FT : Why Hong Kong protesters fear the city’s ‘smart lamp posts’

Why Hong Kong protesters fear the city’s ‘smart lamp posts’
A lack of transparency about facial recognition has fuelled distrust of the government

The New Year in Hong Kong began with a bang — not the usual firework display, which the government cancelled, but the sound of police firing tear gas canisters.

Once again, protesters turned out in force to continue their seven-month demonstration against Beijing’s influence in the nominally autonomous region, the lack of real democracy and police brutality.

Despite a government ban on face masks, the better-prepared wore them to protect against the tear gas. But the masks served another function too: to prevent identification by automated facial-recognition technology.

Over the course of the protests, legislators have repeatedly asked the executive to clarify its use of such technology on the streets but the government has avoided answering the question.

The suspicions around facial recognition in Hong Kong provide a warning of what can happen when a government’s lack of transparency in its use of surveillance tech collides with widespread anger over governance. In the absence of trust, citizens are turning to their own theories of what technology the government is using against them.

Last August, a viral video showed protesters pulling down a “smart lamp post” equipped not just with lights but also cameras and Bluetooth beacons. The government has said that smart lamp posts are not facial recognition-enabled but many are sceptical and have crowdsourced their own analyses of what the posts can do.

The moment the lamp post was felled, protesters scavenged components. Others analysed their functions. One anonymous researcher warned that facial-recognition algorithms could run on any video footage with sufficient resolution, even if the cameras didn’t contain hardware that suggested links to facial-recognition firms. This is correct; as long as the footage can be streamed to another computer, citizens cannot know what is being done to it.

Thus the government is being asked to prove a negative, that it is not running any facial-recognition algorithms on public surveillance footage or passing the footage on to third parties — such as China’s mainland police, who we know are using such algorithms.

The only way that it might prove such a negative is if it had, early on, credibly committed to transparency and to constraints in its use of surveillance technology. Hong Kong’s own Personal Data (Privacy) Ordinance, which allows people to request their data, does not do the job, as it has broad exemptions for “the prevention or detection of crime”. The problem is Hong Kongers already disagree with their government over what is criminal, and the category of “prevention” is broad and vague.

Other city governments have begun to engage in discussions concerning the boundaries of surveillance. Last year, San Francisco was the first major city to temporarily ban government use of facial recognition by passing a surveillance ordinance. It also ensures that government purchases of other surveillance technology must be approved by an oversight body. Several US cities have or are considering passing similar laws.

Such agreements would change the landscape of state surveillance, not just in Hong Kong or mainland China, but also in the UK and other democracies. Police in London kept quiet their involvement with a clandestine facial-recognition program in King’s Cross until it was revealed by the FT last year.

Other cities may not face the breakdown of trust that has happened in Hong Kong. But placing explicit limits on surveillance would help citizens fight more specific injustices; San Francisco, which has a commitment to not help deport undocumented immigrants, has decided not to share certain data with immigration police. There is also the problem of misidentification by the technology, as well as databases being leaked — a common problem in China, where the government has hastily rolled out facial-recognition-enabled surveillance cameras.

In China, a public debate is now brewing over facial recognition. But whether your government is a one-party autocracy or a functioning democracy, it’s always more effective to start the discussion over surveillance technology before your town has been turned into a “smart city”.

FT : Automakers face stiff headwinds in big emerging markets

Automakers face stiff headwinds in big emerging markets
Brazil, Russia, India and China disappoint as manufacturers face investment demands of EVs

Auto markets in the Bric countries are facing two major challenges. The first relates to the downturn already under way in the two largest markets, China and India, where 2019 sales seem likely to be at least 10 per cent below the previous year’s levels.

The second is the need for manufacturers and parts suppliers to spend billions of dollars on the transition to electric vehicles in order to meet Chinese government production targets in 2021-23.

It therefore seems probable that winners and losers will emerge over the next 18 months, as companies along the value chain find themselves short of cash to fund the new investments required.

