FT : Clipper Logistics welcomes possible £1bn offer from US rival GXO

Clipper Logistics welcomes possible £1bn offer from US rival GXO
UK company’s board confirms it would accept proposed terms from New York-listed group

Ecommerce specialist Clipper Logistics plans to accept a potential cash-and-share takeover offer by New York-listed GXO Logistics that would value the British group at £943mn.

Clipper, which processes orders for Asos, H&M and Marks and Spencer, has agreed to GXO’s proposal to pay 690p in cash and issue 230p of new GXO stock for each Clipper share. This represents a 32 per cent premium to the Leeds-based company’s three-month average share price, the groups said in a joint statement on Sunday.

GXO is yet to make a firm offer but Clipper’s board confirmed to its rival that it would accept an offer on those terms.

If the deal goes ahead, it would cement GXO’s position at the centre of British supply chains and online retail, adding to its acquisition of Swiss rival Kuehne+Nagel’s UK contract logistics business in 2020.

The fragmented logistics sector has witnessed a flurry of dealmaking in recent months with container shipping lines such as Maersk using bumper profits to snap up logistics businesses.

GXO’s chief executive Malcolm Wilson said: “This potential acquisition would enhance GXO’s position as a successful pure-play logistics leader. Our two companies have highly complementary service offerings, customer portfolios, and footprints in the UK and Europe.”

Clipper was founded in 1992 by Steve Parkin, a former coal miner who started the business with just one truck. It listed in London in 2014 with a market capitalisation of £100mn.

In 2020, plans for private equity group Sun Capital to buy the group were shelved after they disagreed over a £300mn price tag.

Clipper’s turnover has doubled since 2017 and its shares have trebled since the onset of the pandemic, which supercharged growth in online shopping.

Logistics companies say the complexity of ecommerce has driven retailers to outsource warehousing and supply chain operations to specialist providers.

Clipper runs warehouses for retailers in the UK and Europe, particularly those in the fashion sector, helping them process online orders, including returns, and repairs for electronics.

It had been planning to expand in the US where GXO has a large presence.

The deal could result in a £138mn payout for Parkin who owns a 14.7 per cent stake in the business. He sold a 10 per cent shareholding last year for about £62mn.

He has been interested in buying Leeds United football club, where his company sponsors the training kit.

GXO was spun-off from trucking group XPO Logistics last year in order to focus on warehousing and picking, packing and distributing goods for big brand names such as Nestlé, Apple and Nike.

It had $7.9bn in revenues last year, making it one of the world’s largest contract logistics providers.

WSJ : What CEOs Are Saying: ‘Even Wealthier Families Become More Price-Sensitive

What CEOs Are Saying: ‘Even Wealthier Families Become More Price-Sensitive’
Leaders from Walmart, Kraft Heinz, Nvidia and other companies share their thoughts about inflation, supply chain and future tech

Here is what some of the world’s corporate leaders said in their quarterly earnings reports last week about inflation, the supply chain, travel and dining, and the future of the internet.

To see what business leaders have said in past weeks, click here, here and here.

Walmart Inc. WMT -0.64% Chief Executive Doug McMillon
“During periods of inflation like this, middle-income families, lower-middle-income families, even wealthier families become more price-sensitive. And that’s to our advantage.” (Feb. 17)

Weber Inc. WEBR 1.07% Chief Executive Chris Scherzinger
“When we saw container rates at this, I think, maybe highest cost ever in October, at least from my recollection over my 30 years...we didn’t think it could go up from there. And they went up from there, and they went up from there like almost 50% in December, January...Where I might have felt like, as a business leader, how could it possibly get any worse than this? And then it gets worse than that. It’s just difficult to pin that down.” (Feb. 14)

Arista Networks Inc. Chief Executive Jayshree Ullal
“I would describe our supply chain shortages as two steps forward and one step backward. We don’t like the one step backward, but between the Omicron virus, the labor shortages, the logistics and the component shortages, we’re certainly experiencing another wave of uncertainty in Q1 over here...We’ll keep improving every quarter, but Q1 isn’t the great indicator of supply chain improving.” (Feb. 14)

Cisco Systems Inc. Chief Executive Chuck Robbins
“During the quarter, supply chain didn’t get materially worse and didn’t really get materially better. It was pretty consistent. There were gives and takes throughout the quarter...I wouldn’t say we have a great timeline for you as to when things begin to improve. All we know now is we expect this to be with us through the second half of our year.” (Feb. 16)

Deere & Co. Chief Executive John May
“It’s worth noting that our supply base will likely remain challenged throughout fiscal year 2022. Issues continue to arise, and our guidance contemplates successful resolution of these issues without significant disruptions. Components with heavy labor content remain in tight supply, and of course, semiconductor availability will continue to be limited throughout the year.” (Feb. 18)

