Apr 22 FT Climate Day watching Xi's speech, HSBC's flip flops and resentment, Huarong test case?

22 Apr

MARKETs @ 1:45pm Hong Kong time
Markets opened higher  but most eased in the pm
opened higher and after a shaky start worked higher to close at the day high.Tomorrow we get Flash PMI data pre market
Nikkei opened higher as expected and worked better through the morning and then traded sideways in the afternoon.  Resistance was at 29,125 Currently +604pts (+21%) @ 29,112Topix Traded in a similar pattern currently +28pts (+1.5%) @ 1,916
Pre Market
Foreign Stock investment ¥286.3B vs 641.1B prior
Foreign Bond investment ¥906.5B vs 1,715.5B prior
Tomorrow Inflation and Flash PMI data pre market
Kospi saw a choppy first hour, opened higher rallied to 3,190, sold down to 3,180 rallied to 3,196 and then eased back and then trended lower for the rest of the day, currently +6pts (+0.2%) @ 3,178
Kosdaq choppy start, then worked higher to test 1,030 before selling down, currently +2pts (+0.2%) @ 1,025
TAIWAN opened higher and tested 17,430 in early trades, then eased back and traded sideways until late morning.  Then it sold off into the red with support at 17,100 bounced but failed to break about yesterdays close. Then sold down to close -105pts (-0.6%)@ 17,097
After market we get March Unemployment Feb was 3.73% (F/cast is 3.8%)
CSI300 pre market opened higher @ 5,114 but sold down to 5,068 level in first 30 minutes before working back to test Wednesdays close but failed to hold above going into lunch. PM opened lower and trading sideways, currently -11pts (-0.2%) @ 5,087
Pre market opened 28,717 +95pts vs +201pts ADR’s
Rallied initially to test 28,800 before selling down to yesterday’s close. Then rallied back to 28,750 and traded sideways into lunch. PM opened lower but has worked back to morning highs, currently +148pts (+0.5%) @ 28,772
Chinese banks still weak along with Baba. China Gas -12% after placement, China Res Beer +4% after good Heineken results. Auto’s weak. Kingboard shareholder placement rumoured. Cathay closing Australia and N Zealand bases, Covid cases rumoured 20 vs zero yesterday.
Unemployment data after market
Expect a higher open ahead of the ECB meeting; FTSE +31pts at 7,932, DAX +77pts at 15,268, CAC 40 +31pts at 6,243 and FTSE MIB +157pts higher at 24,080, according to IG.
Earnings. Nestle, SAP and Renault are among the companies to report today.
Credit Suisse, reported a net loss of 252 million Swiss francs ($275 million) as it digests the impact of the Archegos hedge fund scandal.
The European Central Bank to deliver its latest monetary policy announcement, although no major shifts are expected.
US Futures Opened in Asian time Dow -31pts, S&P and NDX -0.15% little changed;  expect some caution ahead of initial claims data.

Trial lifts hopes for US reform
The US justice department yesterday said that it would launch a civil investigation into whether there was a pattern of discrimination and violence within the Minneapolis police department in which Chauvin had served.
President Joe Biden said that the conviction, which was hailed by civil rights advocates as a rare instance of accountability for police brutality and killings that disproportionally affect black people, could be a “moment of significant change”.

Draghi plots €221bn rebuilding of Italy’s recession ravaged economy
• EU recovery fund spending list • High-speed rail and green energy • Legal system overhaul
Having worked at the ECB for so long Draghi is well placed to know what EU funds Italy can draw on rebuild its economy.

Early bath for Super League as most football clubs pull out after backlash
Plans to create a breakaway European Super League have collapsed after most of the football clubs involved said they would quit the controversial project.Many of the top UK club owners making public apologies.
See also LEX Super League: a good kicking

Page 2
Green groups quit over EU energy rule book
Effort to agree on guide to sustainable investment stirs national opposition
The European Commission faces a backlash over its decision to delay part of its energy sources classification system for investors as it tries to resolve a dispute about labelling fuels such as natural gas and nuclear power.It was a complicated task to start with and is already facing disagreements over what should be in and out.
'Germany and countries in eastern Europe see gas as crucial to their transition from fossil fuels, which will help the EU meet its emissions goals by 2030. France and the Czech Republic have demanded that nuclear technology is not penalised. The decision to postpone the question of whether gas and nuclear should be included is designed to placate states and MEPs who have the power to reject the text if they can find a qualified majority against the measures.’
Worth a read, I suspect getting a global agreement will be virtually impossible.

