Reuters : China considers over $1.4 trillion in extra debt over next few years

China considers over $1.4 trillion in extra debt over next few years

Summary
  • China to raise fresh debt via special treasury, local govt bonds
  • Package includes 6 trln yuan to address local govt debt risks
  • China to approve up to 4 trln bonds for idle land, property purchases
  • Beijing may announce stronger fiscal package if Trump wins Nov. 5 election

Oct 29 (Reuters) - China is considering approving next week the issuance of over 10 trillion yuan ($1.4 trillion) in extra debt in the next few years to revive its fragile economy, a fiscal package which is expected to be further bolstered if Donald Trump wins the U.S. election, said two sources with knowledge of the matter.

China's top legislative body, the Standing Committee of the National People's Congress (NPC), is looking to approve the fresh fiscal package, including 6 trillion yuan which would partly be raised via special sovereign bonds, on the last day of a meeting to be held from Nov. 4-8, said the sources.

The 6-trillion-yuan worth of debt would be raised over three years including 2024, said the sources, adding the proceeds would primarily be used to help local governments address off-the-books debt risks.

The planned total amount, to be raised by issuing both special treasury and local government bonds, equates to over 8% of the output of the world's second-largest economy, which has been hit hard by a protracted property sector crisis and ballooning debt of local governments.

Reuters is confirming for the first time that the Chinese authorities are contemplating approving the 10-trillion-yuan stimulus package, an amount that financial analysts have said in recent weeks they expect Beijing to consider.

The spending plans suggest that Beijing has switched into a higher stimulus gear to prop up the economy although it's still not the 2008-like bazooka that some investors have been calling for.

The central bank in late September announced the most aggressive monetary support measures since the COVID-19 pandemic. The government followed up weeks later by flagging more fiscal stimulus without specifying financial details of the package, stoking intense speculation in global markets about the size of the new spending.

The sources who have knowledge of the matter declined to be named due to confidentiality constraints.

The State Council Information Office and the news department of the NPC Standing Committee did not immediately respond to Reuters requests for comment.
The sources cautioned that the plans are not finalized yet and remain subject to changes.

China's top legislative body generally holds its meeting every two months - in the second half of even-numbered months. As per the parliament's 2024 work agenda, released in May, a standing committee session was planned for October.

The forthcoming meeting was initially planned for late October before being rescheduled to early November, said one of the sources.

The meeting's timing, which coincides with the week of the U.S. presidential vote on Nov. 5, offers Beijing greater flexibility to adjust the fiscal package including the total size, based on the election outcome, said the sources.

Beijing may announce a stronger fiscal package if Trump wins a second presidency as his return to the White House is expected intensify the economic headwinds for China, the two sources said.

Republican candidate Trump has gained in recent polls to erase much of the early advantage of his Democratic opponent, Vice President Kamala Harris. Trump has vowed to impose 60% duties on imports from China.

STIMULUS INITIATIVES
As part of its latest fiscal package, the NPC Standing Committee is also expected to greenlight all or part of up to 4 trillion yuan worth of special-purpose bonds for idle land and property purchases over the next five years, said the sources.

Local governments would be allowed to raise that amount on top of their usual annual issuance quota, which mainly funds infrastructure spending. The quota stood at 3.9 trillion yuan this year and 3.8 trillion in 2023.

The latest move is aimed at enhancing local governments' ability to manage land supply, and alleviate liquidity and debt pressures on both local governments and property developers, they added.

Special-purpose bonds are a tool for off-budget debt financing used by Chinese local governments, with the proceeds raised typically earmarked for specific policy objectives, such as infrastructure expenditures.

Should the NPC Standing Committee approve these issuances in full instead of in stages, it could increase the total stimulus size to over 10 trillion yuan, they added.An average of 2 trillion yuan in new central government debt annually underscores an urgency in Beijing to shore up the economy.

Late in 2023, China issued 1 trillion yuan in sovereign bonds to bolster flood-prevention infrastructure and meet its roughly 5% economic growth target.

Beijing started this year with plans to issue 1 trillion yuan in special sovereign debt already in place, but that sum is widely expected to be increased as growth has been drifting off target and economists said a longer-term structural slowdown could be in play.

All the same, the planned fiscal spending falls short of the firepower deployed in 2008, when Beijing's 4 trillion yuan in fiscal stimulus in response to the global financial crisis accounted for 13% of GDP at the time.

The extra money fuelled a property market frenzy and led to unfettered lending to local government financing vehicles, which municipalities used to get around official borrowing restrictions.

