January 25th, 2021
THE EDHEC EXPRESS WEEKLY NEWSLETTER OF EDHEC STUDENTS FINANCE CLUB
CONTENTS
EUROPE USA Eurostar calls for UK bailout WhatsApp to delay launch of after passenger numbers update business features after collapse 3 privacy backlash 7 Birkenstock explores sale to Ahead of Biden Era, Toyota private equity 3 Agrees to Pay $180m In London Metal Exchange plans to Emissions Case 7 permanently close historic ‘Ring’ Tesla has started deliveries of metals trading floor 3 the Chinese-made Model Y 7 ASIA Total quits US oil lobby over Lumentum to acquire Coherent Thailand's PTTOR aims to raise climate policy 4 in cash and stock deal valued at up to $1.8bn in IPO 12 Airbus to raise production more $5.7bn 8 China Evergrande’s Electric slowly as pandemic bites 4 Netflix tops 200m subscribers vehicle ambitions stall 12 BlackRock fail ‘fee disclosure’ but faces growing challenge SoftBank takes new $350m stake test 4 from Disney Plus 8 in OneWeb 13 Moonpig confirms London IPO Office Depot rejects $2.1bn Tianqi Lithium scraps share sale with £1.2bn valuation target 5 takeover bid from rival Staples 8 after exchange queries plan 13 Suez prepares to talk to Veolia U.S. agency orders Ford to recall Chinese purchases of US exports after proposing alternate terms 5 3m vehicles over air bags 9 fall far behind trade deal pledge British Airways agrees cut-price P&G raises forecast after 13 deal for Air Europa 5 earnings top expectations, fueled Hedge fund Elliott pulls out of Deliveroo receives Private by 8% jump in sales 9 Hong Kong 14 finance boost ahead of IPO 5 Morgan Stanley beats estimates Chinese vaping group RLX set to German Online retailer valued at on better-than-expected Wall raise $1.4bn in US IPO 14 $3bn after being listed in the US Street and wealth management Japan insists Tokyo Olympics 6 results 9 will go ahead despite pandemic Nescafe to double their Intel drops 4% after a reported 15 sustainability spending 6 hack forced the chipmaker to China’s currency heads into Logitech raises annual forecasts release its 4th-quarter earnings Biden era on front foot 16 as quarterly profits soar 6 early 10 Jack Ma makes first public United Airlines pledges more appearance since Ant’s cancelled cost cuts 10 IPO 16 IBM pledges return to growth in TikTok owner ByteDance 2021 after another sales drop 10 launches payments in China as it pushes into fintech and e- commerce 16 S. Korea’s Naver to buy global storytelling platform Wattpad for $600m 17
PAGE 1 EBay mulls strategic options for The big miner is under pressure More yield at the expense of its Korea unit. What investors from the local activist group on unnecessary risks 23 need to know 18 the environment issue 20 French Government issued a 5G chipmaker Sumitomo India’s uncertain investment 50-year OAT (Obligations Electric hedges bet on top client environment for foreign Assimilables Du Trésor) 23 Huawei 18 investors 21 Chinese phone maker Honor Indian IT giants reported record partners with key chip suppliers profits on digital transformation RATES after Huawei split 19 trends 21 China’s GDP growth rate Trafigura puts €1.5bn of own increased by +6.5% in Q4 2020 cash to cement close links with 24 Rosneft 21 Pound Sterling-Euro rate hits 8 months high 24 ECB experts overturn GDP growth rate forecast for eurozone 24 UK house price growth rate
reaches a four-year high 25 EMERGING MARKETS AND OTHERS SUSTAINABLE FINANCE Report card of BlackRock after Google will stop search engine service in Australia if forced to DEBT one year of making sustainability promises 26 pay for media contents 20 The recovery of real rates could Adnoc continues accelerating be announcing an economic Joe Biden’s big move 26 crude output despite investors’ recovery not too far into the green strategy 20 future 22 CONCEPT OF THE WEEK Yield also comes with time 22 Depository Receipts 27
PAGE 2 EUROPE +40% on the previous year. The company, born in 1774, has been eying a sale option for months. After Eurostar calls for UK bailout initially pursuing interest from competitors in the after passenger numbers industry with the help of bankers at Goldman Sachs, collapse Birkenstock has turned to private equity bidders. While CVC has been a strong competitor for months, there is no certainty that an agreement will be made. Eurostar, the train operator that runs services through On the other hand, talks with Permira is not certain the Channel Tunnel between London, Paris, and either. The deal would be the latest private equity Brussels, has called for a UK government bailout deal affecting a European shoe business, after following a drop in travel between Britain and the Permira acquired luxury sneaker group Golden Goose European continent. The company, which is from Carlyle in February. Permira and German buyout controlled by French state railway SNCF, is at risk of group Triton last year eyed US sports outfitter Reebok, bankruptcy following a collapse in travel since which has been put up for sale by its German parent March of at least 95%. It has been running just two company Adidas. return services a day since the start of the pandemic and has warned that it could run out of cash this summer. The French government has a majority 55% stake in Eurostar, has already provided €200m ($243m) for the operator, and Belgium 5% after the UK government sold its stake in 2015. Christophe Fanichet, head of SNCF Voyageurs, said that part of the reason the company is in such critical position was that the company was seen in the UK as a French business that was not supported by the British, and in France as a UK-based business not aided by the French. The company was negotiating for UK loans, as well as a SOURCE: FT recapitalization by shareholders. While the UK’s Department for Transport said: “The government has been engaging extensively with Eurostar on a regular London Metal Exchange plans basis since the beginning of the outbreak. We will to permanently close historic continue to work closely with them as we support the safe restart and recovery of international travel.” ‘Ring’ metals trading floor
SOURCE: FT The LME’s proposed closure of the Ring, known for its distinctive circle of red sofas, would mark one of the biggest changes to the world’s oldest and largest metal Birkenstock explores sale to bourse since its founding in a City of London coffee private equity house in 1877. The Ring is popular by the strict dress code of its members and the conditions of trading. The family-owned German sandal maker, Birkenstock LME members usually set the world’s daily benchmark is surveying the option of sale. Deal could value prices for industrial metals such as copper, aluminum family-owned German company at more than €4bn and zinc by shouting buy and sell orders across the Ring (including debt). Private equity group CVC, Buyout during intense five-minute sessions throughout the group Permira and at least one other private equity trading day. Matthew Chamberlain, chief executive of group have been scouting the German company for the LME, told that the pandemic had forced the buying it out. In 2019, Birkenstock made €721.5m in exchange to test whether electronic trading worked revenues and €129m in net income. Net profit was up as well as the Ring for setting its daily closing prices.
PAGE 3 “It found that trading volumes increased compared Airbus, the European leader in aeronautics, is with the Ring over the past 10 months,” he said. increasing production of its most successful single- aisle passenger jets more slowly than expected, fading hopes of an early recovery for an industry devastated by the collapse in air travel. The European aerospace manufacturer will raise production of its popular A320 family of aircraft from 40 to 45 a month by the end of this year after the resurgence in the coronavirus.
