WWD : Anti-American Sentiment Rising in China, Study Finds

Anti-American Sentiment Rising in China, Study Finds
Chinese consumers have a more negative view of the U.S. following Trump’s first month as president, but so far this isn't impacting American brands.

SHANGHAI — A study released today found that 41.2 percent of Chinese consumers have a more negative view of the U.S. following President Trump’s first month in office. Additionally, 50.7 percent of Chinese consumers held a neutral position and 8.1 percent viewed the U.S. more positively, according to a joint study by China Skinny and Findoout.

The online survey was conducted between Feb. 21 and 23. The companies polled 2,000 Chinese consumers, evenly split between male and female, with 56 percent of respondents living in tier one or tier two cities and 70 percent between the ages of 18 and 35 years.

Buying American property and stocks, traveling to the U.S., and studying in the U.S. were the three categories most negatively impacted, with respective 17.7 percent, 13.9 percent and 10 percent declines in net sentiment from Chinese consumers. The net sentiment decline for American beauty products stood at 5.2 percent, whereas the net sentiment for American fashion and accessories dropped by 0.8 percent.

Trump has had a fraught relationship with Beijing since launching his bid for presidency. Before his inauguration, he angered Chinese officials by taking a telephone call with Taiwanese president Tsai Ing-wen, going against the “one China” principle the U.S. has employed since the late Seventies. On the campaign trail, Trump also threatened to label China a currency manipulator. However, he hasn’t implemented this since taking office. The risk of a trade war between the two countries looms large, yet both are important markets for one another, with China being the fastest-growing major market for the U.S.

Although the net sentiment decline for American beauty products and American fashion and accessories is relatively weak, a drop in the number of Chinese tourists and students in the U.S. could have knock-on effects for international brands and retailers as well as impact American companies.

“I wouldn’t underestimate the impact if tourists and students decrease on fashion and beauty as these are often the strongest advocates of these products in China — they are sharing the products on social media and then talking about them when they return to the Mainland. They are also big contributors to the daigou trade [buying products overseas and bringing them back to China], which drives a lot of product awareness and preference,” said Mark Tanner, founder and managing director of China Skinny, the marketing, research and online agency that co-authored the study.

“Unfortunately, there is no silver bullet, but retailers would be wise to monitor sentiment toward America. If it continues to decline, they may have to tone down American focus in positioning and play on other factors that are origin neutral, much like Uniqlo has done in the past,” Tanner said.

The boycotting or banning of brands from a country that has fallen out of favor with Beijing is not unprecedented. In 2012, a territorial dispute with Japan over the Diaoyu Islands led to demonstrations in China and the boycott of many Japanese brands. More recently, it has been speculated that South Korea’s decision to deploy the Terminal High Altitude Area Defense, or THAAD, antiballistic missile system has resulted in a ban on some of the country’s imports into China.

“Based on the survey the negative sentiment doesn’t look to strike as close to the heart as the Japanese territorial disputes in 2012 or current THAAD issues, but if Trump implements more anti-China policy, it could go that way,” Tanner said.

But many on the Mainland are skeptical there is negative sentiment toward the U.S. following the change in administration.

“After the U.S. bombing of the Chinese Embassy in Belgrade in 1999 and the U.S.-China air collision in 2001, indeed there was some Chinese public resentment, but soon the situation improved. Over time, Chinese interest in touring and buying in America has much increased. Personally, I sense much has improved in China-U.S. relations now, comparing with what was in 1999 and 2001,” said Shen Dingli, professor of international relations at Fudan University.

“Given the huge size and extraordinarily interdependent and interactive nature of Chinese-U.S. economic and trade relations, in my view, it is almost impossible for a South Korea/THAAD-style Chinese ‘boycott’ of U.S. commodities to happen between China and the U.S. — just like what has not happened between China and Japan. As of now, even Trump has been more cautious in action toward China than what he had delivered in words. Unless either side commits silly and huge mistakes, I do not see an emerging crisis in Chinese-American relations,” said Chen Jian, global distinguished professor of history at NYU Shanghai.

