42 2GM Tuesday July 28 2020 | the times
BusinessMarkets
news in brief
Floor-show bounce
A leading floor-covering
distributor has reported a strong
revenue recovery since Covid-19
restrictions were eased. Headlam
Group said UK sales bounced
back above July 2019 levels this
month, but warned that it could
not gauge whether this would last
for the rest of the year. The
£230 million Birmingham-based
business was hit hard by the
initial lockdown and confirmed
yesterday that revenue in the UK
was down 96 per cent in April on
the previous year. Shares in
Headlam Group rose 28p, or 10.9
per cent, to 285p.Brown’s WTO choice
Gordon Brown, the former prime
minister, has endorsed Ngozi
Okonjo-Iweala to lead the World
Trade Organisation, saying she
has a track record of delivering
results in “the toughest of jobs”.
Ms Okonjo-Iweala, a former
Nigerian finance minister, leads
the board of Gavi, the global
vaccine alliance. Alongside
Amina Mohamed, Kenya’s former
trade minister, she is thought to
be one of the leading candidates
to succeed Roberto Azevêdo as
director-general of the WTO.Ex-minister lands role
Margot James, a former
Conservative minister, has been
appointed as a non-executive
director at the doorstep lender
Provident Financial. Ms James,
62, was an MP for nine years
until last year and held several
ministerial roles, including in the
culture department. She is also
executive chairwoman of WMG,
a department of the University of
Warwick that seeks innovation in
applied science, technology and
engineering through private
sector collaboration.Busmaker to cut jobs
Britain’s biggest busmaker is to
cut up to 650 jobs after a slump
in demand. Alexander Dennis,
based in Larbert, Scotland, said
customers were unable to place
new orders following the impact
of lockdown, social distancing
and lower passenger numbers.
Furloughs, salary cuts and
reduced hours were insufficient
to deal with the “current
economic reality”. The business,
owned by NFI Group of Canada,
is to move to a “leaner, more
flexible manufacturing model”.large accumulations in an area to the
west of Shetland with independent
reports suggesting its acreage may
contain more than two billion
untapped barrels.
Hurricane raised substantial sums
including a $230 million convertible
bond, which is due in 2022, to build
an early production system (EPS) on
the Lancaster site to prove the
viability of fractured basements. In
2018, Spirit Energy joined as a
drilling partner on the adjacent
Warwick area.
First oil began flowing from the
Lancaster EPS in May last year and
more than 5.7 million barrels have
been extracted. Yet doubts persist as
the amount of water brought up athealthy chunk of risk in their
portfolio. And Hurricane Energy
has experienced peaks and troughs
in the price of its shares during the
past few years.
They were about 10p at the start of
2016 and reached a high of 64p in
May 2017 before sinking to less than
29p in September that year. By
September 2018 they were above 58p
but have been on a steady decline
since last November. The shares
started this year at about 30p and
have not been above 10p since May.
Hurricane looks for hydrocarbons
in rock formations known as
fractured basements, which lie below
where North Sea oil has typically
been extracted. It successfully foundI
nvesting in oil and gas is not for
the faint-hearted (Greig Cameron
writes). Geopolitical tensions can
quickly send oil and share prices into
reverse. There is also growing
pressure to switch to renewables.
Recently you can add demand
issues caused by Covid-19, such as
airlines being grounded and other
forms of transport operating at
fractions of their capacity.
Backing oil companies on London’s
junior Aim offers opportunities for
those who like to indulge in aTempus
Buy, sell or hold: today’s best share tips
Walking tightrope of west versus east
H
SBC has been through
many crises in its 155-
year history but the
threat it faces now
appears to be among its
most serious (Katherine Griffiths
writes). Generations of leaders of the
international bank have found ways
to guide it through times of war,
economic strife and political unrest.
But the team in charge at present are
struggling to follow in their footsteps.
It is not that they are doing an
incompetent job but that the parties
involved in the present conflict
appear to want to force the bank to
pick a side. Is HSBC a western-
grounded financial institution whose
values mirror those of the UK, where
its shares are listed, and the US, a
small market for the bank but the
world’s largest economy? Or is it an
institution whose biggest market and
deepest roots are in Asia, with its fate
firmly tied to China?
