TUESDAY 11 JULY 2017
00
Humanising robots
How ‘neurohacking’ is making us fall
for machines — JOHN THORNHILL, PAGE 9
France signals
new era with
tax break plan
for the wealthy
3 PM Philippe eyes move within a year
3 Macron pushes pro-business agenda
ANNE-SYLVAINE CHASSANY
AND MICHAEL STOTHARD — PARIS
France is considering introducing tax
breaks for the wealthy as soon as next
year to attract more entrepreneurs and
investors, Edouard Philippe, the prime
minister, has said in an interview.
The move would mark a sharp break
from the government of François Hol-
lande, the former president who caused
an exodus of financiers after imposing a
75 per cent income tax on high earners
at the start of his term and declaring
finance “the enemy”.
It would also demonstrate President
Emmanuel Macron’s willingness to
press on with a pro-business agenda
despite concerns about its affordability
given the country’s stubborn budget
deficit, which last week led Mr Philippe
to suggest tax cuts would be delayed.
Speaking to the Financial Times yes-
terday, Mr Philippe said he would
announce the timing of the reforms to
parliament in a matter of days in order
to give companies and households more
clarity on the government’s plan.
The new regime would exclude
investment holdings from France’s
wealth tax and introduce a 30 per cent
flat tax on dividends and other invest-
ment earnings. They are currently taxed
at more than 50 per cent, rising to 60 per
cent for the highest earners.
“There is a discussion on whether we
implement the reform on the wealth tax
entirely in 2019 or whether we move it
forward, or whether we do in two steps,”
Mr Philippe said in his first foreign
media interview since being appointed
Shipping deal highlights
Chinese trade ambitions
State-owned China Cosco Shipping’s
$6.3bn deal for Orient Overseas —
owner of the biggest container ship —
symbolises Beijing’s ambitions to
dominate trade. It pushes Cosco from
fourth to third in terms of market share
and increases pressure on its biggest
competitors, Denmark’s Maersk and
Switzerland-based Mediterranean
Shipping Company. ‘In five years they
could be the largest,’ says one analyst.
Lex i PAGE 10
Trade clout i PAGE 15
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© THE FINANCIAL TIMES LTD 2017
No: 39,521 ★
Printed in London, Liverpool, Glasgow, Dublin,
Frankfurt, Brussels, Milan, Madrid, New York,
Chicago, San Francisco, Washington DC, Orlando,
Tokyo, Hong Kong, Singapore, Seoul, Dubai, Doha
by Mr Macron in May. “It is a discussion
taking into account our other con-
straints, chiefly the goal to get the deficit
back within acceptable levels and meet
our international commitments.”
The backpedalling underlines the del-
icate balancing act for Mr Philippe
between his desire to boost growth and
the obligation to comply with EU deficit
rules to restore credibility in Brussels.
It is also part of an aggressive cam-
paign by Mr Macron to demonstrate a
business-friendly posture at a time
when companies and investors are con-
sidering alternatives to the UK following
Britain’s vote to leave the EU.
Mr Philippe used his first address to
parliament last week to emphasise the
need to curb public spending, which he
described as a French “addiction”, after
the country’s public finance auditor
warned the deficit would exceed the EU
limit of 3 per cent of economic output.
The prime minister suggested some
flagship tax cuts for businesses and
households would be pushed back to
2019 so that a €8bn budget hole left by
Mr Hollande could be plugged.
However, Bruno Le Maire, economy
minister, has appealed to Mr Macron to
implement the tax breaks sooner, say-
ing on Sunday that cutting spending and
reducing taxes was possible “at the same
time, and now”. Mr Philippe, who will
decide on the timing with Mr Macron,
said he “would love that too” but that
the right balance had to be struck.
Mr Philippe last week outlined meas-
ures to lure banks from London.
Analysis page 3
London’s blurring of May’s ‘red line’ on
EU judges opens door to softer Brexit
GEORGE PARKER — LONDON
ALEX BARKER — BRUSSELS
European judges could continue to
have sway over Britain for a “limited
time” after Brexit, the UK government
has conceded, in a development that
could pave the way for a softer exit
from the EU.
Theresa May, the British prime minis-
ter, said last year that one of her negoti-
ating “red lines” was an end to the juris-
diction of the European Court of Justice.
However, Mrs May’s office said yes-
terday that the court could play a tem-
porary role after the UK formally leaves
the EU. “The transition rules could
involve the ECJ for a limited time. That’s
a matter for negotiation,” it said.
The ECJ is the arbiter in disputes
involving the single market and is the
backstop to dozens of EU regulatory
STOCK MARKETS
Jul 10 prev %chg
S&P 500 2429.41 2425.18
Nasdaq Composite 6170.70 6153.08
Dow Jones Ind 21430.27 21414.34
FTSEurofirst 300 1500.77 1494.42
Euro Stoxx 50 3478.81 3463.84
FTSE 100 7370.03 7350.92
FTSE All-Share 4027.69 4020.82
CAC 40 5165.64 5145.15
Xetra Dax 12437.46 12388.68
Nikkei 20080.98 19929.09
Hang Seng 25500.06 25340.85
FTSE All World $ 307.60 306.60
WORLD BUSINESS NEWSPAPER
After Isis
Sunni Islamists have been defeated
before, only to return — PAGE 4
Legal twist Lawyer in spotlight after
latest episode in Russia-Trump saga
A Russian lawyer known for
her campaigning against US
sanctions imposed on her home
country has been thrust into
the centre of the running
controversy over the Trump
campaign’s ties to Russia.
Donald Trump’s eldest son
has acknowledged meeting
Natalia Veselnitskaya during
the 2016 race. Speaking to the
bodies covering sectors including
nuclear power, medicines and aviation.
If Mrs May insisted that ECJ jurisdic-
tion ended immediately in March 2019,
the projected date of Brexit, it would
require Britain to have in place an
entirely new regulatory regime, creating
bureaucratic and business upheaval.
The UK’s clarification on the ECJ is
potentially the most consequential con-
cession since last year’s referendum. It
opens the door to Britain seeking a tran-
sitional deal that temporarily ignores
Mrs May’s other red lines: an end to the
free movement of people and continued
“vast” payments to the EU budget.
The prime minister’s adamant oppo-
sition to any direct ECJ role beyond 2019
has been one of the main constraints on
British officials looking at exit options,
according to senior Whitehall officials.
Mrs May had said Britain “would not
World Markets
CURRENCIES
Jul 10 prev
0.17 $ per € 1.139 1.139 € per $
0.29 $ per £ 1.286 1.288 £ per $
0.07 £ per € 0.885 0.884 € per £
0.42 ¥ per $ 113.990 113.990 ¥ per €
0.43 ¥ per £ 146.626 146.830 £ index
0.26 € index 92.574 91.366 $ index
0.17 SFr per € 1.101 1.099 SFr per £
0.40 COMMODITIES
0.39 Jul 10
0.76 Oil WTI $ 44.52
0.63 Oil Brent $ 47.01
0.33 Gold $ 1211.90
USA $2.50 Canada C$3.
Critical condition
Once a rallying cry, Obamacare has
bruised Republicans — BIG READ, PAGE 7
Briefing
i Oil groups hit back against electric push
Saudi Aramco and Shell have hit back at forecasts
that electric cars threaten a collapse in demand for
oil and warned energy security would be at risk if
investment was withdrawn too quickly.— PAGE 11
i Abe to reshuffle as popularity plummets
Japan’s premier has vowed to reshuffle his cabinet
in response to a poll that showed his popularity at a
record low, raising the odds that he will pull back
from his economic stimulus.— PAGE 4
i Fresh Oculus price cut as VR struggles
Facebook-owned Oculus has decided to cut the
price of its Rift virtual reality headset for the second
time this year, as VR continues to struggle to gain
traction among mainstream consumers.— PAGE 11
i Odinga upbeat on fourth presidential bid
Veteran Kenyan opposition
leader Raila Odinga has told
the FT that frustration over
soaring food prices and a lack
of jobs has shifted momentum
in his favour.— PAGE 4
i Free Democrats launch Berlin bid
Germany’s long-established Free Democrats have
launched a manifesto pushing for deep tax cuts and
an overhaul of immigration law as the party seeks
to share power in the next government.— PAGE 3
i McKinsey drawn into S Africa scandal
The firm revealed that Vikas Sagar, a partner in its
South African office who allegedly misrepresented
the consultancy in a deal with a Gupta-linked
company, is to temporarily stand down.— PAGE 3
i Eritrea modernism recognised by Unesco
The capital Asmara, a 1930s artistic playground for
Italian futurists playing out architectural fantasies
in the then colony, has become the first modernist
city to be designated a World Heritage site.— PAGE 4
Datawatch
Retiring abroad 108,433 people in
Recipients of the UK state pension Spain receive a UK
Yury Martyanov/Kommersant Photo via AP by residence (’000), Nov 2016 state pension, the
Financial Times last year, Ms much of her legal career in Mos- 0 50 100 150 second country in
a league of
Veselnitskaya described herself cow’s suburbs, but her anti- Ireland recipients after
as “an investigative lawyer” out Magnitsky campaign took her
to disprove accusations that led to Brussels and Washington. Spain Ireland, where the
total is 134,822. In
the US Congress to pass the There is little sign she had ties France both countries the
Magnitsky Act, which slapped to senior Kremlin officials. “We Germany number of UK
sanctions on Russians allegedly don’t know who she is and, nat- EU8 pensioners rose
linked to the death of anti- urally, we can’t track the meet- sharply between
EU2
corruption whistleblower ings of all Russian lawyers,” 2002 and 2009
Sergei Magnitsky. said the Kremlin. Source: ONS but has slowed
Ms Veselnitskaya has spent Kremlin denies links page 2
have truly left” the EU until Britain’s
laws are interpreted in British courts.
The EU had dismissed the idea of a
“bespoke” transition for Britain, mak-
ing European courts a clear redline.
Officials in Brussels see Britain’s con-
cessions as a slow but almost inevitable
coming to terms with the practical con-
straints of the two-year talks process.
“The Brits are discovering the hard way
as they bump into the limits of what is
feasible,” said one senior EU negotiator.
Downing Street has already declined
to rule out the possibility of Britain con-
tinuing to make EU budget payments
after March 2019.
Some pro-Brexit Conservative MPs
have indicated they might be prepared
to compromise on some principles dur-
ing a transition period, provided it is
short and has a clear expiry date.
Gideon Rachman & Nicky Morgan page 9
INTEREST RATES
Jul 10 prev price yield chg
0.878 0.878 US Gov 10 yr 100.05 2.37 -0.01
0.777 0.776 UK Gov 10 yr 99.18 1.34 -0.04
1.130 1.131 Ger Gov 10 yr 97.33 0.54 -0.03
129.817 129.845 Jpn Gov 10 yr 100.10 0.09 0.01
76.998 77.363 US Gov 30 yr 101.52 2.92 0.00
102.139 101.762 Ger Gov 2 yr 101.88 -0.57 0.00
1.244 1.242 price prev chg
Fed Funds Eff 1.16 1.16 -
prev %chg US 3m Bills 1.05 1.04 0.01
44.23 0.66 Euro Libor 3m -0.38 -0.38 0.00
46.71 0.64 UK 3m 0.30 0.30 0.00
1215.65 -0.31 Prices are latest for edition Data provided by Morningstar
2 ★ FINANCIAL TIMES Tuesday 11 July 2017

INTERNATIONAL

Kremlin denies Brazilian lawmakers debate putting Temer on trial Politics

links to lawyer JOE LEAHY AND ANDRES SCHIPANI

SAO PAULO
to vote in favour of him. He is clearly los-
ing support,” said Ricardo Sennes,
bribes from JBS through an intermedi-
ary. Under Brazil’s constitution, a sitting
Neves, a Brazil analyst with Eurasia
Group. Analysts said it would be diffi-

who briefed
Michel Temer, Brazil’s president, is fac-
ing the biggest test of his political
career this week with the beginning of a
historic debate in congress on whether
he should be tried for corruption.
director of Prospectiva, a consultancy in
São Paulo.
Brought to power by the impeach-
ment of his predecessor, Dilma Rouss-
eff, one year ago, Mr Temer has sought
president cannot face a criminal trial
without the approval of two-thirds of
the lower house of congress.
The supreme court has sent the
indictment to the congress, which began
cult for Mr Temer’s opponents to mus-
ter the two-thirds of congress necessary
to recommend he be tried.
If Mr Temer’s supporters were able to
pass a labour reform bill, with a vote

Trump’s son
to overcome low popularity ratings by debating the matter yesterday in its expected this week, that could
Although analysts think the president is pushing labour and fiscal reforms to powerful constitution, justice and citi- strengthen the president, analysts said.
entering the process with the necessary pull Brazil out of its longest recession. zenship commission. As house speaker, Mr Maia would
house majority to survive, speculation is But the reforms have been delayed If the commission recommends that become caretaker president for 30 days
growing that an important coalition ally, after a private conversation was taped the indictment proceed, a full session of if the president was suspended, while
house speaker Rodrigo Maia, is setting in March during which he allegedly dis- the house will vote late this month or in congress elected a replacement for the
himself up as a possible challenger. cussed bribes with Joesley Batista, who August; and if the supreme court subse- duration of the trial.
Veselnitskaya is best known in west If congress approves the court case, at the time was chairman of JBS, the quently accepts the case, the president But although there was speculation
Mr Temer could become the first sitting world’s largest meatpacker. will be suspended for up to six months that Mr Maia was manoeuvring behind
for campaign against Magnitsky Act president of Latin America’s largest Brazil’s independent public prosecu- during his trial. the scenes to offer himself as a possible
country to face a criminal trial. tor’s office has charged Mr Temer in the “The advantage he [the president] alternative leader, the house speaker
“The closer this gets to the 2018 elec- supreme court with “passive corrup- has is that there is a lack of Plan B to would struggle to persuade lawmakers
MAX SEDDON — MOSCOW into,” she told the FT last year. To sup- tion, the harder it will be for lawmakers tion”, for allegedly plotting to receive Temer,” said João Augusto de Castro to back him, analysts said.
port her case, Ms Veselnitskaya
They thought they were getting damag- launched a lobbying campaign of her
ing material from a Russian source on own that appeared to involve Russian
their political opponent. She spotted an officials. Last year, Dana Rohrabacher, a
opportunity to press her campaign to pro-Russian Republican congressman, Monetary policy. Cheap money
roll back US sanctions against Russian told the FT that while he was in Moscow,
officials and help one of her clients.
The disclosure that the US president’s
eldest son, Donald Trump Jr, and son-
in-law, Jared Kushner, met Russian law-
Konstantin Kosachev, a senior member
of Russia’s upper house, asked if he
would “at least take a look at something
that our prosecutors would like the
Canada set to join retreat from stimulus
yer Natalia Veselnitskaya in June last Americans to know about”, related to
year to discuss “helpful” information the Magnitsky case. The congressman
has fed suspicions that the Trump cam- met senior Russian prosecutors who
paign was actively seeking Russian help handed him a dossier that referred to
to undermine rival Hillary Clinton. materials filed in the Katsyv money
So who is Ms Veselnitskaya? And why laundering case.
was she allegedly promising dirt on Mrs Ms Veselnitskaya touted around a
Clinton that it seems unlikely she would film, The Magnitsky Act, accusing Mr
have had? Browder of concocting his story. She
Yesterday Dmitry Peskov, Kremlin organised a premiere in the European
spokesman, said he had never heard of Parliament, which was blocked by Mr
Ms Veselnitskaya. “We don’t know who Browder’s lawyers at the last minute.
she is and, naturally, we can’t track the
meetings of all Russian lawyers domes-
tically and abroad,” he said.
‘We can’t track the
A criminal defence attorney, Ms Ves- meetings of all Russian
elnitskaya normally practises in court-
rooms of Moscow’s suburbs.
lawyers domestically
Last year, however, Ms Veselnitskaya, and abroad’
who declined to talk to the Financial
Times yesterday, flew to New York to According to court documents, Ms
represent a family friend, Denis Katsyv, Veselnitskaya was repeatedly denied a
accused of laundering $14m of the pro- visa to defend Mr Katsyv before secur-
ceeds from an alleged $230m tax fraud ing “immigration parole”. Ms Veselnit-
into US real estate. Mr Katsyv’s com- skaya said she was later strip-searched
pany, Prevenzon Holdings, settled the at Heathrow on her way to New York.
case for $6m in May without admitting The film was shown at the Newseum
wrongdoing. in Washington last June, four days after
The alleged $230m tax fraud became she met Mr Trump Jr and Mr Kushner.
a cause célèbre after it was exposed by Angry Russians in the audience shouted
Sergei Magnitsky, an accountant. Mag- “Shame!” and “Lies!” after it finished.
nitsky died in a Russian jail in mysteri- Many of the allegations in the film,
ous circumstances in 2008 after being seen by the FT, were misleading or inac- At a crossroads: pedestrians are reflected in a window in the financial district of Toronto this week Brent Lewin/Bloomberg
arrested by prosecutors he had accused curate. Mr Browder told the FT that it
of the fraud. Magnitsky’s employer, was part of a Kremlin “smear campaign”
hedge fund manager William Browder against him. with four rate rises starting in December cent despite a runaway housing sector. capacity would probably be closed up by
campaigned for the US to pass sanctions “She had one clear, unequivocal Some economists predict first 2015, while the European Central Bank The central bank has been flag- the fourth quarter.
legislation in 2012 against Russian offi- objective in 2016, which was to repeal quarter-point increase in rates has recently signalled that it is getting ging stability concerns around the Currency and bond traders have been
cials implicated in Magnitsky’s death. the Magnitsky Act,” Mr Browder said. more confident that deflation has been inflated property market and high piling bets on a move on rates this week
Vladimir Putin, Russian president, Ms Veselnitskaya also hired Rinat since 2010 will be approved defeated in the eurozone. Some Bank of household indebtedness, which stands since Carolyn Wilkins, deputy governor,
banned US adoptions of Russian chil- Akhmetshin, a Washington-based fixer England policymakers have hinted that at 170 per cent of disposable gave a speech on June 12 saying that
dren in response. for Russian oligarchs. it could lift rates, while Norway’s central income. But Derek Holt, an economist with the oil price crunch past, the econ-
SAM FLEMING — WASHINGTON
Ms Veselnitskaya used an audacious Ms Veselnitskaya presented herself at bank last month ditched guidance that at Scotiabank, said that if the central omy was picking up.
argument in defence of her client, Mr the European Parliament premiere as a The Bank of Canada is preparing to join it could cut borrowing costs. bank had felt driven to use monetary The claim by Mr Poloz later that
Katsyv: it was Mr Browder who was member of an organisation fighting to the swelling ranks of advanced econ- Among the big exceptions is the Bank policy primarily to rein in the property month that the 2015 cuts had “done
guilty of the $230m tax fraud and overturn the Russian adoption ban. The omy central banks that are pulling back of Japan, where the leadership appears market, it could have acted a lot sooner. their job” was taken as a further signal
arranged Magnitsky’s death to cover it organisation was registered at a PO box on their emergency stimulus as inves- committed to its bond buying. But the that the reductions might be reversed.
up. “I’m the real investigative lawyer at an address previously used by Mr tors bet that it could push through the prospect of tighter policy around the However, some economists, including
that he is trying to build Magnitsky Akhmetshin, who denied any link. first increase in its key rate for seven world has triggered turbulence in bond
The prospect of tighter at Goldman Sachs, question whether the
In April, the Senate judiciary commit- years as soon as this week. markets over recent days as investors policy around the world central bank will be ready to move as
tee asked the Department of Homeland In a sign of confidence in what G20 who have taken advantage of years of soon as tomorrow.
Security to investigate Mr Akhmetshin leaders said this weekend in Hamburg cheap money reassess the outlook.
has triggered turbulence A further question is what kind of
for potential violations of lobbying laws. were “encouraging” global growth pros- Larry Hatheway, chief economist at in bond markets guidance it will issue after its deci-
The committee said he conducted “sub- pects, the Bank of Canada has been GAM, which oversees $130bn of assets, sion. Canada is no exception to the puz-
versive political influence operations sending increasingly hawkish signals in said: “In more and more parts of the Stephen Poloz, Bank of Canada gover- zle that is clouding central banks across
often involving disinformation and recent weeks. world the economy has reached a stage nor, might instead be spurred into the advanced economies — while jobs
propaganda”. Some economists predict it will con- where this extraordinary monetary pol- action by robust employment growth, growth has improved and activity
Mr Browder said: “There’s no mystery clude its policy meeting tomorrow with icy is no longer warranted by the funda- he said, as well as diminishing spare has rebounded, inflation remains mori-
about her background. the first quarter-point increase in rates mentals. We have the restoration of full capacity in the economy. bund.
“I’d be surprised that anyone who had since 2010, as policymakers in Ottawa employment, but also financial condi- The Bank of Canada might also be In Canada, core inflation is just
done their due diligence would have consider removing the extra support tions are generally accommodative as encouraged by an easing in interna- 1.4 per cent, below the central bank’s
Natalia Veselnitskaya: expensively agreed to meet with her, considering her they implemented in the teeth of the asset prices have recovered. This is tional risk factors, among them the 2 per cent target.
dressed and practises in Moscow sketchy CV.” 2015 oil rout. prompting central banks to embark on diminished threat of a border tax Mark Chandler, a strategist at RBC
Even if it holds fire, the more bullish normalisation of policy, including in imposed by the US as well as hopes that Dominion Securities, said that the cen-
noises from the bank puts it on a grow- Canada, even in the face of low infla- the North American Free Trade Agree- tral bank need not lift rates steeply,
ing list of central banks that are prepar- tion.” ment would not be torn up. given the depressed level of infla-
ing to pare back their accommodation, Canada previously lifted rates in 2010 “Something else had to bring them off tion. But he said he expected the Bank of
MAKE A SMART INVESTMENT or at least suggesting they will slow
down their stimulus programmes.
only to trim them in 2015 as the oil price
dive hit its energy sector. Since then the
the sidelines, and it is eroding slack,” Mr
Holt said. He added that two of the cen-
Canada ultimately to go beyond just tak-
ing back the half-point of rate cuts it
Subscribe to the FT today at FT.com/subscription The Federal Reserve has led the way Bank of Canada has held rates at 0.5 per tral bank’s preferred measures of spare introduced in 2015.

