MARKETs @ 3pm Hong Kong time
Opened higher but reversed after 5 minutes and trended lower through the morning to test 7,005 at midday. It then bounced and retested before then working better for the rest of the day to close -12pts (-0.2%) @ 7,034
Nikkei opened higher but trended lower through the morning. Tried to hold the 29,126 level (yesterday’s close) for the first hour but then worked down to 29,050 at lunchtime. PM opened higher but resumed the downward trend to close -134pts (-0.5%) @ 28,992
Topix opened lower and sold down to 1,909 in the first 10 minutes then traded sideways into lunch. PM drifted lower to close just off the day low -15pts (-0.8%) @ 1,904
BoJ left rates unchanged but in the quarterly report slashed its consumer inflation forecast for the current fiscal year to 0.1% from earlier predictions made in January of 0.5%, amid downward pressure on service spending. Policymakers warned of lingering risks to the economic outlook as the COVID-19 continues to hurt consumption. Meantime, the projected rates of rise in the GDP for the current fiscal year were little changed (4% vs 3.9% made in January). The central bank reaffirmed it would not hesitate to take additional easing measures if necessary.
Markets sold down despite the good GDP data as investors lock in gains after the recent rally.
Kospi opened just +VE but sold down to 3,206 in the first 45 minutes then bounced but saw resistance as they approached yesterday’s close, tested a few times before selling back down to 3,207 level traded sideways and tested down to 3,203 but then worked better in the last hour to close -1.4pts (flat) 2 3,216
Kosdaq opened just +VE but sold down to 1,024 in the first 35 minutes, saw bounce but then drifted lower for the rest of the day to close -9pts (-0.8%) @ 1,021
GDP Growth Rate Adv Q1+1.6% QoQ vs +1.2% Q4 (F/cast was.+0.9%)
GDP Growth Rate Adv Q1 +1.8% YoY vs -1.2% Q4 (F/cast was.+1.1%)
Opened 14pts higher and trended higher but dipped into the red as the China data came out but then bounced back to 17,624 then traded sideways for about an hour before dipping into the red, bounced and traded around flat before selling down to 17,490 around midday. Then rebounded to flat, was up small dipped into the red and then bounced to closed +24pts (+0.1%) @ 17,596
CSI300 opened flat but sold down to 5,057 bounced but resistance approaching yesterday’s close then trended lower in choppy trading into lunch 5,052. PM retested the morning low but then shot up to 5,093 in the space of 40 minutes, eased back and traded in the tight range to close +12pts (+0.2%) @ 5,089. Definitely looked like ‘Team China’ working in the PM.
Data on the open
Industrial Profits (YTD) Mar +137.3% YoY vs 178.95 Feb was 178.9% (F/cast was +45%)
Pre market opened @ 28,895, -57pts vs +95pts ADR’s with T/O of HK$16.13bn due to the WuXi Bio placement
Choppy early trades and tested down to 28,793 after the WuXiBio placement. At 9:45 the market rallied for15 minutes to 29,010 but couldn’t hold and sold back down to the morning lows by 10:35. Then worked higher into lunch @ 28,910. PM opened @ 28,970 as HSBC earnings beat forecasts and worked up to 29,030 by 1:35 but unable to hold and sold down to 28,900 and saw an uptick. Currently -34pts (-0.1%) @ 28,923
Expect market to open lower following the weakness in Asia ahead of the FOMC meeting. Futures are FTSE -13 points at 6,954, DAX -32 points at 15,268, CAC 40 -15 points at 6,292 and FTSE MIB +3 points at 24,272, according to IG.
Earnings due from BP, ABB, Schneider Electric, Novartis and Whitbread all reporting.
UBS already our beat F/casts even with a $774m loss due to Archegos.
