CANADA

Signs of wage growth cooling encouraging amid inflation fight: economists

TIFF MACLIN BOC

The Canadian Press
Wed, July 5, 2023 

TORONTO — Early signs of wage growth slowing are an indicator the Bank of Canada’s fight against inflation is slowly gaining ground, economists said, but it’s too soon to tell whether Canadians will regain the purchasing power they lost amid sustained price growth.

“If wage growth is going to cool, then we better see inflation come down even faster,” said Brendon Bernard, senior economist with job site Indeed.

Otherwise, workers won’t make up that lost ground, he said.

“It's a bit of a tug of war between the two.”

Wage growth is just one factor the Bank of Canada is eyeing in its ongoing fight against inflation, said BMO economist Shelly Kaushik.

“We are seeing a bit of a slowdown in broader economic activity. We are starting to see demand for labour, demand for some goods and services, starting to step down,” she said.

“That's all in line with what the bank wants to see, to help cool those inflation pressures.”

On Friday, Statistics Canada said the economy was essentially unchanged in April, neither growing nor shrinking.

Inflation peaked last June at more than eight per cent and has been moderating ever since, coming in at 3.4 per cent in May. The central bank is targeting roughly two per cent for inflation, said Kaushik, and ideally wage growth would more or less match inflation.

Wages grew 5.1 per cent in May, year-over-year, slightly slower than 5.2 per cent in April, the month wage growth surpassed inflation, according to Statistics Canada’s labour force survey.

Meanwhile, Statistics Canada’s latest report on payroll employment found that wage growth got stronger in April, but job vacancies declined.

The payroll report provides data at a small lag compared with the labour force survey, but often comes with more nuance, said Kaushik.

CIBC senior economist Andrew Grantham said in a note that the payroll report suggests demand for labour is continuing to cool in line with what the central bank wants to see.

“Evidence from Canadian employers suggests that the labour market may have been cooling earlier and quicker than the more timely labour force survey,” Grantham wrote.

Signs of slowing in the labour market are consistent with the broader economic slowdown expected in the coming months, said BMO's Kaushik.

“But I don't think that that easing of wages is the only thing that needs to happen for inflation to get back to target,” she cautioned.

“More broadly, we are seeing very strong demand still for goods and services, not just for labour. And so I think we need to see cooling in all of these aspects that are still running quite hot in order to get inflation back down to our target.”

Indeed has been tracking posted wages on Canadian job ads, and said wage growth on those postings has cooled somewhat at four per cent in May 2023 down from 5.3 per cent in August of last year.

In a report this week, the company said advertised pay has grown faster among low- and mid-paying job postings, mainly in areas where hiring conditions have been tight, including construction and manufacturing. At the same time, total Canadian job postings on Indeed have also slowed, the company said.

Indeed's Bernard said job postings in many areas are still above pre-pandemic levels, but have come down noticeably from earlier highs.

He said there seems to be hope for what he called “immaculate disinflation,” where inflation comes down but the labour market stays in good shape.

The Canadian Federation of Independent Business has also noticed some easing on wage pressures. In a Thursday report, the organization said businesses’ expectations for wage and price increases are cooling.

A report from the Bank of Canada on Friday seemed to support this. The central bank’s business outlook survey found that businesses continue to see larger-than-normal wage and price increases ahead, but their expectations are moving closer to what they were before the pandemic.

The data so far points to another potential hike in rates from the central bank in July, said Kaushik, though she said it's not a done deal.

Of course, many Canadians are seeking for their pay to catch up to last year’s breakneck inflation pace, said Bernard, which is why wage growth accelerated in the wake of rising prices.

But there is a worry among economists that if higher wage growth becomes sustained, it may actually drive inflation as businesses raise prices to deal with rising labour costs, Kaushik said — the dreaded wage-price spiral.

In a note Friday, RBC’s Nathan Janzen and Carrie Freestone said all eyes will be on the labour force survey at the end of this week as the central bank weighs its July decision.

“Though there are signs that labour markets are softening, the unemployment rate is still historically very low,” they said.

“Economic momentum has likely been too firm for the (central bank) to change course just yet.”

Rosa Saba, The Canadian Press

ECB Says Consumer Inflation Expectations Continue to Decline

Alexander Weber
Wed, July 5, 2023 

(Bloomberg) -- Consumer expectations for euro-area inflation continued to decline in May, adding to a steep drop in the previous month and coming as a relief for European Central Bank officials who are debating how much more monetary tightening is needed.