Roku Inc. Chief Financial Officer Steve Louden
“While we have seen some component costs decrease relative to peak prices in 2021, overall component and logistics costs remain significantly elevated, and availability issues persist. Thus, we believe these disruptions will continue to negatively affect the size of the TV market and our player margins in the short term.” (Feb. 17)

Kraft Heinz Co. KHC 1.77% Chief Financial Officer Paulo Basilio
“Our Q4 inflation were higher than we expected in our October call. We ended up with low double-digit. But for 2022, we are likely to see, or are expecting today, a year of inflation of low teens for the full year. … And we expect this inflation to be higher in the first half than in the second half.” (Feb. 16)

Shopify Inc. Chief Financial Officer Amy Shapero
“While we believe that the Covid-triggered acceleration of e-commerce that spilled into the first half of 2021 in the form of lockdowns and government stimulus will be absent from 2022 and there is caution around inflation and consumer spend near term, for the full year, we see economic growth supporting the continued penetration of retail by e-commerce.” (Feb. 16)

Restaurant Brands International Inc. Chief Executive José Cil
“We took price in 2021 at each of our brands and given the level of commodity cost and labor inflation we’re seeing, we expect additional price increases in 2022.” (Feb. 15)

Cheesecake Factory Inc. Chief Financial Officer Matt Clark
“Frankly, for any small or midsize operator, and we talk to many of them still, there’s no urgency to getting back into the game when you see labor and commodities like this. So, the restaurants that closed next to us two years ago are still closed. So, I think that just bares the opportunity.” (Feb. 16)

DoorDash Inc. Chief Executive Tony Xu
“We’ve put to rest, I think, this question of what happens to demand as diners go back and eat inside restaurants. Well, I think clearly, takeout and delivery, as shown by our performance, not just in the fourth quarter but also in 2021, just in an aggregate, is that they’re complementary.” (Feb. 16)

Airbnb Inc. Chief Executive Brian Chesky
“Nearly two years into the pandemic, it’s clear that we are undergoing the biggest change to travel since the advent of commercial flying. Remote work has untethered many people from the need to be in an office, and as a result, people are spreading out to thousands of towns and cities, staying for weeks, months or even entire seasons at a time. For the first time ever, millions of people can now live anywhere.” (Feb. 15)

Marriott International Inc. Chief Executive Anthony Capuano
“We continue to be really optimistic that there’s still a significant tailwind for leisure demand. And I think part of that is because of the evolution of the way folks work. The incremental flexibility that you’re seeing in working from home, working from anywhere, has been an accelerant for leisure demand. And if anything, we expect further acceleration in that regard.” (Feb. 15)

Nvidia Corp. NVDA -3.53% Chief Executive Jensen Huang
“Today’s internet is 2D, and AI is in the cloud. The next phase of internet will be 3D, and AI will be connected to the physical world. We created Omniverse to enable the next wave of AI, where AI and robotics touches our world. Omniverse can sound like science fiction, but there are real-world use cases today.” (Feb. 16)

Fastly Inc. Chief Executive Joshua Bixby
“Some may refer to this as Industry 4.0 or, in some instances, Web 3.0 or even powering the emerging metaverse. We are buzzword agnostic on this. You can call it whatever you like. It all involves distributed, fast, scalable and secure experiences, and we know it’s in increasingly higher demand from our customers.” (Feb. 16)

WSJ : Apple Finds Itself Under Scrutiny in Washington’s Big Tech Clampdown

Apple Finds Itself Under Scrutiny in Washington’s Big Tech Clampdown
CEO Tim Cook called senators in vain effort to derail bill targeting Apple’s App Store

U.S. lawmakers in both parties are expressing concern with how Apple Inc. AAPL -0.94% runs its App Store, leaving the company playing defense against legislation that would loosen its grip on the profitable business.

The Senate Judiciary Committee voted 20-2 this month to advance legislation that could erode the fees Apple collects on digital app revenues. The vote came despite calls to senators by Chief Executive Tim Cook, and the company’s warnings that the bill would hurt user privacy and security.

The bill is backed by a loose alliance of Apple’s rivals, including Epic Games Inc. and Microsoft Corp. It also offers a middle ground for lawmakers who want to rein in Big Tech but can’t reach consensus on thorny issues such as how to regulate social media content.

That Senate leaders have Apple in their sights is a marked change from Congress’s focus on other tech issues such as Amazon.com Inc.’s treatment of retailers, control of the ad business by Alphabet Inc.’s Google and how Meta Platforms Inc. manages content that could be harmful on Facebook and Instagram.

Mr. Cook also didn’t face the same intensity of questions as the other CEOs—Amazon’s Jeff Bezos, Meta’s Mark Zuckerberg, and Google’s Sundar Pichai —who testified at a 2020 congressional hearing into Big Tech’s market power.

“For a long time, Apple floated above the fray in Washington,” said Paul Gallant, a policy analyst with Cowen & Co. Now, he said, the company has “been pulled down into the muck.”

