FT : Huawei under fire as politicians fret over 5G security

Huawei under fire as politicians fret over 5G security
Even Chinese company’s deep relationship with UK facing severe threat

For nearly 15 years, the Chinese group Huawei has seen the UK as a key market and a springboard to the other deals that helped it become the world’s largest telecoms equipment maker.

Huawei’s partnerships with the likes of BT and Vodafone have weathered bouts of unease over its rumoured links to the Chinese government and the People’s Liberation Army, which the company denies.

But as politicians from the UK and other countries start to consider the rollout of their 5G communications network, Huawei is suddenly facing a grave threat to its international business.

In recent weeks, US officials have toured Europe to warn against using Huawei equipment, while Australia and New Zealand have both joined the US in banning the Chinese company’s gear.

In the UK, Huawei has already signed a contract with the mobile phone operator Three to provide 5G equipment and is conducting tests with Vodafone and EE.

But the technological step change offered by 5G, which will become fundamental to every industry and sector becomes connected, has made the UK, and other governments, nervous of trusting the Chinese company.

“5G is key to enabling the internet of things which will in itself provide a greater range of opportunities for attackers,” said Ewan Lawson from the Royal United Services Institute, a UK defence think-tank.

“If you have security concerns about the backbone of the internet of things then that seems to be a significant change in the risk measurement for policymakers.”

Ian Levy, the technical director of the UK’s National Cyber Security Centre, said there were two main areas of concern: the risk of Chinese spying and the overall security of the network.

“The thing we care about the most is availability of the networks, so turning them off,” he said. “Can someone in Beijing press a button and turn off every piece of Huawei kit and what does that mean for the UK networks, that’s the number one concern.”

The speed of 5G and its latency — the time it takes digital commands to be executed — means that more data processing will take place at the edge of networks, near the devices making the commands, rather than being routed through centralised servers.

Until now the UK approach has been to surround or “island” Huawei kit with products and equipment provided by rival manufacturers such as Eriksson or Nokia. But Mr Levy says this is harder with 5G because more data are being processed away from central or core hubs.

“If you’ve got a bit of Huawei kit we want to make sure the stuff around it is not Huawei,” he said. “But 5G does make that harder, so it’s probably likely you will end up with less Huawei just because of the collusion risk between the different bits.”

The Chinese company, which employs 180,000 people worldwide and took $92.5bn in revenue last year, said that it prioritises security. “[For] every technology for us at Huawei we always try to put the security and safety as top priorities so all the design, products and services will be safe,” said Cui Haifeng, managing director of Huawei Enterprise Business in Germany.

But suspicions of Chinese companies in the west have grown since the adoption last year of a National Intelligence Law which says that “organisations and citizens shall . . . support, co-operate with and collaborate in national intelligence work”.

“The danger is that because of Chinese law, Huawei is required to provide support, help and information to the Ministry of State Security — a mix of the FBI and CIA,” said the Former National Security Agency’s deputy director Rick Ledgett. “The legal process and the protection is just not there.”

Huawei has also been swept up in a general backlash in the west toward China’s “Made in China 2025” industrial policy, which identifies key industries in which Beijing will seek to foster dominance by domestic companies over overseas rivals. The policy has weakened support for China in the western business community, previously was its biggest supporter.

Against this backdrop of increased hawkishness toward China, the fear is that Huawei, which has deep roots in foreign communications networks, could be called on to gather data and spy on adversaries.

Mr Ledgett said 5G was a “game changer” for security: “If you are looking at how to attack a network then complexity is your friend”. Despite playing down the impact of US pressure, the mood from the UK authorities towards Huawei has notably shifted in the past few weeks.

A meeting earlier this month of the oversight board which monitors the testing carried out on Huawei equipment at a special laboratory in Banbury was described by officials and executives with knowledge of the talks as “strained”.


Last week, the NCSC, which leads the oversight board, took the unusual step of issuing a public reminder to Huawei that it must tackle technical issues raised in its last report published in July.

That report identified shortcomings in Huawei’s engineering processes which exposed “new risks in the UK’s telecommunications networks” — the first time Britain has flagged any worries over the Chinese company in the four years since an evaluation centre in Banbury, Oxfordshire was established.