FRIDAY 31 MARCH 2017 WORLD BUSINESS NEWSPAPER UK £2.70 Channel Islands £3.00; Republic of Ireland €3.00

Trump vs the Valley

Tech titans need to minimise
political risk — GILLIAN TETT, PAGE 13
A Five Star plan?
Italy’s populists are trying to woo
the poor — BIG READ, PAGE 11
Dear Don...
May’s first stab at the break-up
letter — ROBERT SHRIMSLEY, PAGE 12 Technology
HMRC warns Lloyd’s of Brussels Insurance market UK £3.80; Channel Islands £3.80; Republic of Ireland €3.80
Briefing
SATURDAY 1 APRIL / SUNDAY 2 APRIL 2017

Chinese city paves way for ‘unhackable’ communications

to tap new talent pool with EU base
customs risks THE END
i US bargain-hunters fuel Europe M&A
Europe has become the big target for cross-border
dealmaking, as US companies ride a Trump-fuelled
equity market rally to hunt for bargains across the
HOW DRIVERLESS
OF THE TECHNOLOGY IS
Atlantic.— PAGE 15; CHINA CURBS HIT DEALS, PAGE 17

being swamped i Report outlines longer NHS waiting times

A report on how the health service can survive CHANGING AN
ROAD
more austerity has said patients will wait longer for
non-urgent operations and for A&E treatment while AMERICAN WAY OF LIFE Censors and sensitivity
by Brexit surge
some surgical procedures will be scrapped.— PAGE 4

i Emerging nations in record debt sales Warning: this article may be

FT WEEKEND MAGAZINE
FEBRUARY 4 2017

Developing countries have sold record levels of

government debt in the first quarter of this year,
upsetting — LIFE & ARTS
taking advantage of a surge in optimism toward
emerging markets as trade booms.— PAGE 15

3 Confidence in IT plans ‘has collapsed’

3 Fivefold rise in declarations expected
JAMES BLITZ — WHITEHALL EDITOR
Credit Suisse Art of persuasion Mystery deepens
i London tower plans break records
A survey has revealed that a
record 455 tall buildings are
planned or under construction over disputed painting of Jane Austen How To Spend It
adjust its negotiation position with the in London. Work began on

A computer system acquired to collect
duties and clear imports into the UK
may not be able to handle the huge
surge in workload expected once Britain
engulfed in
EU, a Whitehall official said. “If running almost one tower a week
our own customs system is proving during 2016.— PAGE 4
much harder than we anticipated, that
ought to have an impact on how we i Tillerson fails to ease Turkey tensions
press for certain options in Brussels.” The US secretary of state has failed to reconcile

fresh tax probe

leaves the EU, customs authorities have
admitted to MPs.
HM Revenue & Customs told a parlia-
mentary inquiry that the new system
needed urgent action to be ready by
March 2019, when Brexit is due to be
completed, and the chair of the probe
said confidence it would be operational
in time “has collapsed”.
In a letter to Andrew Tyrie, chairman tensions after talks in Ankara with President Recep
of the Commons treasury select com-
mittee, HMRC said the timetable for
Tayyip Erdogan on issues including Syria and the
extradition of cleric Fethullah Gulen.— PAGE 9
Chic new lodgings
delivering CDS was “challenging but
achievable”. But, it added, CDS was “a i Toshiba investors doubt revival plan
in Scotland
complex programme” that needed to be In a stormy three-hour meeting, investors accused MAGAZINE
linked to dozens of other computer sys- managers ofhaving an entrenched secrecy culture
tems to work properly. In November, 3 UK, France and Netherlands swoop
and cast doubt on a revival plan after Westinghouse
HMRC assigned a “green traffic light” to filed for Chapter 11 bankruptcy protection.— PAGE 16
3 Blow for bid to clean up Swiss image

Setting up a digital customs system
has been at the heart of Whitehall’s
Brexit planning because of the fivefold
increase in declarations expected at
British ports when the UK leaves the EU.
FINANCIAL TIMES
About 53 per cent of British imports
come from the EU, and do not require
checks because they arrive through the
single market and customs union. But
which lies between the two cities, as an used by commercial banks across the Byrnes, a quantum physicist at New
CDS, indicating it would be delivered on
time. But last month, it wrote to the i HSBC woos transgender customers
committee saying the programme had
been relegated to “amber/red,” which
means there are “major risks or issues
The bank has unveiled a range of gender-neutral
RALPH ATKINS — ZURICH
DUNCAN
titles such asROBINSON — BRUSSELS
“Mx”, in addition
Ms, in a move to embrace diversity and cater togather
it followed “a strategy offull client tax
to Mr, Mrs, Misscompliance”
or but was still trying to
the information about the probes. YUAN YANG — BEIJING
apparent in a number ofkey areas”. Credit
needs Suisse hascustomers.
of transgender been targeted by
— PAGE 20 HM Revenue & Customs said it had
HMRC said last night: “[CDS] is on sweeping tax investigations in the UK, launched a criminal investigation into
track to be delivered by January 2019, France and the Netherlands, setting suspected tax evasion and money laun-
and it will be able to support frictionless back Switzerland’s attempts to clean up dering by “a global financial institution
Datawatch

inter-city hub to route messages. two cities’ financial hubs and by the gov- York University’s Shanghai campus.
Theresa May announced in January that international trade once the UK leaves its image as a tax haven. and certain ofits employees”. The UK
Brexit would include departure from
both trading blocs. HMRC handles 60m
declarations a year but, once outside the
customs union, the number is expected
the EU . . . Internal ratings are designed
to make sure that each project gets the
focus and resource it requires for suc-
cessful delivery.”
Terror attacks inwith
co-operating western Europe after
authorities
offices in London, Paris and Amsterdam
were contacted
Highlighted attack byOthers
Recent

Published daily except Sundays, New Year’s Day,

The Swiss bank said yesterday it was tax authority added: “The international
reach
itsattacks
notably the message
2011
— of this investigation sends a clear
that there is no hiding place for
massacre bythose seeking to evade tax.”
local officials
The lure of the exotic
Robin Lane Fox on the flair

A Chinese city has successfully trialled

to hit 300m.
The revelations about the system,
called Customs Declaration Service, are
HMRC’s letters to the select commit-
tee, which will be published today, pro-
vide no explanation for the rating
Lloyd’s of London chose Brus-
insurers to follow. Most of the
“concerning client tax matters”. Anders BreivikDutch in prosecutors, who initiated the
AFP Norway, the
Dutch authorities said their counter- action, said they seized jewellery, paint- of foreign flora — HOUSE & HOME
EU, with Dublin and Luxem- parts in Germany wereBrussels attacks in Paris
also involved, ings and gold ingots as part of their

330 Hudson Street, Presidents’ Day, Good Friday, Memorial Day, Labor
while Australia’s revenue department and Nice, and the while French officials said their
probe;
likely to throw a sharper spotlight on change, but some MPs believe it was sels over “five or six” other business written in Brussels bourg thought to be more likely Norway Brussels suicide
said it was investigating a Swiss
Nice bank. investigation had revealed “several

whether Whitehall can implement a
host of regulatory regimes — in areas
ranging from customs and immigration
to agriculture and fisheries — by the
time Britain leaves the EU.
caused by Mrs May’s unexpected deci-
sion to leave the EU customs union.
Timetable & Great Repeal Bill page 2
Scheme to import EU laws page 3
Editorial Comment & Notebook page 12
cities in its decision to set up an
EU base to help deal with the
expected loss of passporting
rights after Brexit.
John Nelson, chairman of the
will be reinsured back to the
syndicates at its City of London
headquarters, pictured above.
The Belgian capital had not
been seen as the first choice for
homes for the industry. But
Mr Nelson said the city won on
its transport links, talent pool
and “extremely good regula-
tory reputation”.
Sources: Jane’s Terrorism and Insurgency Centre terror incidents in
Quantum key distribution (QKD) ernment. “It’s amazing how quickly China has
Paris bombings — have
The inquiries threaten to undermine thousand” bank accounts opened in
bucked the trend
efforts by the country’s banking sector Switzerland and not declared to French
of generally low
to overhaul business models and ensure tax authorities.
fatalities from
customers meet international tax The Swiss attorney-general’s office

an “unhackable” communications net-

requirements following a US-led clamp- western Europesaid it was “astonished at the way this
Problems with CDS and other projects Philip Stephens & Chris Giles page 13 centuries-old insurance mar- London’s specialist insurance Lex page 14

New York, NY 10013 essential to Brexit could force London to JPMorgan eye options page 18 ket, said he expected other groups after the UK leaves the Insurers set to follow page 18
billions of dollars in fines.

Day, Martin Luther King Day, Thanksgiving,

down on evaders, which resulted in operation has been organised with the
deliberate exclusion of Switzerland”. It
The probes risk sparking an interna- demanded a written explanation from
tional dispute after the Swiss attorney- Dutch authorities.

City watchdog sends a clear message as

networks are more secure than widely The trials involved sending secure gotten on with quantum research
general’s office expressed “astonish- In 2014, Credit Suisse pleaded guilty
ment” that it had been left out of the in the US to an “extensive and wide-
actions co-ordinated by Eurojust, the ranging conspiracy” to help clients THE RISE
Escape OF
the taper ECO-GLAM
trap
banker loses job over WhatsApp boast
EU’s judicial liaison body.

Christmas Day and the day after Christmas Day.

evade tax. It agreed to fines of $2.6bn.
How high earners can evade

work, raising hope of a rollout of the

Credit Suisse, whose shares fell 1.2 per Additional reporting by Laura Noonan in
cent yesterday, identified itself as the Dublin, Caroline Binham and Vanessa
subject ofinvestigations in the Nether- Houlder in London, and Michael Stothard a pension headache — FT MONEY
lands, France and the UK. The bank said in Paris Austen’s descendants insist the Rice portrait depicts her as a girl — see magazine Bridgeman Art Library

used electronic communication forms. information between 200 different ter- projects that would be seen as too
LAURA NOONAN — DUBLIN Berrys after discussions with regulators. media at work, but banks are unable to
JENNIFER THOMPSON — LONDON

Subscriptions and Customer Service

A boastful WhatsApp message has cost
a London investment banker his job
Christopher Niehaus, a former Jeffer-
ies banker, passed confidential client
information to a “personal acquaint-
ance and a friend” using WhatsApp,
ban people from installing apps on their
private phones.
Brussels takes tough stance on Brexit
Andrew Bodnar, a barrister at Matrix
Chambers, said the case set “a precedent

world’s first widescale commercial

and a £37,000 fine in the first case of
Shutdown risk as border according to the FCA. The regulator said in that it shows the FCA sees these mes-
with Spain handed veto over Gibraltar
regulators cracking down on commu- 390_Cover_PRESS.indd 1 19/01/2017 13:57

wall bid goes over the top nications over Facebook’s popular Mr Niehaus had turned over his device saging apps as the same as everything
chat app. to his employer voluntarily. else”.

Tel: +1 800 628 8088 US subscription rates, 1 year $406. Periodicals

Congressional Republicans seeking to The FCA said Mr Niehaus had shared Information shared by Mr Niehaus

avert a US government shutdown after
April 28 have resisted Donald Trump’s
attempt to tack funds to pay for a wall
on the US-Mexico border on to
The fine by the Financial Conduct
Authority highlights the increasing
problem new media pose for companies
that need to monitor and archive their
confidential information on the messag-
ing system “on a number of occasions”
last year to “impress” people.
Several banks have banned the use of
A classical channel, such as a telephone minals in Jinan over a network covering expensive to do elsewhere.”
included the identity and details of a
client and information about a rival of ALEX BARKER — BRUSSELS ambitious trade and airline access deals. mise. If Britain wants to prolong its
Jefferies. In one instance the banker GEORGE PARKER — LONDON Gibraltar yesterday hit back at the status within the single market after
boasted how he might be able to pay off STEFAN WAGSTYL — BERLIN clause, saying the territory had “shame- Brexit, the guidelines state it would

application of quantum communica-

stopgap spending plans. They fear staff’s communication. new media from work-issued devices, his mortgage if a deal was successful. The EU yesterday took a tough opening fully been singled out for unfavourable require “existing regulatory, budgetary,
that his planned $33bn increase in Several large investment banks have but the situation has become trickier as Mr Niehaus was suspended from Jef- stance in Brexit negotiations, rejecting treatment by the council at the behest of supervisory and enforcement instru-

uscirculation@ft.com, www.ft.com/subsusa
defence and border spending could
force a federal shutdown for the first
time since 2013, as Democrats refuse
banned employees from sending client
information over messaging services
including WhatsApp, which uses an
banks move towards a “bring your own
device” policy. Goldman Sachs has
clamped down on its staff’s phone bills
feries and resigned before the comple-
tion of a disciplinary process.
Jefferies declined to comment while
Living wage rise to pile
pressure on care services
postage paid at New York, NY and at additional
Britain’s plea for early trade talks and
explicitly giving Spain a veto over any
arrangements that apply to Gibraltar.
Spain”. Madrid defended the draft
clause, pointing out that it only reflected
“the traditional Spanish position”.
ments and structures to apply”.
Mr Tusk wants talks on future trade
to begin only once “sufficient progress”

to accept the proposals. encryption system that cannot be
US budget Q&A and accessed without permission from the
Trump attack over health bill i PAGE 8 user. Deutsche Bank last year banned
WhatsApp from work-issued Black-
as iPhone-loving staff spurn their work-
issued BlackBerrys.
Bankers at two institutions said staff
are typically trained in how to use new
or internet cable, can be tapped by an several hundred square kilometres. China made another research break-
Facebook did not respond to a request Senior EU diplomats noted that has been made on Britain’s exit bill and
for comment. About 2.3m people will benefit from European Council president Donald Mr Tusk’s text left room for negotiators citizen rights, which Whitehall officials
Additional reporting by Chloe Cornish today’s increase in the national living Tusk’s first draft of the guidelines, to work with in coming months. Prime believe means simultaneous talks are
Lombard page 20 wage to £7.50 per hour. But the rise which are an important milestone on minister Theresa May’s allies insisted possible if certain conditions are met.

Advertising Subscribe In print and online World Markets

will pile pressure on English councils,
which will have to pay care workers a
lot more. Some 43 per cent of care
staff — amounting to 341,000 people
aged 25 and over — earn less than the
mailing offices; Post-Master. Send address changes
the road to Brexit, sought to damp Brit-
ain’s expectations by setting out a
“phased approach” to the divorce proc-
ess that prioritises progress on with-
drawal terms.
that the EU negotiating stance was
largely “constructive”, with one saying it
was “within the parameters of what we
were expecting, perhaps more on the
upside”.
Boris Johnson, the foreign secretary,
reassured European colleagues at a
Nato summit in Brussels that Mrs May
had not intended to “threaten” the EU
when she linked security co-operation

tions.
eavesdropper without the sender or Aside from increasing the security of through last month when its quantum
www.ft.com/subscribenow new living wage and the increase is The decision to add the clause giving British officials admitted that the EU’s after Brexit with a trade deal.
STOCK MARKETS CURRENCIES INTEREST RATES
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Tel: +1 917 551 5040 to F.T. Publications Inc., PO Box 469, Newburgh, NY
£360m in the coming financial year. deals covering Gibraltar could make the European Court of Justice in any transi- Jonathan Powell, Tim Harford &
For the latest news go to S&P 500 2365.93 2361.13 0.20 $ per € 1.074 1.075 € per $ 0.932 0.930 US Gov 10 yr 98.87 2.38 0.00
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www.ft.com Nasdaq Composite 5902.74 5897.55 0.09 $ per £ 1.249 1.241 £ per $ 0.801 0.806 UK Gov 10 yr 100.46 1.21 -0.03
Madrid and London an obstacle to Brussels sees little room for compro- Henry Mance page 12
Dow Jones Ind 20703.38 20659.32 0.21 £ per € 0.859 0.866 € per £ 1.164 1.155 Ger Gov 10 yr 98.68 0.39 -0.01
© THE FINANCIAL TIMES LTD 2017 FTSEurofirst 300 1500.72 1493.75 0.47 ¥ per $ 111.295 111.035 ¥ per € 119.476 119.363 Jpn Gov 10 yr 100.45 0.06 0.00
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Printed in London, Liverpool, Glasgow, Dublin, FTSE 100 7369.52 7373.72 -0.06 € index 89.046 89.372 $ index 104.636 103.930 Ger Gov 2 yr 102.58 -0.75 0.00 Subscribe In print and online World Markets

The local government of Jinan, in east- recipient being aware. But if a quantum payments and other financial services, satellite — the first in the world — sent a
Frankfurt, Brussels, Milan, Madrid, New York, FTSE All-Share 4011.01 4011.80 -0.02 SFr per € 1.069 1.072 SFr per £ 1.244 1.238 price prev chg

usads@ft.com Chicago, San Francisco, Washington DC, Orlando,

Tokyo, Hong Kong, Singapore, Seoul, Dubai
CAC 40
Xetra Dax
Nikkei
Hang Seng
FTSE All World $
5089.64 5069.04 0.41 COMMODITIES
12256.43 12203.00 0.44
19063.22 19217.48 -0.80 Oil WTI $
24301.09 24392.05 -0.37 Oil Brent $
297.99 297.73 0.09 Gold $
Mar 30
50.22
52.98
1248.80
prev
49.51
52.54
1251.10
Fed Funds Eff
%chg US 3m Bills
1.43 Euro Libor 3m
0.84 UK 3m
-0.18 Prices are latest for edition
0.66
0.78
-0.36
0.34
0.66
0.78
-0.36
0.34
0.00
0.00
0.00
0.00
Data provided by Morningstar
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Mar 31
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5918.69
prev %chg
CURRENCIES

2368.06 -0.04 $ per €

5914.34 0.07 $ per £
20689.64 20728.49 -0.19 £ per €
Mar 31
1.070
1.251
0.855
prev
1.074 € per $
1.249 £ per $
0.859 € per £
Mar 31
0.935
0.800
1.169
prev
INTEREST RATES

0.932 US Gov 10 yr
0.801 UK Gov 10 yr
1.164 Ger Gov 10 yr
price
98.63
100.35
99.27
yield
2.41
1.22
0.33
chg
-0.01
0.02
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FTSEurofirst 300 1503.03 1500.72 0.15 ¥ per $ 111.430 111.295 ¥ per € 119.180 119.476 Jpn Gov 10 yr 100.36 0.07 0.00
No: 39,436 ★

Letters to the editor Printed in London, Liverpool, Glasgow, Dublin,

Euro Stoxx 50
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3495.59
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3481.58 0.40 ¥ per £
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88.767 89.046 $ index
77.226 76.705 US Gov 30 yr
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3.04
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ern China, told the Financial Times yes- channel is tapped, it alters the informa- the network would make it almost message to Earth on a quantum com-
Frankfurt, Brussels, Milan, Madrid, New York, FTSE All-Share 3990.00 4011.01 -0.52 SFr per € 1.071 1.069 SFr per £ 1.252 1.244 price prev chg
Chicago, San Francisco, Washington DC, Orlando, CAC 40 5122.51 5089.64 0.65 COMMODITIES Fed Funds Eff 0.66 0.66 0.00
Tokyo, Hong Kong, Singapore, Seoul, Dubai Xetra Dax 12312.87 12256.43 0.46 Mar 31 prev %chg US 3m Bills 0.78 0.78 0.00
Nikkei 18909.26 19063.22 -0.81 Oil WTI $ 50.46 50.35 0.22 Euro Libor 3m -0.36 -0.36 0.00
Hang Seng 24111.59 24301.09 -0.78 Oil Brent $ 53.35 53.13 0.41 UK 3m 0.34 0.34 0.00

Fax: +44 20 7873 5938, © Copyright The Financial Times Limited 2017. All
FTSE All World $ 297.38 298.11 -0.24 Gold $ 1244.85 1248.80 -0.32 Prices are latest for edition Data provided by Morningstar

letters.editor@ft.com rights reserved. Reproduction of the contents of this terday that its departments would begin tion being relayed, and the disturbance impossible for other governments to lis- munication channel.
Executive appointments newspaper in any manner is not permitted without using the network by the end of August. alerts the parties using it that something ten in on Chinese communications, “Quantum communication has been
www.exec-appointments.com the publisher’s prior consent. ‘Financial Times’ and
‘FT’ are registered trade marks of The Financial
“We plan to use the network for is amiss. once properly implemented. taken up by the commercial sector
Published by Times Limited. national defence, finance and other In QKD networks, a secure crypto- Chinese policymakers have been con- much more in China compared to other
F.T. Publications Inc. 330 Hudson St, New York, fields, and hope to spread it out as a pilot graphic “key”, or password, is sent cerned about protecting domestic cyber countries, which means it is likely to
NY 10013, USA; The Financial Times and its journalism are subject to that, if successful, can be used across between two parties over the network, space since whistleblower Edward pull ahead of Europe and the US in the
Tel: +1 917-551-5000; a self-regulation regime under the FT Editorial Code
Editor: Lionel Barber of Practice: www.ft.com/editorialcode China and the whole world,” said Zhou which they can use to encrypt future Snowden’s revelations of US-sponsored field of quantum communication,” Mr
Fei, assistant director of Jinan Institute communications. If the key is interfered internet surveillance and amid growing Byrnes added.
Printed by Reprints are available of any FT article with your of Quantum Technology, the research with, the two parties know not to use it. awareness of the cost of hacking attacks. Switzerland, Austria and Japan
Blue Island Newspaper Printing, Harvey, IL company logo or contact details inserted if required
Comprint Printing, Laurel, MD (minimum order 100 copies). One-off copyright institute involved in the project. The Beijing-Shanghai network is set As a result, government support has already have small QKD networks
Evergreen Printing Company, Bellmawr, NJ licences for reproduction of FT articles are also The result is a boost for the Beijing- to host the world’s longest land-based poured into quantum research. mostly for use by universities doing
Southwest Offset Printing, San Jose, CA available. For both services phone +44 20 7873 4816, Shanghai quantum network, which is quantum communication channels, “China has achieved staggering things research on the technology.
Sun Publication Inc, Lakeland, FL or alternatively, email syndication@ft.com
under construction. This uses Jinan, stretching over 2,000km, and will be with quantum research,” said Tim Additional reporting by Xinning Liu
Tuesday 11 July 2017 ★ FINANCIAL TIMES 3