While Apple’s lobbying expenditure of about $6.5 million last year was roughly a third that of Amazon or Meta, Mr. Cook has long used his public persona to personally influence those in power and guide the company through Washington entanglements.

During the Trump administration he cultivated a relationship with the former president’s family that played a role in exempting iPhones and some other electronic products from tariffs.

The app store bill is now just one front in a war Apple is fighting against rivals around the world as they challenge its control of the app economy and access to the more than one billion users of its devices.

The distribution of third-party software to iPhones was at the heart of a high-profile antitrust lawsuit brought by “Fortnite” maker Epic Games. While Apple mostly won last year, its practices attracted renewed attention, and the verdict drew cries from rivals that Congress needs to address the tech giant’s power.

Apple has argued that it provides a digital ecosystem that users want and that the fees it collects—up to 30% of transactions—are fair for the technology it is providing.

Mr. Cook shared a stage with Sen. Mike Lee (R. Utah) at a tech conference in Salt Lake City last October and made the case that Apple shouldn’t be lumped in with social-media companies.

“The industry isn’t monolithic,” Mr. Cook said. “They’re very different segments and very different markets…we’re not in the social-media business.”

Mr. Lee praised Apple’s entrepreneurship at the time, but he voted to advance the bill targeting app stores—citing complaints from Tile Inc., the tracking-device maker that has accused Apple of discriminatory conduct, and Parler, the social-media app that Apple and Google removed from app stores after the Jan. 6, 2021, Capitol riot.

Tech giants “are wielding an extraordinarily large amount of market power,” said Mr. Lee during the vote. He declined to comment for this article.

The bill targeting app platforms still has a long road ahead. It would allow developers to sidestep Apple altogether by allowing “sideloading” of software onto iPhones outside of its App Store, or to let apps use the store but skip Apple’s in-app payment system.

The bill would also apply to the app store on Google’s Android operating system, called Google Play.

A second, broader bill previously passed the committee, though the debate was more contentious and the vote tally was closer, at 16-6. It would target allegedly discriminatory conduct on other large tech platforms as well as app stores. Mr. Lee opposed it.

In recent weeks, Apple has said sideloading would allow social-media companies, such as Facebook, to sidestep safeguards put in place to limit how user data is collected.

“Apple made a choice to prohibit sideloading and alternative app distribution because smartphones contain a person’s most sensitive data and protecting that data is imperative,” Timothy Powderly, an Apple lobbyist, told Senate leaders in a letter reviewed by The Wall Street Journal.

Lawmakers aren’t dismissing all of Apple’s entreaties, and in some cases have changed their legislative proposals to address the company’s concerns. But the Senate votes, particularly the support from Republicans, will improve the bills’ chances of passing the House, said Rep. Ken Buck (R. Colo.), the primary Republican backing the legislation in the lower chamber.

Ahead of the Senate votes, Mr. Cook made the company’s case on a 40-minute call with Republican Sen. Ted Cruz of Texas, where Apple has a large campus.

Mr. Cruz, who described the call during one of the committee votes, said Mr. Cook raised a concern that the bill “would erect obstacles to Apple giving consumers the ability to opt out of apps monitoring what they are doing online.”

Mr. Cruz said he disagreed, pointing to provisions that make allowances for moves to protect privacy. “The language of this bill is entirely consistent with consumers being given the right to opt out,” he said.

He voted for both bills, saying tech companies’ market power “would make John D. Rockefeller blush.” He also said he would seek alterations to the bills before a vote by the full Senate.

In at least one case, Apple’s outreach left a senator feeling rebuffed. The company requested a phone call between Mr. Cook and Sen. Marsha Blackburn (R., Tenn.) but canceled it before the app store vote, a person familiar with the matter said.

During the committee debate, Ms. Blackburn remarked on the “arrogance of some of the executives in the Silicon Valley who believe that they don’t need to work with us here in Congress.”

The pre-vote call was postponed because of scheduling conflicts and no other reason, according to an Apple spokesman. Mr. Cook and Ms. Blackburn eventually spoke about two weeks later, and she pushed back against the CEO’s arguments about the bill affecting users’ privacy and security, the person familiar with the matter said.

Before the recent Senate votes, Mr. Cook also reached out to Sen. Amy Klobuchar (D., Minn.), according to her office. She has accused Apple of blocking competition.

All the Democrats on the Senate panel voted to advance the app store bill, although California’s two senators expressed reservations.

“Some consumers might prefer a closed device that provides a layer of security,” said Sen. Alex Padilla (D., Calif.) of the app store bill. “If we aren’t careful, we might be taking a choice away from the marketplace.”

