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Note from the editor - 1 February

Lex Hall  |  01 Feb 2020Text size  Decrease  Increase  |  
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Did you rush out to buy a face mask this week? Or did you buy shares in 3M (NYS: MMM)? Perhaps in the spirit of hedging your bets, you did both. That strain of cynicism conveys the reaction of the market this week as its temperature fell and rose in line with each update of the coronavirus. The WHO eventually told us yesterday that, yes, it’s urgent and we should probably work together to halt the progress of the deadly flu-like condition. By the way, 3M is fairly valued according to Morningstar. And the jury is still out on whether a facemask will spare you.

At the same time, an outbreak of another kind has been doing the rounds: investor complacency. As markets reach record levels, “unknowns like the coronavirus are a compelling reason for investors to always be prepared and vigilant,” writes Morningstar’s Peter Warnes. “The world is not as safe socially, commercially, politically or financially as many may think.” Warnesy’s full warning is worth a read.

No one sought to minimise the seriousness of the virus, of course, and the market was duly infected. The Australian bourse posted its biggest one-day fall for the new year on 28 January. And China and travel-exposed companies—think Fortescue Metals (ASX: FMG), Qantas (ASX: QAN) and Webjet (ASX: WEB)—were the hardest hit.

Yet should China and the world overcome the coronavirus, the outlook might not be as bleak as feared. China had a good last year and investment opportunities haven’t evaporated. Have you checked your China/Asian ETF? You’ll be surprised. Anthon Fensom explains why it won’t necessarily be a rat of a year. And perhaps the trade truce will encourage the Chinese to start drinking more wine. Treasury Wine Estates (ASX: TWE), for one, wouldn’t mind, writes Emma Rapaport, given the sobering news of a glut of cheap wine in the US.

This week we also reveal the companies that have scrubbed up well when it comes to tackling ESG risk. First Solar (NAS: FSLR), for instance, is among the names Susan Dziubinski singles out for their efforts to address environmental, social and governance concerns. What’s more, First Solar is trading at an 18 per cent discount. You can see more of the names making the grade, here.  

Elsewhere, Glenn Freeman examines the imbalance whereby a company can have a poor stewardship and yet still perform; we pay tribute to the legacy of Vanguard’s Jack Bogle; and we tell you how to manage the risks—yes, risks—of getting a pay rise and how it can derail your retirement savings.

Warmest regards,

Investing Compass
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Lex Hall

is senior editor for Morningstar Australia

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