INTERNATIONAL

Manifesto launch South Africa

German liberals push for deep tax cuts McKinsey

Free Democrats’ best
hope for power sharing
lies in victory for Merkel
STEFAN WAGSTYL — BERLIN
Germany’s Free Democrats advocated
deep tax cuts and an overhaul of immi-
gration law as the party launched its
election manifesto yesterday hoping to
share power in the next government.
The liberal party was routed in the
2013 election and lost its place in the
Bundestag but is confident of returning
to national politics under Christian
Lindner, who has overseen a recovery in
support and regional election successes.
The FDP’s best hope of being in gov-
ernment is if Chancellor Angela Merkel,
who has a strong lead in opinion polls,
wins September’s election. Lawmakers
say the FDP could form a coalition with
her Christian Democrats if it does well.
A three-way government with the
Greens is also possible.
However, Mr Lindner said he thought
a renewal of the CDU’s current “grand
coalition” with the Social Democrats
was “most likely” and warned his party
against over-optimism. “We are not in
the Bundestag . . . A bit of modesty is
called for,” he said.
Ms Merkel is aiming to win a fourth
term as chancellor but is almost certain
to have to govern with a coalition part-
Interview. Edouard Philippe
ner. Mr Lindner declined to describe Ms
Merkel’s conservatives as his “favourite
partner” but said the programme of the
CDU and its Bavarian sister party, the
Christian Social Union, was “close” to
the FDP’s. The latest opinion poll from
the Emnid agency puts the CDU/CSU on
38 per cent, the SPD on 25 per cent and
the FDP, the Greens and the Left party
all on 7-8 per cent. If repeated in Sep-
tember, this would leave a CDU/CSU-
FDP coalition close to a majority. Parties
need to win at least 5 per cent of votes
cast to gain Bundestag seats.
The FDP has been a junior coalition
partner, mostly for the CDU, for about
half the years since West Germany’s first
post-second world war elections in
1949. But voters turned against it four
years ago after party leaders failed to
make their mark in Ms Merkel’s govern-
ment and were cast as her stooges.
Mr Lindner, a former businessman
and ex-amateur racing car driver, has
revived morale, with the FDP perform-
ing strongly in regional elections in May
in Schleswig-Holstein and in North
Rhine-Westphalia, the most populous
state and Mr Lindner’s home turf.
The FDP, based on commitments to
open markets, personal freedom, a
small state and low taxes, is fighting the
campaign with promises to cut red tape
and accelerate modernisation by invest-
ing in digitalisation, high-speed broad-
band and technical education.
drawn into
“A lack of patience is also a virtue,”
says the manifesto.
long-running
Manfred Güllner, head of the Forsa
polling agency, said: “The FDP appeals
Gupta family
to the middle classes — skilled workers,
entrepreneurs and self-employed pro-
fessionals . . . [who] want somebody to
scandal
stand up to the two big parties.”
The party promises to slash taxes by JOSEPH COTTERILL — JOHANNESBURG
€30bn over the 2017-21 term, far more
The consultancy McKinsey has been
than the €20bn or so pledged by Ms
drawn into the scandal around South
Merkel’s bloc, with cuts funded by fore-
Africa’s powerful Gupta business fam-
cast tax revenue increases.
ily after revealing that a partner who
Europe would be “the top political
allegedly misrepresented the firm in a
issue” in Germany into the 2020s, said
deal with a Gupta-linked investment
Mr Lindner, who supports talks over
company would temporarily stand
eurozone reform as France’s President
down.
Emmanuel Macron has proposed.
McKinsey said that Vikas Sagar, a direc-
tor in its South African office, would
take a leave of absence to allow an inter-
nal investigation to proceed after he
“inaccurately characterised” the con-
sultancy’s ties with Trillian Capital, a

French PM faces ‘Macronism’ dilemma company owned by Salim Essa, a close

Premier keen to stimulate jobs
on the one hand while meeting
EU deficit limit on the other
ANNE-SYLVAINE CHASSANY AND
MICHAEL STOTHARD — PARIS
Edouard Philippe owes his job to Presi-
dent Emmanuel Macron. But France’s
prime minister makes no claims that his
boss’s reformist presidential agenda is a
radically new ideology.
Rather, in his first foreign media
interview, Mr Philippe shows loyalty to
his former party by suggesting that
“Macronism” is the direct legacy of
Alain Juppé, the unsuccessful centre-
right presidential hopeful and Mr
Philippe’s mentor in politics.
When it is suggested that the govern-
ment’s plans for a more flexible labour
market, tax cuts for businesses and
emphasis on public spending curbs
were all rightwing measures, Mr
Philippe bursts into laughter. “Yes, what
did you expect?” he says.
In his office in the Matignon palace,
Mr Philippe, who was a senior party
leader in the centre-right Republicans,
tells the Financial Times: “I feel that
what we’re implementing here is com-
patible with what we defended in Alain
Juppé’s presidential programme. I feel
very much at ease with myself.”
Yet, like his role model Mr Juppé —
who as Jacques Chirac’s premier became
the most loathed French politician of
the mid-1990s — Mr Philippe is discov-
ering the inherent challenges of his job.
French prime ministers of all stripes
have found themselves stuck between a
president with vast executive powers,
who typically uses his premier to deliver
the bad news, and an ambitious cabinet
of ministers. Michel Rocard, the reform-
ist Socialist premier who became
François Mitterrand’s punchbag, went
so far as to describe the French premier-
ship as “the Matignon hell”.
Unlike Mr Juppé, Mr Philippe’s
approval ratings are still high: polls
show that nearly two-thirds of French
have a good opinion of him.
But the past week has brought his first
difficulties. First Mr Macron stole the
show by choosing to address a joint ses-
sion of parliament in Versailles, a day
before Mr Philippe’s formal speech on
High ratings: future policies to the lower house. Then
Edouard after Mr Philippe told MPs that flagship
Philippe in his tax breaks would have to be delayed to
office at the bring France’s deficit in line with EU
Matignon rules, economy minister Bruno Le
palace, Paris Maire seemed to push for earlier adop-
Leo Novel tion, appealing to the president himself.
Mr Philippe, who as mayor of the Nor-
mandy port of Le Havre used to take out
his frustrations by boxing three times a
week, sounds philosophical about the
whole affair. He says that like Mr Le
Maire he “would love” to simultane-
ously implement Mr Macron’s pledged
tax breaks and meet Brussels’ deficit
limit of 3 per cent of gross domestic
product. But this requires tough spend-
ing cuts, he warns.
Mr Philippe admits there are ongoing
discussions, to be resolved this week,
over reform of France’s wealth tax as
soon as next year instead of 2019, as he
indicated last week. A plan to scrap
property taxes, costing €10bn, could
also be implemented as soon as 2018.
“We are discussing the pace of the
measures, taking into account our other
constraints,” Mr Philippe says. “More
than the measures, what matters is the
direction. The main goal is visibility. No
matter what, by the end of the year, we
will pass a bill detailing the timing of all
the fiscal measures for the next years.”
The backtracking highlights Mr
Philippe’s dilemma in trying to stimu-
late investments and jobs with one hand
while making sure that France emerges
from Brussels’ so-called excessive defi-
cit procedure with the other.
Mr Macron wants to turn France into
a resolutely pro-business investment
destination after his Socialist predeces-
sor — and former boss — François Hol-
lande hit the country’s reputation with
tax rises that prompted a public “revolt”
of entrepreneurs.
‘We are Mr Philippe says the message to the
world is that France is open for business
discussing and serious about curing its “addiction”
the pace to public spending.
Born in Rouen to teachers, the prime
of the minister graduated from ENA, the elite
measures, school that grooms France’s top civil
servants. He became a lawyer at the
taking into Conseil d’Etat, France’s Supreme Court,
account before helping Mr Juppé found the
Union pour un Mouvement Populaire,
our other the centre-right party later renamed
constraints’ Les Republicains by former president
Nicolas Sarkozy.
Mr Philippe did not need much con-
vincing to accept Mr Macron’s offer of
the premiership.
“The president was elected on a very
clear message that was both pro-EU and
pro-business, which is unusual in
France,” Mr Philippe says. “There’s
something quite powerful and deep
happening in this country.”
business associate of the Guptas.
The move demonstrates how interna-
tional companies have become entan-
gled in the fallout from allegations that
the Guptas used their friendship with
President Jacob Zuma to obtain lucra-
tive state contracts and sway public
appointments — referred to locally as
state capture — to bolster their mining-
to-media business empire.
The long-running Gupta scandal has
cast a shadow over the Zuma presidency
and fuelled tensions within the African
National Congress, which will choose
Mr Zuma’s successor in December.
McKinsey acted after evidence
emerged that Mr Sagar wrote to Eskom,
South Africa’s state-owned power
monopoly, last year stating that the firm
had subcontracted certain services to
Trillian.
The consultancy said that managers
in its South African office had been “sur-
prised to learn” of Mr Sagar’s letter to
Eskom, which was revealed in an inves-
tigation into Trillian’s alleged involve-
ment in state capture. The consultancy
said it had “carried out work with Tril-
lian at Eskom, but did not have a formal
subcontract with them” and did not hire
Trillian as a local supplier.
Both the Guptas and Mr Zuma have
denied the accusations of corruption,
which have been fuelled by recent email
leaks that exposed an alleged complex
web of influence from the Guptas to the
heart of the ANC.
Last week Bell Pottinger, the British
public relations adviser, apologised for
work it had done for a company owned
by the Guptas, saying its management
had been misled over “inappropriate
and offensive” social media campaign-
ing linked to the contract. Bell Pottinger
was widely accused in South Africa of
inciting racial tension to divert criticism
of the family.
The Trillian investigation was
launched last year by Tokyo Sexwale,
the company’s outgoing chairperson
and a senior member of the ANC. Mr
Sexwale called for the probe following
allegations that executives at Trillian
were aware that Nhlanhla Nene would
be sacked as finance minister weeks
before it was announced in late 2015.
Mr Sexwale wants the investigation’s
report to be included in a judicial
inquiry into state capture.
McKinsey managers decided not to
partner with Trillian as a supplier last
year following concerns over the firm’s
ownership, people familiar with the
matter said.

Social Democrats Pakistan

Denmark’s centre-left defends closer links with populists
RICHARD MILNE — COPENHAGEN
When Denmark’s leading centre-left
politician made overtures to the coun-
try’s anti-immigrant populist party
earlier this year, it created ripples that
were felt across Europe.
In a highly symbolic move, Mette Fred-
eriksen, leader of the centre-left Social
Democrats, gave a joint newspaper
interview with the head of the Danish
People’s party.
Under Ms Frederiksen, who became
party leader following their election
defeat in 2015, the Social Democrats
have supported DPP policies including a
call for a ban on prayer rooms in univer-
sities and schools. The two parties have
united to block a government-backed
reform to lift the pension age and have
even refused to rule out the possibility
of a future coalition.
For Ms Frederiksen, these closer rela-
tions form part of an attempt to answer
a Europe-wide question: how can the
centre-left survive in a time of populist
politicians?
With electoral near-wipeouts in
France and the Netherlands, there have
been few reasons for the centre-left to
cheer. In the Nordic countries that are
seen as a bastion for liberal social val-
ues, for the first time since the second
world war the social democrats are in
power in just one country — Sweden.
“When I started in politics, 13 out of 15
EU leaders were social democrats. You
compare the situation today with that
period and you really have to admit that
we are challenged. It’s hard times,” she
tells the Financial Times.
Ms Frederiksen’s solution is likely to
be studied across the continent by cen-
tre-left parties seeking to stem a seem-
ingly inexorable decline.
So far, her approach is having some
success. Denmark’s minority three-
party rightwing government is loosely
backed by the DPP.
But the opposition Social Democrats
have consistently polled as the largest
party by about 5-10 percentage points in
recent surveys. This strategy could yet
backfire if its approach to immigration
alienates its normal leftwing coalition
partners.
However, Ms Frederiksen argues that
she is not pro- or anti-immigration but
merely seeking to be realistic in a coun-
try with a big welfare state.
The 2015 migration crisis led to
tougher measures — including the
almost never-used jewellery law, which
allowed police to seize immigrants’ jew-
ellery to pay for their stay.
These measures were also backed by
the new leadership of the Social Demo-
crats.
“When you enter Sweden, Norway or
Denmark you have the right to almost
everything from day one . . . It’s a diffi-
cult system to combine with a lot of peo-
ple coming. Otherwise our system isn’t
going to stick together,” she says.
Peter Nedergaard, a professor of polit-
ical science at the University of Copen-
hagen, says this scepticism is merely a
Social Democrats’
Mette Frederiksen
has supported
policies of the anti-
immigrant Danish
People’s party
return to Social Democratic roots. He
argues that until the 1980s many cen-
tre-left parties viewed immigration sim-
ply as a source of cheap labour.
“I think we will see a shift in the next
three or four years in the Nordics to a
more restrictive view,” he says.
However, a senior Swedish Social
Democrat balks at any comparison with
their Danish counterparts. “Their
recent course is quite worrying,” he
says, referring to the joint interview
with the DPP. The thought of co-operat-
ing with the Sweden Democrats, a party
with its roots in the neo-Nazi move-
ment, is anathema to him.
Ms Frederiksen argues that too many
centre-left parties have failed to make a
bridge between the cosmopolitan elites
and the often rural discontents.
“It’s quite obvious that if the Social
Democrats aren’t able to connect to
those who are most challenged by the
future or the way our society is develop-
ing, then we are not a real Social Demo-
crat party.
She adds: “I feel sad when I see poor,
unemployed people in the US voting for
Trump. They are voting for him because
they could not find a voice for them in
the Democratic party. I need to avoid
that in Denmark.”
Ms Frederiksen says her priority is to
rebuild the social contract in Denmark.
That means: “Fight inequality, make
sure you don’t receive more people from
elsewhere than you are able to deal with,
handle globalisation.”
She is loath to comment on whether
Denmark can be an example for the
European centre-left but she is clear on
where things have gone wrong.
“What I think is the most important
thing about being a Social Democrat
party is actually being relevant. Are you
able to find the answers to the problems
that people are facing?”
Sharif report sparks conspiracy claim
KIRAN STACEY — NEW DELHI
FARHAN BOKHARI — ISLAMABAD
Pakistan’s governing party has con-
demned a probe into the premier over
alleged corruption as a “conspiracy” to
remove him from office, as rumours
swirled about the findings of an investi-
gation into Nawaz Sharif filed to the
Supreme Court yesterday.
Mr Sharif has been under investigation
since last year after revelations from the
Panama Papers leak, when about 11m
documents were leaked from Mossack
Fonseca, a Panama-based law firm.
Information came to light that showed
his two sons and daughter owned off-
shore companies and assets not shown
on his family’s wealth account.
In April, the Supreme Court ordered
the creation of a six-member panel to
investigate the allegations after its own
inquiry proved inconclusive.
The panel reported its findings to the
court yesterday. The details were not
made public, but the governing Paki-
stan Muslim League–Nawaz (PML-N)
party immediately criticised them.
“Some people are hiding behind con-
stitutional institutions [like the
Supreme Court] and working on a
minus-Nawaz formula,” said Abid Sher
Ali, the water and power minister and a
relative of Mr Sharif. “A systematic con-
spiracy is being hatched to have a face-
off between the government and judici-
ary to send Sharif packing,” he said.
The corruption case has proved the
biggest crisis to face Mr Sharif since he
was re-elected as prime minister in
2013. Business leaders have privately
expressed concern it might cost him his
job and disrupt the country’s nascent
economic recovery.
An army crackdown on militants in
Pakistan’s tribal areas over the past few
years has helped reduce terror attacks
and fuel growth, which hit a 10-year
high of 5.3 per cent in 2016-17.
But the achievements have taken
place against the backdrop of growing
criticism of Mr Sharif and his family
since the publication of the leaked
papers. The legal case has focused on
how his children obtained the money to
pay for assets such as apartments on
London’s upmarket Park Lane.
The children have claimed the money
came from Hamad bin Jassim bin Jaber
bin Mohammed bin Thani al-Thani, the
former prime minister of Qatar, as part
of a business deal.
The Sharif family has criticised the
panel for not interviewing Sheikh
Hamad, who they say can provide docu-
ments proving the claim.
4 ★
Japan
Abe’s popularity at lowest ebb after flood of scandals
Economic reforms thrown
into question as support
for PM hits five-year nadir
ROBIN HARDING — TOKYO
Shinzo Abe’s popularity has slipped to a
record low, casting doubt over the dura-
bility of the Japanese prime minister’s
administration and its economic
reforms.
According to a poll for the Yomiuri
newspaper, only 36 per cent of the
Japanese public supported the adminis-
tration while 52 per cent opposed it, the
Africa. Opposition leader
Kenya veteran
looks to youth
vote for victory
Odinga believes state of
economy will propel him to
presidency at fourth attempt
JOHN AGLIONBY — NAIROBI
Three election defeats would be enough
to send most politicians into retirement.
But Raila Odinga, Kenya’s veteran oppo-
sition leader, is gearing up for his fourth
bid for the presidency at elections next
month, convinced that momentum is
shifting in his favour.
The 72-year-old, who contested his
first presidential race 20 years ago, is
predicting that mounting frustration
over soaring food prices and rampant
unemployment will finally propel him
to the nation’s top job.
“The country is angry now because of
the price of food, corruption and exclu-
sion,” Mr Odinga told the Financial
Times. “People feel excluded, they can’t
get a job. My phone is full all the time of
Raila Odinga:
‘I myself will not
urge the people to
violence at all. But
I cannot control
the people’s anger’
messages from the youth saying how
they are, their plight, how they’re una-
ble to eat. ‘Can you please save us from
this situation,’ they say.”
Mr Odinga is leading the opposition
coalition, the National Super Alliance,
that is seeking to unseat President
Uhuru Kenyatta, the scion of the coun-
try’s founding leader.
In an election short on policy debates,
the main concerns for many are infla-
tion running at 9.2 per cent, a slowing
economy and state corruption as the
country grapples with one of its worst
droughts in years. The latest opinion
polls suggest Mr Odinga is trailing Mr
Kenyatta by about 5 percentage points.
But he is confident the gap will be closed
before polling day on August 8.
“I think we’re in the right place
because the latest polls were taken
before we launched our manifesto last
week,” Mr Odinga said. “And the econ-
omy is weakening.” His election pledges
include boosting agriculture, devolving
more state revenues to local govern-
ments and fighting corruption.
Mr Kenyatta is campaigning on the
strong economic growth the country has
enjoyed during his term and the deliv-
ery of multibillion-dollar infrastructure
Mosul
End of Isis nears but opponents fear jihadis are already preparing their reincarnation
ERIKA SOLOMON — BEIRUT
Jihadi forces face their final hours in
Mosul, as Iraqi troops attack their last
stronghold, while in neighbouring
Syria, their de facto capital of Raqqa
has been surrounded. The “state” the
so-called Islamic State claims to govern
looks ever closer to its end.
But in the fight against a militant organi-
sation that has reincarnated itself
before, the biggest challenge may not be
defeating Isis, but preventing it from ris-
ing again.
In 2006, US forces aligned with Iraqi
tribesmen routed an al-Qaeda offshoot
known as Islamic State of Iraq. Eight
years later, the jihadis exploited the
chaos of Syria’s civil war to regroup as
Islamic State of Iraq and Sham, or Isis,
and stunned the world with the capture
of Mosul and blitz across northern Iraq
and eastern Syria.
worst figures since Mr Abe returned to
office in 2012. The figures suggest that a
stream of scandals and unpopular laws,
combined with slow progress on the
economy, have tarnished the leader who
has dominated Japanese politics for the
past five years.
The poor ratings raise the odds that
Mr Abe will pull back from economic
stimulus in an attempt to regain popu-
larity, or that he will be pushed out by a
new leader of his Liberal Democratic
party who will abandon it altogether.
But apart from Tokyo’s governor,
Yuriko Koike, who lacks a national
political platform, Japan’s opposition is
projects implemented by his govern-
ment, including a $4bn Chinese-built
railway from Nairobi to Mombasa that
opened May. But Kenyans will be cast-
ing their ballots just as one of Africa’s
best economic performers endures the
headwinds of a slowdown. Growth fell to
its slowest rate in five years in the first
three months of the year as it slipped to
4.7 per cent, down from 5.9 per cent in
the same period in 2016.
The agriculture sector, in which more
than two-thirds of Kenyans earn their
livings, contracted for the first time
since 2009. The government was forced
to import maize after the price of the
nation’s staple almost doubled in the
first five months of the year. Milk and
sugar prices have also risen sharply.
Mr Odinga said the economic pain
people were enduring should favour the
opposition. He believed the tradition of
people voting along tribal lines was
slowly changing, particularly among
younger, better informed Kenyans.
First-time voters, who comprise more
than 20 per cent of the 19m electorate,
would play a decisive role, he added.
“This youth, who is on the internet, on
social media, is not only communicating
with the youth in other parts of the
country but other parts of the world,”
said Mr Odinga, who was detained three
times in the 1980s for alleged links to an
attempted coup and then his role in pro-
democracy campaigns. “The youth are
no longer so ethnically inclined.”
However, there are lingering fears
that a tight contest could trigger politi-
cally motivated violence. After the dis-
puted 2007 election, when Mr Odinga
came second, about 1,200 people were
killed and 600,000 displaced as clashes
spread across the country.
When the violence ended, Mr Odinga
became prime minister in a unity gov-
ernment that introduced a constitution
designed to strengthen state institutions
and devolve power in the hope of reduc-
ing the risk of future unrest. But this
year, party primaries were marred by
violence, and land invasions in the Rift
Valley have left scores of people dead.
Mr Odinga, who became an MP in
1992 and made his first bid for the presi-
dency five years later, said he had “mis-
givings” about the ability of the electoral
commission and the judiciary to deliver
a free election.
Concerns about widespread violence
were “over-hyped”. But he would not be
able to control supporters if they felt the
election was rigged. “I myself will not
urge the people to violence at all. But I
cannot control the people’s anger.”
Today, Iraqi forces backed by a US-led
coalition have recaptured all but 6 per
cent of the territory they lost. Haider al-
Abadi, Iraq’s prime minister, on Sunday
declared a “great victory” over Isis in
Mosul. But the struggle is far from over.
“I expect an end to the battle by mid-
dle or end-2018,” said Hisham al-
Hashemi, an Iraqi insurgency analyst.
“Then, this will go from a military battle
to a societal war.”
Isis opponents worry the militants
have laid the ground to reinvigorate its
insurgency.
Past experience with brutal revenge
killings mean some residents fear resist-
ing surviving militants. Many Isis mem-
bers are believed to have blended in
with fleeing civilians, and their goal now
will be to destabilise recaptured areas.
Isis has increased the number of road-
side bombs around Mosul and suicide
bomb attacks on towns south of the city.
FINANCIAL TIMES
INTERNATIONAL
weak. And given his strong parliamen-
tary majority, Mr Abe may be able to
ride out a period of unpopularity.
Mr Abe cut short a post-G20 tour of
European capitals to return early to
Japan. He vowed to address public senti-
ment, saying: “We’ll carry out a cabinet
reshuffle early next month.”
Tobias Harris, a Japan analyst at
Teneo Intelligence in Washington, said:
“The Yomiuri poll suggests that the pub-
lic’s trust in Abe, including LDP sup-
porters, is collapsing. The cabinet
reshuffle scheduled for next month
already seems like too little, too late.”
A separate poll in the Asahi newspa-
Take-off
Eritrea capital
made World
Heritage site
Flight of fancy: the Tagliero
petrol station, built in 1937, in
Asmara, with wings that mimic
a plane. Right, the Cinema
Impero in the city, which
boasts paintings of antelopes,
pineapples and dancing girls
Eric Lafforgue/Gamma-Rapho/Getty Images
Others within Iraq and Syria’s large
Sunni Muslim population may even
retain sympathy for Isis, which portrays
itself as their defender in a region of ris-
ing sectarian strife between Sunnis and
Shia. Millions of Sunnis, angered by
increasingly deadly coalition strikes,
remain scattered and displaced by war,
and a target for radicalisation.
In Syria, opposition figures worry that
Isis members are fleeing toward the
Sham Liberation Front, a former al-
Qaeda affiliate dominating the moun-
tainous north-western province of Idlib.
They speculate some Isis fighters could
try to stage a hostile takeover or join
forces with a group it once fought
against. The rugged terrain would make
this harder to recapture, even with US
air support.
Isis has prepared for today’s territo-
rial losses for nearly a year, moving top
cadres to Syria’s oil-rich eastern prov-
per put Mr Abe’s approval rating at 33
per cent, down from 38 per cent, with
his disapproval rating up to 47 per cent.
Last week’s elections to the Tokyo city
assembly, in which the LDP was
defeated by Ms Koike, are the most
recent blow to Mr Abe’s authority.
A series of cronyism scandals, involv-
ing alleged favours for certain private
school operators close to Mr Abe, have
also hurt. Some 72 per cent of respond-
ents to the Yomiuri poll said he needed
to explain himself in connection with a
scandal about a new veterinary school
in a special economic zone.
Mr Abe’s focus on non-economic pol-
Asmara, the capital of Eritrea — a
country perhaps more often
associated with repression and an
exodus of refugees to Europe — has
acquired a more positive image by
becoming the world’s first modernist
city to be designated in its entirety as
a Unesco World Heritage site.
Known as “La Piccola Roma”, or
Little Rome, the Eritrean city of
800,000 people became an artistic
playground in the 1930s for Italian
ince of Deir Ezzor, specifically the town
of Mayadeen, and into desert towns
along the Syria-Iraq border.
Isis has prolonged the fight, suffering
material losses for symbolic gains.
Recent defectors described a strategy in
which the group allots fighters to hold
on until the end, nearly all of whom are
locals. The reasoning is simple: they
Iraqi forces celebrate the ‘liberation’
of Mosul over the weekend
icy may also have upset the public. The
creation this summer of a new criminal
offence of conspiracy was poorly
received, and his pledge to revise Japan’s
constitution by 2020 is regarded as a
low priority by many voters.
Erosion in Mr Abe’s popularity has led
to a resurgence of factional manoeu-
vring within the LDP. Shigeru Ishiba, a
former minister and leadership rival of
Mr Abe, used the Tokyo defeat to criti-
cise the administration and demand a
change of direction.
Fumio Kishida, foreign minister, who
is widely seen as the most likely succes-
sor to Mr Abe, has also begun to speak
futurists who were able to play out
their architectural fantasies in the
Italian colony in the Horn of Africa.
Among the 400 buildings that have
survived the decades, as well as a
protracted war of liberation against
Ethiopia, is a petrol station,
completed in 1937. Shaped like an
aeroplane with seemingly gossamer-
thin outstretched wings, it looks more
like a bird in flight than a building
rendered in concrete. There is also an
have nowhere to run and will find no
quarter in surrender.
Even for less strategically important
towns, the battles drag on — recapturing
Mosul took nearly nine months — often
distorting the optics of what is happen-
ing.
“This fight in Mosul is not like any-
thing modern militaries have done. You
have to go back to the second world war
to find anything close,” Robert Sofge, a
US brigadier-general working with the
coalition in Iraq, told AFP news agency.
He meant it as a tribute to Iraq’s hard-
won victory. But to potential sympathis-
ers, it looks like an outgunned jihadi
force mounting an impressive resist-
ance against a campaign backed by
world superpowers.
“Much of what we have seen in the last
few months has been about defining the
right narrative,” said Charlie Winter, a
senior researcher at the International
Tuesday 11 July 2017
publicly about the LDP leadership.
Mr Abe’s second three-year term as
head of the LDP will run out in autumn
2018. To fulfil his ambition of serving
until the Tokyo Olympics in 2020, he
needs to win that party election, as well
as a general election that must be held
by December 2018 at the latest.
“I think it’s an increasingly open
question whether Abe will even be in a
position to run again in 2018, assuming
he survives that long, especially if
Kishida continues to look and act like a
prime minister in waiting,” said Mr
Harris.
BoJ and bond yields see Markets
art deco bowling alley with stained-
glass windows, and the Cinema
Impero replete with Roman pillars
topped with stone lion heads and
paintings of antelopes, pineapples
and dancing girls.
Partly because Eritrea’s economy
has fallen behind, Asmara has been
spared the brutal lunge to
development that has scarred so
many other African cities with their
cacophony, pollution and shopping
malls. Old men at pavement cafés sip
espressos made by vintage Italian
machines and, if critics of the regime
are to be believed, occasionally spy on
their neighbours. Unesco called
Asmara “an exceptional example of
early modernist urbanism”. Eritreans
call it “The City of Dreams”.
Along with Asmara, the Khomani
ancestral lands in South Africa and
M’banza Kongo, a city founded by the
Portuguese in Angola in the 15th
century, also become World Heritage
sites. There are now 48 sites
protected by Unesco in Africa, out of
814 cultural sites worldwide.
David Pilling
Centre for the Study of Radicalisation
and Political Violence in London.
“They couldn’t abandon Mosul, they
had to look like they put up an apocalyp-
tic fight . . . ideologically this plays into
its hands.”
Isis’s media wing duly announced on
Sunday that militants trapped inside
Mosul had agreed a death pact.
Meanwhile more revenge attacks in
Europe look inevitable. “I expect a big
attack in the not so distant future, on
Europe,” Mr Hashemi said.
In Iraq, those who fled Isis seem
unwilling to believe the saga is over. On a
recent FT trip to Mosul, one Iraqi com-
mander tried to convince a family in a
recaptured area to tell their story. They
refused.
“Stop being frightened. Isis is gone
now,” he said, smiling. “You’re wrong,”
the father replied. “They’re never gone.”
Editorial Comment page 8
Tuesday 11 July 2017 ★ FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Tuesday 11 July 2017