As part of the overall fiscal spending, China is also considering approving other stimulus initiatives worth at least one trillion yuan, such as a consumption boost including trade-in and renewal of consumer goods, said the sources.

Another trillion yuan could also be raised via special treasury bonds for capital injection into large state banks, said one of the sources and another source with knowledge of the matter.

>>> Europe : Brokers Upgrades & Downgrades - 29th of October 2024 V3(++)

>>> Up
* AKVA Raised to Buy at Norne Securities; PT 75 kroner (+)
* Azoty Raised to Hold at Pekao Investment Banking; PT 21.32 zloty (++)
* Big Yellow Group Raised to Buy at BofA (++)
* Burckhardt Raised to Buy at Research Partners
* Heineken Raised to Buy at CIC; PT 94 euros (+)
* Incap Raised to Buy at Inderes; PT 13 euros
* ITM Power Raised to Hold at Pekao Investment Banking
* Kainos Raised to Speculative Buy at Canaccord; PT 1,000 pence (+)
* Lemonsoft Raised to Accumulate at Inderes; PT 6.50 euros
* Marston's PT Raised to 80 pence from 70 pence at Panmure Liberum (++)
* Molecular Partners Raised to Buy at Van Lanschot Kempen (+)
* Pandora Raised to Buy at ABG; PT 1,250 kroner
* PSP Swiss Raised to Buy at BofA (++)
* Segro Raised to Buy at BofA (++)
* Trainline PT Raised to 556 pence from 530 pence at Deutsche Bank (+)
* VAT Raised to Buy at Kepler Cheuvreux; PT 460 Swiss francs
* WDP Raised to Buy at BofA (++)

>>> Down
* ABB Cut to Neutral at Goldman; PT 52 Swiss francs
* Bigben Interactive Cut to Underperform at Oddo BHF (+)
* Bossard Cut to Reduce at Baader Helvea; PT 210 Swiss francs
* Bucher Cut to Reduce at Baader Helvea; PT 350 Swiss francs
* CBrain Cut to Sell at ABG; PT 165 kroner
* Cyberoo Cut to Neutral at Intermonte; PT 3.20 euros
* Nimbus Group Cut to Hold at Carnegie (+)
* Novo ADRs Cut to Hold at Erste Group
* OMA Savings Cut to Reduce at Inderes; PT 13 euros
* Steico Cut to Hold at M.M. Warburg; PT 29 euros (+)
* St James's Place Cut to Neutral at BofA (+)
* Swiss Life Reinstated Outperform at BNPP Exane (+)
* TI Fluid Cut to Hold at Jefferies; PT 200 pence
* VAT Cut to Reduce at Baader Helvea; PT 352 Swiss francs
* Zurich Ins. Cut to Neutral at BofA (+)

>>> Initiation
* Aedifica Resumed Buy at BofA (++)
* Baloise Reinstated Underperform at BNPP Exane (+)
* Carmila Cut to Underperform at BofA (++)
* Cofinimmo Cut to Underperform at BofA (++)
* Eurocommercial Cut to Neutral at BofA (++)
* Hammerson Resumed Underperform at BofA (++)
* Helvetia Reinstated Neutral at BNPP Exane; PT 148 Swiss francs (+)
* Icade Resumed Buy at BofA (++)
* Instone Real Estate Rated New Buy at Baader Helvea; PT 11 euros
* Onward Medical Resumed Buy at KBC Securities; PT 9.10 euros (+)
* Sampo Reinstated Buy at Nordea; PT 51 euros
* Siltronic Rated New Buy at Bankhaus Metzler; PT 105 euros
* Swiss Life Reinstated Outperform at BNPP Exane (+)
* Temenos Rated New Underperform at Oddo BHF; PT 58 Swiss francs
* Thyssenkrupp Nucera Rated New Buy at Pekao Investment Banking

>>> Call
* Bossard Cut to Reduce at Baader, Cites Tough Market Envrionment
* Bucher Downgraded to Reduce at Baader on Continued Weak Momentum (+)
* Deutsche Bank Strategists Say Equity Positioning Fell Last Week
* Estee Lauder Tapping CEO From Within May Disappoint, Citi Says
* Philips Valuation Now Reflects Challenges, Jefferies Upgrades
* Temenos Underperform at Oddo BHF on Structural Growth Challenges
* VAT Cut to Reduce by Baader on Unfavorable Risk/Reward

