dividend and in March raised £375m in debt and equity after new rules from the Prudential Regulation Authority meant it had to bolster its capital reserves to offset risks in the equity release market. The stock has halved in a year.…

There has never been a recession in America without a preceding slide in truck freight, as Jonathan Allum points out in The Blah. Transportation data is a helpful leading indicator as goods always have to be taken somewhere before being assembled or sold. The good news is that according to the For-Hire Truck Tonnage index, there is no sign of a dip in demand. Other recent data has also defied the gloomsters, says a Gavekal Research note. The Atlanta branch of the US Federal Reserve has nudged its first-quarter GDP growth estimate up to 2.1%; manufacturing data and mortgage applications also indicate “a steadying of the ship”. A “newly dovish” central bank should also boost investors’ confidence.…

People all over the world are lavishing more care and attention on their pets. Meanwhile, as consumers in emerging markets get richer, their protein intake increases. These trends explain why the global animal-health market is worth $36bn and set to grow by 5% a year between 2017 and 2023. A key beneficiary will be Zoetis, the world’s number-one producer of medicines and vaccinations for pets and livestock. It’s “firing on all cylinders”, says Lawrence Strauss in Barron’s. Sales are climbing at a mid-single-digit rate, while net margins have doubled to 24% since 2013. It has a strong line up of popular drugs, “solid management” and an “effective” research and development department.…

Is an unprofitable taxi firm worth $24bn, asks Lex in the Financial Times. Number-two US ride-sharing business Lyft managed to price well above its initial filing range when it listed on the Nasdaq at the end of last week, despite losing nearly $1bn last year. The valuation “only makes sense” if you accept that ride-hailing apps are a different business to traditional taxis. But Lyft has no “road map to profitability” other than the hope that expansion and technology will bring down costs. The firm’s 20% bounce in the share price on the first day of trading says “more about the... excitement over a new crop of initial public offerings” than Lyft’s prospects. This year will see the “coming-of-age” of plenty of tech “unicorns”, says James Titcomb in The Daily…

The North Atlantic Treaty Organisation’s 70th anniversary represents a huge achievement, says The Economist. The average lifespan of collective defence alliances is 15 years. However, celebrations have been limited to a “modest” one-day gathering of foreign ministers on Thursday. Although Nato secretary general Jens Stoltenberg met with US president Donald Trump on Tuesday, Nato is keen to avoid a repeat of the bruising confrontations at its summit in Brussels last July, when Trump berated allies for “not pulling their weight” (in 2014, Nato’s 29 members set a target of 2% of GDP on defence spending by 2024, which few, including Germany, have done much about). Despite Trump’s “bolshiness”, bipartisan support for Nato in Congress is strong and defence spending in Europe has risen on his watch. Nevertheless, the idea of…

An important section of the US yield curve inverted at the end of last month. What’s a yield curve, and why should you care? We explain in detail in the box below, but long story short, when a yield curve inverts, it means that markets expect interest rates to fall rather than rise in the future, which is a warning sign that slower growth, or even a recession, lies ahead. In this case, interest rates on three-month US government bonds (Treasuries) moved higher than those on ten-year Treasuries, sparking a flurry of worried press coverage. However, the inversion didn’t last long. Earlier this week, we got unexpectedly good news from both China and the US (their manufacturing sectors saw healthier activity last month than markets had anticipated), and the yield…

Deutsche Bank is having to merge to survive. Scandinavian banks Danske and Swedbank have been rocked by money-laundering scandals. Shares in France’s Societe Generale have almost halved in the last year and BNP Paribas has not done much better. Italy’s UniCredit limps from crisis to crisis. We have heard a lot in the last few years about how much trouble British banks will be in after Brexit takes place. Maybe they will be, if we ever get around to leaving. But right now it is banks across the continent that seem to be in bigger trouble. British banks are in good shape British banks, by contrast, are in respectable shape. HSBC is one of the most powerful banks in the world. Barclays appears to have settled its management issues and…