ARTS

U2 dig deep to revive Joshua Tree

POP
U2
Twickenham Stadium, London
aaaae
Ludovic Hunter-Tilney
The Joshua tree in the Californian desert
that was photographed for the artwork
of U2’s The Joshua Tree album was a
famous piece of vegetation, a superstar
among flora. But the attention must
have gone to its spiny head: it died in
2000 aged about 200, a premature end
considering the 500-year lifespan it
might have hoped for. Rock and roll can
do that to plants.
U2, however, march on. Bono can no
longer play guitar after a severe bicycle
injury in 2014 but he was in fine voice at
Twickenham Stadium, barrelling his
way through songs with stentorian pres-
ence. The Edge’s guitar-playing was
acute, Adam Clayton’s basslines were
beefy and Larry Mullen Jr gave his drum
kit a good hiding. “U2 group is still here!”
Bono cried out. Next year they will cele-
brate their 40th anniversary, outstand-
ing longevity for a rock band with an
unchanged line-up.
The show, the first of two at the sta-
dium, marked a different anniversary.
The Joshua Tree was released 30 years
ago, a global hit that sold over 25m cop-
ies and established the Irishmen as one
of the world’s biggest bands. The original
Joshua Tree tour in 1987 was a fraught
experience (“We were the biggest, but
we weren’t the best,” Mullen Jr later
said). Now they have chosen to restage
the album with decades of stadium
showmanship under their belts.
They opened with four key songs from
their pre-Joshua Tree days, played on a
thrust stage: “Sunday Bloody Sunday”,
“New Year’s Day”, “Bad” and “Pride (In
the Name of Love)”. A 200ft-wide LED
screen was erected behind them, incor-
porating a silhouette of the Joshua tree
image. But the screen remained other-
wise blank, forcing attention on to the
four small figures grouped together
making an outsize noise, a back-to-
basics approach — albeit with sufficient
grandstanding to interpolate David
Bowie’s “Heroes” into one of the songs
Positivity: U2 on stage at Twickenham Stadium — Brian Rasic/WireImage/Getty Image
and to activate the big screen with lines
from Martin Luther King’s “I have a
dream” speech.
They retreated to the main stage for
The Joshua Tree’s first song, “Where the
Streets Have No Name”. Bono sang the
gospel-influenced anthem with head
inclined upwards, searching for the
sunny uplands beyond Twickenham,
one leg bent behind him as though about
to take a purposeful stride towards that
promised land. The screen now showed
an endless desert road filmed by Anton
Corbijn, the photographer responsible
for The Joshua Tree’s original artwork.
The song was followed by two other
heavyweight numbers, “I Still Haven’t
Found What I’m Looking For” and
“With or Without You”, both received
ecstatically. “Red Hill Mining Town”,
never played live until the current tour,
was given a brawny rendition with pre-
recorded horn accompaniments. “One
Tree Hill” was dedicated to the crew
member, Greg Carroll, whose death in
1986 inspired the song; the Edge’s fluid
riffs washed against remorseless tick-
tock rhythms from Mullen Jr and Clay-
ton. “Exit” was introduced by an opaque
anti-Donald Trump film, the spur for
savage guitar-playing and intense
vocals, the highlight of the set.
That was the only moment when the
album’s fascination for America was
allowed to intersect with the troubled
state of the nation 30 years later. Other-
wise Bono preferred to cater to local
tastes by trafficking in platitudes about
London’s diversity (“300 languages!”)
and“greatGreatBritain”offering“safety
and sanctuary for all these years” to
Irish immigrants, a bizarrely rose-tinted
view of Anglo-Irish relations.
The singer believes in using flattery to
achieve his ends; the result is historical
revisionism. “Oil is the reason for the
wars we wage,” he sang during “New
Year’s Day”, a pointed alteration from
the original song’s “gold”. But he must
have forgotten his confident statement
from 2003, after the invasion of Iraq:
“Tony Blair is not going to war for oil.”
POP
Tom Petty and the
Heartbreakers/
Stevie Nicks
Hyde Park, London
aaaae
Michael Hann
The older audience got their
day in the sun, literally, at the
final night of the annual Bar-
claycard British Summer
Time festival, the outdoor
event for those who want to
sleep in their own beds. The
pairing of Stevie Nicks, seem-
ingly in one of her periods of
estrangement from the rest
of Fleetwood Mac, and Tom
Petty — playing his only
European show of the year —
attracted a crowd well
equipped with picnic blan-
kets and unwilling to pack
them up as showtime
approached.
Nicks’s voice is not what it
once was, but the lack of
Christine McVie and Lindsey
Buckingham meant its short-
comings — it is now woody
and hard, where once it was
soft and airy — were not high-
lighted as they can be at a
Fleetwood Mac gig. And her
The Joshua Tree’s re-staging would songs justify attention: being
have benefited from a surer grasp of the original princess of the
history, such as by talking about the goths, all black shawls and
songs in greater depth or using the mysticism, means her
screen to contrast archive footage from strengths as a melody writer
1987 with the present day. The unwill- do not get their due. The
ingness to do so meant the atmosphere Mac songs she played —
occasionally sagged. “Dreams”, “Gypsy” and
A closing sequence of post-Joshua Tree “Rhiannon” among them —
hits cycled through various issues — and her solo material, includ-
Syrian refugees, the murdered MP Jo ing the sublime “Edge of Sev-
Cox, foreign aid (“You are the world’s enteen”, are wondrous
envy, Great Britain”) — in a diffuse
fashion. But the debuting of a decent
new song, “The Little Things That Give
You Away”, showed that U2’s tank has
not yet run empty, while the finale, in
which support act Noel Gallagher joined
the band to perform the Oasis singalong
“Don’t Look Back in Anger”, repre-
sented a generous act of stage-sharing.
Relentless positivity has its uses:
without it, U2 would have gone the way
of the real Joshua tree.
u2.com
things, fantastically simple
patterns woven into the most
beautiful silk.
Nicks appeared onstage
with Petty in a superstar duet
that both participants
appeared thoroughly to
enjoy, for “Stop Draggin’ My
Heart Around”. Petty is, in
the memorable phrase of the
DJ Mark Radcliffe, one of
American rock’s great light-
weights, which isn’t pejora-
tive: he doesn’t come with the
ballast of Neil Young, or his
Traveling Wilburys band-
mate Bob Dylan, but the best
of his songs are impeccable,
and it was striking how much
of his set was delightfully
familiar from floating
around the edge of the pop
consciousness.
“I Won’t Back Down” was a
reminder of American MOR’s
1980s heyday, when old rock
craftsmanship met big pop,
and kicked off a stellar mid-
set run that featured a genu-
inely moving “Free Falling”
(better known to non-fans as
“That One Tom Cruise Sings
Along To In Jerry Maguire”),
“Walls” and “Don’t Come
Around Here No More”.
It wasn’t flawless: “It’s
Good To Be King” should
have been subtitled “But It’s
Bad To Have 174 Long Guitar
Solos”. He finished, of
course, with “American Girl”,
and if one was glad the show
ignored that song’s promise
to “make it last all night”, it
was a pretty wonderful way
to spend a couple of hours on
a hot summer evening.
stevienicksofficial.com
tompetty.com
Silk:
Stevie
Nicks
on stage
in Hyde
Park
Samir Hussein/
Redferns/
Getty Images

From classroom to correctional facility

T H E AT R E
Pipeline
Lincoln Center Theater, New York
aaeee
Max McGuinness
Early in Dominique Morisseau’s new
play about racial tensions in American
schools, Laurie (Tasha Lawrence), a
veteran teacher recovering from an
assault by members of a student’s fam-
ily, complains that her substitute has
done nothing in class except screen the
whole of season four of The Wire, which
is a bit like showing One Flew Over the
Cuckoo’s Nest inside a mental asylum.
With that allusion, Morisseau sets
herself a very high bar. Like David
Simon’s television series, Pipeline por-
trays a group of dedicated educators
who seem powerless to help their
charges in the face of crippling social
problems. But whereas The Wire exam-
ined those problems in precise natural-
istic detail, Morisseau and director Lile-
ana Blain-Cruz opt for an overheated,
melodramatic approach that repeatedly
lapses into cliché. A woman even faints
on stage here. And notwithstanding its
title, the play has surprisingly little to
say about the so-called school-to-prison
pipeline blamed on increasingly draco-
nian disciplinary policies.
The potential jailbird here is Omari
(Namir Smallwood), who has pushed
his teacher at an exclusive boarding
school during an argument about Rich-
ard Wright’s Native Son. Since that novel
is about an African-American criminal
who goes on trial for his life, this seems
like a rather heavy-handed piece of
symbolism. Smallwood, an actor in his
thirties, also struggles to play a convinc-
ing teenager. Karen Pittman is more
plausible as his mother Nya, a teacher
torn between her own violence-plagued
inner-city high school and her son’s edu-
cational needs. But their hectoring
exchanges tend to sound scripted.
Omari’s interactions with his estranged
father Xavier (Morocco Omari) also
become wearingly strident.
Pittman makes better work of her
monologues, particularly one framed
around a lesson about Gwendolyn
Brooks’s poem “We Real Cool”, a bril-
liantly laconic meditation on Pipeline’s
central themes of educational failure
and delinquency. But, as with Moris-
seau’s allusions to The Wire and Native
Son, the weaknesses of her own play
here become all the more glaring in
comparison. The best students tend to
learn from their masters, then leave
them behind.
To August 27, lct.org
Heavy-
handed:
Heather
Velazquez
and Namir
Smallwood
in ‘Pipeline’
Jeremy Daniel