FT : Abu Dhabi wealth fund bets on scientific approach using quant experts

Abu Dhabi wealth fund bets on scientific approach using quant experts
Adia has built a 50-strong team of physicists, academics and data specialists to identify and take advantage of market anomalies

Gathered together on a floor of the Abu Dhabi Investment Authority’s 40-storey headquarters, a group of physicists, academics and data experts huddle around whiteboards, scribbling equations and feeding reams of data into state of the art computers.

Many were lured to Adia, one of the world’s largest sovereign wealth funds, from outside the traditional world of finance — more likely a university campus than an investment bank. But they are all part of a new, more than 50-strong team that the fund believes will be crucial to help it navigate the increasingly complex investment landscape.

The fund, which is estimated to manage about $700bn, has over the past two years been building a “research and development lab and factory” in the hope that a scientific approach will make it more nimble and better able to identify and take advantage of market anomalies.

It is one of the more radical shifts in thinking for a fund that has traditionally been considered among the more conservative SWFs, but is adapting in recognition of the impact artificial intelligence and other technological advances will have on investment.

In a rare insight, Adia told the Financial Times that there was “a sense that a lot of the sources of competitive advantage in a fast moving market are very short lived so you need to be more agile and dynamic to capture those”.

Among the recruits is Marcos Lopez De Prado, a professor and quant expert at Cornell University, who is global head of quantitative research and development at Adia. He said having an in-house team meant the SWF “can mitigate many pitfalls of financial research, such as . . . knowledge hoarding”.

“There are also benefits associated with building this team, and the systems that support it, from scratch,” said Lopez De Prado, who was previously an executive at AQR Capital Management and Guggenheim Partners. “Creating our own capabilities . . . gives us the flexibility to evolve and innovate as we see the future of markets changing and develop our own IP.”

Other members of the team include Alexander Migdal, a physicist and New York University professor, and Alexander Lipton, a professor at Hebrew University who is co-founder of Sila Money and a former co-head of the global quantitative group at Bank of America.

The team’s findings will be made available to all the fund’s asset classes and Adia said it had already “generated a range of new investment ideas and put them into production with encouraging results”.

Lipton said the team would continue to expand.

“We are actively hiring true subject matter experts, thought leaders in their fields, whether that be in machine learning, strategy development, portfolio construction, risk, portfolio implementation, digital platforms or a number of other specific disciplines,” he said.

Javier Capapé, director of sovereign wealth research at the Center for the Governance of Change based at IE University, said Adia was following in the footsteps of Singapore’s state funds GIC and Temasek, which are also investing in more scientific approaches to fund management.

“[Adia is] very much exploring what comes next and it explains this talent acquisition,” he added.

The fund said establishing the lab was part of a decade-long process of increasing specialisation by bringing in “our own experts, whilst maintaining our ability to work with external partners”.

The fund, which was set up in 1976 as the custodian of Abu Dhabi’s petrodollar surpluses, has typically been viewed as an organisation that moves at a cautious pace.

In the 13 years since it first began publishing an annual review, it has publicly announced changes to asset allocation only twice: in 2012 when it lowered its weighting in developed market equities from 35-45 per cent to 32-42 per cent and in 2020 when it increased private equity holdings from 2-8 per cent to 5-10 per cent and infrastructure from 1-5 per cent to 2-7 per cent.

It has also streamlined its middle and back offices in recent years to improve efficiency, merged its internal and external equity teams and closed its internal Japan equities desk, using passive funds and external managers for that market instead.

Half of its assets under management are externally managed, down from 80 per cent in 2009 as internal teams have taken on more responsibility. Adia said it did not expect the new lab to affect its relationships with external managers, including hedge funds.

Like other Gulf SWFs, Adia has been active throughout the pandemic, notably its private equity team, which deployed a record level of capital in 2020 with a focus on Asia.

The only performance data Adia publishes are 20 and 30-year annualised rates of return, which it said were 6 and 7.2 per cent respectively at the end of December 2020.

Professor Patrick Schena, who studies SWFs at The Fletcher School, Tufts University, said the entire asset management industry was looking out for alternative data sources and analytical techniques to identify trends that might not otherwise be obvious.

This includes social media and open source company and sector information. As public markets become more efficient with information “travelling more quickly”, funds need to respond more swiftly, he said.

“Structurally, we are also in a very challenging space. We are in an unprecedented time with low interest rates. With the possibility that rates will tick up, many of these funds will struggle to manage large fixed income portfolios,” he said. “Potentially, lower future returns require that you be well ahead of that curve if you are going to compete.”

Schena added that as Adia now does more internal investing, it was not surprising that it would want to develop new in-house techniques and strategies.

“In some respects, they may eventually compete with some of their hedge fund managers,” he said. “It’s also true that large, leading sovereign wealth funds are sensitive to what each other do and so I see them in a competitive sense emulating, while trying to stay ahead.”

