Major International Business Headlines Brief::: 25 October 2020

Sun Oct 25 07:32:53 CAT 2020

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Major International Business Headlines Brief::: 25 October 2020

 <http://www.nedbank.co.zw/> 

ü  U.S. judge denies new government bid to remove China's WeChat from U.S. app stores

ü  Coca-Cola European Partners in talks to buy Coca-Cola Amatil: Bloomberg

ü  AstraZeneca says its Oxford vaccine deal allows it to add up to 20% of manufacturing costs

ü  China's purchases of U.S. farm goods at 71% of target under trade deal: U.S.

ü  Japan's ANA to cut 3,500 jobs in 3 years as it anticipates prolonged virus woes: Yomiuri

ü  Ant may raise up to $17 billion in Shanghai IPO leg as investors submit bids, say sources

ü  Wall Street Week Ahead: More U.S. companies offer earnings guidance despite pandemic

ü  Sudan: Removing Sudan From Terrorism List Is Step to Ease Debt Burden - IMF

ü  Kenya's Nuclear Energy Project Spills Over 2030

ü  Has Facebook Suddenly Broken WhatsApp?

ü  Tesla to recall nearly 50,000 cars from China over safety concerns

ü  Pandemic makes world’s billionaires — and their advisers — richer

ü  'Gold reserves will boost Uganda's economy'

 <http://www.spidexmedia.com/> 

U.S. judge denies new government bid to remove China's WeChat from U.S. app stores

(Reuters) - A U.S. judge in San Francisco on Friday rejected a Justice Department request to reverse a decision that allowed Apple Inc and Alphabet Inc’s Google to continue to offer Chinese-owned WeChat for download in U.S. app stores.

U.S. Magistrate Judge Laurel Beeler said the government’s new evidence did not change her opinion about the Tencent app. As it has with Chinese video app TikTok, the Justice Department has argued WeChat threatens national security.

WeChat has an average of 19 million daily active users in the United States. It is popular among Chinese students, Americans living in China and some Americans who have personal or business relationships in China.

WeChat is an all-in-one mobile app that combines services similar to Facebook, WhatsApp, Instagram and Venmo. The app is an essential part of daily life for many in China and boasts more than 1 billion users.

The Justice Department has appealed Beeler’s decision permitting the continued use of the Chinese mobile app to the Ninth Circuit U.S. Court of Appeals, but no ruling is likely before December.

In a suit brought by WeChat users, Beeler last month blocked a U.S. Commerce Department order set to take effect on Sept. 20 that would have required the app to be removed from U.S. app stores.

The Commerce Department order would also bar other U.S. transactions with WeChat, potentially making the app unusable in the United States.

“The record does not support the conclusion that the government has ‘narrowly tailored’ the prohibited transactions to protect its national-security interests,” Beeler wrote on Friday.

She said the evidence “supports the conclusion that the restrictions ‘burden substantially more speech than is necessary to further the government’s legitimate interests.’”

WeChat users argued the government sought “an unprecedented ban of an entire medium of communication” and offered only “speculation” of harm from Americans’ use of WeChat.

In a similar case, a U.S. appeals court agreed to fast-track a government appeal of a ruling blocking the government from banning new downloads from U.S. app stores of Chinese-owned short video-sharing app TikTok.

Coca-Cola European Partners in talks to buy Coca-Cola Amatil: Bloomberg

(Reuters) - Coca-Cola European Partners is in advanced talks to acquire Australia’s Coca-Cola Amatil, Bloomberg News reported on Saturday.

The details of the deal which has not yet been finalised could be announced within few days, Bloomberg reported, citing people familiar with the matter.

A deal would be the largest involving an Australian company this year, Bloomberg said.

U.S.-based Coca-Cola Co owns a 19.11% stake in Coca-Cola European Partners, the world’s largest independent bottler of Coca-Cola, Refinitiv Eikon data shows.

Shares in bottler Coca-Cola Amatil were halted on Thursday pending an announcement on a “potential material transaction”.

Nieth company could be reached for comment outside business hours.

AstraZeneca says its Oxford vaccine deal allows it to add up to 20% of manufacturing costs

(Reuters) - AstraZeneca Plc said on Friday its coronavirus vaccine deal with Oxford University will allow it to add up to 20% of manufacturing costs to cover additional expenses required to be incurred by the British drugmaker.