C L A S S I CA L M U S I C
Schubert songs day
Wigmore Hall, London
aaaee
Richard Fairman
Setting a target of performing all of
Schubert’s over 600 songs is quite a
challenge. Only the prospect of tackling
Bach’s 200-plus cantatas is comparable,
though that has also been done, notably
by John Eliot Gardiner’s Monteverdi
Choir to mark the millennium.
Stretching over two seasons, Wigmore
Hall’s complete cycle of Schubert songs
is a joint project with the Schubertiade
Schwarzenberg and Hohenems Festival.
Completion date is early next year on
January 31, Schubert’s birthday, so there
is not much left to go now.
On Sunday, two recitals mopped up
some of the least familiar material.
When all his music was composed
between his teenage years and his death
at the age of 31, every song by Schubert
might count as youthful, but catching
rarities like these reminds us that every
note is worth hearing.
The afternoon recital was mostly
made up of partsongs. Imagine the scene
at a musical gathering in Vienna in the
early 1820s. A popular feature will be
small ensembles of three or four singers.
Schubert wrote pieces for groups like
this throughout his life, ranging from
drinking choruses to miniature operatic
Musical richness: Ian Bostridge
scenes like “Die Advokaten”, composed
when he was 13 and sounding like a lost
number from Mozart’s Die Zauberflöte. A
bright-eyed male vocal quartet — Daniel
Norman, Nicky Spence, Benjamin Appl
and Stephan Loges — brought these
innocent trifles to life. Sholto Kynoch
was the accompanist.
In the evening Ian Bostridge’s recital
ranged across lesser-known areas of
Schubert’s solo songs. A first half focus-
ing on the teenage years was remarka-
ble. Who knew the attractive “Der
Geistertanz”, written when he was 17, or
“Stimme der Liebe”, with its remarkably
wayward harmonies? A second half with
four Hymns to poems by Novalis at its
centre was hardly less eye-opening. It
would have helped if Bostridge had put
less effort into emoting and more into
making the German words comprehen-
sible, but there was no missing the musi-
cal richness of these mostly neglected
gems. With Graham Johnson on inspir-
ing form at the piano, every song
seemed to venture into pastures new.
wigmore-hall.org.uk
Tuesday 11 July 2017
As the Republican plan to replace Obamacare enters a crucial week, the health system faces disruption. If
the bill passes, millions could lose coverage. If it fails, uncertainty will undermine the existing set-up.
T
his is the week Republicans
have craved for more than
seven years — their chance
to repeal Obamacare. Some
time in the next few days
the US Senate will either scrap most of
Barack Obama’s signature achievement
— the 2010 Affordable Care Act. Or they
will abandon the effort for failure to find
the votes. Either way, America is at a
fraught crossroads in its never-ending
healthcare saga.
If the Senate bill passes, up to 22m
Americans could lose their insurance.
Many more will experience a sharp
reduction in healthcare support. If the
vote fails, Obamacare will survive but
very much as a zombie law — a stay of
execution, rather than a pardon. The
battle will continue. Neither outcome
would be for keeps.
“Whatever happens, we are entering a
period of deep uncertainty that will
cause entirely avoidable damage to the
US healthcare system,” says Douglas
Elmendorf, dean of the Kennedy School
of Government at Harvard — and
former head of the Congressional
Budget Office. “This is a textbook exam-
ple of how not to make legislation.”
How did Donald Trump’s Republi-
cans reach this point? In spite of its
name, the Better Care Reconciliation
Act is deeply unpopular. Just 12 per cent
of Americans back it. Even Mr Trump,
who last month described the House of
Representatives’ version of the bill as
“mean”, does not want it named after
him. Given that he has devoted most of
his life to putting his brand name on
things, that says something.
Yet Mr Trump, and Republican con-
‘Whatever happens, we are
entering a period of deep
uncertainty that will cause
entirely avoidable damage
to the healthcare system’
gressional leaders, insist on moving
ahead anyway. Partly this is to appease a
party base that has spent the past seven
years demonising a law named after Mr
Obama. From the day it passed, Repub-
licans described Obamacare as a “jobs
killing” dagger aimed at the US econ-
omy. Passions ran so high that Ben Car-
son, Mr Trump’s secretary of housing,
and the most prominent African-Amer-
ican in his administration, compared
Mr Obama’s law to slavery.
Now that Republicans control both
Congress and the White House, they
have little choice but to redeem their
vow. Yet they also know the potentially
dire consequences. “How can you not
repeal something that you have
described as a wet blanket on the whole
economy?” says James Pethokoukis, a
senior economist at the conservative
American Enterprise Institute. “Repub-
licans have backed themselves into an
impossible position. They cannot act yet
they cannot not act.”
Repeal and replace
The dilemma is that Republican law-
makers can only agree on the first half of
their vow to “repeal and replace”
Obamacare. The difficulty with the
“replace” portion is that there are no
viable conservative healthcare options
available. Obamacare itself was a con-
servative reform. Its key tenets were
based on a plan drawn up in the 1990s
by the conservative Heritage Founda-
tion as an alternative to the more diri-
giste “Hillarycare” — the failed reform
effort championed by Hillary Clinton,
then first lady. The Heritage Plan then
became “Romneycare”, which was
enacted in 2006 by Mitt Romney, the
then Massachusetts governor.
Obamacare is based on the same prin-
ciple that individuals buy healthcare
policies from private insurance compa-
nies on market-based exchanges. It
would be hard to come up with some-
thing more free market than that. “The
problem with repealing the ACA is that
there is nothing more conservative to
replace it with,” says Peter Orszag, who
was Mr Obama’s first budget director —
now head of global healthcare at Lazard,
the investment bank. “So what we get is
this almost irrational situation where
Republicans are abolishing something
they always wanted.”
The result is a mishmash of a bill that
satisfies nobody. Under the Senate ver-
sion, which Mitch McConnell, the Sen-
ate majority leader, hopes to push
through this week, most of Obamacare
would be gutted. It would scrap the so-
called individual mandate that obliges
every American — on pain of penalty —
★ FINANCIAL TIMES
FT BIG READ. US HEALTHCARE
By Edward Luce
On life support
Political November 1945 — The opening shot
battles President Harry Truman pitched to
Congress a universal healthcare bill as
The part of the Fair Deal but the proposal
painful failed after meeting strong opposition,
history of including from the American Medical
healthcare Association, the physicians’ lobby.
reform in July 1965 — Medicare introduced
the US The Medicare law, implemented under
President Lyndon B Johnson, below
left, gave people over 65 hospital and
medical insurance regardless of their
income. A second programme,
Medicaid, offered subsidised
healthcare to some low income
households.
October 1972 — Nixon’s try
The Nixon White House
expanded the eligibility of
Medicare to allow those under
65 with certain conditions and
those of all ages with permanent
kidney diseases to receive hospital
and medical insurance.
1993 — Hillarycare flounders
The initiative to provide healthcare to
all Americans, headed by Hillary
Clinton, the then first lady, was
defeated in 1994 when even a
compromise bill failed to pass
Congress. The defeat weakened the
Clinton White House and
strengthened Republican
opposition.
2003 — Saving with Bush
President George W Bush
introduced health saving
accounts in 2003 to try to
combat rising costs. They
offered a tax-free incentive to save
for healthcare but critics claimed that
the tax breaks were not enough to
help benefit low-income households.
2010 — The Affordable Care Act
Dubbed Obamacare, the ACA
promised to reduce healthcare costs
and increase insurance coverage
across the US. The law required
insurers to accept anyone who
applied for the scheme but was
met with a Republican
backlash. Its repeal was a
major Trump campaign
pledge.
Life expectancy (years)
2017 — Republican plans
Under proposals before the
Senate, which Republican leaders
hope to push through this week, most
of Obamacare would be gutted. It
would scrap the so-called individual
mandate that obliges every American
to have health insurance. Critics warn
that millions of Americans would be
stripped of healthcare cover if it
becomes law.
to have health insurance. Without that,
insurance premiums would rise, since
the market would be subjected to
“adverse selection”, whereby the young
and healthy would forgo insurance. Risk
pools would increasingly be dominated
by older and sicker Americans, which
would drive up premiums. That in turn
would prompt more policyholders to
drop out. And so on in a vicious spiral.
In addition, the bill would weaken
some of the most popular elements of
Obamacare, notably the stricture that
insurance companies offer policies to
people with “pre-existing conditions” —
those with permanent ailments such as
diabetes. It would also allow insurance
companies to reinstate annual and life-
time spending caps that could bankrupt
people who need treatment the most.
The political backlash
But the most devastating element for
poorer Americans is the $772bn cut in
spending on Medicaid, which provides
health coverage to those who cannot
afford insurance. Medicaid covers most
of the 20m or so Americans who were
brought in from the cold by Obamacare.
Some diehard conservatives have
baulked at the political fallout the Med-
icaid cuts could bring — as have big
names, such as John Kasich, governor of
Ohio, and a 2016 rival to Mr Trump for
the Republican nomination.
Yet the spending cuts are essential to
pay for the tax cut embedded in the bill,
which would scrap a 3.8 per cent charge
on investment income. “You could see
this as a kamikaze bill because it will
deprive so many Americans, including
Republican voters, of health coverage,”
says Norm Ornstein, a veteran Con-
gress-watcher. “But if you think of it as a
disguised tax cut then your perspective
changes. The big conservative super-
pacs [election funding groups] will
unleash a lot of campaign money in
Life expectancy in the US has not risen
in line with healthcare spending
Each line represents an OECD country
85 Japan
2014
80 UK
2014
75
70 Start
1970
65
60
55
0 2,000 4,000 6,000 8,000
Health spending per capita (US$ 2010 PPP constant)
repayment for the tax cut. Republican
lawmakers will be banking on this to
shield them from the backlash.”
Even then, it is unclear whether Mr
McConnell can muster the necessary 50
votes to pass the bill (on a 50-50 tie, the
deciding vote would be cast by vice-
president Mike Pence). Mr McConnell
tried and failed to do so before the July 4
recess for fear that Republican senators
would be hit by a barrage of voter criti-
cism when they went home for the inde-
pendence day holiday.
Given the strength of feeling against
the bill, most Republicans sensibly can-
‘You could see this as a
kamikaze bill because it will
deprive so many Americans
of healthcare. But think of it
as a disguised tax cut’
celled their customary town hall meet-
ings with voters last week. But they did
so in awareness of which way most pas-
sions are running. Already two Republi-
can senators, Susan Collins of Maine,
and Dean Heller of Nevada, have said
they cannot vote for the bill, because of
the Medicaid cuts. That would take it
down to a tiebreaker, given that there
are 52 Republican senators.
But Mr McConnell’s task of buying off
the waverers — a skill he has perfected
over the years — is unusually hard
because a number of conservative
senators, including Ted Cruz of
Texas, Mike Lee of Utah, and
Rand Paul of Kentucky,
complain the bill
does not go far
enough in
scrapping
Obamac
are. Any
The Republican plan would leave another
22m Americans without health insurance
Number of uninsured adults under 65 (m)
Previous GOP plan
50
Updated GOP plan
US
2014
Before
Affordable
Care Act Projections
2005 2010 2015 2020
Sources: OECD; UNPD; Congressional Budget Office
7
FT montage / Getty
Summer deadline Senate Republican
leaders hope to approve healthcare
reform before the summer recess
Sticker shock Moderate Republicans
worry that the bill could cause millions
to lose healthcare coverage
Free markets Some conservative
senators believe the plan does not do
enough to scrap Obamacare
concession Mr McConnell makes to
Republican moderates would thus jeop-
ardise support from the right. Mr McCo-
nnell’s near-Cromwellian ability to mar-
shal troop discipline might fail to work
this time.
“For every vote you gain, you lose
another,” says Mr Pethokoukis. That
said, no Republican would wish to cast
the one vote that could kill the bill.
“Nobody would choose to be exposed to
the rage of the Trumpian base by being
the Republican who saved Obamacare,”
says Mr Ornstein. “You would prefer it
to fail by six votes or not at all. There is
only safety in numbers.”
Universal healthcare
What, then, is likely to happen? If the
bill fails, Obamacare will be given a
reprieve. But it will be stuck in intensive
care. Insurers are likely to continue to
exit the market because of concerns
that the Trump administration would
not pay them the subsidies that keeps
the system functioning. Younger policy-
holders are likely to bail out of the sys-
tem on the expectation that Mr Trump
will not enforce the individual mandate.
“There would be a period of chaos until
we knew what, if anything, was going to
replace the ACA,” says Mr Elmendorf.
If the bill passes, however, the US
Battle lines: healthcare system is likely to be plunged
Having made into disarray. Millions of Americans
the repeal of would lose coverage. Hospitals would
Obamacare a still be required to treat them when they
key election turn up in the emergency room. Those
pledge Donald costs would be passed on in steeper hos-
Trump is pital charges for everyone else, higher
struggling to insurance premiums and backdoor tax-
find a payer bailouts. The need for healthcare
replacement reform would only increase.
scheme to cover Indeed, many thoughtful conserva-
millions of tives fear Trumpcare’s passage would
families — Getty only strengthen support for a single
payer healthcare system similar to Can-
ada or the UK. Universal public health-
care is backed by some populist Demo-
crats, such as former presidential hope-
ful Bernie Sanders. “The problem is that
Republicans have been promising uni-
versal coverage at lower taxpayer costs
and with lower insurance premiums,”
says Mr Pethokoukis. “They are trying
to sell a bill of goods. You cannot prom-
ise something for nothing.”
The great irony is that Obamacare
had been achieving many of the goals
conservatives had always wanted. Much
to the annoyance of the Democratic left,
Mr Obama bent over backwards to win
Republican support for the bill in 2009.
He even dropped a clause that would
have provided a “public option” on the
private insurance markets. Conserva-
tives feared the “public option” would
lead inexorably to a US embrace of
socialised medicine.
In fact, before Mr Trump’s election,
the system was working roughly as it
was meant to. US healthcare inflation
has been falling and public spending on
healthcare has been contained. Moreo-
ver, Obamacare’s much-advertised
unpopularity now looks rather different
in hindsight. Even at its low point, sup-
port for the law never fell below 40 per
cent. Today, clear majorities of Ameri-
cans support keeping it.
Whatever happens in the Senate, the
longer-term winners are likely to be
those making the case for single payer
healthcare. Already more than half of
Americans use such a system, mostly
through Medicare. Extending that to all
Americans no longer seems so far-
fetched. “I doubt it would happen
explicitly,” says Mr Ornstein. “But by
expanding Medicare to lower age
groups, a single payer system will proba-
40
bly grow piecemeal and by stealth.”
A Canada-style healthcare system for
Americans? That is surely not what Mr
30 McConnell intends. Yet even the best
Under ACA
(current law) crafted legislation has unintended con-
sequences. Nobody, including conserva-
20 tives themselves, would pretend
2025 Trumpcare is being drafted with much
heed to its consequences.
8 ★
TUESDAY 11 JULY 2017
The Isis threat shifts as
jihadis lose turf in Iraq
Mosul’s fall brings new dangers for the nation and its coalition backers
It is nine months since the battle for
Mosul was launched. By Sunday,
US-backed forces had made enough
progress in crushing resistance from
fighters of the Islamic state that Haider
al-Abadi, Iraq’s prime minister, was
able to visit the city and proclaim vic-
tory from its ruins. Isis is surrounded
too in Raqqa, its de facto capital in
Syria. Defeat there is only a matter of
time and lives sacrificed.
The physical caliphate is crumbling.
No one, however, should underesti-
mate the dangers that still lie ahead.
Mosul has been under Isis occupa-
tion since June 2014 when a few hun-
dred fighters forced thousands of Iraqi
troops into a humiliating rout. It was
from the city’s ancient al-Nuri mosque
that Isis leader Abu Bakr al-Baghdadi,
trumpeted his global ambitions.
The effect was to unite a combustible
mix of Iraqi factions and foreign back-
ers in an alliance to reclaim territory
lost. Kurds, Turkish-backed Sunni
fighters, Iranian-armed Shia militias
and Bagdad government forces have
fought a gruelling metre-by-metre
battle with US backing, at a cost of
thousands of lives. They were driven by
a common military goal.
Unfortunately, no such common
political objective exists to glue these
disparate forces and prevent them
from falling apart and fighting, let
alone encourage them to work together
in rebuilding the Iraqi state.
There does not even appear to be a
plan for governance and security in
Mosul in the aftermath of a battle
which has displaced nearly a million
civilians and caused untold damage to
basic infrastructure. The committee
set up to help local leaders rebuild the
city, made up of Kurdish officials, the
Baghdad government and the US-led
military coalition, has never been con-
vened. Other Iraqi areas have been
similarly ill-served in the wake of their
An arbitrary benchmark
for access to new drugs
Policy is an admission the UK cannot afford to be at the cutting edge
There has been no lack of agonising
over the financial strains on England’s
National Health Service, whether the
results are seen in chronic bed short-
ages, longer waiting times, or decisions
to deny surgery to smokers. Yet a pol-
icy change that would allow NHS man-
agers to ration access to expensive new
treatments, even when they have been
judged cost-effective, has largely
escaped attention. Now, the drugs
industry is resorting to legal action to
try to overturn the policy.
At issue is the introduction of a
“budget impact test” in the process for
evaluating new drugs. Until now, the
National Institute for Health and Care
Excellence (Nice) has tended to recom-
mend adoption of all new drugs it
deems to be cost effective, measured as
cost per additional year of quality-ad-
justed life (Qaly). It uses a threshold of
about £20,000 to £30,000 per Qaly.
But it has not been asked to judge if a
particular treatment is affordable.
The whole point of this system was to
make the decision a technical one,
rather than a political choice. Under
the NHS Constitution, patients have a
right to treatments recommended by
Nice, so long as they are clinically
appropriate. Broadly speaking, the sys-
tem has worked: Nice is widely
admired internationally and seen as a
model for other countries.
Under the new arrangements, Nice
will be able to fast-track approval of
cheaper treatments that clearly pass its
test. But if a new drug is likely to cost
more than £20m in any of the first
three years, its funding will be subject
to commercial negotiations. If NHS
England cannot reach a deal with the
drug’s manufacturer, it can apply to
Nice for permission to phase the drug
in slowly, generally over three years.
This constitutes an admission that
the NHS can no longer afford to stay at
the cutting edge of medical technology.
recapture. Instead of creating govern-
ance structures based on local power
and self-policing, sectarian conflict has
broken out over heaps of rubble. There
is no hope of establishing long-term
peace in Iraq if this remains the case.
Isis was born out of the ethno-sectar-
ian chaos that ensued after the 2003
US-led invasion of Iraq. It has been sus-
tained by Sunni minority resistance to
a Shia supremacist agenda in Baghdad.
No doubt an equally virulent form of
jihadi extremism will re-emerge
should conditions stay the same.
While Mr al-Abadi is a more consen-
sual figure than his predecessors, he
remains weak in the face of vested
interests. As well as Baghdad, the Irani-
ans, Turks and Kurds, are all vying to
step into the vacuum left as Isis fighters
are driven out and US influence wanes.
Squeezed in the middle are minority
Christians and Yazidis, among others
who suffered terribly at the hands of
the jihadi state.
Iraq’s factions are so polarised that
there is little immediate prospect of an
effective power-sharing government at
the centre. This should not preclude
confidence-building measures at local
and regional level, such as the creation
of self-governing cantons that are capa-
ble of self-defence. Indeed, if Mosul,
Iraq’s predominately Sunni second
city, is to rise from the ashes, local
Sunni leaders must be empowered to
lead the process of reconstruction.
Isis still controls numerous towns, as
well as ungoverned areas of cyber
space. Many of its fighters have
escaped recent battles, shaved their
beards and melted away. They are now
waging an insurgency with terrorist
tactics, mirrored on a global scale. No
doubt the fall of Mosul is a propaganda
blow to their poisonous, millenarian
ambitions. But for the coalition forces
ranged against them, victory could yet
turn out to be as perilous as defeat.
It has obvious implications for patients
in England — who are already unable to
access some drugs that are available,
not just in the US, but in Scotland.
Moreover, while it might help NHS
England fill an immediate hole in its
budget, this would be penny-pinching
at the cost of long-term efficiency.
It makes no sense to deny access to a
drug judged to be cost-effective on the
grounds of short-term affordability.
Take the controversy over a new treat-
ment for Hepatitis C — it is costly, but
not as costly as long-term dialysis or
transplants for patients with severe
liver damage. The NHS will always face
difficult decisions, but a system that
allows managers to delay a transforma-
tive new treatment purely on afforda-
bility grounds takes the pressure off
them to identify existing practices that
may be of low value.
Moreover, the £20m yardstick is
arbitrary. If financial pressures really
are irresistible, the right approach
would be to set a lower threshold in the
test of cost per Qaly.
The authors of this policy would no
doubt argue that they need leverage to
secure better prices from the pharma
industry. This is superficially appeal-
ing. However, the UK already has a
mechanism — the Pharmaceutical
Price Regulation Scheme — that is sup-
posed to regulate the industry’s rate of
return and contain the overall cost of
prescription drugs. This system gives
the drug companies flexibility on pric-
ing at launch. They may have an incen-
tive to set a high price for new drugs ini-
tially, since the UK is closely watched
by other regulators. But it would be
better to reform the PPRS than to cre-
ate a parallel system.
The UK’s respected drug evaluation
system is a product of less straitened
times. But the answer to today’s acute
financial pressures is to reform it, not
to tear up its fundamental principles.
FINANCIAL TIMES
What every Uzbek knows about forced labour
Sir, Your report “World Bank accused
over child labour in Uzbekistan” (June
27) on Uzbekistan’s cotton sector
presents a clash of views on forced
labour in the country. Two noted
human rights organisations contend
that forced labour was pervasive in the
2015-16 cotton harvests, including in
World Bank project areas. The bank
counters that the International Labour
Organization, which monitored its
projects, found no such evidence. How
can Financial Times readers sort out
these claims?
As a former ILO director of the
region that includes Uzbekistan, I place
high confidence in the human rights
organisations. Each year, both then and
now, Uzbek human rights advocates
provide the world with on-site
interviews and government documents
revealing massive mobilisation of
forced labour. Their findings
correspond with my own experience in
African women’s right to
control over their bodies
Sir, I write regarding the article
“Failure to address Africa’s rising
population is not an option” (FT
Health G20 Special Report, July 7).
Authors John May and Hans Groth
make the important point that tackling
demographic dynamics is not just a
matter of improving education and
economic growth, but must also
consider women’s rights.
Key to this is the link between
domestic violence and fertility.
Currently, one in three women
experiences physical or sexual violence
in her lifetime. In a relationship, this
can mean intimate partners deny
women and girls access to
contraception and safe abortions,
forcing them to have multiple
pregnancies.
If global attempts to achieve “a
contraceptive revolution” at today’s
London Family Planning Summit are to
be successful, it is critical that we
tackle the way violence in relationships
affects family planning.
Danielle Spencer
Women’s Rights Adviser,
ActionAid UK
Cautious Poland avoided
others’ financial excesses
Sir, Your beyondbrics article “Poland’s
rush to banking sector socialism”
(FT.com, June 30) demands a balanced
response. The authors distort the
reality and intent of this and previous
governments’ prudent oversight of the
continually growing and maturing
banking sector in Poland.
This cautious policy has helped avoid
the excesses of more than one
European financial institution that led
directly to some of the major problems
experienced following the financial
crisis of the late 2000s. That some of
these European entities were also
vested in the Polish banking sector
meant that in several instances their
problems spilled over into Poland,
impeding their ability to support and
fund their Polish operations. When
such a bank takes a strategic decision
to sell its business in any country it
should be free to do so; such are the
rules of an open market economy, as
indeed is the case in Poland.
We do not have a policy of
London can
learn lessons on
living the high
life from Asia
Singapore
Notebook
by James Crabtree
Letters
the country and my continuing
contacts there. Virtually every Uzbek
knew, and knows, that the regime
harvests cotton with forced labour,
including teachers, nurses, students,
civil servants, school children, and
others. This entrenched system makes
it virtually impossible for World Bank
areas to be insulated from forced
labour’s taint.
How, then, do we explain the ILO’s
failure to detect what human rights
advocates have documented? Two
factors are important. First, the ILO is
a standard-setting organisation that
provides valuable technical assistance,
but its officials have neither the
mandate nor the expertise to police
governments’ compliance with its
standards. Second, the Uzbek
government denies its labour abuses
and attempts to conceal them from the
international community.
The ILO’s approach to monitoring
‘Putin is carrying on our joint cyber
security programme without us’
“nationalising” or “repolonising”
foreign-owned banks. However, if there
is a threat to the stability of the
banking sector and the government
can help out, it will endeavour to do so.
We believe this is the duty of
responsible government and by no
means equates to a conscious policy of
nationalisation as was the case in
several western European countries in
their own period of postwar
development, and more recently!
Balanced ownership between private
and public is a given and needs to be
approached with flexibility. Poland
welcomes all and every investor who
wishes to participate in and contribute
to the further success of Europe’s only
country to maintain year-on-year gross
domestic product growth since 1991.
Tadeusz Kościński
Undersecretary of State,
Ministry of Economic Development of
Poland
It takes a generation to
change the tone of politics
Sir, On reading Tony Barber’s
observations on young, pragmatic,
reformist leaders succeeding where
their elders failed (July 7), I was
reminded of the great physicist Max
Planck’s description of how science
really works: “A new scientific truth
does not triumph by convincing its
opponents and making them see the
light, but rather because its opponents
eventually die, and a new generation
Hawker centres, the outdoor food
