“TOO long” was how Li Ka-shing, known fondly by locals as chiu yan (Superman) for his business nous, described his working life when he announced on March 16th that he would be retiring in May. Asia’s pre-eminent dealmaker has been around for longer than his fictional namesake, scoring and selling assets in ports, telecoms, retail and property to amass a fortune estimated at $36bn.
Few expect Mr Li, who will turn 90 this summer, to hang up his cape for good. He says he will stay on to advise his eldest son, Victor Li, who will inherit his two main businesses. The first is CK Hutchison, a conglomerate with interests in power plants, perfume and much in between. It runs 52 ports and owns 14,000 high-street stores, including Watsons at home and Superdrug in Britain. The second is CK Asset, one of Hong Kong’s biggest property developers. Combined they are worth $79.7bn.
At the press conference the younger Mr Li made all the right noises. “When I return to work tomorrow, it will be the same,” he told...Continue reading
HISTORY will rhyme on March 23rd, when Donald Trump’s tariffs on steel and aluminium imports are due to come into force. Several previous presidents, from Ronald Reagan to Barack Obama, also used tariffs in an attempt to protect America’s steel producers from foreign competition. (There are historical echoes, too, in Mr Trump’s plans to slap tariffs on a range of Chinese imports; in the 1980s Japan was the target.) A rhyme is not a repeat. But past experience is not encouraging.
The central problem for America’s policymakers is that trade is like water. Block its flow in one place and pressure builds elsewhere. When many countries are covered by tariffs, trade may simply be diverted through those countries that are let off the hook. Importers will howl for exemptions. As a result, whatever the Trump administration’s broader ambitions with respect to trade, bellicose unilateralism will make them harder to achieve.
In 1982 America browbeat the European Community, the forerunner of the European Union, into limiting its steel exports...Continue reading
IT IS a choice that would make Thomas Hobson proud. European officials this week unveiled plans for a quick and dirty tax policy to apply to big digital firms, in theory by the end of the year. The idea, promised since September, would ditch a tradition of taxing profits and instead let collectors in member states take a share, 3% for starters, of the firms’ local revenues. There is a lively debate about where exactly the tech giants create taxable value. Is it where their programmers sit? Or the intellectual property? Or users? The firms have become so adept at tax avoidance that the European Commission is not going to hang around until the argument is settled.
Pierre Moscovici, the commissioner overseeing the proposals, was at pains to say on March 21st that the turnover tax would be an “interim” fix. He denied Americans are his targets. Between 120 and 150 companies would be affected, around half of them American and a third European. (Apple, Google and other American giants would surely get the biggest bills.) Only those with global...Continue reading
SANAE ABUTA is a manager at Panasonic, a giant electronics manufacturer, in Osaka. One day she may work from 9am to 5.45pm. On another she may take a break in the middle, to go to the bank or see a doctor. Or she will stay with her child in the morning and start at 11am. One day a week she works from home. “I appreciate the flexibility,” she says.
Ms Abuta’s schedule is unusual in Japan. Long office hours are seen a proxy for hard work, itself regarded as the cornerstone of Japan’s post-war economic boom. Companies offer to look after employees for life in return for a willingness to dedicate that life to the company, including “service” (ie, unpaid) overtime or moving house on demand. People hesitate to leave the office before their peers, and certainly before their boss. Some sleep at their desks. Convenience stores sell shirts for workers who have no time to go home and change. Death by overwork is so common—191 people in the...Continue reading
SCOTT GOTTLIEB, the thoughtful head of America’s Food and Drug Administration (FDA), has had a busy first year. He has launched the process of lowering nicotine levels in cigarettes, approved self-testing kits for breast-cancer genes and waved through the most new medicines in two decades, as well as a record number of copycat drugs (see article). There is one thing he and his regulatory agency are doing less of, however—regulating. New rules were at a 20-year low in 2017, according to analysts at PwC, a consultancy. Instead, the FDA is providing more guidance to industry. This approach, Mr Gottlieb hopes, will help pharmaceutical firms in America develop drugs more efficiently. Since that is where most drug development happens, the FDA’s philosophy matters beyond American borders.
Given the rapid pace of scientific advances in...Continue reading
A SINGLE pill of Abilify, a drug used to treat manic depression, costs $30 or so in America. Or you could try gAbilify (the g stands for “generic”), better known to chemists as Aripiprazole. Thrifty pharmaceutical companies, many of them in India, can provide it for less than $1 a pop since the drug’s patent expired in 2015. That is bad news for Otsuka and Bristol-Myers Squibb, the two labs that formulated Abilify and got it approved by authorities in the 1990s. Everyone else, from patients to insurers to the public purse, is correspondingly better off. Generics-makers have thrived, particularly in India. But the prognosis for the industry is less rosy.
