TheChek News Flow

dispute offers US to abolish tariffs on industrial products

According to Minister of Economic Affairs Altmaier, the EU is giving in to the prospect of reducing the tariffs on industrial products to zero. That should also help the flagging economy.

DAX:

MDAX:

SDAX:

Stocks in Asia kicked off the week on a cautious note as traders dialed back expectations on the size of a Federal Reserve easing later this month. Oil gained amid tensions in the Persian Gulf.

Stocks slipped from Sydney to Mumbai, though European equity futures pointed to a more muted start. Futures on the S&P 500 Index were flat after U.S. markets fell Friday. Treasuries were steady after traders pared bets the Fed will slash rates by a half-point this month. China’s new stock venue for technology startups got off to a positive start as all 25 stocks rose on their debut, though the benchmark equity gauge in Shanghai was down about 0.5%. The yen slipped.

Nikkei -0.22% Hang Seng -0.71% CSI -0.11% Shanghai -0.65% Shenzen -1.07%

Eur$ 1.1220 CNH 6.8791 CNY 6.8759 JPY 107.97 GBP 1.2504 CHF 0.9835 TRY 5.6675 RUB 63.0322 WTI 56.06+0.8%

S&P +0.11% EuroStoxx +0.06% FTSE +0.05% Dax +0.04% SMI +0.08%

Macro :

- Goldman Sees S&P 500 Upside Capped, With Stocks Near Fair Value

- Goldman Says Don’t Worry So Much About Weak Manufacturing Data

- Europe Considering Brexit Extension for Next PM, Guardian Says

- Boris Johnson Is Studying New Stamp Duty Report, Telegraph Says

- Credit Suisse Clients’ Top Worry Is Twin Rally in Stocks, Bonds

Keep an eye on :

- ABI BB : AB InBev Trumps Its IPO Bankers With $11.3 Billion Asahi Deal

- ALO FP : France Signs CDG Express Operating Contract With Keolis and RATP

- AMER LN : Amerisur Resources Puts Itself Up For Sale After 5-Year Share Slump (+36.5% on friday)

- AMER LN : Etablissements Maurel Initial Amerisur Offer at 17.0p/Share (1)

- AAL LN : Anglo Seeks Environmental Approval for $3 Billion Chile Project

- MT NA : ArcelorMittal Ukraine Unit Says Security Service Seized Machine

- BATS LN : Reinet Fund’s Net Asset Value EU4.55 Billion at End-June

- BAYN GY : Bayer Recalls Two Lots of Kogenate 2000 Iu Vials in U.S.: FDA

- BMW GY : BMW, Jaguar Land Rover to Deepen Engine Cooperation: Spiegel

- BA/ LN : British Airways Halts All Cairo Flights for Seven Days (1)