“In addition to the manufacturing costs, the company is incurring costs in excess of $1 billion globally that include clinical development, regulatory, distribution, pharmacovigilance and other expenses”, an AstraZeneca spokesman said in a statement.

“To cover these additional expenses, the company will add an amount equivalent to a maximum of 20% of the manufacturing costs to ensure there is no material impact on its finances this year while continuing efforts to provide the vaccine at no profit during the pandemic,” the statement added.

AstraZeneca has previously signed multiple supply-and-manufacture deals for more than 3 billion doses globally.

These agreements are with companies and governments as the company gets closer to reporting early results of a late-stage clinical trial. Developed by the University of Oxford and licensed to AstraZeneca in April, the vaccine is expected to be one of the first from big pharma to secure regulatory approval.

The company had said earlier it has created multiple supply chains to ensure that access to its vaccine is timely, broad and equitable for high- and low-income countries alike.

Pricing and supply of experimental COVID-19 vaccines have been widely debated as richer countries pump billions of dollars into funding, and AstraZeneca has also been granted protection from future liability claims.

Separately, AstraZeneca resumed the U.S. trial of its experimental COVID-19 vaccine after approval by regulators, the company said on Friday.

China's purchases of U.S. farm goods at 71% of target under trade deal: U.S.

WASHINGTON (Reuters) - China has substantially increased purchases of U.S. farm goods and implemented 50 of 57 technical commitments aimed at lowering structural barriers to U.S. imports since the two nations signed a trade deal in January, the U.S. government said on Friday.

In a joint statement, the U.S. Trade Representative’s (USTR) office and the U.S. Department of Agriculture (USDA) said China had bought over $23 billion in U.S. agricultural goods to date, or about 71% of the target set under the so-called Phase 1 deal.

“Since the Agreement entered into force eight months ago, we have seen remarkable improvements in our agricultural trade relationship with China, which will benefit our farmers and ranchers for years to come,” U.S. Trade Representative Robert Lighthizer said in a statement.

The deal defused a bitter trade war between the world’s two largest economies, but disputes over human rights, the COVID-19 crisis and technology have strained ties between Washington and Beijing, raising doubts about the prospects for deepening the agreement in a second phase.

Agriculture is one of the four areas where China pledged to increase its purchases of U.S. goods and services. Many experts question whether China will meet its overall targets this year given lockdowns imposed earlier this year to contain the virus.

The report showed outstanding sales of U.S. corn to China were at an all-time high of 8.7 million tons, while U.S. soybeans sales for marketing year 2021 to China were at double the levels seen in 2017.

U.S. exports of sorghum to China from January to August 2020 totaled $617 million, up from $561 million for the same period in 2017, it said.

U.S. pork exports to China hit an all-time record in just the first five months of 2020, and U.S. beef and beef products exports to China through August 2020 are already more than triple the total for 2017, it said.

In addition to these products, USDA expects 2020 sales to China to hit record or near-record levels for other U.S. agricultural products including pet food, alfalfa hay, pecans, peanuts, and prepared foods.

Japan's ANA to cut 3,500 jobs in 3 years as it anticipates prolonged virus woes: Yomiuri

TOKYO (Reuters) - ANA Holdings Inc 9202.T plans to cut about 3,500 jobs in three years as Japan's largest airline operator braces for its biggest-ever annual loss due to a plunge in demand driven by the coronavirus pandemic, the Yomiuri daily reported.

The job losses are part of ANA’s broader business restructuring plan to be announced on Tuesday, as it scrambles to cut fixed costs in anticipation of a prolonged downturn in travel demand, the Yomiuri said on Sunday.

ANA, which had group workforce of 43,500 as of last year, plans to achieve the job cut target by the year ending in March 2023 through outplacement programmes and a hiring freeze, according to the paper.

ANA representatives could not be reached immediately.

As short-term measures, ANA is considering temporarily dispatching some of its workforce to several other firms including Toyota Motor Corp 7203.T and selling 30 of its costly wide-body aircraft, the Yomiuri added.

