Yuan, Dollar Divergence Heralds More Losses Ahead
by George Lei, Bloomberg Markets Live Commentator and analyst
The Chinese yuan is on track for the first weekly slide in more than two months, despite a much lower dollar and good news on the trade front. That’s a tell-tale sign of how pessimistic market sentiment is and may only reinforce expectations that yuan’s downtrend is here to stay.
The Chinese currency has lost 1% so far this week in offshore trading and 0.7% onshore. While the drop itself doesn’t seem very remarkable, the context is key: the yuan couldn’t hold on to its Monday rally amid news of possible US tariff removals. It also failed to benefit from a 1.3% weekly decline in the dollar index.
The last time a weaker greenback couldn’t help at all was in March: the dollar index lost 0.9% in the week ending March 18, while the onshore yuan dropped 0.34% and its offshore counterpart declined 0.14%. Since then, the Chinese currency has weakened more than 5.5%. Only the Turkish lira, Argentine peso and Hungarian forint lost more among 24 emerging-market peers tracked by Bloomberg.
Following a brief rebound from May 13 to 24, the offshore yuan is sliding once again and is now poised to revisit 6.80 support. A breach may open up path toward year-to-date low at 6.8380, last seen on May 13, when the dollar index found its recent top. Further losses could send the currency toward 6.90, a level last seen in August 2020.
The discord between China’s top leaders over whether to prioritize Covid control or economic growth is paralyzing the implementation of policy responses, according to eight senior local government officials and financial bureaucrats. It may also amplify the negative sentiment toward broader Chinese assets and weigh heavily on the yuan, independent of what the dollar does.
On Thursday, China’s trade-weighted yuan fell below 100 for the first time in seven month, according to a Bloomberg replica of the CFETS RMB index that tracks the exchange rate against 24 peers. Fidelity International and Credit Agricole CIB both predicted more downside for the trade-weighted gauge, with the dollar-yuan pair possibly testing 7 level in the coming months.
“China and the US are moving in different directions and I don’t see PBOC stand in the way of depreciation,” said David Loevinger, Los Angeles-based managing director at TCW Group Inc. and a former China specialist at the US Treasury. He said the big selloff is over and the next 6- to 12-month view is a gradually weaker yuan.
China's Military Must Be Able To Destroy SpaceX's Starlink Satellites: Researchers
The Chinese military must be able to destroy SpaceX's Starlink satellites if they pose a threat to national security, according to an April publication by Chinese military researchers.
The researchers speculated that US military drones and stealth fighter jets could boost their data transmission speed by more than 100x using the Starlink network. Notably, SpaceX has signed a contract with the US Department of Defense to develop technology based on the Starlink platform - which includes instruments sensitive enough to track hypersonic weapons traveling at 5x the speed of sound or faster.
The paper also recommends developing a satellite surveillance system with 'unprecedented scale and sensitivity' in order to track every Starlink satellite, according to the South China Morning Post.
The study was led by Ren Yuanzhen, a researcher with the Beijing Institute of Tracking and Telecommunications under the PLA’s Strategic Support Force. Co-authors included several senior scientists in China’s defence industry. -SCMP
"A combination of soft and hard kill methods should be adopted to make some Starlink satellites lose their functions and destroy the constellation’s operating system," reads the paper, published in China's peer-reviewed journal Modern Defence Technology.
SpaceX founder and CEO Elon Musk is generally considered popular in China, however he received harsh criticism after two Starlink satellites came 'dangerously close' to the Chinese space station last year.
Starlink satellites could threaten China’s national security in space and on the ground, according to the researchers. Photo: Beijing Institute of Tracking and Telecommunications
Musk notably provided over 12,000 Starlink dishes to Ukraine to help facilitate broadband internet amid the war with Russia - which SpaceX is providing free of charge.
"All critical infrastructure uses Starlink, all structures that are needed for the state’s functioning use them," said Mykhailo Fedorov, Ukraine's minister for digital transformation. "We need to receive them constantly because they are one of the elements of the foundation of our fight and resilience.
Another concern from the Chinese researchers is that Starlink satellites all contain ion thrusters, which could allow them to rapidly change orbits for a rapid move against high-value targets in space.
On the public-facing side of things, Starlink's popularity has continued to grow - experiencing a 275% increase since January.
The research paper also suggests that the unprecedented scale and flexibility of the Starlink system would allow the West to insert military payloads into SpaceX commercial launches - necessitating the development of new anti-satellite capabilities and a surveillance system that can obtain super-sharp images of small satellites in order to identify unusual features.