- BKG LN : Berkeley Chairman Tony Pidgley Sells $46.5 Million Stake

- CA FP : French Government Requests EU117.3M Fine Against E. Leclerc

- CLN SW : Clariant Agrees to Sell Healthcare Packaging Unit for CHF308m

- COFA FP : Apollo Global Management Makes Offer for Coface: Reuters

- ACA FP : Credit Agricole & Fiat Chrysler Extend Their Bank Joint Venture

- DAE SW : Daetwyler Plans to Split Technical Components Division, FuW Says

- DTE GY : T-Mobile Asset Sale to Dish Is ‘Imminent,’ NY Post Says

- DIS US : ‘Avengers’ to Pass `Avatar’ as Top-Grossing Film on Sunday

- EVD GY : Germany May Reimburse CTS Eventim, Kapsch For Toll Failure: HB

- FEVR LN : Crunch Time at Fevertree as Brokers Cut Targets, Short Bets Rise

- FCA IM : Fiat Chrysler's Finance-Company Deal May Ram Bonds: Credit React

- GWD GY : Godewind Immobilien Raises 2019 Forecast On Lower Financing Cost

- GSK LN : *GSK SETS OUT STRATEGY TO DOUBLE DRUG DISCOVERY SUCCESS: FT

- ICAD FP : ICADE First Half Net Income EU66.9 Mln

- JMT PL : Jeronimo Martins Polish Tax Impact Sees Estimates Cut: Berenberg

- BAER SW : Julius Baer 1H Oper Income Beats; Net New Money Misses Target

- BAER SW : *JULIUS BAER CEO EXPECTS KAIROS OUTFLOWS TO STOP

- KTCG AV : Kapsch TrafficCom Confirms Outlook Despite Losing Toll Project

- KPN NA : European Telcos May Become Attractive in 2H: Morgan Stanley

- LHA GY : *LUFTHANSA SAYS IT RESUMED FLIGHTS TO CAIRO

- MAU FP : Etablissements Maurel Initial Amerisur Offer at 17.0p/Share

- MBTN SW : Meyer Burger to Review Options After Missing 1H Expectations

- MTRO LN : Metro Bank Prepares GBP500m Sale of Mortgage Portfolio: Sky

- MTGB SS : MTG 2Q Net Sales Rises to SEK1.12 Bln, Revises FY Outlook

- PHIA NA : Philips 2Q Comp. Sales Beat Est.; Maintains Mid-Term Views

- PDL LN : Petra Diamonds Full Year Production 3.87 Mln Carats

- RBS LN : *RBS BOARD DEBATES HOW MUCH BONUS TO GIVE TO MCEWAN: TELEGRAPH

- RNO FP : Fiat Chrysler's Finance-Company Deal May Ram Bonds: Credit React

- RNO FP : Nissan Bets That the Boring Sedan Will Be the Next Big Thing

- RDSA LN : Indonesia Wants Shell, Exxon to Buy Diesel From Pertamina: Post

- SESG FP : FCC Asks for More Comments on Alternatives for Intelsat Airwaves

- SIE GY : Siemens CEO Calls Trump the Face of ‘Racism and Exclusion’

- STAN LN : StanChart Whistle-Blower Says U.S. Missed Billions in Trade

- STAN LN : Whistle-Blowers Accuse Standard Chartered of Iran Deals: FT

- TSLA US : Tesla Drops Restraining Request Against Short Seller: TechCrunch

- THIN NO : Thin Film Restructuring to Cut Over 50% of Work Force

- TOD IM : Tod’s Estimates Cut at Jefferies; 2Q Likely ‘Particularly Weak’

- UBI IM : UBI Banca Sells About EU900m Gross Value of Bad Loan Exposures

- UCG IM : UniCredit’s New Plan to Focus on Organic Growth, CEO Tells MF

- VOw3 GY : VW’s Porsche Sees Lower Margins for E-Cars vs Combustion: HB

- VOW GY : *CUMMINS MAKES OFFER FOR VW'S LARGE ENGINES UNIT: REUTERS

Pure Alpha suffers 4.9% fall in year to June as equities and bonds rise

Bridgewater’s flagship fund suffered one of its worst first-half performances in two decades this year after being wrong-footed by rebounding markets.

The $150bn hedge fund group founded by Ray Dalio saw its Pure Alpha fund, which tries to surf macro-economic trends, lose 4.9 per cent in the six months to June as global equity and bond markets bounced on hopes of looser monetary policy.

The FTSE All-World equity index was up 15 per cent by the end of June, while the broadest global bond market gauge was up 6 per cent. The average “macro” hedge fund gained 5.2 per cent in the period according to HFR, a data provider.

The drop came after a strong year in 2018, when Pure Alpha delivered 14.6 per cent returns net of fees, while other managers struggled with market volatility.

One person close to Bridgewater said the fund had now pared some of its earlier losses, and is now down 1.45 per cent in the year to mid-July.

Bridgewater declined to comment on why its performance has fizzled this year, but the particularly poor performance in January — when Pure Alpha declined by 4.5 per cent — suggests that it went into the new year expecting further turbulence and instead suffered as the market recovered.

Bridgewater’s passively managed All-Weather fund, which in contrast to Pure Alpha aims to be largely immune from macro-economic shifts, rose 13 per cent through June.

Mr Dalio wrote last week about a “paradigm shift” in the global economy that Pure Alpha tries to navigate, characterised by tax increases, rock-bottom interest rates, central banks increasingly financing government deficits through money creation and subsequent devaluations — increasing the lustre of gold.

“History has shown us and logic tells us that there is no limit to the ability of central banks to hold nominal and real interest rates down via their purchases by flooding the world with more money, and that it is the creditor who suffers from the low return,” the 69-year-old investor said in a LinkedIn post on Wednesday. 

Pure Alpha also had a difficult start to the year in 2009 and in 2016, according to data seen by the FT, but managed to claw back its losses in the second halves of those years. 

New Star Market exchange has been billed as Shanghai’s answer to Nasdaq

Shares rocketed by as much as 520 per cent on the first day of trading for Shanghai's new science and technology-focused equities market, as investors scrambled to buy the first 25 companies to list on the so-called Star Market, leaving other Chinese equities high and dry.

Star has been billed as China’s answer to Nasdaq and Beijing hopes it will encourage investment in domestic tech innovators, ensuring they have the resources to develop. Early trading on Monday gave an emphatic endorsement to that notion, with the first stocks trading between 120 per cent and 520 per cent higher from where they priced in the companies' initial public offerings.

