FT : China elites seek to de-escalate trade tension before Xi speech

China elites seek to de-escalate trade tension before Xi speech
Government advisers dismiss reports of secret plan to sell off US Treasury bills

Chinese business leaders and government academics aimed to de-escalate trade war tension on Monday, in advance of a speech by president Xi Jinping in which he was expected to announce new market-opening measures to address US concerns.

China has sought to play the role of responsible guardian of the global trading system in response to tariffs from US president Donald Trump and the threat of even harsher sanctions to come.

At the annual Bo’ao Forum for Asia in the resort island of Hainan — billed as “China’s Davos” — Chinese speakers played down rumours that China was making preparations to escalate the conflict. 

Among the more extreme options for China would be to dump holdings of US Treasuries, of which it held at least $1.2tn at the end of last year. 

“Some people in the market worry that if China sells US assets in large amounts, it could cause the US exchange rate to [weaken] and influence the entire world. But I think the likelihood is very small,” Zhang Yuyan, director of the Institute of World Economics and Politics and the Chinese Academy of Social Sciences (CASS), a government think-tank, told the forum on Monday. 

The renminbi hit its strongest level against the dollar last week since the currency’s shock devaluation in August 2015. But Bloomberg reported on Monday, citing unnamed sources, that Beijing was analysing the potential impact of renminbi devaluation as a tool to combat a trade deal that results in lower Chinese exports. 

Asked about the report, Li Yang, former vice-president of CASS and a former member of the People’s Bank of China’s Monetary Policy Committee, said: “It’s unlikely that a trade war will spread into a currency war.” 

At a speech on Tuesday morning, Mr Xi is expected to announce new economic reforms and market-access measures in a delicate attempt to answer complaints by the US and other trading partners without appearing to bend to foreign pressure. 

Greater market access for securities and futures companies, fund managers, and payments operators have been previously discussed, but Mr Xi may provide further carrots on Tuesday. 

On Friday, a Chinese commerce ministry spokesman repeated Beijing’s stance that “China doesn’t want a trade war, but we’re not afraid to fight a trade war.”

At a speech on Tuesday morning, Mr Xi is expected to announce new economic reforms and market-access measures in a delicate attempt to answer complaints by the US and other trading partners without appearing to bend to foreign pressure. 

Greater market access for securities and futures companies, fund managers, and payments operators have been previously discussed, but Mr Xi may provide further carrots on Tuesday. 

On Friday, a Chinese commerce ministry spokesman repeated Beijing’s stance that “China doesn’t want a trade war, but we’re not afraid to fight a trade war.”

FT : FCA to scale back non-Brexit activities

FCA to scale back non-Brexit activities
City watchdog says it faces ‘particularly challenging year’


The UK’s financial regulator said it will have to cut back on some of its regular responsibilities as it prepares for a “particularly challenging year” ahead of the UK’s exit from the EU in March 2019.

In its annual business plan published on Monday, the Financial Conduct Authority said it had to make “difficult and challenging decisions about our priority activities across all business areas that are not related to work on EU withdrawal, including limiting the number of new initiatives we’ve taken on”.

The watchdog has put aside £30m to deal with Brexit preparations over the next 12 months, £14m of which will come from “reprioritising, delaying or reducing non-critical activity”. A further £11m will be paid by the firms that will be affected by withdrawal, with the remainder funded through the FCA’s reserves.

Andrew Bailey, FCA chief executive, said: 

We recognise that this year we need to dedicate a significant amount of resource to withdrawal from the EU. As a result, setting our priorities this year has involved a particularly rigorous level of scrutiny and challenge to focus on areas where we see the greatest potential for harm.

Other areas of focus for the coming year include improving firms’ culture and governance standards, fighting financial fraud and improving data security practices.

The FCA added that “we expect our work on the implications of EU withdrawal will continue beyond March 2018, throughout any implementation period …we will closely monitor the progress of negotiations and the potential for any further impact on our cost base”.

FT : Novartis buys US gene therapy group AveXis for $8.7bn

Novartis buys US gene therapy group AveXis for $8.7bn
Deal is latest strategic move by Swiss drugmaker’s new chief executive

Swiss pharmaceuticals company Novartis plans to spend $8.7bn buying AveXis, a US specialist in spinal muscular atrophy, a childhood wasting disease, in the latest strategic move by its new chief executive.

Vas Narasimhan, who took over as Novartis’s boss in February, said Nasdaq-listed AveXis, which has yet to report any revenues, would significantly increase Novartis’s strength in gene therapies, and offered “multibillion sales potential”.

The new Novartis boss has embarked on an acquisition spree as part of his plans to boost Novartis’s core business areas of innovative prescription medicines, as well as oncology, generics and eyecare.

The cash offer came less than two weeks after Novartis’s sale to GlaxoSmithKline of its 36.5 per cent stake in their consumer health joint venture, which raised $13bn. Mr Narasimhan said proceeds from that deal would be used to fund the latest transaction.

“We have been of course regularly scanning and looking for value-creative ‘bolt on’ acquisitions in our main therapeutic areas,” he said on Monday.

