Hong Kong rallies close to bull market territory

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Hong Kong’s benchmark stock index climbed as much as 2 per cent on Monday, extending a week-long rally and putting it on course to become the best-performing major index globally in April.

After a weak start to the year, the Hang Seng index entered a technical bull market during the day on Monday, touching a level 20 per cent above its January low, with an influx from international funds improving liquidity. The index closed 16 per cent above its January low and up more than 7 per cent this month.

Sentiment has shifted on Chinese equities, with foreign investors starting to chase lower-valued, high-dividend Hong Kong-listed shares. They have been shifting funds away from other Asia-Pacific markets such as Japan or India, where currencies are under pressure from a stronger dollar.

The rally comes as Hong Kong’s stock exchange is trying to revive its fortunes and attract foreign investors, with the Hang Seng index down more than 42 per cent since early 2021 and investors showing little appetite for initial public offerings.

“Things are changing,” said Alvin Cheung, associate director of Hong Kong-based Prudential Brokerage. “A relatively lower valuation . . . has become an attractive element when the other major markets are not rallying continuously.

“Institutional investors are reallocating their funds from other markets to Hong Kong at this point . . . and the momentum has been strong,” he added.

Property and finance stocks led gains in the broader market in Hong Kong on Monday. Sentiment was boosted by insurance group AIA, which reported a 27 per cent increase in new business value, a key indicator of its future profitability. Mainland Chinese shares also rose, with the benchmark CSI 300 index up 1.1 per cent.

Asian countries in recent weeks have been bracing for turbulence from a stronger US dollar, with the receding prospect of US interest rate cuts this year hitting the yen, renminbi and other regional currencies.

The yen has continued to record new 34-year lows against the dollar, plunging past the ¥160 level against the dollar on Monday before rebounding shortly afterwards.

“It is more about improvement in funding rather than fundamentals,” said Chen Guo, an analyst at China Securities. “The biggest downside for Hong Kong stocks in the second half of last year was the systematic foreign outflows to Japan. But recently, the share allocation in the Asia-Pacific region has shifted from Japan

Blackstone and Goldman to provide funding for $7bn L’Occitane buyout

Blackstone and Goldman Sachs are lining up to provide around $1.6bn in funding to support a potential take-private deal for L’Occitane International by the company’s owner Reinold Geiger, which could value the skincare business at about $7bn including debt, according to a report by Bloomberg.

The report cites unnamed sources familiar with the matter as revealing that Geiger is considering making an offer for the L’Occitane shares he doesn’t already own at HKD33 to HKD34 as early as Monday.

According to exchange filings, a vehicle ultimately controlled by Geiger, L’Occitane’s chairman, already owns more than 70% of the company.

Trading of L’Occitane shares was suspended in Hong Kong on 9 April, pending an announcement related to takeover codes. The stock closed at HKD29.50 a day earlier, giving the company a market value of about $5.6bn.

According to Bloomberg’s sources, talks are ongoing, no final decisions have been made and details such as price and timing could still change.

Why CVC’s IPO was such a hit

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Parents know the golden rule for throwing a great birthday party: every child must leave with a balloon. That way, as one party organiser explains, “everyone leaves not only happy but impressed, so that your child is the talk of the playground for the right reasons on Monday morning”.

Last week European private equity group CVC Capital celebrated a fun fiesta in the capital markets, with balloons and everything.

CVC’s up-to-€2.3bn Amsterdam IPO drew huge investor interest, enabling several shareholders — including Singapore’s GIC, the Kuwait Investment Authority, and the Hong Kong Market Authority — to reap big gains. And despite overwhelming demand, CVC opted to price its offering conservatively — at the €14 midpoint of the indicated range — to ensure a positive after-market. In short, CVC is the talk and toast of trading floors and conference rooms for all the right reasons this Monday morning.

It’s fashionable (arguably too fashionable) to disparage flotations of private equity-controlled companies, but the flotations of the firms themselves have often proved lucrative. In Europe, EQT’s shares trade around 340 per cent above the Stockholm IPO price from 2019, while Bridgepoint stock rocketed on its London debut in the sizzling summer of 2021 and stayed above its offer price for eight months.