Forecast to suffer a net loss of around 500 billion yen ($4.8 billion) for this fiscal year to March, ANA has turned to billions of dollars in loans and a government tourism campaign to weather the slump in air travel.

Separately, the Nikkei business daily reported on Sunday that ANA's local rival, Japan Airlines Co 9201.T, was expected to report an operating loss of about 85 billion yen for the July-September quarter.

JAL was mired in the red as passenger traffic on international flights plunged 97% in the quarter, the Nikkei said.

Reflecting severe headwinds in the industry, domestic airline Star Flyer Inc 9206.T is in talks with Japanese private equity firm Advantage Partners and others to raise some 10 billion yen in capital through new bond issuance, Japanese media reported late Saturday.

ANA is the biggest shareholderin Star Flyer with an 18% stake.

($1 = 104.6900 yen)

Ant may raise up to $17 billion in Shanghai IPO leg as investors submit bids, say sources

HONG KONG/SHANGHAI (Reuters) - China’s Ant Group could raise up to $17.3 billion in the Shanghai leg of the likely $35 billion dual listing, the world’s largest ever, after some large investors submitted bids in the range of 68-69 yuan per share, people with knowledge of the matter said.

The simultaneous listing in Hong Kong and Shanghai of the Chinese financial technology giant, backed by e-commerce behemoth Alibaba BABA.N, would beat the previous largest IPO, Saudi Aramco's 2222.SE $29.4 billion float last December.

The pricing for the Shanghai tranche of the initial public offering was decided on Friday, Alibaba founder Jack Ma said on Saturday, without disclosing the price.

“It’s the first time that the pricing of such a big listing - the largest in human history - has been determined outside New York City,” he told the Bund Summit in the eastern financial hub of Shanghai, referring to Ant’s float as a “miracle”.

Later on Saturday, a person with direct knowledge of the matter told Reuters many large Chinese fund managers had bid for Ant shares in the listing on the Nasdaq-style STAR Market in Shanghai at close to 69 yuan ($10.32) apiece.

At 69 yuan per share, Ant could raise up to 115.3 billion yuan ($17.3 billion) in the Shanghai tranche, valuing the company as a whole at up to 2.1 trillion yuan ($314 billion), before a 15% greenshoe or over-allotment option is exercised.

Under local market rules, the final price for the IPO, which would also be the first dual-listing in Hong Kong and on the year-old STAR, is based on guidance from large investors.

The people declined to be named as they were not authorised to speak to the media. Ant declined to comment on the pricing.

GOOD FORTUNE

The IPO would burnish the Shanghai-based exchange’s status as a fast-growing capital markets center, at a time when rising Sino-U.S. tensions have triggered concerns about the prospects of listing of Chinese companies in New York.

Ant has chosen the stock code 688688 for its Shanghai listing, which for Chinese speakers combines two of the luckiest or most auspicious numbers, together symbolizing long-lasting prosperity and good fortune in Chinese culture.

Books for the Shanghai leg of the float will open for one day on Oct. 29.

Ant plans to sell up to 1.67 billion shares in the Shanghai float, which is set to be the biggest IPO in China, eclipsing the record set by Agricultural Bank of China's 601288.SS $10.1 billion Shanghai float in 2010, according to Refinitiv data.

Strategic investors, whose investments in Ant’s STAR IPO will be locked up for at least 12 months, will account for 80% of the Shanghai float.

Among them are Zhejiang Tmall Technology, a unit of Alibaba, which has committed to purchase 44% of the Shanghai float, according to Ant’s updated prospectus.

Ant aims to split the share sale evenly between Hong Kong and Shanghai, selling up to 11% of its enlarged share capital.

For the Hong Kong leg, Ant plans to open order books as soon as Monday and price the offering in coming days, separate sources have said.

Ant did not immediately respond to request for comment on the Hong Kong timetable late on Saturday.

Its shares are likely to start trading a few days after the U.S. presidential election, which could fuel a spike in market volatility.

Wall Street Week Ahead: More U.S. companies offer earnings guidance despite pandemic

NEW YORK (Reuters) - With earnings season in full swing, more companies are again offering earnings guidance, signaling to investors that some corporations are adapting to uncertainty about a global pandemic that may extend deep into next year.