China claims it has already developed numerous ground-based laser imaging devices that can photograph orbiting satellites at a millimetre-resolution, but in addition to optical and radar imaging, the country also needs to be able to intercept signals from each Starlink satellite to detect any potential threat, according to Ren.He said China had also showed its ability to destroy a satellite with a missile, but this method could produce a large amount of space debris, and the cost would be too high against a system consisting of many small, relatively low-cost satellites. -SCMP
"The Starlink constellation constitutes a decentralised system. The confrontation is not about individual satellites, but the whole system. This requires some low-cost, high-efficiency measures," wrote the researchers.
SCMP notes that Chinese scientists have already developed lasers for blinding or damaging satellites, as well as cyber weapons that can attempt to hack into the satellite communication network.
Investors buy into Liberty Media’s F1 recovery plan
CEO Greg Maffei says shared revenues, a cap on spending and new cars have made the sport more competitive
Not so long ago, Liberty Media — the company controlled by US billionaire John Malone — was pleading for patience as it tried to reinvigorate Formula One, the global car racing series.
Now, though, F1 is on a hot streak after a thrilling championship duel last year between Sir Lewis Hamilton of Mercedes and Max Verstappen of Red Bull, as well as this month’s inaugural Miami Grand Prix. It has also pulled in millions of new fans thanks to Drive to Survive, the fly-on-the-wall documentary from Netflix.
Liberty Media took a risk when it acquired F1 for $8bn including debt in 2017. The sport had been led for decades by Bernie Ecclestone, the former car dealer who turned F1 into a global phenomenon. “There were plenty of things we didn’t understand,” Greg Maffei, the chief executive of Liberty Media, tells the Financial Times. “But the things that mattered, we were right on.”
The sport was at risk of going stale when Liberty Media stepped in. On the track, Hamilton and his team were possibly too dominant, while Ecclestone had neglected social media and young fans in favour of an older male audience flush with cash. It left F1 needing to be more competitive and digitally sharp while increasing its appeal in the US.
“There was an opportunity [that], by creating a better on-track product [and] on-grid experience, you could make it more appealing both to fans, because it was more competitive, and also to investors in the teams,” says Maffei. “That would all create a flywheel that was to our benefit as well.”
But talks to alter the economics of the sport initially faltered amid disagreements with Ferrari, Mercedes and Red Bull, the most dominant teams, and plans for US expansion dragged on.
Then, in March 2020, the Covid-19 pandemic struck. The opening race in Australia had to be scrapped and teams feared for their financial lives. F1’s revenue for the year tumbled 43 per cent to $1.1bn.
Maffei mapped out a recovery plan. Liberty Media shifted assets to strengthen F1’s balance sheet with $1.4bn of cash, offered a backstop to teams deprived of revenue, and reworked the calendar to hold 17 races despite travel restrictions. Drive to Survive, meanwhile, pulled in more female viewers and younger fans. Last year, revenues recovered to $2.1bn.
The pandemic response served to highlight the desperate need for change. Teams at the front of the grid came round to Liberty Media’s proposal for competitors to share revenues more evenly. Despite prior opposition from Ferrari, Mercedes and Red Bull, all the teams agreed to cap individual spending at $145mn, excluding marketing costs and driver salaries. The aim is to ensure that races are won by shrewd use of funds rather than unlimited spending.
New cars introduced this season also make overtaking easier, which should make races more exciting to watch. There had been criticism that the previous vehicles caused “dirty air”: turbulence that made it challenging for drivers to close in on rivals.
Investors are buying into Maffei’s vision. The new economics of the sport mean that teams can generate returns instead of losses.
In the past 20 months, Dorilton Capital has paid €152mn for Williams; Ineos, the petrochemicals company, has acquired a third of the Mercedes F1 team; and investment firms MSP Sports Capital and Ares Management have bought into McLaren. Big tech companies such as Google and Oracle have also sponsored teams. In 2026, Porsche and Audi, the brands owned by German automaker Volkswagen, plan to join the competition.
“Now, the bottom team is probably worth at least $500mn,” Maffei says. “It’s probably more, they’re turning down numbers probably in excess of that.”
F1’s expansion in the US with the Miami Grand Prix adds to a schedule that already featured the US Grand Prix in Texas. In addition, the sport has struck a deal to race in Las Vegas from November next year. With events in Brazil, Canada and Mexico on the calendar already, Liberty Media has increased the number of races in an important timezone. “Never say never, but we have no plans in the US beyond the three we have,” says Maffei. “Our core audience is in Europe . . . we recognise our heritage.”
