TheChek News Flow

* AstraZeneca Raised to Buy at Bryan Garnier; PT 7,950 pence

* Sika Target Raised by Vontobel After Romanian Adeplast Purchase (+)

* Softcat Earnings Growth Priced In, Rating Cut to Hold: Berenberg

* Market Belief in Temenos Will Take Time to Rebuild: Berenberg (+)

Regulators reaffirm tough stance on companies involved in cryptocurrency trading and fundraising

When Chinese leader Xi Jinping touted blockchain technology in October, the price of bitcoin surged, searches for “blockchain” on one of China’s biggest search engines soared and shares of related companies jumped.

A month later, the euphoria is over.

Bitcoin slumped below $7,000 over the weekend, dropping to a six-month low as China reaffirmed its tough stance on companies involved in cryptocurrency trading and fundraising. That wiped out the gains last month—when bitcoin briefly topped $10,000—which followed Mr. Xi’s statement that China should speed up research into blockchain, the open-ledger system behind cryptocurrencies.

Bitcoin recently traded around $6,600, according to research site CoinDesk.

Though China’s central bank is developing its own digital currency, the government is continuing a crackdown that begin in 2017, when it imposed a broad ban on local exchanges and fundraising for digital currencies. On Friday, the Shanghai headquarters of the People’s Bank of China and an arm of the local government pledged to continue to target exchanges, and warned investors not to confuse blockchain technology with virtual currencies.

The two authorities have shut down 13 initial-coin-offering platforms and 10 cryptocurrency exchanges since late 2017. In a joint statement Friday, they said they noticed speculation in cryptocurrencies had surged again during the recent promotion of blockchain technology. They said they will shut down companies that market cryptocurrency exchanges registered outside China to mainland investors, or that introduce Chinese customers to these trading venues.

In recent years, speculation in cryptocurrencies has posed risks for investors, the statement said, adding that activities have included illegal fundraising and fraud, which can severely disrupt financial markets.

“China clamping down again on crypto kind of spooked the market,” said John Patrick Mullin, co-founder and managing director at Tritaurian Capital, a boutique investment bank for companies investing in blockchain and digital assets.

Maxine Ryan, co-founder of Bitspark, a money-transfer company that helps people cash in and out of cryptocurrencies, said the country had started to take a decisive role in bitcoin-market fluctuations. “China really is what the market sees now as the main indicator moving crypto prices,” she said.

Ms. Ryan, a longtime bitcoin holder, said she has taken a small short position—that is, a bet against—bitcoin over the past weeks as prices have declined. She said the latest announcements out of China “caught everybody by surprise” but also show how important the country is for the overall cryptocurrency market.

Last week, crypto news and research site The Block reported Chinese authorities had raided the local offices of Binance, one of the world’s largest cryptocurrency exchanges by trading volume. Binance denied the report.

“The Binance team is a global movement consisting of people working in a decentralized manner wherever they are in the world. Binance has no fixed offices in Shanghai or China, so it makes no sense [to say] that police raided on any offices and shut them down,” a Binance spokeswoman said in a statement.

She said the company works closely with governments to protect users, and has high respect for regulations meant to combat scams or frauds.

EU ‘urgently’ needs common ESG rules, says French watchdog

AMF’s Robert Ophèle voices concern about member states undercutting one another on standards

France’s top financial regulator has urged Europe to move faster on setting common standards for environmental, social and governance investing to prevent widespread “greenwashing”.

Robert Ophèle, chairman of the Autorité des Marchés Financiers, said the explosion in interest in ESG and the absence of EU-wide rules governing what constitutes a sustainable fund left Europe vulnerable to diverging practices that could undermine responsible investing.

Mr Ophèle warned of the possibility of EU countries undercutting one another on ESG unless action was taken, as asset managers become “increasingly ambitious and even aggressive” in bringing sustainable funds to market.

“National regulators cannot accept that financial products are sold in their country which despite [being labelled as ESG] seem profoundly different [from other ESG funds],” he said in a speech delivered in Paris.

He said regulators needed to be subject to “a common doctrine on authorising funds whose investment policy is based on non-financial criteria”. Mr Ophèle said minimum standards were “crucial to avoid the concept of ESG being watered down [and] to avoid potentially disastrous greenwashing”.