With new restrictions in European countries, the timing of any recovery in passenger traffic now appears to have been postponed, putting further pressure on a sorely weakened airline industry. IATA, the aviation SOURCE: FT trade body, this week called for a further $80bn in aid to the aviation industry, on top of the $170bn already Total quits US oil lobby over identified. climate policy SOURCE : FT
BlackRock fail ‘fee disclosure’ test
French energy company Total becomes the first major oil group to break ties with American petroleum institute (API), Big oil’s powerful Washington lobby group. This is another step towards the US-Europe rift with Total clearing its stance on climate change and This week, Blackrock came under the eyes of UK support for politicians who opposed the Paris regulators. It was among the 29 fund managers agreement. This decision comes only a few days before assessed as not meeting minimum standards to help Joe Biden enters the White house with a pledge to rejoin pension trustees get a handle on costs. The company the Paris climate pact. This move is likely to induce a appeared among the list of investor companies who chain reaction where multiple companies pull out of the failed to disclose fees amply to pension clients. From lobby in support of climate change leaving API at a very 2019, UK has made it mandatory for asset managers tough situation. to disclose their fees and charges, using standardized
templates developed by an industry working group, SOURCE: FT assembled by the Financial Conduct Authority. ClearGlass found 242 asset managers met its minimum Airbus to raise production more quality standards for provision of cost and performance data. However, 29 managers, including BlackRock, slowly as pandemic bites Columbia Threadneedle, Aegon UK and Credit Suisse did not pass the quality test set. “Those who failed did so due to bad data, late data or inappropriate data,” said
PAGE 4 Chris Sier, founder of ClearGlass. He was appointed after they proposed alternate terms for the takeover. chair of the institutional disclosure working group, the The two waste and water giants. The conflict began body formed by the FCA in 2017 to improve fee after Veolia bought 29.9% of its rival, and now transparency. proposes a deal worth more than €11bn marking each share at €18. The conflict involves a lot of legal as well SOURCE: FT as professional complications and all experts consider it critical for the two companies to sit and negotiate this the right way. Moonpig confirms London IPO with £1.2bn valuation target SOURCE: FT
Online card retailer Moonpig has confirmed that it British Airways agrees cut-price plans to go public on the London Stock Exchange in a £1.2bn ($1.6bn) float next month after demand for deal for Air Europa its cards surged during the coronavirus pandemic. U.S. investors BlackRock and Dragoneer have agreed to International Airlines group (IAG), the owner of British spend £130m on Moonpig shares when shares start Airways, has agreed to buy Air Europa for €500m. IAG trading in February. “As leaders of a market undergoing only pays half the amount from what was agreed before an accelerating shift online, we’re delighted to bring the pandemic ripped through the aviation industry. The Moonpig Group to the public market. Our data-powered payment for the deal will be deferred for six years technology platform makes it incredibly easy for our from when it is agreed. The deal is expected to be customers to create more special moments for the people completed in the second half of 2021 when the aviation they care about,” Raithatha Moonpig Chief Executive industry is expected to bounce back from the effects of said in a statement. Founded in 2000, Moonpig is the Covid-19 and experts deem this deal be a good one for clear online market leader in cards, holding a 60% IAG. market share in the UK among online card specialists in 2019. Moonpig is the first UK tech IPO of the year. For the financial year ending Apr. 30, 2020, Moonpig Group’s revenue was £173.1m. The company said its revenue grew 44% between the financial year of 2019 and 2020.
SOURCE: FT
Deliveroo receives Private finance boost ahead of IPO
SOURCE: FT Deliveroo’s valuation shot up to $7bn after receiving finances in a fundraiser. The London based online food Suez prepares to talk to Veolia delivery app is gaining confidence in the eyes of the investors as they see promise in the brand and the after proposing alternate terms future of food delivery platforms. This is a welcome news for the company as it precedes the long-awaited One of the most vicious takeover battles now takes stock market debut for Deliveroo. The company another turn. Suez has finally agreed to talk to Veolia announced on Sunday that it raised $180m in new
PAGE 5 funding which they plan to expand the business and offering new services like in-house dining etc.
SOURCE: BLOOMBERG
SOURCE: FT Logitech raises annual forecasts German Online retailer valued as quarterly profits soar at $3bn after being listed in the There have not been a lot of sectors that have US particularly gained from the pandemic, but tech industry is one of them. Logitech has lifted its annual Mytheresa, the German online luxury retailer was forecasts for the third time due to increasing welcomed with a $3bn valuation after its IPO in New demand for work-from-home and gaming York which capped its leap in growth in the past two accessories. The company now expects sales growth of years and hence provides a lucrative exit for creditors of about +60%. The company is using this surge to invest the now bankrupt parent company, Neiman Marcus. in the company’s capabilities to grow further in the Mytheresa sells over 200 brands including Burberry future. and Prada and boasted more than 500 million customers in September 2020. The company plans to SOURCE: REUTERS build on this strong start and promises to strive in this pandemic struck market.
SOURCE: FT
Nescafe to double their sustainability spending
Nestle SA has decided to increase its sustainability expenditures as more and more customers now want to know where their food comes from and how it is produced. Nescafe being one of their biggest brands is first in line. The food giant plans to invest $787m and aims to reach zero-net emissions by 2050. Nestle’s planned spending includes rewarding sustainable farmers, monitoring third-party supplies and ethical standards. They also plan to deploy mire sustainable packaging technologies.
