Monday, 1 February 2016

We still have to spend

This year has been off to a volatile start so I thought it might be interesting to look at how the payment processes (Mastercard, Visa and Paypal) are seeing the world.

Global outlook
As expected Mastercard called out the US as being resilient, Europe is showing stronger growth best since 2011 and China and Brazil are experiencing week and slowing growth.Visa's CEO saw a similar outlook commenting that "U.S. outbound spend is strong, but it is offset by continued weakness from Canada, Brazil, and Russia. And more recently, we're seeing increasing weakness in the Middle East and China. We do see some areas of strength such as Mexico, Japan, and New Zealand, but they're obviously smaller markets for us."

Mastercard also noted that Chinese tourists "earlier they were going to Greater China, Hong Kong, Taiwan. Today they're going more to Japan, as an example. Japan has actually seen a surge of 115% in tourist arrivals from China compared to the prior year".

Soft global economy but e-commerce is strong
More than 25% of all spending on Visa cards in November and December was online up from 20% three years ago. According to Paypal "for the first time ever on black Friday more people shopped online than in-store." Buying online is a much better way to escape the crowds!

The payment processes are very resilient businesses as they benefit from people using less and less cash. You don't get this sort of commentary in many conference calls (Paypal) "margins in our business want to move up, that is kind of the tendency of the margin structure in our business". In a volatile global environment these stocks still make sense.

Decisive has a long position in Paypal (PYPL) and Visa (V). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.