• US Shale Pumps More Cash into Aging Oil Fields, Rystad Says

(Bloomberg) -- US independent shale oil producers plowed money into output growth in the second quarter at the fastest rate in three years, a departure from the fiscal discipline that’s been the industry’s focus, according to a report from research firm Rystad Energy.

Reinvestment rate surged to 72% in the second quarter, highs not seen since 2020, according to the study focusing on 18 companies that collectively account for about 40% of US shale output.

THE NEED FOR CCS TO FRACK OLD WELLS
The cash injection comes as the steep drop in output from US shale wells is turning out to be worse than expected, Rystad notes. The depleted fields have forced oil drillers to work even harder to keep production from slipping, research firm Enverus said in a separatstudy earlier this month.

But rising reinvestment rate is unlikely to last. “As inflationary pressures ease in the coming quarters and oil prices rebound, this spike will be a short-term anomaly instead of a shift of strategy,” said Matthew Bernstein, senior upstream analyst at Rystad. This means shale companies will likely stay focused on paying out shareholders in the form of buybacks and dividends as they have in the past two years.

 Bloomberg Businessweek

CAPTIAL REVOLTS AGAINST ESG
Vanguard joins BlackRock, cuts support for shareholder items on climate, social issues

Mon, August 28, 2023 



By Ross Kerber

(Reuters) - Vanguard supported just 2% of shareholder resolutions on environmental and social issues at U.S. companies this year, down from 12% last year, the top mutual fund manager said on Monday, fueling a drop in investor backing overall.

Vanguard said the declining support rate reflected a rising number of proposals - 359 this year, up from 290 a year ago, coupled with improvements in company disclosure that it said made many resolutions unnecessary.

With $8.2 trillion under management, Pennsylvania-based Vanguard has become a leader in deciding whether companies should take steps like curbing greenhouse gas emissions or reviewing their workforce diversity.

Support for shareholder resolutions calling for such steps has declined at U.S. companies this year, with top asset manager BlackRock saying it backed the mostly-advisory measures just 7% of the time, down from 22% last year.

Vanguard's drop in support was even steeper. Like BlackRock, Vanguard noted new securities regulations that make it harder for companies to leave questions off their ballots. In a note on its website, Vanguard also said many resolutions sought changes that might not be needed.

"In some cases, we identified that although a proposal raised a material risk at the company in question, the board had already demonstrated appropriate oversight of the risk and evidenced its oversight through robust disclosure or had practices in place that substantially fulfilled the proposal’s request," Vanguard said.

Vanguard and BlackRock have been under fire from conservative U.S. politicians who say they have over-emphasized sustainability issues, and from liberal activists who say the firms do too little to address global problems.

Like BlackRock, Vanguard did not address how the criticism may have shaped votes this year but said its approach to evaluating shareholder proposals "has been consistent over time."

(Reporting by Ross Kerber; editing by Diane Craft)

GREEN CAPITALI$M

US Companies Eye Expansion In This Burgeoning Cannabis Market, See Global Potential


Nicolás Jose Rodriguez
Mon, August 28, 2023 


Entre Ríos, one of Argentina's provinces and a vibrant economic hub, played host to the second Entre Ríos Trade Forum from July 10th to 12th, 2023, promoting a diverse array of economic opportunities for the cannabis industry.

Roughly 29 foreign companies engaged in more than 180 meetings with 46 local enterprises and organizations to discuss operations valued at an estimated $149 million. Within the cannabis sector, collaborations worth approximately $12 million were assessed, a significant success given that this marked the inaugural occasion for deliberating investment options in cannabis.

This achievement is particularly noteworthy considering the ongoing depreciation of the local currency, which amplifies the disparity in exchange rates and enhances the value of the US dollar within the country for those seeking asset acquisition.

The forum was led by the Advanced Leadership Foundation in partnership with the provincial government and the Inter-American Development Bank (IDB), and the teams at Benzinga Cannabis and El Planteo were received as special guests.

"These are public policies that transcend administrations," said Governor Gustavo Bordet at the event, which included informative seminars, networking, and matchmaking sessions.

CCCBanner

Hemispheric Cooperation

In his speech, the governor thanked the Advanced Leadership Foundation (ALF), an international nonprofit based in Washington D.C., and its president Juan Verde, "who is constantly collaborating with the province to identify business opportunities.”

The ALF is empowering over 10,000 future leaders from different countries through various programs and trade missions, to drive economic development and enhance bilateral trade relations.

Verde emphasized "the large number of strategic sectors in the province that are of interest to foreign companies" and mentioned, among others, the agricultural sector, fruit industry, food sector, and technology sector, in which he underscored "the enormous potential that local companies have to generate technological advancements for American businesses."
Entre Ríos: A Strategic Gateway for Cannabis Trade and Biotech Innovation

Known for its highly diversified and globalized specialty foods sector, Entre Ríos' strategic geographic location has primed it to become a significant cannabis hub. The province sits strategically between Uruguay and Argentina, where cannabis is legal, opening a window of opportunity for future trade dynamics.

The region's already established role as a primary exporter of commodities bolsters its potential and offers investors the installed capacity to produce cannabis at scale under the strictest pharmaceutical standards.

In addition, the event showcased Entre Ríos' quality of human resources, particularly in the biotechnology sector. The locality of Oro Verde, known for its biotech hub, stood out as a focal point. Companies used the forum to present their business models, pitch for investments, and glean insights from industry experts.
Connecting US Innovators with New Markets: Exploring Opportunities in Entre Ríos

The forum also created a bridge between US innovators and solution providers, aimed at conquering new markets and diversifying the province's productive matrix. This diversification is pivotal for Latin American countries, as it boosts export value, enhances competitiveness, and inflates salaries and revenues.

Participants benefited from the initiative's exclusive advantages. Sector-specific market analysis, comprehensive guides on conducting business in Entre Ríos, and customized business matchmaking services were among the key benefits offered to the American companies in attendance.

Eric Clifton, founder, and CEO of Orison, an American energy storage company, highlighted the importance of the mission to find new production points. "It allowed us to find partners who can help us and whom we can also help to reach the US," he stressed.