How high can the wage floor go? Editorial The Economist The world has “gone minimum wage mad” and Britain is “going madder than most”, says The Economist. Since 2015, the UK minimum wage has risen 17%, twice as fast as median earnings. This week it rises again to £8.21, making it one of the highest in the world. Economists predicted that a “huge jump” in unemployment would follow the introduction of the minimum wage 20 years ago. They were wrong. Even as the rate has risen to 59% of median earnings, unemployment has fallen. It now stands at just 3.9%. Experts interpreted Philip Hammond’s spring statement reference to “ending low pay” as eventually raising the minimum wage to 66% of median earnings. But how high can it go? Seven per…

If you’re contemplating buying a holiday home to rent out, there are several important issues to consider before you can start perusing brochures of exotic beach houses. First, there’s the small matter of how to pay for it. A standard mortgage doesn’t allow you to let out the property, while a buy-to-let mortgage isn’t suitable either: lenders would assess affordability on the assumption that you may not be able to let it out full time. Because the income you can get from renting out a holiday home is deemed less of a safe bet than money made from a buy-to-let property, holiday-let mortgages are seen as riskier. As a result, the pool of lenders in this area is fairly small, and mainly made up of building societies. Lenders will look…

The controversial increase in probate fees (the charge you have to pay in order to execute the will of a deceased person in England and Wales) has been delayed indefinitely because parliament has been so consumed by Brexit, says Emma Agyemang in the Financial Times. The planned changes, which replaced the flat £250 fee with six bands of charges, the highest being £6,000 for the largest estates, were due to come into effect on 1 April. Parliament has yet to find time to schedule a motion to approve the changes; the new system would come into force 21 days after approval. Many people had been rushing to apply for probate ahead of the changes, putting pressure on HMRC to turn around inheritance-tax forms quickly, as inheritance tax must be arranged…

Government rhetoric and policy have emerged as key issues that could affect companies over the coming years. Heated discussions among regulators and politicians in sectors such as technology and healthcare, and the policies that emerge as a result, could enforce real change. In US healthcare, for instance, political efforts to lower drug prices are not only hitting companies in the pharmaceutical sector but are also the driving force behind widespread changes further down the supply chain. These supply-chain companies, however, should ultimately be able to fend off political upheaval and continue to benefit from the vital role they play in the provision of medicine. They are also engaging in mergers and acquisitions, which enable them to diversify into different areas of the healthcare system. They are currently cheap relative to…

I have become rather fussy about my Burgundies as the years roll by and my annual Burgundy Report (published every January on my website at matthewjukes.com) only features wines which I think show extraordinarily good value for money as well as having epic flavours. In a region where prices have skyrocketed of late it is always a joy to find an estate that has a suite of stunning wines that show perfect accuracy, generosity of flavour and also keen price tags. This delicious Mercurey captures the splendour of the famous 2015 vintage and it also shows layers of pinot noir fruit and lustiness. There is a lot of wine here, and at 30 quid it is a steal – so hurry, as stocks are limited. In addition, Chateau de Chamilly…

Going… The George Daniels Grand Complication watch (pictured) is up for auction as part of the Geneva Watch Auction: Nine sale, held by Phillips on 11 and 12 May. The gold watch is “a proper masterpiece”, says Jon Bues on Hodinkee. British watchmaker George Daniels “helped to shape” modern horology, inventing the co-axial escapement (a time-keeping mechanism) in 1975, considered to be “one of the most important advancements in modern watchmaking”. The watch was handmade by Daniels, who died in 2010. It fetched £914,850 at Sotheby’s in 2012. Gone… The Nobel Prize in Economics awarded to Friedrich von Hayek in 1974 sold for £1,155,000 during a Sotheby’s online auction last week. A number of the influential Austrian-born economist’s belongings sold for well above their estimates, including his personal copy of…

• Contrary to popular wisdom, oysters aren’t much of an aphrodisiac, at least not for singer Rihanna, says Laura Armstrong in The Sun on Sunday. On one recent night out at London’s exclusive Chiltern Firehouse, the “kinky singer” (pictured) had gone “all out”, ordering “platters and platters” of oysters for her entourage, according to a source. Then one lad, who was drunk, “bowled over” to her table and pinched an oyster, “thinking it would be hilarious”. He passed it to a friend, who downed it, and they carried on drinking, “only to be given a hefty telling off”. They were told to fork out £250 for a fresh platter. “The bloke who ate the oyster had no choice but to get his credit card out,” said the source. “With all…