courts where locals gather for cheap
evening meals, are the heart of most
Singapore neighbourhoods. There is
one close to my house, where families
sit chatting on brightly coloured
benches as dusk falls, ordering from
dozens of stalls serving fresh local
favourites, from chicken rice to
Hokkien prawn noodles. The nightly
scene provides a pleasing community
vision in all respects bar one — the
centre is ringed with ominous-looking
concrete residential tower blocks.
The ubiquity of high-rise living in
this small island nation came to mind
in the aftermath of London’s Grenfell
Tower tragedy last month. Beyond the
immediate horror, the Grenfell blaze
reinforced worries about tenement
living, and led to calls that new blocks
in the UK be scrapped. The idea of the
residential tower as an emblem of
social failure is deeply rooted, not just
in Britain, but across the west; “an
environment built, not for man, but
for man’s absence”, as JG Ballard put
it, in his 1975 dystopian novel High-
Rise.
Yet Singapore, now mentioned from
time to time as a possible post-Brexit
template for the UK, provides a
hearteningly different vision, in which
tower blocks are not just normal, but
popular, too. Indeed, viewed from
Europe or North America, the story of
public housing in Singapore can seem
almost miraculous.
The state Housing & Development
Board was set up in the 1960s first to
clear slums. It then turned into an all-
reflects both these constraints. Without
a team to call on, in 2016 the ILO
recruited a tiny group of international
observers, just seven people. In a jaw-
dropping violation of its independence,
the ILO allowed this group to be
accompanied by the government-
controlled trade union. Under these
conditions, the ILO’s failure to detect
forced labour in World Bank project
areas is hardly surprising. What could
one expect from a handful of monitors
accompanied by minders in a vast and
difficult-to-assess terrain?
So why did the World Bank
commission the ILO to report on the
state of forced labour in Uzbekistan?
We must conclude that it did so
because it knew precisely what sort of
report it would get.
Elaine Fultz
Philadelphia, PA, US
Former Director, ILO Regional Office for
Eastern Europe and Central Asia
grows up that is familiar with it.”
In the same way, it usually takes a
new political generation to change the
tone of politics, let alone the basic ideas
underlying it. New leaders grow up
taking different things for granted than
their predecessors did, and cultivate
different constituencies to support
them. When suddenly the old
generation has lived out its political
life, this shift to the new cohort can
bring sharp and sudden changes in the
way things are done. Of course the
fresh young leaders of today, as Mr
Barber notes, must keep in mind that
their political careers will also end in
failure, as they become the stale old
faces of yesterday to be replaced in
their turn by something new.
The difference is that science, at least
in theory, builds upon itself to better
and truer truths; whereas in politics,
alas, progress is circular; and the same
ideas tend to come around again every
few political generations.
David AMcM Wilson
Jesus College, Cambridge, UK
Six-party talks doomed
to end in stalemate
Sir, Kurt Campbell’s suggestion
(Comment, July 8) of restarting the
moribund six-party talks offers no
incentive to North Korea to rejoin them
after an absence of eight years. The
talks are so structured as to produce
stalemate: North Korea, China and
Russia on one side; the US, South Korea
and Japan on the other.
Mr Campbell avoids the obvious
solution: direct talks between
Pyongyang and Washington, with a
reasonable agenda. Or, if this is not in
Mr Campbell’s vision, the convening of
a peace conference ending the 67-year-
old Korean war. Such a conference can
and will solve outstanding matters that
seem intractable, including the nuclear
issue.
Robert Cambria
New York, NY, US
Former co-ordinator, Committee for a New
Korea Policy
Only Trump got the memo
Sir, Did the other members of the G20
not get the memo advising that it was
“Bring Your Daughter To Work Day”?
Sarah James
Nuneaton, Warwicks, UK
purpose housebuilder and landlord.
Tall towers solved another problem.
Singapore is the world’s densest
country, if you do not count the tiny
enclaves of Monaco and Macau. To
cram 6m into an area half the size of
Greater London, it helps to build up.
Today, roughly four in five
Singaporeans live in public housing,
almost all of them in high-rise blocks
that often have their concrete flanks
painted in cheerful blues or yellows.
These estates mostly managed to
avoid the problems of crime and social
isolation that dog Parisian banlieues
or the projects of American inner
cities. Although built by the state, it
helps that almost all are owner-
occupied, part of a vision for a
“homeowning society” pushed by
national patriarch Lee Kuan Yew.
The apartments themselves are
cheap and reasonably spacious. Older
buildings are regularly refurbished.
Most have hawker centres nearby, like
the one close to my house, along with
play parks and sports halls. Some
recent blocks have fancier additions,
such as “sky gardens” and rooftop
running tracks. (They also all have
bomb shelters with reinforced blast
doors, but that is a different story.)
Perhaps the most significant
difference is that housing is mixed by
income and ethnicity, with the state
ensuring that each neighbourhood
reflects the population as a whole.
Tharman Shanmugaratnam, the
country’s brainy deputy prime
minister, is fond of saying that while
Singapore still has some poor families,
Tuesday 11 July 2017
Email: letters.editor@ft.com
Fax: +44 (0) 20 7979 7790
Include daytime telephone number and full address
Corrections: corrections@ft.com
West should be far more
worried about Turkey
Sir, Further to your report “Opposition
party marches against Erdogan’s
authoritarian rule” (July 10): it would
be nice if we could find hope in the
protests led by Turkey’s Republican
People’s Party (CHP), but we have to be
careful about how we interpret the
protesters’ calls for “rights, law,
justice”. Unfortunately, there is almost
no support among any of Turkey’s
political parties or supporters for a
tolerant, pluralist understanding of
their own society. Obviously, Turkey,
like any other country, embodies a
great deal of ethnic, religious, and
political diversity, but there is an
immense amount of intolerance for
these differences among all of the
political factions.
Turkey’s democracy, such as it is, has
always operated along crude
majoritarian lines. Whoever wins the
majority in the parliament, or now the
all-powerful presidency, may pretty
much do whatever they please.
Supporters of the ruling AKP know this
full well because they were on the
receiving end of CHP oppression for
decades, as reflected by the quote from
Hamza Araz at the end of your report:
“They don’t support the rights of
conservative people.” He is absolutely
right. He, in turn, does not support any
rights for them. Rights belong to me,
not to you.
Turkish scholars of Turkish society
point toward a rising tide of
conservatism, majoritarianism and
intolerance. One can certainly point to
different “liberal” and “western”
trends in policies, pronouncements and
some public commentary, but all of
these are regularly undermined in
actual practice. Police return beaten
wives to their husbands, in violation of
the law but in accordance with cultural
custom; judges openly state that their
job is not to enforce the law, but rather
to “serve the state”; as part of pro-EU
educational reforms teachers are told
they can select their own textbooks
and should place students at the centre
of the educational process, only to have
the state provide only one textbook
and for authoritarian master-disciple
relationships to reassert themselves in
the classroom.
The situation in Turkey is turning
quite grave and growing worse.
Western policymakers should be far
more concerned than they are. The
current upheaval will not be contained
easily.
Dr Mark A Wolfgram
Ottawa, ON, Canada
Cancelling out electric
cars’ green credentials
Sir, In your editorial on electric cars
(“Volvo delivers an electric shock to
carmakers”, July 6), you say that “if
your battery is charged from a coal-
fired station emitting clouds of noxious
gas, the environmental advantages
peter out”.
Congratulations on highlighting
a fact about which the rest of the
British media seem to have collective
amnesia.
Trevor Tarring
Weybridge, Surrey, UK
COMMENT ON FT.COM
Gavyn Davies’ blog
There’s a continuing strong and co-ordinated
global expansion. What is driving it?
www.ft.com/gavyn-davies
its mixing policy means it no longer
has any poor neighbourhoods. It is a
remarkable claim, and one that is
probably only a very slight
exaggeration.
The Harvard economist Edward
Glaeser describes Singapore as a “close
to ideal” form of urban development,
mostly because it has made tall
buildings work. As a greater
proportion of the world’s population
moves to cities, and metropolises like
London cram ever more people into
old city centres, building high quality
tower blocks is an obvious part of the
answer.
Singapore’s model is not perfect, of
course. Locals here are, by their own
estimation, world-class complainers.
HDB residents often grumble about
things like broken lifts, while
purchasers cannot find flats to buy in
their favoured part of town. There
were safety worries after Grenfell too,
although Singapore has an enviable
fire-prevention record. Either way, the
wealthy mostly choose to live in
fancier condominiums built by private
developers, with gyms and swimming
pools.
Yet while there are plenty of
quibbles, almost no one mentions the
anxieties you would hear in the west
— that tower blocks are inhospitable,
alien monoliths, unsuited to decent
human living. As Britain ponders its
own urban prospects after Grenfell, it
might reflect that a future built tall in
concrete need not be so grim after all.
james.crabtree@ft.com
Tuesday 11 July 2017
OPINION
Nicky
Morgan
G
rowing up in suburban Brit-
ain in the 1970s left me with
a full knowledge of Abba’s
greatest works, as well as
the turmoil caused by a
Labour government running out of
other people’s money. The opening
words of “Money, Money, Money”
still seem horribly appropriate in 2017
— “I work all night, I work all day, to
pay the bills I have to pay/ Ain’t it sad/
And still there never seems to be a
single penny left for me/That’s too
bad.”
The reason that the lyrics still reso-
nate is that for many citizens, Britain’s
social contract — the promise that the
next generation will have better oppor-
tunities than their parents — is broken.
Theresa May’s speech on the steps of
Downing Street in July 2016, as she took
Brexit and the
prospect of
humiliation
FOREIGN AFFAIRS
Gideon
Rachman
T
hings are going badly wrong
in Brexit-land. The UK
government is weak and
divided. The EU is confi-
dent and uncompromising.
The negotiation clock is ticking and only
the wilfully deluded now believe that a
“cake-and-eat-it” Brexit is on offer.
Instead, Britain appears to face a choice
between three different types of humili-
ation.
The first humiliating outcome is that
Britain becomes so desperate for a trade
deal that it is forced to accept the EU’s
terms, more or less in their entirety.
That will mean that Britain agrees to
pay a bill of up to €100bn in gross terms,
merely to get trade negotiations going.
To then secure access to the single mar-
ket, Britain would have to make further
humbling concessions — accepting free
movement of people and the jurisdic-
tion of the European Court of Justice.
An alternative humiliating outcome
would involve Britain refusing to make
an agreement on these terms and crash-
ing out of the EU without a deal in March
2019. British goods and lorries would
then stack up at the Channel ports, as
they hit new trade and customs barriers
— amid general sniggering on the other
Neurohacking robots blur what it means to be human
TECH NOLOGY
John
Thornhill
S
o, I turned to Sophia and
asked: “Are you going to
destroy us?”
“Not if you’re nice to me,”
she replied.
It’s always a little unnerving talking
with a non-human, as I did at a recent
FT125 Forum event, but it is an experi-
ence we are going to have to grow used to
as the robot revolution unfolds.
Sophia was well programmed to
respond to human fear of machines but
many of her answers were a little
clunky. What was mesmerising was her
lifelike facial features. Capable of smil-
ing, frowning, scowling, winking,
Sophia was exceptional at mimicking
human expressions thanks to some
clever nanotechnology and artificial
connective tissue.
Britain’s social contract needs urgent attention
office as prime minister, promised a
tantalising glimpse of how the contract
might be restored. More policy detail on
these areas would be welcome.
It is therefore the lot of 2017 politi-
cians to work out how to repair the con-
tract or face the consequences. And we
have to do so in the headwind of Brexit
and a slowing economy. Unaffordable
housing, increased automation in the
workplace, an imbalance between the
regional economies of London and the
south of England and the rest of the
country, a belief that no one listens to
what the “ordinary voter” thinks, all
contributed to a sense that June 2016
provided the perfect opportunity to
voice these frustrations.
Until as recently as 2015 it was how a
government managed the economy that
shaped how they were viewed. I’ve been
a Treasury minister during both an
Autumn Statement and a Budget. These
are big fiscal events that we were always
aware could reset the terms of political
debate in the UK for months afterwards.
The Conservatives should have done
much more in the recent election to talk
about our economic record over the past
side of the channel. Job losses would
mount in manufacturing and a range of
service industries, from finance to
pharma. And as investment was
diverted to continental Europe, the
economy would take a permanent hit. A
weakened Britain would then turn to
Donald Trump’s America, in the hope
that the US president would make good
on his promise of a “very, very big” trade
deal. But the dream of a proud, prosper-
ous, “global Britain” would look like a
sick joke.
The third humiliating outcome
involves Britain realising that there is no
good Brexit on offer and abandoning the
whole idea and returning meekly to the
EU fold. Even to secure agreement to
this outcome from the EU27, Britain
might have to give up its cherished
budget rebate.
Each of these results will cause dis-
may and anger in Britain. But there is an
argument that a dose of national humili-
ation can be good for a country. The
writer Ian Buruma argued recently that
British and American politics have
become vulnerable to nationalist self-
harm because, after the second world
war, “generation after generation grew
up with . . . the feeling of being special”.
All of the other big nations in Europe
experienced occupation, defeat, humili-
ation or the collapse of democracy dur-
ing the 20th century. By contrast, Brit-
ain takes a frank and understandable
pride in never succumbing, in its mod-
ern history, to political extremism or
military defeat. However Britain’s
national pride, viewed from the
Humanoid robots are already being
used as security guards, nursing assist-
ants, teachers and sex toys. Within 10
years such robots will surely be a lot
smarter than today and in some
respects may be all but indistinguisha-
ble from humans. Is this a good idea?
There is a persuasive school of
thought that argues not. The line
between man and machine should
never be smudged because it risks dehu-
manising humans. Plus, as the joke
runs: “You shouldn’t anthropomorphise
computers because they don’t like it.”
The philosopher Daniel Dennett is an
eloquent advocate of this line of reason-
ing. He argues that we should regard
robots as nothing more than technologi-
cal tools or digital slaves designed to do
our express bidding. It is dangerous to
endow them with human characteris-
tics they do not possess. To kit them out
with “cutesy human stuff” amounts to
false advertising.
“We want to be sure that anything we
build is going to be a systemological
wonderbox, not a moral agency,” he told
me earlier this year. “It’s not responsi-
ble, it doesn’t have goals. You can
★ FINANCIAL TIMES
Comment
seven years and to remind people why
“living within our means” is the only fair
and sustainable way to manage our pub-
lic finances.
Instead, all political debate now
appears to be shaped by Brexit. Is the
person speaking a Leaver or a
Remainer? Is the argument they are
putting forward supporting a hard
Brexit or a soft Brexit?
Warning signs are there —
wages are falling in real
terms, household debt is
rising, confidence is shaky
The task ahead for the government is
to build the widest possible consensus
about an issue that has divided opinion
in the UK for more than 12 months and
looks like it will continue to do so. Those
of us who campaigned to Remain but
accept the decision to leave the EU need
to be reassured that the decisions that
have been taken about Brexit are being
made both to respect the referendum
Brussels perspective, has made the UK
an awkward customer that has never
accepted the concessions of sovereignty
that are necessary to make the EU work.
The Eurocrats murmur that if Britain is
humbled by Brexit, that might have a
positive effect in the long run, persuad-
ing the UK eventually to return to the
EU with a more realistic assessment of
its own power, and of the benefits of the
European project.
But is humiliation really good for a
country? It is arguable that Britain’s
much-prized record of political moder-
ation is connected to the fact that the
country has never really been humbled.
Angry and confused countries often
take refuge in political extremism or
aggressive nationalism. The Chinese
government has made avenging the
The UK’s national pride,
viewed from Brussels’
perspective, has made it
an awkward customer
unplug it any time you want. And we
should keep it that way.”
The distinctions between man and
machine may be clear in a seminar
room but are a lot more blurry in the
outside world. Millions of people have
electronic pacemakers and hip implants
and so could technically be counted as
cyborgs. Collaborative robots (or
cobots) have been working in harmony
Mapping the line between
man and machine is one of
our most intriguing, and
creepy, challenges
with humans on the factory floor. Dis-
embodied digital assistants, such as Siri,
Cortana and Alexa, are “talking” with
millions of us every day.
Sophia’s creator, David Hanson, the
founder and chief executive of Hanson
Robotics, makes two main arguments as
to why we should continue developing
humanoid robots, one playful, the other
deadly serious.
result but also because they will do least
harm to our economy and key public
services.
Governing in the national interest has
to balance these competing demands
and this is only possible by being open
about the different options and why and
how decisions are then made. This is
where our parliament comes in. Keep-
ing parliament under-informed or
thinking MPs and peers can be kept
busy with the Repeal bill, and therefore
won’t want a say on the bigger policy
issues shaping our eventual Brexit, will
not suffice.
The biggest challenge is ensuring that
the Brexit negotiations and a slowing
economy do not become inextricably
linked in the eyes of the public. This
means that our final Brexit deal should
keep business and household confi-
dence strong, which means not losing
sight of the importance of jobs and the
economy in our negotiations.
The economic warning signs are there
— wages are falling in real terms, house-
hold debt is increasing, confidence is
shaky. Even worse is the possibility that
in prioritising the control of immigra-
country’s “century of humiliation”
(which began in 1839) the centre of a
nationalist ideology that its neighbours
find increasingly threatening. Vladimir
Putin’s sense of humiliation at the col-
lapse of the Soviet Union has driven
Russian revanchism in Ukraine and
Georgia. Going further back, German
humiliation, following defeat in the first
world war and the punitive terms of the
Treaty of Versailles, contributed might-
ily to the rise of Hitler.
But if post-1918 Germany offers a
warning about the dangers of national
humiliation, post-1945 Germany dem-
onstrates that being humbled can some-
times be good for the soul. Out of the
moral and physical ruins of Nazism, the
next generation of Germans built a
country that is now rich, stable and
widely admired.
Fortunately, however badly Brexit
goes, it will never be a humiliation to
rank alongside responsibility for the
Holocaust or occupation by a foreign
power. Nonetheless, any of the three
possible Brexit humiliations will be a
profound blow to national confidence.
The first is that humanoid robots are
entertaining, fun, artistic creations that
can help forge new “pathways of com-
munication”. They are, as he puts it, like
computer animations in physical shape,
the next figurative art form.
Just as Disney cartoonists exaggerate
facial features to trigger supernormal
stimuli in the brain, so humanoid robots
can be made to appear more human
than humans. “We are neurohacking
people. That’s what artists do,” he says.
His second argument is that we want
computer systems to understand
human values, cultures, and behaviours
so that we can create “moral machines”
to minimise the dangers of artificial
intelligence going awry. Algorithms in
self-driving cars, for example, may indi-
rectly determine life and death. That is
why some car companies have
employed philosophers to devise ethical
settings for their driving systems.
Mr Hanson is literally putting a face
on AI systems to increase mutual under-
standing. Computers use natural lan-
guage processing to communicate with
humans. But a lot of human communi-
cation is non-verbal, depending on
tion we do real harm in the staffing of
essential public services such as the
NHS and social care. However enthusi-
astic (and that is debatable) the public is
about Brexit they won’t thank the politi-
cians who, in pursuing a quick exit from
the EU, fundamentally undermine their
job security and household finances.
The call by major business groups for
a proper transition period must not be
simply dismissed as a call to slow down
Brexit. These groups represent the
frontline of our economy, the people
who employ our constituents and pro-
vide goods and services for domestic
and overseas markets.
Ultimately those hurt most by a bad
Brexit and a weakening economy are
the very same people who need us to fix
the social contract and opportunities for
the next generation. There will be no
thanks for the politicians who claim to
have got us out of the EU only to fall off
the precipice with even fewer opportu-
nities for people’s children and grand-
children.
The writer is Conservative MP for Lough-
borough and a former education secretary
The resulting public anger is likely to
cause a further polarisation in domestic
politics. The nationalist right is likely to
blame Europeans for allegedly ganging
up on Britain and the liberal establish-
ment in the UK for “selling out the coun-
try”. The Corbynite left would also stoke
anti-establishment anger, and would
use the general chaos to push for a
massive expansion in the state — and a
radical realignment in British foreign
and defence policy. That, in turn, would
provoke a counter-radicalisation by
the right.
But it also possible to imagine more
cheerful scenarios. A country that has
made the self-mocking ditty “Always
Look on the Bright Side of Life” an alter-
native national anthem, might have the
ability to shrug off a Brexit humiliation.
Stereotypes about Britain’s “national
character” tend to emphasise pragma-
tism, a sense of humour and an ability to
cope with adversity. The Brits may need
all of those qualities to cope with the
fallout from Brexit.
gideon.rachman@ft.com
facial expressions and body move-
ments. Robots can act as AI learning
platforms to absorb our ways.
In that sense, creating humanoid
robots is a provocative act, designed to
trigger debate about the scope of
machine intelligence. AI-enabled robots
make visible what is all too often invisi-
ble. “If we develop AI and it’s just behind
the scenes in a big server farm, it’s alien
to humans,” he says.
Much of Mr Hanson’s talk seems way
out there and is freighted with its own
moral concerns — humanoid robots that
can be used for benign purposes can
have malign ends too.
Mapping the contours between
humans and machines is becoming one
of the most intriguing, and at times
creepy, challenges of our times. Huge
amounts of money are also to be made
from exploring this interface.
But perhaps the greatest contribution
humanoid robots can make is to force us
to consider what really distinguishes
man from machine. What makes us
truly human?
john.thornhill@ft.com
9
Banking union
success can be
replicated on the
fiscal front
OPINION
Enrico
Perotti
E
uropean monetary union is a
deep historical choice with
great economic value as well
as political legitimacy. A
majority of citizens in the
eurozone countries appear to support it.
Yet every time there is an election there
are distress signals and signs of a back-
lash, especially at the periphery. At a
time when the European project
appears to be a safe haven from pop-
ulism, it is time for a grand bargain
between the core and the periphery of
the eurozone, based on mutual under-
standing.
The countries of the eurozone differ
in terms of institutional quality, a fact
not reflected in economic models. These
differences are not as pronounced as
those between developed and develop-
ing countries, yet the quality of political
governance and legal enforcement var-
ies a great deal across the single-cur-
rency area. What are the consequences?
A diverse monetary union is good for
growth. It is also very redistributive. In
good times, it allows weaker economies
to borrow and spend more. In hard
times, these weak countries experience
fiscal stress as they can no longer
devalue. Some solidarity is therefore
needed to ensure long-term stability.
Monetary union created a weaker
currency for the core because the euro
exchange rate is a weighted average, so
it does not reflect the productivity of the
core countries. The effect was evident
from the start. Germany joined the euro
at a time when reunification had led to a
trade deficit and falling productivity.
It will be necessary for
countries on the periphery
of the eurozone to accept
external discipline
Both recovered steadily in Germany
under the euro, while they fell at the
periphery. Today, the German surplus is
larger than Belgian gross domestic
product.
As strong countries have gained in
competitiveness while weaker econo-
mies have faced a higher and rigid
exchange rate, solidarity in difficult
periods is not just prudent, it is essential
to the ongoing legitimacy of the single
currency itself. Furthermore, it is in the
long-term interest of the core. In the
event of a euro collapse, capital would
flow to safe havens, and core countries
may experience a sharp revaluation.
At the EU core there is an intellectual
recognition of the gains that have flowed
from monetary union. But there is also
mistrust of weak institutions. Transfers
to a bottomless pit are politically unac-
ceptable. As institutional differences in
the eurozone are structural and persist-
ent, solidarity must come with more
discipline, ensured by a transfer of
responsibility for specific budgets to the
centre (for example, to the eurogroup).
A eurozone treasury could adopt a sen-
sible policy for the issuing of eurobonds.
The eurozone could achieve lasting
stability with a fair and grand bargain,
or solidarity in exchange for a shift in
sovereign powers to ensure compliance.
The banking union is an example of a
credible common institution. Its success
can be replicated on the fiscal front.
Up to now, the main relief to rigid cur-
rency and fiscal conditions at the
periphery has been provided by a
relaxed, uniform monetary stance.
Once a credible fiscal covenant is set,
monetary policy should be allowed to be
asymmetric, targeting those points
where monetary constraints are tight-
est. At present the core is at risk of over-
heating, while the periphery remains
half choked. Recall that local interest
rates were too low for Spain during the
credit boom. Now they may be too low
for Germany.
All eurozone economies are locked in
place by the monetary union. If the core
attributes its success only to its own
(visible) merits, it would ignore basic
economics and ensure permanent insta-
bility. For the periphery, by contrast, it
will be necessary to accept external dis-
cipline. The case for solidarity along
these lines balances costs and benefits,
and would ensure long-term stability.
At a time of great uncertainty, Europe
needs a fair and grand bargain more
than ever.
The writer is professor of international
finance at the University of Amsterdam
10 ★ FINANCIAL TIMES Tuesday 11 July 2017

