Billionaire real estate investor Sam Zell, who founded the precursor to Equity Residential and helped popularise the real estate investment trust in the 1990s, has died aged 81, according to the two trusts he chaired. Zell had a net worth of $5.2bn, according to Forbes, and had invested in a wide range of businesses including manufacturing, travel, retail, healthcare and energy through Equity Group Investments, the private investment firm he founded more than 50 years ago.
Chipmakers look to Japan as worries about China grow
CNN
23-05-18 14:26
The Prime Minister of Japan, Fumio Kishida, has encouraged chipmakers to invest in Japan following talks with executives from Micron Technology, Intel and Taiwan Semiconductor Manufacturing, ahead of this year’s G7 summit. Ensuring resilient and diversified supply chains to prevent challenges to the semiconductor industry, brought on by growing Tawainese and US trepidations with China, is a key focus of the summit. In support of this, Japan will use ¥1.3tn ($9.63bn) of last year’s supplementary budget to support its chip business. Micron will contribute ¥500bn ($3.6bn) of this, becoming the first semiconductor company to introduce its extreme ultraviolet technology to Japan.
Leaders of the G7 gathered in Hiroshima, Japan this week to discuss several issues including the economic and security tensions with China and how the most advanced economies in the world can de-risk strategic industries and diversify global supply chains. A key issue at the summit was the need for leaders to reaffirm their pledge of support for Ukraine, and commitment to impose costs and pressure on Russia and any other nations that assist it. Leaders will focus on calling out China’s actions such as economic retaliation against nations over policy disputes and other agreements, and pledging that their nation's industries will resist such coercion and take concrete steps to start building resiliency. To make the world’s largest economies more resilient in strategic minerals and rare earths, the G7 summit should agree on a plan to collectively become more resilient. This week’s summit should also address how the G7 forum can continue to bolster the rules-based international order, its democratic values and norms, and how to drive technical standard-setting for emerging technologies.
The G7 is significant as it reflects an effort to bring in key countries in the Global South to balance against China’s growing diplomatic and economic influence in that sphere. This year’s summit coincides with a Quad Leaders’ meeting that will take place in Japan on the sidelines of the G7 following President Biden’s decision to shorten his Asia trip. The leaders of Australia, Japan, and India will come together to discuss the changing geopolitical scenario in the Indo-Pacific and will present China with a united and coherent strategy to tackle issues that put current international norms at risk. Given the strategic importance of the Indo-Pacific, there is a growing need for stakeholders to consolidate the rules-based order. It is without doubt that the Quad and G7 grouping need to find a sustainable consensus that would provide space for regional peace and stability in an increasingly competitive and contested world order. These forums should work together to fight back and preserve a space of international affairs which could, directly or indirectly, hurt China’s interests. Any concrete effort to this end will require a competitive collective approach and a shared vision for addressing complex challenges.
Although China is trying to attract foreign investment, its actual utilisation of foreign direct investment (FDI) fell by 3.3% to $73.5bn in the first four months of the year, compared to the same period a year ago. The country has significant work to do in enticing investors, since they play important roles in China's access to capital, technology and expertise in management. The tensions with the US remain a hindrance, compounded by Beijing's crackdowns on fund and due-diligence organisations over national security concerns has fueled concern among investors.
The UK government has told water companies that any investment boost to cut sewage spills should not come at the expense of consumers. The comments followed Water UK’s acknowledgement that customers would foot the “modest” £10bn ($12.7bn) bill for the investment proposal, which has yet to be approved by regulator Ofwat. Ofwat says it will scrutinise the nature of the necessary investment, including how much represents new work, alongside the proposed impact on bills and shareholder and lender returns. In April, bills for average UK households increased by 7.5% to £448 a year.
Prominent activist investor Carl Icahn has conceded that a major bet he made that the market would crash was wrong and has cost his firm nearly $9bn over six years. Icahn Enterprises suffered short losses of $4.3bn in 2020 and 2021 in the pandemic's aftermath. Hedge positions cost the firm $7bn since 2018, after it bet aggressively that the market would suffer another crash after the 2008 financial crisis. The trades have damaged Icahn's position as a formidable activist investor. Short-seller Hindenburg Research recently released a report claiming Icahn Enterprises’ dividend was unsustainable and its market value was inflated.
The UK government will provide up to £1bn over the next decade to chip companies to increase Britain's resilience in the sector, which has faced severe supply chain disruptions during the pandemic and is threatened by worsening geopolitical tensions. The government's National Semiconductor Strategy will give UK chip companies £200mn between 2023 and 2025 with the rest to be distributed by the end of 2033. The strategy is aimed at boosting areas where the UK has a strategic advantage, rather than building specialised fabs, which can cost up to $10bn.