FRANCE Unemployment Benefit Claims, Jobseekers
UK CBI Distributive Trades
Opened in flat in Asian time Dow and S&P flat, NDX+0.1%
Data due Redbook, Case-Schiller Home Price Index, CB Consumer Confidence, Richmond Fed Manufacturing Index API Crude Oil Stock Change. FOMC meeting starts Earnings Microsoft, Alphabet, Visa, Amgen, Advanced Micro Devices, 3M, General Electric, Eli Lilly, Hasbro, United Parcel Service, BP, Novartis, JetBlue, Pultegroup, Archer Daniels Midland, Waste Management, Starbucks, Texas Instrument, Chubb, Mondelez, FireEye, Corning, Raytheon
LEX leads with US capital gains tax: the old equaliser and makes the same point that I did on Saturday when writing about the FT Weekend’s article Biden tax rise fans investor fury.
There is also an article White House hits out at tax rise fury. Capital gains increases will affect only the richest 0.3%, says administration
Basically that this tax will only impact 0.3% of the American population. \Lex adds the the rich are 'as skilled at complaining as making money.’ It also points out that 'Capital gains come with other tax advantages. They are taxed only upon realisation so can compound tax-free, for example.’It concludes '
The Biden proposal almost certainly will be watered down if it is enacted at all. But it has stark consequences for parts of Corporate America.Carried interest earned by private equity managers would no longer be subsidised. Entrepreneurs thinking about exits would consider doing so early.
The reform would make risk capital more expensive and tweak the skewed incentives of wealthy investors. But the basic cost of risk capital has never been lower.
If there is any time for modest redistribution of private investment capital to the public sphere, it is now.’
Nice to be able to say you read it here first.
UBS loses $774m on Archegos trades
Swiss bank says it has full unwound its exposure to the family office,
Its Q1 earnings were otherwise robust;
Net Profit @1.8bn +14% YoY beating forecasts despite the Archego’s losses.
'Excluding investment banking — where profit before tax fell 42 per cent — profits rose in all of UBS’ other main divisions during the quarter. Assets invested on behalf of clients rose by more than $100bn in the first three months of 2021 to $4.2tn.
'Its flagship wealth management business posted a 16 per cent rise in profits before tax to $1.4bn. The boost came from clients shifting into higher fee generating profits, but also an increasing use of leverage, UBS revealed, with lending to wealthy clients — including family offices similar to Archegos — increasing to $219bn. '
'The asset management division also benefited from higher fee income, reporting a 45 per cent year-on-year rise in first-quarter profits before tax to $227m.'
A family affair: can prosecutors flip Donald Trump’s ‘eyes and ears’?
Allen Weisselberg is considered to be the key to unlocking the complex finances of the former president’s empire
US joins global efforts to help India fight coronavirus surge
• EU sends aid supplies • Biden stands ‘shoulder to shoulder’ • Modi criticised for jab prices
Looks at the situation in India as covid surges and the International effort to assist. Oxygen concentrators being sent +VE news for their manufacturers.
Also notes from May 1 the Government will only buy 50% of the vaccines production saying that States and private entities will have to buy the rest and at prices set by the manufacturers (the Serum Institute of India and Bharat Biotech) which is prompting more anger and could make the situation worse.
Not mentioned but yesterday Hong Kong listed pharma companies saw increased interest on the basis that the surge of covid in India could result in less vaccine production. I doubt that but worth watching.
Brussels sues AstraZeneca for alleged breach of EU vaccine supply promises
It alleges the company has breach its deal to supply vaccines to the EU. The latest part in the saga but it notes that legal action may not help in actually getting vaccine doses.
Personally I think it has a lot to do with Brussels trying to deflect the blame for its initial ineptitude in co-ordinating the ordering of vaccines. Points out that AstraZeneca should able to present a reasonable defence thus raising the question of why the EU is going through this process?
Draghi outlines €248bn vision for recovery
PM vows to combat ‘corruption and stupidity’ with package of reforms
Money to be spent on 'transport infrastructure, digitalisation and the environment, as well as on structural reforms to modernise Italian bureaucracy.’ Draghi said the money 'would be centred on three main objectives for Italy: bridging the divide between its wealthy industrialised north and poorer south, improving gender equality and narrowing generational inequality.’
