TheChek News Flow

Beijing will boost economy and introduce market-friendly policies, says top economic official Liu He

China’s top economic official intervened on Wednesday to reassure investors, saying Beijing would take measures to support the economy and financial markets after a sharp sell-off that has accelerated in the wake of Russia’s invasion of Ukraine.

Liu He, a vice-premier and President Xi Jinping’s closest economic adviser, said the government would take measures to “boost the economy in the first quarter”, as well as introduce “policies that are favourable to the market”. He did not elaborate on what specific measures would be taken.

Liu made the comments after convening a special meeting of the State Council’s Financial Stability and Development Committee, which he chairs, according to a summary of the meeting published by Xinhua, China’s official news agency. The FSDC oversees the country’s main financial regulators, including the central bank and securities watchdog, and meets regularly but such a wide-ranging statement to boost confidence is rare.

Investors in Shanghai, Shenzhen and Hong Kong — as well as in US-listed Chinese companies — have been spooked by slowing economic growth, the inflationary aftershocks of the Ukraine war and a long-running crackdown by Xi’s administration on previously fast-growing companies in the technology, education and property sectors.

The meeting overseen by Liu addressed a wide range of issues that have added to uncertainty about China’s economy. Beijing should speed up and quickly complete the rectification of the country’s big tech platforms while making sure policies are transparent and clear, according to the Xinhua summary of the meeting.

Chinese shares rallied on Wednesday, with Hong Kong’s benchmark Hang Seng index having its best day since 2008, after rising more than 9.1 per cent and hitting a six-year low the previous day.

The Hang Seng Tech index jumped 22.2 per cent following the meeting, with shares of Alibaba and Tencent, China’s two biggest internet groups, rising 27.3 per cent and 23.2 per cent respectively.

The CSI 300 index, which tracks the largest listed companies in Shanghai and Shenzhen, closed 4.3 per cent higher after falling more than 13 per cent following Russia’s invasion of Ukraine on February 24.

Larry Hu, chief China economist at Macquarie, said Liu had sent a strong message, “suggesting that policymakers are deeply concerned about the recent market rout”.

Ming Liao of Prospect Avenue Capital said: “With the market sell-off and bad economic situation they decided to take action.”

He added: “They made it clear that China will solve the delisting issue for tech companies in the US, but I don’t think regulation of platform companies will fully come to an end. It may be more subtle in the future.”

The planned delisting of Chinese companies in New York over access to audit records has also weighed heavily on their shares, with the sell-off accelerating after the US Securities and Exchange Commission named the first of up to 270 groups that will be targeted if they do not hand over audit documents.

The FSDC said it had made progress on the issue with the SEC and they were working on a plan to resolve the stand-off.

“The Chinese government supports companies from across industries to list abroad,” the meeting summary said.

The committee also urged regulatory agencies to roll out policies beneficial to the economy and be wary about undertaking policies that detract from growth.

“For any policy that will have an impact on financial markets, it should first be co-ordinated with financial regulators,” the committee said.

The new workshops in Gironde and Charente will create about 500 new jobs, the luxury goods company said in a statement Tuesday. Three other leather new goods sites from Hermès are currently under construction in Tournes, Cliron and Riom.

Hermès is ramping up its leather goods production in response to consumer demand, although the company limits the growth of its leather goods. Hermès sales growth dipped last quarter, as its self-imposed production limitations kept the company from hitting industry forecasts.

”Contrary to what people may think, we’re always very sad when we have to say to our customers, ‘no’, because we don’t have [enough bags],” executive chairman Axel Dumas told reporters last month.

The Italian eyewear manufacturer last year rebalanced its brands' portfolio, saw a strong performance of its proprietary brands and of its prescription frames, as well as a jump in sales in the U.S. and on its online channel.

MILAN — Safilo Group SpA delivered 2021 results well above 2019 levels and returned to the black last year, thanks to a solid execution of its business transformation and a rebalancing of its brands.

A strong performance of its proprietary brands and of its prescription frames, as well as a jump in sales in the U.S. and on its online channel all contributed to the Italian eyewear manufacturer’s progress in the year.

