Financial Times Europe - 19.09.2019

(Jacob Rumans) #1
22 ★ Thursday19 September 2019

Henny Sender

Markets Insight

FedEx as headw ing for its biggest drop in
a decade after warning that US-China
trade tensions and a further weakening of
global industrial production meant full-
year earnings wouldtumble s much asa
30 per cent. Just three months after
setting targets, FedEx said annual
earningsmight beas low as $11a share
compared with a $14.68 consensus.
Adobe eighed on the software stocksw
after reporting a surprise shortfall in
bookings at its digital marketing division.
Third-quarter results from Adobe beat
expectations, but weak subscription sales
for Marketo, an advertising management
tool, and Analytics Cloud forced
management to trim growth guidance.
Philip Morris nda Altria rifted lowerd
after India, the world’s second-biggest
tobacco market, banned the sale of
e-cigarettes, citing an “epidemic” of child
vapers. Separately, Citigroup analysts
said the recent silence from Altria and
Philip Morris over their proposed merger
seemed to increase the chances of a deal
Tracker fund demand liftedCDW ftera
the IT outsourcer gained promotion to
the S&P 500 index. CDW will replace
payments companyTotal System
Services, which is being acquired by
sector peerGlobal Payments.Bryce Elder

Wall Street Eurozone London

Moncler ed Europe’s luxury goods stocksl
sharply lower after its chief executive
warned that Hong Kong protests had
made growth targets less certain. Remo
Ruffini said the Hong Kong protests were
affecting the whole of south Asia,
including Macau and Taiwan.
“Given the incoming elections in Hong
Kongand the more difficult access for
tourists in the area, it is difficult to expect
a normalisation anytime soon,” Kepler
Cheuvreux, which halved its second-half
sales growth forecast, said.
A UBS downgrade ofRichemont lsoa
weighed on the luxury goods stocks. Four
years into a sector recovery, the gap
between the winners and losers has
widened as the most profitable
companies reinvest in their businesses,
UBS said. Investors expect an
acceleration of organic growth this year
that onlyLVMH, Kering, Hermès nda
Monclerseemed capable of delivering,
while the restwould need to step up their
brand spending just to compete, it said.
Ipsos, the French market researcher,
gained after Exane turned positive. Two
consecutive quarters of like-for-like sales
growth and thebedding in of a cost-
cutting programme should help bolster
midterm confidence, it said.
Bryce Elder

Weir Group aded after JPMorganf
Cazenove turned cautious on the
pumpmaker. The minerals unit remained
a “top-tier asset in a still-growing market”
and its oil and gas arm faced a tougher
outlook than the consensus expected, the
broker said. Data on deployed oil rigs and
capital expenditure budgets suggested
customers “can do more with less”, and
another guidance reset may be required.
Kingfisher ed the FTSE 100 fallersl
after a deterioration in sales and a
cautious outlook overshadowed slightly
better than expected half-year profit
from the DIY retailer.
Burberry etreated on caution fromr
Italian rival Moncler about Hong Kong-led
demand. About 10 per cent of Burberry's
sales come from Hong Kong, twice the
sector average, according to UBS.
Royal Mail as under pressure inw
response to a profit warning from FedEx.
Sirius Minerals as weak but off itsw
session lows after Liberum Capital, house
broker to the Yorkshire potash mine
developer, speculated that the economics
of its mothballed project could be strong
enough to attract a strategic investor.
Keywords lid as worries about itss
acquisition-led growth eclipsed first-half
results from the games maker.
Bryce Elder

3 Wall Street stock moves muted ahead
of Fed rate decision
3 Oil price retreats after Saudi Arabia
quells fears of a squeeze in supplies
3 Sterling slips ahead of today’s Bank of
England MPC meeting

