The week in investor relations: Trade war is ‘new normal’, fund managers avoid unicorns and companies under more pressure over climate change
– A majority of investors think the US-China trade war is the ‘new normal’, according to a survey of global fund managers conducted by Bank of America Merrill Lynch, reports Marketwatch. The survey finds that 43 percent of respondents think there is no end in sight to the trade dispute, compared with 36 percent who think it will be resolved before the 2020 US presidential elections. Meanwhile, around three quarters of respondents say an end to the trade wat would be more bullish than any other market development, such as German fiscal stimulus, Chinese infrastructure spending or a resolution to Brexit.
– Fund managers are avoiding the IPOs of ‘unicorn’ companies – those valued at more than $1bn privately – given the expectation their valuation will fall when they enter the public markets, reports Reuters. A number of recent listings are now trading well below their IPO price, such as Uber and Peloton Interactive, leading to investor caution about future market entrants. For example, Jim Callinan, a portfolio manager of the Osterweis Capital Management, tells Reuters he will wait until the 180-day lock-up period has passed before making decisions on new company listings.
– A group of environmental and business organizations, including the Union of Concerned Scientists and the Environmental Defense Fund, have called on companies to take bolder action to combat climate change, reports Newsweek. The groups have said companies need to target reaching net-zero emissions by 2050, an objective encouraged by the Intergovernmental Panel on Climate Change. ‘Given their power to shape public policy, businesses have a vital role to play in moving smart and effective climate policies forward,’ says the letter, according to Newsweek.
– China will end limits on the foreign ownership of investment companies from April next year, reports the Financial Times (paywall). The China Securities Regulatory Commission announced the change late last week after completing a series of studies. Many global asset managers view the Chinese market as a big opportunity and now have a timetable to work toward, says the FT. The changes are part of broader moves to open up the Chinese financial markets. Other measures include ending limits on overseas ownership in securities firms.
– DE Shaw, a large hedge fund increasingly involved in activism, has released a report attacking the way Emerson Electric has been run for the last 10 years, reports CNBC. In the report, the hedge fund criticises Emerson’s management and board for failing shareholders. It also highlights areas where it says the company is wasting money, such as through its 18 different facilities in one city, Houston, and its fleet of eight aircraft. The letter confirms that DE Shaw holds a 1 percent stake in the industrials company and suggests it splits its industrial automation business from its climate technology business, while also taking measures to reduce costs.
– The ongoing saga of Brexit has continued to swing markets back and forth. The news that a new deal had been agreed between the UK and the European Union, combined with solid earnings results from several companies, led US shares to rise on Thursday, reports the Wall Street Journal (paywall). Serious doubts remain, however, about whether the deal will be approved by the UK parliament. ‘There is still a huge amount of uncertainty,’ says William Dinning, head of investment strategy and communications at Waverton Investment Management, according to the WSJ.