More than 140 technology and science companies across China have signed up to list their stocks on the new board run by the Shanghai Stock Exchange, aiming to raise a total Rmb128.8bn ($18.7bn). The 25 companies that began trading on Monday have already raised Rmb37bn.

The new board is unique in China in the enticements it offers tech companies to list, including allowing dual-class shares that preserve founders' control over operations. Investors have been enthusiastic about the ability to bet against individual stocks by short selling — a practice forbidden elsewhere in China, and less severe limits on daily price moves than in Shanghai and Shenzhen, where stocks can only move 10 per cent in either direction on normal trading days.

Indeed, companies such as solar cell module maker Anji and chipmaker Montage Technology were up as much as 520 per cent and 285 per cent, respectively, as market participants took full advantage of the fact that the Star board has no limits on share price movements during a stock's first five trading days. Six of the 25 stocks had gains of more than 200 per cent in morning trading, with all stocks up more than 100 per cent.

The towering gains on day one came despite some rules meant to limit the influence of China’s retail investors, who account for about 80 per cent of turnover on the Shanghai Stock exchange.

Star requires companies to allocate at least half of their listed stock to mutual, social security, pension and insurance funds, and limits trading to investors with an account balance of at least Rmb500,000 and two years of trading experience.

The gains for new the technology stocks on Star appeared to sap enthusiasm for China's other stocks markets, however, as the Shanghai Composite index fell as much as 1 per cent.

“The new Star board likely caused a liquidity drain in the main board,” said Gerry Alfonso, director of Shenwan Hongyuan Securities. Meanwhile the benchmark index in Shenzhen, traditionally the hotspot for tech companies in China, fell 1 per cent. 

Use of Ream naval base would help China’s military project power across a broad swath of Southeast Asia

SIHANOUKVILLE, Cambodia—China has signed a secret agreement allowing its armed forces to use a Cambodian navy base near here, as Beijing works to boost its ability to project military power around the globe, according to U.S. and allied officials familiar with the matter.

The pact—signed this spring but not disclosed by either side—gives China exclusive rights to part of a Cambodian naval installation on the Gulf of Thailand, not far from a large airport now being constructed by a Chinese company.

Details of the final deal were unclear, the officials said, but an early draft, seen by U.S. officials, would allow China to use the base for 30 years, with automatic renewals every 10 years after that. China would be able to post military personnel, store weapons and berth warships, according to the draft.

Military operations from the naval base, airport, or both, would sharply increase Beijing’s capacity to enforce territorial claims and economic interests in the South China Sea, to threaten American allies in Southeast Asia and to extend its influence over the strategically important Malacca Strait.

Chinese and Cambodian officials have denied there are any plans for a Chinese military base in the country. “Nothing is happening like that,” Phay Siphan, a Cambodian government spokesman, said on Friday. He called it “fake news.”

U.S. and allied officials, however, said a deal had been done that, while stopping short of a full-scale Chinese base, would give Beijing its first dedicated naval staging facility in Southeast Asia and a second outpost in what the Pentagon sees as a Chinese quest for a global network of military and dual-use sites.

Washington is “concerned that any steps by the Cambodian government to invite a foreign military presence in Cambodia” would disturb regional peace and stability, said Emily Zeeberg, a spokesperson for the U.S. Embassy in Phnom Penh.

Surrounded by dense jungle and mangroves, and overlooked by a Buddhist temple, the naval installation in question, at Ream, covers about 190 acres and includes two facilities built with U.S. funding and used by the Cambodian navy, and a single pier where a dozen patrol craft dock.

According to the early draft of the base accord, China would build two new piers—one for Chinese use, one for Cambodian, U.S. officials said. U.S. officials said further dredging would likely be needed for the base to host larger Chinese navy ships.

The draft also allows China’s personnel to carry weapons and Cambodian passports, and requires Cambodians to get Chinese permission to enter the 62-acre Chinese section of Ream, U.S. officials said.

U.S. officials are debating whether Washington can persuade Phnom Penh to reverse its decision on Ream. Some U.S. officials and analysts believe the U.S. wielded too many sticks in its relationship with Cambodia, frequently criticizing the government’s human-rights record, and didn’t offer enough carrots.

A senior Pentagon official said the U.S. wanted Cambodia to be a “preferred security partner,” but other officials said it appeared Phnom Penh had turned toward Beijing. There was no response to requests for comment from the White House.