At the moment, it seems, HSBC
cannot be both. Its shares fell more
than 3 per cent yesterday after the
bank acted in an unusual way on
Saturday — publicly denying via
Wechat that it had “framed” Huawei,
the Chinese telecoms group, and
played a role in the arrest of Meng
Wanzhou, its chief financial officer,
in December 2018 at Vancouver
airport on a warrant from the US.
HSBC has also been put underpressure by Chinese politicians for its
stance on the new security
legislation in Hong Kong. The bank
responded through another posting
on Wechat last month by Peter
Wong, its Asia-Pacific chief
executive, signing a petition to back
the legislation. At the same time,
public figures in the UK and US have
taken a swipe at the bank, including
Mike Pompeo, the US secretary ofstate, who has accused HSBC of a
“corporate kowtow”.
It is a long way from the pacifying
words of Mark Tucker, the chairman,
in February alongside the bank’s
annual results. Speaking before
China’s new rules to crack down on
dissidents in Hong Kong but after
the pro-democracy protests of last
year, Mr Tucker said: “We deplore all
violence and support a peaceful
resolution under the framework of
‘one country, two systems’.”
Mr Tucker and Noel Quinn, the
chief executive, will face difficult
questions when they present half-
year results next week: should they
shrink the bank’s US business in an
attempt to please the authorities inMore questions than answers
Share price
Source: Refinitiv800p
700
600
500
400
300
200
2016 2017 2018 2019 2020
Breakdown of revenues for 2019
Business line breakdown 2019
Return on
tangible
equityRetail bank and
wealth management
Corporate bank
Global banking
and markets
Global private bank
Corporate centre41%
27%27%
3%
2%2017
2018
20196.8%
8.6%
8.4%49%
Asia29%
EuropeN America
Latin
America6%N Africa
11%
5%
China? How important will Hong
Kong be in the future and what
opportunities will come HSBC’s way
in China? Just as pressing are
investors’ questions about the hard
numbers: when will the bank boost
its returns and deliver on promised
cost cuts?
HSBC’s challenge is that its stated
strategy of focusing on Asian growth
is hard at a time of political unrest, a
health crisis that originated in China
and the prospect of an extended
period of ultra-low interest rates
making the bank’s surplus of Hong
Kong deposits a particular drag.
Yet while the outlook is grim,
things may not be so bad later on.
US politicians’ bashing of HSBC is
likely to subside after the presidential
election in November. The Huawei
noise may diminish when Ms Meng’s
extradition tussle is resolved,
although that may take months.
There may even be brighter times
ahead in Hong Kong. Individuals are
risking their lives and liberty to fight
for freedom, but some believe the
conflict will be resolved and that
more integration of Hong Kong into
China could put it at the heart of
rapid economic growth.
That would be good news for
HSBC, which is by far the largest
bank in Hong Kong, where it
generates 35 per cent of its group
revenues and 55 per cent of profits.
HSBC’s diverse global network is one
of the most valuable in the banking
world in the longer term. But
investors may want to avoid it until
that is a little bit clearer.ADVICE Avoid
WHY Too much uncertainty
about US-China tensions and
the impact on Hong Kong
one of the two Lancaster wells has
continued to rise. Hurricane this
year withdrew its guidance of 17,000
barrels per day for 2020.