Smith’s goggles and helmets business soared, while sales of sunglasses, although turning positive in the second half, did not fully recover due to the challenging business environment. Prescription frames accounted for 40.4 percent of the total business, up from 37.8 percent in 2019.

In the 12 months ended Dec. 31, Safilo reported a net adjusted profit, excluding nonrecurring costs, of 27.4 million euros compared to the adjusted net loss of 50.1 million euros in 2020. In 2019, the adjusted net loss amounted to 6.5 million euros.

Sales in 2021 reached 969.6 million euros, up 26.3 at constant exchange rates compared to 780.3 million euros recorded in 2020. Compared to 2019, sales rose 7.5 percent.

During a conference call with analysts on Tuesday at the end of trading, chief executive officer Angelo Trocchia said that “Twenty-twenty-one was a record year for Smith, which became the biggest brand in our portfolio. The significant development of its online channel, enhanced at the beginning of the year with the launch of a new e-commerce site, together with the growth in Blenders online confirmed the strength of our digital transformation strategy.” Safilo’s online business now accounts for 13.4 percent of sales, up from 12.7 percent in 2020 and from 3.9 percent in 2019.

The first two months of the year were also “really good,” said Trocchia, with optical maintaining the growth pace of last year and the sun category showing the first positive signs, “even though the season has not started yet.”

Trocchia touted the signing of the three new licensed brands — Dsquared2, Carolina Herrera and Chiara Ferragni Collection — the latter helping to reach out to a younger customer.

In early 2022, business grew in all the main geographies and product categories “confirming a constant currency high-single-digit growth trend,” said the executive, who admitted the environment is still influenced by the COVID-19 pandemic, and more recently by the conflict in Ukraine.” Our thoughts are with the affected population in these difficult hours, while we carefully monitor the impacts to our business,” said Trocchia.

Chief financial officer Gerd Graehsler said sales in Russia and Ukraine account for less than 2 percent of the group’s total revenues.

He also cited global “inflation headaches” and high costs of shipments. That said, “we managed reasonably well,” he underscored, “taking pricing interventions which did not have a negative impact on demand.”

Trocchia defined 2021 “a year of transition,” saying that in 2022 Safilo will remain focused on strengthening its business model, confident in a new phase of development for the group.

Graehsler said Europe showed “a strong performance in the first quarter, and the U.S. continues to grow, while Asia is patchy,” given the new clusters of COVID-19 in China and Hong Kong, but progress is seen in Australia.

In the 12 months ended Dec. 31, adjusted earnings before interest, taxes, depreciation and amortization, excluding non-recurring items, amounted to 84.9 million euros, up 29.7 percent on 2019.

Adjusted operating profit amounted to 32.9 million euros compared to an adjusted operating loss of 57.9 million euros in 2020, and up exponentially compared to an adjusted operating profit of 3.2 million euros recorded in 2019.

Organic sales represented the main growth driver compared to the pre-pandemic business levels, up 10.5 percent at constant exchange rates, thanks to the strong development recorded by the group’s main brands, from Smith and Carrera to Kate Spade, Tommy Hilfiger and Hugo Boss.

The acquisitions of Privé Revaux and Blenders and the launch of the new licenses of David Beckham, Missoni, Levi’s, Isabel Marant, Ports and Under Armour, enabled Safilo to effectively compensate the business decline deriving from licenses terminated at the end of 2020 and at the end of June 2021, including Dior and Fendi.

Trocchia said this was “an extraordinary year for Smith,” and cited a “strong recovery for Carrera and new omnichannel strategy in the U.S.” He said Smith “has huge opportunities, moving away from too much snow into biking.”

Graehsler pointed to a double-digit growth for key licenses Kate Spade, Hugo Boss, Jimmy Choo and Tommy Hilfiger.

The U.S. market was the main driver for the group compared to the previous year and versus 2019, with the organic business exceeding pre-pandemic business levels also in Europe and in most of the emerging markets.

At constant exchange rates, in 2021, sales in North America amounted to 466.2 million euros, up 40.5 percent on 2020 and they were up 47 percent compared with 2019, thanks to the strong growth in the organic business, up 15.9 percent, the acquisitions of Blenders and Privé Revaux and the new licenses.

Sales in Europe amounted to 378.5 million euros, up 14.6 percent on 2020, and down 14.9 percent compared to 2019.