Dublin hints at reluctance to abandon low rate of corporate tax
Ireland will push for a global agreement on corporate taxation that “accommodates” its current low rate and allows “healthy and fair tax competition”, according to Paschal Donohoe, the country’s finance minister.
An interesting read but illustrates that those with much to lose are going to be resistant.

Putin warns west not to cross Moscow’s ‘red lines’
'President Vladimir Putin yesterday promised an “asymmetric” and “tough” response to what he claimed were western attempts to contain Russia, in his state of the nation address.
Hours before supporters of jailed opposition leader Alexei Navalny held further protests against his rule, Putin warned western countries against crossing a “red line” set by Moscow.
“We do not want to burn bridges. But if someone sees our good intentions as indifference or weakness . . . they should remember this: Russia’s response will be asymmetrical, it will be quick and it will be tough,” Putin said.
An interesting read but largely aimed at the domestic audience.

Denmark raises pressure on Syrian refugees to return home
Government is saying its safe for refugees to return to Damascus. Some oppose the move as it could set a new trend.
An interesting read as it shows the reluctance of some people in countries to accept refugees even after they have integrated themselves into the local economy.
A nice quote to sum up the situation in Syria “You have no way of identifying if someone is safe in Syria until that person returns.”

Page 4
Chauvin verdict is milestone in police accountability
In the US, allowing the use of deadly force means convictions of officers charged with killing a black person are rare
Also see Federal inquiry will look for patterns of unlawful behaviour
'The US justice department will investigate whether there is a pattern of unlawful policing at the Minneapolis police department in the wake of former officer Derek Chauvin’s conviction on charges of murdering George Floyd.'An interesting read,  there is no doubt still a lot to do in reforming the police forces in the US but this is a start.   China has stated in the recent past that the US should clean up its own act before pointing at China, in this case it has. But it is unlikely that China will change anytime soon.Also Editorial The Floyd verdict can lead to reform. Murder conviction of Chauvin should change policing and more

Page 5
India devastated by impact of second wave
Officials believed worst of pandemic was over, stirring outrage at lack of preparation.
The graphs of new cases and deaths are shocking.
The article suggests that there is under reporting of deaths too. Government being criticised for both the lack of preparation and lack of social distancing requirements. 'Narendra Modi, prime minister, and his Bharatiya Janata party have been accused of prioritising domestic politics over public health by holding mass political rallies with thousands of people and allowing the Kumbh Mela, a vast religious festival attended by millions, to take place during the second wave.’
It concludes 'But Vineeta Bal, of the National Institute of Immunology, said the roots of the crisis have exposed years of neglect of public health infrastructure. India’s spending on healthcare has long lagged behind global peers.“This is my major problem with not just the current government but the government healthcare system of the past 50 years,” she said. “That’s not going to be solvable in one year when there’s a crisis. This is a steady neglect of many, many years.”’
It will be interesting to see whether the this crisis does really make a difference to government’s long term spending on healthcare.
For investors it has highlighted the viability non-line healthcare and its potential; a theme that is likely to continue.

Brussels and New Delhi plan global infrastructure projects
The EU and India are in talks to build joint infrastructure projects around the world in the latest bid to compete with China’s Belt and Road Initiative.
A good read it says 'The India-EU work would focus on joint projects in their own territories, initiatives in third countries, and setting standards in areas such as financial sustainability and rule of law benchmarks, diplomats added. Another focus would be on improving co-operation in research and innovation.’
I expect the key difference from the Belt and Road Initiative will be the funds are unlikely to be subject to a non-disclosure clauses so people can see what is really happening. The article notes the funds are expected to come from Public and Private sources. Also it is likely that the contractors will be local ones using local labour, unlike Belt and Road where the contracts have gone to Chinese contractors who then use Chinese rather than local labour which means the local economy doesn't benefit as much as it would have if local jobs had been created.
It notes 'The BRI’s wide-ranging framework has been endorsed by more than 150 states and international organisations, including more than half the EU’s 27 nations. But it has also faced a backlash, including over environmental standards, the debt recipient countries take on, and penalties they face if they fail to repay.'
The article says 'EU ambassadors met to formulate a broader strategy at a closed-door meeting, the discussion lasted close to two hours and served as a “wake-up call” to step up work in the area, one diplomat said.
The key will be for the projects to be well researched and monitored so that everybody benefits.

