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Note from the editor - 13 September

Lex Hall  |  13 Sep 2019Text size  Decrease  Increase  |  
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Another week, another potential thaw in the trade war, another iPhone - and another buy now, pay later provider. And a Kiwi one, at that.

The latest entrant into the increasingly crowded BNPL field is simply called Laybuy. They may not have a gimmicky name but their offer - “Get it now. Pay it in 6. Interest Free. Easy” - is reminiscent of Afterpay Touch Group. And like Afterpay, Laybuy has launched in the UK and plans to enter the US soon. The privately owned company was founded by NZ retail veteran Gary Rohloff and his 23-year-old son, Alex, in late 2016. Rohloff describes it as the dominant player in New Zealand with half a million customers. It already has more than 1200 Australian retailers and a new office in Sydney.

Laybuy differs from Afterpay in splitting payments into six weekly instalments, instead of four fortnightly ones, which Rohloff said was in response to customers who want to budget on a weekly basis. Laybuy also offers "Laybuy Global", which lets merchants offer the buy-now, pay-later service to their international e-commerce customers.

You’ll recall that Morningstar analyst Chanaka Gunasekera began coverage of Afterpay Touch last week, valuing it at $22. A key reason he sees it as overvalued is the increasing competition. Laybuy joins other BNPL players Zip Pay, Humm, Splitit, Klarna, Latitudepay, Sezzle, Openpay, Brighte, Creditline, Once …

Afterpay fell 6.4 per cent this week.

Meanwhile, the trade tensions that have coiled themselves around markets this week slackened. Intentional or not, it was a rare moment of coincidental conciliation. The two trade foes agreed to a new round of talks next month. And Donald Trump went so far as to say he would delay increasing tariffs on $250 billion worth of Chinese goods from 1 October to 15 October as a “gesture of good will” to China. Why the good will, you ask? It came “at the request of the Vice Premier of China, Liu He,” Trump tweeted. “And due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary.” The tariffs were set to increase to 30 from 25 per cent on the goods.

Markets liked the news, as did copper, a bellwether for the health of the global economy.
Others, however, are still biting their nails. Most economists in a new Reuters poll believed the trade dispute will worsen or at best stay the same over the coming year. The International Monetary Fund wonks are anxious too, fearing US-China tariffs “could potentially reduce the level of global GDP by 0.8 per cent in 2020, with additional losses in future years.”

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Lazard Asset Management’s Ron Temple tends to agree. During a visit to Morningstar, Temple, who oversees US equities, said the trade war had evolved to the point where both sides of US politics consider the Middle Kingdom a security threat.

Elsewhere, Apple gave us a new iPhone. It’s cheaper and has a better camera, but that’s about it, according to Morningstar analyst Abhinav Davuluri, who also cast doubt on Apple’s new streaming service, Apple TV Plus. The smartphone maker’s entertainment library is too “shallow” in Davuluri’s eyes and will fail to keep up with the big boys of the streaming space, Disney and Netflix.

So in the interests of resisting emotional impulses and avoiding investing mistakes, outlined in this informative column by Morningstar’s director of fund research Russ Kinnel, enjoy the iPhone you have.

Warmest regards,
Lex Hall

is senior editor for Morningstar Australia

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