Sales in Asia Pacific amounted to 52.6 million euros, down 14.2 percent compared to 2020 and down 32.1 percent on 2019, with the entire year strongly affected by the impact of the terminated licenses.

In Asia Pacific, despite the persistence of the pandemic and of the related lockdowns in many markets, organic sales almost completely recovered pre-pandemic business levels, down 3 percent compared to 2019, thanks to the group’s business in China almost doubling and Australia growing double-digit compared to 2019.

Sales in the Rest of the World amounted to 72.4 million euros, up 57.8 percent compared to 2020 and above 2019 business levels by 6.5 percent. The latter performance was driven by an 18.5 percent organic sales growth, with Brazil and Mexico as the key contributors, and progress was seen in the Middle East.

Asked about Kering Eyewear’s acquisition of Maui Jim a day earlier, Trocchia said it was “a great brand,” implying he had looked at its dossier, but vaguely mentioned a lack of official figures and the many “opportunities from a financial perspective.”

As of Dec. 31, net debt stood at 94 million euros, down sharply compared to 222.1 million euros at the end of December 2020 thanks to the net proceeds, equal to 133.1 million euros, deriving from the capital increase completed last November.

Despite hints of narrowing differences Putin says Kyiv is not showing ‘serious commitment’ to reaching an agreement

Volodymyr Zelensky has said talks with Russia aimed at ending the war were beginning to “sound more realistic” as three European leaders visited Kyiv, the most senior foreign delegation to visit Ukraine since the start of the war.

The Ukrainian president’s remarks came as Vladimir Putin’s invasion, which has laid waste to frontline cities such as Kharkiv and Mariupol and sent more than 3m refugees abroad, entered its 21st day with Russia’s land offensive still largely stalled.

Speaking during another night of Russian shelling, Zelensky said ongoing talks with Russia were “difficult” and gave no details of how Kyiv and Moscow’s negotiating positions had narrowed. But the president and his aides have increasingly played down Ukraine’s prospects of joining Nato, signalling alternative “security guarantees” may be a more pragmatic option.

“All wars end in agreements . . . As I am told, the positions in the negotiations sound more realistic,” Zelensky said in a video address. “However, time is still needed for the decisions to be in Ukraine’s interests. Our heroes, our defenders give us this time defending Ukraine everywhere.”

While some Russian negotiators have also noted positive momentum in talks, western leaders who have spoken to Putin remain downbeat. The Russian president said that Kyiv was “not showing a serious commitment to finding mutually acceptable solutions” on Tuesday.

Moscow has called for Kyiv to formally renounce its aspiration to join Nato, which is included in Ukraine’s constitution, and to recognise the independence of two pro-Russian separatist statelets in the country’s east and Russian sovereignty over Crimea, which it seized in 2014.

Russia’s military is still struggling to make significant advances, with the US noting its ground forces had made “limited to no progress” in recent days. Armoured units remain about 15km-20km to the north-west of Kyiv and about 20km-30km east of the capital. Russia has also faltered in its push to envelop Kharkiv, Ukraine’s second-biggest city in the east of the country.

Ukraine’s military said on Wednesday that it had delivered “devastating blows” to Russian positions, in some cases via counter-attacks. The armed forces added that its aircraft continued to launch missile and bomb strikes on ground targets, including columns of equipment and clusters of occupying troops, highlighting Putin’s inability to gain control of the country’s skies.

Ukraine’s claims have not been independently verified.

Zelensky’s address was delivered shortly after he hosted the leaders of Poland, the Czech Republic and Slovenia, giving them a briefing on the military and humanitarian situation in his country. He thanked the “brave friends” for making the trip and showing solidarity, while pointedly noting “it can be dangerous here” because Ukraine had yet to receive support for a no-fly zone and was still waiting for fighter jets from Europe.

After the meeting, Mateusz Morawiecki, Poland’s prime minister, reiterated Warsaw’s desire to see Ukraine join the EU, a move that has been resisted by most member states despite Zelensky’s lobbying. “We will never leave you on your own, because we know that you are fighting not only for your own freedom and security, but also for us,” he said.