He concluded'“I am certain that we will succeed in implementing this plan. I am sure that honesty, intelligence and a care for the future will prevail over corruption, stupidity, vested interests.”
I am not sure I would endorse that view but time will tell.
Brussels targets company tax rules in bloc rebound plan
Brussels is pushing some EU member states to clamp down on sweetheart corporate tax deals as part of economic reforms as European capitals draw up detailed plans to spend billions of euros of EU recovery fund cash.
EU in talks with US over travel for vaccinated Americans
The talks have started +VE for the airlines. Does note that key will be people being vaccinated with vaccines approved by the European Medicines Agency. That could be a -VE for Chinese vaccine suppliers if they are not approved by international agencies. It does note as well that currently the AstraZeneca vaccine has not been approved by the US which could complicate talks.
Interestingly the EU has yet to start talks with the UK 'which accounted for around 75m visits to the EU in 2019, compared with just under 40m from the US.’
German groups file complaint against Apple in ad dispute
A group of Germany’s largest media, tech and advertising companies have accused Apple of antitrust abuse as it introduces changes to the privacy settings of iPhones that they say will harm the advertising market.Apple is saying 'privacy was a “fundamental human right”, that users’ data belonged to them, and that they should choose whether they wanted to share. “These rules apply equally to all developers — including Apple.”
It will be interesting to see how that works out and I would imagine others will watch the case closely.
Supply chain disruption dents manufacturers’ optimism
Looks at the implications from yesterdays German Ifo data.
'Rising consumer demand, restrictions to stem the pandemic’s spread and acute container shipping delays have put pressure on global supply chains, leaving manufacturers around the world scrambling to cope with shrinking inventories and delayed orders.’
All of which suggests that growth will continue and accelerate as those bottlenecks are cleared and also that we are likely to get more cost inflation as manufacturers compete for limited supplies.
Cosco Shipping reports today in Hong Kong and it will be interesting to see if they have anything to say about the container situation and shipping costs in the near future.
Ukraine leader calls for peace process revamp to end conflict
Zelensky says accord with Moscow over breakaway regions is deadlocked
Berlin resists Brussels move to restrict research co-operationGermany is leading a backlash of EU capitals against proposals from the European Commission to exclude researchers from the UK and other non-EU countries from sensitive parts of the bloc’s €90bn scientific co-operation programme (mentions projects relating to quantum technologies and space research).
Consensus to build back better is needed to help boost growth
Looks at the fact that ’the growth rate of output per hour worked had been slowing for many decades in high-income countries before the pandemic.’
Considers whether with new work technology and practices productivity can be increased? The digitalisation of many practices was accelerated due to covid and that could lead to further gains.
Another potential area is aggregate demand management; a recent survey showed that 'weak demand growth holds back productivity growth (and hence supply). One is that companies hold back on investments in research and development and in new technology if they are uncertain whether the demand will be sufficiently strong for their expanded output. Another is that weak demand growth slows down reallocation of resources from less dynamic to more dynamic companies.’
It concludes 'So far, only the US among high-income economies has made a strong commitment to high demand pressure through fiscal policy. As a result, it bucks the trend in The Conference Board’s productivity forecasts. All the signs are that President Joe Biden’s big fiscal push is not just going to speed up the recovery but will also push the economy’s supply capacity higher than it would otherwise have been.Here, perhaps, lies one of the great opportunities of the pandemic. Building back more productively seems possible; a consensus to build back better could be what helps us achieve growth above what we were resigned to accept before the world changed.’
Worth a read.
Iran hardliners put faith in justice chief
Popular campaigner against corruption is viewed as ideal candidate to establish unityWorth a read as the election is on June18. The forces at play with Iran explain the stand-off with the west.
Ethiopian telecoms licence sell-off falls flat
Ethiopia’s sale of two telecoms licences, billed by the government as the “deal of the century”, has flopped, dealing a blow to a push for market capitalism championed by Abiy Ahmed, the prime minister.