FT : Big Oil on course for near-record $38bn in share buybacks

Big Oil on course for near-record $38bn in share buybacks
Seven majors set for supercharged stock purchasing on top of estimated $50bn of dividends

Western oil and gas majors are on course to buy back shares at near record levels this year as they seek to win investor confidence by boosting returns.

The seven supermajors — BP, Shell, ExxonMobil, Chevron, TotalEnergies, Eni and Equinor — are poised to return $38bn to shareholders through buyback programmes this year, according to data from Bernstein Research. Investment bank RBC Capital Markets puts the total figure even higher at $41bn.

That would be almost double the $21bn in buybacks completed in 2014 when oil last traded above $100 a barrel and the highest level since 2008 when their total buybacks topped $46bn driven by a huge share purchasing scheme at Exxon.


Between 2006 and 2008, Exxon, then the world’s biggest company by market capitalisation, bought back roughly $30bn of its own shares every year, supported by a period of capital discipline and the divestment of assets following its 1999 merger with Mobil.

This time, every supermajor has supercharged its share purchasing programme, said Biraj Borkhataria at RBC Capital Markets. “The sector is in the best shape it’s been in for a long time. Now the question is the duration of the cycle.”

Shell is set to lead the pack, buying back more than $12bn of its own shares in 2022, according to both RBC and Bernstein. At least $8.5bn of those buybacks will be completed in the first half of the year, Shell said this month, including $5.5bn from the sale of its assets in the US Permian basin.

Chevron bought back shares worth $1.4bn in 2021 and has said it will spend $3bn to $5bn on buybacks this year.


The underperformance of the sector during the pandemic meant that most management teams felt their shares were undervalued and that buybacks were cheap, Borkhataria said.

On top of the share purchases, roughly $50bn is expected to be returned to shareholders via dividends, he added, noting that total shareholder returns from the supermajors could move even higher if oil prices climbed further.

Several banks, including Goldman Sachs, expect Brent crude, at present at $93 a barrel, to trade at more than $100 later this year. BP’s target of $4bn of share buybacks a year and a 4 per cent annual increase in the dividend until 2025 is based on an oil price of just $60 a barrel.

Some critics have suggested that buybacks are diverting capital away from the energy transition. BP bought back shares worth $3.2bn in 2021, while total capital expenditure in its low-carbon energy division was $1.6bn. But many investors argue that returning cash to shareholders enables them to reinvest those funds in other parts of the energy sector.

Given the uncertainties surrounding future energy demand, companies had to “strike a balance” between returning cash to shareholders, maintaining spending on core businesses and investing in the energy transition, said Nick Stansbury, head of climate solutions at Legal and General Investment Management, the UK’s largest asset manager.

“In the face of this uncertainty, allocating significant weight to buying back shares at particularly undemanding levels is likely to be an attractive proposition for investors,” he said.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: The Federal Reserve is late in removing stimulus that, with the benefit of hindsight, was far too excessive, especially in conjunction with massive fiscal aid.

Cover Story:
The Federal Reserve is late in removing stimulus that, with the benefit of hindsight, was far too excessive, especially in conjunction with massive fiscal aid. The Fed’s largess might have staved off a worse recession and market correction in 2020, when the Covid pandemic first reached the U.S. in force and the economy effectively closed. But it has contributed to an inflationary mess that is getting more painful to address. The risks of a policy failure are big and growing, threatening job losses and market bloodshed to fight inflation, persistently higher prices to avoid recession, and, in a worst-case scenario, all of that at once.

Interview:
Barron’s recently talked with Gregory Davis, chief investment officer of Vanguard. He oversees $7.7T in assets and he’s most worried about inflation and US stock valuations. Davis is also part of a committee that meets quarterly to advise the Treasury Department on the strength of the economy and debt-management issues—about what to do with cash, why Treasury inflation-protected securities might not be the best inflation hedge, and why investors might want to look abroad. An edited version of our discussion follows.

Tech Trader:
The idea that food delivery service companies like DoorDash would be one of the lasting winners from the pandemic is a bit surprising—and the volatility in DoorDash stock suggests that skepticism remained high heading into earnings. DoorDash went public in December 2020, smack in the middle of the pandemic. The company’s IPO was priced at $102 a share, and it opened at $182, closing that first day at $189.51. But the stock got caught in the recent tech slump, plunging more than 60% from its November 2021 peak of $245, to a recent price around $96.