PAGE 6 USA
WhatsApp to delay launch of Tesla has started deliveries of update business features after the Chinese-made Model Y privacy backlash
Facebook Inc. (FB) after users raised concerns that the messaging platform was weakening its privacy policies in the process. WhatsApp delayed an update aimed at increasing business transactions on the platform. WhatsApp users received a notice this month that it was preparing new privacy policies and terms and conditions, and that it reserved the right to share some user data with the Facebook app. This sparked a global outcry, and it said in a statement: "This update will not expand our ability to share data with Facebook.” The release of the new policy was delayed Tesla has begun rolling out locally produced Model Y from February to May. crossovers in China, where the "Long Range" version of the Model Y starts at 339,900 yuan ($52,400), and SOURCE: REUTERS the "Performance" version starts at 369,900 yuan ($57,000). Deliveries began Monday in cities, including Shanghai, Hangzhou and Wuhan, the Chinese social Ahead of Biden Era, Toyota media company. To make customers feel more Agrees to Pay $180m In comfortable, staff have also packaged an "anti-virus" kit in the new car, including a bottle of hand sanitizer. Emissions Case China has increasingly become an essential part of Tesla's global strategy, with the chief executive, Elon Toyota Motor Corp. will pay $900m to settle U.S. Musk, once calling its factories there "a template for government charges that it violated the country's future growth."In 2019, the company passed the Clean Air Act, days before the deal closes on an deadline to start producing cars in China, beginning ambitious climate agenda for President-elect Joe Biden's trial production just ten months after breaking inauguration. According to the Justice Department, the ground at the plant. This bolstered confidence in the automaker's decision to settle despite having the option company's ability to meet its growth targets. Tesla has to fight in court represents the "maximum civil penalty" said the Shanghai plant would initially aim to for violating the law's reporting requirements. The produce 250,000 cars a year, then grow to 500,000. rapid implementation of the Toyota settlement is a sign It revealed in October that it had achieved the first that Japan's leading automaker is trying to bolster target, while "continuing to expand" capacity. It is also its environmental credentials during the Biden the first foreign carmaker to open a factory in China administration transition. without a Chinese partner, putting pressure on local companies. Tesla previously received tax breaks for SOURCE: TOYSMATRIX some vehicles, which helped make its prices more attractive to customers. It also lowered the cost of the Model 3 to receive government subsidies. Meanwhile, the Chinese car market is expected to become even more critical in the coming years. "By 2022, we believe 40 % of Tesla's overall delivery sales could come from China, as it remains a key growth area in the PAGE 7 future, followed by Europe and then the U.S.," Wedbush milestone was highlighted in the fourth-quarter results analysts wrote in a report last week. released on the 19th of January. "Netflix continues to exceed expectations for subscriber growth, and has SOURCE: CNN executed extremely well during the pandemic," Wedbush analyst Michael Pachter told investors in a report. The revolutionary concept of streaming TV was Lumentum to acquire Coherent introduced about 14 years ago. At the time of its in cash and stock deal valued at inception it had just about 6m subscribers. The catalyst $5.7bn to its rapid growth was the Netflix original ‘House of Cards’, introduced about 7 years ago. This attracted more than 170 million additional subscribers. However, Netflix now faces new competition from Disney+. In order to retain and attract subscribers, Netflix has been spending much more than what its video services bring in from its subscribers, however, it is has still remained profitable under the accounting standards allowed in the entertainment industry. After the latest subscriber numbers came out, Netflix's stock surged by more than +12%, to a record $568.Netflix also predicted it will no longer need to raise additional cash from lenders Lumentum Holdings Inc. Lite, +1.57 % said that it to help finance its original-programming budget. It does has agreed to acquire Coherent Inc. Cohr, + 0.96 % not expect to experience the same drain on its cash as it for a cash and stock deal valued at $5.7bn on has for most of the past decade, even after it ramps up Monday. Under the deal's terms, Lumentum will pay production of its original programming. Coherent $100 a share in cash for each of its 1.1851 Commentary shares. In closed. The relevant claims SOURCE: CNBC will own about 27% of the combined company. The deal "will be coherent in microelectronics, precision manufacturing, instrumentation and aerospace and Office Depot rejects $2.1bn defense market-leading photonics and laser with takeover bid from rival Staples Lumentum leading telecom business, data communication and 3 d sensing photonics business The Office Depot owner has rejected a $2.1bn takeover together, create a scale significantly increase the offer from its larger rival Staples, saying it is open to a diversity of photon technology companies and market more limited deal with the two largest US stationery reach", the two companies said in a joint statement. The retailers. In a letter to the Staples board on Tuesday, transaction is expected to be accretionary to Joseph Vassalluzzo, ODP's chairman, highlighted the earnings in the first year following closing and possibility that regulators could block the generate annual operating synergies above $150m. partnership on antitrust grounds, which could cause "significant harm" to its business. The SOURCE: MARKET WATCH rejection comes a week after Staples, controlled by US private equity group Sycamore, offered to buy ODP for Netflix tops 200m subscribers $40 a share in cash, a premium of more than 60 % to its average closing price in the 90 days before the but faces growing challenge bid.Staples' unsolicited offer is the chain's third attempt from Disney Plus to acquire its smaller rival. Four years ago, a federal judge blocked a proposed $6.3bn acquisition of ODP because it would hurt competition. Plans by the two Netflix surpassed 200m subscribers for the first companies to create "Staples the Office Depot" in 1997 time as it expanded its line-up of TV series and also prevented merger attempts. Referring to previous movies during the pandemic. The subscriber objections from regulators, Mr Vasarozzo wrote on PAGE 8 Tuesday that the latest merger attempt could involve "a lengthy and expensive regulatory review process with P&G raises forecast after no guarantee of success."He offered alternatives to earnings top expectations, fueled how the two groups could be combined, suggesting that Staples either make an offer to buy ODP's retail and by 8% jump in sales consumer-facing e-commerce businesses or form a joint venture with its retail arm. Procter & Gamble said its fiscal second-quarter revenue rose 8%, led by higher demand for its cleaning products and grooming tools. The Tide owner is among the consumer companies that have benefitted from at-home consumption trends driven by the coronavirus pandemic. On Wednesday, the company raised its outlook for the second consecutive quarter. The company, with brands under it like Tide, Pampers and Bounty, now expects sales growth of 5% to 6% in fiscal 2021, up from its prior position of 3% to 4% growth. It is also projecting that its adjusted
earnings will rise 8% to 10%, up from the previous SOURCE: FT target of 5% to 8%. “It’s a combination of products that were planned and a quick response to real, emerging needs,” CFO and COO Jon Moeller said. U.S. agency orders Ford to recall 3m vehicles over air bags SOURCE: CNBC
NHTSA (National Highway Traffic Safety Morgan Stanley beats estimates Administration) denied petitions filed by Ford and on better-than-expected Wall Mazda Motor Corp in 2017 seeking to avoid recalling vehicles which have potentially dangerous inflators - Street and wealth management which leads in rare instances to air bag inflators results rupturing and sending potentially deadly metal fragments flying - especially after long-term exposure to high humidity. The recall will apply to various Ford Ranger, Fusion, Edge, Lincoln Zephyr/MKZ, Mercury Milan and Lincoln MKX vehicles, along with Mazda 2007–2009 model year B-Series vehicles. Takata inflators have resulted in the deaths of at least 27 people worldwide and 18 in the United States, and over 400 reported injuries. This defect prompted the recall of about 67m inflators in the US and 100m worldwide by 19 major automakers. The NHTSA said the “evidence makes clear that these inflators pose a significant safety risk.” The regulator said Ford Morgan Stanley on Wednesday reported fourth-quarter must within 30 days “submit to NHTSA a proposed earnings and revenue that beat analysts' expectations schedule for the notification of vehicle owners and the for strong trading, investment banking and wealth launch of a remedy.” management results. The company reported a +51 % rise in profit to $3.39bn, or $1.81 a share. Excluding SOURCE: REUTERS the $189m integration cost related to last year's E-Trade acquisition, earnings per share were $1.92, compared with the average estimate of $1.27 of analysts surveyed
PAGE 9 by Refinitiv. Revenue was $13.64bn, beating the fourth quarter, including approximately $10m estimates of $11.54bn and exceeding $2bn. "The of severance and debt payments. company delivered robust quarterly results and full- year results, with strong performance across all three businesses and geographies," Chief Executive James Gorman said in a news release." Our unique business model will continue to serve us as we further execute on our long-term strategy by acquiring E * Trade and Eaton Vance.
