the times | Thursday October 15 2020 2GM 35
Business
may continue to rise and one Chinese
news outlet yesterday described the
country’s stock market as “world-beat-
ing”.
Other big financial hubs continue to
struggle, the South China Morning Post
noted, as the United States and leading
economies across Europe grapple with
rising coronavirus infections.
China’s market capitalisation is now
the second largest in the world, behind
America’s $38.3 trillion. Japanese equi-
ties are worth $6.2 trillion and stocks in
Hong Kong are worth $5.9 trillion. The
UK market, with a capitalisation of
$2.8 trillion, is the fifth largest.
Equities in China have broadly mir-
rored its convalescing economy, which
has been in recovery since suffering its
worst quarter in decades as restrictions
imposed to curb Covid-19 put millions
of people out of work, halted activity at
manufacturing plants and forced shops
to pull down the shutters.
Figures collated by the World Health
Organisation indicate that Beijing has
now largely contained the virus, with a
minimal number of cases reported each
week. Stocks have been boosted, too, by
the strengthening yuan, which recently
enjoyed its best quarter in 12 years.ed from £8 to £28, aimed at young customers. Sales at the retailer rose by 19 per cent
A
sos is a phenomenon.
The online clothing
retailer has surfed the
celebrity fashion wave,
bringing instant cheap
replicas of the garb worn by the
stars direct to smartphone-waggling
twentysomethings without them
having to get off the sofa.
That requires not just discipline in
logistics but also constant attention
to the social media world through
which it engages with its 23 million
active customers.
It means that its jargon-loving
chief executive Nick Beighton can
say things to analysts like “we’re
going to dial up Twitch” and no one
laughs (Twitch is a hugely popular
Amazon-owned live-streaming
platform for video games).
The quadrupling of profits this
year shows just how much this
approach can deliver. Lockdown has
had the effect of reducing returned
products — the curse of so many
online retailers. That is partly
because of the changed product
mix. Nobody bothers to send back
ill-fitting jogging bottoms.
There were a few setbacks. The
US unit has stumbled a bit, but is
still profitable. The 10 per cent fall in
the always-volatile Asos shares
yesterday seems to have been about
its cautious outlook statement
rather than anything more sinister.
Asos is a good example of a
business that disproves the swings
and roundabouts philosophy of
investors as they contemplate the
rise of digital disruptors. This is the
theory that says losses on Marks &
Spencer, say, will be offset by profits
from Asos.
The unpalatable truth is that
while millions of investors indirectly
own M&S because it is a core
holding for many pension funds, or
because it is automatically included
in any tracker fund, they don’t own
Asos because it is listed only on
Aim, the junior market avoided by
most mainstream institutions. Many
investors are overweight in
disruptees like M&S and
underweight in disruptors like Asos.
It may soon be time for Asos to
join the grown-ups on the main
market. Weighing in at £5 billion, it
would be a contender for FTSE 100
inclusion. It claims it already meets
the disclosure and governance
thresholds, so the costs would be
modest. It has few retail investors,
so the inheritance tax drawbacks
also would be modest.
Its close rival Boohoo, another
Aim-listed fashion giant-killer, is
under fire for unorthodox
governance, egregious bonus
arrangements and sourcing from
sweatshops. For Asos, the clear blue
water provided by a full listing
would be no bad thing for a
company that now aspires to be
“one of the few truly global leaders
in fashion retail”.Stopped short
S
hort-selling hedge funds are a
very necessary species in the
capitalist ecosystem. They help
to expose fraud, incompetence and
hubris. They are sometimes unfairly
abused as parasites that destroy
good businesses; more often thannot, they are canaries giving early
warning of bad businesses.
But they have to play by the rules.
ARCM’s down bet on Premier Oil
was anything but that. The Hong
Kong hedgie somehow managed to
amass a 16.9 per cent short position
in the North Sea oil explorer without
telling anyone (report, page 38).
That was a gigantic secret down
bet that should automatically have
been disclosed in the interests of
transparency and fair markets. It was
doubly egregious in this case
because ARCM had other tentacles
stuck into Premier: it was and is
Premier’s largest creditor.
It has got off very lightly with the
£873,000 fine from the FCA. This is
a group with $3.5 billion of assets
under management. Its excuse that
it rarely played in the UK market
and didn’t know the rules was not
good enough. As for its claim that it
was delayed from rectifying things
by the pro-democracy protests in
Hong Kong, that is close to “dog ate
homework” territory.Banks look west
M
uch lower bad debt
provisions reported this
week by US banks augur
well for headline third-quarter
numbers later in the month from
their UK counterparts. Bank of
America, Goldman Sachs and Wells
Fargo all set aside much smaller
sums for loans going sour compared
with the second quarter. It was the
same story with JP Morgan Chase
and Citigroup on Tuesday.
