TheChek News Flow

DAX:

MDAX:

SDAX:

Nikkei +8.04% Hang Seng +3.25% CSI +2.80% Shanghai +2.26% Shenzen +2.96%

Eur$ 1.0818 CNH 7.0781 CNY 7.0698 JPY 111.22 GBP 1.1834 CHF 0.9797 RUB 78.4458 TRY 6.4472 WTI 24.94 +3.87%

S&P +0.30%% Nasdaq -0.02% EuroStoxx +1.25% FTSE +1.79% Dax +1.90% SMI +1.89%

Macro :

- Germany Wins EU Approval to Guarantee Virus Crisis Company Loans

- Margin Calls Trigger an Illiquid Asset Firesale: Markets Live

- China’s Wealth Fund Is Said to Slash Risk-Parity Assets by 50%

Keep an eye on :

- AIR FP : Airbus Nearing Decision on A220 Production Halt in Canada

- AIR FP : Airbus Mandates Five Banks to Syndicate 15 Billion-Euro Loan

- ALSN SW : Also Confirms FY Guidance as China Production Resumes

- ATC NA : Altice’s Drahi: French Stores Staff To Be Partially Unemployed

- AAPL US : Apple Expects to Start Reopening Stores in First Half of April

- BAYN GY : Pence: We Will ‘Spin Up’ Manufacturing of Drugs That May Help

- BME SM : Spanish Government Authorizes Six Group’s Bid for BME Bourse

- BA US : Boeing Plans 737 Max Production Restart by May, Reuters Says

- BT/A LN : BT to Sell About 46.7m Shares or Remaining ADR Holders

- CO FP : Casino Said to Suspend Geant Sale as Grocers Get Virus Kick

- CTM SS : Catena Media Reiterates Growth Target; Seeks to Refi 2021 Bond

- CSGN SW : Credit Suisse Says Ex-CEO Thiam’s 2019 Pay Fell 15% to CHF10.7m

- DMP GY : Dermapharm Full Year Revenue EU701 Mln

- DWNI GY : Deutsche Wohnen Full Year Ebitda Beats Estimates

- EOAN GY : EON 2019 Adjusted Ebit Meets Estimates

- EOAN GY : E.On to Boost Dividend Per Share Annually by Up to 5%

- EQNR NO : Equinor Cuts Organic Capex by About 20% to About $8.5B for 2020

- EVS BB : EVS Withdraws Guidance, Cancels Final Dividend Payment

- FCA IM : Two Fiat Chrysler Workers Die After Positive Virus Tests

- FCT IM : Fincantieri Postpones FY Results to April 1

- GILD US : Gilead Experimental Covid-19 Drug Scores Potential Tax Break

- HLAG GY : Hapag-Lloyd Sees Significant Virus Effect on Container Traffic

- IBST LN : Ibstock to Suspend Manufacturing Output, Cancel Final Dividend

- IPN FP : Ipsen Suspends 2020 Finl Guidance, Confirms Div. EU1/Share

- MVV1 GY : MVV Energie Says EnBW, RheinEnergie in Pact to Sell Their Stake

- NEX FP : Nexans Suspend 2020 Guidance on Coronavirus Outbreak

- NHH SM : Spain’s NH Hotel to Apply to Suspend Staff on Virus Impact

- NIBC NA : Blackstone to Submit NIBC Offer to Regulator by May 19

- NOEJ GY : Norma Assumes It Won’t Meet 2020 Adj. Ebita Margin Forecast

- POM FP : Affected by low demand, zero output in 90 plants, All 31 chinese plants resumed ops