Overall, 73 companies in the S&P 500 index have offered guidance this quarter so far, up from last quarter’s 65 pre-announcements but well below the 170 companies that typically offer guidance, according to Refinitiv data. The companies offering guidance are giving the most bullish expectations in Refinitiv data going back to 1997.

“If a company is able to offer guidance it shows that they’re able to have a better idea of what’s coming down the road,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

The market has been buffeted by cross-currents related to the looming Nov. 3 U.S. presidential election, drawn out fiscal stimulus talks in Washington and a resurgent pandemic. Still, investors appear more hopeful in recent months.

Fifty percent of high net worth U.S. investors surveyed by UBS Global Wealth Management voiced optimism on the economy, up from 41% three months prior, with 55% optimistic on stocks, up from 44%. The S&P 500 index is up nearly 7% year to date, including a 2.2% gain since the start of October.

So far this quarter, shares of AT&T Inc T.N, Verizon Communications Inc VZ.N and Quest Diagnostics Inc DGX.N have rallied after each company gave investors updated guidance on how they expect to fare over the next fiscal year.

“It’s not surprising we’ve had so many beats this quarter because we entered the season with very little guidance,” causing analysts to slash their estimates, said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

“Now we’re seeing how companies expect to be able to navigate through the challenges of the year ahead,” she said.

Investors next week will wade through the busiest period of earnings season so far, with companies ranging from Beyond Meat Inc BYND.O and Microsoft Corp MSFT.O to Pinterest Inc PINS.N scheduled to report results.

Microsoft, in particular, should outperform its conservative guidance thanks to strong PC shipments and growth of its Azure cloud computing platform, said J. Derrick Wood, an analyst at Cowen.

“The set-up feels more compelling as the bar was reset last quarter and as macroconditions are improving,” he said.

Nearly 86% of companies that have reported earnings so far have beat analyst expectations, a rate 20 percentage points higher than the average beat rate since 1994, according to Refinitiv data.

Still, investors like Nixon say they are looking past beat rates and focusing on companies that can improve or maintain measures such as refinancing debt, raising cash, and controlling costs regardless of the pandemic’s trajectory or a breakthrough in stimulus talks.

The White House and congressional Democrats remain in negotiations for another coronavirus relief bill, though Senate Majority Leader Mitch McConnell has signaled he may not bring the bill to the floor until after the election.

Companies in the S&P 500 index are likely to post average earnings growth rates of up to 25% next year as they bounce off of prior-year comparisons during the worst of the economic lockdowns, said Steve Chiavarone, a portfolio manager at Federated Hermes.

Companies that can offer positive guidance despite the unknowns are also more likely to weather higher corporate taxes expected if Democratic challenger Joe Biden beats President Donald Trump and Democrats take the U.S. Senate, he said.

“We’re seeing a lot of positive metrics that show that these companies may be able to easily absorb any cut to earnings,” he said.

Sudan: Removing Sudan From Terrorism List Is Step to Ease Debt Burden - IMF

Washington — The International Monetary Fund (IMF) stated on Friday that the US government's plans to lift Sudan from the list of states sponsoring terrorism would remove one of the obstacles facing the heavily indebted country in its quest to ease the debt burden.

The Head of the IMF mission in Sudan, Carol Baker, said that the IMF is encouraged by the US administration's official notification to the Congress on its intention to remove Sudan from the terrorism list, explaining that the removal of Sudan from the list takes away one of the obstacles that prevent alleviating the debt burdens of the heavily indebted poor countries.

The International Monetary Fund and the World Bank launched the Heavily Indebted Poor Countries Initiative in 1996 to ensure that no poor country faces a debt burden that it cannot manage, but the process is a long one and will require major reforms from Sudan.

The International Monetary Fund approved last month plans to monitor a 12-month economic reform program that is being implemented by Sudan's new transitional government as it seeks to gain international confidence and to move towards eventual debt relief.

The high external debts and arrears for a long time are still limiting its access to external loans, including those from the International Monetary Fund (IMF).

The total of Sudan's external debt amounts to 60 billion dollars, as the country is in urgent need for financial help to reform its economy.-SNA.