For now, officials said the worry is guaranteeing the kit cannot be attacked by hostile cyber hackers — who may come from any country and not necessarily China. The evaluation centre which tests all Huawei kit before clearing it for use by telecoms operators has not found a smoking gun which points to direct Chinese espionage or malicious activity.

But the bugs and defects have raised serious doubts about the equipment — even though telecoms operators say it is the cheapest and best on the market.

“Back doors would be too strong a word but there was stuff in the hardware that looked like a potential vulnerability which could be exploited,” said one former UK intelligence official.

One possible approach to Huawei being considered by UK officials is to take a similar line on Huawei to the one adopted on the Russian cyber security firm Kaspersky Labs. Last December the chief executive of the NCSC, Ciaran Martin, wrote to all government departments warning them not to use Russian anti virus software after fears data could be transferred to the Russian state.

While that approach stopped short of issuing a ban on Kaspersky, the message to the business community and industries responsible for critical infrastructure was clear.

Whatever the UK decides, some in the telecoms industry believe the backlash against Huawei has been fuelled by the company’s rapid rise. “One of the reasons Huawei is being looked at more closely by governments and intelligence agencies is because they have been so successful,” said one telecoms executive. “They are a much larger part of the supply chain than they were five years ago.”

>>> China President Xi has indicated he is "open to approving" the prior unappro

China President Xi has indicated he is "open to approving" the prior unapproved deal between Qualcomm and NXP, should it again be presented to him
**reminder April 18th: QCOM China MOFCOM: Reviewing Qualcomm, NXP deal, deal may have negative impact on market
April 19th: QCOM Confirms withdrawal and refiled NXPI notice of acquisition at MOFCOM request
- At the request of the Ministry of Commerce in China(MOFCOM) have withdrawn and refiled the notice of acquisition regarding the companies' planned combination.

>>> Barrons weekend summary: Positive feature on PGR; cautious on FB Cover story

Barrons weekend summary: Positive feature on PGR; cautious on FB

* Cover story: “The explosive growth of digital data, along with better tools to analyze and store it, has jump-started a once-niche industry that packages under-the-radar information”; so-called alternative data, such as language tracking software that detects consumer sentiment, is becoming mainstream, creating potential and risk for investors.

* Features: 1) Cautious on FB: Company has gotten past a string of scandals recently, but there is the risk its prospects may be damaged more than the market expects down the road by Washington and Brussels; 2) Positive on PGR: Company, the No. 3 auto insurer in premium volume behind State Farm and Geico, has excelled at every major aspect of the business, and offers a tech-like growth story with its sophisticated analytics; 3) Regular investors are increasingly able to take advantage of alternative data, such as credit-card use or location tracking, offered by firms such as AMTD or Sentieo.

* Tech Trader: Positive on MSFT: Tech giant’s revival bucks a trend in which once-great companies such as Sun Microsystems or Digital Equipment flounder and disappear; Under chief Satya Nadella, it made a bold pivot away from Windows, putting its cash cows at risk, and successfully transitioned to cloud computing.

* Trader: Earnings estimates are likely to keep falling, says Dennis DeBusschere of Evercore ISI, and with the S&P 500 trading about at 15.8 times forward earnings, the risk of lower profits will limit future returns; Positive on APTV: For investors unwilling to bet on automakers such as GM because of tough competition and high capital needs, Aptiv, a supplier that sells key safety technologies for driverless cars, could be a good play;The annual meeting of the American Society of Hematology will feature developments from big firms such as CELG, AMGN and smaller ones such as BLUE and Genmab.

* Interview: Raghuram Rajan, governor of the Reserve Bank of India, has an independent streak that has drawn backlash; He talks to Barron’s about where the next crisis might be brewing, China’s debt, and why investors should care about income inequality.

* Profile: Robert Hyman, manager of the ALPS/Core Commodity Management Complete Commodities Strategy fund is trying to mitigate the contango that has cost about six percentage points per year for the past 10 years to the Bloomberg Commodity Index.