- QIA GY : Qiagen Names Thierry Bernard as CEO

- RNO FP : Renault Shuts Down Latin America Plants Until Further Notice

- ROCKB DC : Rockwool Suspends 2020 Outlook on Coronavirus Uncertainties

- SHA GY : Schaeffler Suspends 2020 Guidance as Virus Grip Tightens: React

- SCHA NO : Schibsted Cancels Dividend, Sees Revenue Hit on News Media

- SNH GY : U.S. Retailers Plan to Stop Paying Rent to Offset Virus Closures

- TLGO SM : Talgo to Temporarily Suspend 280 Employees in Spain

- TIT IM : Elliott Cut Telecom Italia Stake to 7% From 9.7%: Consob

- TKA GY : Thyssenkrupp Expands Job Cuts in Overhaul of Ailing Steel Unit

- UCG IM : UniCredit Long-Term Rating Affirmed at BBB- by Fitch

- VAHN SW : Vaudoise Full Year Combined Ratio Reported 91.8%

- VOLVB SS : Volvo Postpones AGM to Get More Clarity on Coronavirus Impact

- Z01 GY : Zooplus Full Year Sales Meet Estimates

* Alcon Raised to Hold at SocGen

* Big Yellow Group Raised to Buy at Berenberg

* Bodycote Raised to Neutral at JPMorgan; PT 615 pence

* Boohoo Raised to Sector Perform at RBC

* Chr. Hansen Raised to Hold at Berenberg; PT 450 kroner

* Continental AG Raised to Buy at Jefferies; PT 78 euros

* Daimler Raised to Buy at Jefferies; PT 40 euros

* Entra Raised to Buy at Arctic Securities; PT 167 kroner

The country’s economic system has many flaws — yet critics underestimate it at their peril

It is hard work being in the China-is-doomed camp.

Just a few weeks ago, the Communist party looked to be facing the sort of cataclysm that can sweep away authoritarian regimes. The economy has been so badly hit by the coronavirus epidemic that China is likely to record its worst quarterly result since the depths of the Cultural Revolution.

At the same time, an anxious public was beginning to realise that the authorities had covered up the early stages of the outbreak, paving the way for a much more aggressive spread of the disease.

The anti-party mood even found a martyr figure in the form of Li Wenliang. The 34-year-old Wuhan doctor was detained by police in early January for “spreading false rumours” after he had warned about a strange new pneumonia sweeping the city. When he died from the same virus in late February, the internet in China exploded. All of a sudden, everything seemed in play.

Fast forward to late March and the situation appears completely different. It is Donald Trump, not Xi Jinping, whose political survival appears threatened by the coronavirus crisis, as the US president flails in the wake of an impending healthcare disaster. China’s economy is showing new signs of life and Xi is sending medical supplies and messages of solidarity to Europe and Africa. The intended subtext of these gestures is clear: the Chinese model is superior to that of the west.

If nothing else, the last few weeks have been a warning to those authors predicting the “Coming Collapse” to take a very deep breath. But that does not mean that the system is invulnerable. If the Chinese economy ever does enter a prolonged slump, it need not be the result of some freak crisis. It could just as easily come from within and the steady accumulation of intractable problems that veteran China-watcher Dexter Roberts identifies.

There is the huge build-up of debt that is slowly clogging the financial system — a potential crisis a coronavirus-led recession could expose. There are the inexorable demographic forces of an ageing population, which means there are fewer cheap, young workers to operate its factories. And there are the grinding inequalities and social resentments which four decades of breakneck growth have created — “today’s unbalanced, deeply unequal society”, as Roberts puts it.

In The Myth of Chinese Capitalism, Roberts tries to answer the big question facing China before the coronavirus crisis hit. Can it forge ahead for another generation and become the first authoritarian regime to enter the exclusive club of high-income countries? Or will it succumb, like Brazil, Thailand and countless others, to the so-called “middle-income trap”, where it can no longer compete on cheap manufacturing but does not yet have the skills or technology to sustain more advanced industries?

Roberts approaches this task not through a careful parsing of bad debts or through looking at its prowess in artificial intelligence, but through tenacious reporting that seeks to expose the murky underside of the Chinese miracle. A former Bloomberg journalist, he has been following the main characters who people this book for nearly 20 years, which is a sort of perseverance that few other writers can match.

For Roberts, many of the social tensions now threatening to explode can be traced to the hukou — a small red passbook that records where a family is officially registered as living and what benefits it is entitled to. The result is a strict divide between residents of prosperous cities and those from rural areas — or as Roberts sees it, between a privileged urban middle class and an underclass.

“Nothing defines the lives of China’s other half — the hundreds of millions of farmers, many now turned migrant workers — more than the hukou,” he writes.

This system has been abused to create a “pliable, low-cost labour supply”. Without the right to live in a city, factory workers fear being thrown into informal detention centres known as “black jails” if they outstay their temporary permits. It has also made them less likely to complain about their conditions.

The biggest impact has been in education. The Shanghai schools that win international prizes are for those with a city hukou: the kids of migrant workers have to go to expensive private schools or be sent home to extended families in their villages.

