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Seven Days: 13 November 2020

Seven Days: 13 November 2020

Vaccine breakthrough

Markets surge

Pfizer (US:PFE) and BioNTech (US:BNTX) announced that their Covid-19 vaccine candidate was more than 90 per cent effective, sending markets into a frenzy. In the drug’s first interim analysis, protection was achieved 28 days after the initiation of the vaccination, which consists of two doses. The companies noted that the final vaccine efficacy percentage could change as the study continues, but investors have still grown more bullish on the prospect of a recovery in 2021: a view shared by Sir Martin Sorrell. 

 

Biden wins White House

Trump cries fraud

Democrat Joe Biden has emerged as the apparent victor of the US election, although President Trump refuses to concede defeat. The Trump campaign has launched a number of lawsuits in battleground states over voter fraud, but they have been mostly rejected in the courts. Mr Biden, who is set to take up office in January, called Trump’s failure to recognise his win an embarrassment. The President-elect’s margin of victory appears to be growing as vote counting draws to a close, but the Republican Secretary of State Mike Pompeo insisted in a press conference that “there will be a smooth transition to a second Trump administration”. 

 

Investment platforms buckle 

Accounts blackout 

Outages at major investment platforms this week meant that some investors were not able to access their accounts during a flurry of market activity, spurred by the Pfizer vaccine news. Customers of Hargreaves Lansdown (HL.) and AJ Bell’s (AJB) Youinvest flocked to social media to express their frustration at their inability to buy or sell holdings during such big market moves. Some investors also cited issues at Fidelity Personal Investing and Vanguard. Hargreaves and AJ Bell said that sheer volume had driven the technical problems, raising concerns that the platforms are not designed for high-volume trading. 

CGT allowance at risk

New proposals 

The annual allowance on capital gains tax (CGT) could be severely cut under new proposals in a review commissioned by the chancellor, Rishi Sunak. CGT rates would be moved closer in line with those that govern income tax, which HM Revenue & Customs estimates could raise an additional £14bn a year for the Exchequer. The Office of Tax Simplification (OTS) said that the “relatively high” annual exemption, which currently sits at £12,300, can “distort investment decisions”. The review suggested that the threshold could be pushed down to somewhere between £2,000 and £4,000. 

 

RSA in takeover talks

£7bn deal

Insurance group RSA (RSA) is in talks with Canada’s Intact Financial and Danish peer Tryg about a £7bn takeover deal. The board is “minded to recommend” the bid, which values the company at 685p a share and at a 24.5 per cent premium to the offer from Zurich Insurance in its takeover attempt in 2015. Under the terms of the proposal, RSA’s divisions would be split, with Intact taking the Canadian, UK and international operations and Tyrg absorbing divisions in Sweden and Norway. If the deal passes, it will be the largest acquisition of a public company in the UK this year. 

 

Watkin Jones undeterred

Boosts student property

Student property occupancy rates may have taken a hit following the pandemic, but Watkin Jones (WJG) boosted the number of beds in its development pipeline by almost a fifth during the six months to September. However, a lower level of student occupancy for the 2020/21 academic year across six legacy assets is expected to result in a £5m reduction in revenue for 2021. While management said underlying operating profits would be in line with consensus, house broker Peel Hunt downgraded pre-tax profit forecasts for 2021 and 2022 by 31 and 36 per cent, respectively, citing slower development progress. 

 

BP getting greener 

Potential hydrogen move

Oil supermajor BP (BP.) has signed a deal with the Danish power group Ørstead (DEN:ØRSTED) to develop a hydrogen project in Germany. The companies are planning a 50 megawatt facility that would use renewable energy from a wind farm in the North Sea. The hydrogen electrolyser, which splits water into hydrogen and oxygen, is still at the design stage. A final investment decision will come in 2022 and, if positive, operations will kick off in 2024. BP has said that it will grow its current renewable investment from around $500m (£377m) a year to $5bn a year by 2030. 

 

Apple’s new chip 

Intel out 

Apple (US:AAPL) has launched the first devices that will be powered by its own chip, Apple Silicon. The new Macbook line and Mac mini compact desktop will run on the chip, after the company said earlier in the year that it will transition away from the Intel (US:INTC) processors it has used since 2006. Meanwhile, this week the Financial Times found that thousands of student interns had worked overtime to assemble iPhones at a supplier in China, in breach of domestic law. Apple told the paper that it had stopped giving new business to the manufacturer. 

 

Rent prices in London dropped 3.2 per cent in the third quarter of 2020,compared with an average rise of0.7 per cent in the rest of the country, according to data from Zoopla. 

Read Emma Powell’s analysis of how this might have a knock-on effect on buy-to-let investors on page 77. 

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