SOURCE: CNBC
Intel drops 4% after a reported In the current quarter, United said it expects hack forced the chipmaker to revenue to fall by 65% to 70% from a year ago and release its 4th-quarter earnings its flight capacity to shrink by at least 51%. The airline early aims of have a liquidity of $19.7bn by the end of March. However, its cost reduction plan positions it to exceed its 2019 adjusted earnings before interest, taxes, nd The shares of intel dropped by 9% on the 22 of depreciation, and amortization (EBITDA) margin by January after the company was forced to release its 2023, or sooner if demand returns more quickly. United th 4 quarter monthly earnings earlier than expected held an investor call on Thursday, with focus on due to a reported hacking. The hacker is believed to summer booking trends. But since U.S. airlines have have gained unauthorized access to financially sensitive dropped fees for changing or cancelling flights, it data. “An infographic was hacked off of our PR has become more difficult to predict revenue based newsroom site,” Davis told businessinsider.fr. "We put on bookings. our earnings out as soon as we were aware." Without providing further details, he said the breach was caused SOURCE: REUTERS by an unlawful action that did not involve any unintentional disclosure by Intel. However, it’s fourth- quarter revenue exceeded investor expectations and its IBM pledges return to growth in own forecast. It saw quarterly revenue fall -1% year-on- 2021 after another sales drop year to $ 20bn, but still beat the $ 17.49bn estimate of analysts polled by Refinitiv. Net income for the quarter came in at $ 1.52 per share, compared to $ 1.10 expected. International Business Machines Corp. expects a return to revenue growth this year, even as corporate SOURCE: BUSINESS INSIDER customers' focus on preserving cash during the coronavirus pandemic contributed to a -4.6% drop in revenue in 2020. IBM has reported that sales will fall United Airlines pledges more every quarter through 2020, underscoring the cost cuts challenges faced by CEO Arvind Krishna, who took over during the pandemic. In the most recent quarter, revenue fell to $20.37bn from $21.78bn in the same United Airlines Holdings Inc aims to cut about $2bn period last year. IBM, which suspended its financial of annual costs through 2023 as it maps a recovery forecast last year because of uncertainty about the from the coronavirus pandemic hit that drove its fourth pandemic's commercial impact, said on Thursday that quarterly loss. Chicago-based United said 2021 would it expected revenue to grow this year and forecast be a “transition year that’s focused on preparing for a adjusted free cash flow of $11bn to $12bn this year. Mr. recovery.” Even as it continued to slash costs, the Krishna has focused the firm on revenue growth and company expended an average of $33m per day in invested in artificial intelligence and hybrid cloud, a
PAGE 10 bet that customers will increasingly operate in multiple clouds, both public and private.
SOURCE: FOXBUSINESS
PAGE 11 ASIA group. The group recently decided to launch a new group Evergrande New Energy Vehicle Group, due to Thailand's PTTOR aims to raise their expectations of a boom in the Electric Vehicles up to $1.8bn in IPO sector. They announced their willingness to become a leading electric car brand, and they want to diversify away from Chinese real estate, as the market faces Thai oil and gas company PTT Pcl said on Thursday pressure. that it has made an initial public offering (IPO) of shares in retail unit PTT Oil and Retail (PTTOR) to raise up to $1.8bn to go public this year. The company plans to use the IPO proceeds to expand its gas station network and invest in distribution centers for its oil business. PTTOR's main business is its 2,000 gas stations, as well as 3,000 coffee shops and other restaurants under the Cafe Amazon brand.
This long-term planned initial public offering follows a series of large-scale listings in Thailand last year. Central Retail Corporation Pcl and SCG Packaging Pcl each raised more than $1bn. The Stock Exchange of However, the project is facing numerous setbacks. Thailand plans to increase its market value by 500bn Billions of dollars have been invested in the baht in 2021. construction of 5 factory plants, whereas its competitors preferred to outsource production to established PTT has set the initial price range of PTTOR stock carmakers. While 2 of the plants are near completion, between 16 and 18 baht, which will raise 43.2bn to progression is really slow on the 3 other ones. No 54bn baht ($1.44bn to $1.80bn). State-owned PTT vehicles have been released commercially at the said in a statement that the final price will be moment, and the group is under the threat of determined on February 3. After the IPO, PTT will hold government investigation on its investments. 75% to 77.5% of its shares. Suspicions are likely because the company looks like a “land grab”, meaning that the company would be using PTTOR said in a separate document on Thursday that it its Electric Vehicles activity as a reason to buy land, and has reached agreements with 28 cornerstone investors, therefore obtain it for a cheaper price (and eventually including SCB Asset Management, BBL Asset use this land for its real estate activity), according to Management, and Kasikorn Asset Management. Deng Haozhi, an independent economist. Foreign cornerstone investors include Singapore sovereign wealth fund GIC, Asian Research & Capital On the other hand, Evergrande New Energy Vehicle Management Corporation, and JPMorgan Chase. Group is acquiring technical competences (acquisition of Protean Electric, UK based component maker, and a SOURCE: REUTERS majority stake in NEVS AB, Swedish carmaker), suggesting that the company is implicated in its Electric Vehicles activity. The company could also benefit from China Evergrande’s Electric huge investor interest in the sector. vehicle ambitions stall SOURCE: FT
Evergrande Group is China’s second-largest property developer by sales. As of 2018, it was the world’s most valuable real estate company. The company is also the world’s most indebted property PAGE 12 The company announced it had terminated the plan, SoftBank takes new $350m that would see it raise as much as ¥15.9bn ($2.5bn) by stake in OneWeb issuing stock to controlling shareholder Chengdu Tianqi Industry Group Co. at ¥35.94 per share, about 40% below its last closing price. Tianqi said it scrapped OneWeb, a satellite internet company which was the deal to avoid short-swing trading and protect the forced into bankruptcy by SoftBank last year (the interests of smaller shareholders. Chinese tech investor refused to take part in an urgent founding round), was rescued from a Chapter 11 after The proposal for Chengdu Tianqi to buy shares comes receiving help from the UK government and the Indian the same month it said it would reduce its stake, along telecom tycoon Sunil Bharti Mittal, which invested with other holders, by up to 4% over a six-month $1bn. The further investment of SoftBank gives the period starting 29 January. The company had also company about 30% of the company stake, roughly completed a 6% share-sale plan announced last year. the same level as the UK government and Sunil Bharti Mittal. Over the weekend, the Shenzhen exchange queried the no-deal announcement, asking whether Chengdu $1bn of funding, either by debt or new investors, is Tianqi’s subscription to the private-placement plan still required for the achievement of OneWeb main after earlier reducing its stake constitutes a short-term project: a constellation of 648 Low Earth Satellites transaction and if it hurts the interests of small and which will deliver global broadband services to the most medium shareholders. remote areas. It was noted that Tianqi Lithium’s share price had The company faces increasing competition, especially tripled over the past 60 trading days and asked the from Elon Musk’s Starlinks Internet Constellation, company whether any insider information had been which already has more than 600 satellites in orbit (vs. leaked, as well as if the plan is feasible. 110 for OneWeb). Although, OneWeb focus is more on government on corporate customers, due to the intense SOURCE: BLOOMBERG price competition in the mass-market broadband.