Cosco/OOIL: banking on an upturn

Chinese container shipper Cosco is buying Hong Kong rival Orient Overseas with the help of state financing.
If the recent recovery in container rates continues, it will look a shrewd purchase.

Shipping consolidation Net debt to equity

Twitter: @FTLex Email: lex@ft.com
Stada Arzneimittel:
common dominator
One of Stada Arzneimittel’s lead
products is Hedrin, a treatment for
head lice. But the convoluted pursuit of
the generic German pharma group by
two private equity firms has given its
investors plenty else to scratch their
heads over.
Yesterday, Cinven and Bain Capital
relaunched their offer for Stada. The
target, managed by a new chief
executive following the ousting of the
previous incumbent, has backed the
move. So too has BaFin, the German
regulator. About a fifth of shareholders
have indicated their acceptance.
The tweaks to the terms are minor.
The duo is offering a mere 25 cents
a share, or 0.3 per cent, more than
the failed €66 cash bid. A competing
offer is unlikely, since the original
proposal was the product of an auction
process.
The minimum acceptance level has
dropped to 63 per cent. The previous
bid attracted 65 per cent support from
a fragmented shareholder base — just
short of the 67 per cent required.
Bain and Cinven almost certainly
intend to end up controlling the
company. The only question is how.
The usual method would be to apply
for a “domination agreement”, which
allows a majority shareholder to
control a subsidiary’s cash flows and
direct its managers according to its
own interests. Minority shareholders
accept this seemingly unpalatable state
of affairs because they get protections
of their own, including the right to
request a court appraisal of any
eventual exit price. A decade ago,
hedge fund Paulson used this provision
to squeeze a big premium out of
Blackstone for its holding in Celanese.
But a domination agreement
requires 75 per cent ownership. It is
possible that index funds may deliver
this; they could tender their shares
later in the process, once it becomes
clear that Stada faces deletion from the
MDax index. If not, Bain and Cinven
could make a subsequent delisting
offer. This makes clear to minorities
that they face a choice between
tendering, or owning shares in an
unquoted company.
These game-theory permutations
give minorities extensive rights, but
only as a quid pro quo for the powers
conferred by uniquely German
domination agreements.
Just as killing the lice removes the
nits from the scalp, so scrapping these
agreements would remove the need for
complex minority rights.
Norsk Hydro:
miracle works
Turning water into wine makes a good
fable. Converting water into
aluminium is good business. Norsk
Hydro of Norway does just that, using
cheap hydro power to run its smelters.
The next step, transforming smelted
metal into products for industry, is
unlikely to prove as lucrative.
Yesterday, Norsk announced it would
become the world’s leading integrated
aluminium producer, from mined ore
to finished product, after buying the
half of products maker Sapa that it did
not own. It plans to boost its exposure
to downstream customers, such as the
already flagging automobile industry.
Norsk did not pay very much; a price
of just over 3 times Sapa’s likely
forward earnings before interest, tax,
depreciation and amortisation sounds
reasonable. And shareholders in
Norwegian conglomerate Orkla, Sapa’s
other owner since 2013, should be
pleased. It has announced a special
dividend of almost 6 per cent on its
undisturbed price.
Yet the deal, NKr13.5bn ($1.6bn) in
cash, looks dilutive to Norsk’s group
operating margin. Whether it is good
news for shareholders depends on how
quickly Sapa can be banged into the
required shape. Sapa had operating
margins of 5.5 per cent in the first
quarter of this calendar year. Norsk
group estimated that margins for this
year should be double that. The
difference would have mattered less
when Norsk shared ownership, but
after the deal closes Norsk will
consolidate Sapa, which will dilute
profitability. It promises to cut
NKr200m in costs every year. That will
be unlikely to lift margins more than
half a per cent. True, once the assumed
saving is taxed and capitalised the net
cash price looks cheaper still.
Then again, maybe Sapa just
deserves to be cheap. Aluminium has a
high degree of economic sensitivity,
given its exposure to transportation
and packaging. Norsk will need to spin
Buyer/target, total transaction size ($bn)
Cosco/OOIL
(Jul 2017) 10.4
8.0*
CMA CGM/
Neptune Orient 5.6
(Jul 2015)
3.9
Harim-JKL/
Pan Ocean 2.6
(Dec 2014)
* Estimated
FT graphic Sources: S&P Capital IQ; FT research; Jefferies; Bloomberg; Drewry
Hong Kongers are generally reluctant
to relinquish control to Beijing. But a
cash offer at a 31 per cent premium to
Friday’s closing price convinced the
family of the territory’s former chief
executive, Tung Chee-Hwa, to sell its
68 per cent stake in Orient Overseas
(OOIL) to a pair of Chinese shippers
led by state owned Cosco. Both hope
others will like the $6.3bn valuation.
Overcapacity and a slowdown in
global trade have hit shipping
margins in recent years. Both Cosco
and Danish market leader Maersk
lost money in the past two years.
Korea’s Hanjin filed for bankruptcy
in August 2016.
Chinese banks helped rescue OOIL
during the previous downturn and
are pivotal in this one too. Cosco’s
a better tale on cost savings to justify
buying Sapa at this point in the
economic cycle.
Carillion:
what a carry on
History loves to scorn false prophets.
Carillion’s brand of corporate
soothsaying — slogan: “Making
tomorrow a better place” — has
received its comeuppance. Yesterday,
the support service group’s chief
executive quit in the wake of a profit
warning. Carillion’s problems may be
just beginning.
A 40 per cent decline in one day for a
FTSE 250 company’s share price might
suggest overreaction. Not in Carillion’s
Ratio
0 1
Maersk
OOIL
Hapag-Lloyd
Evergreen
Mitsui OSK
Nippon Yusen
Hapag-Lloyd
Cosco
/UASC
Kawasaki Kisen
(Jun 2016)
Yang Ming
Hong Kong to Los Angeles container rates
$ per 40-foot container
Maersk/
Hamburg Süd
(Dec 2016)
2015
proposal is helped by a bridge loan
from Bank of China. This highlights
Beijing’s influence at a time when ship
financing elsewhere in the world is
reeling from writedowns and losses.
State financing support is also useful
because Cosco is already among the
more highly indebted global carriers. If
all OOIL shareholders accepted its bid,
then Cosco’s existing net debt of $4bn
could jump to a multiple of twice its
equity.
Its creditors will clearly need
patience. But there are signs that the
shipping cycle might be turning.
Container rates from Hong Kong to the
west coast of the US have more than
doubled from their 2016 nadir,
according to Drewry data. The industry
is benefiting from improving economic
case. Interim chief executive Keith
Cochrane has ordered a strategic
review after booking £845m in
unexpected contract provisions.
Cutting the dividend — saving about
£80m — is a formality given the
company’s yield was close to double
digits before the latest sell off. An
equity raise is a likely next step.
Assuming, that is, the company can
make it there in one piece.
Mr Cochrane’s claims that Carillion’s
net debt is presently “well within”
banking covenants may look stretched
soon. Over the next six months, when
cash outflows are seasonally higher, an
additional £100m-£150m profit hit
could come from increased
impairments. Assuming the company’s
forecast of £234m in annual earnings
before interest, tax, depreciation and
2 3 4 5
2500
2000
1500
1000
500
16 17
conditions in both Europe and the US
and consolidation among shipping
groups. The Cosco/OOIL combination
will be the third largest, after Maersk
and privately held MSG.
Orient Overseas shares trade
roughly at their book value — a three-
year high, but still a discount to Asian
peers. Maersk is estimated to have
acquired Hamburg Süd at roughly
1.3 times book value.
Shares in the target company
jumped a fifth but are still short of
the bid price. That reflects the fact
that further regulatory approvals are
required in the US and Europe.
But the 5 per cent rally in Cosco’s
shares highlights the potential
rewards from China’s countercyclical
backing for consolidation.
amortisation is on target and Liberum’s
estimate of £900m of net debt in the
second half is correct, then Carillion’s
3.5 times debt ceiling could be
breached. It plans to sell its Middle
East construction business for £125m.
Carillion has never recovered from
an expensive acquisition of green
energy services company Eaga in 2011.
Exiting the Middle East means more
UK dependence, already nearly three-
quarters of revenues, and not
necessarily a bad thing. UK support
services, half of group sales, is mostly
public contracts, with decent margins
and less cyclicality than construction.
Disposals will give Carillion a little
breathing space. But with debt
covenants at risk and a cash call
expected, Carillion will need to find
that better place soon.
Great Plains/Westar:
utility function
Never conflate the investment decision
with the financing decision, profess the
corporate finance textbooks.
Sometimes, it takes a state regulator to
teach company managers this lesson.
Yesterday, two Midwestern utilities,
Great Plains Energy and Westar, said
they would combine in a nil premium,
all-stock deal creating a group with an
equity value of $14bn. Both are
middling operators in a consolidating
industry. A combination is sensible.
It makes so much sense that the pair
announced a deal more than a year
ago. But that transaction was a pricey,
mostly-cash buyout that entailed the
smaller Great Plains paying a near
40 per cent premium to Westar
shareholders. Westar, naturally, liked
that structure. Kansas regulators did
not, ruling in April that the deal was
not in the public interest given the risk
to ratepayers from such a leveraged
electricity provider. Give both Great
Plains and Westar credit for
appreciating that the combination
offered enough benefits to try again.
The $60 per share that Great Plains
initially agreed to pay Westar
shareholders required $8bn in new
debt. The need to generate cash to
service the debt may have required
Westar customers to pay unnecessarily
higher bills. The new terms are less
dramatic for Westar shareholders,
valuing their shares at $53.
Earnings growth will be 6-8 per cent
a year, and dividends will rise
accordingly. The groups say that they
can knock 15 per cent off of their
combined operating cost base. Each set
of shareholders only benefits if that
really happens. The clear thinking
from the Kansas regulator is rarely
seen from acquirers themselves, who
are happy to use other people’s money
to chase risky deals. But the outcome
shows that the strategic benefits of a
deal can still be extracted even within a
more conservative capital structure.
Alas, most industries do not attract
such stringent third party oversight.
Corporate America should look more
often at its bookshelves.
Lex on the web
For notes on today’s breaking
stories go to www.ft.com/lex

CROSSWORD
No. 15,598 Set by ARMONIE
        ACROSS DOWN
1 Convention competently 1 Welcome law restricting fungal

handles failure, on reflection growth (6)
  (8) 2 Conservative member on the
5 A quiet drive to religious cricket field (6,3)
retreat (6) 3 One poorly formed
 
10 Agitate Chinese vessel (5) arrangement to make easy
11 Art Hilton devised sports event profits (5,3,3,4)
(9) 4 Greek infiltrating the French
12 Alliance views shared link (5,4) network (7)
  
13 Covering for hen (5) 6 Calm down with early music
 14 Vocal arrangement by compositions to deal with
European found in recess (6) grudges (6,3,6)
  
15 Clio sat composed and 7 Turn the corner in driving
 resigned (7) contest (5)
18 Space for large English curry 8 Fellow bit monkey (8)
   (7) 9 Various old aquatic birds (6)
20 Passionate painter’s in India (6) 16 Charlie’s urged to be contrite
22 Edward keeps relationship (9)
  lukewarm (5) 17 Greek god endlessly leading
24 Guide for much-loved autocrat Greek philosopher (8)
short of time (9) 19 Miss people without support
  25 Once more treat commander in (6)
silence (9) 20 Old US president’s domains
26 Swill some beer in Serbia (5) regulated (7)
27 Novice appears in The Seraglio 21 Beast takes redhead for partner
in New York (6) (6)
JOTTER PAD 28 Partial description of a Möbius 23 Musician is quiet in supporting
strip (3-5) part (5)

Solution to Saturday’s prize puzzle on Saturday July 22

Solution to yesterday’s prize puzzle on Monday July 24
Winners’ names will be printed in Weekend FT
Tuesday 11 July 2017 ★ 11

Shire Eon M&S Brent crude 10-yr Treasury FTSE 100 Dollar / yen 10-year Bund
Out of the mire Banks can soon
be an engine of UK productivity 3.2% 2.2% 1.6% 0.6% 2bp 0.3% 0.2% 3bp
INSIDE BUSINESS, PAGE 12
£41.86 €8.43 339p $46.99 2.38% 7,370.03 ¥114.13 0.54%

‘Big oil’ plays down electric threat Short

View
3 Shell and Aramco defend ‘reliable’ fossil fuels 3 Renewables shift to take ‘generations’
sources like oil and gas, on the mistaken to ban sales of all petrol and diesel cars areas such as air travel, shipping and
Jennifer
ANDREW WARD — LONDON
assumption that alternatives will be by 2040. ‘There is heavy freight that cannot be electrified Hughes
Two of the world’s largest oil companies rapidly deployed,” Amin Nasser of Listed oil companies such as Shell are not one, using current technology.
have hit back against predictions that Saudi Aramco told an energy confer- facing increasing scrutiny from inves- “There is not one, single energy tran-
electric vehicles threaten a collapse in ence in Istanbul. tors over the risks posed to their busi- single sition under way but many, all running Which came first: the rally in emerging markets, or the
demand for hydrocarbons and warned Addressing the same event, Ben van nesses by renewable energy. energy alongside each other . . . [and] they will boom in their tech stocks? The sector has become the
that global energy security would be at Beurden of Shell said that the transition Meanwhile, Aramco, the Saudi take many decades to play out,” said biggest single grouping in emerging markets this year for
risk if investment was withdrawn from to low-carbon technologies would “take Arabian state oil company, needs to transition Mr van Beurden. the first time since the dotcom boom. Cue several as-yet
fossil fuels too soon. place over generations” rather than as a convince potential shareholders of its under way’ But Mark van Baal of Follow This, a unsuccessful efforts to label EM techs with a catchy equiv-
Saudi Aramco and Royal Dutch Shell rapid “revolution”. long-term appeal ahead of a planned group of activist “green” shareholders in alent to the Fangs (Facebook, Amazon, Netflix and
acknowledged that a shift towards Their comments followed a spate of flotation. Mr Nasser said that, while Ben van Beurden Shell, said that Mr van Beurden was Google) in the US. But simply equating the sector with hot
renewable energy — including battery- developments that have suggested expectations for alternative forms of Shell being too complacent. US tech rivals sells it short: hardware, as well as internet
powered cars — was under way but said decarbonisation of the global economy energy were going “through the roof”, “The world needs to get to zero emis- enthusiasm, is driving this rally.
that oil and gas would remain indispen- is gathering pace. These included last the reality often fell short. Electric vehi- sions by 2050 [to tackle climate Emerging market equities are enjoying their best year
sable for decades to come. week’s announcement by Volvo, the cles, for example, today make up less change]. In our opinion, that means since 2009, with MSCI’s benchmark index up 17 per cent.
“There seems to be a growing belief carmaker, that all new models would be than two-tenths of 1 per cent of the stopping exploring for oil and gas and Strong exports and earnings upgrades are the biggest driv-
that the world can prematurely disen- partially or completely battery- 1.2bn global vehicle fleet, he said. starting exploring for new business ers, particularly in Asia, which accounts for more than
gage from proven and reliable energy powered from 2019, and a French plan Mr van Beurden also highlighted models,” he said. two-thirds of the index (and all of its tech stocks). Even
profits at unloved Chinese groups are generally expected
to rise, giving Asian EM stocks one of their best-ever runs
of improving profit forecasts, at 12 months and counting.
The tech sector, up 38 per cent this year, has led the
advances. Within that, Tencent and Alibaba are up 43 per
Wrong fit cent and 62 per cent, respectively. Samsung Electronics is
Abercrombie & Fitch 35 per cent higher and poised to overtake Intel as the
world’s largest chipmaker. Taiwan Semiconductor, the
merger talks end world’s biggest chip foundry, has gained 18 per cent. Com-
bined, they have added $325bn in market capitalisation.
Tech hardware stocks are benefiting from several
Abercrombie & Fitch, the struggling trends. One is the perennial optimism around the rise in
teen fashion retailer, said yesterday that emerging economies’ disposable income as a middle class
it had terminated talks over a potential develops. Another, more specific theme is the rising global
merger, sending its shares sinking, write demand for chips and specialised components to power an
Adam Samson and Mamta Badkar in increasing range of devices. After years of consolidation,
New York. supply options are limited — and most are out of emerging
The decision, which sent shares Asia. There is also the looming launch of Apple’s iPhone 8.
sliding 20 per cent in early trading, Speculation abounds in the Asian tech supply chain as to
dashed investor hopes raised by its which group has won a share of orders. About a third of
statement in May that it was in Taiwan’s tech sales are iPhone-related, says Citigroup.
preliminary discussions with several In spite of the hype, emerging market tech stocks are
parties. “After a comprehensive review still cheaper than US counterparts at 15 times earnings,
of all relevant factors, with the compared with 18 times, according to BNP Paribas. That
assistance of our financial adviser, the might spur tech lovers, whether internet enthusiasts back-
A&F board of directors determined that ing Alibaba or fans of Samsung and its component bets, to
the best path to enhance value for push this rally further still.
stockholders is the rigorous execution of
our business plan,” said Arthur Technology taking over
Martinez, executive chairman. Sector weightings in MSCI EM index
Abercrombie had received interest (%)
from Express and American Eagle Tech stocks
30
Outfitters, the Financial Times reported Financials
this spring, and private equity sponsors Materials
were also reported to be considering bids 20
Randal Konik, analyst at Jefferies, said The tech sector,
that getting a bid at an acceptable which is up 38 per
premium had always seemed a long 10 cent this year, has
shot. “The state of apparel retail remains led the recent
challenged and its future uncertain, 0 advances in
likely contributing to a limited number 1994 2000 05 10 15 17 emerging market
of financial sponsors in the process with Source: BNP Paribas equities
serious interest,” he said.
jennifer.hughes@ft.com
Craig Warga/Bloomberg

Facebook’s Oculus in fresh price cut as

VR fails to make ground in real world
TIM BRADSHAW — SAN FRANCISCO the world’s largest social network in quality headsets — Sony’s PlayStation
a $2bn deal in 2014, Oculus has made VR and HTC’s Vive.
Facebook-owned Oculus is cutting the
slow progress in its mission of bringing Analysts have attributed the slow
price of its Rift virtual reality headset
virtual reality to a wider audience. progress of VR to a combination of high
for the second time this year, as VR
Brian Blau, analyst at Gartner, said prices and limited availability of high-
continues to struggle to gain traction
potential purchasers of VR headsets quality content. Oculus is trying to
among mainstream consumers.
were “enthusiastic and very interested, address both with its “Summer of Rift”
Dalian Wanda develops The price of a bundle including the Rift but they are not buying it at the level of promotion.
a theme with park sales headset and a pair of Touch motion- other kinds of technology where there’s There are now more than 500 games
sensitive controllers will be $200 lower such a large hype factor”, such as smart- and apps available for the Rift, includ-
China’s Dalian Wanda is to sell a at $399 for a “limited time”, Oculus phones when they first emerged. ing Star Trek: Bridge Crew, which puts
majority stake in many of its theme announced yesterday. The offer means Gartner estimates that fewer than 5m players on deck inside a starship of the
parks to rival developer Sunac in a that the Rift bundle is now available for VR high-end headsets such as the Rift venerable sci-fi franchise, and TV car-
Rmb63.2bn ($9.3bn) deal. The sale is half the combined $800 cost at which have been sold since they went on sale a toon spin-off Rick and Morty.
part of Wanda’s policy of selling its the devices launched last year. Oculus year ago. According to a report last “All of a sudden, that’s a very good-
property assets to investors with brought in its first, permanent, $200 month by analyst group IDC, the Oculus sized library but it’s still not like the app
whom it would share its rental income. price reduction four months ago. Rift sold just over 99,000 units in the store on smartphones,” said Mr Blau. “It
Report i PAGE 12 Despite single-handedly reviving the first quarter of this year, and is lagging will likely be a long time before we get
VR market and winning the backing of far behind its main competitors in high- there.”