A crunch in money market liquidity and
worries over Middle Eastern oil supplies
stole some of the limelight from the US
Federal Reserve, which cut interest rates
by 25 basis points yesterday.
The run-up to the central bank meeting
was overshadowed by intervention in the
overnight borrowing market by the Fed,
which made $75bn available to banks and
investors after a severe imbalance in the
repo market sent the cost of borrowing
cash overnight surging.
Wall Street stocks edged lower as
investors digested the Fed’s intervention.
The S&P 500fell 0.3 per cent, withFedEx
down the almost 14 per cent after the
group ut its earnings forecast, citingc
harm from trade tensions and weakening
global growth.
TheNasdaqdipped 0.4 per cent by
midday in New York while the Dow Jones
Industrial Average slid 0.3 per cent.
The tentative mood increased the
appeal of haven assets such gold and
top-rated government bonds. The yield
on the 10-year US Treasury fell 6 basis
points to 1.76 per cent while gold
advanced 0.5 per cent to $1,509 an ounce.
Trading was also cautious across the

Atlantic, where the Stoxx Europe 600
index ended the day flat, with luxury
brands such asRichemont eeping a lidk
on the regional benchmark after UBS
analysts downgraded the sector.
Ahead of today’s Bank of England
Monetary Policy Committee meeting,
sterling fell 0.2 per cent against the dollar
to $1.2475 after the UK’s inflation reading
came in at 1.7 per cent, below the BoE’s 2
per cent target.
“A below target inflation print affords
the MPC some space to stay on hold for
the time being as it awaits the outcome of

Brexit,” said Cathal Kennedy, European
economist at Royal Bank of Canada.
Oil moved lower, meanwhile, adding to
its 7 per cent drop on Tuesday as Saudi
Arabia’s officials sought to calm the
market after an attack on the country’s
infrastructure had sent prices rallying.
The Saudi energy minister said on
Tuesday that the country would fully
restore output by the end of September.
With the risk of an oil supply squeeze
less likely, Brentfell 1.4 per cent to $63.20
a barrel while WTI lid 1.8 per cent tos
$58.30 a barrel.Ray Douglas

What you need to know

Oil prices slide as supply fears ease
 per barrel

Source: Bloomberg

Reports surface that Saudi Arabia output









Wed Thu Fri Mon Tue Wed


Reports surface that
Saudi Arabia output could
return sooner than expected

Spikes as much as 20%
on fears of prolonged
supply disruption



The day in the markets

Markets update

US Eurozone Japan UK China Brazil
Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
Level 2997.51 1529.66 21960.71 7314.05 2985.66 104247.42
% change on day -0.27 0.03 -0.18 -0.09 0.25 -0.35
Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
Level 98.386 1.106 108.225 1.248 7.088 4.102
% change on day 0.127 0.090 0.018 0.000 -0.080 0.082
Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
Yield 1.751 -0.513 -0.187 0.564 3.120 7.207
Basis point change on day -4.870 -3.600 -3.050 -5.300 3.800 -8.200
World index, CommodsFTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 346.63 63.58 58.15 1502.10 17.84 2814.30
% change on day -0.15 -0.44 -0.90 0.33 0.03 -0.86
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.

Main equity markets

S&P 500 index Eurofirst 300 index FTSE 100 index

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Jul 2019 Sep





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Jul 2019 Sep






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Jul 2019 Sep





Biggest movers
% US Eurozone UK


Capri Holdings 2.13
Cboe Global Markets 2.08
Nordstrom 1.87
Kla 1.72
Dominion Energy 1.59

Edf 3.18
Yara Int 2.69
Dnb 2.08
Enel 2.04
Telenor 1.97

Int Consolidated Airlines S.a. 1.90
Halma 1.46
Tui Ag 1.35
Sse 1.28
Severn Trent 1.15


Fedex -13.62
Nektar Therapeutics -4.01
Alexion Pharmaceuticals -3.79
Netflix -3.04
Conocophillips -2.92
Prices taken at 17:00 GMT

Wartsila -12.48
Seadrill -6.03
Swatch -3.85
Ses -2.96
Jeronimo Martins -2.64
Based on the constituents of the FTSE Eurofirst 300 Eurozone

Kingfisher -3.15
Burberry -2.53
3i -2.20
St. James's Place -1.84
Taylor Wimpey -1.83
All data provided by Morningstar unless otherwise noted.


