FT Weekend thoughts: Abe, Taiwan in the UN? NZ internet attacks, Epic, Tibet parallels to

02 Sep

FT Weekend thoughts: Abe, Taiwan in the UN? NZ internet attacks,  Epic, Tibet parallels to

Abe ends record term at Japan helm.  Health forces decision  Premier praised for steady hand in fact many believe that he achieve so much because of the stability he gave the country.  He had been PM since 2012.  Now there is a race to find a replacement with a large number of candidates.  But that uncertainty will create concerns in itself and couple with covid comes at an awkward time for Japan.  Friday saw the market sell down ahead of the press conference and announcement so there is potential for bargain hunting at the open on Monday.

For a list of the potential replacements Reuters has a good rundown of 9 potential candidates. Shigeru Ishiba, Fumio Kishida, Yoshihide Suga, Taro Koko, Shinjiro Koizumi, Toshimitsu Motegi, Katsunobu Kato, Yasutishi Nishimura, Siko Noda.

Also read Abe departs with formidable record. Which sets out that despite notable failures, PM Abe brought stability that beefed up the role of premier.
Investors grapple with questions over future of Abenomics Whilst not all the candidates are in favour of Abe’s aggressive monetary policy most of them are likely to follow his same path in regard to many of his other polices.
Also LEX Shinzo Abe/inflation: priced to go. Makes the point that despite many attempts inflation in Japan is nowhere the set target. It asks with that in mind what the Fed hopes to achieve with its latest policy moves and notes that
'Other forces, from the internet’s price disrupting powers to demographics, look too powerful for any central bank to tackle for the foreseeable future. That augurs well for asset inflation — just not for prices.'

For investors and companies key on PM Abe’s resignation will be how quickly a replacement can be found and how much support that person gets from the rest of the party so that the stability that Abe created continues. The strengthening of the Yen that occurred on Friday will be a slight -VE to Exporters in the short term. But one fact that should help clam the markets is the fact that Abe’s departure does not affect the tenure of BoJ’s Kuroda.
The LDP has says it will hold an election around the 15 of September.

Taiwan clears obstacle to US trade deal. The government pledge to ease controls on food imports eased at time of growing cross-strait tension. The barrier had been the fact that US pork contains the feed additive ractopamine. The move will also allow the import of beef older than 30 months.
Whilst a trade agreement is still a long way off the fact that the pathway is now open will no doubt increase tension with China, as will Taiwan’s move to try and regain membership of the UN.

NZ sends spies into action after hackers target bourse. Looks at the fact that the NZX has been under cyber attack for the past four days with suspicion it could be from a foreign state backed organisation.
Evidently others have been attacked too; it mentions PayPal, MoneyGram and India’s Yes Bank.
It notes that hacker groups have increasingly been targeting companies with ransom demands recently. It also highlights that hackers in general are becoming increasingly sophisticated.

The ‘Fortnite’ billionaire waging an epic battle. Video game group founder leads the charge against smartphone gatekeepers Apple and Google, writes Tim Bradshaw. A look at the man who built Epic and a little insight into the man.
I agree with his sentiment that “The maker of a smartphone does not have the right to dictate the terms of our lives and our businesses,” I think that will endear him to many people. I think for too long the likes of Apple have dictated to their clients, albeit often with their best interests at heart but still.
It notes that he has a good record of turning opponents into allies and for enabling change in the industry such as getting Sony, Microsoft and Nintendo to compete between all three console platforms.
The key here is over Apple and Googles control on what they can do on their phones. It has wide implications because it could make a big change to Apple revenues and also to a lot of App makers too. IF Apple cannot monetise its years of investment in hardware and software via the App Store it will have to look at a alternative way of doing so.
There is also the chance that even if Apple wins its battle against Epic that the regulators will introduce restrictions on its actives going forward. Apple iOS trading at all time highs and on Monday it will trade post stock split which may push it higher still. It seems prudent to take some money off the table considering this threat, the potential for more regulation in the future and the warning this weekend from China (that Chinese consumers would boycott its products if WeChat is banned in the US).

A book review Eat The Buddha: The Story of Modern Tibet Through the People of One Town by Barbara Demick. Looks at Tibetan realities. Intrepid reporting on the history of one town delivers a fascinating portrait of a culture being destroyed by a paranoid and heavy-handed Beijing. Reviewed by Geoff Dyer.
An interesting read especially as a parallel to Hong Kong’s new security law.
It notes that 'The historical relationship between Tibet and China is deeply complex and she recognises that many Tibetans welcome the economic progress that has come with being part of post-Mao China. But that modernity has been imposed from above in a highhanded manner. She details not just the mass migration of Han Chinese and destruction of large parts of the way that culture is passed between generations but also the more subtle elements — the shakedowns that Tibetans suffer from Chinese police, the ban, in effect, on getting a passport and the auctions of public land that exclude Tibetans. In its efforts to weed out any political opposition in the region, Beijing has criminalised large parts of Tibetan culture.’
Another notable quote 'The shrill nationalism the (Communist) party has deployed since Tiananmen cannot abide a competing narrative about the country’s history; and its insecure leaders cannot cope with individuals, whether it be the Dalai Lama or Joshua Wong, who enjoy greater legitimacy in the eyes of some of the population than they do.’
And a quote from the Dalai Lama 'Asked if China has won, he contents himself with the belief that Beijing’s economic power is not supported by moral principles. The Chinese are “very weak”, he tells Demick. “The whole society is full of suspicion and full of distrust.”’