U.S. and allied counterparts are also lobbying Cambodia not to allow China’s military to use the large new airport being built at Dara Sakor, about 40 miles northwest of Ream, by a private Chinese company with a 99-year lease on a sparsely populated stretch of coastal Cambodia.

Recent satellite images show that work has progressed rapidly in the past year. The site now features a two-mile-long runway—big enough for Boeing 747s and Airbus A380s, and for China’s long-range bombers and military transports.

The images, according to U.S. and allied officials, also show what appear to be preparations for the runway turns needed for quick takeoffs and landings by military aircraft, particularly fighters. The company building the airport says it is purely commercial.

Warplanes flying from Dara Sakor would be able to strike targets in Thailand, Vietnam, Singapore and elsewhere.

China opened its first military outpost abroad, in the east African nation of Djibouti, in 2017, to facilitate operations around the Indian Ocean and Africa. Since 2014, China has also built seven heavily fortified artificial islands—three with airstrips—in the South China Sea.

A Cambodian outpost would further cement China’s grip on a country whose authoritarian government is backed by Chinese loans, investment and diplomatic clout, as Beijing increasingly challenges Washington for economic and military influence across the developing world.

Cambodian Prime Minister Hun Sen, in power for decades, denied there was any plan for a Chinese military base in Cambodia in November, after U.S. Vice President Mike Pence wrote to him expressing concern over the issue.

China’s defense minister denied in June that Beijing was establishing a military presence in Cambodia. China’s defense ministry didn’t respond to a request for comment.

Until shortly before China opened its Djibouti outpost, which it calls a naval “logistics support facility,” Beijing repeatedly denied having any plans for bases abroad.

Combining Cambodian facilities with China’s military outposts in the South China Sea, “you basically have a triangular perimeter boxing in all of mainland Southeast Asia,” said Charles Edel, a former adviser to the U.S. secretary of state who is now an analyst at the United States Studies Centre in Sydney.

A Chinese presence at either facility would also “greatly complicate” the ability of the U.S. to come to the aid of Taiwan if Beijing decides to attack the island, a U.S. official said, as some American forces would arrive via the Strait of Malacca or the outer reaches of the South China Sea.

Ream has been embroiled in great power competition before, attracting both U.S. and Soviet attention in the Cold War.

The U.S. bombed the base at the tail end of the Vietnam War in 1975 after China-backed Khmer Rouge forces took power in Cambodia and seized an American container ship. After Vietnam invaded Cambodia in 1978, the Soviet navy visited Ream repeatedly and helped repair and upgrade facilities there, deepening its waters.

Washington sought to rebuild ties with Cambodia in the past decade, resuming aid in 2007, carrying out joint military exercises and financing the Ream facilities. Tensions have mounted again as Hun Sen has tightened his grip on power.

China has made rapid inroads meanwhile, bringing in millions of tourists, and billions of dollars of investment and loans, much of it as part of Beijing’s Belt and Road global infrastructure plan, and focused around the deep-water port of Sihanoukville, about 10 miles from Ream.

U.S. officials say they first learned about negotiations between China and Cambodia over Ream about a year ago, prompting the letter from Mr. Pence.

Their suspicions grew early this year when Cambodia’s defense ministry first requested, then refused, U.S. funding to renovate the facilities at Ream, according to letters between the two governments seen by the Journal.

Recent satellite images shows that an area inside the Ream base has recently been cleared in apparent preparation for construction work. A bridge at the entrance is also being repaired.

Meanwhile, a state-run Chinese construction company is working on Dara Sakor airport, which is due to open next year and will be Cambodia’s largest despite being in a province with a population of 200,000 people.

The Chinese company behind the new airport, Union Group, says it is part of a $3.8 billion plan to develop the 36,000 hectares (89,000 acres) of land—including about 20% of Cambodia’s coastline—that it leased in 2008.

The company’s showroom in Phnom Penh displays plans to build five-star tourist resorts, golf courses, marinas, two container ports, high-tech industrial zones and a “new city” of luxury residences.

So far, however, the single casino and golf resort completed in 2014 has failed to attract many tourists. On a recent visit, seven of about 100 hotel rooms were occupied, staff said, and little progress has been made on other promised facilities.

Union Group representatives say they underestimated transport difficulties and believe the airport will bring in 300,000 Chinese visitors annually. Western officials are skeptical.

The Cambodian runway “seems far longer than needed for any normal commercial purpose or aircraft, and certainly longer than necessary for any tourist development envisaged there,” an Australian intelligence official said.

“We have some concern that China is using the same playbook used in the South China Sea, creating facts on the ground until such time that it is too late for anyone to object.”