The anticipation for the next 12 months fell to 3.9% from 4.1% in April, the ECB said Wednesday in its monthly survey. For three years ahead, however, it remains unchanged at 2.5%, still above the central bank’s 2% target.

The decline in expectations for the coming period follows a retreat in the headline number for price gains in the currency bloc, mainly driven by falling energy costs. Underlying price pressures — the main focus of policymakers at the moment — have remained more robust, picking up again in June.

Several ECB officials have said they want to see a sustained decline in the measure stripping out items like energy and food before they can pause interest-rate hikes. Another increase in borrowing costs on July 27 is almost certain, but the following steps are more open.

Bundesbank President Joachim Nagel said earlier Wednesday that while the ECB hasn’t reached the end of its tightening path, “the question of how much further interest rates will have to rise cannot be answered at the present time.”

In its survey, the ECB also said:

Uncertainty about inflation expectations 12 months ahead fell to the lowest since March 2022

Nominal income expected to rise by 1.2% over the next 12 months, up from 1.1% in April

Expectations for economic growth for the next 12 months rose to -0.7% from -0.8%

Unemployment rate seen at 11% in 12 months, down from 11.2% in April

1929 REDUX

China Property Pain Worsens With Failed Auction, Sino-Ocean Rout


Bloomberg News
Wed, July 5, 2023




(Bloomberg) -- Fresh signs emerged Wednesday that China is facing yet more challenges in its property debt crisis.

Defaulted developer Shimao Group Holdings Ltd. failed to find a buyer for a $1.8 billion project at a forced auction, even at a heavy discount. Sino-Ocean Group Holding Ltd. saw its bonds tumble on news that the state-backed builder told some creditors it’s been working with two major shareholders on its debt load.

They’re the latest indications that China’s two-year real estate crisis is likely to remain one of the biggest drags on the world’s second-largest economy. A brief rebound after the nation scrapped Covid restrictions has quickly faded, with home sales resuming declines and property investment worsening — hurting markets ranging from iron ore to high-yield bonds.

“Investors are disappointed with the slow recovery of the housing market,” said Anitza Nip, Union Bancaire Privee’s head of fixed income research for Asia. “The recovery path appears to be even longer than what the market had initially anticipated earlier this year.”

The nation’s second-largest developer by sales, China Vanke Co., said last week that the home market is “worse than expected,” joining a chorus of investors and analysts who have become bearish on the sector. Goldman Sachs Group Inc. recently raised its projected default rate for Chinese high-yield property dollar bonds.

No buyers bid for Shimao’s land portfolio in Shenzhen, even though the asset was offered at a price 20% lower than its appraised value, according to results posted on online auction site JD.com.

That will likely add hurdles to Shimao’s debt restructuring, Bloomberg Intelligence property analysts Kristy Hung and Lisa Zhou wrote in a note. The developer’s onshore commercial property unit purchased the land — spanning an area equivalent to 34 football fields — in 2017 for 24 billion yuan ($3.3 billion), a record in Shenzhen at the time.

Its original plan was to build a landmark complex with a 500-meter skyscraper, but the project ran into trouble last year after the company missed some payments on high-yield trust products used to fund the construction. Citic Trust Co., which manages the trust project, seized the asset and sued Shimao’s unit, according to the auction documents and Shimao’s company filing.

Meanwhile, China Life Insurance Co. and Dajia Life Insurance Co. sent a working group to Sino-Ocean regarding a holistic risk mitigation plan, people familiar with the matter said. That added to concerns that even China’s state-backed developers aren’t immune to the industry’s unprecedented liquidity squeeze.

Sino-Ocean bonds slumped further Wednesday, putting prices at just half their start-of-week levels. A 2 billion yuan onshore note due next month, the company’s next maturity, plunged 34.6% and saw trading suspended twice. A Sino-Ocean dollar bond due 2024 fell to a record low at about 15 cents. Shares dropped as much as 4.4% in Hong Kong.

This week’s bond selloff at Sino-Ocean was kicked off by people familiar with the matter saying that a state-owned shareholder-led working group of the developer had engaged China International Capital Corp. to conduct due diligence on the firm.

China’s renewed housing slump has fueled expectations for the government to issue more stimulus measures. Adding to the economy’s woes, figures on Wednesday showed China’s services sector slowed in June.

Yet support measures have so far been modest, keeping pressure on developers facing mounting debts.

“Investors are concerned not only about credit risk on individual names now, but also about the sector as whole as the restructuring process remains slow,” UBP’s Nip said.