Opportunities were ripe in agriculture and agro-industries, tourism, metal manufacturing, the burgeoning cannabis industry, knowledge-based economy businesses, and renewable energy.

The forum highlighted the province's appealing combination of a highly qualified workforce, political stability, and favorable tax incentives, factors that have been driving its international exports and foreign direct investment over the past decade.

As the gateway to 43 million consumers and boasting a world-class labor force, Argentina – and Entre Ríos in particular – is emerging as an attractive prospect for US companies looking to expand abroad.

If you want to find more investment opportunities, strategic partnerships, and key investors, do not miss, the upcoming Benzinga Cannabis Capital Conference, returning to Chicago on September 27 and 28. This is your opportunity of attending an event where deals get DONE!
Related News

Government-Funded THC-Rich Cannabis Strains Debut In Argentina: Why This Could Shake Up Marijuana Markets


Argentina: Government Legalizes Self-Cultivation, Sale Of Medicinal Cannabis

Equinor buys Carbonvert's stake in Bayou Bend carbon capture and sequestration project

With nearly 140,000 gross acres of pore space for permanent CO2 sequestration and gross potential storage resources of more than 1 billion metric tons, Bayou Bend could be one of the largest CCS sites in the U.S. for industrial emitters, Equinor said. The site includes nearly 100,000 gross acres onshore in Chambers and Jefferson counties plus approximately 40,000 gross acres offshore Beaumont and Port Arthur.

COURTESY EQUINOR

By Olivia Pulsinelli – Assistant managing editor, Houston Business Journal
Aug 28, 2023

Denver-based Carbonvert Inc. has sold its stake in the Bayou Bend carbon capture and sequestration project along the Texas Gulf Coast to Norway-based Equinor ASA (NYSE: EQNR).

Bayou Bend CCS LLC is a joint venture with subsidiaries of Houston-based Talos Energy Inc. (NYSE: TALO) and California-based Chevron Corp. (NYSE: CVX). Chevron owns a 50% stake in the JV, and Talos owns 25%. Chevron is the operator.

Equinor acquired all of Carbonvert's 25% stake, the companies said Aug. 28. Financial terms were not disclosed.

The initial JV between Talos and Carbonvert was selected as the winning bidder for the Texas General Land Office's Jefferson County carbon storage lease offshore Beaumont and Port Arthur in 2021. It was the first offshore lease in the U.S. dedicated to carbon dioxide sequestration, according to the companies and the GLO. Chevron joined the JV in May 2022.

"Commercial CCS solutions are critical for hard-to-abate industries to meet their climate ambitions while maintaining their activity," Grete Tveit, Equinor's senior vice president for low-carbon solutions, said in an Aug. 28 press release. "Entering Bayou Bend strengthens our low-carbon solutions portfolio and supports our ambition to mature and develop 15 million-30 million tonnes of equity (carbon dioxide) transport and storage capacity per year by 2035. Our experience from developing carbon storage projects can help advance decarbonization efforts in one of the largest industrial corridors in the U.S."

With nearly 140,000 gross acres of pore space for permanent CO2 sequestration and gross potential storage resources of more than 1 billion metric tons, Bayou Bend could be one of the largest CCS sites in the U.S. for industrial emitters, Equinor said. The site includes nearly 100,000 gross acres onshore in Chambers and Jefferson counties plus approximately 40,000 gross acres offshore Beaumont and Port Arthur.

During Talos’ second-quarter earnings call, CEO Timothy “Tim” Duncan said the company plans to drill its first offshore stratigraphic well for Bayou Bend in the second half of the year. Chevron will operate a stratigraphic well onshore by the first half of 2024.

"We continue to make significant progress in developing Bayou Bend, which we believe will be a premier regional carbon storage hub solution for Texas’ largest industrial region," Robin Fielder, Talos' executive vice president of low carbon strategy and chief sustainability officer, said in the Aug. 28 release. "Equinor is a welcomed addition to the partnership. Their experience and track record further enhance the joint venture, which is committed to developing safe, reliable, cost-effective lower-carbon solutions while enabling continued economic growth."

This is the first low-carbon project Equinor has announced on the Gulf Coast and thus a significant milestone for the company, said Chris Golden, senior vice president and U.S. country manager. Earlier this year, Upstream News reported that Equinor left a decarbonization project in Appalachia in favor of a potential carbon capture project on the U.S. Gulf Coast after the Inflation Reduction Act was signed.

"Alongside our upstream production and offshore wind developments, we’re strengthening our position as a broad energy company and expanding our footprint in the Gulf region," Golden said in the Aug. 28 announcement.

Equinor manages key strategic and innovative initiatives and its offshore exploration and production activities from its Houston office, according to the company's website.

What we know so far about a mysterious Tiger Global memo that’s making its way around Wall Street

Anne Sraders, Jessica Mathews
Mon, August 28, 2023 

Amanda L. Gordon—Bloomberg via Getty Images

Twitter threads. Texts. Emails. Phone calls. All asking: Have you seen the Tiger Global memo?

Last week, finance circles were abuzz over an anonymously-written and damning memo that’s being sent around. The document, which extensively cites anonymous sources, details some pretty aggressive, and unsubstantiated, accusations against mega hedge fund and startup investor Tiger Global regarding its performance and personnel. While we reviewed the memo ourselves, we’ve decided not to print any of the specific accusations and details, as we have been unable to verify them by press time. Tiger sent a letter to investors on Friday, Forbes first reported, acknowledging the memo, but saying it is “packed with lies,” and that the firm was being “targeted with a series of information attacks.” The firm blamed the memo on a disgruntled former employee, according to the letter seen by Forbes.

The memo does include mention of some issues that have already been publicly reported, including a controversy around a reported large settlement with a female employee, and Tiger’s reported struggles with raising its new fund. The memo is also being circulated far and wide among investors and founders, leading to much speculation over who wrote it—and why. Tiger declined to comment to us beyond the contents of the letter to investors.

“It’s in everyone’s inbox right now,” one venture investor said, adding that founders have been texting them about it. Another fund manager told us: “I think I was sent this by six or more people in the last 48 hours,” they said Friday.