Chinese purchases of US exports fall far behind trade deal pledge
Trade war between China and the US briefly paused a year ago and resulted in a trade deal between the two countries. The agreement stated that China would buy $200bn more of US goods and services than it did in 2017, over a two-year period (2020 to end of 2021). However, China looks far from meeting this target according to analyst, and this could turn out to be another challenge for Joe Biden’s administration. China SOURCE: FT would have purchased only 58% of the US exports expected under its projections ($100bn by the end of December, missing the target of $173.1bn). This could Tianqi Lithium scraps share affect Joe Biden’s administration decision on the sale after exchange queries plan preservation or not of the US tariffs on Chinese imports. The new US president previously mentioned that he would aim to work with Europe to further pressure Tianqi Lithium Corp. halted a private share-sale plan Beijing on trade issues. after a Chinese exchange quizzed the deal. PAGE 13 responsible investment positions of foreign companies, as well as the new situation in Asia, transactions and investments to the London office." Elliott's largest activity in Asia included a $2.5bn deal with Japanese technology giant SoftBank Investment and a six-year battle with the Bank of East Asia controlled by the Hong Kong Li family. A person close to the fund said that these will now be overseen by teams in London and Tokyo.
Other funds contacted by the Financial Times have described plans to transfer individual employees or part of their business to other cities in Asia, citing concerns that the business environment in Hong Kong is becoming increasingly unpredictable. The new regime in Hong Kong, China aims to subvert the state power or be "interfered" by foreign countries. This has raised
concerns about Hong Kong’s future as a global SOURCE: FT financial center, including concerns that government restrictions may lead to capital and talent flowing to rival Asian business centers in Hedge fund Elliott pulls out of Singapore and Tokyo. Hong Kong However, people close to Elliott said that the decision to close the Hong Kong business was originally made in early 2018 and was not driven by recent political or legal changes in the region. He said the fund has reduced the number of employees in Hong Kong from about 40 to less than 20 in the past three years.
SOURCE: FT
Chinese vaping group RLX set to raise $1.4bn in US IPO The US hedge fund Elliott Management will close its Hong Kong office, becoming one of the first large financial institutions to shut down operations in Hong RLX is China’s biggest e-cigarette maker, and the Kong since entering a period of civil unrest and political country is potentially the world’s largest vaping tension in 2019. This radical fund was founded by market, with an estimated 286.7 million adult billionaire Paul Singer in 1977 and has been established smokers in 2019 and RLX declares to control about in Hong Kong for 15 years. It will transfer employees 63% of China’s e-cigarette market. based in Hong Kong to offices in London and Tokyo, which will become its sole base in Asia. The company, founded in 2018, doubled in value on Friday in a NYSE IPO, despite the recent tensions The memorandum to investors stated: “In line with between Beijing and Washington regarding the funding Elliott’s long-term planning process, we will close of Chinese companies with US Capital. Shares of RLX the Hong Kong office’s trade and investment Technology Inc jumped 86% in their U.S. stock market activities and take effect on January 1, 2021. We will debut this Friday, which gave the Beijing-based transfer existing Asians (except Japan) The main company a market capitalization of nearly $35bn. RLX’s shares opened at $22.34, above the IPO price PAGE 14 of $12 per share. The Chinese vaping firm offered 116.5 cancellation, it will provide insurance for the loss of million shares in its IPO and raised $1.4bn. broadcast fees by the International Olympic Committee. Tokyo also does not have to pay compensation. The In 2019, China issued an effective ban on online sales person familiar with the matter said: "No one will of e-cigarette due to health concerns, but it did not admit to canceling until a recommendation is hinder the growth of the market in the country. RLX given." posted a net income of ¥108.6m ($16.76m) on net revenue of ¥2.2bn ($339.45m) for the nine months People close to the Tokyo Olympic Organizing ended Sep. 30, 2020. Committee said that instead of forcing the cancellation of competitions, it is better to say if international athletes cannot participate in those competitions. We can then make other qualifying arrangements. If the Japanese government wants the Olympics to continue, it must relax border restrictions. However, due to concerns that the new Covid-19 variant will be popular in the UK, South Africa and Brazil, it may be subject to domestic opposition.
SOURCE: FT
Japan insists Tokyo Olympics will go ahead despite pandemic However, Haruo Ozaki, the head of the Tokyo Medical Association, warned in an interview with Japanese Despite reports that the Tokyo Olympics, which has media that the sharp increase in coronavirus cases has been postponed, will be cancelled due to concerns about put heavy pressure on the medical staff. He called on the level of Covid-19 infection. But the Japanese the government to develop clear guidelines stating that government has insisted that the Tokyo Olympics will the number of cases needs to be reduced (to a specific be held this summer. Japan’s Deputy Chief Cabinet date) to justify the deployment of doctors and nurses in Secretary Masai Sakai said he “completely denied” the competition. a report in The Times of London that the government had resigned to abolish the Olympics. International Olympic Committee official Dick Pound
told Kyodo News this week: "No one can guarantee But officials from the Tokyo Organizing Committee said (the Olympics will go as planned). But I think they they were worried about the negative sentiment in the have a big chance, and they will." country before and after the Olympics. Japan’s borders are closed, and the capital is in a state of emergency in SOURCE: FT response to a surge in the virus outbreak.
Two global sponsor consultants based in Tokyo said that if the International Olympic Committee wants to cancel the Olympics, it is likely to make a special request to the United Nations or the World Health Organization to seek formal advice. If the proposal supports the
PAGE 15 China’s currency heads into Jack Ma makes first public Biden era on front foot appearance since Ant’s cancelled IPO The Renminbi, China’s currency, is currently at a 30- month high against the dollar. It means the Renminbi This is the first time Jack Ma, the Chinese billionaire and is stronger than it used to be even prior to the trade founder of Alibaba, makes a public appearance since war. The currency has been boosted by a strong the Ant Group’s IPO was cancelled by the Chinese economic recovery following the covid-19 pandemic, regulator 3 months ago (it was set to be the world and overall, a great success in handling the spread of largest IPO). This unachieved IPO caused Jack Ma to the virus. Also, Biden’s election and the Senate criticize the Chinese regulators as well as the state- controlled by the democrats gave investors better owned banks in late October. He disappeared next to expectations for the relation between the two this event and therefore it created a lot of speculation countries. about what happened.
China currency strength will depend heavily on future Following its public appearance, investors were relieved Biden’s decision about the tariffs. They caused the and able to rule out the worst-case scenario: share currency to depreciate when they were set by the ex- price rose more than 8% on Wednesday. On the same president Donald Trump. Removal of tariffs would day, China proposed stricter rules for payment therefore have the opposite effect. business, such as tighter control of users’ payment data, greater sharing of data with regulators and even possible antitrust action against the biggest domestic actors of the sector: Ant and Tencent.
According to his friends, Jack Ma was simply keeping a low profile while negotiation between the regulator and its businesses (Ant and Alibaba) was running. However, Jack Ma has not spoken about it yet.