However, yesterday the shares rose
by 7.7 per cent to just under 6p after
an electric pump on the more
troublesome well lifted production to
5,000 barrels per day in the past few
weeks. The other well continues to
produce about 12,000 barrels.ADVICE Hold
WHY There is not much
further for the shares to fall
and some potential upside
hsbc
2019 revenues
$56bn2019 profit
$13bnhurricane energy
2019 revenue
$170.3m2019 barrels of
oil produced 3mCommodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)Brent Physical 42.44 -0.72
BFOE(Sep) 43.46 +0.07
BFOE(Oct) 44.00 +0.12
WTI(Sep) 41.60 +0.31
WTI(Oct) 41.80 +0.35Products ($/MT)Spot CIF NW Europe (prompt delivery)Premium Unld 356.00 358.00 -6.00
Gasoil EEC 365.00 367.00 -4.75
3.5 Fuel Oil 236.25 237.50 -0.75
Naphtha 372.00 374.00 -4.00ICE FuturesGas OilAug 376.00-375.75 Nov 383.50-383.25
Sep 378.00-377.75 Dec 385.00-384.75
Oct 381.75-381.50 Volume: 598443Brent (9.00pm)Sep 43.49-43.47 Dec 44.82-44.80
Oct 43.97-43.95 Jan 45.16-45.14
Nov 44.42-44.40 Volume: 1770392LIFFECocoaSep 1562-1560 Dec unq
Dec 1581-1575 Mar unq
Mar unq May unq
May unq
Jul unq
Sep unq Volume: 70035RobustaCoffeeJul 1300-1337 Mar unq
Sep 1343-1342 May unq
Nov 1360-1353
Jan 1382-1371 Volume: 21678White Sugar (FOB)Reuters May unq
Aug unq
Oct 367.40-366.90 Oct unq
Dec 364.00-362.00 Dec unq
Mar unq Volume: 44749PRICES
Major indices
New York
Dow Jones 26584.77 (+114.88)
Nasdaq Composite 10536.27 (+173.09)
S&P 500 3239.41 (+23.78)
Tokyo
Nikkei 225 22715.85 (-35.76)
Hong Kong
Hang Seng 24603.26 (-102.07)
Amsterdam
AEX Index 564.37 (+0.42)
Sydney
AO 6169.60 (+21.60)
Frankfurt
DAX 12838.66 (+0.60)
Singapore
Straits 2575.79 (-3.72)
Brussels
BEL20 3407.46 (-27.97)
Paris
CAC-40 4939.62 (-16.81)
Zurich
SMI Index 10272.34 (+58.13)
DJ EURO Stoxx 50 3302.84 (-8.05)London
FTSE 100 6104.88 (-18.94)
FTSE 250 17157.94 (-106.90)
FTSE 350 3421.03 (-12.41)
FTSE Eurotop 100 2713.28 (-9.37)
FTSE All-Shares 3382.75 (-12.10)
FTSE Non Financials 4129.11 (-6.13)
techMARK 100 5454.12 (-7.63)
Bargains n/a
US$ 1.2873 (+0.0077)
Euro 1.0945 (-0.0030)
£:SDR 0.98 (+0.00)
Exchange Index 76.98 (+0.14)
Bank of England official close (4pm)
CPI 108.58 Jun (2015 = 100)
RPI 292.70 Jun (Jan 1987 = 100)
RPIX 290.10 Jun (Jan 1987 = 100)
Morningstar Long Commodity 469.21 (+0.56)
Morningstar Long/Short Commod 3901.25 (+0.95)London Financial Futures
Period Open High Low Sett Vol Open Int
Long Gilt Sep 20 138.05 138.38 137.95 138.34 136787 514037
Dec 20 137.24 137.58 137.17 137.31 6
3-Mth Sterling Sep 20 99.905 99.910 99.905 99.905 25788 489022
Dec 20 99.925 99.935 99.920 99.930 43634 497179
Mar 21
Jun 21
Sep 21
3-Mth Euribor Sep 20 100.45 100.45 100.44 100.45 34357 486545
Dec 20 100.44 100.45 100.44 100.45 34401 414121
Mar 21
Jun 21
Sep 21
3-Mth Euroswiss Sep 20 100.73 100.73 100.72 100.73 1050 44578
Dec 20 100.74 100.75 100.74 100.74 1893 35640
Mar 21
Jun 21
FTSE100 Sep 20 6070.0 6110.5 6050.5 6076.5 62007 721110
Dec 20 6047.5 6047.5 6047.5 6045.0 1 5106
FTSEurofirst 80 Sep 20 4478.5
Dec 20 4473.0© 2019 Tradeweb Markets LLC. All rights reserved.
The Tradeweb FTSE Gilt Closing Prices information contained
herein is proprietary to Tradeweb; may not be copied or
re-distributed; is not warranted to be accurate, complete or timely; and does not constitute
investment advice. Tradeweb is not responsible for any loss or damage that might result
from the use of this information.