Breakingviews - Corona Capital: NZ vote, Health kit, Julius Baer
MELBOURNE/LONDON/MILAN (Reuters Breakingviews) - Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
- New Zealand election
- Health equipment
- Swiss wealth managers
LADY OF THE RINGS. New Zealand Prime Minister Jacinda Ardern and her centre-left Labour Party won a commanding election victory over the weekend. They are in the rare position of having an outright majority, without a coalition, thanks largely to her decisive responses to the pandemic, a deadly volcanic eruption and mosque mass shootings. Although Ardern will be the envy of leaders elsewhere, she now has to prove she can do more than manage crises.
Successfully suppressing the virus has taken its toll, forcing Ardern to postpone policy initiatives such as affordable housing. The economy is suffering its deepest slump on record, contracting 12.2% in the second quarter compared to the first three months of the year. With tourism from overseas frozen, some 11% of GDP remains under threat. More monetary stimulus is possible, but high unemployment and debt levels will have to be contained, too. (By Jeffrey Goldfarb)
MARGINAL GAINS. Koninklijke Philips Chief Executive Frans van Houten has solved one side of his corporate Rubik’s Cube: growth. Sales at the 38 billion euro Dutch health-technology company rose 10% year-on-year in the third quarter of 2020, after stripping out currency fluctuations. Coronavirus-stricken hospitals, particularly in western Europe, are investing in monitors and other bits of kit to help them oversee patients remotely. To the extent that health budgets allow, that trend should continue.
The question is how much of the new revenue van Houten can turn into profit. Analysts are pencilling in a 14% margin for earnings before interest, taxes and amortisation next year, Refinitiv data shows, compared with 17% for Siemens Healthineers. Van Houten could wield the knife, but underinvestment would risk handing business to rivals – effectively scrambling the neat face of his half-completed puzzle. (By Liam Proud)
VIRAL BOOST. Julius Baer is turning into a pandemic winner. The Swiss wealth manager said on Monday that its gross margin – basically the income it squeezes out of the assets it manages – was around 89 basis points in the first nine months of 2020, well above 2019 levels and close to the chunky 92 basis points it reported in the first half. That means clients continued to trade with gusto even after a pandemic-related spike around March. The private bank also managed to add new money from wealthy clients faster than expected, lifting shares.
This bodes well for larger rivals UBS and Credit Suisse. Asian countries’ ability to contain the pandemic has encouraged rich clients there to invest more aggressively. And if uncertainty kicks in again, as seems the case in Europe, market volatility could jump again, bringing in higher transaction fees. As the virus persists, so will wealth managers’ profit. (By Lisa Jucca)
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