SOURCE: FT
TikTok owner ByteDance
Another factor will be the strength of the dollar itself. launches payments in China as Biden’s coming stimulus could generate inflation and it pushes into fintech and e- weaken the US dollar. In addition, low rates in the US market makes holding assets in Renminbi more commerce attractive. ByteDance has launched a new payment service in Eventually Beijing policy priorities will determine the the Chinese version of Douyin, a short video- future value of the Renminbi. China wants to focus on sharing app TikTok. Douyin users can choose Douyin the sustainability of its debt and therefore its rates are Pay to make purchases in the short video application. not likely to reach low levels as in the US and in Creators usually sell items or merchandise related to Europe. Also, the Chinese currency value is guided by their content. Chinese policymakers, which could decide to limit the rise of the currency. Douyin has provided payment methods for Alibaba affiliate Ant Group’s Alipay and Tencent’s WeChat Pay. SOURCE: FT These two mobile payment applications dominate in China. PAGE 16 administrative work necessary for acquisitions in South Korea, the United States and Canada in the first half of this year. At the same time, Naver Webtoon plans to be listed on the Nasdaq in the United States next year. Naver shares closed 4.71% to 322,500 won ($293.45) on Thursday.
According to data from iResearch, Alipay and WeChat Pay together account for more than 90% of China's mobile payment market. Both payment services can be used in apps or in physical stores, where customers can scan barcodes to purchase goods. This is different from Douyin Pay, which can only be used in the Douyin app. Wattpad has 90 million monthly users, and the total monthly reading time is 23 billion minutes. ByteDance said in a statement: “The purpose of Approximately 1,500 stories of Wattpad have been establishing Douyin Pay is to supplement the published as books or adapted into movies or TV shows. existing main payment methods and ultimately Naver, which owns Wattpad, runs Naver Webtoon, enhance the user’s experience of Douyin.” ByteDance which has 72 million monthly users. It will become the owns both Douyin and TikTok. world's largest storytelling platform, with a total of 160 million content users. The acquisition is also The latest developments in e-commerce and financial expected to enable Naver to have 90 million Wattpad technology (fintech) have highlighted ByteDance's users from different cultural backgrounds (including desire to surpass social networks. This includes getting North America and Europe), expanding its influence in involved in mobile games, search engines and music the global content business. streaming. A Naver official who asked not to be named predicted SOURCE: CNBC that Wattpad will be able to strengthen its online novel ecosystem under Naver and become a stronger content provider in the entertainment industry. It is expected S. Korea’s Naver to buy global that online novels will also be added to help diversify storytelling platform Wattpad and enhance their Webtoon content. for $600m By integrating Wattpad's own global video business studio with Naver Webtoon's Studio N, it is expected South Korean Internet giant Naver Corp., which that the latest acquisition will also produce synergies in runs the world's largest online cartoon platform, Naver's film a $600m on program business. Kim Joon- will acquire Wattpad Corp., a social narrative ku, Chief Executive Officer of Naver Webtoon, predicts platform based in Toronto, Canada for $600m. This that the addition of Wattpad will enable the Korean will expand its footprint in the global entertainment company to move further towards becoming a field through enhanced narrative content. leading global entertainment company with enhanced IP diversity. Naver announced on Wednesday that its board of directors had approved a plan on Monday to acquire all SOURCE: PULSE shares in Wattpad, the world's largest online novel platform, for $600m. Naver plans to complete the PAGE 17 which Sequoia, Fidelity and BlackRock have smaller EBay mulls strategic options for investments. its Korea unit. What investors need to know SOURCE: MARKETWATCH
EBay said late Tuesday that it is considering strategic 5G chipmaker Sumitomo options for its e-commerce business in South Korea. Electric hedges bet on top client The news came as more and more people speculated Huawei that Coupang, the leading competitor in the South Korean e-commerce market, was about to conduct an IPO.
The online marketplace said in a statement: "eBay has initiated a process of exploring, reviewing and evaluating strategic options for its Korean business."
"The company is considering what can bring maximum Sumitomo Electric Industries of Japan sold most of the value to shareholders and create future growth 5G base station semiconductors to Huawei opportunities for the company. Choice. The company Technologies. The company seeks a larger customer said it does not intend to make any other base to reduce the risk of troubled Chinese telecom announcements in the process until the eBay board of giants. directors decides to act.
Huawei accounts for 90% of Sumitomo Electric's 5G base station semiconductor revenue. These semiconductors are used in antennas. Semiconductors generate tens of billions of yen (¥10bn equals $96.2m) in revenue each year. The goal of Japanese suppliers is to reduce this ratio to 50% within five years. In September, the U.S. Commerce Department issued a de facto ban prohibiting the provision of semiconductor products to Huawei. This caused Sumitomo Electric to suspend product shipments to Huawei. Since then, except for a small number of high-power output
products, these deliveries have resumed. In the nine months ended September 30, eBay’s revenue in South Korea was only about $1bn, which But the ban prompted Sumitomo Electric to seek European customers. Large investments from Chinese accounted for approximately 13.5% of the company’s total revenue. EBay shares rose 2.8% on customers have also lost momentum. Sumitomo Thursday to $56.98. The stock rose 0.5% in after-hours Electric will expand its European R&D facilities during trading to $57.25. the fiscal year beginning in April. The R&D team there will enhance its ability to develop semiconductors for There were reports last spring that Coupang, a Sweden's Ericsson and other 5G base station competitor in the South Korean e-commerce market, manufacturers. was considering acquiring a "major stake" in eBay South Korea. It was reported earlier this month that Huawei is caught in friction between the United States Coupang may conduct an IPO in March. According to and China, and its products are excluded from the fifth- reports, Coupang has received approximately $3bn in generation wireless infrastructure in many countries. funding from SoftBank and SoftBank Vision Fund, of Other Japanese parts manufacturers may move in the same direction. Akira Minamikawa of U.K.-based research firm Informa Intelligence said: “Huawei’s PAGE 18 procurement of base station components from Japanese companies has climbed to nearly $1.1bn.” “As the Chinese market has a large share, even if Japanese suppliers diversify their customers, they will inevitably Suffer a demand loss of up to 10%."
SOURCE: TOYSMATRIX
Chinese phone maker Honor partners with key chip suppliers after Huawei split
Phone Maker Honor announced it had signed a partnership with some of the biggest chip suppliers such as Intel and Qualcomm. Previously a branch of Huawei, the two companies are now split due to last year’s US Sanctions. Therefore, Huawei sold Honor to a consortium of 30 of the sub-brand’s agents and dealers in November 2020. The goal was to allow Honor to purchase components to US companies, which they could not do while they were a part of Huawei. US restriction prevented Huawei to access advanced US chip technology. The US explained this decision saying that Huawei’s equipment poses a “security risk”. Honor also shifted its strategy. It used to focus on the budget end of the phone market but will now move into the middle and higher tier market and expand overseas, according to George Zhao, Honor Chief executive.