Basically onerous restriction put many off bidding; 'But potential participants from Europe, the Gulf, India and China stayed away. Some complained about the opacity and restrictive nature of a process that banned new participants from offering mobile-money services or bringing in specialised telecoms tower operators to build new infrastructure.’ Along with 'an overvalued currency and difficulty of repatriating profits, some potential bidders were thought to be concerned about political risk.’
By-election losses sting Japan prime minister
Yoshihide Suga has suffered a setback in his first electoral test as Japan’s prime minister after opposition parties won a string of victories in by-elections across the country.
Makes an early election unlikely but I don’t think PM Suga had that in mind. He is looking to speed up inoculations and that might win him wider favour between now and the election. PM Suga also still has positive approval ratings so his tenure as PM is safe.
It notes that 'Toshikawa said the biggest loser was one of Suga’s main rivals, Fumio Kishida, the former foreign secretary who led the LDP campaign in Hiroshima prefecture. “This almost completely knocks Kishida out of the race to succeed Suga,” Toshikawa said.
With no other viable candidate expected to stand, Suga is the favourite to win re-election as LDP party leader in September, and to continue as prime minister. He must call a general election by October 22.’
COMPANIES & MARKETS
Standard Life Aberdeen unveils ‘agile’ rebranding
• Abrdn name earns online mockery
• Chief insists switch is good value
'The name change was widely mocked online, with more than 400 comments posted on the FT website, many ridiculing the rebranding. Several asked if the Abrdn name was a late April Fool joke. Another suggested the group would now be known as “A burden”. Twitter users also poured scorn on the name, with one asking: “Is Abrdn the most preposterous rebrand ever? Not if you remember Royal Mail becoming Consignia.”
’'The change to Abrdn is arguably the most eye-catching yet from Bird, who in September took the reins of a company that has failed to deliver on the promises made when it was formed through Aberdeen Asset Management’s acquisition of rival Standard Life. The group last month cut its dividend by a third after full-year, pre-tax profits fell almost 17 per cent, as investors yanked money from its funds.’
All that said the stock was up 2.2% on Monday. I would have say that it does seem a ridiculous name to me; evidently it is pronounced Aberdeen. Investors will not doubt be horrified at how much was paid for the new name and will want to know how it is going to improve the company’s performance.
Read also Abrdn hopes bold rebrand proves more Accenture than Consignia
Renaming a business can give fresh vigour but often this week’s hot word is ditched within months
Nailed it OnlyFans social media platform feels the lockdown love as transactions hit £1.7bn
'The size of revenues and growth rate suggests OnlyFans could have a multibillion-pound valuation if it went public, making it one of the UK’s leading tech companies.
But the business remains closely held. Chief executive Tim Stokely, 37, and his father Guy, 77, a former Barclays investment banker, established the website in 2016. Tim had spotted a gap for social media influencers to monetise content other than via sponsored adverts or promotional deals.
In 2018, Leonid Radvinsky, an entrepreneur behind the porn site MyFreeCams, bought at least 75 per cent of OnlyFans’ parent company, Fenix International. The Stokelys declined to give a figure for the value of the deal.’
Goes to show what the internet can do.
Thoma Bravo agrees $12.3bn deal for cyber security group
Thoma Bravo has agreed to take cyber security company Proofpoint private in a $12.3bn deal, as the technology-focused private equity firm continues its push for bigger opportunities.An interesting read as Thoma Bravo also invested in SolarWinds.
This is a dangerous time for Britain to join the fintech frenzy
Looks at the UK Governments support for the sector and the landscape for Fintech just after Greensill which was a fintech in name has collapsed.The concerns are over high valuations and the difficulty in appraising value in the Fintech sector. He notes that Jamie Dimon said in his recent letter to investors “Fintech is an area where some of that cash could be put to work,” but he concludes 'Dimon also voices a growing concern among traditional bankers that upstart fintechs may be less of a threat than established tech giants from Google to Alibaba as they chip away at more and more of the banks’ business.
All of which adds up to a frenzied atmosphere in financial technology — and an urgent need for great vigilance from government and the financial sector alike in sieving the good from the bad and the ugly.’