Despite the symbolism of the wartime visit, officials in Brussels expressed reservations about the trip, insisting it was not an official mission on behalf of the EU. The presidents of the European Council and the European Commission were informed about the travel plans last week, their spokespeople said.

Nato will hold an emergency summit next week in Brussels of the alliance’s 30 leaders, including US President Joe Biden, in a sign of the west seeking to maintain diplomatic pressure on Moscow and step up support for Ukraine.

“We will address the consequences of Russia’s invasion of Ukraine, our strong support for Ukraine, and further strengthening Nato’s deterrence and defence in response to a new reality for our security,” said Jens Stoltenberg, Nato secretary-general.

According to humanitarian officials, large numbers of Ukrainian civilians are living in dire conditions.

In the south-eastern port city of Mariupol, where power, water, heating and other basic services were cut off in early March, civilian buildings have remained under relentless air bombardment. Kyrylo Tymoshenko, deputy head of Zelensky’s office, said in a post on social media platform Telegram that about 20,000 people had left the city in what appeared to be the largest evacuation of residents since it was surrounded.

Efforts to evacuate residents in Mariupol and other besieged cities via “humanitarian corridors” have proceeded slowly because of a lack of trust between the two sides. Ukraine has accused Russian troops of firing on evacuating people.

Montreal-based Converium Capital says estate agent is underperforming even as property market runs ho

London-focused estate agent Foxtons has failed to take advantage of a red hot property market and should sell itself to realise value for shareholders, according to an investor in the company which is launching the second activist attack on Foxtons in nine months.

Converium Capital, a Montreal-based investment fund, has built a stake of around 2 per cent in Foxtons over the past six months, according to people familiar with the matter. The investor surfaced this week, urging Foxtons to exit the public markets in a letter sent to the company’s chair, Nigel Rich, and seen by the Financial Times.

“As the London property market has started to rebound following its Brexit and Covid-19 induced malaise, Foxtons ought to have risen to its potential. Unfortunately, Foxtons has continued to underperform,” wrote Michael Rapps, managing partner of Converium, in the letter.

“Converium believes that the better path for Foxtons is to pursue a formal process to sell itself, and we believe that in a sale Foxtons should command a significant premium over today’s depressed share price,” it read.

Over the past six months, during which demand for UK property has run at historically high levels and both average rental and sales prices in London have increased, Foxtons’ share price has fallen by 40 per cent.

Since an initial public offering at 267 pence per share in 2013, the company’s stock has fallen by close to 90 per cent, closing on Tuesday at 31.5 pence.

A sale could bank shareholders as much as 100 pence per share, according to Converium.

If the company cannot fix itself, someone else should buy it and do the fixing.

Django Davidson, founding partner at Hosking.

Converium is not the first activist to criticise Foxtons’ strategy. The company spent much of last year fending off criticism from shareholders, 40 per cent of which voted against the approval of an April remuneration report which gave chief executive Nic Budden a cash bonus of £389,000 and shares worth £569,000 — despite Foxtons having claimed millions in government Covid support schemes.

Hosking Partners, Foxtons’ largest shareholder with an 11 per cent stake in the company, has called for “radical change” to the board.

Last May, activist investor Catalist Partners published a dossier urging Foxtons to target expansion outside of London, which the investor claimed had the potential to increase the agent’s market value to £1bn — at that point around five times its market capitalisation and now roughly ten times.

Budden has cast doubt on Catalist’s projections and pointed to signs of a turnround at the company.

In January, the agent announced that annual revenues had hit their highest levels in five years, at £133mn, and the company’s operating profit was at the higher end of analysts’ expectations at £7mn.

Foxtons also replaced its longtime chair Ian Barlow with City grandee Rich in September and has bolstered its lettings business with the acquisition of rival agent Douglas & Gordon. But those measures have failed to quell shareholder disquiet.

“If the company cannot fix itself, someone else should buy it and do the fixing, said Django Davidson, founding partner at Hosking.

Foxtons declined to comment.

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Washington power brokers cut ties with high-profile clients after Putin’s invasion of Ukraine

A collection of well-connected lobbyists and lawyers in Washington have made millions of dollars over the past eight years by working for Russian clients with links to the Kremlin, according to a Financial Times analysis.