Kenya's Nuclear Energy Project Spills Over 2030

Kenya's plan to have a nuclear power plant will now wait beyond the 2030 timeline envisioned when the idea was conceptualised.

The Nuclear Power and Energy Agency (NuPEA) says lengthy compliance procedures needed before setting up a nuclear power plant will only be ready in 2035, pushing the dream to have the major base load energy source further away.

NuPEA chief executive Collins Juma told Nation that the agency would also prioritise use of smaller nuclear reactors as opposed to a planned single reactor generating 1,000MW as Kenya grows its electricity demand over time.

"We are looking into having those small reactors in phases as we monitor how the country's electricity demand grows and how the grid is prepared to take the additional energy. They smaller reactors are also cheaper and faster to implement but that will be possible around 2035 or 2036 according to our projections," Mr Juma said in an interview.

The nuclear power generation plan will now heavily rely on how fast the country will expand its manufacturing sector and encourage establishment of more industries capable of consuming huge levels of power.

Vision 2030 blueprint

Kenya Power has been struggling with depressed demand for electricity generated by its suppliers who have contracts compelling the monopoly to pay for the energy even when it is unable to sell it.

The demand headache has been instrumental in the postponement of future generation plans such as nuclear, which Kenya had first projected to have by 2020 when the Vision 2030 blueprint was first documented in 2008.

Nuclear energy, which is capital intensive is billed as among the best base load power sources to power industrial plants and heavy power consumers.

Such energy plants have useful lives of up to 80 years compared to the other sources, which barely go beyond 30 years but the fears around its potential danger in case of mismanagement has kept many worried about its suitability in Kenya.

Minimal chances

"Its like taking a flight, there are very minimal chances that it will crash and when it does the chances of survival are so slim. We have had this technology for more than 50 years and the few incidents around it have made valuable learning points and various improvements on the technology.

It is also a highly controlled sector and that is even why Kenya is taking longer to comply first before we are even ready to set up the first reactor," Mr Juma said.

In August, the agency hinted at building a $5 billion (Sh540 billion) nuclear power plant on a site around the coastal region funded by private investors but the small reactors concept is said to be cheaper than the projected amount.

The coast is ideal for the project due to the availability of water for cooling the reactors as well as the lower logistical cost associated with moving the equipment from the port of Mombasa after shipping.-Nation.

Has Facebook Suddenly Broken WhatsApp?

And so it begins. WhatsApp, the world’s leading secure messenger has suddenly and without warning confirmed its plans to become a commercial shopping site, a marketing tool for businesses to pitch their wares. This has been the risk from the moment Facebook acquired the platform all those years ago. Well, now all those fears that Facebook will break WhatsApp have become much more real.

Does it really matter, you ask, if businesses use WhatsApp to transact with customers in the same way Facebook Messenger and Instagram do? Is it such an issue if Facebook provides business-to-business marketing, cloud hosting and sales services to help it “continue building a business of our own, while we provide and expand free end-to-end encrypted text, video and voice calling” for its more than two billion users?

The answer entirely depends on your perspective as to what a secure messenger should be. There is already a deep-seated concern among many in the security community as to what goes on behind the scenes at WhatsApp—mining messaging metadata and collecting contact details, inevitable cross-platform marketing as the integration of Facebook’s Messenger, Instagram DMs and (eventually) WhatsApp becomes a reality. 

“This is how easy we think messaging a business should be,” WhatsApp says, “seeing a store’s catalog in a chat, adding an item to your cart, placing your order and getting fast responses to questions. We are looking forward to bringing these experiences to more people on WhatsApp!” Great. Can’t wait.

Is a secure messenger just that, a communications tool you can trust, or is it an extension of a broader social media architecture, one designed to commercialise your usage? For most users, this shift will not cause concern. But for those that want a clean interface and an unencumbered platform, it will be an issue. And that will include many of WhatsApp’s early adopters, attracted to its users-first approach.

The real challenge for WhatsApp is that it’s owned by Facebook. And while the social media giant now finds itself front and center in the battle with government to maintain end-to-end encryption, its continued drive into messaging will orient toward increasing commercial opportunities and not the preservation of a communication channel relied upon by two billion users to send tens of billions of messages daily.

