The pandemic has created the wrong sort of decoupling for emerging markets, hurting their performance over the past three years, warns John Authers in Bloomberg Opinion. However, he added "none of this means that there won’t be a decoupling; but it’s not going to be the panacea that many have long wanted it to be". If China becomes the pole of what is effectively a different financial system, reshoring and deglobalisation will create opportunities in the emerging world, but it will also make them much harder to take advantage of, warns Authers. Nevertheless, these markets are experiencing some signs of recovery after a decade of underperformance, following the brief bull market which came to an end in the Global Financial Crisis in 2008.
Meanwhile, there is concern over the budget strategies of the US. Ted Decker, CEO of Home Depot, expects comparable sales to drop as much as 5% this fiscal year — the first annual decline in 14 years. Despite problems so far being driven by unusual conditions such as the price of lumber falling, according to Authers, if the recession risks loom larger over the US economy, and workforces normalize with new return-to-office policies, then support will fade for such firms that have been doing so well during the pandemic’s economic conditions. This would spell the end of the trends that Authers calls the home-building boom, e-commerce and working from home/home improvement.
Chinese investors have become net sellers of Tencent Holdings shares this quarter, with HKD 3.5bn ($447m) shed, according to Bloomberg data. The selling has coincided with a 10% drop in the Tencent stock since the end of March. Experts suggest that the turn might indicate concerns over China's economic future, which saw mainland investors buy up shares during a slump in the second half of 2020.
China’s securities regulator has unveiled new rules for global depositary receipts (GDRs) that could renew listings in Europe. The China Securities Regulatory Commission now mandates the registration of companies within three days of GDR applications' submission. Further, any subscription size must be reasonable, pricing must be aligned with regulations, while lockup periods for investors must also conform with guidelines. The identity of subscribers in the GDR issue must be part of a report submitted 15 days after a sale.
Chinese tech giant Tencent has reported a boost in Q1 2023 revenue of 11%, driven by growth in advertising and game sales. Total revenue reached CNY150bn ($21.4bn), up from CNY135.5bn in the same period last year and better than consensus estimates, company founder and CEO Pony Ma Huateng said. Profit rose 10% to CNY25.8bn from CNY23.4bn, falling short of analyst expectations. The results came as China's economy emerged from the pandemic, boosting consumer and advertising spending. Tencent, operator of China's biggest social media platform, has been consolidating operations following a year of cost-cutting measures.
Asia's bullish stock traders are dwindling as China's post-Covid economic recovery has failed to rally stocks in a sustained way, reinforced by a recent miss in April economic data, from industrial production to fixed-asset investment. Concerns centre on the speed and strength of China's recovery and a looming overseas recession that will add to the pressure on external demand. The lacklustre trading pattern has led to a drop in the number of investors bullish on China's recovery, a recent survey by Bank of America revealed, adding that India has overtaken China as the favourite for investors in Asia. Per capita consumer spending during May's golden week holiday came in below pre-pandemic levels. Property investment continued to contract, and youth unemployment hit a record high of 20.4% – but that data excluded almost 12 million university graduates who will enter the job market this summer.
The United States is facing record levels of drug shortages, with the issue forcing the closure of some drug manufacturers, causing hospitals to scour pharmacy shelves on a never-ending quest to access life-saving cancer treatments, and increasingly narrowing the options of doctors. Dr. Amanda Fader from Johns Hopkins said, “This is in my opinion, a public health emergency because of the breadth of the individuals it affects and the number of chemotherapy agents that are in shortage right now.” The Biden administration has been working to find long-term solutions and has set up a team to determine a path forward for the pharmaceutical supply chain, which remains overly reliant on medicine from China and India. Measures that have been discussed include tax incentives for manufacturing in America, greater transparency around generic drug quality, and greater investment in potential alternatives to supply core pharmaceutical ingredients. The problem is leading to pressure from Congress and the White House to try to fix the situation urgently.