--With assistance from Pearl Liu.

Sino-Ocean Working With Major Shareholders on Debt Plan, Sources Say

Jackie Cai, Wei Zhou and Dorothy Ma
Tue, July 4, 2023

(Bloomberg) -- A state-backed Chinese developer facing mounting signs of concern in credit markets told some creditors Tuesday that it’s been working with two major shareholders regarding its debt load, according to people familiar with the matter.

State-owned China Life Insurance Co. and Dajia Life Insurance Co. sent a working group to Sino-Ocean Group Holding Ltd. regarding a holistic risk mitigation plan, said the people, who asked not to be named as the matter is private.

The builder has so far avoided debt defaults that have hit even some of its government-linked peers. But credit markets are indicating growing strains. HSBC Holdings Plc credit analyst Keith Chan downgraded Sino-Ocean to underweight on Tuesday, predicting the builder will halt offshore-debt servicing pending a holistic restructuring.

Sino-Ocean bonds slumped further Wednesday, putting prices at just half their start-of-week levels. A 2 billion yuan ($277 million) onshore note due next month, the company’s next maturity, plunged 32% and saw trading suspended twice. A Sino-Ocean dollar bond due 2024 fell to 17 cents, approaching its all-time low. Shares dropped as much as 4.4% in Hong Kong.

This week’s bond selloff was kicked off by people familiar with the matter saying that a state-owned shareholder-led working group of the developer had engaged China International Capital Corp. to conduct due diligence on Sino-Ocean.

The firm is adding to concerns that even China’s state-backed developers aren’t immune to the industry’s unprecedented liquidity squeeze as a housing crisis persists. Sino-Ocean’s woes follow a recent default by Central China Real Estate Ltd. and a debt setback last year by another state-linked peer, Greenland Holding Group Co.

Moody’s Investors Service and Fitch Ratings both dropped the company’s credit ratings deeper into junk territory last week, citing upcoming debt maturities and liquidity levels.

A representative at Sino-Ocean’s investor relations department declined to comment.

MONOPOLY CAPITALI$M

Borouge Surges as Abu Dhabi Envisions $30 Billion Chemical Giant


Eyk Henning, Dinesh Nair and Aaron Kirchfeld
Wed, July 5, 2023 

(Bloomberg) -- Borouge Plc surged the most in over a year as Abu Dhabi explores an ambitious plan to use the company to create a chemicals and plastics giant worth more than $30 billion.

Shares of Borouge jumped as much as 9.4% in Abu Dhabi trading Wednesday, the biggest intraday gain since June 2022. They were up 4.1% at 11:44 a.m. in the United Arab Emirates, giving the company a market value of about $23 billion.

Abu Dhabi and Austria’s OMV AG are discussing the valuation and ownership structure for a potential merger of Borouge and Borealis AG, people with knowledge of the matter said. The owners may reach the broad outlines for formal negotiations in the coming weeks, according to the people.

The mooted transaction would dovetail with a wider plan by the United Arab Emirates to attract investment and technology as well as build new industries and manufacturing capabilities. State-owned Abu Dhabi National Oil Co. has been expanding a refining and chemicals hub in Abu Dhabi to find additional outlets for its oil and natural gas production and make the plastics that go into consumer goods.

Vienna-headquartered Borealis is 75% owned by OMV, with the remainder held by Adnoc. Borouge is itself a partnership between Adnoc and Borealis.

Global Market

Combining the companies would give Borouge access to Borealis’s established European markets as well as growth from the US, according to Citigroup Inc. It could also help Borouge broaden its portfolio to include more olefin monomers and base chemicals, plus offer synergies on sales and distribution costs by uniting a global customer base, Citigroup analysts wrote in a research note.

“Any merger would likely boost Borouge’s current technological abilities and product offerings,” they said. “For Adnoc we see it deepening its presence in the petrochemicals value-chain as it looks to hedge against what may happen long-term in oil transport demand.”

The two parties are discussing a possible valuation of about $10 billion for Borealis, including its Borouge stake, the people said. After taking into account potential synergies, the overall valuation of the combined entity could exceed $30 billion, the people said. The exact value and ownership structure remain the two key hurdles for any agreement and may still change, they said.

Talks have been on-and-off for several months and could still be delayed or fall apart, the people said, asking not to be identified because deliberations are private.