>>> MSCI beats by $0.08, beats on revs

MSCI beats by $0.08, beats on revs
  • Reports Q3 (Sep) earnings of $3.86 per share, excluding non-recurring items, $0.08 better than the FactSet Consensus of $3.78; revenues rose 15.9% year/year to $724.7 mln vs the $716.15 mln FactSet Consensus.
  • Recurring subscription revenues up 15.4%; Asset-based fees up 19.5%. Operating margin of 55.4%; Adjusted EBITDA margin of 62.2%.
  • Co reaffirms FY24 operating expense $1,305 to $1,345 million.
  • "MSCI's third-quarter results highlight the underlying strength of our business model and client footprint, as well as the essential role that our solutions play across the investment ecosystem. Among other achievements, we posted our best-ever Q3 for recurring sales in Index and Analytics, along with nearly 20% growth in asset-based-fee revenue, which was driven by record AUM balances in financial products linked to our indexes," said Henry A. Fernandez, Chairman and CEO of MSCI.

>>> US Research Calls I

Research Calls I
  • Upgrades:
    • Coca-Cola FEMSA (KOF) upgraded to Buy from Neutral at Citigroup; tgt raised to $102
    • Philips (PHG) upgraded to Hold from Underperform at Jefferies
    • Summit Materials (SUM) upgraded to Overweight from Equal Weight at Barclays; tgt raised to $52
  • Downgrades:
    • CEMEX S.A. (CX) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $6
    • Redwire Corporation (RDW) downgraded to Neutral from Buy at B. Riley Securities; tgt raised to $9.50
    • Tapestry (TPR) downgraded to Hold from Buy at TD Cowen; tgt $52
  • Others:
    • AppLovin (APP) initiated with an Overweight at Wells Fargo; tgt $200
    • Arcosa (ACA) initiated with an Overweight at Barclays; tgt $106
    • CRH Plc. (CRH) initiated with an Overweight at Barclays; tgt $110
    • Criteo (CRTO) initiated with an Overweight at Wells Fargo; tgt $70
    • Curtiss-Wright (CW) initiated with an Overweight at Alembic Global Advisors; tgt $412
    • DoubleVerify (DV) initiated with an Underweight at Wells Fargo; tgt $14
    • Evergy (EVRG) initiated with an Outperform at Mizuho; tgt $67
    • Genelux (GNLX) initiated with a Buy at Guggenheim; tgt $8
    • HIVE Digital Technologies (HIVE) initiated with an Overweight at Cantor Fitzgerald; tgt $9
    • LiveRamp (RAMP) initiated with an Equal Weight at Wells Fargo; tgt $25
    • Magnite (MGNI) initiated with an Equal Weight at Wells Fargo; tgt $13
    • RxSight (RXST) initiated with a Buy at Jefferies; tgt $72
    • Six Flags Entertainment (FUN) initiated with a Buy at Guggenheim; tgt $52
    • TG Therapeutics (TGTX) initiated with a Buy at TD Cowen; tgt $50
    • The Trade Desk (TTD) initiated with an Overweight at Wells Fargo; tgt $150
    • Unity Software (U) initiated with an Equal Weight at Wells Fargo; tgt $20

>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • VFC +22.1%, LAC +11.8%, FFIV +11.1%, CWH +9.8%, VEEA +8.2%, NARI +7.9%, CDNS +6.8%, UCTT +5.6%, CR +5.6%, AGYS +5.4%, HSBC +4.8%, NWE +4.6%, KRC +4.5%, EHC +4.2%, LDOS +3.7%, TREX +3.2%, DFH +3%, PSO +2.2%, SBAC +2.1%, LTC +2.1%, BRX +2.1%, SAFE +2%, KFRC +1.5%, WELL +1.3%, SKY +1.3%, WM +1.2%, QTRX +1%
  • Gapping down:
    • TMDX -26%, CVI -25.3%, HLIT -16.1%, AMKR -10.8%, VERA -6%, F -5.9%, EYPT -5.6%, TRNS -5.3%, BOOT -4.9%, PRCT -4.4%, NEE -4.1%, RMBS -4%, FLS -3.9%, KDP -3.8%, NVS -3.5%, CCCS -3%, QUAD -2.7%, LEG -2.5%, PCH -2.5%, UFPI -2.4%, BP -2.3%, LEU -1.8%, CHKP -1.7%, SHYF -1.6%, ESI -1.5%

WWD : Brunello Cucinelli Talks About His Vision of Life, Values and More

Brunello Cucinelli Talks About His Vision of Life, Values and More
Ahead of receiving the John B. Fairchild Honor, Cucinelli reflects on his career and on his goal of being seen as "a decent man."

