FILE PHOTO: People walk past a Xiaomi store in Shenyang, Liaoning province, China June 12, 2018. REUTERS/Stringer
March 19, 2019
SHANGHAI (Reuters) – Chinese smartphone maker Xiaomi Corp said on Tuesday its fourth-quarter net profit more than tripled to 1.85 billion yuan ($275.59 million), on stronger revenue.
That profit exceeded the 1.7 billion yuan average estimate of 10 analysts, according to Refinitiv data.
Revenue for the period increased 27 percent to 44.4 billion yuan, lower than the 47.4 billion yuan average estimate of 13 analysts, according to Refinitiv data.
For the full 2018 calendar year, Xiaomi brought in revenue of 174.9 billion yuan and made a net profit of 8.6 billion yuan.
This marks the third set of financial results for the company since its IPO in Hong Kong. Xiaomi shares have rallied nearly 30 percent since early January, though they remain well below their July listing price.
(Reporting by Josh Horwitz; Editing by Muralikumar Anantharaman)
FILE PHOTO: An exterior view of China Evergrande Centre in Hong Kong, China March 26, 2018. Picture taken March 26, 2018. REUTERS/Bobby Yip
March 19, 2019
BEIJING (Reuters) – Chinese property firm Evergrande Group will start producing its first electric vehicles in June as part of a goal to become the world’s largest new energy vehicle (NEV) company within the next three to five years, according to its chairman.
Hui Ka Yan made the comments at a conference in the eastern city of Tianjin over the weekend, according to a statement published on the company’s website on Tuesday.
“The new energy automobile industry has a huge market prospect. Evergrande has completed the entire industrial chain layout in the field of new energy vehicles,” Hui said.
He also said that Evergrande plans to start selling its first electric vehicle model globally “soon”, which will use electric car production technology from Swedish car makers Saab and Koenigsegg, and drive systems from Netherlands’ e-Traction, according to the statement.
Evergrande, China’s second-largest property developer by sales, has been aggressively expanding into the automotive space in search of new areas of growth as the Chinese property market slows.
Its subsidiary, Evergrande Health, invested in vehicle manufacturer National Electric Vehicle Sweden AB and Chinese auto battery maker Shanghai CENAT New Energy Co this year. It is also the majority investor in Swedish super car brand Koenigsegg.
Not all of its investments have gone smoothly, however.
Last year, Evergrande Health bought 45 percent of Chinese electric vehicle firm Faraday Future as part of a $2 billion plan but the deal eventually turned sour. The companies have since ended their legal fight.
Sales of NEV vehicles have remained a bright spot in China’s car market, jumping 61.7 percent in 2018 to 1.3 million vehicles even as the overall car market contracted for the first time since the 1990s. China’s biggest auto industry association predicts NEV sales to hit 1.6 million this year.
(Reporting by Yilei Sun and Brenda Goh; Editing by Muralikumar Anantharaman)
FILE PHOTO: The logo of Germany’s biggest retailer Metro AG is pictured at a Metro cash and carry in Berlin in this June 10, 2009 file photo. REUTERS/Fabrizio Bensch/Files
March 19, 2019
By Kane Wu and Julie Zhu
HONG KONG (Reuters) – German wholesaler Metro AG has kicked off the sale of its China operations by calling for bids, in a deal that would value the business at between $1.5 billion and $2 billion, two people with direct knowledge of the deal said.
Metro, which owns 95 stores in China and real estate assets in major cities such as Beijing and Shanghai, is planning to offload a majority stake in its China business, said the people.
The sale move is part of a global reorganization of the wholesaler and comes as China’s wholesale and retail sectors are experiencing disruption from e-commerce players.
Metro’s China business could yet be valued at up to $3 billion, said two separate sources with direct knowledge of the matter.
Potential bidders include electronics retailer Suning Holdings Group, supermarket chain operators Wumart Stores Inc and Yonghui Superstores, according to three of the people.
Private equity firms such as Hillhouse Capital Group and Bain Capital are also studying a potential deal, they added.
Property makes up the bulk of the value in Metro’s China business, the people said, cautioning, however, that there is a large gap between price expectations among buyers and the seller.
