Market Round Up: Tesla Shacks Up In Shanghai 🚘 Thomas Cook Takes off ✈
1. Tesla Shacks Up In Shanghai
After securing its site in October, Tesla has finally opened the bidding for construction companies to build China’s very first completely foreign-owned auto-factory. Good job Elon!
The ‘Gigafactory’ is predicted to cost roughly $2 billion, but analysts are not just viewing this as any other car factory. The China-Tesla relationship is being watched very closely by investors as a measure of US-China relations and the increasing openness of the Chinese economy.
Opening up its doors to foreign business in traditionally protected industries is an extremely important development as other companies seek to exploit the vast opportunities in the Chinese market.
Tesla’s progress will undoubtedly serve as a benchmark for other businesses, but this factory is also of extreme importance to Tesla which has been under considerable pressure lately.
Trade war tensions have forced Tesla to slash car prices to match lower demand, and Trump’s threat to remove subsidies for the green auto-market are both worrying signs for the future.
However, Tesla’s plans to release its mass-market Model 3 in 2019 from the Chinese Gigafactory may be the X-factor that solves all of Elon Musk’s problems. Let’s see if he can muscle his way into the highly competitive Chinese electric vehicle (EV) market. Better start hitting the gym, Elon.
2. Thomas Cook Takes Off
UK travel company, Thomas Cook, has had a pretty chaotic two weeks to say the least. Its share price plunged 60% last week after it issued its second profit warning in two months, but bounced 29.58% to halve the decline during yesterday’s session – wild stuff!
Things have been falling apart for Thomas Cook thanks to an extra hot UK summer that had Brits soaking up the rays at home, rather than heading abroad. That aside, the company is drowning is a £389 million sea of debt which investors are more concerned about than their fading tans.
In a bold move of confidence, Thomas Cook’s Chairman, Frank Meysman, gobbled up 373,00 shares worth £80,441 just before the stock jumped up by 30%. Nice timing Mr Chairman!
However, his celebrations would have been short-lived as Moody’s recently downgraded Thomas Cook’s outlook from stable to negative. This will likely push it out of the FTSE 250 group and continue the downwards spiral that has seen it lose almost 80% of its value this year alone…ouch!
Rising competition in the European airliner space and the shift to self-service in holiday-bookings has made it hard for Thomas Cook to keep up in the fast-paced industry. Unless there are some drastic changes to their business model, the bad news may continue to roll in for Thomas Cook.
Easyjet and Ryanair are waiting like vultures…
Today we are watching…
1. Rolls-Royce (#rolls)
UK jet engine-maker, Rolls-Royce, slid 7.59% yesterday as short-sellers climbed into the action to profit from a short-term decline. Having lost almost 20% of its value since July, many large institutions are starting to eye up Rolls-Royce as a potential investment, upgrading their outlooks from neutral, to positive at these lower prices. This may be a bit premature, but its definitely something to keep in mind.
2. Prudential (#pru)
UK financial services firm, Prudential, has had a very bad start to the month, dropping 9% from its peak. 2018 has been a tough year for Prudential, and it doesn’t look to be getting any better. The share has proven to be riskier than most of its market peers, so investors will likely continue to put downward pressure on its share price into 2019.