Interestingly, the memo is being billed as a draft of a big exposé from a New York media brand (The New Yorker). But we confirmed that isn’t the case. A spokesperson for The New Yorker told us: “This is not a draft New Yorker article, and we do not know its provenance.” The fund manager told us a similar memo was sent to them six to eight months ago, though The New Yorker was not mentioned in that one.

And from our perspective, as journalists, we highly doubt this was written by anyone in our field. There are some tells, like the fact that the writer doesn’t explain an “asset-liability duration mismatch,” the kind of jargon journalists almost always spell out to a general audience. Not to mention, it’s quite unheard of for drafts of stories to be sent around except to one’s editors. While it’s not yet confirmed who wrote or passed the memo around, one thing is clear: someone has it out for Tiger.

The memo comes at a time when Tiger is reeling from the cratering market. The hedge fund plowed massive amounts of cash into startups in 2021 at a rapid clip, investing at high valuations without taking board seats at companies. Now, the private market is going through a correction, and Tiger has struggled to raise more funding to invest in private companies. Meanwhile, the fund has been trying to offload swaths of its stakes in startups; and The Information reported last week that Tiger is nearing a deal to sell part of its stake in buzzy artificial intelligence startup Cohere at a $3 billion valuation—a boost from Cohere's most recent raise at a roughly $2 billion valuation in June. (Tiger first invested in 2021 in a $125 million Series B round, although the valuation wasn’t disclosed, per PitchBook.) Per reports, Tiger’s performance has recovered somewhat this year from severe lows in 2022, though its public funds are still underperforming the rebound in public tech stocks so far in 2023. Tiger, which has backed prominent startups like Instacart, Databricks, and OpenAI, is subject to the same kind of valuation headwinds the rest of the industry is facing. Its most recent private fund had reported a 20% paper loss as of December 2022, The Information reported in April.

Whatever way you look at it, the mysterious memo has sparked fear in other fund managers.

“This is a new form of meme warfare that every fund should be petrified of,” the fund manager says. “You can essentially create longform, unsubstantiated claims that can go viral to every major decision maker and to refute them is to only give them more credibility. That’s scary.”

See you tomorrow,

Anne Sraders and Jessica Mathews
Email: anne.sraders@fortune.com and jessica.mathews@fortune.com

Australian retailer plots to win over British shoppers after Wilko collapse

Hannah Boland
Mon, August 28, 2023 

Kmart, Australia’s biggest non-food retailer, plans to expand into the UK and French markets - Jin Lee/Bloomberg News

An Australian discount retailer is plotting a push onto Britain’s high streets as it looks to seize on the collapse of Wilko.

Kmart is understood to have initiated talks with major UK supermarkets in the past few months over deals to replace retailers’ existing pet, toy or homeware products with its Anko-branded versions.

The chain, which is owned by the Australian conglomerate Wesfarmers, is discussing partnerships which would see it manage the non-grocery divisions of supermarkets through its Anko Global business. This would free up a supermarket to focus solely on its food operations, which many have been forced to divert more attention in recent months to deal with inflationary pressures. It is thought an initial deal could cover a specific category, such as accessories. Talks are at an early stage and a tie-up is not imminent.

The UK is understood to have been identified as a key early market for Kmart, alongside France, where it is also holding talks with retailers. Its preference is to partner with existing retailers in the countries rather than open its own stores.

Kmart is Australia’s biggest non-food retailer, generating more than $A10bn (£5bn) in revenues last year. Around 85pc of the range stocked in Kmart is its Anko own-brand. It has recently agreed a deal to supply its range into Target stores in Australia. The Australian business is separate from the US Kmart chain.

Arjun Puri, chief executive of Anko Global, said: “We know from our conversations with retailers around the world that they are looking for solutions to their non-core categories.”

It comes as the future of Wilko hangs in the balance after it fell into administration earlier this month.

PwC, which is acting as administrator for Wilko, last week warned that many stores were likely to close as it races to find a buyer.

It said interested parties were not discussing taking over the whole Wilko group, instead looking to buy part of the business.

Doug Putman, the Canadian owner of HMV stores, late last week emerged as a potential last-minute bidder for Wilko, although he is understood to not be looking to buy all the 400 stores.

Other interested bidders have expressed an interest in buying only a handful of stores, with a small number looking to buy more than 50 sites.

Private equity group M2 Capital is said to have made a £90m bid for the retailer, the Guardian reported.


Robert Mantse, the investment company’s managing director, told the BBC the firm would “guarantee all employees’ jobs for two years”, should its bid for Wilko be successful.

PwC said “talks are continuing with a number of parties” but declined to comment on interested parties.

China’s Worsening Economic Slowdown Is Rippling Across the Globe

Bloomberg News
Sun, August 27, 2023 



(Bloomberg) -- China’s economy was meant to drive a third of global economic growth this year, so its dramatic slowdown in recent months is sounding alarm bells across the world.

Policymakers are bracing for a hit to their economies as China’s imports of everything from construction materials to electronics slide. Caterpillar Inc. says Chinese demand for machines used on building sites is worse than previously thought. U.S. President Joe Biden called the economic problems a “ticking time bomb.”

Global investors have already pulled more than $10 billion from China’s stock markets, with most of the selling in blue chips. Goldman Sachs Group Inc. and Morgan Stanley have cut their targets for Chinese equities, with the former also warning of spillover risks to the rest of the region.

Asian economies are taking the biggest hit to their trade so far, along with countries in Africa. Japan reported its first drop in exports in more than two years in July after China cut back on purchases of cars and chips. Central bankers from South Korea and Thailand last week cited China’s weak recovery for downgrades to their growth forecasts.

It’s not all doom-and-gloom, though. China’s slowdown will drag down global oil prices, and deflation in the country means the prices of goods being shipped around the world are falling. That’s a benefit to countries like the US and UK still battling high inflation.

Some emerging markets like India also see opportunities, hoping to attract the foreign investment that may be leaving China’s shores.

But as the world’s second-largest economy, a prolonged slowdown in China will hurt, rather than help, the rest of the world. An analysis from the International Monetary Fund shows how much is at stake: when China’s growth rate rises by 1 percentage point, global expansion is boosted by about 0.3 percentage points.