A Metro spokeswoman in Germany said the company is in talks with potential partners concerning the further development of its China business but declined to comment on details of its exchanges with potential partners or the sale process.
Bain and Suning declined to comment. Yonghui and Hillhouse did not immediately respond to requests for comment. Calls to Wumart went unanswered.
First-round, non-binding bids are due in the second week of April, said two of the people. Citigroup and JPMorgan are advising Metro, the people said. The banks declined to comment.
All the sources declined to be named as the deal talks are not public.
E-commerce giant Alibaba Group Holdings has also been in talks with Metro about taking a stake in the China business, Reuters previously reported.
Tech giants such as Alibaba and Tencent have been investing in supermarkets and shopping malls to help develop their online-to-offline strategy.
Alibaba in 2015 poured $4.6 billion into Suning’s listed entity – Suning.Com Co Ltd and holds a 19.99 percent stake, its biggest step towards integrating online and store-based shopping at the time.
Tencent, which has invested 4.2 billion yuan in a 5 percent stake of Yonghui, is also forming a partnership in China with Europe’ s largest retailer Carrefour.
The German wholesaler opened its first China store in Shanghai in 1996 and now has over 11,000 employees in the country. Its sales in the country reached 2.7 billion euros ($3 billion) in the financial year of 2017-2018, according to its website.
Once a sprawling retail conglomerate, Metro has been restructuring in recent years to focus on its core cash-and-carry business, selling Kaufhof department stores and then splitting from consumer electronics group Ceconomy.
Metro is also trying to offload its loss-making Real hypermarkets chain.
(Reporting by Kane Wu, Julie Zhu and Sumeet Chatterjee in Hong Kong; Additional reporting by Matthias Inverardi in DUESSELDORF; Editing by Jennifer Hughes and Muralikumar Anantharaman)
The Goldman Sachs company logo is seen in the company’s space on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., April 17, 2018. REUTERS/Brendan McDermid
March 18, 2019
KUALA LUMPUR (Reuters) – Malaysian prosecutors on Monday said they would issue summonses to units of U.S. investment bank Goldman Sachs in London and Hong Kong, requiring them to respond by June to criminal charges filed against them last year.
Soon after being elected in May, 2018, a new government charged three units of Goldman Sachs for misleading investors by making untrue statements and omitting key facts in relation to bond issues totaling $6.5 billion for state fund 1Malaysia Development Berhad (1MDB).
On Monday, only the Singapore unit of Goldman Sachs appeared at a pre-trial hearing in a Kuala Lumpur court as a respondent.
“Fresh summonses will be served on the United Kingdom and Hong Kong offices of Goldman Sachs ahead of the next court hearing on June 24,” prosecutor Aaron Paul Chelliah told reporters.
The 1MDB scandal played a major role in the electoral defeat that ended Najib Razak’s near decade in power, and a new government led by Prime Minister Mahathir Mohamad promptly re-opened corruption investigations.
Najib, who has consistently denied wrongdoing, is facing multiple criminal charges, mostly linked to 1MDB, and has been barred from leaving the country.
The U.S. Department of Justice (DoJ) has estimated that a total of $4.5 billion was misappropriated by high-level 1MDB fund officials and their associates between 2009 and 2014, including some of the funds that Goldman Sachs helped raise.
Malaysia has said it was seeking up to $7.5 billion in reparations from Goldman Sachs, including $600 million in fees paid to the bank for the bond issues.
Goldman Sachs has consistently denied wrongdoing and said certain members of the former Malaysian government and 1MDB lied to it about how proceeds from the bond sales would be used.
A separate Kuala Lumpur court also set April 15 for prosecutors to serve documents to the defense for former Goldman Sachs banker Roger Ng.
Ng, a Malaysian, was charged on Dec. 19 last year with abetting the bank to provide misleading statements in the offering prospectus for the 1MDB bond sales.
Prosecutor Zaki Arsyad told the court he needed more time to obtain documents as most of them were overseas.
Ng was originally set to be extradited to the United States to face money laundering charges filed against him by the DoJ.
Malaysia, however, has said it may postpone the extradition until Ng can face a domestic trial first.