MILAN — Conference calls about a company’s financial results generally focus on the numbers, the outlook and any business trends a chief executive officer may be seeing.

Then there are Brunello Cucinelli‘s.

Sure, he will also talk about the numbers — which are almost always good. But he is more likely to quote philosophers such as Horace, Cicero, Socrates or Aristotle, and blend these with a discussion of everything from the use of artificial intelligence to the latest medical research into longevity, the dignity of hard work to the humanistic condition.

It might seem to someone listening in for the first time an odd mixture, but to Cucinelli they are core to his beliefs of following a path aimed at the betterment of himself — and all of mankind.

It is for this, as much as for the success of his brand, that Cucinelli is the recipient of the 2024 John B. Fairchild Honor. Past recipients have been Ralph Lauren, Karl Lagerfeld, Leonard Lauder, Giorgio Armani, Miuccia Prada, Tommy Hilfiger and Maria Grazia Chiuri of Valentino and, now, Dior.

Typical of Cucinelli, when he was notified he would receive this year’s John B. Fairchild Honor, he said he considered the recognition “a tribute to the dignity of the work, to my people, to their creative genius and their industrious effort, as well as to our Umbrian land and its spirituality.”

Carefully chosen, these words reflect in one sentence Cucinelli’s ethics and vision of life. Dignifying manual work, pursuing creativity and reinforcing the connection with the territory have long been driving forces for the entrepreneur and designer.

A self-made man, he has built his namesake company to reach sales of more than 1 billion euros, but he prides himself on focusing on gradual growth, “with good taste, in a beautiful relationship with humanity.”

Asked about his dream project going forward, he said it is to see the company “last for 200 years without straying from these guidelines,” which also include balancing profit and giving back, and promoting the idea of “humanistic capitalism” and human sustainability. In fact, among personal highlights Cucinelli often refers to the invitation in 2021 by Italy’s then-Prime Minister Mario Draghi to speak at the G20 Summit in Rome about the latter two topics.

“I would like to be remembered for being a respectable and decent man who loved beauty,” he said in an interview from his headquarters in Solomeo, in Italy’s central Umbria region.

Indeed, in addition to developing a business centered on luxurious men’s and women’s fashion in the most precious fabrics, Cucinelli has beautified Solomeo over the years by restoring the medieval hamlet he bought in 1985, dubbing it “The Hamlet of the Spirit.” There, he has built a theater and an amphitheater; a winery with a vineyard, and a Monument to the Dignity of Man. There also are the Aurelian Neo-humanistic Academy, which has hosted seminars on philosophy, history, architecture and spirituality, and a school of arts and crafts that teaches masonry, gardening and farming, tailoring, knitting, cutting and sewing, darning and mending to train new generations of artisans.

Holding the role of executive chairman and creative director of the company he founded, Cucinelli is a staunch supporter of Made in Italy production, leveraging the expertise of the artisans in the Umbria region, and has committed to ensure the longevity and prosperity of the country’s pipeline and supply chain.

Likewise, his aim is to improve the conditions of workers by creating beautiful working spaces for the artisans who create the products for his namesake company, voicing his belief in the importance of erecting factories where “seeing the sky is inspiring, not a drawback,” and which contribute to the dignity of work, he has often said.

Born in Castel Rigone, about 10 miles away from Solomeo, the son of a farmer, Cucinelli imagines his sense of style was handed down by his father, who insisted that the furrows plowed should be “straight and accurate,” as per the classical conception and Aristotle — one of Cucinelli’s oft-quoted mentors.

For his contributions to fashion and the territory, he has received awards that he always considers “wondrous gifts,” but, in particular, he is often touched and fascinated by the “laudatio,” the motivations provided with the tribute, which, in his mind, “make the difference.”

The awards stand pride of place in his home in Solomeo, from the first, bestowed by Pitti Immagine in 2004, to the Knight of Labor honor received by Italy’s President Giorgio Napolitano in 2010, followed two days later by an honorary degree from the Perugia University in “Philosophy and Ethics of Human Relations.”

Asked to single out others with a highly significant meaning, he spoke of the “Global Economy Prize for the World Economy” from Germany’s Kiel Institute in 2017 for “personifying the figure of the honorable merchant,” and, a year later, bestowed by President Sergio Mattarella, the Knight of the Grand Cross of the Order of Merit of the Italian Republic for “having honored the Italian Republic.”

