Finance

Finance

Hong Kong and Singapore succumb to the lure of dual-class shares

FOR Charles Li, Alibaba was the one that got away. The head of the Hong Kong stock exchange (HKEX) courted the Chinese e-commerce giant when it sought a venue for its listing five years ago, but he could not push through rule changes wanted by Alibaba to keep control of the company in its leaders’ hands. It opted instead for an initial public offering (IPO) in New York. “Losing one or two listing candidates is not a big deal for Hong Kong,” he wrote at the time. “But losing a generation of companies from China’s new economy is.” Since then he has been determined to make the next big catch. It is finally within his grasp. After a debate that has trundled on for several years HKEX is, in the coming weeks, poised to allow companies to issue shares with different voting rights. Known as dual-c...

Are China’s state giants reformable?

AMONG investors it is fashionable to say that China’s state-owned enterprises (SOEs) do not matter much any more and that entrepreneurs now power the world’s second-largest economy. But China’s SOEs are still hard to avoid. They account for 40% of its stockmarket and a third of its investment, and they dominate heavy industry. On the global stage, SOEs’ appetites sway commodity prices and many are expanding abroad. These empires of men and machines account for 45 cents of every dollar of debt in China, so their health determines whether the country’s financial system will escape a crisis or blow up. And SOEs have become a loaded gun on the negotiating table between China and America. Treasury officials argue that China has broken the promises it made upon joining the World Trade Organisati...

German cars have the most to lose from changes facing the auto industry

GERMAN carmakers have much in common with the self-confident roadhogs who favour their vehicles. The cars they produce, with sleek design, doors that close with a satisfying thunk and roomy interiors swagged with leather and technology, are the dominant force at the upper end of the car market worldwide. At home, too, they are the purring engine of the economy; carmaking is by far Germany’s biggest industrial sector. But cars are changing. Electric power and autonomous vehicles will alter radically the way they are used (see special report). The difficulty in adapting threatens not only future revenues and profits at the big three—Daimler, BMW and Volkswagen (VW)–but also Germany’s status as a mean economic machine. Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and...

Jerome Powell's game of Kerplunk

THERE is an old children’s game called Kerplunk. It is similar in concept to Jenga. Marbles are poured into a plastic tube through which sticks have been threaded. The players take it in turns to remove the sticks with the aim of avoiding the fall of marbles. The normal pattern is for a few marbles to drop until the unlucky player removes the strut that keeps up the rest. A noisy crash ensues. Jerome Powell (pictured), the new chairman of the Federal Reserve, may be that unlucky player. Janet Yellen, his respected predecessor, managed to pull out five sticks (ie, raised rates five times) before she departed, leaving both the economy and the markets in fine shape. Doubtless, Ms Yellen was not happy when President Donald Trump denied her a second term. But it may have been a blessing i...

Forecasting congressional votes could yield juicy returns

STOCK traders hang on central bankers’ every utterance. They scan news sites for market-moving events, such as terrorist attacks, and monitor President Donald Trump’s tweets for hostility towards publicly traded firms. Curiously, though, few analyse goings-on in Congress, which can shift the course of the world’s largest economy. Jonathan Strong, a former reporter (including at Roll Call, a sister publication of The Economist), hopes to change that. With the help of 0ptimus, a firm of Republican data wonks, he has spent three years building Legis, an algorithm powered by vast quantities of data and a neural network (a computer system modelled on the human brain), which predicts the outcome of congressional votes. Each of the 44 votes it has forecast so far has been correct. Last year a hed...

Square’s bets beyond a register brought in $253M last year as it posts a largely positive fourth quarter

Square posted a largely successful fourth quarter that showed continuing growth with its Cash app — with users spending around $90 million on its Cash card in December, putting it on at a potentially $1 billion run rate. That would offer another significant avenue for Square to snap up additional customers as it looks to chip away at the alternatives available for directly sending cash between users. While popularized by Venmo, many companies have gone after this space — including Apple, where you can send money over iMessage — and its massive popularity through services abroad are showing the appeal for a company like Square. The rest of the report was largely above analyst expectations, though it got a slight dig for missing a near-term forecast for its earnings. Square is looking less a...