China’s deflation “isn’t such a bad thing” for the global economy, Peter Berezin, chief global strategist BCA Research Inc., said in an interview on Bloomberg TV. “But, if the rest of the world, the US and Europe, falls into recession, if China remains weak, then that would be a problem — not just for China but for the whole global economy.”

Here’s a look at how China’s slowdown is rippling across economies and financial markets.


Trade Slump

Many countries, especially those in Asia, count China as their biggest export market for everything from electronic parts and food to metals and energy.

The value of Chinese imports has fallen for nine of the last 10 months as demand retreats from the record highs set during the pandemic. The value of shipments from Africa, Asia and North America were all lower in July than they were a year ago.

Africa and Asia have been the hardest hit, with the value of imports down more than 14% in the first seven months this year. Part of that is due to a drop in demand for electronics parts from South Korea and Taiwan, while falling prices of commodities such as fossil fuels are also hitting the value of goods shipped to China.

Read more: China’s Faltering Growth Risks Derailing Commodities Demand

So far, the actual volume of commodities such as iron or copper ore sent to China has held up. But if the slowdown continues, shipments could be impacted, which would affect miners in Australia, South America and elsewhere around the world.

Deflation Pressure

Producer prices in China have contracted for the past 10 months, meaning the cost of goods being shipped from the country is falling. That’s welcome news for people around the globe still struggling with high inflation.

The price of Chinese goods at US docks has fallen every month this year and that is likely to continue until factory prices in China return to positive territory. Economists at Wells Fargo & Co. estimate that a ‘hard landing’ in China — which they define as a 12.5% divergence from its trend growth — would cut the baseline forecast for US consumer inflation in 2025 by 0.7 percentage points to 1.4%.

Slow Tourism Rebound

Chinese consumers are spending more on services, like travel and tourism, than on goods — but they’re not yet venturing overseas in large numbers. Until recently the government had banned group tours to many countries and there is still a lack of flights, meaning it’s much more expensive to travel than it was before the pandemic.

Read more: China’s Open for Travel But Few Tourists Are Coming or Going

The pandemic and weak economy have curbed incomes in China, while the years-long housing market slump means homeowners feel less wealthy than before. That suggests it may take a long time for overseas travel to rebound to the levels they were at before the pandemic, hitting tourism-dependent nations in Southeast Asia such as Thailand.

Currency Impact

China’s economic woes have pushed the currency down more than 5% against the dollar this year, with the yuan close to breaching the 7.3 mark this month. The central bank has escalated its defense of the yuan through various measures including its daily currency fixings.

The depreciation in the offshore yuan is having a greater impact on its peers in Asia, Latin America and the Central and Eastern Europe bloc, Bloomberg data show, with the correlation of the Chinese currency to some others rising.

The weak sentiment spillover may weigh on currencies like the Singapore dollar, Thai baht, and Mexican peso as correlations rise, according to Barclays Bank Plc.

“With the weaker China economy it’s very difficult to be optimistic on the Asian economies and currencies and we’re more concerned about the metal-exposed currencies,” said Magdalena Polan, head of emerging market macro research at PGIM Ltd. Weakness in the construction sector may see currencies of commodity-led economies, such as the Chilean peso and South African rand, suffer, she said.

The Australian dollar, which often trades as a proxy for China, has lost more than 3% this quarter, the worst performer in the Group-of-10 basket.

Bonds Lose Appeal

China’s interest rate cuts this year have reduced the appeal of its bonds to foreign investors, who have cut their exposure to the market and are looking for alternatives in the rest of the region.

Overseas holdings of Chinese sovereign notes are at the lowest share of the total market since 2019, according to Bloomberg calculations. Global funds had turned more bullish on the local currency bonds of South Korea and Indonesia as central banks there near the end of their interest-rate hiking cycles.

Luxury Stocks

Companies from Nike Inc. to Caterpillar have reported a hit to their earnings from China’s slowdown. An MSCI index that tracks global companies with the biggest exposure to China has retreated 9.3% this month, nearly double the decline in the broader gauge of world stocks.

Read More: Global Stock Managers on Guard as China Pain Set to Spread

A gauge of European luxury goods and Thailand travel and leisure also track losses to China’s onshore equity benchmark. The sectors are “accurate reflections of how global investors may take indirect exposure to China and the outlook as China’s economy continues to weigh,” said Redmond Wong, a market strategist at Saxo Capital Markets in Hong Kong.

Luxury goods firms such as Louis Vuitton bags-maker LVMH, Gucci-owner Kering SA and Hermes International are particularly vulnerable to any wobbles in Chinese demand.

--With assistance from Marcus Wong and Ernest Tsang.

 Bloomberg Businessweek

Billions of dollars are flowing out of Chinese markets in a ‘seismic’ change in capital flows despite a flurry of actions to shore up confidence

Will Daniel
Mon, August 28, 2023 



Chinese stocks rebounded on Monday morning after Beijing unveiled a raft of measures meant to halt their nearly monthlong slide. But the rally proved to be short-lived as foreign investors used it as an opportunity to unload $1.1 billion of mainland Chinese equities, according to Bloomberg data.

China’s CSI 300 Index, which tracks the performance of the 300 largest firms on the Shanghai and Shenzhen stock exchanges, rose as much as 5.5% on Monday before paring most of its gains to end the day up just 1.17%.

Over the weekend, Chinese authorities halved the tax charged on stock trades, called a “stamp duty,” and lowered the amount of collateral a trader has to deposit in order to borrow money to invest in stocks in a bid to “boost investor confidence,” according to a Google translation of a statement from China’s Ministry of Finance. Beijing also asked some mutual funds to avoid being net sellers of equities, Bloomberg reported, citing unnamed sources.

Despite the moves, foreign investors continue to flee Chinese markets. With Beijing cracking down on foreign consulting firms amid tensions between the U.S. and China and repeatedly requiring investment firms to avoid selling stocks when markets look shaky, investors seem increasingly nervous about the risks of holding capital in China.

In the first half of this year, the number of active China-focused hedge funds fell for the first time in more than a decade. And in the second quarter, direct investment liabilities—a measure of foreign direct investment into China—slumped 87% from a year ago to a record low of $4.9 billion, according to figures released by China’s State Administration of Foreign Exchange on Friday.