* Follow-Up: 1) Positive on GM: Automaker is taking the right steps with its plan to shutter plants and focus on its profitable truck/SUV business and autonomous vehicles, but investors are giving it little credit, and shares are undervalued; 2) Cautious on GE: Story offers four suggestions for how chief Larry Culp can turn around the troubled company: Be bold at GE Capital, sell part of GE Healthcare, infuse new life into the culture, and switch deal-making priorities.

* European Investor: Positive on J.D. Wetherspoon: Shares of British pub chain, which recently dropped after an earnings scare, are cheap, and offer a persistently high return on equity.

* Emerging Markets: Markets are skeptical about the ability of Mexico’s incoming President Obrador to deliver on socially generous campaign promises and deal with a “caravan” of migrants massing on the U.S. border.

* Commodities: “Achieving a balance in the oil markets is proving to be a challenge for OPEC and its allies, and they face their stiffest test yet when they meet in Vienna next week.”

* Streetwise: If there’s value in stocks, it’s in foreign markets, says Doug Ramsey of Leuthold Group—companies such as those in the MSCI EAFE index could gain 10% just to get back to median valuations.

>>> G20 Communique: leaders note trade issue and affirm pledge to use all means

G20 Communique: leaders note trade issue and affirm pledge to use all means to achieve strong, sustainable and balanced growth
- G20 agrees to guard against downside risks by stepping up dialogue and actions to enhance confidence
- Agree that fiscal policy should rebuild buffers and be used flexibly to support growth, while ensuring public debt is on a sustainable path
- To work together on solution to address the impacts of digitalization in the international tax system; to give update in 2019 and final report by 2020
- The trade system is currently falling short of its objectives and there is room for improvement; G20 supports the necessary reform of the WTO to improve its function and will review progress at our next summit
- Reaffirms commitment to further strengthening the global financial safety net with strong, quota based, and adequately resourced IMF at its center

NY Post : Ex-Fugees rapper helped Jho Low funnel $73M into US accounts: feds

Ex-Fugees rapper helped Jho Low funnel $73M into US accounts: feds

Ready or not, here come the feds.

Ex-Fugees rapper Prakazrel “Pras” Michel has landed in the middle of an international corruption scandal that has ensnared Goldman Sachs — and attracted the attention of the Department of Justice.

According to an explosive suit filed Friday by the DOJ, the “Ghetto Superstar” singer conspired with an ex-DOJ official to thwart a federal probe into the $6 billion bribery and money-laundering scandal surrounding Malaysian playboy financier Jho Low, the DOJ alleged.

The civil suit claims Pras and the ex-DOJ official, George Higginbotham, last year helped Low funnel $73 million into four US bank accounts in a scheme to pay off other DOJ officials in the hope of influencing a criminal investigation.

“Jho Low’s money was funneled through various US bank accounts set up by, and under the control of, an entertainer and businessman named Prakazrel ‘Pras’ Michel,” the DOJ said in its civil action.

The funds had been earmarked to go to an unnamed financier and his wife, who would try to influence the DOJ to drop its criminal investigation into Low, according to the DOJ’s suit.

In March, The Wall Street Journal reported that ex-Trump fundraiser Elliott Broidy and his wife, Robin Rosenzweig, were in talks to earn millions for getting the feds to stop their probe.

A lawyer for Broidy and Rosenzweig didn’t return an email seeking comment.

The allegations, filed in DC federal court, come as the DOJ and other law enforcement ramp up their investigation into 1Malaysia Development Berhad, the fund Low controlled and used to fund his over-the-top lifestyle and produce “The Wolf of Wall Street.”

Goldman Sachs shares reached their lowest point in more than two years Friday after reports that the Federal Reserve is investigating how the Wall Street bank helped fund Low’s $3 billion junket, which included Basquiat paintings, luxury real estate, and financial backing for “The Wolf of Wall Street.”

The stock on Friday dipped 2.2 percent to $190.69 after plunging as low as $188.13 — a two-year trough — after Bank of America cut its recommendation to “neutral” from “buy.”

That’s a 31 percent drop from its all-time high of $273.38, reached in March, and only a few bucks higher than the closing price of $181.92 on Nov. 8, 2016 — the day of Trump’s election.

In the new claims, Low brought Pras and Higginbotham to Macau to hatch a plan to funnel money through a Chinese novelty toy company under the guise of entertainment and consulting pay for Pras.