Plastics Ambitions

Combining Borealis and Borouge would simplify the ownership structure and is likely aimed at creating a stronger competitor to chemical rivals like Sabic, Bloomberg Intelligence analysts Salih Yilmaz and Darja Lema wrote in a research note Tuesday.

The Abu Dhabi energy group and OMV are still discussing whether they would have the same stake in the merged entity, though they envision the two parties having equal control of the board and decision-making capabilities, according to some of the people.

Under one scenario, both the Mideast investor and Austrians would eventually hold similar stakes that are less than 50%, with free float on the stock exchange making up the rest, though Adnoc could end up with a slightly larger share, they said.

The Austrian side would also prefer to have the headquarters in Europe, where most of the operations are, even if the combined entity was listed in Abu Dhabi, the people said. Representatives for Adnoc and OMV declined to comment. Spokespeople for Borealis and Borouge referred queries to their owners.

Borouge went public last year in a $2 billion initial public offering. The company, which makes specialty plastics for manufacturing and consumer goods, reported $6.7 billion in sales in 2022. Borealis employs about 7,600 people and makes plastics, chemicals and fertilizers. It had total sales and other income of €12.2 billion ($13.3 billion) last year, according to the Borealis website.

Asia Expansion

A combination would give the companies significant scale to compete, simplify the ownership structure and create more flexibility to invest and expand in Asia, where demand for chemicals and plastics continues to rise. Still, given the various stakeholders, including governments, reaching a final agreement is not ensured.

The possible deal comes at a pivotal time for OMV, whose biggest shareholders are the Austrian government followed by Abu Dhabi. OMV last year announced plans to transform itself from one of eastern Europe’s biggest fossil-fuel companies to an integrated green enterprise built around chemicals, recycling and electric-vehicle infrastructure. This February, it confirmed a Bloomberg News report that it’s considering selling some exploration and production assets as part of that shift.

Adnoc has been busy hunting for deals in this space. Chief Executive Officer Sultan Al Jaber last month made a preliminary $12 billion takeover approach for German polymers producer Covestro AG, Bloomberg News has reported. The target’s management rejected the proposal as too low, though signaled it’s open to discussing the deal at better terms.

The Abu Dhabi firm is continuing its pursuit of a potential Covestro takeover and has been studying its next steps, according to people with knowledge of the matter. Adnoc is likely to decide as soon as the next couple weeks whether to increase its offer for Covestro, the people said. A spokesperson for Covestro declined to comment.

Adnoc, which pumps almost all the oil in OPEC member United Arab Emirates, plans to invest $150 billion to expand production capacity for crude, natural gas and chemicals. It’s also investing in low-carbon energy.

--With assistance from Archana Narayanan.

GLOBALIZATION 

Taiwan’s Powerchip Teams Up With SBI to Build Japan Foundry

Komaki Ito and Yuki Furukawa
Wed, July 5, 2023 




(Bloomberg) -- Taiwan’s Powerchip Semiconductor Manufacturing Corp. and investment firm SBI Holdings Inc. are teaming up to build a foundry in Japan to meet growing demand by manufacturers to source chips locally.

SBI will help raise funds for the new venture, which plans to begin with 40-nanometer and 55nm automotive and industrial chips and produce more advanced 28nm chips in the medium-to-longterm, according to SBI President Yoshitaka Kitao.

Details on the timing and location of the factory remain undecided, he said at a news conference Wednesday. The world’s leading contract chipmaker Taiwan Semiconductor Manufacturing Co. is building a plant in southwest Japan expected to go online as early as next year.

“The most important thing is how they will recover their investment,” said Masayuki Otani, chief market analyst at Securities Japan Inc. Shares in SBI closed up 2% after the announcement, while Powerchip rose 2.3%.

Tokyo-based SBI is eyeing the growing financing needs of chipmakers to create redundant production lines as manufacturers bow to political and investor pressure to diversify their suppliers. SBI will help the chip venture raise funds globally and consider measures including issuing municipal bonds and securing Japanese regional bank loans.

“Our priority is Japan,” Powerchip Chairman Frank Huang said, noting that the weak yen, lower labor costs and favorable financing now make Japan attractive as a production site.

Prime Minister Fumio Kishida is betting shifting geopolitical priorities will help Japan regain some of its long-lost leadership in semiconductors. Japan’s preparing billions of dollars in subsidies as part of a push to triple domestic production of chips by 2030. Such efforts are not enough, Kitao said.

“The government has spent ¥2 trillion over the past two years to develop domestic chip manufacturing capacity, but I think that’s too little,” Kitao said. “We want to help revive Japan’s chip industry.”