These are all highly symbolic in his view. “Being recognized in turn for my style and my work, for humanistic entrepreneurship, for being considered honorable and for paying tribute to my country made me feel even more responsible for the beauties of creation, committing to be an even better person,” he elaborated, responding to a question about the impact and value of these accolades.

Receiving the John B. Fairchild Honor is especially meaningful to Cucinelli, as he highlighted his longstanding relationship with the American market, with retailers such as Neiman Marcus, Saks or Barneys New York, which led him to recall his first trip to the U.S. back in 1985.

“I walked on the Verrazzano Bridge at sunset, marveling at the city I had only seen in postcards. I fell in love with New York; I was drunk on its beauty,” Cucinelli said. “I remember the surprise looking up at the skyscrapers, thinking about those who had built them over the years and the astonishing experience of being able to buy milk at midnight, which was unconceivable for us in Solomeo [where stores close at night].

“I do love how America always has an eye on the future and on innovation, but I admit that I continue to need the silence and the smells of my own town, our pace here is so different.”

As per Immanuel Kant, he related, “There are only two fascinating realities: the starry sky above us and the moral law within us. And looking at the sky and stars for me is always a source of inspiration.”

He said he considers New York and Los Angeles as key references, and that he makes a point of traveling to the West Coast once a year “for research.”

In addition to developing a loyal cluster of Silicon Valley tycoon customers, from LinkedIn cofounder Reid Hoffman to Salesforce founder Marc Benioff and Amazon honcho Jeff Bezos, several Hollywood celebrities have been wearing the brand. Last year, Cucinelli turned 70 and he celebrated the milestone by staging a celebratory event in Solomeo, inviting 600 guests who ranged from his employees and journalists to the likes of Patrick Dempsey, Ashley Park and Ava Phillippe. Gwyneth Paltrow and Cameron Diaz have also visited Cucinelli in Solomeo, and were treated to rigatoni and mozzarella. Paltrow and Ryan Seacrest are neighbors, as they have houses in the area, he said.

Indirectly, Cucinelli’s history was referenced in the fourth series of “Emily in Paris,” as creator and producer Darren Star created the imaginary town of Solitano and the Umberto Muratori character, whose family produces cashmere.

“Darren came to Solomeo, he had read my book and wanted to know about the town,” recounted Cucinelli, who gifted Star a book on Roman emperor Hadrian. Asked if he supported the Netflix version of Solomeo and of his own brand, Cucinelli said “yes, it was such a beautiful allegory, and Darren paid homage to my father, who was called Umberto and was also a mason [which in Italian translates as muratore].”

On the other hand, the relationship with Benioff began in 2017, when he asked Cucinelli to be a guest at Dreamforce, Salesforce’s annual tech conference in San Francisco, and renewed the invitation the following year. This led to Cucinelli sending his own invitation to the first “Symposium on Soul and Economics” held in Solomeo in May 2019 and attended by Bezos; Dick Costolo, former CEO of Twitter; Hoffman; Ruzwana Bashir, founder and CEO of Peek.com; Drew Houston, CEO and founder of Dropbox; Lynn Jurich, cofounder and co-CEO of Sunrun, and Nirav Tolia, cofounder of Nextdoor.

“Humanizing technology, sharing questions about eternity and leaving a mark on earth” were some of the issues discussed at the time, Cucinelli said.

Even as he can quote philosophers from memory, Cucinelli remains as curious about the future as he is about the past. For instance, in May, Cucinelli for the second time hosted a three-day symposium in Solomeo, focused on “exploring the relationship between ethics and artificial intelligence.”

Further embracing technology, in July he launched a new website innovated through AI. Called Solomei AI, it “combines human creativity with the potential of technology.” The project took three years, since he formed a team of researchers in late summer 2021 to explore possible ways to adopt AI in the company’s activities, “respecting the human values we believe in.”

Cucinelli said that a key purpose with this tool was for people within his company and his customers to feel less threatened and concerned by AI. “The guiding principle of our work on humanistic AI has been and will continue to be the pursuit of a serene and hopeful attitude toward a technology that, I am certain, will bring benefits to all humanity,” he said.

Cucinelli has come a long way as he admitted that “I started with cashmere but I knew nothing about it, I used to play cards at the town bar before. But I wanted to do something that would be passed on from one generation to the next, that would stand the test of time. You don’t throw cashmere away.”

Learning to sew from his mother, when he was 25 he sold his first 53 women’s pullovers, a milestone moment representing the seeds of what would become his calling. They were in six colors, from azure to orange and light yellow, slim, and to be worn under a fitted jacket. He wanted them to be feminine and sexy and said they were somewhat inspired by Gianfranco Ferré’s style. He was driven by the idea of a Made in Italy product, leveraging the expertise of the artisans in the Umbria region, a storied knitwear hub.