China’s weaker-than-expected post-COVID recovery and lingering economic issues—which include a property crisis, sky-high youth unemployment, nearly $13 trillion in local government debt, and fading industrial firm profits—have also led to a slowdown in foreign investment in the country.

“The change in global capital flows is seismic,” Robin Brooks, chief economist at the Institute of International Finance, wrote in a Sunday post on X.com. “For the past decade, China attracted the bulk of capital flows to EM [emerging markets], often at the expense of other BRICS. But China has now seen consistent and large outflows for the past 18 months, as investors grow wary of autocracies.”

In a wider sign that China is becoming a less friendly place for investors, Chinese millionaires are leaving the country in droves amid a regulatory crackdown against large private companies. The country will lose a record 13,500 millionaires this year, according to an estimate from migration consulting firm Henley & Partners’ new Private Wealth Migration Report. That follows the loss of around 10,800 millionaires in 2022.

Mending a broken relationship?

Against this backdrop, on Monday, Commerce Secretary Gina Raimondo was seeking to mend the fractured relationship between the two nations with a visit to Beijing. Raimondo and Chinese Commerce Minister Wang Wentao agreed to set up a group to “seek solutions on trade and investment issues” following multiple hours of discussions in a sign that Washington is changing its attitude toward China.

“The world is counting on the U.S. and China to responsibly manage and maintain our commercial relationship,” the commerce secretary said, adding that “this is meant to be a dialogue where we increase transparency.”

Just days before Raimondo’s visit, the Commerce Department had removed 27 Chinese companies from a list which had prevented them from purchasing American technologies.

China’s Ministry of Commerce called the move “conducive to the normal trade between Chinese and American companies” in a statement, adding that it is now “entirely possible to find a solution that benefits companies on both sides.”

After meeting with Raimondo on Monday, Wang struck a positive tone as well. “I’m ready to work with you together to foster a more favorable policy environment, for stronger cooperation between our businesses to bolster bilateral trade and investment in a stable and predictable manner,” he told the U.S. commerce secretary.

This story was originally featured on Fortune.com

London’s Listing Exodus Threatens Its Status As Global Financial Hub

Editor OilPrice.com
Mon, August 28, 2023 

London’s status as a global financial hub may not be at risk – yet – but its equity markets are certainly out of favour with the wider world. How did we get here? City A.M. takes a long hard look at the state of the stock exchange

“I wanna be a part of it,” Frank Sinatra sang of New York, New York.

“Those little town blues are melting away.”

Ol’ Blue Eyes may have made Liza Minelli’s song famous, but it’s a tune now whistled in the boardrooms of London boardrooms as they contemplate life beyond the capital’s grey summer skies in a year marked by fears London’s public markets have lost their lustre.

This past month saw two more of London’s listed outfits say they were pondering a state-side departure. Plus500, the Israeli retail investing platform, said they’d be worth more across the Atlantic. And YouGov, the polling firm adapt at reading a room, also confirmed they’d be looking at a secondary listing in New York in due course.

They joined a lengthy list of firms looking to chance their arm on Wall Street. Arm, the UK chips firm, will list in the US, whilst gambling giant Flutter is set for a secondary listing. Commodity broker Marex, based in London, has also confirmed it would look at New York if it chose to list rather than letting equity markets this side of the pond have their wicked way.

It wasn’t supposed to be this way. As long ago as 2021, then-Chancellor Rishi Sunak was talking up a ‘Big Bang 2.0’ in an interview with City A.M.

Two and a bit years on, the City’s publicly-traded indices are still haemorrhaging listed companies. It’s not just the big boys. There were 155 small cap firms listed on the FTSE in 2018. That number is now 117.

Ask around the City and the reasons proffered for London’s demise are varied. Some simply say there’s more cash in New York. Bosses quietly complain institutional investors are biased towards short-term returns rather than long-term value. Others blame lax rules on short sellers for doing down London’s reputation. Seven years on from the vote, plenty too blame Brexit for permanently taking the heat out of London valuations – and the sharp and seemingly permanent devaluation of sterling has also made UK-listed firms easy prey for cash-rich US private equity.
A flurry of activity

When Mark Austin, a former journalist and now senior City lawyer, was tasked with reviewing listed markets back in 2020 as part of a government review, it seems there was precious little understanding of just how weak London’s capital markets might be.


“Very often the response we got was ‘really? Reform? Do we need to?,” he told City A.M. earlier this year.

“Now the conversation has totally moved on.”

It’s not hard to see why. Whilst high-profile IPOs have been few and far between, firms have exited public markets at a rate of almost once a week.

Biffa accepted a take-private in June 2022, valuing the firm at £1.36bn. Dechra, the pharmaceutical firm, took a £4.5bn takeover deal from Swedes EQT in June of this year.

Clinigen was taken over by Triton in 2022; Sureserve succumbed to a £200m plus offer earlier this year. Hyve, the events business, has also gone private. Even that great champion of Britishness the Daily Mail abandoned the London markets, with Lord Rothermere engineering a return into private hands last year.

In a bitter twist of fate, that last privatisation was conditional on another British brand – Cazoo – listing in Wall Street.

The slew of departures has spooked government sufficiently that it announced further reviews into London’s financial competitiveness. It may take some keeping up with: since 2020 we’ve had Lord Hill’s review of the listings regime, then Ron Kalifa’s analysis of the fintech sector, Austin’s assessment of the secondary capital markets, which reported in July of 2022.

The government added a further review to that in March 2023, asking lawyer Rachel Kent to look at the research and analysis landscape.

Add to that a host of work done by the City watchdog, the FCA, and we are certainly not shy of suggestions.

Everyone recognises what the central question is, but we’ve all got a slightly different perspective and solution to the problem

Mark Austin

This year has seen, finally, some movement towards resolving the sticker parts of the listings conundrum.

In May the FCA laid out plans to “make the UK a more attractive place for business,” with a twelve month plan to achieve “better outcomes for consumers and markets” including reforms of the UK’s listing regime and an overhaul of consumer protections.