Canada’s WestJet has reached a tentative agreement with Air Line Pilots Association (ALPA), thus avoiding a strike by the airline’s pilots, which would have begun on 19 May. Pilots will now begin the process of ratifying the contract in the coming days. Canada’s second biggest airline has not commented on the new contract. ALPA did not mention details of the agreement, but chair of the WestJet ALPA Master Executive Council Bernard Lewall stated that human resources issues at the company will be resolved, including retention and recruitment.
Chinese state-owned company Sinopec has partnered with Kazakh oil and gas business KazMunayGaz in plans to construct a gas-based petrochemical complex in Kazakhstan's Atyrau region. A final investment decision will be made in 2024, but the deal was announced at the China-Central Asia Summit in Xian, Jiangsu province. The complex will process ethane into ethylene and will have an annual capacity of 1.275 million tonnes, alongside two polyethylene facilities that will produce 625,000 tonnes a year. All three of China's main state-owned oil enterprises have previously invested in Kazakhstan's oil and gas sector.
The state of Iowa is considering legislation that would stop asset managers operating with a political agenda, rather than acting in the financial interests of Iowa's taxpayers. The law, known as Senate File 507, would protect taxpayers from investments in companies based on politics rather than financial considerations. The proposed legislation is similar to that in 18 other US states, including Texas and Ohio. However, 14 different states, including California, New York and Illinois, have mandated that public money is directed toward environmental, social and governance principles (ESG). While investors may favour advancing a social or political agenda over returns, asset managers whose investment includes taxpayers' money must prioritise their fiduciary duties. ESG-based investments also impose a greater risk on customers. The legislation aims to limit such fiduciary breaches and diminish harm to taxpayers.
China is fighting a diplomatic "great game" for global dominance by amassing political and economic influence with countries that are underdeveloped, nondemocratic or share the same resentment towards the US-led international order. Beijing's recent diplomatic offensive to actively enlist countries to help overthrow and remold the international order has become increasingly aggressive since President Xi Jinping took power. The aim of China's strategy is to attract the most supporters so it can shape the system from the inside out.
Many developing countries have significant economic and political needs that require support from a leading global power and investment in infrastructure, which China is happy to fill. To compete with China, the US must do a better job of telling its story in the developing world, preserve American dominance in economic and military realms, and offer an alternative to countries turning to China. Developing countries are less likely to side with China if they feel secure that the US will remain the dominant power. The US must help fill the economic and political needs of developing countries and provide them with that alternative, while at the same time ensuring that its investment satisfies development needs.
Wei Li, the global chief investment strategist for BlackRock, has attributed her success in the financial sector to maths skills that she honed as a teenager competing in the International Mathematical Olympiad. Li, who is based in London, explained to Bloomberg Markets that she had initially stumbled into finance, attracted by the "fast pace of markets" and the sense that "an individual can soak all of that in and respond". She has also cultivated an awareness of her introverted tendencies and how to play to her strengths in dealing with her more assertive colleagues. Her advice to younger colleagues is to "be replaceable".
In the interview, Li expressed doubts about the effectiveness of central banks over the longer term. She said that although the banking crisis of March 2020 had “stabilized”, the cost of the supply-side tools of central banks, specifically measures to address the impact of Covid-19, was higher than for demand-side tools, leaving economies vulnerable. Growth would slow down and financial “cracks”, such as unfunded tax cuts and funding stress on commercial real estate, could appear.
Although cautioning against a focus on the longer term, Li said she was preoccupied by “building depth and expertise” and “putting in place a very rigorous process for generating views in a whole portfolio context”. Notably, she said that the net-zero transition and the “structural forces like aging demographics” required closer attention. BlackRock is one of the world’s largest asset managers, with over $9tn in assets under active management.
The world is seeing a rise in "parametric" insurance as developing countries are hit by worsening drought, storms and heatwaves due to climate change. In these schemes, if conditions reach a predetermined threshold beyond which they are considered extreme, there is no need to prove losses as payments to policyholders can be made within a few days. Paramount insurance payouts are on the rise, with Swiss RE reporting a jump of 40% between 2021 and August 2022. Insurance analysts predict the market, currently worth about $11.7bn, could reach $29.3bn by 2031. However, some industry experts question whether such products will be financially viable in the long term, predicting too-frequent payouts would increase premiums. While these type of insurer-backed schemes in developing regions are often still reliant on charities, NGOs, national governments or wealthier nations, there is an aspiration that policyholders one day cover more if not all of the premium. However, the urgency of the situation and frequency of extreme weather events could make that difficult.
Chinese electric vehicle (EV) maker Nio has invested $150m in Neo Fusion, a start-up that is developing technology toward bringing commercial controlled fusion to market globally within two decades. Nio and affiliate Nio Capital have taken a 19.9% stake and 10.1% stake respectively in the company, with $689m and $349m from other sources. Neo Fusion is 50% owned by China's Anhui provincial government, according to a company registration filing seen by Reuters. Fusion technology could help the world curb emissions linked to climate change, according to market observers.