Shares of M&A Research Institute, a company that uses AI to match small and medium-sized business owners with successors in Japan who can keep the firms open, have surged, making 32-year-old founder Shunsaku Sagami a billionaire. The company aims to tackle the issue of closure of profitable businesses when there is no clear successor identified. It uses AI and its proprietary data to close deals in between 49 days and six months and charges up to 5% in fees for a successful closure, unlike some competitors who charge retainer fees even if deals don’t ultimately materialise.
The UK government has requested that the EU delays a rule in its Brexit trade deal relating to manufacturing, which has threatened the continued manufacture of electric vehicles in the country. Vauxhall’s parent company, Stellantis, warned that it would be unable to make EVs in the UK without changes to the rules, including one that requires 45% of an EV’s value to originate in the UK or the EU to qualify for trade without tariffs, by January 2024. The British government has requested the deadline be delayed until 2027 to avoid the UK being hit by a 10% tariff.
Citi analyst Shreyas Madabushi has reiterated the company's bullish prediction on lithium prices due to the anticipated improvement of China's EV market and the return of battery restocking in H2 2023. Madabushi claims that lithium prices hit $28,000 per tonne in China over the past two weeks after declining by around 70% over the last five months to $22,000 per tonne. He targets a 25-40% upside, predicting that lithium carbonate prices have reached a bottom, citing improving market sentiment, demand from physical traders, recovering EV sales, lower inventories in the supply chain and more robust export arbitrage. Meanwhile, Bloomberg's energy specialist Javier Blas argues that weak oil prices are due to the thriving black market in oil, with Iran, Russia and Venezuela responsible for almost all the unanticipated and excessive production. Black market crude is available at a discount, with Iranian production having hit a four-year high last month, up 50% from mid-2020.
Hong Kong-based Hua Hong Semiconductor has been granted permission to raise $2.6bn for a second listing on the Shanghai stock exchange in a move that could boost local fundraising amid reports of an economic slowdown. Approval for the listing comes as the US continues to block the route to technology for many Chinese firms. Hua Hong, which produces semiconductors on 200mm wafers, raised $332m in its Hong Kong IPO three years ago. Its share price has fallen by about 5.9% in 2019, with the company's current market value standing at just over $4.3bn.
Chinese online marketplace Douyin has seen its gross merchandise volume (GMV) rise by 80% as it continued to ramp up e-commerce efforts. Parent ByteDance set up a dedicated unit last year to lead efforts to convert the social media platform's hundreds of millions of users into buyers. GMV for Douyin in 2021 was Yuan 1.41tn ($202.3bn), according to The Information. Alibaba and JD.com still have significantly higher volumes, of nearly Yuan 8tn and Yuan 3.48tn respectively.
The UK Treasury Select Committee of MPs has recommended that retail trading in unbacked cryptocurrencies should be regulated like gambling because of its lack of intrinsic value and volatility, according to a report published on 8 December. Whilst the government had originally proposed tougher regulation similar to that for traditional financial services, CryptoUK said it was disappointed with the "fundamentally flawed" assessment of the industry, while the financial regulator warns traders regularly that investments in cryptocurrency are highly risky. However, the UK approach is a contrast to most major jurisdictions.
Russia has agreed to extend the Black Sea grain corridor agreement with Ukraine for two more months, according to Turkey's President Recep Tayyip Erdogan. The pact had been under threat after Moscow claimed obstacles caused by Western sanctions made it difficult for Russia to export its own food and fertilisers. The move will allow ships carrying food from Ukraine to use the Black Sea without being involved in the fighting by Russian and Ukrainian troops on land, according to UN Secretary-General Antonio Guterres.