Proposals included a single listing category to replace the current standard and premium segments, the removal of eligibility rules requiring a three-year track record, and a more welcoming approach to dual class structures, in which some shareholders – often founders – have greater say than others.

Study of the reforms quickly scouted out that even the more liberal approach to dual class share structures would still be “more limited in certain respects than in the US,” as a Cooley legal analysis put it.

Whilst that consultation was launched, the Capital Markets Industry Taskforce was plotting its own review. Set up in August 2022 “in consultation with the government,” the taskforce comprises CEOs and other senior City execs who seek to bring a private sector viewpoint to policy issues. Two weeks after the FCA discussion document was published, Mark Austin was again tasked with a further study – a ‘new market model’ review to carve out a new narrative for Britain as an international financial centre.”

“Everyone recognises what the central question is, but we’ve all got a slightly different perspective and solution to the problem,” Austin told City A.M. at the time.

“This all needs putting together into one cohesive, simple to understand model and vision, which goes all the way across law and regulation, market practice and the cultural attitude and mindset.”
Movement if not momentum

Not everybody is convinced that listing reforms along will do the trick.

One of the City’s most active investment banks has warned that the “considerable activity” to reinvigorate the UK’s equity markets will not be enough to turn around the decline.

In a note seen by City A.M., Peel Hunt’s head of research Charles Hall sounded a distinctly downbeat note.

“There is a problem,” he wrote.

“There has been considerable de-equitisation of the UK market over a number of years and the pace is accelerating.

“Reform of the listing requirements and research rules should help, but much more needs to be done to ensure that being listed is seen as an attractive option.”

His concerns were echoed by the boss of the Quoted Companies Alliance, the trade body for small listed firms.

“It would be churlish to reject all the work that is going into ensuring London’s public markets are fit for the future,” James Ashton told City A.M.

“But as company numbers continue to decline, more must be done to get them functioning better right now.”
Quick wins and tough losses

Ashton has cited tax reform as a way to boost liquidity, modelling a new type of investment vehicle that builds on the success of venture capital trusts.

“Even bolder,” he said, “would be to scrap stamp duty on share trading, a £4bn-a-year dampener that doesn’t even exist across the Atlantic on Wall Street.”

One sledgehammer of a measure that was under consideration at the highest levels in the Treasury was to mandate the UK’s largest pension funds put more cash into UK firms.

The obligatory element of such a move eventually spooked the City and the Chancellor, with Jeremy Hunt instead announcing a voluntary pact between the Treasury and a host of large institutional investors.

That ‘Mansion House Agreement’ will see firms like Aviva and Phoenix promise to put 5 per cent of their default funds into unlisted equities by 2030, giving high-growth companies access to capital that – in time – could see them become London-listed.

Treasury sources said it could unleash £75bn-worth of investment into the UK’s private companies.

But pension funds remain wary of equity markets. Though they tend to increase in the long-term, individual shares do not necessarily do so, even if a longer-term shift towards holding bonds rather than equities in recent years may have been checked by last year’s mini-Budget driven reminder of the need for liquidity.

Of course, London’s attractiveness as a listing destination also relies on valuations.

The capital’s businesses trade at a significant discount, on a price to earnings ratio, than in the US.

But it’s not just that crude measure putting founders off listing, or forcing others to think about secondary listings abroad.

A number of high-profile UK firms have been given a torrid time of it on the public markets in recent years.

Darktrace, for instance, is widely recognised as being one of the world’s leading cybersecurity firms, and a UK tech powerhouse.

Yet a short-seller attack from New York saw the firm’s share price slide dramatically. It was accused of questionable marketing and the shorter, Quintessential Capital Management, said it was “deeply sceptical about the validity of Darktrace’s financial statements and fear that sales, margins and growth rates may be overstated.”

Darktrace appointed EY to look at the books. It received a clean bill of health. Lo and behold, shares rocketed.

Some believe the UK’s short-selling regime is open to abuse. Market makers have an exception to a rule forbidding so-called naked short selling, when you sell shares you do not own and are not borrowing from somebody. Proponents of this system say market makers need to be able to do this to provide liquidity in the market.

The UK government, in a consultation published in July, committed to keep the market maker exemption in place, continuing to allow naked shorting.
People power

It’s not just the mechanics of the financial markets, however, that are blamed for London’s malaise.

More and more bosses are looking at London as lacking the institutional expertise and risk appetite to give sufficient fire to the FTSE.

Chief amongst the complainants has been Julia Hoggett, boss of the London Stock Exchange itself.

Back in April Hoggett was quizzed by MPs on the exodus of firms from public markets.

“We need to recognise that stock markets are about risk capital,” she said. “We have to recognise that not every time, companies will succeed. Some will fail, and not every company will have the returns expected.”

“We’ve clearly got the desire and framework for it, but we’re not all providing financing and the rocket fuel that enables those companies to [grow],” she added.

She’s not the only one to make that complaint.

London Stock Exchange chief Julia Hoggett has been critical of UK investor risk appetites

Schroders chief exec Peter Harrison has made similar noises.

“How do we create a system that is more willing to accept risk,” he asked in an interview with Financial News in March.

“Everything (has become) about risk reduction. That has been the thing that has undermined growth, and importantly it has undermined returns.”

Other corporate leaders have found issue with investors for other reasons; a focus on short-term returns over long-term value.

BT’s outgoing boss Philip Jansen criticised London investors for turning against his £15bn investment plan, spending plenty of cash on fibre connectivity now to guarantee long-term relevance.

UK investors “seem to have a focus more on the short term and find it harder to look at the longer term”, especially when compared to the US, Jansen said in an interview with The Sunday Times.

Jansen’s complaints are not new, with a number of City watchers having critiqued the relative underperformance of UK companies.

Respected stockpicker Nick Train said similar in July.

However, one analyst pushed back on Jansen’s read of the market and said the short-termist mindset from investors went beyond just London.

“I don’t think that’s a completely fair assessment given that foreign investors own around two thirds of listed UK shares, so reticence towards UK companies is coming from overseas as well,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, told City A.M.