The Trader:
Gold has benefited from the tensions between Russia and Ukraine, as investors seek havens from the possibility of war. Even those who have taken less of a shine to the precious metal see potential upside ahead. “Risk-off tones, market fluctuations, and acute geopolitical risks are all occurring against an inflationary backdrop,” writes RBC strategist Christopher Louney. “While by year end we still think gold will be lower, in the near term we are not writing off the possibility of high prices and further volatility.”
-Beware for other factors having a negative impact on the markets. It’s not only about the Federal Reserve interest rate moves and the Russia-Ukraine situation. It may be just a matter of time before the ground under the market gives way. For one, it hasn’t been able to rally on days when it looked like it should have. On Thursday, oil prices declined, as did bond yields and the odds of a half-point rate increase. That should have been good news. Instead, the Dow fell 1.8%, its worst one-day decline of the year.
-Junk bonds often signal a recession—but not necessarily the way many investors think. A stock selloff is just a selloff, we’ve often been told, as long as high-yield bonds hold up. That helped during the first four weeks of January, when the S&P 500 fell 7% and the iShares iBoxx $ High Yield Corporate Bond exchange-traded fund (ticker: HYG) fell just 2.7%. But the S&P 500 has bounced 0.9% since then, and junk bonds have kept falling. As of Tuesday’s close, the S&P 500 was down 6.1% year to date, while the ETF was down 4.5%. That would seem to suggest economic worries are building.

Features:
-The Purpose Bitcoin ETF, which started trading on the Toronto Stock Exchange on Feb. 18, 2021, has proven popular. In only one month after its hit the market, it amassed assets for $1B, making it one of the fastest-growing ETFs at launch and showing how eager investors are for an easy and secure way to get exposure to Bitcoin. Today, the fund has about $1.5 billion in assets. But investors in the U.S. are still waiting—and many are pressing regulators to act.
-At $24.86, Ethan Allen trades for 8.1 times its expected earnings over the next year, below that of competitors like La-Z-Boy (LZB), at 8.6 times, and Restoration Hardware parent RH (RH), at 15.9. And its dividend yield of 4.6% is more than triple that of the average small-cap. If its valuation grew to the low double-digits, where it regularly traded before the pandemic, Ethan Allen could trade above $30 and return over 25% to investors.

European Trader:
Nokia stock has jumped 73% to €4.85 since its October 2020 lows but with the turnaround only just entering the growth phase, analysts see the stock having plenty of upside potential. Those covering the stock have an average target price of €6.18, implying a 28% upside to Monday’s closing price. “We have created an excellent foundation as we begin to move into the next phase of our strategy to deliver growth and expand profitability,” Lundmark said as the company reported fourth-quarter earnings earlier this month.
JP Morgan analysts, led by Sandeep Deshpande, shared those sentiments as they maintained a Buy rating on the stock. “We believe the company can now move to the next stage of taking share and growing more than the market,” the analysts said in a note.

Emerging Markets:
One result of the Ukraine crisis seems more predictable: The European Union will look to cut its dependence on Russian natural gas, which currently accounts for 40% of consumption. Companies from Norway to Texas might benefit. The simplest way to replace Russian flows, if you were sitting over a game of Risk on a rainy afternoon, would be US liquefied natural gas. America has more gas in the ground than it can use domestically. LNG output jumped 42% year on year in the first half of 2021.

It could climb another 80% over the next five years, says Randy Giveans, head of energy maritime equity research at Jefferies. Top producer Cheniere Energy is earning $100 million on every shipload right now, Giveans estimates.
-How much is Hong Kong’s strict zero-Covid policy hurting the city’s business environment, as cases rise in the financial hub? That question has taken on greater urgency as the Omicron variant has seeped into its strictly controlled borders and repeatedly hit record high case numbers for the city within weeks, at more than 4,000 Wednesday.

Commodities:
Oil has been hovering just under $100 a barrel for the past few weeks, as tensions escalate about Russia’s intentions in Ukraine. But Russia isn’t the only reason oil prices are high. One analyst outlined a scenario where prices could spike to $150, which would be a record. If oil rose to that level, it would undoubtedly cause more inflationary pressure throughout the economy at a time when the prices of all sorts of goods are jumping.

Streetwise:
-Jack Hough thinks the movie business is bouncing back from pandemic losses. A box-office analyst confirms my findings, saying North American theaters could bring in $8B, versus $4.5B last year and $11B in a normal prepandemic year. Meanwhile, Paramount Global (ticker: PARA), formerly ViacomCBS, topped expectations on streaming subscribers this past week, but the stock took such a brutal beating that it almost got its own CSI spinoff. “This combination of traditional assets and streaming assets is a real advantage,” CEO Bob Bakish tells me. “I realize that’s not in vogue, but that is the truth.”