India became the world’s biggest exporter of generics almost by accident. Lax intellectual-property rules in the 1980s allowed its firms to crib drugs patented elsewhere for its huge domestic market. Trade deals gradually opened markets abroad. As patents for a wave of drugs from the 1980s expired two decades later, sales of Indian generics...Continue reading
DREW HOUSTON and Arash Ferdowsi must have few regrets since they turned down an offer for their startup from Apple’s then boss, Steve Jobs, in 2011. Dropbox hasn’t done too badly in the interim. It rakes in over $1bn in revenue by allowing users—500m at the last count—to store and share data in the cloud. On March 23rd it is due to go public, making it the biggest firm to do so since Snap, a messaging app, floated in early 2017. Dropbox’s range for its share price values it at between $8bn and $9bn. That will comfort other “unicorns”, the tag given to startups valued at over $1bn, that are considering listing.
True, the valuation is less than its early backers were hoping for when they valued the company at $10bn in 2014, when it last raised equity. But as Matthew Kennedy from Renaissance Capital, a research firm, points out, the previous valuation coincided with peak investor exuberance for tech firms. The adjustment may also reflect some doubts about the firm’s long-term prospects.
Its challenge, common to many...Continue reading
IT USED to be the world’s two biggest makers of airliners that would invariably deliver new designs late and over budget. A decade ago the cost of Airbus’s A380 superjumbo soared by about €5.5bn ($6.6bn) after engineers got its 330 miles of cables in a jumble. Boeing’s rival 787 Dreamliner exceeded its forecast costs by a whopping $20bn, give or take; its parts, once assembled, did not fit together properly. But just as both planemakers are mending their ways—Airbus’s A350 and A320neo and Boeing’s 737 MAX arrived in a much more timely and economical manner—manufacturers of the engines which power the aircraft are beginning to stall.
On March 15th Boeing revealed that the new engines, the largest ever made, for its new 777X wide-body airliner had completed their first test flight. But GE, the American engineering giant that built them, is already three months behind with their development, because of hiccups with the...Continue reading
“WE ARE not naive free traders. Europe must always defend its strategic interests,” said Jean-Claude Juncker, the president of the European Commission, last year as he introduced plans to screen foreign investment into the European Union. America has had such rules since the 1970s; they are set to tighten further. The EU used to be more relaxed about acquisitions by foreigners. Now it too is toughening up.
The target is China, whose firms have been on a shopping spree (see chart). Purchases of fripperies such as football clubs and hotels have been curbed by the Chinese authorities, but investment continues to flow into technology and infrastructure, notes James Zhan of the UN...Continue reading
TO GAUGE an issue’s importance, a guest list is a good place to start. The one for a conference in Brussels on March 22nd to discuss the European Union’s “action plan” on sustainable finance features heavy-hitters including Emmanuel Macron, France’s president, and Michael Bloomberg, a former mayor of New York who campaigns on climate change. Given that sustainable finance is well-established, what action does the EU think is needed?
Investing with an eye to environmental or social issues, not just financial returns, has become mainstream in the past decade. According to the Global Sustainable Investment Alliance (GSIA), $23trn, or 26% of all assets under management in 2016, were in “socially responsible investments” that take account of environmental, social and governance (ESG) issues. New asset classes have sprung up. According to SEB, a Swedish bank, the issuance of green bonds, the proceeds of which are invested in environmental projects, reached $163bn in 2017, up from less than $500m in 2008.
Yet standards are a...Continue reading
WHEN it comes to companies and their passports, there is a flutter of activity in the air—and a reek of hypocrisy. This month Qualcomm, an American-domiciled tech giant which does 65% of its business in China, booked most of its profits last year in Singapore, and pays little tax at home, successfully lobbied the Trump administration to block a hostile takeover on the ground that its independence was vital to ensure American strategic supremacy over China. The predator was Broadcom. It is listed in America but domiciled in Singapore, where it gets tax perks. On November 2nd, four days before its bid, it announced a burning desire to shift its legal base to the home of the brave.
In Europe, Unilever, which a year ago demanded that the British authorities help it fend off an unwelcome takeover by Kraft Heinz because it was a national treasure, is shifting its sole base to the Netherlands (at present it is split between London and Rotterdam). The consumer-goods firm says it wants to simplify its...Continue reading
FEW measures of stockmarket valuation are as controversial as the cyclically adjusted price-earnings ratio, or CAPE. American equities have looked expensive on this measure for most of the past 20 years, which is why many bulls tend to dismiss its usefulness. It is pretty clear that the CAPE does not help investors to time the market.
But a new paper* from Research Affiliates, a fund-management group, explains why many criticisms are overblown. The strongest case for the measure is that a higher ratio tends to be associated with lower long-term returns. A study of 12 national markets shows that a 5% increase in the CAPE, from 20 to 21, say, tends on average to reduce the total ten-year expected return by four percentage points.
The attraction of the CAPE is that it smooths out the vicissitudes of the profit cycle. In a recession, profits can plunge even faster than share prices. So if you look only at the ratio of a share price and the previous year’s profits, the market can look very expensive....Continue reading