Three things that got the team talking this week - Firetrail Investments

Weekly insights from the Trail

Three things that got the team talking this week

April 8, 2022April 14th, 2022

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1. Home is where the office is…

Over 20,000 bankers, traders and other workers have reportedly turned their offices into their home this week, as Shanghai went into strict Covid lockdowns. Some 23 Chinese cities are under total or partial lockdown currently, affecting an estimated 193 million people in areas accounting for 22% of their GDP.

As a result of the lockdowns:

Port cargo volumes have dropped by about a third since March 12, with increased safety measures incorporated
Flight activity into Shanghai Pudong airport was just 3% of its rate last month
Trucking services in and out of Shanghai are down an estimated 30%.

Source: Vessels Value

2. Bill shock…

A surge in coal and gas prices, partly due to sanctions on Russia, has driven wholesale electricity prices through the roof. It is interesting to note that wholesale prices make up 40% of a retail bill. Industrial users even more so. Wholesale electricity prices in NSW have almost doubled versus a year ago, while VIC prices are up around 50%. This is pushing the earnings pendulum further towards commodity owners and away from commodity users.

NSW electricity baseload futures prices

Source: AEMO, Bloomberg

3. Jobs are tight…

The ratio of job vacancies to unemployed persons is at very high levels across all states in Australia. Since the 1970s there had been a relatively consistent relationship between the job vacancy rate and the short-term unemployment rate. Until now. More signs of how tight the labour market is. Check out the Chart of the week video below to hear some potential implications.

Source: ABS, Seek, Macquarie Macro Strategy

Disclaimer

This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com

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