Tim Leissner, another former Goldman Sachs official, and Malaysian financier Low Taek Jho have also been charged in the United States over the alleged theft of billions of dollars from 1MDB. Leissner has pleaded guilty.
Low, whose whereabouts is unknown, has issued denials of any wrongdoing and has refused to return to Malaysia, saying that the case against him is politically motivated.
(Reporting by Rozanna Latiff; Editing by Simon Cameron-Moore)
FILE PHOTO: A Cathay Pacific self check-in machine is displayed at Hong Kong Airport in Hong Kong, China, April 4, 2018. REUTERS/Bobby Yip/File Photo
March 18, 2019
By Jamie Freed
SINGAPORE (Reuters) – Hong Kong’s Cathay Pacific Airways Ltd, in talks to buy low-cost carrier Hong Kong Express Airways, believes budget airlines have a “unique market segment” it does not capture at present, Chief Executive Rupert Hogg said on Monday.
Cathay this month said it was in “active discussions” to acquire the airline controlled by HNA Group Co Ltd.
That would boost revenue and give Cathay access to the growing low-cost travel market at a time when a lack of slots at Hong Kong International Airport has constrained its ability to follow peers like Singapore Airlines Ltd and Qantas Airways Ltd and set up its own budget brand.
“It does interest us,” Hogg told Reuters of the budget airline sector during an interview in Singapore. “We watch Singapore Airlines and Scoot; we can see they are trying to get connectivity between them.”
He declined to comment on the status of talks to acquire Hong Kong Express but said the low prices offered by budget carriers helped to stimulate new travel demand, making it a “unique market segment”.
The potential acquisition comes as Cathay faces a more challenging outlook for revenue growth, according to Hogg.
Higher airfare and cargo rates pushed revenue up 14.2 percent in 2018, helping the airline last week report a swing to a $300 million profit after two years of loss as a turnaround plan helped it cut costs and increase income.
“We’ve had great revenue growth, both cargo and passenger,” he said. “As we look forward we can see the sort of gains in percentage growth terms that we’ve had, by definition it is more difficult to achieve that.”
The 18 analysts polled by Refinitiv I/B/E/S on average expect revenue at the airline to grow 3 percent to HK$114.3 billion ($14.56 billion) in 2019.
Hogg said the airline was investing in technology to better handle schedule disruptions and product improvements such as better meals to help drive passenger revenue growth, but the macro-economic environment was weaker than last year.
“There is a lot of uncertainty,” he said. “Uncertainty is definitely bad for corporate sentiment and investment and travel. And it is bad for consumer sentiment.”
Cargo volume is also weaker than at the same time last year, falling 5.2 percent in January due to a slower Lunar New Year rush than the prior year.
($1 = 7.8495 Hong Kong dollars)
(Reporting by Jamie Freed; Editing by Christopher Cushing)
FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo
March 18, 2019
By Tommy Wilkes
LONDON (Reuters) – Collapsing asset price volatility has turned ‘carry trading’ into one of investors’ top plays of 2019. Many reckon the run is far from over.
This strategy sees investors borrow in currencies where interest rates are low to invest in countries where yields are high, such as in emerging markets. Investors can pocket the difference, or ‘carry’.
For the trade to work liquidity needs to be plentiful, the global economic backdrop benign and, importantly, currency volatility next to nothing. Broadly, all those conditions seem to be in place.
Volatility, or vol, had been crushed this year by central banks’ decisions to hit the pause button on interest rate rises. Societe Generale analyst Kit Juckes says markets’ “outright boredom” so far in 2019 has been the perfect recipe for carry trade success – FX volatility is near multi-year lows.
As a result, carry trading has returned 5.5 percent in 2019, according to HSBC’s Global FX Carry Index. That follows a fall of 1.4 percent in 2018, when rising U.S. interest rates caused a stampede out of emerging markets, the favored place to earn carry.
The current environment for carry is “textbook”, says Andreas Koenig, head of foreign exchange at Amundi Asset Management.
(GRAPHIC: Speculators long on Mexican peso – https://tmsnrt.rs/2Cg2cxu)
SELL AND BUY
Koenig has been betting on the Turkish lira and Brazilian real, both of which offer yields well into the double digits.