SCMP : Is China’s health care industry the next regulatory flashpoint under Bide

Is China’s health care industry the next regulatory flashpoint under Biden’s administration?
  • Administrative decisions on WuXi Biologics, Innovent Biologics and other Chinese firms have knocked at least US$9.8 billion from their market value
  • China contributed 6 per cent to the number of new drugs launched worldwide in 2020, trailing the US with 67.6 per cent and Japan’s 13.3 per cent

Are Chinese biotechnology players becoming the focal point of friction under the broken US-China ties?
Recent events and data are stoking speculation that it will be the next flashpoint involving mainland Chinese drug producers and US government departments and regulatory authorities, some analysts suggested, as competition in the market for cures intensifies amid the pandemic.
On February 7, the US added WuXi Biologics and 32 other Chinese firms to its “unverified list” in a move that entails export restrictions, hurting their access to US technology. In a February 11 statement, Innovent Biologics said an FDA advisory committee decided to ask the firm and its US partner Eli Lilly to broaden its clinical trials for a cancer drug before approval for use in the US.
“Seeing US regulators take various actions targeting Chinese health care companies in the past few months, we expect [the] sector to become a new source of US-China tensions,” said Carol Dou and Sunny Chen, analysts at UOB Kay Hian. “China’s biotech sector has been developing rapidly”, with more spending on innovation and research collaborations globally, they wrote in a February 15 report.

The US-China rivalry has deepened since former president Donald Trump started slapping punitive tariffs on Chinese goods in 2018, fuelling a still- unresolved trade war. Since then, both governments have traded barbs, tariffs, and sanctions over contentious issues ranging from human rights to forced labour, military technology, accounting and Hong Kong autonomy.
WuXi Biologics slumped 22.4 per cent in Hong Kong while Innovent lost 0.3 per cent since the related decisions, wiping a combined HK$76.1 billion (US$9.8 billion) of market capitalisation from their stocks.
The US has shown heightened concerns around foreign investments and export controls for sensitive technologies, said Helen Chen, Greater China managing partner in Shanghai at LEK Consulting. While biotechnology is technically on the list, health care should not fall into the category, she added.

Chinese firm ready to make 100 million Coronavirus vaccine doses if trials are successful
“Where there might be more sensitivities would be areas which impact public health or those science or technologies which might be considered more sensitive, such as those that cover human genetic materials,” she said by email.
The industry is global in nature, “not a zero-sum game”, according to Bruce Liu, a China-based partner at consultancy Simon-Kucher & Partners. There are not many pure US companies as most of their businesses are global with China as an increasingly important part, he added.
“There is nothing wrong with that and there isn’t really a conspiracy to dominate the global industry,” Liu said. China has been opening up its own market to innovations abroad while encouraging local industry players to move up the ladder, he added.

China’s share of the global innovation pipeline for new drugs rose to 13.9 per cent as of February 2020, up from 4.1 per cent in 2015, according to a March 2021 report by the China Pharmaceutical Innovation and Research Development Association and the Pharmaceutical Association Committee.

Still, the Asian nation only contributed 6 per cent to the number of new drugs launched worldwide, with the US and Japan topping the ranking with 67.6 per cent and 13.3 per cent share respectively, according to the report.
The global pharmaceutical market was worth US$1.3 trillion in 2020, and was expected to reach US$1.71 trillion in 2025, according to Frost & Sullivan data cited by Chinese drug manufacturer Asymchem Laboratories in its stock prospectus in November.
The US imported US$3.4 billion worth of Chinese pharmaceutical products last year, a 55 per cent increase from 2020, according to data published by the US International Trade Commission. They accounted for 2.2 per cent of all US purchases in that category.
China’s biotech industry is still in the very early stages of development, and very few companies have highly innovative drugs as part of their core assets, said Jay Lee, a senior equity analyst at Morningstar.
“Theoretically, US-China tensions may eventually rise to the point where even innovative drug development becomes a major point of contention, but that is beyond the control of any individual company,” said Lee. “The best strategy is to focus on innovation and meeting medical needs, as we think this is more politically defensible.”

Nature.com : Asteroids, Hubble rival, and Moon base: China sets out space agenda

Asteroids, Hubble rival, and Moon base: China sets out space agenda
In the next five years, the nation hopes to launch a robotic craft to an asteroid and two lunar missions.

China has had a bumper few years in space exploration, and its ambitions are about to get bolder. The China National Space Administration has released an overview of its plans for the next five years, which include launching a robotic craft to an asteroid, building a space telescope to rival the Hubble and laying the foundations for a space-based gravitational-wave detector.

The missions were highlighted in a white paper, ‘China’s Space Program: A 2021 Perspective’, released last month. The plans continue the country’s trend in emphasizing missions with science at their heart, rather than technology development and applications, says Shuang-Nan Zhang, an astronomer at the Institute of High Energy Physics in Beijing. “This is a very good sign,” he says. “It’s a continuous increase in investment in exploration of the Universe.”

Nature looks at five of the most ambitious projects.

Visit an asteroid
China aims to launch asteroid probes to sample near-Earth asteroids and study icy comets that have asteroid-like orbits. The mission, which will probably be named ZhengHe after a Ming-dynasty Chinese explorer, would be the country’s first to visit an asteroid, and could launch as soon as 2024. It will follow in the wake of Japan’s successful Hayabusa asteroid missions and NASA’s OSIRIS-Rex, which is due to return space rocks to Earth next year.