Japanese electronics group Panasonic risks ramping up investment too quickly as it seeks to double capital spending to a record ¥700bn ($5.1bn) for the fiscal year to March. Over half the sum will fund expansion of electric vehicle (EV) battery production. Panasonic was once best known for its LCD televisions, leading to large investments in plasma and LCD technology that ended in failure when cheaper Chinese competitors entered the market, causing the company to withdraw from LCD panel and solar cell production. Panasonic has invested heavily in EV batteries and is the world’s fourth-largest producer and one of Tesla’s leading suppliers. However, US tax credits have accounted for much of the company's net profit increase. Shares currently trade at a discount, with a forward earnings ratio of 12 compared to local competitors. Its heavy investment in production capacity ending in failure after competition entered the market caused the company to withdraw from all LCD panels production in 2012 and also withdraw from solar cells and sell its semiconductor business.
A draft communique from the G7 group of rich nations, which met in Hiroshima, Japan last week, suggests that publicly supported investment in the gas sector may be “temporarily appropriate”. Such investment would be to help countries accelerate the process of phasing out dependency on Russian energy. This language, if adopted in the final version of the statement, would represent stronger support for gas investments in relation to the G7 ministerial meeting in April. G7 climate ministers eventually agreed at this meeting that gas investment could be used to address “potential market shortfalls”. Unlike the Hiroshima draft communique, however, ministers did not say that such investment may be appropriate.
The G7 leaders summit beginning on 26 May in Japan is expected to back decarbonisation and the accelerated phase-out of fossil fuels, according to a draft communiqué seen by The Guardian. The leaders are expected to affirm their commitment to “no less” than a full decarbonisation of the global economy in the course of this century, whilst recognising the “possible urgent need for flexibility” in approaches to energy security in individual countries. The draft recognises the significance of offshore wind power and solar energy, and states support for natural gas “implemented in a manner consistent with our climate targets” to alleviate “market shortfalls” during the transition to greener energy.
UK savers can now invest in the first long-term asset funds (LTAFs) following over six years of research by the UK government and the financial regulator on pension fund diversification into illiquid assets such as roads, bridges, airports, and private equity. With stock market volatility, advocates for the infrastructure sector believe it is a potential alternative to equities offering an inflation hedge, low volatility, higher dividend yields based on inflation-linked revenue streams, and defensive capabilities. The LTAF's launch suggests it is time to invest in infrastructure. Infrastructure investment covers water, energy, roads, airports, education, border security, healthcare, and communication systems. Investments in schools, hospitals, and renewable energy generators can be considered lower risk than assets exposed to the economic cycle, says Gravis' Head of Energy and Infrastructure Ed Simpson. There is also potential to align the sector with environmental, social, and economic considerations, with key types of infrastructure playing a central role in building a greener future. The bullish infrastructure sector is looking to align with Biden's $1.2tn infrastructure law and the EU's Global Gateway investment programme. However, there are also uncertainties and risks associated with these assets; governments can be guided more by politics than economics, fall out with private partners, and change policies with elections.
China's investments in Afghanistan have been growing, with a focus on economic and diplomatic engagement, rather than military involvement. Chinese firms are exploring and developing Afghanistan's natural resources, including oil, copper, iron, lithium, and rare earth minerals, in order to gain access to the country's natural resource wealth and expand China's Belt and Road Initiative. China's investments have provided a much-needed boost to the country's economy and offered some legitimacy to the Taliban government. However, the country still faces challenges related to developing strong state institutions, a functioning bureaucracy, and a safe security environment.
Chinese investors will also face concerns about how their investments will be used, particularly how much of the money will flow into the coffers of the Taliban, and how much will be used to generate revenue that can be used to improve the standard of living of the Afghan people. The absence of strong state institutions and environmental regulations are also potential issues for Chinese investors. Furthermore, China’s growing influence in Afghanistan is likely to face increased scrutiny from the international community, particularly India, which may view China’s growing influence in the region as a threat to its own strategic interests.
Overall, stabilizing Afghanistan will be a long and difficult task for China, but it could pay off by creating an arc of Chinese influence that extends from western China all the way to the Euphrates, encompassing surrounding countries and linking them with China via highways, railways, and pipelines, which would offer benefits to China’s industrial sector and enhance China’s superpower rivalry with the United States.
Morgan Stanley CEO James Gorman has announced his plan to step down over the next year, after leading the US bank for 13 years in which he transformed the Wall Street firm into a wealth management powerhouse less reliant on trading and investment banking. The bank's board has identified three strong candidates to replace him, but a final decision has yet to be made. Gorman will become executive chairman once a new CEO is chosen. He has been credited with growing Morgan Stanley into a more diversified company, with 45% of its revenue now coming from less volatile business of wealth management.