Bad debt provisioning is more art
than science. Even small changes in
economic expectations can lead to
very big differences in expected
credit losses. British banks will want
to minimise them to polish their
capital ratios and maximise their
chances of being allowed to restore
dividends next year.
The Prudential Regulation
Authority may be torn: only a few
months ago it was ordering banks
not to be too hair-shirted, arguing
that the downturn would be short-
lived and V-shaped. Now that hope
has been smashed, the obvious
conclusion is that it should be
demanding more realism and
prudence. Awkward.Party people
R
ock’n’roll? Round Hill Music
this week announced plans to
raise $375 million from
investors in a London flotation. The
fund, which owns rights to the
Beatles’ She Loves You, wants to buy
more songs and set itself up as a
rival to the FTSE 250 member
Hipgnosis, which is promoting
music as a new asset class.
Drugs? London-based private
office Chrystal plans to raise
$100 million to invest in cannabis
companies, though it emphasises it
will be looking only at medicinal
products. This is a private party —
the minimum spliff size is $500,000
— but there is plenty of potential
interest. Just sex to go now.[email protected]
Alistair Osborne is awaybusiness commentary Patrick Hosking
Time for this upstart
to join grown-ups
Take aways
surge during
pandemic
While Italian, Chinese and Indian
menus remain the most popular
choices of takeaway, demand for Big
Macs and hot Greggs sausage rolls is
helping to drive strong growth at Just
Eat Takeaway.com.
The FTSE 100 food delivery operator
underpinned its position as one of the
winners in the coronavirus pandemic
by reporting a forecast-beating 46 per
cent jump in orders in the third quarter
to 151.4 million, an acceleration on the
growth of 41 per cent reported in the
second quarter, as positive trends re-
ported in July continued into August
and September.
Order growth in the UK showed an
even bigger improvement — 43 per
cent, up from 34 per cent in the second
quarter — and analysts are forecasting
more of the same in the final quarter
against easy comparative trading.
The group said that its British busi-
ness had been given a lift by several new
partnerships, including the rollout of
about 800 McDonald’s restaurants and
300 Greggs stores nationwide.
In early summer, Just Eat reported a
sharp rise in demand for breakfast and
lunch as consumers adjusted to being in
lockdown, while hot weather boosted
orders of Greek, Turkish and Thai food,
as well as ice cream. Vegetarian and
vegan options are also on the up.
Just Eat Takeaway.com was formed
in February this year via the £10 billion
merger of Just Eat and Takeaway.com,
its Dutch rival.
Just Eat was launched in Copen-
hagen in 2001, entered the British
market in 2006 and was floated on the
London Stock Exchange in 2014.
Takeaway.com was founded in 2000 by
Jitse Groen, who is chief executive of
the enlarged company.
Last week, shareholders approved
the $7.3 billion acquisition of Grubhub,
an American company, and the deal is
expected to be completed in the first
half of next year.
The company said the integration of
Just Eat and Takeaway.com was “on
track”, adding that it had started an “ag-
gressive investment programme” in the
Just Eat territories, increasing spending
on marketing and sales.
Shares of the group rose 562p, or
6.4 per cent, to £94.04.Dominic Walsh
BHP coal exports on hold
amid tensions with Beijing
The world’s biggest mining group
has received requests from Chinese
customers to defer shipments of Aus-
tralian coal.
Amid fears over rising trade tensions
between the countries, Ken MacKen-
zie, BHP’s chairman, said: “We under-
stand there may be some new devel-
opments relating to how China plans
and moderates imports versus its own
domestic coal production.”
In recent days reports have sug-
gested that China may have banned
Australian coal imports outright as part
of a diplomatic spat, although it
remains unclear whether this is the
case. “It would be concerning if the
rumours were true,” Mr MacKenzie, 56,
said yesterday.
BHP mines iron ore and coal in Aus-
tralia, with both commodities primarily
destined for China. The group employsmore than 70,000 people globally and
reported underlying profits of $9.1 bil-
lion last year.
China is Australia’s top trading part-
ner, but tensions between Canberra
and Beijing have increased since 2018,
when Australia banned Huawei from
its 5G network. Scott Morrison, Aus-
tralia’s prime minister, has inflamed
tensions by calling for an inquiry into
the origins of the Covid-19 outbreak.
Last week S&P Global Platts report-
ed that Chinese state-owned compa-
nies had been ordered to stop import-
ing Australian supplies of thermal and
metallurgical coal. Thermal coal is used
in power stations, while metallurgical
coal is used in steelmaking. Analysts
said it was not clear whether any
restrictions had been designed as a
political blow to Australia or as a move
to protect China’s coal industry.
Shares in BHP fell 8¼p, or 0.5 per
cent, to £16.41¾.Emily Gosden
ASOS