Meituan hit by Beijing antitrust probe
Watchdog targets food delivery group after record fine for Alibaba
It comes as the company was still operating a “‘pick one of two’ and other suspected monopolistic practices” said the State Administration for Market Regulation (SAMR). It is amazing in some respects because the sector had been warned about the practices. The article says that it operated a less severe version than Alibaba but regardless it could face penalty of up to 10% of domestic revenues. That could benefit Alibaba’s ELE.me takeaway operation which has a much smaller market share at present.Meituan has been the subject to several other investigations and warnings and investors will need to be sure that the management is taking the change of attitude from Beijing seriously.
Stock closed slightly lower Monday but is +2.6% today with Alibaba +1.3% and Tencent -1.1%
Tesla faces challenge to its China crown
Welter of bad publicity comes as local rivals seek to make up ground on US group
Accused of being arrogant by Beijing is a bad sign for the company just as local rivals are gaining traction in the market. China is an important market because it contributes about 20% or Tesla’s sales. It also has the benefit of not have a joint venture partner and got State bank financing for its Shanghai gigafactory.
It notes that the arrival of Tesla has been key to driving innovation in the Chinese EV market; prior to that the EV market in China was very poor quality. China used Tesla to vitalise its EV sector and it has worked 'Chinese rivals have responded with a host of locally made models. These include US-listed Nio, Xpeng and Li Auto, as well as Zeekr, the high-end electric car brand of Geely, owner of Europe’s Volvo. Joining them are technology groups Huawei, Xiaomi and Baidu, which have formed partnerships with traditional vehicle makers.’
China still has the ambition to have a globally recognised brand; Geely had been acquiring global brands in an effort to achieve this but with Tesla’s presence there is chance that they can achieve that. So now the question is whether Beijing still feels it needs to be nice to Tesla. As many know the Chinese very good at bringing in partners, watching how they do something and then when they think they know it marginalising the partner. That could be happening to Tesla.
Nice quote about business in China; '“The only thing tougher than having a partner in China is not having one,” said ZoZo Go’s Dunne. “When things go bad with regulators, no one is advocating on behalf of Tesla aside from Tesla itself.”’
Regarding the woman who made the protest :'The quagmire of bad publicity for Tesla shows few signs of disappearing soon despite repeated climbdowns and public apologies by the group following the customer protest.
The company’s latest move has been to release car data related to the driver’s crash in February. The protester claims that her vehicle’s brakes failed, but the data shows she braked repeatedly in the half-hour before the crash and was travelling at nearly 40km above the speed limit.
The release has done little to defuse the situation. The customer has accused Tesla of tampering with the data while her husband said the company’s move was a violation of privacy rights.’
It concludes '“Tesla’s stance globally is that they build a world-class product and are going to be uncompromising in response to customer complaints,” added Dunne. “And what they are discovering is that this is the wrong formula for China.”’
That is true for every business in China.
Executive told Facebook to ‘prepare for the worst’ over ad reach spat
Carolyn Everson, one of Facebook’s most senior advertising executives, said the company had to “prepare for the worst” over claims it overstated the reach of its advertisements, according to newly released court filings.The case goes on and the publicity for Facebook gets worse, especially as Apple changes it ad policy.
An interesting read and would suggest a certain arrogance on the part of Facebook.
Oscars success ‘Nomadland’ wins Best Picture, Director and Actress amid calls to watch it in cinemas. Looks at this years Oscars and how China effectively banned them.
Vaccitech taps appetite for innovation with plan for $117m US float
Vaccitech, the company behind the Oxford/AstraZeneca vaccine platform, said it planned to raise as much as $117m in a US initial public offering that would value the company at about $613m.
Healthcare is near the top of most peoples investment themes at the present; so good timing.
But it does warn 'Vaccitech has never generated a profit and last year reported a loss of $17.9m, which it disclosed stemmed largely from research and development and staff costs. It said it expected its expenses to rise “substantially” following its flotation as it pursued clinical development of its drug and vaccine candidates.’Interesting to note that in a recent fund raise backers included Tencent along with M&G Investment Management and Gilead Sciences, a California-based biotech.
