19th January 2013
HMV’s importance to other businesses
This week we got some hard numbers behind the music and film industry’s concerns about HMV – they were not just worried about being squeezed more by online firms but about losing part of the overall market. Analyst Kantor World tells the Financial Times that a complete HMV closure will cost the entertainment industry £300m a year or around 9 per cent of the market especially ‘impulse buyers’.
There are still winners to be found in UK retail
Here is Invesco Perpetual fund manager Martin Walker: “Over the past three years Dixons’ cost base has been fundamentally re-engineered and its stores re-energised. Dixons prices are not only on a virtual par with internet-only operators such as Amazon, but the group boasts good-quality customer interaction that comes with its portfolio of stores. The company’s suppliers recognise this and have started to offer Dixons favourable buying terms over internet operators. The backdrop of a slowly improving UK consumer environment is likely to be significantly enhanced by the group’s market share gains brought about by the demise of its biggest competitor, Comet. With sales on an improving trend, operational gearing within the business should allow for earnings to grow significantly faster than sales.”
Apple isn’t planning cheap versions for China any time soon
Despite much discussion about Apple’s plans to create a low-cost iphone for the Chinese market, the company itself seems determined to fight on its own expensive terms by extending credit of '12 easy monthly payments' to Chinese customers as Arstechnica reports. One important note is that 15 per cent of the firm’s revenue in 2012 came from China according to boss Tim Cook so the country is no longer just the manufacturing centre but a market too. Of course Apple doesn’t face the same challenges over censorship as its search engine and social media rivals. Macworld suggests that Apple is the second favourite brand among China’s rich men and the fifth favourite brand among China’s rich women. But what does it mean long term for the share price? It doesn't sound like bad news.
More generally China is doing quite well again
Fund manager Schroders economist James Bilson gives this positive yet cautious assessment
"We have long felt that China would see an improvement in the final quarter of 2012, driven by some infrastructure spending (there has been heavy investment in railway spending), an easing of monetary policy and improvement in the housing sector, with both prices and sales volumes beginning to rise. Our view is that this positive growth momentum will carry on into the first quarter of this year, with leading indicators such as the Purchasing Managers Index appearing to confirm this, but growth will begin to plateau as we move towards the second quarter. With the global economy still sluggish, and domestic policy remaining accommodative but cautious, final demand remains too weak to see growth improve sharply”.
And finally that UK bank bailout is the gift that just keeps taking
Last week Michael Cohrs a member of the new Bank of England Financial Policy Committee (a committee effectively charged with anticipating and preventing the new financial crisis) under questioning from MPs suggested the UK taxpayer probably overpaid when it bailed out the UK banks i.e. the big state owned share of RBS and Lloyds in comparison with the US where the Treasury eventually turned a profit. His view was reported on trade paper ftadviser.com. Now the US may be quids in as well as dollars in. As the Guardian’s financial editor Nils Pratley points out part of the expected RBS fine for Libor will be the UK effectively fining itself. However he also notes the US usually extracts about four times the amount that the UK authorities do. So we are transferring hard cash to America. Oh dear.