One benchmark of the sport’s success in America will be its new broadcasting deal. The current contract, with ESPN, the US channel owned by Disney, was worth single-digit millions and is due to expire soon. The next US deal could be worth $50mn to $100mn, according to one person with knowledge of F1 broadcast contracts. “I think the next deal will be substantially higher,” says Maffei. “Our growth in the US isn’t done.”
F1 has, however, drawn criticism for expanding into jurisdictions that activists say have poor records on human rights. Drivers discussed whether to go ahead with the Jeddah Grand Prix in Saudi Arabia after a missile attack on an oil depot near the track in March. And, last November, F1 held its first race in Qatar, where migrant workers’ conditions have come under scrutiny.
“We have plenty of drivers who are aware and help us . . . and we try to do what we can to be a force for good as well as creating a sports spectacle,” says Maffei. “It’s very difficult to operate in only countries where people are incredibly happy with the regime.”
But Russia, a grand prix set up by Ecclestone, will no longer feature on the F1 calendar after the country’s invasion of Ukraine. Abandoning that race will mean a loss of up to $70mn in revenue, according to the person with knowledge of F1 finances, though another source close to F1 put the number at $40mn. Maffei declines to comment on the figure. F1 will hold 22 races this year instead of 23 as planned.
Five years since its gamble, Liberty Media has no plans to cash in. Maffei sees new opportunities in the US, sponsorship and advertising, in broadcasting rights, and in fees from the promoter partners that stage races.
“There’s a lot of positive flywheels, I don’t know we would want to exit,” he says. “In an environment where a lot of businesses are challenged, it is pretty nice to have one that’s about hitting on every cylinder.”
Ferrari’s Benedetto Vigna: ‘We are in a period of technology transition’
The Italian technologist CEO says the link between F1 and quality road cars is more than just marketing
When Benedetto Vigna was 14 years old, he sneaked out of the family home in southern Italy and travelled with a friend to Imola to watch the 1983 San Marino Grand Prix — a round trip of almost 1,000 miles. His anxious parents had no idea where he was and, without mobile phones, it stayed that way until he returned two days later. The race was won by a Ferrari.
Vigna went on to a stellar career in technology with STMicroelectronics, a Geneva manufacturer — during which he invented the motion sensor at the heart of the Nintendo Wii console and Apple’s iPhone 4.
But, then, last autumn, the 53-year-old strode into Ferrari’s Maranello headquarters as its new chief executive.
“I am a technologist, but I am an Italian technologist,” he explains. “So, as an Italian, I always had a great passion for racing. This is true all my life. And it’s an honour for me to be at the helm of this company. I always dreamt about it. I never thought I could arrive.
“But I remember, when I was going to school, on my backpack there was a red Ferrari with a yellow driver helmet. Now, as a technologist, I am fascinated [by] all the different kinds of technologies that we deploy in F1 and also how we can deploy these technologies in the road car.”
Ferrari’s fortunes on the track are not just cyclical, they are a rollercoaster. The company dominated the sport with Michael Schumacher 20 years ago. After that, there were several false dawns and near misses, which meant that Ferrari’s last F1 world drivers’ championship win was in 2007.
However, this season it is a contender again, with a bullet of a car designed to F1’s new technical regulations. Its lead driver Charles Leclerc is locked in a battle for the world title against Max Verstappen, Red Bull’s reigning champion.
Vigna’s role, though, is to look ahead. He has not been brought in to help Ferrari produce or sell its current range of luxury cars. Last year, it shipped a record 11,155 models and there is a strong order book for 2023. Ferrari shares, since listing in New York at $52 in October 2015, have risen fourfold.
Instead, the Italian was headhunted to ensure Ferrari does not make a mis-step as it adopts the technologies that will be critical to its future.
The first electric Ferrari will be unveiled in 2025. So, while it seems that the adage “win on Sunday, sell on Monday” — which car manufacturers trot out to justify investment in motorsport — does not apply to Ferrari, Vigna is quick to point out that the link between F1 and quality road cars is about more than marketing,
“A lot of technologies we developed for F1 are transferred to the road cars. So, if you want, the benefit is indirect,” he says. “Today, we have the broadest and most innovative sports car range. We also leverage a lot of the hybrid technologies we have been developing in F1 for 15 years.