In reality, that money was intended to bribe DOJ officials who were investigating Low and 1MDB, the DOJ said.

Higginbotham and Pras set up four different bank accounts with Morgan Stanley, Wells Fargo and Citigroup by lying about the source of the funds and its intended use, according to the DOJ.

Higginbotham, who was a liaison between Congress and the DOJ up until August, pleaded guilty earlier on Friday to misleading banks about the source of the money. He had no role in the investigation, the DOJ said.

A lawyer for Pras didn’t immediately return an email seeking comment

BArron's : The Case for Health Care — and How to Play It

The Case for Health Care — and How to Play It

There are a number of epic battles raging in the stock market right now, and it is not just a question of whether the bull market remains intact or the bears now have the upper hand. There are also debates related to growth versus value, momentum versus quality, domestic versus international, free trade versus protectionism, and other similar questions.

In the realm of domestic stocks, a schism separates those seeking the biggest opportunities from those whose primary goals are safety and capital preservation. Recently, much of this difference in approach has been playing out in sector rotation.

More-aggressive investors are yearning for the promise of secular growth stories that come from the sectors such as technology and communications—industries that have been the focus of selling programs recently. Another growth-oriented contingent is looking at cyclical names that should outperform as the economic expansion continues. Here, industrials, financials, and energy all look superficially appealing, but are at the mercy of vagaries of trade, interest rates, and geopolitics.

Finally, there are those who see the risk of recession looming large and are seeking shelter in higher-dividend and lower-beta names, which can be found in defensive sectors such as consumer staples and utilities—though these trades are getting crowded.

Read more: How to Use Options to Beat the Market

The result of all of this is a landscape where growth names still appear expensive and defensive names have been bid up to levels that are likely to be unsustainable.

Money needs somewhere to go, and at the moment, stocks look risky, expensive, or both, while bonds continue to grapple with the headwinds of rising interest rates. In the midst of all the turmoil, there is one sector that offers growth opportunities, has a solid grounding in value, is largely insulated from trade-war concerns, and has minimal exposure to rising interest rates and a stronger dollar: health care.

The case for health care is simple. It is an all-weather sector that somehow manages to avoid almost all of the threats that are currently ravaging the broader stock market.

An investor seeking to take advantage of the upside potential in health care can do so with a so-called long call spread in the Health Care Select Sector SPDR exchange-traded fund (ticker: XLV). With the ETF recently trading at $93.75, an investor can buy the Jan. 18 $94 call for $2.01 and sell the Jan. 18 $96 call for $1.10, for a net outlay of $91 cents.

This trade will make money if the SPDR ETF is above $96.91 at the January expiration. The position has a maximum gain of $1.09 and a maximum loss of the net purchase price of $0.91, should the ETF find itself below $94 at expiration.

Keep in mind that the SPDR is a broad health-care ETF with a domestic large-capitalization focus. Its country exposure is 98%-plus in the U.S., with the balance in Ireland and the United Kingdom. This means there is limited currency risk. From an industry perspective, the largest concentration for this broadly diversified ETF is in pharmaceuticals (32%), with smaller exposures to areas such as health-care providers, services, and equipment. The ETF has exposure to the more volatile biotechnology sector of 16%.

So, while China, the Federal Reserve, and the technology sector may dominate the headlines, investors are under no obligation to try to trade areas where emotions run the highest. Instead, steady growth opportunities that are largely immune to headline risk may prove to be more attractive as 2018 winds down and investment managers begin to reshuffle their portfolios to take advantage of the best opportunities that 2019 has to offer.

For that reason, the all-weather health-care sector should be on everyone’s radar.

Barron's : A Toast to J.D. Wetherspoon

A Toast to J.D. Wetherspoon

t’s time to quaff some shares of British pub chain J.D. Wetherspoon .

The stock (ticker: JDW.UK), which recently dropped after an earnings scare, is cheap and has a persistently high return on equity. “We view the pull-back as a compelling buying opportunity,” states a recent report titled “Playing the Long Game,” from European broker Berenberg.