SOURCE: REUTERS
PAGE 19 EMERGING MARKETS AND OTHERS may have peaked, he believes that global consumption will soar to 105 million barrel per day by 2030. He Google will stop search engine expects that being the lowest-cost producer will service in Australia if forced to always be their competitive strength. pay for media contents Based on the accelerating crude output strategy, this company also aims to be lower-cost and the lowest- Alphabet Inc’s Google announced on Friday it would carbon. The company is looking for partners to build stop its search engine service in Australia if the expertise in carbon capture technology and hydrogen government enforce a new code that would require it energy. and Facebook Inc to pay media companies for the right to use their content included in search results SOURCE: FT or news feeds. Australia announced the legislation last month after an investigation found Google and Facebook dominated too much market power in the The big miner is under pressure media industry, which leads to a potential threat to a from the local activist group on well-functioning democracy. the environment issue SOURCE: REUTERS
Adnoc continues accelerating crude output despite investors’ green strategy
The Global Legal Action Network (GLAN) claims that the Cerrejón mine, which is one of the largest open- pit mines in the world, has failed to meet standards
for multinational enterprises (MNE). The expansion Although some biggest oil groups are increasingly on of the mine over the past forty years has led to severe the defensive, as investors require them to retreat environmental degradation with a negative impact on from dirtier businesses into greener energy human health. considering the climate change, the Abu Dhabi National Oil Company is on the course on accelerating GLAN requires Anglo American, BHP, and Glencore, crude output and aims to raise the output capacity of joint owners of the mind, to close mine and the pits, the United Arab Emirates from around 3 million which are located close to where people live. barrels of oil per day in 2016 to 5 million barrels per Cerrejón has claimed that it met requirements made by day by 2030. Colombian courts to improve the water and air quality and decrease noise levels. The head of this company Sultan Al Jaber insisted the UAE’s crude, one the cheapest to extract, would be SOURCE: FT needed even in a world that abandons fossil fuels. Unlike other global oil executives who believe demand PAGE 20 transformation efforts during the pandemic to shift India’s uncertain investment their workers online. environment for foreign With this favorable business environment, Indian IT investors companies with expertise for operating the digital transformation are retaining their price bargaining India crossed the $500bn mark in cumulative in-flow power, and they will not be worried about the currency investments over the past two twenty years. For the risks. government, it was good news, denoting that foreign interest remained undimmed. However, the sums SOURCE: NIKKEI ASIA invested by overseas companies are not large and appear to be more defensive than a serious attempt to commit to the Indian market because of the shifting Trafigura puts €1.5bn of own regulations. cash to cement close links with Rosneft Mr. Modi’s government, with an ambivalent attitude towards foreign investment, is less business-friendly than what executives had expected when his Bharatiya Janata Party came into power. Unpredictable regulation and frequent policy changes, including the recent increase in import tariffs, prove that it is an economic nationalist government.
SOURCE: FT
Indian IT giants reported record profits on digital Trafigura injected €1.5bn of its own cash into a transformation trends €7.3bn deal for a 10% stake in the Vostok Oil’s gargantuan Arctic oil project, illustrating that it tends to cement its ties with Rosneft and secure millions of barrels of crude for its huge trading business. This project, which aims to develop a new oil-producing region on Siberia’s Taymyr Peninsula, will link the existing production of about 370,000 barrels per day and new exploration assets to markets in Europe and Asia via the Northern Sea Route, a fair-weather shipping lane between the Atlantic and Pacific oceans.
Although US sanctions have impeded the Russian
group’s western financing, Trafigura has competed India's top information technology companies, with rival Glencore and win prized supply agreements. including Tata Consultancy Services, Infosys, HCL Rosneft is also expected to attract investments from Technologies, and Wipro reported record quarterly China and India. net profits during the fourth quarter in 2020, as their global clients accelerated their digital SOURCE: FT
PAGE 21 DEBT changing the perspectives of economic recovery in the markets. The recovery of real rates could be announcing an economic SOURCE: FT recovery not too far into the future Yield also comes with time
Democratic majority in the United States Congress We have largely seen how investors are seeking have pushed up expectations for further fiscal higher yields as hard as they can. This directed big stimulus to foster economic recovery. This could flows into Chinese bond markets. This makes sense as have a direct impact on economic performance. the interest rates in China are at 3.85%, while rates in Nonetheless, it is important to remember that one of the the United States are at 0.25% and European rates for principal drivers of economic growth is consumption main refinancing operations are at 0.00%. This makes and when consumption goes up fast, inflation pressures an enormous difference. Nevertheless, recent news arise. The implications for debt market investors are about Chinese companies, thought to had huge, as real yields and inflation-adjusted bonds’ yields governmental support, defaulting on their go up as inflations do. At this moment, real rates are obligation may have opened the doors for different negative due principally to the monetary easing markets. measures implemented by the FED to support the economy in face of COVID-19 impacts. Real rates are Such is the case of some other Asian companies that are the result of subtracting inflation from nominal rates, taking advantage of the historic-low level of interest which explains why fast interest rates could yield this rates. This is even the case for Japanese companies. negative level for them. While it is true that interest rates in Japan have been near zero for a very long time (0.10% at the time), some Japanese and Korean companies have been issuing long terms corporate dollar bonds as a way to lock low-interest rates for a very long time and offering investors higher yields at the same time. Investors have a big appetite for them. One example is the issue from the chipmaker SK Hynix with a value of $2.5bn, the biggest issued by a non-financial company in its country, which had a demand of 5 times the issuance size. Other examples are the Indonesia sovereign 10- year bond with a value of $3bn at 1.9% and the Nippon Life Insurance 30-year subordinated notes with a value of $1.6bn at 2.75%. Issuances are expected to keep coming, being an $8bn bond from Alibaba one of the Nevertheless, nominal rates on US bonds, especially more expected ones. in the 10-year tenure, have been increasing as inflation expectations have been showing pressures SOURCE: FT tilted to the upside. This has changed the tendency for real rates which were at its minimum of -1.12% not long ago. It is worth noting that this effect happened although no monetary tightening measures are expected in the near future. This reflects how optimism regarding additional financial support is
PAGE 22 More yield at the expense of French Government issued a 50- unnecessary risks year OAT (Obligations Assimilables Du Trésor) The constant search for higher yields has benefited the speculative bonds market. Such is the case of the Last week, the French Treasury issued a 50-year Sweden house alarm company, Verisure, who bond with a value of €7 bn. It has been the fourth managed to raise €4.4bn in debt. It is important to time that the French Treasury had issued such a long say part of this debt was comprised of a €1.3bn- tenure bond. The last time was in 2016 when they lock equivalent of debt with ratings in the triple C bracket, an interest rate of 1.923%. Five years later, they have the lowest given by rating agencies. It offers a 5.25% managed to lock a 0.593%. In fixed income coupon while an index of European similar bonds has instruments, longer maturity is translated by higher currently a 7.8% coupon yield. risk. Just to give a sensibility sense to how much this impacts the total return of an investor, we need to think about the total return the investor will yield assuming he can reinvest the coupon payments at the same rate. This is equal to compounding the yield-to-maturity 50 years. In the former case, the total return will be 39.40%, while in the latter, it will be almost 160%. This means that a difference of 1.30%, compounded annually, translates into a difference of almost 120%. Despite this, investors are very keen to finance French government debt at current levels as there are not a lot of options to obtain a higher yield. This was reflected by the demand for this instrument which accounted for €75 bn, more than 10 times the original amount asked for. It is clear that such a low level of interest, though attractive due to the current interest rate context, is not But the most incredible part is what the company is the sole driver for this high demand. It is a combination using the money for. Management is currently going of institutional investors to fund their long-term to cash out a big dividend payment. Amazingly, obligations with the normalization of a low-interest rate investors are aware of it as the company has been very for investors as it has proved to be able to be around for transparent about it. Normally, portfolio managers are extended periods. not very keen to finance dividend payments to shareholders even for high-quality creditors. This SOURCE: LE FIGARO issuance took the company to a leverage level of 7 times. Even if the company has been able to decrease its high leverage levels sharply, the question about if investors are starting to take on unnecessary risk in their seek for higher returns is hard not to rise.