China’s downturn is particularly important as sales in Brazil, Russia and India have already fallen by 20 per cent since peaking in 2012, as the chart below shows (January-November basis). Chinese sales have been in a downturn for more than a year, and the impact is broadening along the supply chain.

As Automotive News reported: “We knew China had been in a prolonged auto sales slump, and we knew the market was under pressure from tougher municipal and provincial emissions standards. Now, we’re seeing how these factors are devastating dealerships, to the tune of half of them being sold and several hundred being driven out of business.”

Less than a third of China’s 31,000 dealerships were profitable in the first half of 2019. The downturn is particularly bad news for western manufacturers, whose global profits have depended on China volumes.

US brands are worst hit, with January-November sales down 23 per cent due to frictions caused by the US-China trade war. General Motors reported third-quarter China sales down 17.5 per cent, continuing their slide since the second quarter of 2018, with sales also hit by strong competition in the key mid-priced sport utility vehicle segment. Ford saw its third-quarter sales fall 30 per cent — accelerating the downturn that began at the end of 2017.

French brands are having a difficult time, with volume down 54 per cent in January-November. Seventy per cent of Peugeot, Citroën and Renault’s dealerships were lossmaking in the first half of last year.

Korean brands were down 15 per cent, and even German brands had no growth over the previous year.

The problem is magnified by the fact that China’s market has seen rapid growth since 2008. Many companies and dealerships therefore assumed that the sales ramp-up from 550,000 vehicles a month in 2008 to 2m a month by 2016 was somehow “normal”. They have no concept of a slowdown, or how to survive it.

The downturn is likely to intensify as the government continues to squeeze the shadow banking sector and hence the property market. As the chart below shows, shadow lending remains well down on its earlier peaks, averaging just $67bn a month in the 10 months to October. This means, as we noted here a year ago, that “buyers can no longer count on windfall gains from property speculation to finance their purchase”.

As Reuters notes, the scale of the previous stimulus-driven growth also means that today, “much of the urban middle class has already purchased a vehicle. Household ownership rates were nearing 50 per cent in the provincial-level cities of Beijing and Tianjin and the wealthy province of Zhejiang by the end of 2017 . . . Pushing ownership further down the income scale in urban areas as well as out into the poorer countryside is harder without generous tax incentives, plentiful credit and fast growth in incomes.”

Sales in the other Bric markets are also slowing. India’s sales were down 13 per cent at the end of November, while in Russia the industry is now forecasting a 2 per cent decline. Even in Brazil, industry trade group Anfavea has reduced its growth forecast to 8 per cent, due to the slowing Latin American economy.

The downturn creates a major dilemma for the industry, as it coincides with the need to commit to major new investments in EV manufacture.

China is proposing to set a 14 per cent target for EV production in 2021, rising to 16 per cent in 2022 and 18 per cent in 2023. Similarly, the industry ministry has called for EVs to be 25 per cent of total new car sales by 2025, and announced that “regions with ripe conditions have our support if they establish trial projects to establish no-go zones for gasoline-powered vehicles and replace them with new energy vehicles in the urban public transport system”.

Companies therefore have to move forward with EV investments, even though their profits are under pressure from the sales downturn.

Volkswagen, for example, is planning to open two Chinese EV factories this year with total capacity of 600,000 cars, and aims to produce 11.6m EVs in China by 2028. Tesla is opening capacity for 250,000 cars and plans to double production in the future.

With other manufacturers following suit, some in the industry expect EV prices to fall below those for internal combustion engines within the next two years, which would further accelerate the transition.

The industry is therefore faced with a stark choice. The need to commit to EV manufacture means there is no “business as usual” strategy for either manufacturers or parts suppliers. Those who decide to conserve their cash risk finding themselves without the relevant products and services in the world’s largest auto market.

