Donald Trump has signed two US bills supporting Hong Kong’s pro-democracy protesters, defying calls from China to block the legislation and putting the territory’s special trade status at risk. The president ratified the Hong Kong Human Rights and Democracy Act after it was overwhelmingly passed by Republican and Democrat lawmakers, a rare example of bipartisan co-operation. It mandates the US government to re-examine annually Hong Kong’s status and imposes sanctions on anyone who has suppressed human rights in the former British colony. Mr Trump also signed a second bill that blocks new export licences for tear gas, rubber bullets and handcuffs being sent to the Hong Kong police force. China’s foreign ministry condemned Mr Trump’s decision, saying in a statement that Washington had “seriously interfered with China’s internal affairs”.
Shares in Alibaba jumped more than 6 per cent in their Hong Kong trading debut, after the technology group raised more than $11bn against a backdrop of simmering anti-government unrest in the Asian financial hub. At Hong Kong’s stock exchange, where riot police stood guard outside, Alibaba chief executive Daniel Zhang told an audience minutes before the market opened that Alibaba has “returned home to Hong Kong” to a large round of applause. The mammoth listing also follows increasing Sino-US trade tensions. Five years ago Alibaba raised $25bn in New York in what was the world’s biggest initial public offering. The secondary listing will make it easier for investors in China and elsewhere in Asia to trade the shares. “After five years of travelling afar, [Alibaba has] decided to come home,” said Charles Li, chief executive of Hong Kong’s stock exchange operator, at the event. “Despite the difficulties and challenges in Hong Kong.”
Companies unleashed a wave of global takeovers on Monday, agreeing more than $70bn in deals as multinationals targeted the booming US market to squeeze out competitors and find new sources of growth. Industry leaders such as US discount brokerage Charles Schwab, French luxury powerhouse LVMH, Swiss drugs company Novartis and Japanese conglomerate Mitsubishi all snapped up rivals to extend dominance over their sectors. The shopping spree suggests that a dealmaking boom across the corporate world remains intact, after a pause attributed to shrinking confidence among executives and fears of a slowdown in global growth. Instead, decisions by US and European central banks to cut interest rates even further in recent months have propped up stock markets and extended the availability of historically cheap borrowing.
Private equity firms are lobbying politicians in Washington as their industry’s far-reaching role in the US economy draws fire from constituencies as diverse as unions, prison reform advocates, Hollywood screenwriters — and Taylor Swift. Congressional hearings held this week ended a long period in which “there hasn’t been a substantial degree of political scrutiny of the private equity industry, besides that around [Bain Capital founder] Mitt Romney in 2012,” said Jim Baker, leader of the Private Equity Stakeholder Project, a pressure group targeting the industry. “The fact that you had the chair of the house financial services committee staking out a critical position about private equity is groundbreaking,” he added.
Michael Bloomberg, the billionaire former mayor of New York City, has taken another step towards declaring his official candidacy for president by filing paperwork with the Federal Election Commission to run as a Democrat. After ruling out a run in March, Mr Bloomberg, 77, revealed earlier this month that he was laying the groundwork to enter the Democratic presidential race with less than three months to go before the Iowa caucuses. Mr Bloomberg filed the necessary paperwork on November 8 to be included on the ballot in Alabama, which has an early filing deadline for its primary. Howard Wolfson, a Bloomberg adviser, said at the time that the former mayor was concerned that the more than dozen Democrats already running for president “were not well positioned” to defeat Donald Trump in 2020.
Xerox has given HP an ultimatum in its effort to acquire the PC and printer maker, threatening to turn its bid into a hostile one unless the company agrees by next week to pursue a “friendly combination”. HP turned down the $22-a-share bid on Sunday, saying it “significantly undervalues” the company, and asked for more information about Xerox’s business prospects. HP left the door open to “a potential combination” of the two companies. In its response on Thursday, Xerox said its board is “determined to expeditiously pursue our proposed acquisition of HP to completion — we see no cause for further delay”. “Accordingly, unless you and we agree on mutual confirmatory due diligence to support a friendly combination by 5:00pm. EST on Monday, November 25, 2019, Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders,” John Visentin, Xerox chief executive, wrote in a letter to HP’s board.