--With assistance from Takako Taniguchi.

CRIMINAL CAPITALI$M; IRONY

Fake Rolex watches make up half of the luxury replica market, exec says

Phil Rosen
Wed, July 5, 2023 


Half of replica watches are Rolex replicas, according to Watchfinder's CEO.


The exec told Bloomberg that the brand sees the highest demand on replica markets.


Meanwhile, prices for luxury watches have fallen near two-year lows on secondary markets.

The replica watch market is getting more and more sophisticated, and roughly half the market is comprised of Rolex fakes, according to the chief executive of Watchfinder & Co.

In an interview with Bloomberg on Tuesday, CEO Arjen van de Vall said up to 10% of the watches received from sellers last year were found to be knockoffs, with facsimile Rolexes showing up the most often. The company has been buying and selling pre-owned watches since 2002.

"Rolex is the most aspirational luxury watch brand and the highest demand, hence, it's the most replicated," van de Vall said.

Previously, Watchfinder, which is owned by Swiss luxury corporation Richemont, was able to identify roughly 80% of fakes by sight alone, van de Vall told Bloomberg. Now, however, that proportion has dropped to just 20% since replicas are getting more convincing.

But it's not just Rolex that's showing up in the knockoff market.

"You see replica or clone watches — very, very high quality watches — of virtually all of the big luxury brands," van de Vall told Bloomberg. "The whole gamut."

The luxury timepiece market at large has tumbled over the last year as the global economy slows down and wealthy buyers tighten their belts. Bloomberg's Subdial Watch Index, which tracks the 50-most traded pre-owned watches, has dropped nearly 20% since last June.

For example, a second-hand Audemars Piguet Royal Oak Jumbo Ultra Thin has declined by more than 35% over the last year, and now it sells for an average of $71,692.

President Joe Biden has stated multiple times that he doesn't anticipate a recession, but Wall Street forecasters aren't so certain. JPMorgan strategists see a 23% chance that the US skirts a downturn, while Bank of America's top economist Michael Gapen expects a recession to strike by year-end.

TAKE OFF BOTH WORK 3 DAYS

We asked if people want to be in the office Mondays, Fridays — or neither. A big landlord says 5-day workweeks are dead.

Lakshmi Varanasi
Wed, July 5, 2023 

With the return-to-office debate heating up, Insider polled readers on LinkedIn to see whether they like going into the office on Mondays, Fridays, or neither.Getty Images

One of New York City's biggest landlords said the office is dead on Fridays and maybe Mondays, too.


Data on office occupancy rates also shows Mondays and Fridays are the most vacant days of the week.


We asked Insider readers on LinkedIn to tell us whether they agree. Here's what they said.

With major companies like Amazon, Disney, Salesforce, and Meta trying to wrest reluctant workers back to the office, the corporate world is grappling with a big question: Are we ever returning to the office five days a week?

Insider previously reported that Steven Roth, the chairman of Vornado, one of New York's biggest private landlords, said Mondays in the office are "touch-and-go" — and Fridays are likely "dead forever."

Meanwhile, a report from Placer.ai, a firm that tracks mobile-phone data from 800 sites across the US, found that those who come into the office are indeed more likely to do so in the middle of the week. They appear to be avoiding the workplace on Mondays and Fridays, according to the data.

Insider asked readers on our LinkedIn page if they're going into the office on Mondays and Fridays, Mondays or Fridays, or neither.LinkedIn

So Insider polled readers via LinkedIn to see if they agreed with the stats. We asked: "Given the choice, do you go into the office on Mondays and Fridays?"

As of Monday, just over 16,000 people had already responded, and the results — not scientific, of course, but an interesting snapshot — corroborate Roth's contention and the Placer.ai data.

A little less than half of the respondents said they wouldn't go into the office on either Mondays or Fridays. Another 29% said they would go in on either a Monday or a Friday — but not both. And only 22% said they would go in on both Mondays and Fridays, given the choice.

Why do some people choose to come in on a Monday, a Friday — or both of the days?

An academic administrator wrote that "the commute is easier on both days because less people work those days, it's more peaceful in coffee shops as well.

Steven Roth, the chairman of one of New York's biggest private landlords, Vornado, said Mondays in the office are "touch-and-go" and Fridays are likely "dead forever."

Misha Friedman/Getty Images

And an academic based in the UK agreed on the ease of a Friday commute: "Love working Fridays ... nice and quiet and commute is easy. Also sense of relaxation as the weekend approaches," he wrote. "Hate Monday working though — for the converse reasons."