or investors, navigating the
tech ndustry is increasinglyi
a g a m e o f avo i d i n g t h e
hazards, be they political,
such asgovernments’ banned
lists or companies providing sensitivef
technologies, or financial, as when
the publicdebut of property group
WeWorkstumbled ftera scrutiny of its
business model.
For a company that has plotted
a careful path around the traps, con-
sider Taipei-basedAppier, a marketing
analytics provider.
Appier is an outlier in several ways.
For one, it is considering listing in Japan.
Most regional tech companies sell
shares in the US or Hong Kong, if not in
their home markets. Taiwan’s stock
market has been doing reasonably well
in 2019, with growth in the double digits.
Some of that growth reflects successes
of tech hardware companies such as
TSMC, a chipmakerthat has been
shielded rom much of the collateralf
damage in the trade war between main-
land China and the US. The company’s
share price has doubled over the past
five years, compared with a 13 per cent
rise in Taiwan’s broader equity index.
Yet Appier’s strength is not in hard-
ware but in software, and “outside
China itself, there aren’t many such sto-
ries in Asia”, says Chih-Han Yu, the com-
pany’s co-founder.
For investors like the regional arm of
Sequoia Capital, the Menlo Park, Cali-
fornia-based venture firm, Appier
is a part of a third generation of
portfolio companies, following China’s
Alibaba nda Tencent n the first genera-i
tion, orMeituan Dianping nda ni
the second.
Sequoia gave Appier $6m in its
“series A” funding round in 2014 and
remains the biggest shareholder after

the management group. Appier is unu-
sual, too, in that few young tech compa-
nies outside Japan would think of
listing on Japan’s Mothers tech index,
which is what Appier plans to do in
coming months.
There are a few obvious attractions:
Japanese investors are still handing out
generous valuations to techgroups, the
market has been performing well in
recent weeks, and it has a low correla-
tion with most other markets.
In Japan, too, a company from Tai-
wan, rather from the Chinese mainland,
tends to attract fewer suspicions over
possible links to the government and

theft of intellectual property in the eyes
of investors.
One other way in which Appier is out
of the ordinary: it looks like it will soon
turn profitable. Until recently, investors
appeared to pay little attention to
whether tech groups, especially in the
consumer internet area, had any pros-
pect of making money anytime soon.
But that has changed over the past
18 months. Despite the Fed’s -turnU ear-
lier this year, slashing expectations of
imminentrate hikes and keeping the
easy money flowing, there are signs that
sanity is returning to the tech market.
Today, investors are falling out of love
with techgroups that do not have such
prospects, from ecommerce business
Meituan n Hong Kong to ride-hailingi
companyUber n New York. And nowi
the debacle over WeWork is likely to be

the catalyst for an even more dramatic
Appier, like WeWork, has money
fromSoftBank, but from the Tokyo-
based parent — not theVision Fund.
In contrast to the office space pro-
vider, Appier’s revenues seem strong
and investors say they expect the com-
pany to turn profitable even as it contin-
ues to spend heavily in expanding its
business. Its core focus is to help compa-
nies keep consumers loyal and antici-
pate their needs — and help them turn a
profit one day as well.
Appier’s supporters sayit has real
technology, with real use cases. “With
marketing software you can quantify
the difference it makes; it lends itself to
clear testing,” says C.K. Choun of Pavil-
ion Capital,part of Singapore’sTemasek
Holdings, which has been an investor in
Appier for several years. “It doesn’t
involve a leap of faith.”
Most of Appier’s team are also US-
educated returnees, and several worked
inGoogle’s research lab in Taiwan on
projects such as autonomous driving.
Others have been lured away from
careers atelite Taiwanese hardware
companies uch as TSMC ands Quanta.
Originally, the founders and many of
their team thought they would make
their careers as scientists working at
either leading universities in the US or
at Taiwan National University.
Some of their optimism is reflected in
the value of Taiwan ech stocks, whicht
have had a good run. But with an aver-
age enterprise value of 0.9 times historic
sales, these equities are not quite as
superheated as they are in the US, where
the ratio is closer to four times sales.
Staying below the radar might well
prove to be a good thing.

Appier’s growth

highlights allure of

Taiwan tech stocks

In contrast to WeWork,

Appier’s revenues seem
strong and investors

expect it to turn profitable

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