These “left-behind” children pay a heavy price. Research has shown they are 3cm shorter and weigh significantly less than their city peers. By 2015, there were 100,000 boarding schools to cater for them, many of them suffering from overcrowding. Roberts describes the bleak conditions at one school in Shaanxi province. After dinner, the students were “herded into classrooms, sometimes with the doors locked behind them, and ordered to read their textbooks and keep quiet until 10pm”. China, he concludes, is not educating the young workers it needs for a more advanced economy.

The cumulative effect of these pressures is to create an economy which is both running out of steam but where an exploited workforce is starting to demand more. China will “suffer an ever more anaemic economy” while at the same time the “disadvantaged become ever more aware of their meagre lot”.

Is Roberts right? His book focuses on a side of the Chinese story that has been downplayed in recent years amid the hype about a new technology superpower. But it is still only one side of the story, and risks ignoring the dynamism that still powers China’s economy.

Part of the answer might have come from The Shenzhen Experiment, by Juan Du. An architect and urban planner, she sets herself the task of telling the story from the ground up of Shenzhen, the southern city just across the border from Hong Kong that symbolises like no other China’s economic success.

Between 1980 and 2017, the city’s gross domestic product increased from Rmb150m to an extraordinary Rmb2.2 trillion — bigger than many EU member states, such as Finland and Greece, and the bulk of US states, including the likes of Connecticut and South Carolina.

With a glittering skyline adorned by several of the tallest buildings in the world, the city is now home to Huawei, the telecoms infrastructure company whose technological prowess has generated such anxiety in the west, and Tencent, the pioneering gaming and social media company. Even within the context of China’s extraordinary recent history, Shenzhen stands out.

Du aims to break through the clichés that have dominated so many accounts of Shenzhen, especially the idea that it was little more than a fishing village in the late 1970s when Deng Xiaoping’s economic reforms began and it was designated one of the crucial special economic zones. By rooting her story in the “countless individuals” who defined the city, she argues that Shenzhen is much more than a top-down exercise in building a modern metropolis. But while her research is painstaking, the book often gets bogged down in planning documents and zoning decisions, and loses sight of the city’s vitality.

The counterargument to Roberts is, instead, one that he inadvertently provides. One of his chapters is on the growing use of robots in factories desperate to remain competitive — a development he believes will exacerbate social tensions by limiting the number of new jobs. But the reason for the surge in robots is revealing: “After a decade in which manufacturing wages doubled, China’s workers are no longer cheap.” Indeed, salaries now match Brazil and exceed those in Mexico, Thailand and Malaysia.

This is important for two reasons. First, it suggests that for all modern China’s stark social divides, at least some of the benefits of economic growth have trickled down to workers.

It also hints at the major transformation that has quietly taken place in the Chinese economy. A decade ago, growth was driven by unsustainable investment in mega-projects. But now it is services and consumption that are the largest part of GDP. Even as the headline rate of growth slowed before the coronavirus crisis, real per capita disposable incomes have still been rising at more than 6 per cent a year — a figure that any other large economy would kill for.

Roberts is disparaging of those analysts who call China “the world’s greatest consumer story” because such descriptions sanitise the harsher realities of city life. Yet if China does manage to maintain a relatively high growth rate for another generation, this will be the reason — a steady, relentless rise in wages and a growing domestic market.

Coronavirus could yet prompt another slump in the Chinese economy if Beijing’s scramble to revive activity in the second quarter results in a new spike in infections — and another wave of lockdowns. The disease has already shown many of the failings in the Chinese system. But at the very least, it has also demonstrated the Communist party’s ability to withstand a torrent of criticism and then quickly shift the national narrative on to the flaws of other countries. That ability gives China’s leadership a resilience that is easy to underestimate.

The Myth of Chinese Capitalism: The Worker, The Factory, and the Future of the World, by Dexter Roberts, St Martin’s Press, RRP$28.99, 288 pages

The Shenzhen Experiment: The Story of China’s Instant City, by Juan Du, Harvard, RRP£28.95, 384 pages

see pdf attached

Coronavirus dispels private capital’s postwar delusions of autonomy

One of the most moving responses to coronavirus has come from home-quarantined Italians singing together from their balconies. They were belting out Il Canto della Verbena or Volare. The subtext was that interdependence is the only defence humans have against their own fragility. For postwar individualist philosophers like Ayn Rand — cheerleader for the primacy of private capital — the jig is well and truly up.

Witness the extraordinary efforts by governments to stabilise their economies and forestall the collapse of business. The US signed off on a $2tn aid package in the early hours of Wednesday morning and the global bailout — central bank liquidity support included — will have a sticker price of more than $4.5tn.