>>> What to look at today - 8th of January 2020

Stocks in Asia and U.S. equity futures pared losses and crude oil came off its highs after Iran assured that its strike on U.S. facilities in Iraq Wednesday didn’t mean it was seeking a war, and President Donald Trump declared “all is well.”
Traders coped with a volatile session, with futures on the S&P 500 Index tumbling as much as 1.7% in the wake of Iran’s rocket attack on two U.S.-Iraqi airbases. Japan’s stocks slid as much as 2.4% at one point, and crude oil soared 4.7% in New York; gold punched through $1,600 an ounce for the first time since 2013. Hopes that hostilities might be done for now then triggered a reversal of much of those moves. U.S. stock futures were down just 0.4% by 6 a.m. in London and Treasuries erased most of the earlier advance.
US After Hours SONO +1% (files patent lawsuit against Google), LTHM -16.2% (lowers Q4 EPS and revenue guidance),RADA -11.1% (announces offering; size not disclosed), SPNE -4.4% (guides Q4 and 2020 revs above consensus; announces stock offering)

Nikkei -1.57% Hang Seng -1.16% CSI -1.06% Shanghai -1.13% Shenzen -1%

Eur$ 1.1150 CNH 6.9418 CNY 6.9434 JPY 108.38 GBP 1.3130 CHF 0.9705 RUB 61.8709 TRY 5.9780 WTI$ 63.31 +0.97%

S&P -0.30% EuroStoxx -0.77% FTSE -0.49% Dax -1.01%

Macro :
- Gundlach Doubles Down on Weak-Dollar Call After Resilient 2019
- Ray Dalio’s Pure Alpha II Loses Money for First Time Since 2000
- OPEC Seeks to Reassure Oil Markets on Spiking Mideast Tension
- Gold Bid to Grow as ETF Holdings Approach Record: Markets Live

Keep an eye on :
- AIR FP : FAA, EASA to Meet Boeing This Wk on 737 Max Software Audit: Rtrs
- ATL IM : Italy May Seek 5% Toll Cuts From Atlantia’s Autostrade: MF
- AML LN : Aston Martin Lagonda Corrects FY 2019 Trading Update
- CS FP : AXA Banque to Transfer Ops, Employees to Arkea: Les Echos
- BSLN SW : Basilea’s Cresemba Drug Has Been Launched in 40 Countries
- CGG FP : CGG Boosts Full Year Revenue Forecast
- CSGN SW : Credit Suisse Hires Ex-Deutsche Bankers to Join Quant Research
- DAI GY : Daimler CEO Promises Cost Cuts Today Will Fund Cars of Tomorrow
- DEQ GY : Deutsche EuroShop Sees Negative 2019 Valuation of About EU123M
- LISN SW : Lindt & Spruengli Farms Out 300 U.S. Sales Jobs, AWP Reports
- NMC LN : Holders to Sell Shares in NMC Health and Finablr
- NDX1 GY : Nordex Wins Three Dutch Turbine Orders Totalling 172 MW
- ORA FP : Orange Said to Pick BNP, Morgan Stanley to Advise on Africa IPO
- ORSTED DC : Orsted Share Offering Said to Fulfill Demand Within 10 Minutes
- RNO FP : Ghosn Accuses Nissan of Sham Takedown Before Grabbing Microphone
- SFOR LN : S4 Capital to Buy Mexico Based Circus Marketing: Sky
- UN01 GY : Uniper Eyes Offering to Switch Off All Its Coal Plants: RP
- VOW3 GY : Volkswagen SEAT Head De Meo Quits Top Role at Spanish Carmaker
- VOW3 GY : Audi Plots 2020 Comeback Helped by New Models, Cost Cuts