Billions of dollars were wiped off the market value of two Hong Kong companies on Thursday, marking the latest examples of spectacular wipeouts in the city’s equity market. A lossmaking marble producer that had rallied 3,800 per cent this year saw its market capitalisation fall by HK$45bn (US$5.7bn) — a 98 per cent decline — after index compiler MSCI said it would not include the stock in its globally tracked benchmarks. ArtGo Holdings, which recorded a net loss of almost Rmb640m ($91m) last year, had been selected for inclusion in the MSCI China index on November 7. That prompted the company’s share price to more than double in little over a week as investors snapped up the stock ahead of its scheduled inclusion. But on Thursday, MSCI reversed its decision on ArtGo, citing “further analysis and feedback from market participants on investability”.
Private equity owner TA Associates has hired Goldman Sachs to explore a sale of Russell Investments, putting the $293bn asset manager on the block as part of a wave of consolidation in the fund management industry, according to people briefed on the matter. A sale of the money manager follows several bruising years for the industry, with profits at some of the biggest fund houses squeezed by the rise of passive investing. Shares in listed asset managers have trailed the benchmark US stock index, the S&P 500, over the past five years. Russell Investments was last valued at $1.15bn in 2016 when TA Associates acquired the group from the London Stock Exchange. It is unclear how much TA is seeking for the Russell, which claims to have invented the first so-called smart beta strategies with the creation of small capitalisation, growth and value investing funds more than three decades ago and runs multi-asset, equity, fixed income and alternative funds.
SoftBank-backed Yahoo Japan and messaging app Line have agreed to merge as Masayoshi Son seeks to create a south-east Asian powerhouse in data and artificial intelligence worth ¥3.3tn ($30bn). The deal follows years of courting by Mr Son, SoftBank’s founder, who has long pitched the merger as a way to compete against rivals in China and Silicon Valley, according to people familiar with the discussions. Under the framework announced on Monday, Line will first be taken private through a tender offer at a proposed price of ¥5,200 per share, which represents a 13 per cent premium to Line’s share price on November 13 before news of the talks broke last week. Z Holdings, a subsidiary of SoftBank’s telecoms arm formerly known as Yahoo Japan, and Naver, the South Korean internet search group that owns 73 per cent of Line, plan to each spend ¥170bn on the tender offer.
Thousands of people in Tehran, Shiraz and other cities and towns across Iran took to the streets on Saturday to protest against the sharp rise in petrol prices. At least one person was killed in the southern town of Sirjan, local officials confirmed. Security forces were out in parts of the capital city and other places where many drivers had stopped their cars at main junctions. There were unconfirmed reports suggesting petrol stations in some cities had been set on fire. Security forces used tear gas to disperse the crowd in Tehran and elsewhere while shootings were heard in Shiraz, eyewitnesses said. Iranians awoke on Friday to discover that the cost of petrol had jumped 50 per cent overnight as authorities in the Islamic republic reduced subsidies, meaning that each motorist could get 60 litres of petrol a month at IR15,000 a litre, a 50 per cent price increase. Extra fuel would still be available, but at IR30,000 a litre.
Amazon will appeal the Trump administration’s decision to grant a $10bn defence contract to its rival Microsoft, accusing the US government of having shown “unmistakable bias” in its procurement process. The company said on Thursday it was lodging a legal case against the decision, following accusations that Donald Trump manipulated the process to harm Jeff Bezos, Amazon’s founder. The Pentagon awarded the so-called Jedi cloud computing contract to Microsoft last month after several rounds of bidding, a legal challenge from one of the bidders, and a last-minute intervention by the US president. Numerous aspects of the Jedi evaluation process contained clear deficiencies, errors, and unmistakable bias Amazon spokesperson An Amazon spokesperson said in a statement: “AWS [Amazon’s cloud computing service] is uniquely experienced and qualified to provide the critical technology the US military needs, and remains committed to supporting the Department of Defence’s modernisation efforts.
