The week in investor relations: Historic gains, sell-side pain and dividend warnings
– The US stock market recorded historic gains as American politicians finalized a huge $2 tn rescue package for the economy, reported Reuters. The Dow Jones Industrial Average witnessed its biggest gain over three days since 1931. The S&P also achieved a three-day rally for the first time since February. US politicians hope the rescue package will pull the economy through the disruption caused by Covid-19.
– The sell side is struggling to predict corporate earnings as the Covid-19 outbreak disrupts the US economy, reported MarketWatch. Given the uncertainty, some analysts have decided to pull forecasts. ‘We believe it is far too early to assess the potential impact of the Covid-19 virus response/precautions on the economy and corporate profitability until more data is released in the coming months,’ said Brian Belski, chief investment strategist at BMO Capital Markets.
– The European Banking Federation (EBF) has called on European banks to stop dividend payments and buybacks to shore up balance sheets and encourage lending to the economy, reported Reuters. ‘For 2020 the EBF believes listed banks should not accrue dividends or undertake share buybacks so as to maintain maximum capital preservation, and bank boards will be deciding on dividend policy and any distribution amounts at year-end,’ the EBF said in a letter.
– The SEC halted trading in Zoom Technologies due to ‘concerns about investors confusing this issuer with a similarly named Nasdaq-listed issuer,’ reported Fortune. The company is a penny stock and, according to the SEC, has not made any public disclosure since 2015. The stock of similarly named Zoom Video Communications has soared during the Covid-19 outbreak due to demand for its popular videoconferencing services.
– The Financial Times (paywall) noted that a large group of investors have written to 95 companies calling for more disclosure over human rights in their operations and supply chains. The companies contacted – including Prada and Starbucks – are the worst-performing names on the Corporate Human Rights Benchmark, a ranking produced by the World Benchmarking Alliance.
– A commitment to long-term valuation creation by asset managers has garnered several more signatories, according to Investments & Pensions Europe. The new names include Dutch fund ABP, Australia’s HESTA and UK pension scheme Nest. The statement was released in March by major public pension funds in the UK, the US and Japan. It calls on companies and investors to ‘keep short-termism at bay and drive sustainable economic growth for customers, beneficiaries and society.’