“The London market has struggled to recover partly due to Brexit effect, current UK economic troubles but also the make up of the indices with far less of a tech focus, and so have been left on the sidelines of the recent AI fuelled euphoria.”
The Brexit effect

The reason du jour touted in the City is that the lack of pension fund cash flowing into the stock market has fuelled the decline in valuations, which is in turn blamed on accounting tweaks brought in around the turn of the millennium.

Pension funds’ holding of equities has indeed plummeted since 2000. Just four per cent of the UK stock market is now held by pension funds – down from 39 per cent in 2000, according to a report from think tank New Financial.

However, valuations did not correlate with that decline. As Fidelity fund manager Alex Wright pointed out earlier this year, much of that de-equitisation was done by 2015, and the valuation of the UK market “held up roughly the same”.

You also got a real divergence in valuations between the US and the Eurozone around Brexit. That is the real pushback I give against it being solely a Brexit effect.”

Adam Hoyes, Capital Economics

He says the elephant in the room came after that – in June 2016.

“Unfortunately, and again politicians don’t want to say this, but it’s very clear what’s caused the undervaluation: it’s Brexit,” he told Citywire in an interview.

“You can see it to the day that international investors have disinvested from the UK market after the Brexit vote and the uncertainty that that has created. That is the key reason.”

Analysts at Capital Economics similarly point out the emergence of a gap in equity valuations doesn’t tally with the timing of the pension accounting changes and it was only from 2016 that a substantial gap emerged.
Smoking gun for the London Stock Exchange?

Given the timing, it’s tempting to attribute that gap solely to the UK’s vote to leave the EU, analyst Adam Hoyes of Capital Economics told City A.M. in June.

The price/earnings ratio of UK firms, which compares a company’s share price to its annual net profits, was broadly comparable to the US up until 2016. It was only at that point that they began to diverge.

“It looks like a bit of a smoking gun” Hoyes said earlier this year. But, he cautions, the reason may in fact be more muddy.

“You also got a real divergence in valuations between the US and the Eurozone around that time,” he adds. “That is the real pushback I give against it being solely a Brexit effect.”

The EU similarly began to deviate from the US in terms of valuation just prior to Brexit. Much of the valuation discount may in fact, he says, be a simple assessment of the UK and EU’s long term economic prospects against the US in that time.

Investors’ cash is not restricted by borders, and money managers may have just chosen to follow the more rosy economic outlook on the other side of the Atlantic.
Global IPO Market

It is also important to note the global picture of a major listings slowdown. The IPO market globally has been largely shuttered for the past year and the UK is not alone in that regard.

Global IPO activity was down by eight per cent in terms of deal numbers and 61 per cent in terms of proceeds compared to the same period last year, according to data from EY.

The amount of cash raised via UK IPOs did fall more sharply, however, with cash raised falling some 80 per cent on the same period in 2022, and 99 per cent on the blockbuster 2021 levels.

But for William Wright, the director of think tank New Financial, even taking into account that UK slump, the wider global picture shows that it is not Brexit that has dampened the UK’s appeal.

“I wouldn’t personally put Brexit towards the top of the list or even on the list,” he told City A.M. earlier this year.

“If Brexit were a significant factor in the recent slowdown in IPOs in the UK, then surely the markets in the rest of the European Union, which were very active in 2021, would have continued to be very active in 2022 and into 2023 – and they just haven’t been.

“This is not a UK specific problem,” he added.

The fact the UK’s IPO market was going gangbusters in 2021 may also point to that argument. Britain had left the EU by then and it did not then prove to be too much of a deterrent for scores of firms to debut in London.

For Wright, the reason for the current slump on the stock market is the more macro assessment of the current state UK economy.

“The only way that Brexit could be a factor is the extent – and one can argue this till the cows come home – to which Brexit has had a drag effect on the UK economy,” he said.
“They don’t understand”

One other regularly heard complaint is the level of institutional knowledge in the City – with analyst and research coverage thinned out.

Tech firms are particularly hit, one CEO of a listed firm told City A.M.

“People literally don’t understand what we do,” he said after lunch.

Peel Hunt’s Charles Hall also had concerns which date back to a very different element of our relationship with Europe.

Brussels-era MIFID rules forced up the cost of research signficantly, by ‘unbundling’ coverage from trading commissions. In the old days, research was simply part of the service offered by brokerage firms. Now, it had to be paid for separately – and it became apparent that it was not a money maker.

London, like other financial centres, saw vast swathes of its analyst base wiped out. That didn’t happen in the US, where the system continues to operate much as it used to.

Often smaller companies only receive coverage from one firm – and it is often from the house broker, which comes with its own complications.

Hall said “there is clear recognition that the current situation is not working for the benefit of all market participants, let alone the health of the UK economy and the ecosystem around listed companies.”

Tech firms are amongst those who most regularly complain about the lack of research coverage in London.

As two Cambridge professors found, the capital – as you’d expect from a stock exchange still weighted towards ‘old’ industries – hasn’t adjusted its research coverage to the 21st century.

“Investors may well be reluctant to pay for investment research in sectors underrepresented on the London Stock Exchange. Tech firms stand out here as being in the minority, with, instead, mature, “old economy” sectors such as mining, energy, finance and retail featuring more prominently,” the authors Brian Cheffins and Bobby Reddy wrote in a piece for the Harvard Law School.

The government has proposed a string of measures – including reform of Mifid – to revitalise the research world.

Could this explain why shares like Ocado – itself the victim of a now unwound short-seller attack – have found it difficult to find love in London? Whilst critics point to the firm’s ‘jam tomorrow’ loss-making, US stock markets – especially the Nasdaq – are full of companies which are yet to break into profitability, but aren’t a punching bag for investors and commentators.

Could Ocado boss Tim Steiner have a point when he implies London investors don’t understand quite how revolutionary the firm’s back-end technology really is?
London Stock Exchange readies for battle

It’s hard to pin London’ stock market malaise on any one thing – and the solutions are similarly difficult to identify in isolation.

The good news, for those looking, is that few are in denial about the scale of the problem.

Efforts are certainly well underway to breathe new life into London’s stock markets – with the benefits of capital-raising and growth that a vibrant public trading exchange brings.

Time will tell.