Whenever a deal goes wrong, it’s important to critically dissect the execution and identify the mis-steps. But here’s a deal that has so far been a clamorous success for the selling shareholders, for new investors and for CVC itself. It’s therefore only appropriate to review why this listing developed into a “win-win-win situation.”

Instant histories have a way of embarrassing chroniclers, but here are three tentative explanations for the deal’s success: quality and size of the company; alignment of interests; and the tactical decision to prioritise offer size over price. And if these explanations hold any water, it means that this success might unfortunately be hard to replicate consistently.

First, investors want to buy the best stuff at times of uncertainty, not rummage through marked-down aisles of second-hand merchandise for a cheap bargain. And they crave the liquidity that a larger company and larger float provide, because it means they can manage the risk of their position much more nimbly.

CVC fits the bill: it is regarded as a thoroughbred asset manager with a strong record, and

Yen’s sharp rebound triggers speculation of government intervention

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The yen strengthened sharply against the dollar on Monday afternoon in Asia, rebounding from a 34-year low reached a few hours earlier and triggering speculation that Japanese authorities had intervened to support the currency after weeks of warnings.

From about 1pm Tokyo time, the yen began to strengthen from ¥159.5 a dollar to ¥155.2 over a 50-minute period. Traders in Hong Kong said it was “highly likely” that Japanese authorities intervened.

Earlier in the day, the yen had slid past ¥160 against the dollar, a level many traders assumed would force an intervention by Japan for the first time since late 2022. Markets in Japan were closed for the first day of the country’s Golden Week holidays, resulting in thin trading.

Traders said that by Monday afternoon there was a clear perception in the market that breaching the ¥160 level had forced Japanese officials to act, though they did not have solid evidence the intervention had taken place. They added that the volatility of trading and speculation could have convinced some investors to unwind some of the huge bets they had amassed against the yen in recent weeks.

Tokyo had been warning for weeks that it was standing by to support the yen if trading became too volatile. Bank of Japan governor Kazuo Ueda said in mid-April that the central bank could act if the impact of the weak yen became “too big to ignore”.

The yen has lost about 11 per cent of its value against the dollar since the start of the year, weakening under the gap between the US’s high interest rates and near-zero rates in Japan. The wide differential could remain in place for longer than expected as the US Federal Reserve has said rates may need to stay high to tame inflation.

The “yen carry” trade, in which investors cheaply borrow the yen to fund investments in higher-yielding assets, is unlikely to start diminishing meaningfully until the Fed starts cutting rates, said Shusuke Yamada, head of Japan foreign exchange and rates strategy at Bank of America.

Yamada said in a note that holding the yen above ¥155 a dollar would require continuous interventions by Japanese authorities to buy time until the BoJ raised rates, a move that is now not expected for at least three months. He added that any intervention would need to

How Europe solved its Russian gas problem

Wilhelmshaven has long been a strategic port for Germany, initially a stronghold for 14th-century pirates and later a major trade and naval base.

However, in 2022 the North Sea coastal town took on a new role. It became home to Germany’s first floating gas terminal, a vital artery for gas supplies to keep power flowing both at home and across Europe at a time when the continent was coming perilously close to running out.

The infrastructure for the terminal was constructed in just 10 months as Russia slashed pipeline gas supplies to the EU after its invasion of Ukraine, threatening shortages and blackouts. It receives natural gas cooled to its liquid form, regasifies it and then sends it into mainland Europe’s sprawling network of gas pipelines.

A full shipment has the capacity for enough gas to power 90,000 homes for a year. Appropriately the vessel, owned by Norway’s Höegh LNG, is named the Esperanza, after the Spanish word for hope.

In 2023, the Esperanza provided around 6 per cent of Germany’s total gas consumption, according to Uniper, the German energy giant that operates the terminal, and its capacity will be fully used again this year.

“With the expansion of that import capacity, a significant amount of gas could be diverted from Asia in the short term to bring into Europe so it was a really important part of dealing with the crisis,” says Uniper’s chief executive Michael Lewis.

Wilhelmshaven was the first floating storage regasification unit (FSRU) to come online during the crisis but many more are in the works. Since Russia started cutting pipeline supplies to Europe in 2021, at least 17 liquefied natural gas (LNG) terminals have been planned or are under construction.