France has gone further than many other EU member states on ESG. Its 2016 energy transition law requires asset owners to report their management of climate-related risks and the integration of ESG into investment policies.

Mr Ophèle welcomed the work the EU is doing on sustainable finance, which is aimed at turning the bloc into a global leader for ESG. But he indicated that Brussels, which is not expected to finalise the new rules until at least next year, needed to speed up its efforts. “We need to act urgently.”

One of the EU’s proposals is a classification system defining environmentally sustainable investments. However, this “taxonomy” only partially addresses France’s concerns, as it will not define investments that meet social and governance criteria.

Sven Giegold, a Green MEP whose push for social and governance factors to be included in the taxonomy did not win a majority in the European Parliament, said the lack of standards for all sustainability criteria would hinder asset managers’ efforts to obtain relevant data from investee companies. “Without this, investors cannot compare anything.”

Mr Giegold added that until social and governance investments were defined at an EU level, the risk of greenwashing remained high. “More and more financial companies want to do sustainable investment. But if there is too much dirt in the market people will be put off. The credibility of the market is at stake.”

Funds have a role to help manage risk, not create risk for individuals or the economy

The UK investment management industry’s reputation has been tested like never before in 2019. The suspension and now imminent closure of one high profile fund has cast a long shadow and led to a broader discussion about the role of fund managers, and how companies look after the savings of people across the country.

Much has been said about the lessons to learn from the Woodford Equity Income fund. While we are aware of the regulatory investigations, the Investment Association and its members have already been reflecting deeply and taking action where needed.

We operate in an environment where demonstrably high standards of governance and oversight are more important than ever. That is why we strongly support the regulatory measures that will see a new value assessment and reporting process for investment funds.

The role played by new independent non-executive directors should also provide a level of additional challenge and perspective. And this all takes place against a backdrop of greater emphasis on culture in the investment industry.

Helping savers to better understand how the industry works and how their money is invested is a priority. Already there are significant changes to fund communication materials. Next year further work will be done on both fund and wider industry communications, reaching out to savers and investors in a jargon-free language that resonates with them.

It is important that this work does not take place in isolation. Investment managers rely on financial advisers and distribution platforms as the immediate touch point with customers. Ensuring that the whole chain works seamlessly together to deliver the best outcomes is essential.

There is of course a central theme in the governance and communication questions being asked around the Woodford episode: liquidity management. This in turn goes to the heart of the debate about the investment management industry’s role in the wider economy, partly focused on how we can help to increase the supply of so-called patient capital — a form of long-term investment — to help finance companies, or infrastructure for local communities.

From a regulatory perspective, the Bank of England and the Financial Conduct Authority have also been evaluating whether there is a connection between fund liquidity and financial stability. The global financial crisis saw the fund management industry tested in the harshest conditions and come through positively. However, times change and this is an important piece of work that we hope will recognise the role funds play in helping to manage risk, not create risk for individuals or the wider economy.

Separating the different components of the liquidity debate is a challenge, but there are clear starting points.

Where poor practice or communication is identified, we must move quickly to ensure demonstrable improvement. While it may be some comfort that suspensions are rare, it is of no comfort to those who are locked into a fund and face material loss.

Where there is potential for liquidity issues in certain market conditions, such as those after the 2016 Brexit referendum, we need to act quickly to ensure the right framework is in place to protect UK savers and investors. Our view is the existing regime for authorised funds, notably Ucits, is fundamentally fit for purpose, with room to improve the toolkit for liquidity management. The IA is working on guidance to help ensure consistency and to highlight good practice.

Where funds invest in fundamentally illiquid assets — you cannot sell a bridge or a holding in a private company overnight — there is a strong argument for moving beyond a daily dealing environment, while continuing to offer the highest standards of investor protection and governance. This is why the IA believes the fund universe could be enhanced by allowing people to invest in illiquid assets over longer time horizons. We are currently further developing our blueprint for an innovative long-term asset fund.

The industry faces a year of change and scrutiny in 2020. It is for us to ensure this is ultimately for the good of the savers and investors who are relying ever more on investment funds to help them achieve their financial goals.