Robert Parlaman, who works as a Facilities and human resources coordinator at Levolor, a company that manufactures window coverings headquartered in Atlanta, told Insider via LinkedIn message that he never had the option to work from home even during COVID-19.

On the one hand, the mandate has helped him feel more connected his job, he said. "I go into the office Monday-Friday. I enjoy being at the office and feel more connected to the company I work for when I'm in the office," he wrote in the comments section of Insider's poll on LinkedIn.
Offices are less than half full across the US

Offices are less than half full across the US

City	Wed 6/14	Wed 6/21
New York metro	48.1%	50%
San Jose metro	39.4%	38.1%
San Francisco metro	44.4%	45.4%
Chicago metro	54.7%	54.0%
Washington D.C. metro	46.9%	46.3%
Philadelphia metro	40.9%	41.2%
Houston metro	60.6%	60.8%
Austin metro	58.3%	58.2%
Dallas metro	54.5%	54.4%
Average of 10	49.7%	49.8%
Los Angeles metro	49.6%	49.7%

Source: Kastle Systems building swipe data from 2,600 buildings in 136 cities

But in an ideal world — or at least one with more choices — he'd like to go in just four days a week. "I would choose Monday-Thursday in-office, and the office CLOSED on Fridays," he said. "4-Day work weeks over 5-Day Hybrid schedules," he suggested.

A four-day workweek seems a long way away for most US workers, but still less than half are coming into offices.

Kastle Systems — which tracks when employees swipe their badges at office entrances — found that the average office occupancy rates across the week for the country's 10 major metro areas were just under 50% for the weeks beginning June 14 and June 21.

1933

CRIMINAL CAPITALI$M

Odey Faces ‘Fit and Proper’ Test as UK’s FCA Contacts Police

FCA Contacts Police Over Odey Sexual Assault Allegations


Jonathan Browning
Wed, July 5, 2023 

(Bloomberg) -- The UK financial regulator said it’s in contact with the police about allegations of sexual assault against Crispin Odey as it investigates whether the hedge fund manager passes its ‘fit and proper’ test to operate in the financial industry.

The Financial Conduct Authority said that as some of the allegations are “potentially criminal” it has been in touch with the police, according to a July 3 letter to UK lawmakers. The FCA is focusing on allegations that Odey dismissed the executive committee at Odey Asset Management for “an improper purpose” and said its enforcement arm is leading the investigation.

@tommackenzietv asks Sarah Pritchard from the Financial Conduct Authority why it's "taken so long" https://t.co/qee9hKfKcm pic.twitter.com/N2jlKJK0K4

— Bloomberg UK (@BloombergUK) July 5, 2023

Odey denies the allegations. A spokesman for Odey Asset Management declined to comment. London’s Metropolitan Police didn’t immediately respond to a request for comment.

The watchdog is responding to a barrage of questions from politicians over its handling of the investigation into the hedge fund manager as well as its wider work on non-financial misconduct. It’s the first public comment by the regulator since it started looking at Odey’s conduct almost two years ago.

Odey Asset Management was plunged into turmoil last month after the Financial Times published multiple allegations of sexual harassment and assault by Odey. Numerous banks have cut ties with his firm and investors have raced for the exits, forcing the company to shut funds and suspend several others.

The regulator said that Odey Asset Management itself is also being investigated over whether it failed to have a “functional and compliant governance structure.”

Fit and Proper

A fit and proper test gives the regulator a chance to assess an individual’s “honesty, integrity and reputation; competence and capability; and financial soundness,” but the regulator has been slow to issue banning orders for non-financial misconduct without a criminal conviction. It has so far banned seven people on that basis — all but one involved a conviction or caution.

Odey was acquitted of a sexual assault allegation at a criminal trial in 2021 and the FCA said that in cases where an individual has been acquitted of criminal charges, there may be “significant challenges” using the same evidence to justify using their own powers.

“Regulatory action or an investigation of regulatory matters is not intended as a replacement for, or alternative to, a police investigation or criminal prosecution,” the FCA’s Chief Executive Nikhil Rathi said in the letter. “There may be occasions where it is appropriate for us to keep our investigation on hold while the police or another authority considers the relevant matters.”

The regulator has also been investigating allegations that Odey dismissed the executive committee at the firm that bears his name.

