Breakingviews - Corona Capital: Julius Baer, Philips, Reshoring
MILAN/LONDON/HONG KONG (Reuters Breakingviews) - Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
- Julius Baer
- Japanese reshoring
PANDEMIC JITTERS. Julius Baer made hay in the first half of the year. The Swiss private banking group on Monday reported net profit of 491 million Swiss francs over that period, up 43% from a year earlier, thanks to frenetic trading by rich clients. Boss Philipp Rickenbacher said the second half could be challenging. If market activity were to fall back to pre-pandemic levels, the bank would struggle to make decent profit on managing client assets while interest rates remain ultra-low. The poor performance of asset management Kairos has also been dragging down Julius Baer’s advisory fees.
The Covid-19 pandemic is not yet under control in several countries. And there are growing fears that a new wave of infection may be on its way. U.S. elections in November and global tensions surrounding China could also make asset prices more volatile. But as the first half showed, if markets jitters come back, Julius Baer may again benefit. (By Lisa Jucca)
STRONG PROGNOSIS. Frans van Houten, chief executive of healthcare-kit specialist Koninklijke Philips, was finally able to deliver some good news about the patient’s progress on Monday. After a dire second quarter, in which hospitals paused non Covid-19 equipment orders and sent Philips’ sales down 6% year-on-year, he sees signs of life. Orders, which will be booked as revenue in future quarters, were 27% higher than a year earlier. And it’s not just ventilators: Hospitals want more specialist scanners too, van Houten said.
That pushed Philips’ shares up by almost 4%, taking its market value to a record 41 billion euros. The rally may have further to go. It’s likely that governments and hospitals will raise spending after the pandemic, scarred by images of overcrowded intensive-care units. Selling equipment such as patient monitors may be the new shovels in a gold rush. (By Liam Proud)
ANYWHERE BUT THERE. Japan is following through on its plan to encourage some companies to reshore production from China, starting with makers of facemasks. The total subsidy, at around $536 million, won’t go very far when spread around 57 companies. That suggests Tokyo is aware of the unattractive economics of companies moving back home where the minimum hourly wage is three times higher than in core Chinese manufacturing provinces.
In addition, 30 companies are being paid to move out of China into Southeast Asia, including Vietnam, where labour costs are lower. A shift to these neighbouring countries sounds more realistic. Either way, it’s one thing to help companies invest in their home economy for critical medical equipment. It’s another to pay firms to evacuate from the People’s Republic for a third location. Relations between Tokyo and Beijing have been cooling, and this will add to the frost. (By Pete Sweeney)
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