Covid in China, Twitter counterattack and what matters in the market

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Covid in China worries markets

A new record in the number of symptomatic cases of Covid-19 registered on Friday (15) in Shanghai, the financial center of China, has the market on alert for its economic consequences.

Understand: the local government has imposed restrictive measures on the movement of people in places with an outbreak of coronavirus, which can further shuffle the global supply chain and generate losses worldwide. The Chinese have protested the decisions.

New lockdown announcements in recent weeks have also shaken equity markets around the world, with investors fearing new logistical bottlenecks, one of the economic effects generated by the global pandemic.

In numbers: given the losses, analysts have already revised downward their estimates for the country’s growth for the year. If before the projection was for a growth of 5.5% of the GDP, now a dozen houses see an increase of 5% for the year.

Among the companies in the West, Apple appears to be among the most directly affected. Its supplier Pegatron has suspended factories in Shanghai and Kunshan, while Quanta, which makes three-quarters of the world’s Macbooks, also shut down.

In Zhengzhou, a 14-day lockdown was announced. It is there that one of the factories of Foxconn, the main iPhone assembler in the world, is located.

More about China:

The country’s GDP grew 4.8% in the first quarter, in the annual comparison. The result came above the market forecast, which was 4.6%but it is a sign that the country will struggle to reach the target of 5.5% by the end of the year, points out the Wall Street Journal.

Twitter’s “poison pill”

A day after Musk announced that he had made a $43 billion offer to buy Twitter, the company responded by saying it would put a corporate ploy known as the “poison pill” into play.

Understand: the strategy serves to hinder the onslaught of those who want to “take by force” the command of a company, forcing the purchase to be negotiated with the company’s board.

• In the case of Twitter, the “poison pill” will be triggered every time someone buys 15% or more of the company’s shares. If this happens, all other shareholders gain the right to buy new shares at a lower price.

• With more shares on the market, the job of Musk, who acquired 9.2% of the company last month, would be far more difficult — and expensive.

• This mechanism was created in the 1980s. Companies only use the strategy in extraordinary cases and with limited validity –on Twitter, until April 14, 2023– because they limit shareholder rights.

Negative reaction: Musk said in the offer that the proposal was his “best and only”, saying that the social network needs to become a privately held company to have effective changes.

His first setback came hours later, when Saudi Arabia’s Prince Alwaleed bin Talal said the offer should be rejected as not being high enough. He bills himself as one of Twitter’s oldest and largest shareholders.

Where Musk would get the money to make the purchase remains unclear. Much of his fortune is linked to Tesla, which limits personal loans with shares as collateral. If the billionaire decided to sell his shares, he could bring down their price.

Stock market at 130 thousand points?

Confident in the good moment of the Brazilian stock market during the year, bank and brokerage analysts raised their forecasts to the Ibovespa level at the end of the year.

In numbers: if in previous forecasts the index would close the year at 120 thousand points, now BofA (Bank of America), XP, Ativa and Guide see the Ibovespa among the 130 thousand and the 135 thousand points until December.

On Thursday (14), he closed in 116,181 pointsin an appreciation of 10.84% ​​in the accumulated of this year.

What explains: analysts believe that the banks and companies linked to commodities, which led the stock market to rise this year, will continue to set the tone for the local market. The international flow should also continue as a positive factor. So far in 2022, the gringos have put BRL 68 billion In the purse.

• Commodities: boosted by the war in Ukraine, the prices of some basic materials have even cooled down a little since the beginning of the conflict, but they remain at high levels and should bring good results to Brazilian exporting companies.

More about investments:

Online sales dominate at retailers

If previously the physical stores of retailers served as a single point for purchases and other services, such as installment payment, today they account for less than half of the sales made by the three of the largest retailers in the country.

But this does not mean that they have lost their importance for the sector, which is increasingly using them as an important point in the logistics chain.

In numbers: of the three giants, Via (Casas Bahia and Ponto chains), Magazine Luiza and Lojas Americanas have, respectively, 59%, 71% and 76% of all your sales made over the internet.

• Even in the face of competition from Asian sites, online sales grew 39% in Magalu and Via and were discharged from 56% in Americanas in 2021, while in physical stores sales fluctuated close to stability.

• The survey was carried out by reporter Daniele Madureira based on information disclosed by the companies.

What explains: this movement had already been happening before the pandemic, but it was driven by the explosion of purchases made over the internet from the restrictions caused by the health crisis.

• For logistics, physical points become essential given the size of the Brazilian territory.

• In stores, it has increased the space for stock, which is used to store the product that goes to the customer’s house, cutting costs and speeding up delivery – essential factors in the ecommerce war.

• They also serve as a collection point for consumers and can be used to sort and ship products from sellers, the third-party sellers who advertise their products on retailers’ websites.

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