Hedge funds chafe at extension of South Korea’s short-selling ban. Seoul’s financial watchdog says restrictions will remain until March 2021 Despite the strong recovery the ban has been extended on the grounds of “widening market volatility amid a resurgence of Covid-19”. It along with Malaysia and Indonesia still operate short selling bans. It notes that many are concerned about the recent strong rally in healthcare names and that extending the short sell ban will increase the retail inflows but could reduce institutional and foreign investments. It might also mean that overbought stocks at some stage crash, with retail investors suffering the impact.
For foreign investors it may mean avoiding the market or looking to hedge portfolio’s with synthetic solutions rather than straightforward short selling.

For Interest
Fed inflation shift turns attention to past rate rises.
Looks at the Fed’s change in policy. Nice quote from Jonathan Golub, chief US equity strategist for Credit Suisse, who saw parallels with Japan. “We’ve had 30 years of Japan doing very, very aggressive policy, and you didn’t get either inflation or growth there,” he said. “Why do we believe we are going to be different?”
I still think that low interest rates don’t actually help the economy as seen by the example in Japan. Companies do not borrow money just because rates are cheap. They were cheap last year but they only borrowed recently because of the threat of covid which meant they needed cash to keep going. The fact that even at low rates that is a burden on the company. The normal reason for companies borrowing is to spend on Capex which is normally in response to an increase in demand for their goods or services. For a lot of companies covid has prompted the reverse reaction. Which may mean more bad news ahead.
But there is growing potential for inflation from the massive amount of stimulus that has been unleashed. The key will be whether the under the new policy the Fed is able to control it. It was notable that Gold rallied on the announcement.

Is this the end for America’s mom-and-pop stores? Looks at small family businesses which have long been a cornerstone of US towns and cities and embody America’s entrepreneurial spirit. But Covid-19 is proving the final straw for many. By David Crow and James Fontanella-Khan.
Whistle the article looks at retail operators I think that a number of other small businesses are also under threat. The knock on effect for local communities and in some cases larger businesses will at some point force a reconciliation between what we are seeing on Wall Street and the reality on Main Street.

Editorial Cities will transform and survive the pandemic. Urban living holds attractions even if many move to greener pastures. Looks at how cities and suburbs have evolved. It mentions that in UK and US workers are less keen to return to their offices.
Interesting to note that in Asia and amongst a lot of the people I talk to, many of whom are traders there is a desire to get back to the office and the buzz and interaction that comes from that. It may also be that in Hong Kong flats are small as are the distances between the centre and ’suburbs’ if you can call them that in Hong Kong. It is also doubtful that in Hong Kong properties will see change of use or that prices will come down significantly because of covid; which is good news for the developers which will also be encouraged by the Fed’s new policy of keeping rates lower for longer. The once thing that could change all that is increased sanctions by the US on China and Hong Kong. The most dramatic would be further weaponisation of US investment money. I still think Trump could look at that in the run up to the election as he is currently trailing Biden and needs something to boost his ratings.

Private markets are a club and the ordinary investor is not invited. Looks at how companies are taking longer to list at a time when investors, especially the pension funds are looking to try and improve their returns as the returns from bonds no longer provides them with the income they need.
It suggests that the best companies will stay in private hands for longer. Partly because the rule and regulations for running a listed company mean that the cost involved are also rising making the whole listing less attractive.
Many of those additional cost are because of regulators reacting to past frauds and bad practices. It would seem a good idea to get the regulators to review the rules and costs so that listing becomes less onerous. But it is also a poor reflection on society that the integrity of some running companies has dropped so far that all the rules are required in order to protect investors.

Hedge fund makes record £100m bet against Lloyds. Marshall Wace takes short position on UK bank highlighting that many think the outlook for UK banks is still bad. In Lloyd’s case despite the fact that their shares have already fallen 50%.

Fragmented debt structures can be a menace. Looks at how companies have increasingly raise debt on specific parts or assets with their businesses. This have allowed them to target their debt raising actives to specific groups of investors and raise money more cheaply.
All of which makes good business sense whilst the company is operating profitability. But it becomes a nightmare when you file for chapter 11. Mainly because getting agreement from so many different parties with so many different interests can be impossible. It cites the cast of Toys R Us. As with many case of financial engineering it’s great when it works but can have unintended consequences when circumstances change.

FT BIG READ. RUSSIA Who wanted Navalny dead?
The anti-corruption activist — now in a coma in Berlin — was campaigning to unseat United Russia, the party of Vladimir Putin, when he was poisoned. His supporters are pointing the finger at the Kremlin. A good read and worth noting that because of his past arrests his team are used to continuing the cause in his absence. That could be an on-going problem to Russia. It seems that authoritarian regimes around the world are coming under more pressure from discontented people. In may cases we are not hearing about is due to government control over reporting but it doesn’t mean it isn’t there..

Obituary A resolute pragmatist who inspired García Márquez
Mercedes Barcha Muse and manager 1932-2020. Wife of the famous writer García Márquez. An interesting read.

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