That is a big number, even by the standards of recommended takeovers. And have no doubt that this is a takeover. Bringing in the state to help fend off the virus resembles a tactic in which target companies recruit “white knight” bidders to frustrate hostile bids by asset strippers. It is an ironic term for a least worst option.

Swaths of businesses are in the same needy place today. Whole sectors — notably airlines, hotels and cruise lines — will lack a raison d'être for months. For many companies, revenues will fall short of overheads. But state support, and the quid pro quos that go with it, are preferable to going bust.

“This is analogous to a war we have to mobilise to deal with,” says Jesse Fried, an economist and Harvard law professor. “It is not part of the normal boom and bust cycle.”

The UK is ahead of the US on per capita infection levels. Britain therefore provides transatlantic pointers on how coronavirus can extend the frontiers of the state. Recently, the government has promised loans and grants to business worth £330bn, and basic pay for company employees who are left workless. In an echo of the wartime command economy, ministers are co-ordinating supermarkets to distribute food and manufacturers to make ventilators.

“If the government said it was nationalising all the UK’s shoe shops, people would regard it as entirely plausible,” jokes Howard Davies, chairman of Royal Bank of Scotland.

For diehard free marketeers, the only mercy is that Mr Johnson is a conflicted dirigiste. Conservatives are qualified for interventionism because they generally pursue it from necessity, not choice. The irony of Tories enacting the agendas of the Labour opposition is weaker than pundits pretend.

But the government will need to go further, not least in softening loan terms. Travel businesses like airlines need bailouts. If the state also takes equity stakes, it will wind up with a share portfolio again. All this after 40 years of privatisations interrupted only by a brief detour into bank bailouts.

Such expedient interventions will create legacies that will take years to unwind. “The danger is that free market economies end up resembling Soviet tractor collectives,” warns Simon French, chief economist of broker Panmure Gordon. In time, loans must be recouped or written off, and equity stakes sold.

Just about everything economic libertarians disapprove of is happening all at once. “If your house is burning, you have to put up with fire fighters flooding it with water,” sighs Matt Kilcoyne of the libertarian Adam Smith Institute.

Sadly for Mr Kilcoyne, the works of libertarian philosophers like Ayn Rand are among the chattels going up in smoke. Traumatised by the evils of communism, this Russian émigré coined an equally ruthless materialist philosophy. It glorified entrepreneurs rather than workers and elevated financial relationships not community ties. It fed into the nineties neoliberal view of globalising corporations as a parallel power base to nation states.

The 9/11 terrorist attacks in 2001 and the financial crisis in 2008 damaged the ideology. The emergence of tech giants has kept it alive in the US, a more individualist society. But coronavirus is dispelling any doubts that ultimately the state, not business, is in charge. It can create money or pencil in future tax increases. Businesses cannot.

What they can do right now is help. Imminent bankruptcy precludes this for many. But plenty of businesses are solvent and able to show they are part of society more meaningfully than by printing a pretty brochure once a year.

French luxury group LVMH is making hand sanitiser. UK grocer Morrisons has set up a call centre for seniors who cannot order food online. Amazon will reportedly distribute Covid-19 test kits.

Duty aside, it makes business sense to accrue goodwill now. It may be needed in coming years, when every buyback and executive payout will face a tough public sniff test. Businesses in developed, democratic nations especially need to emerge well from coronavirus to maintain their competitive advantages.

Lucy Neville-Rolfe, a Conservative peer and City grandee, puts it like this: “When plague broke out in ancient Athens, it enabled Sparta, which was more disciplined, to become dominant.” No prizes for guessing, as China seeks to emerge from its own coronavirus lockdown, who might be Sparta this time.

Sens. McConnell and Schumer are set to deliver remarks from Senate floor

WASHINGTON—Lawmakers and the Trump administration reached a preliminary agreement on an estimated $2 trillion stimulus package aimed at shielding the U.S. economy from the worst consequences of the coronavirus pandemic.

“Ladies and gentlemen...we have a deal,” Eric Ueland, the White House director of legislative affairs, said early Wednesday morning.

Senate Majority Leader Mitch McConnell (R., Ky.) and Senate Minority Leader Chuck Schumer (D., N.Y.) were set to deliver remarks from the Senate floor after a flurry of negotiations on Capitol Hill, with Democrats saying they had secured higher unemployment benefits, among other items.