FT Weekend:- TikTok, Whose vaccine do you want? Huawei, Trading and more

22 Jul

FT Weekend:- TikTok, Whose vaccine do you want? Huawei, Trading and more

The two big themes remain the US/China stand off and Covid-19 both are increasing the prospect of a twin track world.
The week ahead sees US reporting kick off in earnest and yet covid and vaccines will still be in focus as a number of pharmaceutical companies report.
Feedback and comment welcome.
Stay safe

Trump weighs ban on teens’ favourite TikTok as US-China friction heats up. Allegedly doing so on the grounds that the app gathers personal data on US citizens. Tik Tok says it doesn’t have close ties with its Chinese parent. The key is that it shows that for the Trump administration everything is on the table for discussion. In my view taking action against Tik Tok would alienate Trump from most new voters in the forthcoming election more than it would hurt China, although the impact to ByteDance would be significant. I think the fact that it made the front page is summed up in the quote 'James Lewis, a tech expert at the Center for Strategic and International Studies, said the entity list was the most aggressive option. “They have so much fun with the entity list that they are entertaining that one, too,” he said. “They’re very happy with how that played out with Huawei.”
The cross read must be that if they are considering Tik Tok there are an awful lot of other companies that are being considered and I would expect a number fo listed ones. ByteDance is not listed but a report in the SCMP suggest that CNOOC and China Communication Construction are in line for sanctions that reveals the risk to investors from this current policy.

Pick sides in vaccine fight, says Russian official. Another example of how the world may be divided. First telecoms, now over a vaccine and there is still the fight over the internet and 5G. This comes after the UK, US and Canada accused Russian hackers of trying too steal information on the development of a British vaccine. The US also accused China of trying to steal American research.
Russia has denied the allegation and said that Russian did not need to steal any information because AstraZeneca is about to sign a deal with RDIF to manufacture the drug in Russia. He added that he thought the Russian vaccine was better and would be entering trial soon, although there is little data on the Russian vaccine and no peer reviewed data.
It appears that vaccines are destined to become ideological.

Europe faces a fateful choice on Huawei. With the UK changing it’s mid on letting Huawei have access to its 5G system the rest of Europe is having to reconsider too. Realising that just as the UK will face retaliation from China, they will too; depending upon their decision from either China or the US. For Germany the decision may be hard due to its trading links with China. The key point of the article seems to be that Europe and UK and in fact most nations are middle men in the struggle between China and the US. But if they stand united with one main aim and provide a unified front then at least they have some leverage.
It also seeks to remind Merkel that it was in Leipzig 'that tens of thousands of her fellow East Germans stared down heavily armed police and marched for liberty in 1989. Perhaps it is time to take the side of those marching for freedom and democracy in Asia today.’

Huawei backlash consigns oil’s ‘Sun King’ to the shade. Looks at John Browne’s life. It notes his standing down as the chairman of Huawei UK just before the UK government announced a ban on the firm’s equipment being used in the UK 5G system. He joined Huawei because he saw they had great technology, which I think everyone would agree with. His role was the help them 'navigate a British business culture it did not fully understand’, which he also did well. It is striking at how good the Chinese firm has been at getting good people to join its ranks in order to be able to advance its business. Something that many other Chinese companies would do well to learn from is they want to become world leaders. It also looks at the other avenues of his life; an interesting read. An interesting read, it mentions naivety, trying to cover his homosexuality but what the article does seem to reveal is that having admitted that and lived more honestly he seems to have enjoyed life more. Maybe if everyone did that the world would be a better place.

Japan to promote tourism despite virus spread fears. The government says it will press ahead with the campaign but exclude Tokyo as a place to travel to or from. That will have a significant impact on the success of the scheme and puts the government under pressure as it is not looking to provide refunds for trips already booked. But. He key is it illustrates how difficult it is for governments to revive tourism until we either have a vaccine, a cure or know a lot more about how the virus is transmitted.

Traders warn of slowdown after best quarter in decade. Looks at how US executives are braced for drop-off as prime conditions created by the coronavirus panic fade.
The good results were from 'clients rapidly adjusting their portfolios to deal with fast-changing economic forecasts, and the massive bond-buying programmes launched by the US Federal Reserve and other central banks — which had also slashed interest rates.’
Having got through that exceptional period the outlook is now more stable, at least until we see a vaccine go into production when there will be another big change to client portfolios although whether I think it is doubtful the Central Banks change their policies as quickly. The real problem they have is that markets expect them to act quickly in the light of bad news and slowly in the case of good news. The problem that leads to is having less scope to act next time. Going forward I think that Central Banks are going to have to unwind radical positions more quickly and try and get markets thinking back to previous ’norms’. No doubt markets will not like that and we will see market tantrums but just a nobody likes to take bad tasting medicine; it is necessary. For investors the warning is another reason to be cautious on the US banks. Trading was their saviour this quarter. The size of the provisions they took show they are not confident about the outlook and trading is another reason why. Read also Investors not yet convinced that banks are safer by Robert Armstrong. He focuses on the fact ‘..the biggest problem for the group has not been that assets have turned sour, it is that their lending margins have been squeezed by falling interest rates and a flat yield curve.’ Other issue still remain the fact of provision and the tough outlook still for both mainstream and SME’s. Another aspect to add to the mix is that people in the US are not using their credit cards as much as they were so another important source of income is waning.

Caution ‘thrown aside’ with bets on US stocks. Notes that call option trading is running ahead of put options. The divergence on Wednesday was near a six year low. It notes that part of the reason is that retail investors see options as a good way to make leveraged bets because they trade at fractions of the equity prices. Part of their confidence is froth fact that the Fed has undertaken a number of market supporting moves recently and they assume the Fed will do so again. Which is a questionable assumption. For Asian investors it adds some uncertainty. Asian markets usually follow the direction of US market Tuesday to Friday but there are signs of disconnects arising. As always care is required.

Think carefully before betting on return of inflation. Notes that this is one of the most divisive questions for investors today. It looks at the increase in demand for TIPS (Treasury inflation-protected securities with returns adjusted with moves in consumer prices). Goes through a number of reasons why not least the fact that Iron ore has now outperformed gold this year, largely due to the upswing in China which should theory lead to a bolstering of the global economy. Also the decline in the USD, together with other smaller factors could indicate that inflation could return with a vengeance. That in turn could prompt another up swing for equities and a broadening of the rally from growth and tech to the cyclicals and hence requiring a rebalancing pf portfolios. That might crimp the US markets with the current dominance of the Nasdaq tech names. The BUT it suggest is that in recent past history there have been good reason to believe that inflation would return but it has not. Some are suggesting again stagflation (inflation without growth). Some are suggesting that all we see is a continuing of the same as we saw pre covid; modest growth and low inflation. The only thing for sure is that time will tell. Personally I’m expecting a growth in inflation largely because of the amount of stimulus and the need to governments to find a way to pay for that stimulus.

For interest
FT BIG READ. CORONAVIRUS. ‘A failure of national leadership’ America’s sunbelt states are facing a big rise in cases and deaths amid the politicisation of issues such as wearing masks. But with the economy struggling, there is little enthusiasm for a return to full lockdowns.

Under the hood US airlines fly in different directions on middle-seat bookings. Carriers lose money when flying at partial capacity, but packed planes risk undermining consumer confidence in the safety of air travel. A look at how the US airlines are trying to get people back into air travel. It would appear there are no easy answers. As with many industries the key is a vaccine.

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