Total declares ‘force majeure’ on Mozambique LNG projectComes after an escalation in attacks by Islamist insurgents forced the mothballing of Africa’s biggest private investment.
NN considers asset manager sale after activist pressure
Dutch insurer NN Group is weighing up a sale of its asset management division after coming under pressure from activist hedge fund Elliott Management last year to improve returns and streamline the group.
Discount chain Pepco picks Warsaw over London for IPO
It outlined plans to open thousands of new stores across Europe and appointed City grandee Richard Burrows as chair. It said the the decision was “definitely not a snub to London” after the disappointing investor reception for the recent Deliveroo float.“Poland is our home market, it’s our biggest market, it’s where the business was born,” he said. “I don’t think we’ll be under investors’ radar. Warsaw has had a coming of age over the last couple of years.”
Lumber prices log up record gains on housing demand
Builders and DIY enthusiasts fuel rally that highlights scale of US inflationary challenge
An interesting read mainly for the inflationary pressure this will create on wages. If house prices are rising in part because of lumber prices then employees are going to ask for more wages.
China groups defy tension to raise $11bn in New York
Funds raised by Chinese groups on US equity markets surged 440 per cent in the opening months of 2021 as the allure of sky-high Wall Street valuations outweighed the threat of forced delistings.
I don’t think the threat of delisting is a worry to any Chinese firm. They are just interested in raising money and the US offers the best valuations. The worry of delisting is more of a worry for investors as trading delisted stocks is more limited and difficult. What is strange then is that the valuations are so good, which suggests that investors do not believe these new companies will be delisted; despite the delistings of the Chinese Telco’s. Makes you wonder what warning they put in the prospectus and whether anyone’s reading them?
Turkey’s crackdown on platforms gathers pace as bitcoin demand surgesAt least four Turkish cryptocurrency platforms have gone offline since last week with some claiming liquidity problems after police began investigating fraud allegations connected to the exchanges and the central bank introduced measures to regulate the market for the first time.
The interesting thing being that the demand for crypto currencies over USD, largely I would imagine because the Central Bank last year forced people to liquidate their USD in order to try and support the lira… unsuccessfully. So people have turned to something that the Government doesn't control or influence.
'A central bank decree published on April 16 barred the use of digital money to pay for goods and services. While it did not prohibit trading crypto assets, the measure stoked confusion about whether buying digital money as an investment constituted a payment.’
The government is saying it 'is planning a comprehensive regulatory framework in the coming weeks but has “no intention” to prohibit cryptocurrency outright.’
Bitcoin fans will be proud that crypto is doing what it was originally intended to do.
European sustainable fund inflows surpass all other ETFs for first time
Shows that it has caught the public’s attention. It notes that Europe is leading the US which is probably because it is building a better framework of what constitutes a “sustainable” company. Although I’m sure there are still a lot of grey areas as noted in an article last week in the FT about the EU discussion. The performance of the ETF’s has been good so far but it is a rather self fulfilling prophecy with the sector generally in demand as portfolios rotate out of the out of favour fossil fuel sector and other non ESG sectors. Market thinking has a good piece on this written last October as the trend was starting (https://market-thinking.com/2020/10/esg-be-careful-what-you-wish-for/)
ESG rush opens opportunities in ‘sin stocks’
Looks at the stocks people reject as the rotate into ESG’s which often provide better returns; 'There are many reasons for this. Because some investors avoid them, sin stocks are systematically cheaper than their fundamentals would suggest.
Sinful industries enjoy what are in effect “societal moats” as new competitors would struggle to raise capital.
That protection against normal competitive pressures allows them to reap bigger profits. The corollary to divestment campaigns that raise the cost of capital for controversial companies is an increase in return for investors willing to ignore the social opprobrium that they might incur.
The idea of a “sin premium” that socially obtuse investors can harvest is now being challenged. Recent research indicates that tilting towards stocks that score better on ESG metrics is, at worst, neutral for returns. Some studies find they actually enhance performance.