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LNG received by these FSRUs have helped replace all but 10 per cent of the gas supplies that previously came to the EU from Russia via pipelines, helping to reduce gas prices from record highs of over €300 per megawatt hour in August 2022 to near pre-crisis levels of around €30 per megawatt hour today.

The energy crisis that Europeans feared two winters ago has not come to pass, thanks to a combination of unprecedented energy policy interventions, cuts in demand and good luck. In terms of both storage levels and prices “we are in a much better position now

BHP’s bid for Anglo American chips away further at London’s reputation

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If you want diamonds, head down to London’s Hatton Garden. For musical instruments, you need to go a mile or so further west to Denmark Street. And if you want to invest in a mining company, the London Stock Exchange has historically been one of world’s top destinations.

For years, the market built its reputation as the home of an array of global natural resources companies. The likes of Rio Tinto, Anglo American, Fresnillo and Antofagasta have been among the mainstays of the mining offering, while BP and Shell have led the way for the oil & gas sector.

BHP’s potential bid for fellow miner Anglo American threatens to put a dent in that hard built reputation. If successful, it would deprive London investors of a £34bn company that has been listed in the city for a quarter of a century.

That reputation has already suffered some blows. In 2018, the City lost its biggest gold mining company when Randgold Resources was bought by Canada’s Barrick Gold for $6bn. And BHP itself has already taken a chunk out of London’s status. In 2022 it changed its structure from a dual listing in London and Sydney to a primary listing in Australia. At the time, it said that the move would make the company “more efficient and agile” and would better position it for “continued performance and growth”.

Regardless of whether BHP succeeds in its quest to buy Anglo, there could be more damage on the way. Last month, hedge fund Tribeca Investment Partners suggested that Switzerland-based Glencore — which has been listed in London since 2011 — should move its listing to Australia, arguing in a letter to the company that “London is no longer the home of mining”.

Over in oil & gas, it emerged last year that in 2021 Shell had considered moving its listing to the US, while there have been mutters this year about a possible bid for BP, which would remove it from the London Stock Exchange.

Valuations play a part, as they have for the numerous other UK-listed companies that have decided recently that they would rather have their shares traded elsewhere. In a note earlier this month, analysts at investment bank Liberum found that mining companies in the UK trade at much steeper discounts to their US peers

Vomiting frogs and other ‘dust’ prove vexing for US bitcoin ETFs

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US exchange traded funds that invest directly in bitcoin are building up stores of digital assets they did not buy and cannot sell after inadvertently receiving them as “gifts” attached to their cryptocurrency purchases.

Digital artworks of frogs vomiting rainbows and other cartoonish imagery have shown up in bitcoin wallets run by ETF providers, including Cathie Wood’s Ark Investment Management and Bitwise Asset Management, according to analysis from blockchain analytics group Arkham Intelligence and a review of their holdings by the Financial Times. Arkham says it has also tracked more than $20,000 worth of non-bitcoin tokens that have made their way to wallets associated with BlackRock’s bitcoin ETF.

The unexpected virtual arrivals have been embedded in previous cryptocurrency transactions — akin to stapling a cheque to a banknote — and sold by past owners. Cryptocurrency trades handled via blockchain, by design, cannot be reversed, potentially handing the funds a small windfall.

However, the funds are unable to cash in on their fortune because the bitcoin ETF managers would need regulatory approval to sell the bonus virtual assets, known colloquially as “dust”, to avoid falling foul of tax regulations. The Securities and Exchange Commission, which greenlit the first spot bitcoin ETFs in January, has not granted that approval.

“These are just weird crypto artefacts that legacy SEC structures and legacy tax structures were not designed to accommodate,” said Joe Hall, an attorney with the Davis Polk law firm.

US spot bitcoin ETFs have hoovered up more than 500,000 bitcoin since their long-awaited launch in January, which means the issue of “dust” has been growing.

Many of the gifts have been made possible by the creation of types of tokens that allow text and images to be embedded into bitcoin, creating bitcoin NFTs (non-fungible tokens).

A review by the FT of Bitwise’s bitcoin ETF wallets found that some of them appear to hold assets other than bitcoin, such as a images of a frog vomiting a rainbow and a figure in a cartoon spaceship as well as a rare sliver of cryptocurrency that once belonged to American computer scientist Hal Finney, the first recipient of bitcoin after its pseudonymous creator, Satoshi Nakamoto.