ZhengHe will fly for ten years, first landing on an ancient asteroid known as HO3 or Kamo‘oalewa, which loops around Earth as a quasi-satellite (see Earth’s Pet Rock). Scientists hope that studying it will give them an insight into conditions in the early Solar System. ZhengHe will anchor itself on the asteroid before scooping up its sample, according to a correspondence1 published in Nature Astronomy last year. ZhengHe will return to Earth’s orbit in 2026 to drop off its spoils, which will parachute to the ground. The craft will then sling-shot around Earth and Mars and travel to comet 311P/PANSTARRS in deep space.

Towards a lunar base
Not content with returning the first lunar samples to Earth since the 1970s, China approved three more lunar missions in December, all focusing on the Moon’s south pole, where the country is considering building a lunar base.

Chang’e-7, set to launch in 2024, will carry out a detailed survey of the Moon’s south pole, including mapping the distribution of ice in its shadowy craters. Chang’e-6 will follow, aiming to bring back polar soil samples. The ice is a treasure trove for scientists, who can use it to study the Moon’s history, and for prospectors, who hope to use it as rocket fuel and to supply lunar bases.

Work will also begin on Chang’e-8, which is not scheduled to fly until 2030; this will test “core technologies” for a crewed international lunar research station — the focus of China’s lunar programme beyond 2025. Russia and China will sign an intergovernmental agreement on building a research base together “as soon as possible this year”, said Wu Yanhua, vice-administrator of the China National Space Administration (CNSA), at the press conference to launch the white paper. He stressed, however, that the venture was open to all nations.

Wu added that China wants to broaden and deepen international collaboration, including on lunar exploration; on China’s space station, Tiangong, which is under construction; and on planetary exploration.

Mars and beyond
China made its first leap into interplanetary space with the Tianwen-1 orbiter, which dropped a lander containing the Zhurong rover on Mars in May. According to the white paper, China will complete research for sending a craft to Mars to sample rocks and return them to Earth. This mission could launch in 2028. (NASA’s Perseverance rover collected the first Mars rocks in 2021. The agency hopes to bring them back to Earth as part of a joint mission with the European Space Agency (ESA), launching in 2026.)

The white paper also lays out China’s plans to eventually probe further into the solar system. The next five years will see the completion of key research for a mission to explore Jupiter and its ocean-filled moon system. Press reports suggest that this mission could launch as early as 2029 — meaning that it would join ESA’s JUICE and NASA’s Europa Clipper mission, scheduled to fly in 2023 and 2024. “Deep space is certainly another area China sees there are a lot of opportunities for scientific breakthroughs,” says Zhang.

The country has also set its sights on exploring the boundary of the Solar System. China’s funding agencies have yet to confirm this, or the Jupiter mission, but “a mention in the plan is certainly helpful”, says Zhan Hu, an astronomer at the National Astronomical Observatories in Beijing.

A new Hubble: the Xuntian space telescope
China also plans to launch a space telescope called Xuntian, whose name means ‘survey the heavens’. This will image in the same wavelengths — ultraviolet, visible and infrared — as those used by NASA’s Hubble Space Telescope.

Slightly smaller than Hubble, Xuntian will not quite match its predecessor’s resolution; but, at any one time, Xuntian will capture a patch of sky 300 times larger. That will allow it to probe a much greater volume of the Universe than Hubble, says Zhan, who works on Xuntian.

Most of Xuntian’s first 10 years will be devoted to understanding the history and evolution of the Universe through a wide survey of the sky. The telescope will periodically dock with China’s space station, Tiangong, for refuelling and maintenance. Zhan says that the team plans to deliver the telescope by the end of 2023, ready for launch in 2024. “The schedule is very tight,” he says.

Detecting gravitational waves in space
China wants to further develop plans to launch a space-based gravitational-wave detector, called Taiji, in the early 2030s. If launched then, it would be the first of its kind. Such a mission would observe lower-frequency waves than those seen by ground-based detectors such as Advanced LIGO, allowing it to detect higher-mass black holes, including those in the early Universe.

But the experiment would be complex: spotting ripples in space-time will mean detecting shifts of just a few trillionths of a metre in the distances between three spacecraft, positioned 3 million kilometres apart from each other in the shape of a triangle.

An initial pilot satellite, called Taiji-1, completed its mission successfully in 2019, and researchers now hope to fly a two-satellite mission in 2024–25 to test the necessary precision technologies. This will “remove all the technical obstacles” for the ultimate Taiji mission, says Yue-Liang Wu, a physicist at the University of the Chinese Academy of Sciences in Beijing.

ESA has long planned its own gravitational-wave observatory, LISA, and has already flown a successful pathfinder. But LISA is not scheduled to launch until 2037. Together, the two networks could be used to measure the Hubble constant, which describes the expansion of the Universe, with much greater accuracy than ground-based detectors can, say researchers behind the mission.