In other words, investors can have their cake and eat it too.’
Well worth a read he concludes "This leaves an enormous opportunity for norm-agnostic investors willing to lean against the ESG wave. If public markets continue to become inhospitable to iffier companies, private equity is likely to be a big beneficiary.
This should not be construed as an argument against the importance of ESG investing per se. But sometimes, virtue has to be its own reward.'
FT BIG READ. CRIME Nigerians suffer at hands of ‘thriving’ kidnapping industryMass unemployment, underfunded security forces and easy access to guns are fuelling a record number of abductions in Africa’s most populous country. The crisis is adding to the pressure to reboot the economy.
A sad read of what happens when a country cannot create enough good jobs.
Editorial A new deal for the young: ensuring fair pensions
Third way is needed between paternalism and financial individualism. Looks at the case for collective retirement schemes.
'Today’s young have a mountain to climb to achieve the same retirement as their parents. Workers retiring two decades ago were likely to do so with a generous company pension that paid a guaranteed income for life. Younger employees today are overwhelmingly saving into cheaper and riskier pensions that give little certainty of what they will end their working lives with.'It concludes 'This approach is not perfect. But perfect should not be the enemy of the good if it gives the young a better chance of retiring as securely as their parents.’
The tragedy of India’s deadly second wave
Foreign aid is not just a moral imperative but a matter of self-interest
AI at work isn’t always intelligent by Sarah O’ConnorLooks at the use of AI to monitor worker, especially remote ones.Concludes 'The EU is right to worry about how to protect workers from the risks posed by intelligent machines. It is even more important to protect them from stupid ones.’
India’s Modi and the perils of Covid hubris. ByGideon Rachman
The baleful phantom of border changes haunts the Balkans By Tony Barber
Britain should reform the way politicians handle business. By Gus O’Donnell; was cabinet secretary and head of the civil service, 2005-2011A good read not just as a critique of the UK system but the approach would work well for many businesses.
Begins 'One of the reasons the UK retains a relatively good record on financial corruption is that as a nation we take allegations of impropriety extremely seriously. Multiple inquiries are under way and the key facts will surely emerge.What should we do then? Reforms often follow scandal. Some are wise and enduring, like the Victorian era reforms to the civil service and the establishment of public audit. Others are rushed and ineffective. How do we ensure we make the right choices once the current row has subsided?’
He then lists 4 steps he thinks need to be followed .
He concludes 'There are plenty of examples of good practice. Excesses tend to occur when the tired old mantra of “public sector bad; private sector good” takes hold. But there are also clear lessons about the separation of public and private interest and the need for transparency around arrangements.
These reforms will help keep the UK as free from financial corruption as possible. The private and public sectors need to work together effectively; that will not be achieved by turning the civil service into some sort of administrative monastic order.’
LEX China steelmakers: it isn’t easy going green. Looks are the reforms taking place in China and the impact that cutting supply will have on the global markets and prices. Not mentioned is the fact that it will also created unemployment in China.
Looks at 'HBIS China’s second-biggest steelmaker, has shut its plants in Tangshan, the steelmaking hub of Hebei province, triggering thousands of lay-offs.’Cutting steel production to reduce pollution as infrastructure spending was increasing; that drove other steel company shares higher. The price of rebars also shot up, hitting a record high Monday. 'No one expected production cuts to be so quick and deep. The problem for local makers is that they are low-cost, low-margin producers dependent on high output to cover overheads. They cannot automatically pass on ore price rises.’'Net profit at the listed unit of HBIS fell a third last year even as prices rose.
It is difficult for low-margin steelmakers to switch to pricier higher quality ore supplies or to research lower carbon production.
In the quest for steel that can build the human world without destroying the planet, higher quality South Korean and Japanese producers have an advantage. Investors must avoid stocks and bonds from Chinese steelmakers.’
An interesting read and highlights the dilemma China has in trying to go green. It’s similar with coal, it needs cheap energy to drive its growth and yet wants to be seen as a leader in the race to be green.