NEWS, VIEWS & TRUTHS (20TH MAY – 24TH MAY)

Why, hello there. How are you? Well, I hope you’re good. Either way, many thanks for tuning into this week’s News, Views and Truths.

I shall avoid the obvious political wranglings this side of the pond. Perhaps the results, when announced on Monday, will affect the markets. To be honest I highly doubt that, as it seems that an inevitable result is already well and truly priced into the markets.

Yet that is still a very small element of the global theatre and it is my focus to discuss events of potentially greater significance. Like the ongoing Huawei situation.

For those of you who are unaware, Huawei is a Chinese telecommunications provider and the second largest manufacturer of mobile phones in the world. Founded in 1987, annual revenue in 2018 was $108.5bn, a 21% increase over 2017.

If they were based in any other country, Huawei would be a very good investment opportunity. Their Research & Development arm has 21 institutes globally and employs 76,000 individuals, investing $13.8bn in 2017 alone. As a result of this, Huawei is the leading developer of the new 5G wireless networks, the implementation of which will transform the speed of data transfer from the current 4G network.

However, because they are a Chinese company, they have been caught in a perfect storm of both espionage accusations and the US/China trade war. And the negativity shows no sign of abating.

It started with the “Five Eyes” intelligence alliance, comprising Australia, Canada, New Zealand, the UK and the US, purporting that Huawei, under the influence of the Chinese state, has created security “backdoors” within its hardware, enabling surveillance of calls made. These allegations came in the wake of China’s wide investments into the development and deployment of 5G networks motivated by a goal for the country to become more competitive on the global market.

From there, the US added Huawei to a trade blacklist, which puts curbs on its ability to do business with American firms. This caused significant ripples throughout global markets, specifically through tech stock that has benefitted from the rise in technology usage in recent years.

Perhaps influenced by this announcement, Google suspended its ties with Huawei, significantly affecting the ability for Huawei handsets to implement software updates. And if that wasn’t bad enough, British chip designer, Arm Holdings suspended its business with the embattled Chinese firm, instructing employees to halt “all active contacts, support entitlements, and any pending engagements” with Huawei. To emphasise the significance of this, Huawei uses Arm’s blueprints to design the processors that power its smartphones. Huawei also licenses graphics technology from the Cambridge-based company.

Huawei is being dropped like a hot rock. The world awaits China’s next move; according to a report from the South China Morning Post, China is pondering dropping purchases of natural gas from the US which was worth $6.3bn in 2017.

As we look at a rather choppy week for markets, remember that fundamentals remain strong. Remain invested and you give yourself the greatest chance to grow your wealth meaningfully. Bad days are closely followed by good; a wise man once said, “It’s about time in the market and not timing the market.” Very wise man. Devilishly handsome too, one hears. And painfully humble. All round catch I reckon…

Anyway, to the playlist. Again, curated by the staff at Three Counties. I hope you enjoy this and the weekend (Bank Holiday, woohoo!). Have fun, stay safe and I shall see you all next week.


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