Xi puts tensions aside to join Biden climate change summit
Coming after his Boao speech which was critical of the US it will be interesting to see the content of his speech today. Last year he made expansive claims about how China would go climate friendly, which many saw as an attempt to steal the limelight from Trump. So it will be interesting to see if this speech has more substance, especially on coal; it notes “...and Xi committed to curb the use of hydrofluorocarbon refrigerants.But China’s reliance on coal-fired power plants and polluting industrial manufacturing has threatened to undermine its climate ambitions.
Beijing has resisted setting strict limits on coal use or announcing a moratorium on more coal-fired power plants.’
China recently defended its building of new coal fired power stations on the basis that they were more efficient that the old ones. Which works as long as you are closing the old ones too.

Canada trims bond-buying and raises growth forecast
'Canada has become the first G7 country to scale back the monetary policy support measures put in place when the coronavirus pandemic first struck early last year. The Bank of Canada cut its monthly bond-buying by a quarter yesterday and brought forward its projections for when it will meet its inflation target, citing a brightening economic outlook despite the “temporary” setback from an upsurge in Covid-19 infections.'

London court orders billionaire’s son to pay mother £76m
The former wife of a Russian billionaire has won a High Court lawsuit against their son whom she accused of helping his father avoid paying her a £450m award, in one of the largest and most bitter divorce cases to go through the English courts.An interesting read. 'Temur Akhmedov had testified that his father “would rather have seen the money burnt than for the wife to receive a penny of it”.’

Companies & Markets

HSBC chief vows to resist ‘flip-flops’ on China strategy
• Quinn defends non-political stance
• Bank prizes role ‘bridging’ regions
HSBC will not “flip-flop” on strategy every time there is a flare-up in tensions between Beijing and the west, according to chief executive Noel Quinn, rebuffing criticism of the bank for moving closer to China as it cracks down on Hong Kong.An interesting read, it has come under pressure from the all sides. Quinn said “I do believe there’s still a place for an international bank, one headquartered in London, bridging east and west,” he said.’ Although with it selling its US operations and pulling out of France it is becoming less of a bank and more of a wealth manager.
Not mentioned in the article but the local HK Standard reports 'Rumblings of discontent stir in wake of HSBC leadership relocating to HK’
'HSBC Holdings is moving senior executives from its London headquarters to Hong Kong to seal a pivot by Europe’s largest lender to Asia. The moves are also brewing some discontent, Bloomberg reports.
Already smarting from a cut to the bonus pool after losses in Europe, some senior executives in Greater China worry about added bureaucracy and blurred reporting lines, according to people familiar with the discussions who asked to remain anonymous discussing a sensitive issue.
The global heads of investment banking, commercial banking and wealth are relocating to Hong Kong this year and senior bankers expect friction with regional chief Peter Wong, who has so far enjoyed a high degree of autonomy. Wong has expressed his unhappiness about the costs of the relocations, one of the people said.
At the same time, some staff are encouraged by the move to shift more leadership to Hong Kong, the people said.'
I would imagine that the relocations are likely to upset quite a lot of local staff and that friction could hurt its performance. Peter Wong has effectively ruled the roost with regards China for many years and whilst he is preparing for retirement he will still be a key player for a few years.

Tapping demand Heineken’s Asia and Africa sales offset decline in locked down EuropeLooks at the good Q1 earnings out yesterday which beat expectations.

Clubs signed up to punitive exit clauses for football Super League
Super League football clubs would have faced financial liabilities worth hundreds of millions of euros for leaving the breakaway competition once it began, according to leaked documents that reveal measures designed to lock Europe’s top teams into the unravelling project.
No doubt the lawyers will still do well.

Airbus chief sets risky course with management shake-up
An interesting look at the management changes taking place which questions whether they are right.
It concludes 'The conclusions from the reshuffle are two-fold: first, that Gutiérrez’s appointment is a political move to satisfy the Spanish government, which shares funding of a new European fighter aircraft.The second is that the company’s culture is changing significantly. Faury and his small inner circle have centralised decision making, and there are fewer inclined to speak out. The former helicopter test pilot is smart and capable, and so far has not put a foot wrong. As chief executive he has to lead. But, like anyone, he will have only so much bandwidth. While Airbus delivers, Faury will get the credit. But at the first sign of trouble, he also has to be ready to take the blame.’