Public data collated by OpenSecrets and examined by the FT shows that Washington-based power brokers have earned nearly $50mn since 2014 by representing high-level Russian clients. Many firms are now cancelling such contracts in the wake of western sanctions introduced following Vladimir Putin’s invasion of Ukraine.

Campaigners have questioned whether they should have been working with the clients in the first place, especially since some have at times been subject to sanctions after Russia annexed Crimea in 2014.

Anna Massoglia, investigations manager at OpenSecrets, which tracks spending on lobbying in the US, said: “Foreign agents and lobbyists took millions of dollars from Russian clients before trying to distance themselves after Russia’s invasion of Ukraine despite mounting accusations of human rights abuses.”

The data analysed by the FT comes from two sources: the US Senate and the Department of Justice, both of which maintain registers of lobbying activity. The disclosures included in those databases show some of the most powerful firms in Washington have represented Russian interests for years.

Two well-known lobbying groups in particular have done lucrative work for Russian clients in recent years: Mercury and BGR.

Mercury partner Bryan Lanza, who was an adviser to former president Donald Trump, has made $2.3mn since 2014 by representing two big Russian clients: Sovcombank, a midsized Russian bank, and EN+, the metals group founded by Oleg Deripaska.

The Senate filings show David Vitter, a former Republican senator and now a partner at lobbying firm Mercury, was writing letters to lawmakers as recently as last month urging them not to impose sanctions on Sovcombank.

Doing so would be “extremely counterproductive”, he warned, due to the bank’s “deep ties to US and western institutions”. The lobbying effort did not work, however: just weeks later, the Biden administration froze the bank’s assets that touch the US financial system and prohibited US citizens from dealing with the lender.

Mercury has worked for EN+ for years, and played a crucial role in advocating for sanctions to be removed from the company in 2018. While the company was under sanctions, Mercury listed as its client Greg Barker, the former UK Conservative minister who was then its non-executive chair. Barker resigned from the company earlier this month.

Mercury has in recent weeks cancelled both contracts. It declined to comment further.

BGR meanwhile, has represented the Nord Stream 2 gas pipeline between Russia and Germany, and Uranium One, a mining company owned by the Russian state-owned nuclear corporation Rosatom. BGR is known in Washington for representing foreign governments, including those of Bangladesh, Bahrain and Kazakhstan. One of its founders, Haley Barbour, was a former Republican governor of Mississippi.

BGR has cancelled the contracts. It did not respond to a request to comment.

Other large contracts have gone to well-connected individuals rather than firms.

One of those is Vin Roberti, a high-spending donor who has given $683,000 to Democrats since 2018 and who has for years represented Nord Stream 2, earning $9.1mn in the process. He is chair of public policy firm Roberti Global.

Nord Stream 2, which is a subsidiary of the Russian energy company Gazprom, has been controversial for years, with the US government warning that it threatened to undermine Europe’s energy security. The Senate filings show Roberti lobbied members of Congress over the threat of potential US sanctions as recently as January.

Last month however, Olaf Scholz, the German chancellor, put the project on pause after Moscow recognised two breakaway regions of Ukraine as independent republics. Three days later, Roberti Global terminated the contract. The firm declined to comment.

Adam Waldman meanwhile, a Washington lawyer whose star-studded list of clients has included actor Johnny Depp, has worked directly for Deripaska.

Deripaska was sanctioned alongside six other wealthy business people in 2018 because of his close ties to the Kremlin. The US Treasury noted at the time that he had been investigated for money laundering and accused of threatening the lives of business rivals.

Deripaska dismissed the allegations last year as “guesses, rumours and balderdash”.

Waldman represented his interests in the US, even taking on a commission directly from Sergei Lavrov, the Russian foreign minister, in 2010 to lobby the US to grant Deripaska a visa. Lavrov wrote to Waldman at the time: “I believe that the involvement of your firm will contribute to the ongoing efforts aimed at achieving a successful resolution of this problem.”

Waldman did not respond to a request to comment.

Lobbyists have privately defended their work, pointing out that Russia was not regarded by the US as a pariah state until recently.

One said: “Sometimes you reject work for being too controversial, but until the last few weeks, many of these clients did not fit that bill. We have all been caught out by how fast this situation has moved, and we have had to respond accordingly.”