It is still the early days of the Trump administration and, as of yet, there have not been any policies implemented that are detrimental to Chinese consumers’ interests. It appears, from a historical context, that Chinese consumers are reactive rather than proactive, but there have been instances in the past when sentiment toward a country has turned.

“So far, while it’s fair to say that Chinese consumers are discussing the political situation in the U.S., very few have elected to change their buying behavior as a result. So, at least in the near-term, I don’t think U.S. brands or retailers will suffer. I think where there would be cause for concern is if Trump does enact trade policies that directly hurt Chinese brands. If that happens, we may see consumer sentiment change and actually see a significant number of people change what they are buying. But at present, it doesn’t seem to be happening,” said Benjamin Cavender, principal at China Market Research Group.co fp Equity q

>>> Financiere Turenne Lafayette has Casino Guichard and Cofiego among potential

Financiere Turenne Lafayette has Casino Guichard and Cofiego among potential bidders

Cofigeo, a French privately-owned canned ready meals and sauces maker, is understood to have expressed an interest for the canned food division of troubled privately owned food processing group Financiere Turenne Lafayette, which included brands such as William Saurin, French weekly Challenges reported.
Other potential suitors include French groups D’Aucy (formerly known as Cecab), Cooperl, and supermarkets chain Casino Guichard Perrachon [EPA:CO], the report said.

The canned food division of Financiere Turenne Lafayette generates annual revenues of EUR 324m, the report noted.
The original article appeared in print, page 5.

(BofA-ML) The Flow Show : In like a lion


>>> Asset Class Flows
- Bonds: 10 straight weeks of inflows ($9bn)
- Equities: 9 straight weeks of inflows ($9.8bn) ($12.9bn ETF inflows vs $3.2bn mutual fund outflows)
- Precious metals: 5 straight weeks of inflows ($0.2bn)

>>> Equity Flows
- EM: first outflows in 8 weeks ($0.6bn)
- Japan: 8 straight weeks of inflows ($0.7bn)
- Europe: $1.7bn outflow, largest in 13 weeks
- US: $6.7bn inflows (inflows in 4 of past 5 weeks)
- By sector: largest inflow to utilities in 35 weeks ($0.4bn); largest inflows to REITs in 7 weeks ($0.2bn); 8 straight weeks of inflows to materials ($0.7bn); inflows to energy 6 of the last 7 weeks ($0.4bn); 8 straight weeks of inflows to infrastructure ($0.1bn); only sector losers are tech, financials & healthcare.

>>> Fixed Income Flows
- Inflows to HY bond funds in 13 of past 14 weeks ($1.4bn)
- Inflows to EM debt funds in 8 of past 9 weeks ($0.9bn)
- 10 straight weeks of IG bond inflows ($6.5bn)
- 16 straight weeks of inflows to bank loan funds ($1bn)
- 12 straight weeks of inflows to TIPS funds ($0.6bn)
- Largest outflows from govt/tsy funds in 10 weeks ($1.4bn)

(ZH) Bank Of America Sets A Date For The Market's "Great Fall" (full Note)

Bank Of America Sets A Date For The Market's "Great Fall"