He has often said that meeting students at the bar was actually his first place of learning about real life and his self-taught education, helping him acquire a taste for those that became his mentors, from Kant, Plinius, Saint Benedict and Epicurus to Jean-Jacques Rousseau, Plato, Alexander the Great and Socrates, to name a few.

He is an avid reader and while he is interested in technology, in his mind the desirability of physical tomes beats e-books on all fronts.

So much so that Cucinelli is building a Universal Library in Solomeo, inspired by the Great Library of Alexandria, Egypt, one of the largest and most significant libraries of the ancient world. To this end, he bought an 18th-century villa that he is restoring to house the library. The villa, surrounded by a park, spans over some 21,600 square feet and Cucinelli estimated the library will comprise between 400,000 and 500,000 books.

“The founding of libraries is like constructing public granaries,” said Cucinelli, quoting Emperor Hadrian. “The library is meant to last for the next 1,000 years.”

“Books indicate us the path,” mused Cucinelli, who in 2018 published his first book, “The Dream of Solomeo,” subtitled, “My life and the idea of humanistic capitalism” — a collection of his notes, he insisted, shying away from being called a writer.

“I’ve always been in love with books,” he continued, saying that he gifted each of his daughters with 1,000 books on their wedding days. “And I plan to give the same amount to each of my three grandchildren when they will marry.”

The library is being built through the Foundation Brunello and Federica Cucinelli, conceived to promote cultural activities and support people and the territory they live in. Among other projects, the foundation has helped fund the medieval village of Castelluccio di Norcia, which was seriously damaged by the 2016 earthquake and is located in the Umbria region, a two-hour drive from Cucinelli’s Solomeo headquarters.

In the past the entrepreneur invested in the preservation of the region’s other cultural assets, including donating 1 million euros to help restore the famous Etruscan Arch of Perugia, which dates to the third century B.C. In that city, located 10 miles from Solomeo, the foundation also financed the restoration of the Morlacchi Theater, dating back to 1778. The facades of the San Lorenzo Cathedral in Perugia, in Umbria, have been restored thanks to contributions from the foundation.

Aiming to secure the company’s longevity, in 2012, Cucinelli publicly listed it in Milan, and recalls it as “the most beautiful moment of our history at an entrepreneurial level.” At the time of the road show, he candidly dissuaded investors who were looking for fast gains through the IPO. He still stands by his mantra — “to grow in a healthy, gentle and graceful way” — and continues to believe it was the right decision for his company, learning to open up to the market and cherishing the exchange and relationships with and support of analysts and investors. So much so that, at the end of September, he held a “dinner of gratitude” at the Bourse with analysts, investors and journalists.

The company has indeed grown, as last year revenues exceeded 1.1 billion euros, the highest in its history. The milestone target was met five years sooner than expected, based on Cucinelli’s initial 2019 to 2028 10-year plan, which saw the company doubling sales by 2028. In the first nine months of 2024, sales rose 12.4 percent to 920.2 million euros, bucking the general slowdown trend.

Cucinelli continues to bolster the production facilities of his company while protecting Italian know-how, increasingly becoming a point of reference in the Umbria region. He is investing in doubling the company’s manufacturing plant by restoring an existing industrial site in Solomeo that covers eight hectares, or about 540,000 square feet, and plans to open new sites in Italy, in Penne and in Gubbio.

Earlier this year, he revealed he had acquired tailoring specialist Sartoria Eugubina, based in Gubbio, near Perugia and around 40 miles from his Solomeo headquarters, and will take on its 70 artisans.

This is in line with Cucinelli’s belief in the strength of menswear tailoring.

In 2013 Cucinelli acquired the production division of the prestigious Sartoria D’Avenza in Carrara, another example of Made in Italy excellence in the production of men’s suits.

In November last year Cucinelli presented his project for his new menswear manufacturing site, his “bella fabbrica [beautiful factory],” in Penne, Italy. The plant will be located in the Ponte di Sant’Antonio area of Penne and will be unveiled in spring 2025, covering 48,600 square feet and employing between 300 and 350 people. Located in the central region of Abruzzo, the town is historically a production hub that specializes in sartorial menswear. It is home to the storied Brioni brand.

Last year Cucinelli and Chanel signed a long-term agreement with Piergiorgio Cariaggi, president and CEO of Cariaggi Lanificio SpA. Under the terms of the deal, the Cariaggi family retained control of the namesake company with 51 percent of the shares, while Brunello Cucinelli and Chanel each have a 24.5 percent stake.