“We are investigating whether Mr Odey is a fit and proper person to work in financial services and whether Mr Odey has failed to comply with the FCA’s conduct rules relating to integrity and acting with due skill, care and diligence,” Rathi said in the letter.

Rathi also said that lawyers for Odey had threatened to bring a court challenge to the FCA’s probe. “We responded robustly to this,” the executive added.

--With assistance from Nishant Kumar.

OBS Group Nearing Deal for Bayer Pharma Assets in Pakistan, Sources Say


Faseeh Mangi
Wed, July 5, 2023 



(Bloomberg) -- Pakistan’s OBS Group is nearing a deal to acquire pharmaceutical assets in the country from Bayer AG, according to people familiar with the matter.

The Karachi-based pharmaceutical maker is close to buying a manufacturing facility in Lahore and 12 pharmaceutical brands for about 7 billion rupees ($25 million), said one of the people, asking not to be identified as the information is private. OBS Group has incorporated a new unit that is partially owned by employees for the acquisition, they said. The transaction could close in the coming days, the people said.

Following the Bloomberg News report, shares of AGP Ltd., a subsidiary of OBS Group that also manufactures and markets pharmaceuticals, climbed to their highest level in five months.

Bayer is in the process of transferring its pharmaceutical and consumer health manufacturing plant based in Lahore, as well as selected pharmaceuticals and consumer health brands, to an international diversified company with a strong presence in Pakistan, according to a statement in response to a query from Bloomberg News. Impacted Bayer Pakistan employees have already joined the acquirer with effect from July 1, with a two-year job guarantee and bonuses, the statement showed.

Bayer representatives declined to comment on the name of the buyer or size of the transaction. Representatives for OBS didn’t respond to requests for comment.

The development comes as the South Asian nation is going through its worst economic crisis, with record interest rates and sky-high inflation. Shell Plc, one of the oldest multinational companies with operations in Pakistan, is also selling its stake in its local unit, while Sanofi divested majority ownership of its local arm last year for about $23 million.

Read More: Pakistan’s Politics Seen Key to Deliver on New IMF Aid Program

Drug prices in Pakistan are fixed and regulated by the government, which pharmaceutical companies have cited as a hurdle to their operation in the country.

--With assistance from Naomi Kresge.

ABOLISH SCOTUS

Federal agency powers in the crosshairs at the US Supreme Court


Andrew Chung and John Kruzel
Tue, July 4, 2023 

Court's conservatives skeptical toward agency powers


Cases involve securities and consumer protection agencies

WASHINGTON, July 4 (Reuters) - Even as it has ushered in sweeping changes to American law and society - on abortion, gun rights and affirmative action - the U.S. Supreme Court has kept tabs on another issue of keen interest to its conservative majority: keeping federal regulatory power in check.

The issue will figure prominently during the court's next term, which begins in October, as the justices already have agreed to decide several cases that could curtail the authority of U.S. agencies to issue regulations and enforce laws in areas ranging from finance to fisheries.

The cases involve what has come to be known as the "administrative state," the agency bureaucracy that interprets laws, crafts federal rules and implements executive action. The court's conservatives, with a 6-3 majority, in recent years have reined in what they viewed as governmental overreach by the Environmental Protection Agency (EPA) and other agencies.

"Next term is going to be a huge one at the court for cases involving the administrative state," said Brianne Gorod, chief counsel at the Constitutional Accountability Center liberal legal group. "These cases all represent challenges that are part of a long-running, multifaceted conservative attack on the administrative state, and nothing less than the ability of the federal government to function effectively is at stake."

The court, in a summer recess after ending its last term on Friday, has agreed to hear in its coming term cases challenging the constitutionality of the funding structure for the Consumer Financial Protection Bureau (CFPB) and the in-house enforcement regime at the Securities and Exchange Commission (SEC). It also could overturn a decades-old precedent that helps federal agencies defend their regulatory actions in court.

Legal experts see potential trouble ahead for the agencies.

"It's harder for the court to rule that the agency's composition or funding mechanism is unconstitutional without declaring a lot of what the agency has done to be illegal," said Jonathan Adler, a professor at Case Western Reserve University School of Law in Cleveland.

The court's conservatives have proven willing to make vast changes to the law. Last year, they ended the recognition of a woman's constitutional right to abortion and expanded gun rights. Last week, they rejected affirmative action policies used by many universities to boost Black and Hispanic student enrollment and allowed certain businesses to refuse services for same-sex weddings.