While investors lament the shrinking high street, which is under pressure as online sales grow, one thing hasn’t changed. People in the United Kingdom like booze. The average Briton (over age 15) drinks the equivalent of 12 liters of pure alcohol a year, versus 9 and 10.3 liters in the U.S. or Canada, respectively, according to the Our World in Data research website. The “pure alcohol” measure equalizes the different beverage types; wine, beer, liquor. However, Wetherspoon’s appeal goes beyond booze.

The Berenberg report cites rising market share, good growth in same-store sales, and management’s decision to continue investing in staff. It also says that the stock is worth 14 British pounds ($17.92), a more than 20% premium to its recent price of £11.40 ($14.59).

The shares are inexpensive, both by historical standards and relative to those of competitors. It trades at a forward price/earnings ratio of 14.93, down from 18.6 in 2017, according to Morningstar. In contrast, restaurant and hotel chain Whitbread (WTB.London) sports a 17.3 forward P/E.

Read more: It’s Time to Bet on British Stocks—Even With Brexit Looming

Wetherspoon, which also runs some hotels, is generating stellar profits. In its latest fiscal year, ended in July, return on equity was 25.9%, up from 25.7% and 23.8% in fiscal 2017 and 2016. The figures remain ahead of those at Whitbread, which had an ROE of 15.4% over the latest 12 months, and 16.4% in its fiscal 2018 year.

Despite the favorable metrics, Wetherspoon spooked investors recently. “Wetherspoon is increasing pay of our staff, starting from this week,” Chairman Tim Martin declared on Nov. 7, adding that he expects earnings to be “slightly below that achieved in the previous financial year.” Since then, the stock has fallen. It recently was about 13% below its Nov. 6 high.

However, Martin’s move could help limit costly staff turnover. At 4.1%, U.K. unemployment is near a multidecade low and might fall further after the country leaves the European Union at the end of March, impeding the inflow of migrant labor. Nevertheless, Martin support’s Britain’s exit from the EU and is planning a pub crawl to more than 100 of the firm’s establishments to promote the benefits of a “no deal” Brexit.

And the pay decision comes amid robust growth. “Sales momentum remains strong,” states a recent report from British broker Peel Hunt, citing same-store sales gains of 5.5% so far in Wetherspoon’s fiscal 2019 year. The report notes that gains in the managed pub sector averaged 0.9%. Berenberg sees little risk of a decline in earnings per share, with stock repurchases offsetting any profit drop. “Buybacks could ultimately negate the impact on EPS,” the report says.

There are risks. In November, Martin announced that he’d had a burst appendix and would temporarily work part-time. Consumer tastes are fickle. And the firm is significantly levered. (Net debt to equity was 253% at the end of fiscal 2018.) Still, the stock, which could broadly be classified in the affordable luxury category, might be a good defensive play during this period of Brexit-related stress and uncertainty. “Stressed people might not spend as much money, but they still want the experience” of socializing in a pub, says Vincent Catalano, the chief investment officer at Redmount Capital Partners in New York.

In other words, especially in tumultuous times, people want to raise a glass.

(ZH) CIA Intercept Reveals Saudi Crown Prince Sent 11 Messages To Head Of Khasho

CIA Intercept Reveals Saudi Crown Prince Sent 11 Messages To Head Of Khashoggi Hit Team Hours Before Murder

It has been nearly two months to the day since Jamal Khashoggi walked into the Saudi consulate in Istanbul hoping to retrieve papers needed to marry his Turkish fiance - only to be killed and butchered by a 15-man Saudi murder squad. In the intervening weeks, the Saudis have suffered remarkably little blowback (considering that the uproar elicited by Khashoggi's murder nearly triggered a global diplomatic crisis): To date, the US and Canada have levied sanctions against a 17 Saudis suspected of participating or orchestrating Khashoggi's murder, and a handful of countries who don't sell arms to Saudi Arabia have said they will stop selling arms to Saudi Arabia. Meanwhile, both Canada and the US have balked at similar measures because they would inevitably kill jobs.
Clearly concerned about the flagging interest in holding Saudi Crown Prince Mohammed bin Salman accountable for his suspected role in ordering the killing, the CIA has decided to pick up where Turkey left off.
Last week, somebody inside the agency leaked a preliminary report to the Washington Post detailing the agency's determination that MbS had ordered the killing. And on Saturday morning, the Wall Street Journal published the latest (illegal) intelligence agency leak when it reported on the contents of intercepts revealing that during the hours after and immediately before the killing, MbS had exchanged 11 messages with Saud al-Qahtani, a close aide to the prince who is believed to have supervised the murder squad.
Notably, the WSJ report followed a vote in the Senate earlier this week to open debate on a measure to withdraw US support for Saudi Arabia's proxy war in Yemen (the kingdom's brutal bombing campaigns have reportedly resulted in the deaths of tens of thousands of innocents and created one of the worst humanitarian crises in the world). The Trump Administration has opposed the bill, arguing that it would damage its relationship with a crucial geopolitical ally while also killing jobs in the Military-Industrial Complex. While we wouldn't go as far as to suggest that the CIA is deliberately trying to undermine the administration, the timing of this leak is certainly curious.

