Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Mamma Cathie takes on China

Written by Li-Ann Chin, associate
Edited by Scott Reid, associate partner

24 August 2021

Good morning,

Newsflash, celebrity fund managers are back in business.
 
Meet Cathie Wood, superstar fund manager and founder of Ark Invest, a US-based investment firm notorious for its focus on meme-worthy investments in companies that generate little or no profit, but are believed by Wood to have the potential to change the world through “disruptive innovation”.
 
On social media, Wood is nicknamed “Mamma Cathie,” “Aunt Cathie” and, inexplicably, “Money Tree” in South Korea. There are dedicated websites built to track her investment moves. T-shirts featuring her profile in the style of Barack Obama’s “Hope” poster can be found in certain deep, dark corners of the internet.
 
In recent months, the company has bet heavily on trendy sectors and companies including alternative energy businesses, space exploration and digital currencies; the likes of Tesla, Zoom, Coinbase and retail trading platform Robinhood – to name a few.
 
Following Beijing’s regulatory clampdown on sectors ranging from education, technology to healthcare, Ark Invest has sought to rid itself of the previous shares held in Chinese technology firms. Wood’s flagship Ark Innovation ETF now sits with no exposure to shares of companies in the world’s second-biggest economy. “The crackdowns by the Chinese government are contradictory to their desire to become one of the most innovative countries in the world,” Wood declared.
 
But has Mamma Cathie moved too hastily? Investors – M&G and T.Rowe Price – are reportedly flocking to sectors in China such as semiconductors, electric vehicles and artificial intelligence which are more aligned with the nation’s development priorities, and therefore still on the receiving end of Beijing’s good graces.
 
Analysts predict that companies helping China to achieve its climate and environmental goals stand to benefit from government largesse in the coming years; similarly, those involved in “import substitution” – semiconductor firms and suppliers of electric car components, in particular – now that achieving self-reliance in domestic manufacturing is viewed by Xi Jinping’s administration as vital in fending off growing threats from the US. Local brands that cater to China’s populace and innovative drug and biotechnology companies are also perceived to be potential winners in the long run.
 
As tensions between Beijing and Washington reach new heights, it appears China’s strategy is to redirect capital and human resources away from internet companies into sectors that will help the country become more self-reliant – a sentiment that investors, including Mamma Cathie, ought not to discount.

News

The US is under pressure from allies to delay its withdrawal from Afghanistan to allow those who want to flee the country more time to evacuate. US troops controlling Kabul airport – the only airport still operating in the country – are scheduled to leave by 31 August. A virtual G7 summit hosted by the UK today is due to discuss the issue. Prime minister Boris Johnson is also expected to call for an increase in aid, and promise “to use every humanitarian and diplomatic lever” to protect human rights in the country.
 
Extinction Rebellion protestors brought parts of London’s West End to a standstill yesterday as up to 1,000 activists marched from Trafalgar Square to Covent Garden where they erected a 13ft-high pink table equipped with sleeping quarters and areas where they can lock themselves in. The protests are expected to last for two weeks and are primarily aimed at the City of London. (£)
 
The UK government ordered an additional 35 million doses of the Pfizer-BioNTech vaccine which is expected to be delivered in the second half of next year, as it prepares for a programme of Covid boosters to protect the most vulnerable this year. Health secretary Sajid Javid has confirmed that third booster doses for the over-50s is likely to start in September, pending approval from the Joint Committee on Vaccination and Immunisation.
 
Up to 80,000 EU nationals could lose their right to reside in the UK due to errors in EU Settlement Scheme applications. According to data published by City law firm Bates Wells in City A.M, many applicants are likely to lose their jobs or face deportation, particularly since many of the rejected applications may not be appealed.