We have just seen Facebook Messenger and Instagram tie up their back-ends, a long-promised cross-platform play that will ultimately extend to WhatsApp. And while we also know that Facebook is struggling to end-to-end encrypt Messenger, there are moves afoot to bring early-stage linkages between Messenger and WhatsApp apps.

Instagram is already a sales and marketing focused platform; Messenger has been designed to maximize the revenue potential from its userbase. Until now, though, WhatsApp has been clutter-free. Yes, businesses can be messaged by their customers. That’s fine. But there’s a difference between communications and commerce, and in reality, WhatsApp needs to decide what it wants to be.

Beyond its Facebook ownership, WhatsApp’s problem is that the messaging war is heating up. iMessage is a great alternative for Apple users texting within its ecosystem, and the likes of Telegram and Signal offer the same for everyone else. I have been clear that the combination of its security, functionality, ease of use and install base make WhatsApp the go-to messenger for everyday use. But its evolution into commerce platform, where businesses will push their wares at users changes that.

The $19 billion that Facebook paid for WhatsApp back in 2014 was always going to come home and bite at some point. That time might well be now. For many, this will make little difference. A billion-plus of you still use Facebook Messenger, with all its commercial compromises. But if you take your secure messaging seriously, which was the driver behind WhatsApp’s stellar growth in the first place, then this will matter.

If you haven’t yet installed a standalone secure messenger, then now is definitely the time. In the meantime the 50 million-plus businesses that communicate with customers on WhatsApp will have paid premium services options and WhatsApp’s long-touted shift into payments has become a lot more real.

WhatsApp falls behind its rivals when it comes to key messaging functionality. Multiple device access, for example, including the long-awaited iPad app. And then there’s end-to-end encrypted backups, resolving the vulnerability where WhatsApp’s recommended process to transfer chat histories to a new phone is unsecured. All of these updates are still “in development,” with beta code leaking from time to time. Meanwhile the development team seemingly have other priorities. 

WhatsApp’s mission has always been to provide simple, secure messaging, ad-free, clutter-free. WhatsApp co-founder Jan Koum welcomed the Facebook acquisition in 2014, saying “this will give WhatsApp the flexibility to grow and expand… You can still count on absolutely no ads interrupting your communication. There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product.”

Facebook’s mission, meanwhile, is monetization. “We want to make shopping easier for people and empower anyone,” it says, “to use our apps to connect with customers and grow their business. That’s why we’re creating new ways for people to shop on our apps and providing tools to help businesses sell online.”

The issue for WhatsApp users is that once the platform turns its attention to supporting the marketing and sales aspirations of its business customers, once that becomes its remit, then the data wizards will set to work. If Facebook is deriving revenue from businesses successfully exploiting WhatsApp, then its powerful data tools will be applied to growing those revenues. That’s the business model.

WhatsApp will clearly maintain its vast user base, even as its parent begins to properly and systematically commercialize the platform. WhatsApp isn't going anywhere. But this new shift to shopping, combined with its planned Instagram and Messenger integration, does seem to signal the beginning of the end of the simple messenger Mark Zuckerberg acquired from Brian Acton and Jan Koum all those years ago.-forbes

Tesla to recall nearly 50,000 cars from China over safety concerns

U.S. electric car manufacturer Tesla will recall almost 50,000 vehicles imported into China due to potentially faulty front and rear suspensions, China's market regulator said Friday.

The recall applies to 29,193 Model S and Model X cars imported into China from September 17, 2013 to August 16, 2017, as well as 19,249 imported Model S vehicles manufactured between September 17, 2013 and January 15, 2018.

Defects in the suspension found in both models could "increase the risk of accidents," the State Administration for Market Regulation said in a statement.

This is not the first time that Tesla ordered a recall from the Chinese market. The company announced in February the recall of 3,183 Model X vehicles in China, because of a potential issue that could make steering harder and increase the risk of an accident.

China is the world's biggest auto market and the main growth driver for many car manufacturers – especially for Tesla, which intends to benefit from the country's ambitious targets for reducing CO2 emissions.

Tesla's Shanghai factory – its first outside the United States – produces its mid-price, mass-market offering of the Model 3, which it plans to begin exporting to Europe this month.