Dish Network taps Amazon for 5G launch
US satellite group to run operation from public cloud in landmark dealDish Network has become the first telecoms company in the world to opt to run its entire network from the public cloud after striking a deal with Amazon to use its servers to control its new 5G network.
A test case for the sector. With not everyone convinced its the right move.
AWS are obviously positive they expect more telecoms companies to follow Dish’s example over the coming years to focus their “scarce resources” away from in-house data centres and into network expansion and customer services.
Others say, like Dean Bubley, founder of Disruptive Analysis, said it was likely that the broader telecoms sector would move to the public cloud “in stages” as some parts of a network could not be “cloudified”.
Interesting that one reason cited by Dish was 'the move toward the public cloud and the use of smaller suppliers, known as ‘Open RAN’, are crucial to the US and UK attempts to regain a footing in the global telecoms market in the wake of crackdowns on the use of Huawei equipment in markets including the US and UK.“
It gives the US a chance to get back into a leadership position in telecoms. The best cloud providers in the world are in the US. Nobody writes better software than the US. And now with Open RAN we are able to use American suppliers for radio,” he said.’

Koch backs developer aiming to fill Huawei gap
Made their money in oil and now looking to the future by backing 5G via 'its Koch Strategic Platforms fund that targets growth markets including industrial automation and healthcare.'
An interesting read because its theme is on 5G impacting industry. It’s bought into Mavenir which develops software for 5G and has emerged as a leading operator in the ‘Open RAN’ market. That is what Dish is relying on for its roll out in the article above and Dish is using Mavenir softeware.

Uber Eats targets Germany for growth
Group set to challenge Just Eat Takeaway’s dominance as it strives for profitability
Another move in the increasingly competitive world of food delivery, the dominance of Just Eat Takeaway has allowed them to charge high commission rates which is no doubt part to the reason for the move by Uber.
An interesting read, which if things play out the normal way will mean commission fall, which is good for end users but not the firms. An especially not Just Eat Takeaway which sees Germany as vital source for profits.

Apple supplier Quanta hit by cyber attack
Quanta, one of Apple’s major suppliers, said yesterday it had been hit by a cyber attack and was trying to “recover data” after one of the world’s most notorious hacking gangs said it was attempting to extort both companies.
'The admission came after REvil, one of the most prolific criminal ransomware hacking groups, said on its dark web site that it had compromised Quanta and was now extorting Apple.
REvil typically locks up the data or computer systems of its victims until it is paid off. The group said Quanta had refused to co-operate with its demands and it was now asking Apple to pay a ransom by May 1 in exchange for not leaking their sensitive information.’
The reporting in the local press continued less information. An interesting read on the way they operate and the threats that make.

Dulux owner warns of higher paint prices
Europe’s largest paint maker Akzo Nobel put customers on notice for further price rises yesterday because of strong demand and supply chain disruptions that have pushed up the cost of raw materials.Another sign of inflation in the system.

Chinese tech groups recruit former watchdogs to ease Beijing pressures
Alibaba and Tencent among start-ups tapping advice of ex-officials amid sector crackdown.
Chinese companies following the Western approach it notes 'Public records reviewed by the Financial Times showed China’s biggest internet groups, which also include Tencent, ByteDance and Meituan, have hired dozens of former officials ranging from anti-monopoly regulators to court judges. That has raised questions over how far Xi’s administration can go to rein in the companies.’
An interesting read; it would appear the policy is working as Alibaba’s fine was less that it could have been and the article says its head of competition policy research at Alibaba since 2019 is Cui Shufeng, a former deputy director at the commerce ministry’s anti-monopoly bureau, who spoke to his former colleagues before the fine was announced.
It says 'deep-pocketed private groups are certain to remain a popular destination for low-paid Chinese officials.’'According to a study by Li, China’s listed companies had more than 4,800 executives and board directors with government work experience in 2019. That compared with 99 two decades ago.’
But there are concerns about it people losing confidence in the system, although I suspect many have already lost confidence for many reasons. Cites some interesting examples. 'Beijing has unveiled measures in recent years in a bid to limit the influence of former government employees. These included a requirement for former officials to wait two to three years before joining the private sector if they dealt with it while in government. But analysts said the regulations are vague and lack adequate transparency requirements.’
Looks like China is facing the same problems the west does, well worth a read.