They also last week blocked President Joe Biden's student debt relief plan and in May embraced a stringent new test for declaring wetlands protected under a landmark anti-pollution law - rulings that limited the role of the U.S. government's executive branch and curtailed its regulatory power.

PAYDAY LOANS

In the upcoming CFPB case, the justices will hear the agency's appeal of a lower court's ruling that its funding mechanism violated a constitutional provision giving Congress the power of the purse. The case involves a lawsuit by trade groups representing the payday loan industry against the agency that enforces consumer financial laws.

In the latest legal attack on the SEC, the financial markets regulator, the justices will hear a Biden administration appeal of a lower court's decision striking down the agency's enforcement proceedings as a violation of the constitutional right to a jury trial. The case involves a hedge fund manager who the SEC found committed securities fraud.

The court will also weigh a challenge by New Jersey-based fishing companies to a federal regulation requiring commercial fishermen to help fund a program monitoring herring catches off New England's coast. The companies asked the court to overturn its own precedent that calls for judges to defer to federal agency interpretation of U.S. laws, a doctrine called "Chevron deference."

For the conservative justices, cases such as these often raise a central concern: the constitutional principle of separation of powers among the U.S. government's executive, legislative and judicial branches.

"This is a court that is very interested and comfortable with separation-of-powers cases and is very interested in opining on it," said attorney Sarah Harris, an administrative law expert who has argued cases before the justices.

The court's embrace of the "major questions" doctrine has provided a seismic shift in its approach toward agency power. This judicial approach gives judges broad discretion to invalidate executive branch actions of "vast economic and political significance" unless Congress clearly authorized them.

The court's conservatives this year invoked the doctrine to invalidate Biden's student debt relief and last year to curb EPA authority to reduce carbon emissions from power plants. In a dissent in the student loans ruling, liberal Justice Elena Kagan called the doctrine "made-up."

University of Texas law professor Thomas McGarity, a critic of the doctrine, said the court's approach is diminishing "the agencies to which Congress has assigned the responsibility for protecting people, for protecting the environment and for protecting consumers."

(Reporting by Andrew Chung in New York and John Kruzel in Washington; Editing by Will Dunham)

AMBERGRIS
A professor trying to solve the death of a beached sperm whale ended up discovering 21 pounds of whale-vomit worth half a million dollars

Matthew Loh
Wed, July 5, 2023 

A sperm whale and two young ones swimming under the surface, on November 10, 2011 in Mauritius Island, Indian Ocean.Alexis Rosenfeld/Getty Images

A university professor investigating the death of a beached sperm whale found $544,000 of ambergris.

The digestive substance is extremely rare, and highly valued in the perfume market.

The professor said he wants to sell the ambergris and give the profits to the town he found it in.

A scientist in the Canary Islands discovered a 21-pound lump of whale vomit worth around $544,000 in the intestines of a beached sperm whale.

Antonio Fernández, a professor from the University of Las Palmas, was inspecting the dead sperm whale at Nogales beach on May 21 when he found a huge clump of ambergris in it, per reported local news outlet Canarias7.

Ambergris is a rare and highly sought-after secretion produced in the digestive systems of sperm whales, and is typically only found in around one out of 100 specimens. It's valued in the perfume industry for its distinct odor and scarcity, and is often called "floating gold" or the "treasure of the sea."

Scientists believe the substance is excreted by sperm whales when they eat cephalopods, such as squid and octopus, and cannot digest the beaks of their prey. These remains are often vomited out, but sometimes they can mix with a waxy substance in the intestines to produce ambergris.

Fernández told Canarias7 that he was investigating the cause of death for this particular sperm whale, and was checking its colon.

"What I took out was a stone about 50 to 60cm in diameter weighing 9.5 kg," he said, according to The Guardian. "The waves were washing over the whale. Everyone was watching when I returned to the beach but they didn't know that what I had in my hands was ambergris."

Fernández, who's also the director of his university's animal health and food safety institute, said the whale died of sepsis caused by the chunk of ambergris, per The Guardian.

The professor also told Canarias7 on June 20 that he planned to give the valuable lump to local authorities in La Palma, so that it could be sold to help those affected by a devastating volcano eruption in 2021.

In 2021, a group of fishermen in the Gulf of Aden scored a hunk of ambergris worth around $1.5 million, which they sold to a buyer in the United Arab Emirates. The 35 fishermen purchased houses, cars, and boats from their profits, the BBC reported.

Commercial trade of ambergris is strictly regulated in some countries, including Australia and the US, which bans trade of the substance over concerns of exploitative whaling.