“This is why the success of the 296 [the new hybrid convertible Ferrari] is very good. So it’s not a direct consequence but clearly winning in F1 is testament that our technologies are good.
“Competition is part of the game and the differences are very small. So we have to continually fight to optimise our technologies.”
F1 hybrid engines are already among the most efficient motors on the planet, with more than 50 per cent of the available energy from the fuel driving the rear wheels — far more than any road cars.
The next step will be the game-changer in F1’s mission to decarbonise motorsport: the shift in 2026 to 100 per cent sustainable fuels.
It is a move that will transform F1’s relevance and looks set to attract Porsche, Ferrari’s longstanding rival, into the sport.
“All of us, all the companies, have an important responsibility in front of the world that we have to respect,” says Vigna. “We are in a period of technology transition. I think that we have to explore all the avenues possible of high efficiency,” he adds.
“Sustainable fuels is a big one that we have to keep in mind — we are pushing on that.”
Vigna is well aware of Ferrari’s pedigree. Enzo Ferrari, the company’s founder, who died aged 90 in 1988, was a racing driver and team owner before he built his first road car. Under Vigna, the race team appears to be well aligned with the road car business.
Another tradition that began with Enzo continues to this day. “Here, in Maranello, when we win on Sunday the local church rings the bell and all the people come out of their homes,” Vigna says.
“And I can tell you that, on Monday morning, when you’re in the office, if you win the race, you can smell and taste the sense of pride of all the people. It means a lot. Competition is part of the DNA of this company.”
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ViiV ‘actively negotiating’ voluntary licence for HIV prevention drug
GSK majority-owned company in talks with regulators on generic manufacture of highly effective PrEP injection
GlaxoSmithKline’s ViiV Healthcare is “actively negotiating” a voluntary licence on the patents for its injectable HIV prevention drug to make it more widely available in poorer nations, where fewer than a third of those at risk are on prophylactic treatment.
Deborah Waterhouse, ViiV chief executive, said in an interview that the GSK majority-owned drugmaker was committed to licensing the patents relating to the drug and that it was in talks over terms with the UN-backed Medicines Patent Pool.
ViiV makes cabotegravir, a long-acting, injectable drug that is highly effective in preventing HIV infection. It is given as infrequently as six times per year. A licence would enable generic makers to produce more of the drug at affordable prices without the risk of patent litigation, widening availability at the same time.
The move underscores how protracted battles on intellectual property during the Covid-19 pandemic, especially for vaccines, may have altered how companies think about access to medicines.
ViiV had initially said in March it was “unable” to seek a voluntary licence for the drug, mainly because of manufacturing challenges, according to archived copies of the webpage seen by the Financial Times. After an outcry, ViiV issued a statement, stored at the same URL, saying it was open to the voluntary licensing of its patents.
Waterhouse said this had been a “misunderstanding . . . Our policies [on access] never change . . . We’ve always been open to exploring licences on this medicine and all others.”
Cabotegravir is part of an HIV prevention strategy called pre-exposure prophylaxis, or PrEP, which is highly effective and has reduced new infections where it is widely used. Before cabotegravir, PrEP was available only in tablet form, usually taken daily.
Charles Gore, the head of the MPP, said the drug could be “a game-changer in prevention”.
Despite improvement, global access remains lopsided. According to the UN, in 2020, the drug had reached only 28 per cent of the 3mn targeted in poorer nations.
Jessica Burry, of the HIV and Hepatitis C access campaign at the Médecins sans Frontières charity, welcomed the news. She said, however, that it had “taken far too long even to get to this point”, delaying entry of a more affordable and generic version of the drug into the market.
Asia Russell, executive director at Health Gap, said the company should make the drug available in the interim at a price comparable to oral PrEP, which can retail for less than $30 per month.
Waterhouse said the drug, a vial of which retails at $3,700 per year in the US, would be available to low-income, least-developed and sub-Saharan African countries at a non-profit price until a generic became available.
ViiV had earlier this year privately told stakeholders this could be as low as $240 per patient a year, according to people familiar with the matter. Waterhouse and the company declined to comment on pricing. However, ViiV alone cannot satisfy global demand.
The need for effective and easily accessible PrEP continues to be strong. In sub-Saharan Africa, for example, thousands of young women and adolescent girls contract HIV every week, said Kimberly Smith, ViiV’s chief of research and development.
“Those numbers are shocking and upsetting and we all feel the need to do something,” she said. “We want to be able to reach as many as we can to change the trajectory of the pandemic.”