The firm said Wednesday that profits in the past quarter had more than doubled and forecast that deliveries would hit 500,000 units this year.-news.cgtn

Pandemic makes world’s billionaires — and their advisers — richer

The world reels from the economic aftershocks of the coronavirus pandemic but for the Swiss bankers shepherding the fortunes of the world’s super-rich, it is boom time.

Switzerland’s dozens of other ultra-discreet, storied private banks — depositories such as Lombard Odier, once lender to Napoleon — have watched their clients’ assets surge this year. The larger ones are benefiting too: this week Zurich-based UBS, whose private bank operations are the world’s largest, reported its best quarterly earnings in a decade. Next week, its rival Credit Suisse is predicted a similar bonanza.

“[Our clients] did not panic during the sell-down,” Sergio Ermotti, UBS’s chief executive told the Financial Times. “Instead they used it to build up positions.”

The global economy is expected to contract 4.4 per cent this year — the sharpest contraction in modern history — throwing millions into poverty, according to the IMF. But the world’s billionaires have grown wealthier compared with 2019, according to data compiled by UBS. The trend, observed across regions from Brazil and China to the US and Germany, is further indication the pandemic could deepen inequalities.

Some bankers believe the last time the super-rich had it this good was in 2009, after the great financial crunch. As was the case then, the crisis has been as much of an investment opportunity as it has a threat. This time, the scale of the payday is far greater, thanks to governments and central banks’ quicker reaction to cushion the blow.

“Compared to '08, '09, you had a huge stimulus coming into the system straight away,” said Mr Ermotti, who stepped down this week after nine years leading the bank. “And there was already plenty of liquidity, with very little places for it to go. As a result, asset prices across financial markets have held up very well.” 

Less than a year ago, analysts across Wall Street fretted about the wild valuations of technology stocks. The pandemic has washed all such concerns away.

The net worth of Amazon chief executive Jeff Bezos rose by $73bn between mid-March and mid-September, powered by his holdings in the company, according to a report by the Institute for Policy Studies, a US think-tank.

Over the same period Mark Zuckerberg, chief executive at Facebook and Elon Musk, chief executive at Tesla and SpaceX, each enjoyed a net worth increase of more than $45bn each.

In China, the world’s fastest growing nursery for the super-rich, 257 people became billionaires this year. The country’s established tycoons were no less fortunate.

Jack Ma, founder of commerce platform Alibaba, increased his net worth by 45 per cent over the past 10 months. He is now worth $58.8bn, according to the Hurun Report, the benchmark monitor for the fortunes of China’s oligopoly. In the 22 years the report has been compiled, there has never been a year in which the wealth of those on it has grown so much.

The eye-catching successes of celebrity billionaires is half the picture. Across the board, the pandemic has made the rich richer. For many, the key was advice their bankers gave them right at the outset of the crisis: don’t sell.

“If you panicked and sold out in February or early March it would have been very difficult to come back because the market recovered so quickly,” says Nicole Curti, head of wealth adviser Stanhope Capital’s Swiss arm. Ms Curti recounts the case of two wealthy brothers that Stanhope advises: one sold down his portfolio as the pandemic gripped. The other kept his risk. The second has seen his assets grow 7 per cent this year. The first has trod water.

“It’s been hard emotionally, but the key to performance this year was to remain invested,” Ms Curti says.

Lombard Odier, which looks after SFr287bn of millionaire and billionaire money from around the globe, began telling its clients as early as February that they should be putting capital to work in panicked markets.

In January the bank tasked almost all of its quantitative analysts with a project to hoover up as much public data on economic indicators as they could: from traffic data in Asian cities to hospital figures in US states.

“It showed us very early on that despite lockdowns and despite some economic sectors being clearly disrupted — such as airlines — there was life in other sectors,” says Frédéric Rochat, one of Lombard Odier’s seven managing partners.

“We were very consistent on that since February. Don’t get out. Build hedges.”

One hedge in particular was pushed by many Swiss bankers and wealth advisers to their clients with great success this year — gold.

The precious metal hit a record high of $2,073 an ounce in August. Buying it was the corollary to the huge governmental stimuli that buoyed equity markets. Just as the rich benefited from public spending that kept stock market valuations stable, so too have they benefited from the fear generated by the huge government borrowing it has necessitated.

