Election bounce
Subsequent decline
The Conservatives’ election victory in December was a boon for sterling. The FTSE 100 also enjoyed a boost – the UK-focused FTSE 250 index more so – buoyed by the prospect of a smoother divorce from the EU, and the fact that various sectors are no longer at risk of nationalisation under Labour rule. But optimism didn’t last long. The pound dropped as the path forward grew murkier, with prime minister Boris Johnson introducing legislation to prevent Brexit negotiations extending beyond 2020. This could, ostensibly, heighten the risk of an abrupt or ‘no deal’ departure.
Takeover town
Cobham approved
As 2019 drew to a close, the UK government revealed that it had greenlighted the £4bn acquisition of defence company Cobham (COB) by US firm Advent international. This wasn’t the only high-profile swoop on a British plc to occur last year. Among others, we saw takeover bids for Merlin Entertainments, Inmarsat and Entertainment One. In December, food delivery group Just Eat (JE.’s) board recommended that shareholders accept a final offer from Takeaway.com, rejecting a rival bid from Naspers.
Woodford saga
Liquidity issues
2019 saw the Woodford saga unfold. Neil Woodford’s eponymous Equity Income fund was suspended in June. In October, we learnt that it would be wound up. The fund was, in a nut shell, too heavily invested in illiquid assets to meet a surge in redemption requests. So, how to avoid liquidity mismatches in other investment vehicles? As part of an ongoing review of open-ended funds, the Bank of England’s Financial Policy Committee has “established that there should be greater consistency between the liquidity of a fund’s assets and its redemption term”.
IPO woes
Underwhelming floats
Troubled property group WeWork abandoned its US flotation plans in September, with management explaining at the time that “we have decided to postpone our IPO to focus on our core business”. And while other much-hyped stateside companies were more successful in their efforts to go public, they still saw lacklustre debuts. Shares in Lyft (US:LYFT) and ride-hailing technology peer Uber (US:UBER) are currently down by around a third since their IPOs in March and May, respectively.
Trade war progress
Tensions thawing?
After 18 months of the US and China exchanging retaliatory tariff blows, the end of 2019 has brought some hope of relief for the global economy. The two countries recently agreed a ‘phase one’ deal – a promising first step to de-escalating tensions – but the truce remains precarious. In the meantime, seeking to boost domestic growth, China is opening up trade with the rest of the world and will lower import tariffs on more than 850 goods from 1 January. This includes frozen pork after the year of the pig was marred by the African Swine Fever epidemic.
Hong Kong dissent
Political turmoil
Tensions over China’s commitment to its ‘one country, two systems’ policy boiled over in 2019 as Hong Kong was rocked by anti-government protests. As the political unrest shows no signs of abating, the widespread disruption is taking its toll on the economy. The latest purchasing managers' index from IHS Markit fell from 39.3 to 38.5 in November, the worst deterioration in private sector activity since the SARS epidemic in 2003 – a reading under 50 indicates contraction. Persistent instability could undermine the territory’s status as a global financial hub, although businesses will be wary of attracting the ire of mainland China.
Climate change
Greta leads the way
Climate change captured the public’s attention in 2019. This was the year when global emissions were set to reach their highest point ever at 43bn tonnes of carbon dioxide and 16-year-old Greta Thunberg gave world leaders both barrels at the UN. But it will take more than that to shift the priorities of the world’s major emitters. Royal Dutch Shell (RDSA) and BP (BP.) and others are still green-lighting new projects that will reportedly hinder the planet from hitting the Paris climate goals of keeping warming to between 1.5 and 2 degrees.