With the US stock market likely to continue its levitation today, it means that by close of trading, the S&P500 will be above 2,400, the same as Goldman's year end price target, and 100 points away from Bank of America's "euphoric blow off top" destination, which is also known as Michael Hartnett's Icarus Trade. In a note released overnight, Hartnett confirms that he is "sticking with our “Icarus Trade” targets: SPX 2500, GT30 3.5%, DXY 110, oil $70/b", even as he admits that the euphoria level in stocks is unprecedented:
  • Yes, markets are increasingly overbought (it’s now 96 trading days since SPX fell >1% in one session).
  • Yes, sentiment is increasingly bullish (our Bull & Bear Indicator is 7.0, close to the 8.0 sell-signal).
  • Yes, the easy money has been made. But we believe a March Fed rate hike at a time of booming macro data will cause the bears to fully capitulate into risk assets, causing the melt-up toward our targets in Q2.
He also notes that the renewed jump in bond yields is coinciding with renewed outperformance by small cap & banks, and by high yield bonds vs. investment grade bonds, "thus we are willing to remain long risk assets for a little longer."
* * *
However it is what happens after this blow off top phase that is more interesting: that is the moment the "Icarus" trade becomes the "Humpty Dumpty" trade.
According to bank of America, "the “great fall” in risk assets comes when hawkish Fed & weaker EPS combine." That particular fusion will take place in H2, which is when Harnett says it will be time to get out...

The Fed has hiked just 2 times in the past 10 years. On March 15th the Fed will likely tighten for the 2nd time in 3 months. A second rate hike in 3 months would cause markets to anticipate a hike each quarter in 2017, and a jump in the Fed funds rate to 1.5-2% by early 2018.
As if that wasn't enough, March 15th is also the date of the Dutch election, and also when the US debt ceiling will be - hopefully - reinstated and immediately surpassed.
However, it is the Fed's tightening that is the biggest concern to BofA: "this acceleration of US financial tightening is a huge deal, and could in time become hugely negative. (In contrast, there were 35 Fed rate hikes in the 1970s, 28 in the 1980s, 11 in the 1990s, 20 in the 2000s – Table 1)."
Historically, once the Fed starts tightening, it keeps tightening until there is a “financial event” (Chart 4). This is likely to occur at a much lower rate of interest in the past given the economy & market’s reliance on QE in recent years,
Another warning from an increasingly concerned Hartnett: extreme US rate differentials can cause financial instability. US-German 2-year rate differentials are currently at 28-year highs (Chart 5). Rate differentials this wide have in the past either required either policy intervention (Plaza Accord in 1985) or have coincided with bad “events” (1987 crash, 1997 Asia crisis).
* * *
Putting it all together, BofA writes that "while for the moment we remain tactically bullish, we need to acknowledge the vulnerability of risk once the Fed gets going raising rates, to the extent that they coincide with a bear flattening of the yield curve and lower EPS expectations (see Investment Clock above). Like Humpty-Dumpty, risk assets will invariably have a great fall once the “wall of worry” is climbed and investors stop worrying.:
After all:
  • The current US equity bull market is already the 2nd longest ever, and will become the longest ever if it runs past August 22nd 2018; and the bull market will become the 3rd largest ever at 2467 on the S&P500.
  • At some stage in coming months our Bull & Bear Indicator will likely exceed the “greed” threshold of 8 (Chart 6)
  • Private client exposure to stocks will likely reach new all-time highs (current equity allocation is 60%, not far from Mar’15 peak of 63% - Chart 7); note their exposure to debt has already fallen to 12-year lows
  • Meanwhile, with US consumer confidence at 15-year highs, small business optimism at 12-year highs, US ISM at a very high 58, and European PMI’s at 6-year highs, the run of better-than-expected data may end by this summer.
  • And ominously, Chinese money supply (M1) growth – a lead indicator of Chinese nominal activity - has rolled over hard on a year-on-year basis (Chart 8)…and some might rightly argue that China (more than Trump, Yellen and so on) has been the true driver of the cyclicals in the past 2 years.
* * *
BofA's bottom line: "we recommend buying S&P 500 puts for the second half of 2017."