A crucial deal aimed at averting a global food crisis has been extended. Here’s everything you need to know
CNN
23-05-17 16:38
Russia, Ukraine and Turkey have agreed to extend the UN-brokered Black Sea grain deal which has allowed the safe passage of ships from Ukraine and prevented global food insecurity occuring while Russia blockade vital grain exports. Ukraine is key exporter of grain with it accounting for 10% of the world wheat market, 15% of the corn market, 13% of the barley market, and a key global player in the sunflower oil sector. The agreement has been renewed for a third time for two months as there were fears that it would not be renewed after Russia called for it to be scrapped, citing concerns that a separate agreement with the UN to facilitate shipments of its own foodstuffs and fertilisers had not yielded results and dissatisfaction with the sanctions imposed by G7 nations. The EU had previously lifted all duties on Ukrainian grain via land to facilitate exports, causing a glut of cheap Ukrainian grain to flow into central and eastern Europe and affecting the sales of local producers.
Climate scientists face a communications challenge to convey the scale of the climate emergency to which they are alerting the world, according to Bloomberg Opinion’s David Fickling. Scientific projections of the future impact of global warming may seem abstract and distant to many, even as the effects of the crisis become blindingly apparent. The broad techniques used by scientists to make verifiable forecasts about the future, and the way the human brain processes statistical data, exacerbate this disconnect, Fickling argues. There are also substantive obstacles to predicting some of the short-term effects that generate media coverage and to forecasting things like the highest temperature ever recorded in a particular region. Meanwhile, the public faces a constant barrage of short-term distractions. Fickling argues that, instead of accusing scientists of alarmism when their predictions are confounded, society should take such concerns seriously.
Barclays is said to be planning a major push to grow business in Paris, with the aim of expanding its headcount in the city by around 200 people over the next two to three years. The bank already has around 300 employees in the French capital and plans to move to larger premises next year. In March, Paris overtook London as Europe’s largest stock market with the UK capital now $250bn (£204bn) smaller than the French equivalent. It lost its place as Europe’s largest centre for trading equities for the first time last year when Paris overtook it.
China is now the world leader in initial public offerings (IPOs) after the number of IPOs in the US fell this year amid a regional bank crisis and a debt ceiling standoff. Over 100 deals totalling $25bn have been secured in mainland China so far this year. Beijing has made major reforms aimed at stimulating innovation, and it launched the Nasdaq-style STAR board in 2019 and earlier this year it rolled out the registration-based listing mechanism to all domestic stock exchanges. However, the fast influx of new IPOs is changing the country's stock market.
A report has argued that China's embrace of artificial intelligence (AI) for its military means the US needs to redesign its military to respond to the threat. Produced by the Special Competitive Studies Project, headed by former Google CEO Eric Schmidt to speed up the adoption of AI in US defence establishment, the report argues that China’s 30-year effort to study US combat techniques will be greatly enhanced by the development of AI. The ratcheting up of AI usage by both countries has sparked concerns of an arms race, potentially exacerbating any diplomatic conflict. US concerns have included the risk of AI-enabled attacks against satellites in space and nuclear architecture, while Redwood City venture capitalist Vinod Khosla has argued that slowing down US AI research would benefit China. United Nations Secretary-General Antonio Guterres has called for a new international law on autonomy in weapons systems.
US investors are calling quits on China technology investments because of tensions between the countries, according to Ventures Capitalist Patrick Zhong. He said that a great deal of investors and company CEOs no longer travel to China because of Covid-19 restrictions which has caused everyone to put it on hold because of geopolitical concerns. Before founding M31 Capital, which has heavy ties to China, Mr Zhong invested in companies such as Alibaba, Tencent and Baidu. While he is not concerned about China's technology regulation efforts, he said that he is optimistic entrepreneurs from different countries can work together in the future.
Micron Technology will receive about $1.48bn in government financial incentive funding to help develop its advanced memory chip-making capabilities in Japan. The funding is expected to be announced when Japanese Prime Minister Fumio Kishida meets with chipmaker executives on Thursday. Micron will use the funding to add advanced chip-making equipment, from ASML, to its Hiroshima facility so it can fabricate DRAM memory chips. The funding is part of Japan's wider strategy to counter China's strong position in advanced technology development. Micron has not commented on the reports.