Hong Kong is on the “brink of total collapse”, the territory’s police warned on Tuesday as a second day of violence pushed the five-month crisis towards a new and more dangerous phase. Police fired tear gas and rubber bullets to disperse protesters in the city’s financial district and at university campuses, a day after the shooting by officers of a demonstrator unleashed a fresh wave of violence that continued through the night. On Wednesday morning, multiple metro stations, major roads and many schools remained closed for a third consecutive day, with more protests expected through the day. The Hang Seng index opened down almost 1.5 per cent. At the Chinese University of Hong Kong on Tuesday night, tear gas was deployed as its vice-chancellor tried to negotiate between student demonstrators and the authorities. “The police should not attack the campus and its students,” said one young protester at CUHK. “It is no different from June 4,” he added, referring to the 1989 Tiananmen Square massacre in Beijing.
President Donald Trump threatened a new escalation of the trade war with China, saying US tariffs on Chinese goods would be “raised very substantially” if no truce was reached with officials in Beijing. Mr Trump’s comments at the Economic Club of New York highlight the trouble the US administration is having in its efforts to strike an interim deal with China that would bring a halt to the commercial conflict afflicting the world’s two largest economies. After Mr Trump announced that a tentative agreement had been secured in early October, US and Chinese officials have been haggling over the details, including where a deal would be signed and whether Washington would roll back existing levies as part of such a settlement.
Walgreens Boots Alliance, the $70bn drugstore chain, has received a buyout proposal from the private equity group KKR, a deal that would be the biggest private equity transaction on record. The approach, just three years after KKR sold the last of its shares in Walgreens from a previous buyout, was outlined in a document shared with the company’s board, according to people briefed on the matter. KKR would need to collaborate with other investors to pull off a deal, which would dwarf the record-breaking $45bn acquisition of energy company TXU in 2007. One person close to the private equity group said that it was also talking to a number of its own investors to explore their interest in participating in the transaction.
Hong Kong commuters faced transport chaos on Tuesday, with multiple metro train stations and lines closed and gridlock on some roads, as the city braced for a second consecutive day of clashes. Violence broke out across the city on Monday following the shooting by police of a demonstrator, in an escalation of protests that have gripped the territory for the past five months. Police confirmed that live fire was used and that one man had been shot during a confrontation with protesters, an incident that was filmed and circulated on social media. A separate video also went viral showing what appeared to be protesters dousing a man in liquid and setting him on fire. A third clip shared online showed a traffic police officer on the motorbike driving into protesters.
Apple has piled on more than $400bn of market capitalisation so far this year, even as its profit margins fade and its new iPhone failed to wow analysts. The share price of the tech company closed on Friday at a record high, up 65 per cent so far this year, its best run for a decade and almost three times the gain for the benchmark S&P 500. The increase in its equity value since January comes to $407bn: almost as much as the entire market capitalisation of JPMorgan Chase, America’s biggest bank by assets. The higher price nudges Apple ahead of Microsoft — which itself is up 44 per cent — to regain the title of the world’s most valuable listed company, worth $1.16tn. “People are looking for certainty in an uncertain market,” said Michael Kagan, a portfolio manager with ClearBridge Investments in New York, which owns the stock. “Investors love that Apple generates so much cash flow — it’s a cash machine even though it’s a relatively mature business.”
Michael Bloomberg, the billionaire former mayor of New York City, is laying the groundwork to enter the Democratic presidential race months before voters in Iowa and New Hampshire kick off the fight to choose the 2020 nominee. Mr Bloomberg, 77, ruled out a run in March, saying he was “clear eyed” about the difficulty of breaking through a crowded field where much of the energy had been with candidates well to his left. But Howard Wolfson, a Bloomberg adviser, said the former mayor had grown concerned that the Democratic candidates were “not well positioned” to defeat Donald Trump. On Thursday, The New York Times reported that Mr Bloomberg would file the necessary paperwork this week to be included on the ballot in Alabama, which has an early filing deadline for its primary.
Wall Street has significantly scaled back earnings expectations for US companies for the final three months of 2019, putting the S&P 500 on track for its slowest annual pace of earnings growth in four years. With nearly four-fifths of America’s largest companies now having reported their third-quarter figures and updated investors on the outlook, earnings are forecast to rise just 0.8 per cent in the final three months of the year. That is down from a forecast of 4.1 per cent at the start of October, according to Refinitiv, and a far cry from the 7.2 per cent expected as recently as July. A shallower-than-expected decline in third-quarter earnings has helped shares grind their way to record highs in recent days, despite the prolonged global trade war and the uncertain direction of US interest rates. The diminished outlook, however, on top of new forecasts that US gross domestic product growth could slip to 1 per cent or less in the fourth quarter, raises questions about the durability of the equity market rally.
