Buffett buys Berkshire shares; Huawei booms in China; Multichoice competitor folds

By Alec Hogg

  • Warren Buffett’s Berkshire Hathaway disclosed over the weekend that it bought back $440m worth of its own shares in the three months to end June. The investment follows a recent change in the company’s policy to make buybacks practically possible. Berkshire also added to its ownership in Bank of America, increasing its stake to over 10%. But these investments hardly dented Berkshire’s mushrooming cash pile which rose from $114bn to $122bn during the quarter. The cash was boosted by net selling of $1bn worth of shares Berkshire owns, its biggest net sale in almost two years. The group’s second quarter earnings rose to $14bn from $12bn a year ago, the result of unrealised investment gains. Operating earnings were down from $6.9bn to $6.1bn because of excluding not-ready numbers from Kraft Heinz in which Berkshire owns 27%. It was also disclosed over the weekend that Justin Sun, the Chinese cryptocurrency promoter who paid a record $4.6m to secure a charity auctioned lunch with Buffett, had abruptly postponed the engagement, apologising on social media for self-promotion.
  • The world’s number two smartphone maker Huawei Technologies is reaping an unexpected benefit from continued attacks by US president Donald Trump and his allies. Huawei’s domestic Chinese sales have been lifted to new records by a patriotic buying spree. Financial results released over the weekend shows Huawei’s sales jumped by almost a third to a record 38% of all smartphones sold in China during the three months to end June – a ten percentage point market share gain on a year ago. The Chinese sales more than offset the fall in Huawei smartphone shipments in most of its key export markets, with overall revenues for the first half of the year rising 23%. Mobile phone companies outside China have been moving away from Huawei because of concerns at its ability to retain access to US-based Google’s Android operating system. This is not an issue in China where smartphone users are predominantly plugged into Tencent’s WeChat App rather than Android. Huawei has also been helped by a number of other Chinese companies offering their staff bonuses if they switch to Huawei phones.
  • In a related story, after brief and unproductive talks last week, the US/China trade war ratcheted higher on Sunday when US president Donald Trump over-ruled his advisors by deciding to ramp up tariffs. An apparently angry Trump insisted doing so was the best way to make Beijing comply with US demands. The Wall Street Journal says people familiar with the matter told it the debate was heated, and Trump insistent that from September the US will impose 10% tariffs on $300bn in Chinese imports that had thus far been excluded. The WSJ adds that battle lines are also hardening in China, raising prospects that any deal could be put off until after next year’s presidential election. Trump’s advisors argued that a new round of tariffs would hurt the US economy and further strain relations with China. Trump reckons the Chinese are holding off in the hope that after the election they would be able to negotiate with a Democratic Party president.
  • Zimbabwe’s economic crisis has reached a new level with Finance Minister Mthuli Ncube announcing he is to black out inflation statistics for the next six months. Although alarmed by the decision, observers were unfazed at the context, pointing out Zim’s black market exchange rate data puts inflation at 558% – three times the official level and the second highest worldwide behind Venezuela’s 35,000%. Bloomberg quotes Harare-based analyst Derek Matyszak of the ISS as saying “Zimbabwe is at a tipping point and if it falls over it’s going to be quite a long way in coming back.” Finance minister Ncube admitted Zim’s beleaguered economy will contract again this year for the first time since 2008, but was hopeful that policy actions would soon help. He said there had been a relaxation of local ownership requirements in the platinum industry and that the Treasury is starting to run fiscal surpluses. Meanwhile Zimbabwe’s Econet Wireless announced that because of the shortage of foreign currency it will shut its African pay-TV unit Kwese. The unit had been operating in over a dozen countries. Econet Group CEO Douglas Mboweni said this was because “third party content providers on whose content we rely, require payment in foreign currency.”