By CityAM

Chevron’s Australian LNG Workers Set Potential Strike Date

Stephen Stapczynski and Ruth Liao
Mon, August 28, 2023 


(Bloomberg) -- Strikes at Chevron Corp.’s liquefied natural gas export plants in Australia could begin as soon as Sept. 7, threatening to disrupt global energy supply and sending fuel prices higher.

Unions gave notice that industrial action at the Gorgon and Wheatstone export plants will begin if Chevron doesn’t reach an agreement with workers, the company said Monday in an emailed statement. Chevron said it will “continue to work through the bargaining process as we seek outcomes that are in the interests of both employees and the company.”

The threat of strikes has roiled global gas markets since early August, when unions first voted for potential labor actions at three plants in Australia, and European prices jumped 10% Monday. The two Australian LNG plants operated by Chevron make up approximately 5% of global LNG supply.

Read More: Australian LNG Strike Threat Remains Focus Amid Chevron Dispute

“Members will be participating in rolling stoppages, bans and limitations which will escalate each week until Chevron agrees to our bargaining claims,” the Offshore Alliance, which includes the Australian Workers’ Union and the Maritime Union of Australia, said Tuesday on Facebook.

Setting a specific date to begin the strike ratchets up pressure on Chevron, posing a more imminent threat to its production in Australia. Woodside Energy Group Ltd. last week reached a breakthrough with unions, avoiding strikes at the nearby North West Shelf LNG complex.

Unions have been locked in a dispute with Chevron over demands around pay and other conditions.

The threat of strikes has caused jitters in European gas markets, which are still recoiling from a drastic drop in pipeline flows from Russia in the aftermath of the invasion of Ukraine. While Europe doesn’t directly import LNG from Australia, any disruption could tighten global supply and risk triggering a bidding war with Asia for spare gas shipments.

To be sure, European gas storage sites have refilled to a seasonal high, reducing the risk of a shortage. Meanwhile, a weaker recovery in Chinese LNG demand has allowed for more fuel to be shipped to Europe.

(Updates with price move in third paragraph, union comment in fourth)


Most Read from Bloomberg Businessweek

Chevron LNG workers in Australia allow union to call for strike

Mon, August 28, 2023 
By Lewis Jackson

SYDNEY, Aug 28 (Reuters) - Supplies from Chevron's liquefied natural gas facilities in major exporter Australia could be disrupted after the last batch of its workers on Monday voted to authorise their unions to take industrial action if necessary.

The Gorgon and Wheatstone facilities in Western Australia - along with Woodside Energy Group's projects in the same area - account for one-tenth of global supplies of LNG, of which Australia is the world's largest exporter.

Some 37 workers at the Wheatstone offshore platform on Monday decided in favour of industrial action, according to ballot results seen by Reuters, joining peers at another Wheatstone unit and the Gorgon facility.

The Offshore Alliance (OA), which combines the Maritime Union of Australia and Australian Workers' Union, now has the mandate, but not the obligation, to take industrial action, which could include work stoppages ranging from half an hour to 12 hours.

"All 500 OA members on the 3 Chevron facilities are backing in PIA...PIA notices will be filed shortly," the union alliance said in a Facebook post. PIA is protected industrial action.

The unions must give Chevron seven working days' notice beforehand any action.

Last week, more than 99% of the 450 or so workers at Chevron's Gorgon LNG facility, one of the country's largest, and Wheatstone's downstream processing facility voted to allow unions to call strikes if necessary.

Chevron said it was aware of the result, and continued to negotiate with the workers "as we seek outcomes that are in the interests of both employees and the company".

Earlier on Monday the company said it would put in place measures to safeguard supplies.

The potential for industrial action has provided some support for LNG prices. Energy analyst Saul Kavonic said on Friday Chevron could face some "low-level" industrial action but that was unlikely to significantly disrupt supply.

The Chevron dispute comes after Woodside resolved a similar issue at its North West Shelf LNG facility in Western Australia.

Workers at the North West Shelf offshore platforms had voted to approve strike action, but then struck an agreement with the company.

(Reporting by Lewis Jackson; Editing by Miral Fahmy)

Another Chevron LNG facility in Australia to decide on strike action


Sun, August 27, 2023 
By Lewis Jackson

SYDNEY, Aug 28 (Reuters) - Workers at one of Chevron's liquefied natural gas (LNG) facilities in major exporter Australia will decide on Monday whether to authorise their unions to call a strike after the company's other two facilities voted yes for possible action.

The Gorgon and Wheatstone facilities in Western Australia - along with Woodside Energy Group's projects in the same area - account for one-tenth of global supplies. Any industrial action at Chevron could disrupt output from Australia, the world's largest exporter of the super-chilled fuel.

Last week, more than 99% of the some 450 workers at Chevron's Gorgon LNG facility, one of the country's largest, and Wheatstone's downstream processing facility voted to allow unions to call strikes if necessary.

The results of ballots at the Wheatstone offshore platform are due on Monday afternoon.

If authorised by the Chevron workers, the Offshore Alliance, which combines the Maritime Union of Australia and Australian Workers' Union, would have the mandate, but not the obligation, to take industrial action, which could range from a brief work stoppage to refusing to load LNG onto tankers.

If they do decide on industrial action, the unions must give Chevron seven working days' notice beforehand.

The Offshore Alliance said on Monday industrial action was "about to kick off". The unions want higher pay and changes to working conditions, including rules that make it harder to change work rosters.

"A settlement ... is increasingly likely to come after we jam up Chevron’s LNG exports with Chevron losing $billions of revenue," the unions said in a social media post.

Chevron said on Monday it would put in place measures to safeguard supplies. "We will also continue to work through the bargaining process as we seek outcomes that are in the interests of both employees and the company," the company added.

The potential for industrial action has provided some support for LNG prices. Energy analyst Saul Kavonic said on Friday Chevron could face some "low-level" industrial action but that was unlikely to significantly disrupt supply.

The Chevron dispute comes after Woodside resolved a similar issue at its North West Shelf LNG facility in Western Australia.

Workers at the North West Shelf offshore platforms had voted to approve strike action, but then struck an agreement with the company.

(Reporting by Lewis Jackson; editing by Miral Fahmy)