Investors buying 10-year Russian government bonds can earn yields of 8.5 percent, or 8 percent in Mexico. Those returns have been further burnished by currency appreciation — some emerging currencies such as the rouble have firmed as much as six percent against the dollar and euro.
On the other hand, the Japanese yen, Swiss franc and euro tend to be carry traders’ funding currencies of choice, as their low yields make them attractive to sell.
Yields in Switzerland on the benchmark bond return -0.35 percent; in Germany barely 0.07 percent. But the euro has been particularly popular this year as the struggling economy has further delayed policy tightening plans in the bloc.
(GRAPHIC: Comeback for carry – https://tmsnrt.rs/2O2a6iz)
But can the good times last?
Analysts say the carry trade is here for a while, or at least as long as rates remain low and economic data is strong, but not so strong it forces a central bank rethink.
BNP Paribas predicts near-term growth in major economies will be “not too cold, but certainly not hot.
“The tepid economic outlook means we are positive on long carry and short volatility trades,” the bank’s economists wrote last week.
As history shows, the hunt for carry is not without risks.
Should U.S. growth deteriorate, international trade conflicts escalate or the end of the decade-long bull run crystallize, the resulting volatility spike can send “safe” currencies such as the yen, euro and Swiss franc shooting higher, while inflicting losses on riskier emerging markets.
But even in a good carry environment, some high-yield trades may not work. For instance, MSCI’s emerging currency index is up 1.6 percent in 2019 after last year’s 3.8 percent drop, but the gains mask individual poor performances.
Robin Brooks, economist at the Institute for International Finance, notes that since the Federal Reserve’s surprise policy U-turn in January, high-yielders such as South Africa’s rand and Turkey’s lira have actually weakened.
Asian currencies including India’s rupee and the Malaysian Ringgit have gained – a “puzzle” Brooks attributes to expectations of a U.S.-China trade deal rather than investors responding to the Fed’s dovish shift.
(GRAPHIC: Emerging markets currency performance in 2019 png – https://tmsnrt.rs/2Cg2cxu)
Investors have also loaded up their carry trade positions already: speculators are $2.3 billion net long in Mexico’s peso against the U.S. dollar, against a neutral stance in January, according to CFTC positioning data.
(GRAPHIC: Speculators long on Mexican peso – https://tmsnrt.rs/2FbJ996)
Amundi’s Koenig said that following the strong recovery in high-yielding currencies in 2019 “the risk is not only in terms of volatility but in underlying levels.
“Carry from here is not my favorite strategy,” he said. “In a late-cycle stage, it’s not very likely that it holds forever.”
(Graphics by Ritvik Carvalho; Editing by Toby Chopra)
Mass Transit Railway (MTR) trains collide near Central station during signal system trial in Hong Kong, China March 18, 2019. MTR Corp/Handout via REUTERS ATTENTION EDITORS – THIS IMAGE WAS PROVIDED BY A THIRD PARTY. NO RESALES. NO ARCHIVES
March 18, 2019
HONG KONG (Reuters) – A train collision disrupted services in Hong Kong on Monday, threatening commuter chaos during rush hour in the heart of the Asian financial hub, authorities said.
The rare disruption on a network used by nearly 6 million people every weekday brought services to a halt between the stations of Central and Admiralty, rail operator MTR Corp said.
“The repair will take quite a long time and the service between Central and Admiralty … will not be available for the whole day,” its operations director, Lau Tin-shing, told a news briefing.
An investigation into the incident has begun, although the trains carried no passengers at the time of the collision during the trial run of a new signal system.
The drivers of both trains were taken to hospital, the network operator added, urging commuters to use other forms of travel or different rail routes.
Shares of MTR fell more than 1 percent in early trade, lagging a gain of 0.3 percent in the benchmark index.
(Reporting by Anne Marie Roantree and Donny Kwok; Editing by Clarence Fernandez)
Bottles of Champagne are displayed at Dilettantes wine shop in Paris, France, December 31, 2015. REUTERS/Benoit Tessier
March 17, 2019
PARIS (Reuters) – Brexit and France’s “yellow vest” protest movement pushed the number of bottles of French champagne sold last year to its lowest since 2004, trade group data showed on Sunday.