Novartis is offering $218 per share for Chicago-based AveXis, which was listed in February 2016 and specialises in developing treatments for patients with rare and life-threatening neurological genetic diseases. That represented a premium of 88 per cent over Friday’s closing price of $115.91.

The Swiss group expected AveXis to contribute “strongly” to operating income and earnings from 2020. The acquisition will help compensate in coming years for the expiry of patents on some of Novartis’s best-selling existing medicines.

But Stefan Schneider, analyst at Vontobel in Zurich, said the “blockbuster” potential of AveXis’s gene therapies had yet to be proven and the price premium Novartis was offering assumed “flawless execution” of the deal.

The latest deal follows the $3.9bn acquisition last October — shortly after Mr Narasimhan’s appointment was announced — of Advanced Accelerator Applications, the French nuclear medicines business. Novartis has also won US approval to develop a new chimeric antigen receptor therapy, known as Car-T, for children and young adults with a type of leukaemia.

Mr Narasimhan said the price offered for AveXis was in line with similar deals in the sector over the past decade, and represented an “attractive” deal given Novartis’s assessment of AveXis’s product pipeline and gene therapy capabilities.

Novartis believed AveXis’s AVXS-101 treatment had the potential to be “the first-ever one-time gene replacement therapy” for spinal muscular atrophy (SMA). Nine out of 10 infants with SMA Type 1 do not reach their second birthday or are permanently dependent on ventilators.

“Bringing AveXis on board would support both our ambition to be a leader in neurodegenerative diseases and our neuroscience franchise priorities to strengthen our position in devastating paediatric neurological diseases such as SMA,” said Paul Hudson, head of Novartis’s pharmaceuticals division.

Sean Nolan, AveXis’s chief executive, said Novartis’s global operations and resources “should expedite” the use of its gene therapies around the world.

Mr Narasimhan was previously head of drugs development at Novartis. His predecessor, Joe Jimenez, had restructured and streamlined the Basel-based drugmaker following its rapid global expansion through mergers and acquisitions under his predecessor Daniel Vasella.

Novartis’s shares were little changed at SFr78.94 in early Zurich trading.

>>> FDJ 50% stake to be sold by French government via IPO – report (translated)

FDJ 50% stake to be sold by French government via IPO – report (translated)
09 APR 2018
The French government is understood to have decided to sell about 50% of the national lottery company Francaise des Jeux (FDJ) via a listing on the stock exchange, French weekly Le Journal du Dimanche reported. The report cited a source as saying that a minority of about 25% in FDJ would be retained by the government. The French state currently owns 72% of FDJ, the report noted. The report added that existing shareholders would be able to either retain their shares or acquire more via preferential rights issue during the IPO. Existing shareholders include individuals, veterans’ associations, and the French tobacconists and newsagents’ federation among others.
The report also cited a source from the French Finance ministry as claiming that a major private player from the betting and entertainment industry could also acquire a shareholding in FDJ simultaneously and help with the company’s development.
The plan is expected to be presented to the president during a ministers’ council in May, the report went on to say.
FDJ generated sales of EUR 15.1bn in 2017. It pays about EUR 3bn in taxes annually to the state, a level that will be maintained post-privatisation, according to the report.

The original article appeared in print, page 2.

(HSBC) Publicis Buy : Warming up for the sprint – roadshow feedback

Warming up for the sprint – roadshow feedback

* We hosted a CEO/CFO roadshow in Paris on 5 April
* Group in shape to meet evolving needs from clients
* Buy rating reiterated; TP maintained at EUR73

Management Focus on the strategy. Both CEO and CFO reiterated that Publicis is
well advanced compared to peers in terms of internal transformation (breaking silos,
client-centred organisation) and development of digital offers (consulting part with
Publicis.Sapient, data management, digital creativity) which makes it a unique player
in the marketing landscape. It is even more important at a time when clients are
looking for strategic partners instrumental to their marketing and business
transformation. Management did not elude the obvious difficulties relating to the
market itself as several clients are already anticipating a likely slowdown of the macro
growth, and competitors are offering massive discounts to retain budgets. Publicis is
also facing challenges in-house with its internal transformation and especially the
addition of scarce talents. Financial communication should focus in the future on facts,
based with KPIs, in order to restore confidence. The ultimate aim is to shape Publicis
to meet clients’ future demand, to reinvent a cash-generative sustainable growth
model with stable margins. Value for the shareholders was mentioned very often.

Our take: Buy reiterated. This roadshow supports our positive view on the name we
expressed post CMD. We see the outcome of the roadshow as broadly consistent
with the strategy, outlining the room for manoeuvre Publicis has in terms of cost
management, and highlighting its differentiation versus peers. A weak Q1
(HSBCe organic around 0%) does not prevail on the FY performance that will see an
increasing contribution from new businesses quarter after quarter. Even if Publicis is
not immune to headwinds impacting the industry, and considering the journey will
likely remain bumpy, we are positive on the long-term strategy and consider the
current valuation as favourable (PE 2018e 12.8x vs 13.5x for agencies, vs 22.6x for
Accenture). Our EPS 2018-20e estimates change marginally (<1%, mostly driven by
FX); reiterate Buy rating and EUR73 target price.

(MS) Utilities : A UK Rebound, and a cardon slump ? We like SSE & NAtional G


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