‘That extra bit’
Avien Pillay, Head of Research and Investor Services at Old Mutual Wealth.
Discovery has announced that it has exercised the right to acquire the final 25% of the UK JV from Pruhealth.
Discovery the “disruptor”
Discovery has earned a reputation of being the perfect disruptor. It did not introduce the medical aid model to SA, but is now the dominant player by a very wide margin. This was achieved by using the highly successful Vitality model to disrupt traditional and outdated business models. Discovery has redefined the way insurers assess risk and successfully managed to change consumer behaviour using an elaborate reward system. The United Kingdom is the third largest market by gross premiums and Discovery believes that this large and commoditised market presents an opportunity for an innovative and disruptive model.
Why is the oil price so weak?
The market is speculating that the US will lift the ban on oil exports. There is a four decade ban on oil exports from the US in place. This was put in place as the US was concerned about maintaining adequate supply. Given higher production from fracking, the US’s production has increased by 14% over the past year and 58% since 2005. The US has just overtaken Saudi Arabia as the largest producer in the world. There has also been a shift in demand given efficiency gains in cars and commercial vehicles. Demand for the year to September 2014 dropped 3.5% and given the advances in technology and the increased use of electric vehicles, this trend is expected to continue. Fuel prices have dropped by more than 20% over the last year and this drop has injected $ 71 billion into the US economy. Brent crude is currently trading at $80 per barrel after peaking at $ 126 in 2012. Given that $80 is the price at which a number of major producing countries need to balance their budgets, we expect these large producers to reduce supply to prevent the price from dropping further. There is the risk that the oil price could overshoot (to the downside) in the short term.
What is Singles Day in China?
It is the US equivalent of Cyber Monday which follows the big Thanksgiving shopping day of “Black Friday”. On Cyber Monday, US online retailers discount prices aggressively to attract customers. Singles Day in China is an online shopping frenzy day, as consumers react to the heavily discounted prices. Alibaba (China’s largest online retailer) reported sales of $ 9.3bn on Singles’ Day. This is by far the biggest single shopping spree on any recorded measure and a big windfall for Alibaba. If you were lucky enough to participate in the Alibaba listing seven weeks ago, your investment would be worth about 70% more today.
China’s stock market finally opens to foreigners
On Monday the 17th November 2014, investors anywhere in the world will be able to purchase shares of companies on the Shanghai Stock Exchange. Previously investors could only invest in China’s B shares or Hong Kong’s H shares as a proxy for the Chinese stock market. It seems that the Chinese economy is becoming a lot more “open” as it adjusts to a lower level of growth.