The Comité Interprofessionnel du Vin de Champagne (CIVC) said the number of bottles sold fell 1.8 percent to 302 million in 2018, though total revenue edged up 0.3 percent to a record 4.9 billion euros ($5.6 billion) as prices rose.
“The fall in volume is becoming a bit worrying, with the slowdown in France and Britain not compensated by higher sales outside the European Union,” CIVC co-president Jean-Marie Barillere told Reuters.
French and UK sales together account for about 60 percent of total sales by volume. French sales fell 4.2 percent to 147 million bottles, with more bottles sold abroad than in France for the first time in 100 years, as a slow economy and the yellow vest anti-government protest movement weighed on sales.
Barillere said the protests had hit Paris tourist arrivals and French household confidence, hurting demand.
Total export sales edged up 0.6 percent to nearly 155 million bottles, but total export revenue rose 1.8 percent to 2.9 billion euros as the focus on value of big houses, such as LVMH’s Moët & Chandon and Pernod Ricard’s Mumm, the world’s best-selling champagne, paid off.
In Britain, sales fell for the third year in a row, due in part to uncertainty sparked by the country’s planned departure from the European Union. Volumes dropped 3.6 percent to 26.8 million bottles for total revenue of 406 million euros. Volumes had already fallen 11 percent in 2017 and 9 percent in 2016.
CIVC said champagne was feeling strong competition from Italian prosecco, which is three to four times cheaper.
Sales to the United States increased 2.7 percent to 23.7 million bottles for revenue of 577 million euros.
Sales to Japan were up 5.5 percent to 13.6 million bottles, while sales to Hong Kong and China – each accounting for more than 2 million bottles – were up 12 and 10.1 percent respectively.
The biggest sales increase was seen in South Africa, where volume was up more than 38 percent to 1.1 million bottles.
(Reporting by Pascale Denis; Writing by Geert De Clercq and Mark Potter)
FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 8, 2019. REUTERS/Brendan McDermid
March 15, 2019
(Reuters) – Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.
1/ THIRD TIME LUCKY? MAY-BE
If at first you don’t succeed, try and try again. And again and again. The UK Parliament has voted to extend the March 29 exit date but Prime Minister Theresa May is still hoping to railroad lawmakers into approving the EU divorce deal she’s negotiated. The unpopular agreement has already been heavily rejected twice but prospects of a long delay or even another referendum that may reverse Brexit could well swing eurosceptic Tories over to her side. So a third “meaningful” vote, dubbed MV3, is planned for the coming week. If that fails, well, MV4 is already being touted.
There is, of course, no guarantee an exasperated EU will play ball — all 27 remaining members have to agree the extension. And there are doubts a three-month delay will break the deadlock. If MV3 fails, the EU’s March 21 summit will be key, first to see if it agrees an extension and second, whether it presses Britain for a delay of one year or more.
With the parliamentary votes, meaningful or otherwise, grabbing the limelight, there’s probably not much the Bank of England can add at its meeting on March 21. It’s already said no-deal Brexit is a bad idea; any clarity on its policy intentions is likely only after the manner and timing of Brexit becomes evident.
(GRAPHIC: No-deal” Brexit probabilities – https://tmsnrt.rs/2Ua88yG)
2/ FIGURE IT OUT BOEING
President Trump has told Boeing to “figure it out fast”. That’s probably good advice for the company, a long-standing stock market darling that’s lost almost $28 billion, or 13 percent of its value, since the March 10 Ethiopian Airlines’ crash.
The disaster has prompted country after country into grounding Boeing’s fleet of 737 MAX aircraft – the model involved in the Ethiopian crash and another recent one in Indonesia. Possible links between the accidents have rocked the aviation industry, scared passengers worldwide, and left the company scrambling to prove the safety of its best-selling model that was intended to be the standard for decades. Before the crash, Boeing was the seventh most valued stock on the Dow Jones, but it’s fallen to 14th. Its shares hit record highs just a week before the crash, having risen a stunning 52 percent since the end of December. They are still up almost 20 percent year-to-date.