The theme is one that many of the world’s richest are expecting to continue as the true economic costs of the pandemic become clearer.

Soaring equity prices in tech and other niche sectors are the “short-term” trade of the crisis, says Mr Rochat.

“Longer term many investors are realising that — even more than in 2007 and 2008, when we started playing with these experimental fiscal economics. It is triggering a lot of questions now about what lies in the future . . . how inflation might make a comeback.”

'Gold reserves will boost Uganda's economy'

A country with high gold reserves boosts investor confidence in the market, which, ultimately, leads to more business decisions made.

'Gold reserves will boost Uganda's economy'

AGR's acting CEO Sharon Tem says bullion banking should be the next discussion after Uganda builds up gold reserves

GOLD

Uganda has been urged to widen its capacity to absorb refined gold in the country by looking to build its gold reserves at the Central Bank, among other things.

Sharon Tem, the acting chief executive officer of African Gold Refinery (AGR), said gold reserves at the Central Bank come with benefits such as increase in their value, and that Uganda would be in a better position if it further supported the gold refining industry with specified legislation. 

"Yes, President Museveni has always supported African Gold Refinery, but we need to take it forward and have the necessary legislation in place and then we can absorb this gold," she said.

Tem was speaking at a recent mineral wealth conference organized by the Uganda Chamber of Mines and Petroleum. AGR has been one of the main sponsors of the conference since 2015. 

Globally, central banks hold gold reserves as a means of backing their currencies. Simply put, gold reserves are held as a security to pay depositors. A country with high gold reserves boosts investor confidence in the market, which, ultimately, leads to more business decisions made.

Uganda's neighbor Tanzania is expected to be the first East African country to lead the way in building its own gold reserves. It is nearing completion of its gold refinery, from which it is expected to produce gold reserves for its central bank. 

In Uganda, the central bank backs up its currency with foreign exchange reserves, largely in United States dollars. Like gold, the dollar is said to be a safe haven during times of financial stress. 

If Uganda is to build its gold reserves, Tem advised that the country ought not to rely on foreigners to extract its gold, saying there is need to build local capacity.

She said the Ugandan government "should sponsor the surveys [exploration] of its gold and extract it itself. Once we own the gold, then it is easier to build up the gold reserves".

The AGR acting CEO said that once Uganda builds up gold reserves, the discussion should then move towards bullion banking, where commercial banks start trading in metal assets.

"Once the Central Bank has capacity to absorb more gold into their reserves, then we can take the conversation to bullion banking."

Subsequently, Tem added, manufacturers can move to hedging upon gold instead of land or machinery, to get bank loans for industrialization, which in the end greatly boosts the economy.

Chris Lubangakene, the assistant commissioner laboratories at the Directorate of Geological Survey and Mines, agreed with Tem.

"With the emergencies of gold refineries in the country, it is high time we started talking bullion banking within the country. [There is also a] need for a bill to regulate refineries," he said.

Nicholas Woods, a lawyer and representative of AGR, said there is need to fight the exportation of raw gold.

"Most of the refineries are exporting raw gold, which is really unfortunate. But this can be worked on. It is work in progress," he said while appearing at a recent talk show ahead of the conference.

"The gold sector is managed by international standards. There are standards like those in the London bullion market, and also guidelines from the Dubai sector.

"If all the licensed refineries in Uganda are following those standards, and are not smuggling raw gold on airline seats, then we shall be getting much more export earnings from the sector," said Woods. 

Meanwhile, Tem said that AGR has a huge capacity to produce gold bars.

She, however, said that most of refined gold they produce is exported out of Uganda because the local market is not sufficient to consume large quantities.

"If Government can embrace metal banking; if the Central Bank can absorb and back up metal banking and introduce it across the commercial banks - even as a reserve asset - we will not need to export gold.

"We need to have the capacity to absorb the gold that the refinery is producing daily."

AGR recently made its first set of gold coins, with the company stating that it will soon produce gold bars and jewelry.-newvision

Invest Wisely!

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INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Companies under Cautionary

Bindura Nickel Corporation

Padenga Holdings

Delta Corporation

Meikles Limited

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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