SOURCE: FT
PAGE 23 RATES
China’s GDP growth rate Pound Sterling-Euro rate hits 8 increased by +6.5% in Q4 2020 months high
On Monday, 18th of January 2021, China released its economic data for the Q4 2020. The world’s second- largest economy’s GDP growth rate expanded by +6.5% from October 2020 until the end of 2020 and beat prior expectations. Looking over the full year, the Chinese economy grew by +2.3%. While other big economies struggle from the negative impacts of the global pandemic, China is one of the few countries in the world that register positive growth for 2020. High industrial production backed China’s economy with additional state support. Total industrial output went up by +2.8% in 2020 and even +7.1% in the fourth quarter. Also, China’s robust export growth lowered Accelerating economic recovery and UK’s vaccine stimulus measures by the government. In December, progress boosted the Pound-Euro rate to a new 8 China registered a record-high trade surplus month high. On Wednesday 20th of January, the underlined by a +18% export growth compared Pound Sterling reached €1.13 in intraday trading with December 2019. Despite the positive GDP growth after the release of the December inflation figures by rate in 2020, it was still the weakest year in more the Office for National Statistics. An unexpected than 40 years. Especially low consumer spending and increase of the consumer price index by +0.6% in retail sales prevented the economy’s stable growth. December, up from 0.3% in the previous month, Analysts expect strong growth of up to +7.1% in was the trigger of the Pound’s rise. Before the latest 2021 if the global economy recovers from the figures on inflation rates, it was likely that the Bank of pandemic. England (BoE) will cut interest rates. Besides the surprising increase of the inflation rate, progressive Covid vaccinations and the last-minute Brexit deal between UK and Brussels on Christmas Eve were catalysts for Sterling’s strength. Against the US Dollar, the Pound Sterling rose +0.2% to above $1.36 on Wednesday.
SOURCE: FT
ECB experts overturn GDP growth rate forecast for eurozone
The European Central Bank (ECB) monetary policy experts have lowered their forecast for economic growth in the eurozone this year due to the second Coronavirus wave. The economists now expect the SOURCES: FT, NIKKEI ASIA PAGE 24 gross domestic product (GDP) to rise by only +4.4% in 2021, the ECB announced in Frankfurt on Friday. In UK house price growth rate October, economists had still predicted recovery of reaches a four-year high +5.3% after last year's economic slump during the Coronavirus crisis. But then, there were new lockdown measures in Europe because of a massive Huge demand for property boosted UK average house increase in the number of infections. The ECB surveys prices at the end of 2020. According to the official house economists four times a year on their growth and price index released on Wednesday by the Office for inflation forecasts. The results of the survey always play National Statistics, UK property prices increased by an important role in the monetary policy considerations +7.6% during the year to November 2020. The of the monetary guardians. For next year, however, the increase represents the highest rate since 2016. economists' growth forecasts are somewhat more Lockdown lifestyle shifts and government measures optimistic than last time. By 2022, they now expect triggered the number and supply of housing the economy in the currency area to grow by +3.7%. transactions. For the first time, the average house In October, they had predicted economic growth of price in London surpassed £500,000 in November only +2.6%. Their long-term forecast for 2025 2020. Across the UK, the average house price is now assumes a growth rate of +1.4%. £250,000.
SOURCE: HANDELSBLATT
SOURCE: FT, OFFICE FOR NATIONAL STATISTICS
PAGE 25 SUSTAINABLE FINANCE
Blackrock also had declared that it would divest from Report card of BlackRock after companies that generate more than 25% of its revenues one year of making from thermal coal, but experts say that it has not gone sustainability promises far enough. A report by Reclaim Finance says that Blackrock still holds around $85bn in the coal sector.
Even though Blackrock seems to be responding rather than leading from the front, this is a positive sign for climate activists, as they see a lot of potential in Blackrock to do more towards sustainability.
SOURCE: FT
Joe Biden’s big move
The $8.1tn fund house had made huge promises towards sustainability. It has taken steps in this direction but according to experts, these have not been enough as per the promises made. Blackrock’s chief Larry Fink said it was time to put sustainability as the One of the first things that Biden did after taking over focus of its future investments. the president’s office was to send a letter to the UN stating the USA’s willingness to join the 2016 Paris Looking back, Blackrock had declared to review its agreement treaty. This treaty requires all the voting policies, improving its stewardship policies participating countries to limit the rise in global transparency, and voting against the director’s decision temperature from preindustrial levels to +2°C, with an against sustainable practices. Blackrock did well enough ambition to keep it around +1.2°C. The next and the in these areas to get a B rating in engagement, in an tougher step would be to set up a plan to reduce annual rating of big asset managers from Influence emissions and submit the Nationally Determined map. The rating is good, but it still lags most of its peers. Contribution with 2030 as a goal. Biden also went on to scrap the permit for the Keystone XL oil pipeline Blackrock had also declared to keep ESG at the center of connecting the US with Canada. This is a step in the its investments, integrating around $2.7tn of its assets right direction as the US has a lot to catch up on after 2 with ESG. Critics however say that as a larger chunk of years of inactivity. its investments is not subjected to the same sustainability requirements, there is a “passive SOURCE: FT problem”.
PAGE 26 CONCEPT OF THE WEEK
Depository Receipts
One of the most famous methods to invest in foreign companies is Depository receipts. Depository Receipts represent ownership in a foreign firm and are traded in the markets of other countries in local market currencies. A bank deposits shares of the foreign firm and then issues receipts representing ownership representing of a specific number of the foreign shares. The depository bank acts as a custodian and manages dividends, stock splits, and other events. Although the investor does not have to convert to the foreign currency, the value of the DR is affected by exchange rate changes, as well as firm fundamentals, economic events, and any other factors that affect the value of any stock.
If the firm is involved with the issue, the depository receipt is a Sponsored DR; otherwise, it is an Unsponsored DR. A sponsored DR provides the investor voting rights and is usually subject to greater disclosure requirements. In an Unsponsored DR, the depository bank retains the voting rights.
Global Depository Receipts (GDRs) are issued outside the United States and the issuer’s home country. Most GDR’s are traded on the London and Luxembourg exchanges. Although not listed on U.S. exchanges, they are usually denominated in U.S. dollars and can be sold to U.S. institutional investors. GDRs are not subject to the capital flow restrictions imposed by governments and thus offer the firm and the investor greater opportunities for foreign investment. The firm usually chooses to list the GDR in a market where many investors are familiar with the firm.
American Depository Receipts (ADRs) are denominated in U.S. dollars trade in the United States. The security on which the ADR is based is the American Depository share (ADS), which trades in the firm’s domestic market. Some ADRs allow firms to raise capital in the United States or use the shares to acquire other firms. Most require U.S. Securities and Exchange Commission (SEC) registration, but some are privately placed.
PAGE 27