A brawl on a cruise ship raises worries about security at sea

THE cruise industry sells itself as a relaxing way to travel, a world away from the hassle, queues and crime of travelling on land. Yet not all holidays look like the brochure, and cruises are no exception. Earlier this month one such voyage, nicknamed the “cruise from hell”, came to a resounding end in Melbourne, Australia. Dozens of brawls had broken out on board the Carnival Legend, a ship owned by the world’s largest cruise firm, many of which had apparently been instigated by a family group of 23. It appears that the crew struggled to control the situation. One video seems to show crew members kicking a passenger on the ground. Another passenger told reporters that she had heard the captain respond to the violence by saying, “What do you want me to do about it, throw them overboard?” ...

Here’s the latest update on the very spicy beef between two massive chipmakers

While the largest deal in the history of technology continues to hit a number of speed bumps, we’re now getting into the phase of very strongly worded publicly issued statements between the two companies as we get closer and closer to the annual meeting of stockholders in early March. Broadcom and Qualcomm, the former of which is trying to acquire the latter, are continuing to duke it out on their respective investor relations pages by issuing public statements to investors over how much drama there is over the pricing of this deal. Broadcom is looking to buy Qualcomm for $79 per share (actually down from $82, though that’s another story), making this a massive tech deal worth more than $100 billion. And, naturally, they can’t agree — and it is definitely the other party’s fault. Qualcomm ...

Money stolen by Bernie Madoff is still being found

WHEN bankruptcy trustees were appointed over a hectic weekend late in 2008, there seemed no end to the losses caused by the collapse of Bernie Madoff’s Ponzi scheme. Cash in the bank was no more than $150m. But the losses have been less, and the assets available for compensation greater, than had been feared. On February 22nd Irving Picard, the bankruptcy trustee overseeing the liquidation of Mr Madoff’s firm, announced that a fund set up to reimburse customers would make its ninth distribution, of $621m, bringing the total handed out so far to $11.4bn. Another $1.8bn in held in reserve for contested claims. This is on top of a separate distribution of $723m last November from a separate fund run by the Department of Justice. Another $3bn remains to be distributed in that fund and the bank...

The rapid rise and fall of the Anbang empire

RARELY in corporate history has a giant come and gone so quickly. Anbang was founded in 2004 as a small Chinese car-insurance company. By the start of last year it ranked among the world’s biggest insurers with some $300bn of assets, including stakes in hotels and financial firms across America, Europe and Asia. Given another ten years, boasted Wu Xiaohui, its swashbuckling founder, Anbang’s scale would “exceed your imagination”. But then, just as vertiginous as its ascent, came its fall. Alarmed at its debt-fuelled expansion, regulators started blocking its overseas deals, reined in its insurance business and detained Mr Wu. On February 23rd its disgrace became complete: the Chinese government announced that it had taken over Anbang and would prosecute Mr Wu for economic crimes. The insur...

Snap, chatter and pop goes the share price

KYLIE JENNER, a model and reality TV star best known for being the, er, second most famous Kylie in the world, managed to cause a stir on Wall Street. With this idiosyncratic tweet sooo does anyone else not open Snapchat any more? Or is it just me…ugh this is so sad Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and Editor’s Picks. she knocked back the share price of Snap, the parent company of the video- and picture-sharing app. Ms Jenner’s influence in the target market is deemed to be huge; she has 24.5m Twitter followers, and her message has (at the time of writing) been retweeted 58,000 times and “liked” by 310,000.  Snap’s share price fell 6%, reducing the company’s market value by $1.3bn. The decline was not just down to the influence of Ms Jenner...

A pharmaceutical firm bets big on a cancer drug

WHEN Ken Frazier, chief executive of Merck, an American pharmaceutical giant, started his job in 2011, he had a hard decision to make. The firm had promising new drugs—such as Januvia, for diabetes, and Gardasil, a vaccine against cervical cancer. But the pharma industry was struggling with dismal returns on R&D and investors were questioning if companies were overspending on science. Some surrendered and started buying in drugs instead. But Mr Frazier opted to carry on backing his labs and promised publicly to spend on R&D for the long term, not for the stockmarket’s immediate gratification. An opportunity to implement the pledge soon arrived. Merck’s merger with another pharma firm, Schering-Plough, in 2009, had brought it an obscure new cancer drug. At first Merck’s scientists w...