The Week 22Feb2020

CITY 51

22 February 2020 THE WEEK

Talking points

Thethreatposedbythecoronavirusto
globalbusinessesappearstobe
intensifying,saidDaisukeWakabayashi
inTheNewYorkTimes.Globalstocks
dippedthisweekafterasaleswarning
fromApple,whichis“widelyregarded
asabellwetherofglobalsupplyand
demandforgoods”.TheiPhone-maker,
whichis“highlydependent”onboth
Chinesefactoriesandconsumers,noted
that“productionisrampingupmore
slowlythanexpected”asChinaattempts
tore-openfactories–hamperingsupply
ofitssmartphones.Appleisfarfromthe
onlycompanycontemplatingextra-
ordinarymeasuresbecauseoffailing
supplychains,notedtheFT.Thebossof
JaguarLandRover,SirRalphSpeth,admittedthatthecarmaker
hadresortedto“flyingcomponentsoutofChinainsuitcases”(it
isrunningoutofkeyfobsinparticular)inaracetopreventitsUK
plantsfromclosingattheendofthemonth.

Mosteconomistshave sofar“onlynudgeddowntheirforecasts
forfull-year global growth”,said TheEconomist.Andstock
markets have,onthe whole, continuedtoclimbhigher.Let’s hope
“theiroptimismisjustified”. Historyprovides littleguidance.
China’seconomyhasgrown from4%ofglobalGDPto16%
sincetheSarsepidemic of2003.It hasalso“become enmeshed in
supply chains ofmind-bogglingcomplexity”, while“just-in-time

productionleaveslittleroomfordelays”.

Manyfirmscannottracealltheir

suppliers,makingithardtopredictthe

impactofstoppagesontheiroutput,let

aloneglobalgrowth.Chinachurnsout

athirdoftheworld’schemicals,halfits

LCDscreensandtwo-thirdsofits

polyester.“Companiesthatthinkthey

areisolatedcouldbeinforasurprise.”

Sars’fatalityratemaybehigherthan

Covid-19’s,“buteconomicallyspeaking,

thenewcoronavirusisfarmoredeadly”,

saidCareyHuangintheSouthChina

MorningPost.Evenatthisstage,it’s

obviousthattheeconomicimpactwill

bemoreseverethanthatofanyother

previousepidemic.“Wholecitieshavebeenlockeddown”–and

“thenightmaremaybejustbeginning”formillionsofsmall

Chinesemanufacturersifforeigncustomersshiftorderstoother

countries.“Ifthedisruptiongoesonlongenough,itcouldtrigger

awaveofbankruptcyamongSMEs”,whichcontributemorethan

60%ofChina’sGDPandaccountfor80% ofjobs.That,in turn,

willweighon banks,adding“pressuretothe country’stowering

debtpile”,whichstoodat300% ofannualGDPlatelastyear.

“Theworse-case scenariocannotbe ruled out.”If thisepidemic

isn’tcontainedsoon,“massive financial collapse, anexodus of

foreign companies andlarge-scalebankruptcies allloomon the

horizon. Inshort, nothinglessthaneconomicmeltdown.”

Issue ofthe week: the corona threat

Apple:asaleswarningrattledglobalinvestors

Dog funds: what the experts think

●Multiplying mutts
Bewarethedog,saidImogen
Tewon FTAdviser. Markets
mighthave beenflyingof
late, butthathasn’tstopped
thenumber ofunder-
performingfunds risingby
morethan50%inthepast
sixmonths,accordingto
Bestinvest’slatest “Spotthe
Dog”survey.Thereport,
which “namesandshames”
theworst-performingequity
fundsoverthreeyears,
identified91 fundsmeeting
“thedog criteria”–up from 59 last
summer. The levelofUKassets held indog
funds has also jumped alarmingly–from
£32.6bn to £44bn since thelastreport.

●Worstinshow
For thefourth timeinarow, Invescohas
topped the listof fund groups in the
doghouse–leadingthe pack, byalong
way. The fundhousemanagedtochalkup
11 “dog funds”holding£13.1bnof assets,
makingupmorethanathirdofthe total
£44bn. The secondand thirdworst
culpritswere JPMorgan’sJPM US Equity
Income fund (£3.8bn of assets) andLink,
which managesthe£3bnEquityIncome
Fund formerly runby disgraced starfund
manager Neil Woodford. There werealso
multiple entries fromfund houses
Schroders, Jupiterand M&G. Invesco’s
excuse forits poor performance was that

thefundson thedoglisthad

“adisciplined valuation

drivenphilosophy”, which

hadbeenoutoffavour of

late.Two ofitsgiantfailing

incomefundsusedto berun

byWoodford.It seems as

though “thecurseofNeil

Woodford”continues to

blightsome ofthecountry’s

largestfunds,saidMark

Atherton inTheTimes.

Fundsbearing “hisfinger-

prints”wereamongthose

deliveringtheworstvalue.

●Findinganother pet

Should youditchyour dogs? Not

necessarily, saidJonathan Jonesin The

DailyTelegraph–though,asthe report

advises,“unlessthere are good reasons to

believeperformance willturnaround”, it

maymakesense to switch. “Time will tell

whether the so-called Boris Bouncehelps

thesefunds turn acorner,” saidthe

report’s author, Jason Hollands. In the

meantime, fund managerscontinue to

rook customersover fees:British savers

invested in the 91 dogsarepaying an

estimated£410mayear forthe privilege.

Unsurprisingly, fundexperts arefullof

ideasfor replacements,said Mark

Atherton. Sodoyour research.But before

“takingthe plunge andmovingyour

money,be clearthatyou couldbelocking

in some heftylosses”.

Money tribes

Amid all the selfies, the photo app

Instagram is also hostingagrowing

trib eofamateurs offering financial

“inspo”, says Katharine Gemmell in the

FT. The new “money influencers” are

“friendly, casual and typically positive”.

Here’sasample of what they’re up to:

@thebudgetmomWashington-based

Kumiko Love is typical of the “frugal

types” sharing tips, goals and values.

Her 450,000 followers love her open

approach to money–she even lists

her savings balance on her profile

(currently $404,000 and rising).

@thefinancialdietThis “media/news

company” tailors its offering to

Instagram. Poster Annie Atherton says

that few people actively seek financial

content on the platform, so she uses

visual inspiration–delivering money

advice likea“Trojan horse”.

@mrsmummypennyukTackling debt

is abig Insta preoccupation: one of the

most popular financial hashtags is

#debtfreecommunity. Financial blogger

Lynn James gainedabig following

while she was paying down £16,000

of credit card debts.

@personalfinanceclubSan Diego-

based Jeremy Schneider is typical of

the new type of Instagrammer offering

investment ideas–tapping into the

US “Fire” movement (Financial

Independence, Retire Early) by sharing

small bite-sized infographics.

Covid- 19 hasalreadyheavilydisruptedglobalsupplychains.Howbadcouldthingsget?

UK funds: in the doghouse