So what’s next? Moody’s reckons Boeing will overcome the near-term challenges. The question for investors is whether the share price slide takes into account the damage to the bottom line and potential legal exposure. Analysts will be assessing the possible fallout; chances are, some earnings downgrades will start coming through.
– Boeing faces crisis with worldwide grounding of 737 MAX jetliners- Boeing 737 MAX 8 groundings spread around the world- Boeing shares cheaper, but are they a buy?
(GRAPHIC: Boeing valuation – https://tmsnrt.rs/2O6oKWa)
3/ PAUSE PERFECT
U.S. unemployment is plumbing its lowest level in half a century, wages are ticking up but the Federal Reserve, meeting on Tuesday and Wednesday, is not poised to snatch away the proverbial punch bowl.
On Wall Street at least, the Fed’s dovish 2019 conversion is paying off: The S&P 500 is up about 6 percent since the Fed’s Jan 30 meeting signalled it was putting in abeyance a tightening policy that began in 2015.
Labor shortages notwithstanding, the slowing economy is keeping prices in check, giving the central bank leeway to stand pat on interest rates after hiking four times in 2018. Compared to the Fed’s 2 percent inflation target, producer inflation was up 1.9 percent in the year to February, while consumer inflation rose just 1.5 percent to its smallest annual gain in 2-1/2 year.
The next reading of the Fed’s preferred inflation measure, the core personal consumption expenditures price index, is due on March 29. But that gauge rose 1.9 percent year-year in December.
Already, money markets are building in some easing in 2020. By then, the Fed should have completed a review of how it manages its policy mandate of keeping prices stable and employment high.
(GRAPHIC: U.S. price and wage growth – https://tmsnrt.rs/2O4K4ex)
4/ SURPRISES GOOD AND BAD
It’s been a rough old time for Europe’s economy, with momentum steadily waning last year even as the United States powered ahead. Growth warnings issued by the OECD and the European Central Bank have rattled investors further this year, as they try to assess what kind of toll the euro zone has suffered from trade wars, Brexit and Italian debt concerns.
But finally! There are some signs the nasty surprises are fading. Citi’s well-known economic surprise index – a gauge showing how much economists have been over- or underestimating economic performance compared to what indicators actually deliver – now shows a cross-over between the euro zone and the United States.
That means negative surprises from economic indicators in the world’s top economy have worsened dramatically in recent weeks. Euro zone data misses, meanwhile have been less bad than previously.
Whether this run continues or not will become evident in coming days. First up on Tuesday, comes Germany’s ZEW economic index. Purchasing manager indexes, a crucial forward-looking gauge, will be released on Friday from the United States, Euro zone and Japan.
(GRAPHIC: Macro surprises U.S. versus Euro zone – https://tmsnrt.rs/2Fb2JT4)
5/ SEARCHING FOR MEANING
To many economists, the Bank of Japan’s forecasts have long seemed to be on the optimistic side. The key difference in views was the global outlook. Well, the world economy is slowing down and even if Japanese companies are awash with cash and no major central bank runs a looser policy than the BOJ, the No.3 economy is still feeling the pinch.
What’s worse, inflation encounters less resistance on the downside than it does on the upside. So the BOJ is well and truly in a corner. There was little it could do at its March meeting save keeping policy unchanged and tempering its economic outlook predictions. But might the BOJ be forced to resort to further policy easing? That question is being asked of the ECB too, while central banks elsewhere — from Australia to the United States — may also have to cut rates.
Upcoming data on Japan’s trade and price growth will help investors determine what happens next. Policymakers will also be hoping for a resolution soon to the U.S.-China trade dispute. The data could intensify the debate on whether the BOJ’s dogged adherence to a 2 percent inflation target means anything – finance minister Taro Aso predicted “things could go wrong” if the BOJ hung on to that goal.
(GRAPHIC: Japan inflation – https://tmsnrt.rs/2FbxTJT)
(Reporting by Sujata Rao, Karin Strohecker and Josephine Mason in London; Alden Bentley in New York and Marius Zaharia in Hong Kong; Editing by Toby Chopra)