Market Round-Up

Bilibili, a popular video-sharing site in China backed by Alibaba and Tencent, has been accused of overworking employees after the recent death of 25-year-old worker Muse Muxin. The tragedy has led to the company proposing changes in which it has promised to make great efforts to expand the recruitment of auditors and take on an additional 1,000 censors to work with the team.

The company has also said that it would set up a counselling service to help ensure the physical and mental wellbeing of its employees. Bilibili had 2,413 content monitors at the end of 2020, and this is set to increase by 40%. The debate of overwork is widespread over the country’s internet industry and it comes as Bilibili has already been struggling with widening losses which are likely to worsen unless its exhaustive working culture is properly addressed.

Excessive overtime has been a repeated issue in China’s tech industry and Muxin’s death has sparked accusations that the government has not done enough to address the problem despite the succession of high-profile deaths linked to overworking in 2020. There is a deep-rooted expectation for employees, especially those of the tech industry, to accept the toxic overtime culture dubbed “996”: working from 9am to 9pm six days a week. This has been promoted by several prestigious figures, including Alibaba’s founder Jack Ma. Bilibili has denied that it overworked Muxin, claiming that he had only worked eight hours a day and taken two days off per week during the recent Lunar New Year holiday period, while also denying that he had put in any overtime. The company asserted that the type of profession requires personnel to be present 24/7 and the Lunar New Year is no excuse. This statement, however, is contradictory to reports made by workers who have said that they were often denied their annual days off with no pay for working in excess of their hours. With Bilibili’s shares tumbling 80% over the past year, its future will not be promising if changes are not made.

Meanwhile in the UK, consumer prices rose at an annual rate of 5.5% in the 12 months to January 2022, up from 5.4% in December, making it the highest rate rise in 30 years. This has even exceeded expectations from economists at Reuters who predicted Consumer Price Index (CPI) inflation to remain at 5.4%. The Bank of England (BoE) expect inflation to peak at 7% in April when energy regulator, Ofgem, plan to increase the default energy tariff price cap. This puts more pressure on the BoE to raise interest rates again to prevent a further squeeze on living standards. The government has stepped in to help UK citizens in this challenging environment by offering millions of households up to £350 to help with rising energy bills, however, this is unlikely to be enough as the squeeze on income will be more intense than previously anticipated.

Markets are now likely to run with the idea that the BoE’s next interest rate rise in March will be a hike of 50 basis points, increasing bank rates to 1% by May. The future is very much uncertain, but wider market expectations have not ruled out that policy rates will climb above 2% within the year. The current Russia-Ukraine tension could also keep inflation higher for longer as it may trigger a further rise in the Producer Price Index (PPI), which raises wholesale costs and will likely be passed onto consumers.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get back less than you invested.