As for his own company, Cucinelli has structured it with two CEOs — Luca Lisandroni and Riccardo Stefanelli. His daughters Camilla and Carolina hold the roles of co-creative director and copresident of the Brunello Cucinelli company, and co-head of the designer brand’s women’s style team, respectively.

Cucinelli, though, continues to be actively involved, planning strategies and traveling around the world, curious about other cultures and markets.

FT : How Callaway’s bet on driving range chain Topgolf went off course

How Callaway’s bet on driving range chain Topgolf went off course
The merger of hospitality and golfing has fallen victim to changing consumer habits and high costs

In 2020, Oliver Brewer III made a foray into processed poultry on the bet that food service would be the next growth story for his sporting goods empire.

Brewer, the longtime chief executive of golf equipment stalwart Callaway, saw an opportunity in the booming number of rounds played during the pandemic. That year, he paid $2bn in Callaway stock to buy Topgolf, a chain of “gamified” driving ranges whose revenues were growing 30 per cent a year.

“However you interact with golf, our company will have the best offer,” Brewer said when announcing the effective merger of equals.

Topgolf brought in younger, more casual players who liked not just the lighter competition that came with hitting shots among friends, but what was, at its core, a sports pub environment that featured craft cocktails and fancy bar snacks. Including large quantities of chicken.

“I never thought I would actually be listening to the cost of chicken wings going up. But evidently, they did,” Brewer said in 2022, a year after the merger closed, tacitly admitting that the new Topgolf Callaway Brands was now operating in a much different industry.

That foray into the hospitality business has since proved disastrous. Topgolf’s growth has reversed as the pandemic economy normalised and inflation emptied out middle class wallets. 

In its most recent quarter, Topgolf’s like-for-like sales dropped 8 per cent and Callaway projected that the rest of the year looked similarly bleak.

Just after the Topgolf acquisition closed in March 2021, Callaway’s market capitalisation jumped to $6bn. Today its group equity is valued at just $2bn, even as the legacy Callaway golf club business has remained resilient.

Adding to the pain, shares of arch-rival Acushnet, the maker of Titleist and FootJoy golf products, have soared as Topgolf has struggled.

In September, Brewer said Topgolf would be spun off from Callaway, acknowledging that investors never warmed to the combination and that the differences in the two business models were irreconcilable. 

It was a humbling for a man who was made to be a golf executive, down to his nickname, “Chip”.

Brewer’s father was a top amateur player who was among the club leaders at Pine Valley, the ultra-exclusive links in New Jersey widely considered to be America’s best golf course. The younger Brewer was good enough to play college golf and has prevailed occasionally in club championships. 

After earning an MBA at Harvard, Brewer made his way up the ranks to become CEO at Adams Golf, then a boutique club maker in Dallas. But another golf concept was getting attention in North Texas.

Erik Anderson, a Dallas financier, had acquired the rights to a technology developed by two brothers in the UK that embedded a microchip in golf balls to track their movement. Anderson’s West River Capital went on to commercialise what would become Topgolf, which would also pick up big backers Providence Equity and Thomas Dundon, the Texas subprime auto finance billionaire. 

By the time Brewer joined Callaway in 2012 as chief executive, the San Diego-area company had already been a Topgolf investor for six years. Callaway itself was known for its space age golf clubs, starting the revolution in metal woods with its Big Bertha driver in the 1990s.

Brewer eventually decided to develop golf balls to take on the sector leader, Titleist, and also made two notable apparel brand acquisitions, Jack Wolfskin and Travis Mathew.

The company was never worth more than a few billion dollars, but its board attracted luminaries including Adebayo Ogunlesi, the private equity billionaire and John Lundgren, the longtime CEO of Stanley Black & Decker, each serious golfers.

By 2019, Topgolf had around 60 venues and sought to add around 10 per year. But the expansion was extremely expensive. Each range cost around $30mn to construct and Topgolf was borrowing heavily to pay development costs.


Debt matured during the pandemic and the Callaway acquisition functioned almost as a Topgolf bailout with the club maker’s strong cash flow directed to the driving ranges. Between the apparel businesses that Callaway acquired and the driving ranges, golf equipment was eventually projected to slide to a quarter of group sales.

At the investor event in early 2022, Callaway said that its combined annual operating profit could go from $450mn to $800mn. Executives shared a slide arguing the new company could be favourably compared with the likes of Amazon, Tesla and Chipotle which traded at nearly 20 times cash flow.

