Category Archives: markets

Surrender?

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Recall that the New York Stock Exchange, pursuant to an Executive Order regarding US investors and People’s Republic of China’s PLA-owned or -controlled companies, had begun the process of delisting China Telecom Corp Ltd, China Mobile Ltd, and China Unicom Hong Kong Ltd.

Now the NYSE has walked that back and decided not to proceed with the delisting. Exchange management have chosen to not provide any details or rationale for their, other than that their decision follows “further consultation” with federal regulators. The Exchange’s full statement can be read here; it’s carefully uninformative.

I have to wonder: is this in response to the PRC’s threat to take the necessary countermeasures to resolutely safeguard the legitimate rights and interests of Chinese companies? Or is it an attempt to duck away from those threatened countermeasures rather than fighting a battle that needs to be won?

The foregoing was written Tuesday. Now the NYSE has reversed itself again:

it received “new specific guidance” from the Treasury Department’s Office of Foreign Assets Control on Tuesday, which listed the three companies’ American depositary receipts as being covered by Mr. Trump’s order.

Which raises an additional question: who’s actually in charge at the NYSE, since the new specific guidance should not have been necessary.

Miami as Financial Center

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Financial firms are starting to figure it out: in addition to a better climate and (much) friendlier tax regime, Miami is the place to be for them. I have a thought on one bit of that maybe-migration, the opening statement:

This city has long pitched itself as an attractive location for finance and tech firms, with its tax advantages, flight connections to New York and cosmopolitan flair. Its efforts appear to be paying off.

I’m not sure that Miami needs to tout New York as being within easy reach. It should begin noting that it’s within easy reach of New York. There’s no need for Wall Street to remain in a city as anti-business, anti-financial success, as badly run generally as New York City, or as badly run and high-tax as is the State of New York.

Miami should encourage all of them to come on down to Brickell. The water’s better than fine.

Investing in the PRC

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For good or ill, the People’s Republic of China has decided change the regulatory rules regarding Alibaba Group Holding Ltd’s banking activities. The company has lost

almost all its stock-market gains this year, just days after [PRC] regulators signaled a major change in their posture toward the e-commerce behemoth and its finance affiliate, Ant Group Co.

Notice that: the regulatory change does not cover the PRC’s banking or finance industries—it’s explicitly targeted at Alibaba’s subordinate, Ant. The PRC’s

central bank released a harshly worded statement Sunday criticizing Ant’s business practices and instructing the financial-technology giant to shift its focus back to its mainstay—and less lucrative—digital-payments business.

Notice that, too: the ruling is not the outcome of any sort of investigation, followed by trial in court to assess whether anything wrong actually was being done, followed by a court ruling based on the presented evidence. No, the order is government diktat.

Investors, unwarned by the existence of an investigation or subsequent existence of a court trial, have lost heavily. The only warning investors had was a Christmas Eve announcement of an investigation—and then came the diktat.

Alibaba’s swift comedown has led investors to reassess the regulatory risks faced by [PRC] internet companies…
The hard part is figuring out “how much of the recent regulatory moves against Ant and Alibaba is politically based, how far it will go, and when it will be over,” said Alex Au, managing director at Alphalex Capital Management, a Hong Kong-based hedge fund.

Yewbetcha.

This is what rule by law does, as compared to rule of law. This is why it’s foolish, potentially to the point of violating fiduciary responsibility, to invest in PRC businesses.

Remember this for the coming year.

The Willy Sutton Objection

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Facebook has joined with Epic Games in the latter’s lawsuit against Apple over how to charge—and who gets to make the charge—for apps installed on Apple’s iPhones. Facebook is doing so to further its feud with Apple over Apple’s decision to give iPhone users tools with which to protect their private information.

Facebook isn’t alone in the beef.

Apple has said starting early next year its iOS 14 operating system will give iPhone and iPad users the option to no longer share personal information that many developers rely on to tailor ads. When users open an app, they will see a message asking permission to track what other apps and websites they visit, their location, and other behaviors.
Apple’s plan has drawn criticism from a range of businesses and trade groups…saying that Apple’s plan was anticompetitive.

Because people moving to protect their private information from snooping and private enterprises moving to protect their products from being used as tools for the snooping is somehow anticompetitive.

It’s an objection that Willy Sutton would have loved: how anticompetitive of those banks to obstruct his business model?

Wrong Resolution

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Recall that Huawei Technologies Co’s Deputy Chair and CFO Meng Wanzhou is facing US criminal wire and bank fraud charges related to her alleged violations of US sanctions on Iran, which she did on Huawei’s behalf. She’s in the middle of extradition proceedings in Canada en route to getting her here.

Now there’s a resolution in the works: DoJ officials are talking about a “deferred prosecution agreement,” in which Meng would admit her wrongdoing in those cases and then be allowed to return to the People’s Republic of China directly from Canada.

This is the wrong resolution. The case should be resolved by bringing her into the US and letting a trial court resolve the matter.