>>> Europe : Brokers Upgrades & Downgrades - 8th of January 2019

>>> Up
* Edenred Raised to Overweight at Morgan Stanley
* Elior Group Raised to Overweight at JPMorgan; PT 14.80 euros
* Essity Raised to Buy at Handelsbanken; PT 340 kronor
* Imperial Brands Raised to Sector Perform at RBC
* Premier Oil Raised to Buy at Stifel; PT 150 pence
* Sipef NV Raised to Buy at Berenberg
* Sodexo Raised to Neutral at JPMorgan; PT 100 euros
* Voestalpine Raised to Buy at Deutsche Bank

>>> Down
* Air Liquide Cut to Neutral at Goldman; PT 131.50 euros
* Boostheat Cut to Hold at Berenberg
* Commerzbank Cut to Hold at Pareto Securities; PT 6 euros
* DNO Cut to Underperform at RBC; PT 11 kroner
* DSV PANALPINA A/S Cut to Neutral at Exane; PT 750 kroner
* Elementis Cut to Hold at Jefferies; PT 190 pence
* Elis Cut to Hold at Berenberg
* Genel Cut to Underperform at RBC; PT 160 pence
* Henkel Cut to Hold at HSBC; PT 101 euros
* ID Logistics Cut to Hold at Berenberg
* Kering Cut to Market Perform at Bernstein
* Kuehne + Nagel Cut to Neutral at Exane; PT 155 Swiss francs
* Maersk Cut to Neutral at Exane; PT 9,500 kroner
* MBB SE Cut to Hold at Berenberg
* Pandora Cut to Sell at Handelsbanken; PT 310 kroner
* Proximus Cut to Underweight at JPMorgan; PT 24 euros
* REC Silicon Cut to Hold at Arctic Securities; PT 3 kroner
* Rieter Cut to Reduce at Baader Helvea; PT 143 Swiss francs
* Sparebanken Sor Cut to Hold at DNB Markets; PT 110 kroner
* Spirent Cut to Sell at Goldman; PT 175 pence
* STMicroelectronics Cut to Neutral at Goldman; PT 24.50 euros
* STMicroelectronics ADRs Cut to Neutral at Goldman; PT $27.40
* TUI Cut to Add at AlphaValue
* u-blox Cut to Sell at MainFirst; PT 80 Swiss francs
* Unilever Cut to Reduce at HSBC; PT 46 euros

>>> Initiation
* Chr. Hansen Reinstated Sell at Goldman; PT 480 kroner
* Cyan Re-Initiated Buy at Bankhaus Lampe; PT 29 euros
* FDJ Rated New Neutral at Oddo BHF; PT 23.50 euros
* MTG Reinstated Hold at Spin-Off Research; PT 107 kronor
* Novozymes Reinstated Buy at Goldman; PT 375 kroner
* Qiagen Rated New Equal-Weight at Wells Fargo; PT $36

>>> Call
* European Small, Mid-Caps Offer Opportunities in 2020: Berenberg
* ABI CFO Change May Lower Chances of Near-Term M&A: Jefferies
* Imperial Brands’ ‘Lowly’ Valuation Prompts Upgrade at RBC
* Pandora Gets Double Downgrade After ‘Unwarranted’ Rally: SHB
* Kurdistan-Focused Oil Firms DNO, Genel Energy Downgraded by RBC

>>> US After Hours Summary:

After Hours Summary:

After Hours Gainers:

Companies trading higher in after hours in reaction to news: SONO +1% (files patent lawsuit against Google),

After Hours Losers:

Companies trading lower in after hours in reaction to news: LTHM -16.2% (lowers Q4 EPS and revenue guidance), RADA -11.1% (announces offering; size not disclosed), SPNE -4.4% (guides Q4 and 2020 revs above consensus; announces stock offering), PLMR -3.6% (stock offering), NYMT -1.8% (plans to offer 30 mln shares), TEN -1.1% (announces mgmt changes; reaffirms that end-market conditions are affecting its ability to complete separation), PNM -0.7% (4.9 mln share offering), ATEN -0.5% (upside Q4 rev guidance), APLS -0.3% (7 mln share offering).