The implication was that Topgolf Callaway could soon approach a $15bn valuation. 

“The board had a shockingly unsophisticated understanding about valuation,” said one person involved in the 2020 merger negotiations, alluding to the inflated sense of how public market investors would buy the hype around Topgolf as a cash flow generator.

This person added the board had been considering a multibillion-dollar offer from a blank cheque vehicle sponsored by Michael Klein, the swashbuckling Wall Street dealmaker.

From the time of the deal announcement, Wall Street analysts immediately telegraphed their concerns about Topgolf’s capital intensity.

The company was spending more than $200mn a year in capital expenditures to build the 10 new ranges per year. Callaway insisted that the “unit economics” — essentially how much recurring revenue would follow the construction period — would easily justify the outlays.


Each facility required less than $10mn of equity from Topgolf and would generate nearly $5mn of annual cash flow, what it described as a 50 per cent “cash on cash” return.

But Topgolf’s financing structure would prove complex for investors to follow. Topgolf, after building a facility, typically then sold it to real estate investment funds to whom it then owed rent payments. Today the value of the capitalised debt associated with those leases alone is around $1.5bn.

Callaway’s financial statements now feature unusual terms such as “embedded cash flow”, “deemed landlord financing obligations”, and “Reit adjusted net debt” and the company has struggled to convince shareholders of the earnings and cash flow prospects of the business.

After the spin-off, Callaway will retain around $1bn in financial debt while Topgolf takes $200mn of cash and all driving range leases. The company says a standalone Topgolf will be at least modestly free cash flow positive. The remaining Callaway will stick to “avid golfers”, Brewer recently said.

How receptive public markets are to a standalone Topgolf is unclear and the company may be hoping a buyer arrives. The private equity powerhouse Leonard Green Partners has taken a 3 per cent stake and has shared its feedback with the company.

The recent difficulties have been blamed on a softening economy that has pinched consumers and forced belt-tightening at businesses now less willing to hold midweek corporate events.

But there is the more ominous worry that the 30mn casual golfers in America will just move on to one of the many Topgolf copycats — Puttshack, PopStroke, and 5 Iron. 

“Running a hospitality business is different than running a golf manufacturing business,” said Megan Alexander, a research analyst at Morgan Stanley.

FT : Saudi Arabia’s wealth fund retreats from international investments

Saudi Arabia’s wealth fund retreats from international investments
Public Investment Fund will focus more of its financial firepower on domestic projects

Saudi Arabia’s sovereign wealth fund plans to scale back the share of its international investments by about a third, drawing a line under the past decade’s multibillion-dollar global spending spree as it refocuses on the domestic economy.

The Public Investment Fund, which has about $930bn worth of assets, said it intended to cut the proportion of funds invested overseas to between 18 and 20 per cent, down from 30 per cent.

PIF governor Yasir al-Rumayyan told the Future Investment Initiative conference on Tuesday in Riyadh that initially most of the fund’s investments were domestic Saudi projects.

“But then [the proportion of international investments] increased from 2 per cent all the way up to 30 per cent,” he added. “Now our target is to bring it down to a range between 18 to 20 per cent.”

As the PIF comes under pressure to deliver returns and on its vast array of domestic commitments, it has been putting more conditions on mandates for fund managers, telling them it wants to see more investment in Saudi Arabia if it is going to commit to new funds.

The wealth fund has already sold down its stake in BlackRock, and disposed of its holdings in Carnival, the cruise liner company, and entertainment group Live Nation.

According to filings at the US Securities and Exchange Commission, the PIF’s traded stocks in the US fell from about $35bn at the end of 2023 to $20.5bn on March 31, before stabilising in the second quarter at $20.6bn.

The PIF has been at the heart of a major plan launched by Saudi Crown Prince Mohammed bin Salman to diversify the kingdom’s economy away from its dependence on oil revenues.

It had previously made waves with a string of high-profile deals, including pumping $45bn into SoftBank’s Vision Fund in 2016 and $20bn into a Blackstone infrastructure fund the following year.

The fund has also made splashy acquisitions including Newcastle United football club and bankrolled ventures such as the LIV Golf professional tour.

Rumayyan said international investors who had previously sought funding from the PIF were also shifting their approach.

“We’re more focused on the domestic economy and we’ve been achieving and doing so many big things,” he said. Now, he said, there were more “calls for co-investments” with the PIF instead of “people who want us to invest or take our money”.

Rumayyan did not say when the PIF aims to meet its new target for international investments.