Business and economy

Lord Ian Botham, a former English international cricketer, has been tasked by Boris Johnson to lead a trade mission to Australia in his latest position as a UK government envoy. Botham is expected to head a delegation that includes law firms, carmarkers and whisky distillers when Covid restrictions are lifted. Other trade envoys to countries where the UK has a strategic trading interest were also named. (£)
 
According to the latest IHS Markit business survey, the UK’s economic recovery faltered in August as companies faced labour and supply shortages due to the so-called ‘pingdemic’ and rising Covid-19 case numbers deterred consumers. Britain’s economy grew by 4.8% in the second quarter of the year but remains more than four per cent smaller than pre-pandemic levels.
 
The UK government is set to extend the deadline for manufacturing companies to pivot away from using the RU’s CE safety mark and adopt a new “UKCA” safety and quality mark instead for their goods post-Brexit. Businesses will now have up to January 2023 to apply for the “UK Conformity Assessed” mark. (£)

Columns of note

Drug seizures have, in recent months, increased drastically in Southeast Asia, with most of the narcotics originating from Myanmar – one of the world’s largest synthetic drug producers. The Big Read in the Financial Times exposes how the country’s post-coup civil conflict and cash crunch has provided cartels with ideal conditions to entrench and expand operations, fuelling the rise in illegal drugs trade and addiction across the region. (£)
 
Writing in The Times, Clare Foges invokes the concept of tribal distaste, arguing that Extinction Rebellion’s disruptive antics are counterproductive in the way that they alienate the parts of the British public from a cause that desperately needs their attention. Last autumn, public ire was raised when Sir David Attenborough was harassed by a group of Extinction Rebellion protestors. This week, the environmental campaign group is reportedly gearing up for their Impossible Rebellion – a two-week climate protest set to take place across London, which Foges suspects will cause similar distaste. (£)

Cartoon source: M Reuters

Markets

The week ahead

London stocks finished in a mixed state on Monday as investors waded through a raft of UK data releases and Sainsbury’s share price experienced a surge as a result of takeover speculation.
 
The FTSE 100 ended the session in the green, up by 0.3% at 7,109.02, while the FTSE 250 was down 0.04% at 23,740.49.
 
Sterling was similarly up, last advancing 0.69% on the dollar to exchange hands at $1.3717 and rising 0.4% against the euro to trade at €1.1691.
 
Wall Street stocks rallied on Monday as market participants await the Federal Reserve’s Jackson Hole symposium later this week.
 
At the close, the Dow Jones Industrial Average was 0.61% firmer at 35,335.71, while the S&P 500 was 0.85% stronger at 4,479.53. The Nasdaq Composite, on the other hand, ended the session up 1.55% at 14,942.65.
 
In company news
 
EasyJet appointed Stephen Hester, one of the City of London’s most experienced chief executives, as chairman as it attempts to recover from a brutal few years for the airline industry.
 
McKinsey & Company won a £3m contract to consult the UK government on digital, data and technology services ahead of its annual spending review.
 
Sainsbury’s shares rose by more than 10% – their highest level in more than seven years – after reports over the weekend revealed that the supermarket chain could be the next in line to receive a buyout bid from a private equity firm.
 
Visa entered the non-fungible token market with its purchase of a collectable CryptoPunk avatar valued at £109,393.
 
Sir Richard Branson’s Virgin Orbit confirmed it will go public by merging with special purpose acquisition company NextGen Acquisition Corp in a deal that values it at £2.3bn.

What’s happening today?

Interims
Puretech

AGMs 
Northern Bear
Nuformix
Purplebricks

International Economic Announcements   
(07:00) Gross Domestic Product (GER)
(15:00) New Homes Sales (US)

Source: Financial Times

did you know

For a Cornish pasty to be truly Cornish, it needs to have exactly 20 crimps along the outer edge – nothing more and nothing less.

Parliamentary highlights

House of Commons

The House of Commons is in recess. The House will next sit on 6 September 2021.

House of Lords 

The House of Lords is in recess. The House will next sit on 6 September 2021.

Scottish parliament 

The Scottish parliament is in recess until 30 August.

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on email