Tesla goes into reverse on complaint after state media rebuke
Tesla has apologised after being attacked by Chinese state media for its treatment of customers, days after a protest against the company in one of its most important markets.
Interesting to note that the event caught the eye of China’s Central Commission for Political and Legal Affairs, the Communist party’s top legal authority who said; 'the company shirked responsibility whenever it was criticised. It went on to say Tesla’s popularity in China came from consumers having faith in the company, the article said, “but arrogance, let alone a lack of respect for China’s market and consumers, cannot be the response to that faith”.
The details of the actual case are not clear cut and the fact that the protestor will not allow a third party inspection raises concerns. But the bigger issue is public perception as local brands roll out competitive models to Tesla’s. A good reputation for dealing with clients will set a company apart in China.“Tesla has a lot at stake,” said Tu Le, founder of Sino Auto Insights, a consultancy. “They risk alienating the one place that is the linchpin in their ambitions.”
Chinese media have a history of whipping up sentiment against foreign companies.
Worth a read

Zalando set to extend pre-owned service
Fashion retailer Zalando is expanding its sustainable and pre-owned ranges, saying that the industry’s survivors will be those that address its environmental and ethical challenges.It’s a growing trend and one that is likely to cause some disruption to the existing fashion industry models and hence on the textile supply chain.
An interesting read.

Covid test demand lifts Roche
Roche reported a 55 per cent jump in diagnostic sales in the first quarter thanks to strong demand for Covid-19 tests, including a new product to track virus variants.

Huarong affair tests Beijing’s resolve to bail out state groups
Bonds sell-off sees investor attention shift away from former chair’s execution
'“Regulators have to decide who they’re going to help and how, and while they’re deciding, western investors are reacting with shock and horror, because it looks all of a sudden like a company owned 61 per cent by the Ministry of Finance is being hung out to dry,” said Andrew Collier, managing director of Orient Capital Research.’
The key issues are how good are the assets that Huarong currently has and will it need or how much will it need from the government. That then leads to the question of how many other asset managers might the government also have to bail out… that is the real worry. Can it afford to bail them all out or will it have to make choices. All of this against the background of trying to attract more international money as well as maintaining its stance that investors take risks and cannot expect the government to bail them out.
It concludes '“Any losses on Huarong bond instruments will not only impact the company itself but rock the foundations of proactive state support by the Chinese government on which the dollar bond valuation of Chinese financial institutions and other state-owned entities are built,” said CreditSights in April, though it added losses were unlikely.'

Netflix slides as pandemic subscriber gains tail off
Netflix shares fell yesterday after the company said it added just 4m subscribers in the first quarter, a sharp slowdown from its pandemic-driven gains last year as the US began to emerge from lockdown. Key for the company now seems to be new content as most people will have watched the past re-runs during lockdown.

Robotics-focused ETFs hit by wave of outflows in March as hot trend falters
Robotics-focused exchange traded funds have posted large outflows in recent weeks as one of the hottest trends of the past six months unwinds. But nobody seems to be able to identify why but an interesting read.

Workplace software start-up UiPath powers ahead on Wall Street debutShares in software company UiPath rose on their Wall Street debut yesterday, after one of the largest ever initial public offerings in the sector.

Central banks must act now on climate change By Anne Richards chief executive of Fidelity International
An interesting read says the Central Banks need to act even before governments agree policies.She concludes 'Central banks cannot solve this problem alone. But as Mark Carney said almost six years ago as then Bank of England governor: “Once climate change becomes a defining issue for financial stability, it may already be too late.”’
Worth a read but I think that Central Banks need to focus on their core business first and foremost, getting that right is complicated enough. They can help but it's not their main focus.

FT BIG READ. CORONAVIRUS. The vaccines are workingAlthough infections are at a record high, lives are being saved in countries such as the UK, US and Chile with effective immunisation programmes. The evidence offers hope that the virus can be suppressed.A positive article.

With US help, Japan’s stance towards China hardens by Jennifer Lind an associate professor at Dartmouth College and an associate fellow at Chatham House
'Japan has long been reticent to discuss Taiwan with its US ally. Tokyo is skittish about the idea of collective security, with longstanding fears of being drawn into regional wars. Japan has sought to avoid antagonising China, now its largest trading partner. Suga’s willingness to talk about Taiwan represents a noticeable departure from a longstanding norm.'
She concludes 'And what about Japan? The joint statement said Japan has “resolved to bolster its own national defence capabilities” to further strengthen regional security. But the US has been prodding Japan to do precisely that for decades, and Japan — though watching an unfriendly neighbour building up a vast military in its backyard — has demurred. Defending Japan, let alone supporting Taiwan, will require Tokyo to make non-subtle increases in defence spending. And it will require Japanese leaders to have a straight conversation with an unenthusiastic public who needs to decide how to answer a growing threat.’
A good read and seems to indicate that change is taking place.

For all their fine words, bosses are not sharing the pain
Looks at board pay levels.

Johnson is not the man to clean up public life

Europe’s future hinges on Italy’s recovery fund reforms by Andrea Lorenzo Capussela author of The Political Economy of Italy’s Decline

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