>>> 21st Century Fox CEO says bid for Sky will strengthen UK creative sector

21st Century Fox CEO says bid for Sky will strengthen UK creative sector

21st Century Fox [NASDAQ:FOX] Chief Executive James Murdoch said the New York-based media group’s bid for full ownership of the FTSE-100 satellite television broadcaster Sky [LON:SKY] will strengthen the UK’s creative sector, The Times reported.
Murdoch, who is also Sky’s chairman, said on Thursday, 2 March, that Sky and Fox between them invested about GBP 700m (EUR 816m) in original content in the UK and plan to maintain that investment.
The Times is published by News Corp, whose chairman is James Murdoch’s father Rupert, the item noted. Murdoch Sr. is also co-chairman of Fox, which holds a 39% stake in Sky and has tabled an agreed GBP 11.7bn bid for the shares in Sky that it does not already own.
As previously reported, Sky’s proposed takeover of Fox has prompted criticism, with some UK politicians urging the telecoms regulator Ofcom to review whether Murdoch is a suitable candidate for a broadcasting licence due to his connections to a previous scandal over phone hacking at the former News Corp newspaper News of the World.
Fox is also trying to persuade the European Commission to approve the deal, the item said. UK culture secretary Karen Bradley is thinking about whether a government intervention is necessary, the report added.
The Financial Times also quoted James Murdoch, who said yesterday that the proposed takeover of Sky would represent a “significant driver” for the UK’s creative sector.
A review of the deal could be launched today, Friday 3 March, the FT item said. It is expected that Ofcom will review the takeover with regard to media plurality, according to the report.

>>> Carrefour’s Carmila and Cardety to merge

Carrefour’s Carmila and Cardety to merge
03 MAR 2017
Carmila and Cardety [EPA:CARD], two retail property companies specialised in the management of shopping centres and retail parks anchored to stores operated by Carrefour [EPA:CA], announced the proposed merger of Carmila and Cardety.
Under the terms of the proposed merger, the exchange ratio would be 3 Carmila shares for 1 Cardety share, subject to the approval of their respective shareholders.
Post completion of the merger, Carrefour would own 42.4% of the new merged entity while the other shareholders of Carmila and Cardety would own 55.3% and 2.3% respectively.
This proposed merger aims to create a major retail property company dedicated to the value enhancement and the development of leading shopping centres in France, Spain and Italy, leveraging a strategic partnership with Carrefour, one of the world's leading retailers. The new merged entity, listed on Euronext Paris and benefiting from the SIIC status (“REIT”), would be named Carmila.
The new merged entity, the leader in food-anchored shopping centres and the 3rd largest listed retail property company in Continental Europe, would own a portfolio with an appraisal value of EUR 5.3bn as of December 31st, 2016, including 205 shopping centres. The net asset value of the new merged entity would be EUR 2.9bn (based on the estimated EPRA NAV of each of the two companies as of December 31st, 2016).
This merger proposal shall be submitted in the coming weeks to the relevant employee representative bodies for information and consultation purposes. Following completion of this information and consultation process, and subject to the signing of the definitive agreements and to certain regulatory approvals, the merger shall be submitted for the approval of Carmila and Cardety’s respective shareholders at General Meetings to be held in the course of 2017.
As part of its development plan, the new merged entity would proceed, subject to market conditions, with a capital increase of approximately EUR 500m to EUR 600m, which would imply a placement of new shares on the market in the course of 2017.
The main shareholders of Carmila and Cardety, support this proposed merger, demonstrating their confidence in the strategy and the growth prospects of the new merged entity.
On this occasion, Jacques Ehrmann, Chairman of the Board of Directors of Carmila declared: “After three successful years, marked notably by the completion of the refurbishment program of its 194 shopping centres, the deployment of our local and digital marketing strategy for the benefit of our tenants, and active tenant management, Carmila enters a new 5-year phase to deliver shopping center extensions”.
For his part, Francis Mauger, Chairman of the Board of Directors of Cardety declared: “Within one year, Cardety has significantly grown its activity both through transformative acquisitions and the development of new retail parks at Saran (Orléans), Saint-Egrève (Grenoble), Rambouillet or Chalezeule (Besançon). The complementarities of Carmila and Cardety will allow to maximize the value creation of shopping centres and retail parks anchored to stores operated by Carrefour in France, Spain and Italy”.