“Dust” swept up into ETF digital vaults includes

Big Tech investors question AI pay-off

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Financial companies scramble to rework contracts after US Federal Trade Commission rule bans non-compete agreements, the largest western banks that remain in Russia paid the Kremlin hundreds of millions of euros in taxes last year, and Turkey is in talks with the US energy supermajor ExxonMobil over a multibillion-dollar deal to buy liquefied natural gas. Plus, the message from Big Tech companies to investors about when AI will be profitable: be patient.

Mentioned in this podcast:

Ban on non-compete agreements sends shockwave across Wall Street

Microsoft and Alphabet enjoy AI-powered gains from cloud divisions

Question of pay-off from AI hangs over Big Tech earnings

Western banks in Russia paid €800mn in taxes to Kremlin last year

Turkey in talks with ExxonMobil over multibillion-dollar LNG deal

The FT News Briefing is produced by Fiona Symon, Sonja Hutson, Kasia Broussalian and Marc Filippino. Additional help by Denise Guerra, Sam Giovinco, Peter Barber, Michael Lello, David da Silva and Gavin Kallmann. Our engineer is Monica Lopez. Topher Forhecz is the FT’s executive producer. The FT’s global head of audio is Cheryl Brumley. The show’s theme song is by Metaphor Music.

Read a transcript of this episode on FT.com

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Musk makes surprise visit to Beijing as Tesla’s China-made cars pass data security rules

Local Chinese authorities have removed restrictions on Tesla cars after the company’s China-made vehicles passed the country’s data security requirements, the automaker said Sunday. The breakthrough came as Tesla CEO Elon Musk arrived in Beijing for an unexpected meeting with Chinese Premier Li Qiang, amid the first major auto show in the city in four years. Musk’s visit to China on Sunday also raised expectations that Tesla’s driver-assist software “Full Self Driving” would soon be available in the country. Elon Musk, CEO of Tesla and owner of social media site X, formerly known as Twitter, attends the Viva Technology conference dedicated to innovation and startups at the Porte de Versailles exhibition center in Paris, France, on June 16, 2023. Gonzalo Fuentes | Reuters

BEIJING — Local Chinese authorities have removed restrictions on Tesla cars after the company’s China-made vehicles passed the country’s data security requirements, the automaker said Sunday.

The breakthrough came as Tesla CEO Elon Musk arrived in Beijing for an unexpected meeting with Chinese Premier Li Qiang, amid the first major auto show in the city in four years.

Although Tesla’s electric cars are some of the most popular vehicles in China, they have reportedly been banned from some government-related properties due to concerns about what data the U.S.-based automaker can collect.

Tesla’s press release did not specify which local authorities had removed restrictions on the cars. The Biden administration earlier this year announced a probe into whether imported cars from China pose national security risks due to their ability to potentially collect data about the U.S. and send it back to China.

Tesla’s vehicles were not the only ones that passed the data security rules.

In addition to Tesla’s Model 3 and Model Y, several new energy vehicles from BYD, Lotus, Nezha, Li Auto and Nio passed China’s data security requirements, the China Association of Automobile Manufacturers and the National Computer Network Emergency Response Technical Team/Coordination Center of China said Sunday.

The new data security requirements for “connected vehicles” were released in November and cover cars released in 2022 and 2023 which automakers voluntarily submit for inspection, the center said.

The rules test for whether the cars anonymize facial recognition data outside the vehicle, default to not collecting cockpit data, process

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UK local elections loom for Conservatives

Israel has said that it would be willing to delay a long-planned assault on Hamas’s last stronghold in the Gaza Strip if a deal to secure the release of Israeli hostages can be agreed.

Hamas said over the weekend that it was studying a new proposal by Egypt and Israel that, according to reports, would lead to a halt in the fighting and a further withdrawal of Israeli forces from Gaza in return for the release of two to three dozen of the Israelis seized during the militant group’s October 7 assault on the Jewish state.

Israel has begun preparations for the civilian evacuation of Rafah, Gaza’s southernmost city and the last population centre controlled by Hamas, ahead of an expected attack that could come “within weeks”, according to one Israeli official.

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