Al-Qahtani has shouldered most of the consequences of Khashoggi's kingdom (he has been fired from the kingdom's intelligence service and targeted by US and Canadian sanctions) largely due to his reputation as MbS's enforcer. Al-Qahtani has attacked dissidents whom MbS views as a threat, as well as orchestrated their detention and torture (and not just inside the Riyadh Ritz Carlton).
According to the CIA intercepts, MbS also discussed taking steps to silence Khashoggi if he continued to speak out (with talk of "making arrangements" to lure him somewhere outside Saudi Arabia).
The Saudi leader also in August 2017 had told associates that if his efforts to persuade Mr. Khashoggi to return to Saudi Arabia weren’t successful, "we could possibly lure him outside Saudi Arabia and make arrangements," according to the assessment, a communication that it states "seems to foreshadow the Saudi operation launched against Khashoggi."
[...]
The previously unreported excerpts reviewed by the Journal state that the CIA has "medium-to-high confidence" that Prince Mohammed "personally targeted” Khashoggi and "probably ordered his death.” It added: “To be clear, we lack direct reporting of the Crown Prince issuing a kill order."
The electronic messages sent by Prince Mohammed were to Saud al-Qahtani, according to the CIA. Mr. Qahtani supervised the 15-man team that killed Mr. Khashoggi and, during the same period, was also in direct communication with the team’s leader in Istanbul, the assessment says. The content of the messages between Prince Mohammed and Mr. Qahtani isn’t known, the document says. It doesn’t say in what form the messages were sent.
Other details seemingly culled from the CIA's internal reports also found their way into the WSJ story, including a detailed accounting of the agency's reasons for suspecting MbS's involvement.
The judgment on Prince Mohammed’s likely culpability, the CIA assessment says, is based on the crown prince’s personal focus on Mr. Khashoggi, his tight control over the Saudi operatives sent to Istanbul to kill him, "and his authorizing some of the same operators to violently target other opponents."
Mr. Qahtani has led Prince Mohammed’s efforts to crack down on dissent internally and abroad. He is one of the 17 sanctioned by the Treasury.
[...]
The highly classified CIA assessment says that the Saudi team sent to kill Mr. Khashoggi was assembled from Prince Mohammed’s top security units in the Royal Guard and in an organization run by Mr. Qahtani, the Center for Studies and Media Affairs at the Royal Court, the Saudi royal court’s media department.
"We assess it is highly unlikely this team of operators…carried out the operation without Muhammed bin Salman’s authorization," it says.
The document says that Mr. Qahtani "explicitly requested the Crown Prince’s permission when he pursued other sensitive operations in 2015, which reflects the Crown Prince’s command and control expectations."

Some can argue that these findings don't necessarily contradict the administration's position. Trump, National Security Advisor John Bolton, Secretary of State Mike Pompeo and even Defense Secretary James Mattis have said that the intelligence agency's findings aren't definitive - which, by the CIA's own admission, is true.
As Trump recently said about MbS's involvement, "Maybe he did, maybe he didn't." While this chilling exercise in realpolitik might make many Americans uncomfortable, it's worth remembering that Canada has also resisted cancelling arms deals with the kingdom, despite its government's scathing rhetoric. And Turkish President Recep Tayyip Erdogan only stands to benefit from a rift between Saudi Arabia and the US (it would weaken one of his biggest regional rivals, while potentially leading to warmer relations with the US).