Germany’s finance minister has offered hope of a breakthrough in plans to create a full eurozone banking union by ending Berlin’s opposition to a common scheme to protect savers’ deposits. Olaf Scholz said that Europe’s global role would be undermined if it failed to complete the integration of the eurozone’s financial sector. The plan to centralise oversight of eurozone banks was conceived seven years ago in response to the region’s deep sovereign debt crisis. “The need to deepen and complete European banking union is undeniable. After years of discussion, the deadlock has to end,” Mr Scholz wrote in an opinion article for the FT. He said that Brexit, which would see the EU losing the City of London — its largest financial centre — also meant it was time for the bloc to promote better integration of its banks.
Trump administration officials are debating whether to remove some tariffs on Chinese goods as a concession to seal a partial deal that would pause the trade war as early as this month. According to five people briefed on the discussions, the White House is considering rolling back levies on $112bn of Chinese imports — including clothing, appliances, and flatscreen monitors — that were introduced at a 15 per cent rate on September 1. The US move would meet a core demand from Beijing as negotiators from the world’s two largest economies work out the terms of a ceasefire to be signed in the coming weeks by Donald Trump and Xi Jinping. But Washington would probably expect something in return, including beefed up provisions on the protection of intellectual property for US companies, greater certainty on the scale of Chinese purchases of US farm products, and a signing ceremony for the agreement on American soil.
JPMorgan Chase has pushed more than $130bn of excess cash into long-dated bonds and cut the amount of loans it holds, marking a major shift in how the largest US bank by assets manages its enormous balance sheet. The moves, which have seen the bank’s bond portfolio increase by 50 per cent, are prompted by capital rules that treat loans as riskier than bonds. As it continues to return billions of dollars to shareholders in dividends and share buybacks each year, JPMorgan has less room than some rivals to hold riskier assets. “It’s incredible,” said an executive at a large institutional investor. “The scale of what JPMorgan is doing is mind-boggling . . . migrating out of cash into securities while loans are flat.” The dramatic change, which has occurred this year, was first flagged by JPMorgan at an investor event back in February. Then chief financial officer Marianne Lake said that, after years of industry-leading loan growth, “we have to recognise the reality of the capital regime that we live in”.
Saudi Aramco launched its long-awaited initial public offering on Sunday after delays triggered by doubts over the ability of the world’s most profitable company to secure the $2tn valuation coveted by Crown Prince Mohammed bin Salman. The listing of the state energy firm is the centrepiece of Prince Mohammed ambitious plan to overhaul Saudi Arabia’s oil-addicted economy. It is expected to be the world’s largest IPO with Riyadh hoping to raise as much as $60bn. But the process has been dogged by questions over the valuation of Saudi Aramco, with bankers and analysts saying $1.2tn to $1.5tn is more realistic. The company said the final offer price and the number of shares would be determined at the end of the bookbuilding period. Yasir al-Rumayyan, Saudi Aramco’s chairman, said: “Today marks a significant milestone in the history of the Company and important progress towards delivering Saudi Vision 2030 [Prince Mohammed’s reform plan], the kingdom’s blueprint for sustained economic diversification and growth.”
Google has struck a $2.1bn deal to buy fitness-tracking pioneer Fitbit, as the two Silicon Valley companies team up to take on Apple’s fast-growing wearable-tech business. Fitbit is Google’s biggest acquisition in consumer electronics since it paid $3.2bn for smart home company Nest in 2014. The deal could put Google in the sights of antitrust authorities. While Google’s cash offer represents a 19 per cent premium to Fitbit’s closing price on Thursday, it prices Fitbit at little more than half of the $4bn valuation at which it went public four years ago. “Fitbit has been a true pioneer in the industry and has created terrific products, experiences and a vibrant community of users,” said Rick Osterloh, senior vice-president of devices and services at Google.
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March 2021
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