Companies / Sectors / People

Companies
Abercrombie & Fitch..............................11
Accenture.....................................................15
Adecco...........................................................15
Adnoc.............................................................14
Alibaba............................................................11
Amazon...............................................11,14,19
American Eagle Outfitters..................11
Anbang..........................................................12
Apple..........................................................11,14
AutoNation..................................................19
BASF................................................................13
Bain Capital................................................10
Bain Capital ...............................................15
Balfour Beatty...........................................19
Barclays.........................................................12
Berkshire Hathaway..............................12
BlackRock.....................................................18
Blackstone...................................................10
Bloomberg...................................................14
Brevan Howard.......................................20
CME Group..................................................18
Capita..............................................................13
Carillion..............................................10,13,19
Celanese.......................................................10
China Vanke...............................................12
Cinven......................................................10,15
Cisco Systems............................................15
Citi....................................................................19
Cosco........................................................10,15
DMGT.............................................................14
Dalian Wanda.............................................12
Diageo............................................................19
Dunelm..........................................................19
EY......................................................................15
Elliott Management ..............................12
Energy Future Holdings......................12
Esure...............................................................19
Exor.................................................................14
Express...........................................................11
Facebook.................................................11,14
Fosun..............................................................12
Gap...................................................................19
Gazprom.......................................................14
Global Logistics Properties...............15
Goldman Sachs...................................12,18
Google.......................................................11,14
Great Plains Energy.........................10,12
Guggenheim Securities........................12
HNA.................................................................12
HSBC...............................................................18
HTC..................................................................11
Hamburg Süd............................................10
Hanjin.......................................................10,15
Hanson Robotics.......................................9
Hermès..........................................................14
Inpex Corporation...................................14
Intel............................................................11,20
Intercontinental Exchange................18
JPMorgan.....................................................18
Johnson Matthey.....................................13
Just Eat.........................................................12
Kier...................................................................19
Kohl’s..............................................................19
LG......................................................................13
Lazard............................................................12
LeEco..............................................................12
Legal & General.......................................15
Lithium Americas....................................13
Lloyds.............................................................12
Louis Vuitton.............................................14
L’Oréal............................................................15
MSG.................................................................10
Maersk......................................................10,15
Matalan..........................................................18
Mediterranean Shipping Co..............15
Mitie.................................................................13
Mobileye......................................................20
Moore Capital .........................................20
Morgan Stanley........................................18
Natixis............................................................18
Netflix..............................................................11
New York Times......................................14
News UK.......................................................14
NextEra Energy........................................12
Nokia...............................................................15
Norilsk Nickel.............................................13
Norsk Hydro........................................10,14
OOCL..............................................................15
OSTC...............................................................18
Oculus.............................................................11
Oncor..............................................................12
Orient Overseas.......................................10
Orkla..........................................................10,14
Panasonic.....................................................13
Partech Ventures....................................15
Paulson..........................................................10
Roche..............................................................19
Rolex...............................................................14
Royal Dutch Shell....................................11
Samsung...................................................11,13
Sapa...........................................................10,14
Saudi Aramco.......................................11,14
Schroders.....................................................19
Serco...............................................................19
Shanghai International Port.............15
Shire................................................................19
Siemens.........................................................14
Société Générale......................................18
Soho China..................................................12
Sony..................................................................11
Stada...............................................................15
Stada Arzneimittel.................................10
Stagecoach..................................................13
Standard Life.............................................15
Statoil.............................................................14
Sunac..............................................................12
TAG Heuer..................................................14
Taiwan Semiconductor.........................11
Technopromexport................................14
Tel Aviv Stock Exchange..................20
Tencent..........................................................11
Tesla................................................................13
Time Inc........................................................14
Total................................................................14
Trinity Mirror.............................................14
Tudor Management..............................20
UBS .................................................................13
Umicore.........................................................13
Unibail-Rodamco......................................15
Volvo................................................................11
Wall Street Journal................................14
Warburg Pincus........................................15
Weir Group..................................................13
Wells Fargo.................................................12
Westar............................................................10
Westar Energy..........................................12
Whole Foods..............................................19
Yugra..............................................................15
Sectors
Banks............................................2,9,12,15,19
Basic Resources.......................................14
Financial Services....................................15
Financials.........................................15,18,20
Healthcare..................................................7,8
Industrials..............................................10,14
Media..............................................................14
Oil & Gas.................................................11,14
Personal & Household Goods....11,14
Pharmaceuticals.............................8,10,15
Retail....................................................11,18,19
Shipping..................................................10,15
Support Services..........................10,13,15
Technology...................................2,9,15,20
Transport......................................................15
Travel & Leisure......................................12
Utilities.....................................................10,12
People
Bacon, Louis..............................................20
Ben-Zeev, Ittai..........................................20
Beurden, Ben van....................................11
Bezos, Jeff...................................................14
Brandtzaeg, Svein Richard................14
Buffett, Warren........................................20
Burke, Michael...........................................14
Cochrane, Keith..................................10,13
Corfield, Graham......................................12
Coster Tjeenk Willink, Engelbert...15
Deak, David.................................................13
Elkann, John...............................................14
Green, Philip...............................................13
Grynberg, Marc.........................................13
Hanson, David.............................................9
Hargreaves, John....................................18
Howson, Richard......................................13
Khan, Zafar..................................................13
Martinez, Arthur.......................................11
Ming, Mei......................................................15
Nasser, Amin...............................................11
Nefedov, Alexei........................................15
Ruzicka, Peter...........................................14
Soros, George...........................................20
Wood, Peter................................................19
Tudor Jones, Paul..................................20
Tung, Chee-Hwa.....................................10

© The Financial Times Limited 2017 Week 28

12 ★ FINANCIAL TIMES Tuesday 11 July 2017

COMPANIES
INSIDE BUSINESS
Financials
FINANCE

Elliott challenges Buffett bid for Oncor Patrick

Activist hedge fund set
to launch rival $18.5bn tilt
at Texas-based group
JAMES FONTANELLA-KHAN — NEW YORK
Elliott Management set the stage for a
public battle between billionaire inves-
tors yesterday as the activist hedge fund
controlled by Paul Singer openly chal-
lenged an $18bn bid from Warren Buf-
commitment to a counter proposal in
which Elliott would convert its debt into
equity and inject fresh cash into EFH
through a third party partnership. The
move would allow it to take control of
Oncor, the crown jewel of the bankrupt
company.
“While we are entirely supportive of a
transaction with Berkshire or another
third party in the event that the value
provided by that transaction exceeds
the value being proposed by Elliott, we
Jenkins
Elliott’s plan values EFH at $9.3bn. Berkshire ringfenced from the rest of its utilities
The hedge fund has held talks with a operations, so any financial problems in
agreed to
number of potential partners, including
rival energy companies, infrastructure
funds and wealthy individuals, accord-
acquire
other parts of its business would not
affect service to its 10m customers
across the state. Such a solution is likely
Banks can become an
ing to people familiar with the matter.
The remaining 20 per cent of Oncor —
EFH for
$9bn in
to win the regulator’s backing for the
deal being completed.
engine of productivity
which Berkshire did not acquire — is
controlled by Borealis, the subsidiary of
Canadian pension fund Omers, and GIC,
cash,
However, for the deal to go through
Berkshire will require creditors to be
onboard as well. Elliott’s opposition to
instead of a brake
Singapore’s sovereign wealth fund.
implying the current terms suggests that Mr Buf-
The deal between Mr Buffett’s holding an equity fett will either have to increase his offer

fett’s Berkshire Hathaway for the Texas
utility Oncor.
Elliott, the largest creditor of Oncor’s
bankrupt parent company, Energy
Future Holdings, said the deal Berkshire
agreed last week failed to maximise
creditors’ interests and that it was ready
to launch a rival bid worth $18.5bn.
The hedge fund disclosed a series of
documents yesterday highlighting its
fear that the Berkshire transaction does company and EHF was reached after
not provide such value,” the fund said in several other deals had fallen apart due
a letter to the board of EFH dated July 5 to regulatory concerns.
and published yesterday. NextEra Energy agreed 12 months ago
Berkshire agreed to acquire the to buy Oncor for $18.4bn but the deal
restructured EFH for $9bn in cash, was later blocked by Texas regulators
implying an equity value of $11.25bn for because they were opposed to a plan
Oncor, which is the regulated transmis- that would have fully merged the two
sion and distribution business of which companies under one umbrella.
EFH owns 80 per cent. Berkshire plans to keep Oncor
Travel & leisure. Property
F
value of or be forced to walk away.
Berkshire and EFH were not immedi-
$11.25bn ately reachable for comment.
for Oncor EFH used to be known as TXU and in
2007, KKR, TPG Capital and the buyout
arm of Goldman Sachs acquired the
company for $45bn in the largest ever
leveraged buyout. It collapsed under the
weight of debt that the buyout groups
put on it to finance the deal.
irst there was the financial crisis. Now, it seems,
Britain has a productivity crisis. Of the G7 coun-
tries, only Japan has been registering weaker out-
put per worker of late. Last week, data from the
Office for National Statistics showed UK produc-
tivity growth went into reverse in the first quarter of the
year, declining 0.5 per cent.
One common assertion is that Britain’s economic reli-
ance on financial services and related sectors, which
boomed pre-2008 then bust disastrously, is responsible for
this “productivity puzzle”. But is that right?
Logic suggests it is. The outsized revenues and profits
that banks and other financial groups made in the run-up
to the crash, much of it inflated by mis-selling and manip-
ulation, have given way to lower income. At the same time,
banks have had to employ thousands more back-office

Dalian Wanda to sell theme park stakes
Rival Sunac will pay $9.3bn
for 76 hotels and take 91%
holding in tourism projects
YUAN YANG, CHARLES CLOVER AND
EMILY FENG — BEIJING
Chinese developer Dalian Wanda Group
said it would sell a majority stake in
many of its theme parks to rival devel-
oper Sunac China a year after its chair-
man boasted of driving Disneyland out
of China.
Dalian Wanda announced yesterday
that Sunac would pay Rmb63.2bn
($9.3bn) for 76 Wanda hotels as well as
taking a 91 per cent stake in 13 of
Wanda's tourism projects in China.
Wanda Hotel Development’s Hong
Kong-traded shares rose as much as 155
per cent in early trade yesterday on the
news, and closed up 47 per cent at
HK$0.85
Among the projects in the deal was
the Nanchang Wanda City, which the
company opened last year and Wanda
chairman Wang Jianlin talked up as a
Mr Wang had boasted that
his theme parks would
‘make Disney’s China
venture unprofitable’
competitor to Disneyland Shanghai. Mr
Wang had boasted that his chain of
Wanda City theme parks would “make
Disney’s China venture unprofitable”.
The sale of the group’s leisure proper-
ties is part of Wanda’s “asset-light” pol-
icy, a plan launched two years ago to sell
its real estate assets to investors with
whom the company would share its
rental income.
Several major Chinese developers,
such as China Vanke and Soho China,
have launched asset-light policies in the
past two years to limit their exposure to
turbulent Chinese property
prices. Under the model, developers
finance and manage the projects on
behalf of third-party investors but do
not own the land or buildings.
Mr Wang said the deal would cut the
debt of Wanda’s recently delisted Dalian
Wanda Commercial Properties, and that
the group planned to clear all its debts
during the next three years.
“For Wanda, this deal is about reliev-
ing the pressure of their debt,” said
Zhang Hongwei, chief analyst at prop-
erty brokerage Tospur.
The conglomerate, which has three
publicly listed subsidiaries but is itself
privately owned, released half-year
results on Thursday showing it was
healthy, with 12 per cent year-on-year
revenue growth.
While other Analysts said debt levels at its listed
developers are subsidiaries, which do publish audited
selling off assets, financial statements, were not unusu-
Sunac is ally high. Wanda declined to comment
aggressively on the debt of the parent.
buying them in The group’s turnround on its leisure
property and assets was, however, curious given that
leisure it had been using the properties as part
Mark Schiefelbein/AP
of an image rehabilitation blitz.
Last month China’s banking regulator
confirmed it was examining banks’
exposure to Wanda and a handful of
other big business groups — HNA, Fosun
and Anbang — amid worries that their
big offshore deals could strain the bal-
ance sheets of China’s domestic banks.
An analyst familiar with Wanda said
the probe was “a signal from the govern-
ment to stop the run of overseas acquisi-
tions” rather than any genuine concern
about unsustainable debts.
Wanda has been on a publicity push in
recent weeks, pointing to its domestic
culture and recreation investments.
Just last week, Mr Wang was handing
an oversized key to a Rmb1.5bn
($220m) ethnically themed tourism vil-
lage over to the local government of
Danzhai County, home mostly to mem-
bers of the Miao ethnic group.
A host of local officials were on hand
at the opening to sing the praises of “The
Chairman”, as Mr Wang is known to
those close to him. “Wang Jianlin is
responding to the call of the govern-
ment, really helping the poor and help-
ing the most poverty-struck areas,
which is why he also chose Danzhai,”
said the county’s propaganda chief, who
declined to give her name.
Wanda said the opening of the village,
along with a vocational school and pov-
erty alleviation fund, were nothing out
of the ordinary for the company, and
unconnected to recent political set-
backs and regulatory scrutiny in China.
Mr Wang was also on hand to cut the
ribbon on the world’s largest indoor ski
resort at a Wanda City project in Harbin
at the end of June, an event that in a pre-
vious era would have seen less fanfare.
The 80-hectare project was “aided by
a cultural tourism investment of
Rmb20bn [$2.9bn],” said Wanda at the
time. Harbin is one of China’s more eco-
nomically depressed areas.
While other developers are selling off
assets, Sunac is aggressively buying
them in property and leisure. The cash-
rich developer sank $2.4bn into rescu-
ing technology group LeEco, known for
video-streaming and its US autonomous
car ventures, earlier this year.
Sunac’s chairman said in a Caixin
interview that the acquisition would be
fully funded by the company’s cash
holdings of Rmb90bn, as of the end of
June, which come from the group’s
strong property sales.
“For Sunac, it’s about diversifying —
although their sales have been high,
nearly all of it is from residential proper-
ties, and they don’t have much in the
way of commercial property such as
hotels,” said Mr Zhang of property bro-
kerage Tospur.
Sunac has expanded in the past year,
with its property sales up 121 per cent in
2016, its annual report states. But it has
also embarked on debt-funded acquisi-
tions within China, largely in real estate.
staff to cope with new compliance and regulatory
demands. Such roles, while crucial, are the very definition
of economically unproductive, unless you count the pre-
ventive benefits that the data struggles to capture.
Sure enough, analysis by the Financial Times this year
showed that banking has been a big sectoral impediment
to UK productivity growth over the eight years to 2016.
ONS data showed banking, which makes up 4.4 per cent of
the economy, accounted for
a fifth of the slowdown in
There are signs
productivity growth. Since
2008 it has grown 1 per cent a that some banks
year, down from 6.4 per cent
in the pre-crisis decade.
are becoming
Other ancillary sectors, more productive,
such as legal services and
consultancy, were also drags.
not less
With finance and related
services accounting for more than 10 per cent of the econ-
omy, no wonder overall productivity numbers are weak.
Yet some brave souls are quietly predicting that banks
will lead the UK out of its productivity morass. Do some
digging and, sure enough, there are promising signs that
some banks are becoming more productive, not less.
Take Lloyds, the UK’s biggest high street bank. True, it
has had a decade of problems — until recently it was part-
owned by the state following a 2008 bailout; more than
any other lender it has been mired in the payment protec-
tion insurance scandal (cost so far: £17bn); and the reputa-
tional damage from an old fraud at HBOS, for which it has
yet to fully compensate clients, is reverberating.
But its core business is looking stronger. Though profits
are still 20 per cent below the levels of the immediate pre-
crisis tally racked up by the combined Lloyds and HBOS
groups, performance measured in relation to its branch
network and staff numbers
has improved sharply.
FT analysis shows revenue
There is probably
per employee last year further to go in
topped £233,000. In 2011 the
figure was £211,000 and in
cutting overheads
2006 £164,000 for the com- relative to
bined group. Revenue per
branch has risen from £7m
revenues
to more than £9.2m.
Revenue overall is a third below the artificial pre-crisis
peak. But branch closures and staff cuts have been more
acute. Lloyds, much to the anger of traditionalists, now has
only 1,900 branches, down from 3,300 for Lloyds/HBOS in
2006. It employs just 75,000 people, half the peak tally.
There is no perfect way to measure productivity in
banking. Like any service sector, it defies economists’
attempts to apply what is essentially a manufacturing con-
cept — of units produced per employee. Still, revenue per
branch or per employee is a decent proxy.
Lloyds is not alone among banks, either. Peers have been
through a similar process. Over the past five years Wells
Fargo, the biggest retail bank in the US, raised its per-
employee revenue 7 per cent to $328,000 and its per-
branch revenue 15 per cent to $10.2m, although those
numbers may be distorted somewhat by Wells’s own mis-
selling scandal last year.
There is probably much further to go in the process of
cutting overheads relative to revenues, as online banking
usurps traditional branch banking.
One bank chief executive recently said he thought the
sector’s best-in-class cost-to-income ratio of about 40 per
cent could halve within five years if banks implement
strategies to reduce branch outlets and automate low-
skilled roles. Already the UK’s banks and asset managers
between them employ fewer than 500,000 people for the
first time since 1980, according to the ONS.
Additionally bolstered by the prospect of higher interest
rates — and therefore bigger profit margins — banks could
soon become an engine of productivity instead of a brake.
patrick.jenkins@ft.com

Utilities Travel & leisure

Westar and Great Plains agree revised merger Just Eat in a stew over UK’s curry chefs shortage
JAMES FONTANELLA-KHAN — NEW YORK
Westar Energy and Great Plains
Energy, two big US electricity utilities
that scrapped a deal last year due to
regulatory concerns, have agreed a new
all-shares merger that will create a
company with a combined equity value
of $14bn.
Under the new deal structure, Westar
shareholders will lose the 36 per cent
premium that Great Plains had offered
to pay last year as part of a $60 cash and
stock deal worth $12.2bn, including
$3.6bn in debt.
But Kansas regulators refused to
approve the original deal structure put
forward by Great Plains because it
planned to borrow $8bn to fund the
acquisition of its larger rival. Both com-
panies provide service in the state and
other parts of the US Midwest.
Regulators said then that the pur-
chase price was “simply too high” and
would eventually hurt customers
through higher rates needed to cover
the debt.
In the new deal, Westar will in effect
acquire Great Plains at a small premium
and will require no incremental debt,
which avoids the problem raised by
Kansas authorities. Westar shares cur-
rently trade around $53 and Great
Plains shares trade at $30.
Under the new terms, Westar share-
holders will receive a share in the new
merged entity for each of their shares,
while Great Plains stockholders will
receive 0.5981 shares of common stock
in the new holding company for each of
their shares.
Once the transaction is completed,
Westar shareholders will own approxi-
mately 52.5 per cent of the new
combined group, while Great Plains
shareholders will own about 47.5 per
cent.
Great Plains hired Lazard and Bar-
clays to help it get the new deal done.
Guggenheim Securities advised Westar.
See Lex
CONOR SULLIVAN — LONDON
Online food-ordering platform Just Eat
has renewed warnings over a shortage
of curry chefs in the UK and called on
the government to loosen immigration
rules and improve training.
Graham Corfield, Just Eat’s UK manag-
ing director, said chef shortages for cui-
sines such as Indian and Chinese was “a
real problem now and unless we address
it could get worse”. He said the restau-
rant sector included many “small fami-
ly-run businesses who are often strug-
gling” and that were being forced to
close “because they are finding it diffi-
cult to get the staff”.
He spoke out as the British Takeaway
Campaign, a lobbying effort led by Just
Eat, published research about the eco-
nomic contribution made by the restau-
rants in an effort to combat what Mr
Corfield said were “negative connota-
tions” about the industry. The research
found the public spent £10bn on takea-
ways last year.
Just Eat works with about 28,000 res-
taurants in the UK and has built a busi-
ness around linking them with custom-
ers. But while demand for home-
delivered restaurant food is rising, the
outlook for the restaurants themselves
is less clear.
More than a third of the 300 takeaway
restaurants surveyed for the BTC report
said they were experiencing skills short-
ages, particularly for chefs, front of
house staff and delivery drivers. Twen-
ty-nine per cent said they needed to
recruit skilled labour from outside the
EU, while 37 per cent said they expected
the UK’s decision to leave the EU would
make it harder to recruit staff.
The UK government maintains a list
of “shortage occupations” to inform visa
decisions. These jobs include chefs, but
only for restaurants that do not provide
a takeaway service, and Mr Corfield
called for this to be changed. There are
fears immigration rules could be tight-
ened after the UK leaves the EU.
Tuesday 11 July 2017
Chemical groups gear up for electric car race
Umicore, Johnson Matthey and BASF change direction from reducing exhaust emissions to powering battery vehicles
HENRY SANDERSON
AND MICHAEL POOLER
An industrial transformation is under
way. The world leading companies that
for decades have made catalysts that cut
harmful and toxic emissions in vehicle
exhausts are switching focus. Their aim:
to become significant players in power-
ing the electric cars of the future.
The big three groups in the area —
Umicore of Belgium, UK-listed Johnson
Matthey and German chemicals group
BASF — are now preparing for the even-
tual decline of the traditional internal
combustion engines they help to filter.
So far, Umicore is ahead in the race for
market share. It already has a dominant
position making battery materials for
portable electronics, which has helped
its shares more than double in price in
the past 18 months.
But the other two groups are chasing
hard, and are keen to catch up in the
hope of providing materials for the lithi-
um-ion batteries vital for the electric car
industry to properly take off.
“Today the vast majority of our
investment goes to battery materials
because of the formidable acceleration
that we see in demand for our products,”
Marc Grynberg, chief executive of Umi-
core, told the Financial Times.
Mr Grynberg says he expects the bat-
tery division to overtake the autocata-
lyst division after 2020, but that
demand for catalysts up to that point
will continue to remain strong as car-
makers strive to meet tightening emis-
sions regulations.
Although sales for catalytic convert-
ers are holding up, markets are prepar-
ing for the demise of diesel engines and
growth in electric cars, with platinum
prices falling sharply in the past year.
Platinum is a key component in cata-
lytic converters.
Indeed, the electric car market
appears to be close to a turning point,
with projections pointing to a potential
surge in sales in the next few years.
According to the International Energy
Agency, there are 2m electric cars on the
road, making up only 0.2 per cent of
total passenger light-duty vehicles in
circulation. The IEA estimates the fig-
ure could reach 9m-20m by 2020 and
40m-70m by 2025.
A tipping point may come when the
cost of EV ownership falls to the same
level as a conventional car, which UBS
reckons could happen by 2019, although
other analysts predict 2025. “The explo-
sion of growth from that point [2019] on
will be fairly impressive for the cathode
materials producers,” says Andrew Stott
an analyst at the investment bank.
The big three car catalyst groups hope
to capture the growth in demand for
components used in rechargeable lithi-
um-ion cells manufactured by the likes
of Samsung and LG, and are planning to
expand production of cathode materi-
als, critical in increasing the amount of
power a battery can deliver.
Supply chain
Question marks over
environmental impact
The uptake of electric cars is close to a
watershed moment, as battery costs
continue to decline and the market
prepares to accelerate. But that is
drawing increased concern about the
battery supply chain and its
environmental impact.
The C02 emissions from electric
vehicles will depend on the amount of
fossil fuels used in the electricity grid
and when and where the cars are
charged.
A 2015 report by the Union of
Concerned Scientists found that in the
US, on average, electric vehicles over
their life produce less than half the
Support services
Chief quits as Carillion warns on profit
CONOR SULLIVAN AND KATIE MARTIN
The chief executive of Carillion has
stepped down as the outsourcing group
issued a profit warning and announced
a strategic review, triggering a 35 per
cent fall in its share price.
The FTSE 250 group, which is the most
shorted stock on the London exchange,
said yesterday that full-year revenues
and “overall performance” would be
lower than management’s expectations
because of “difficult markets” and
measures to cut borrowing.
The group also said first-half operat-
ing profits would be lower than
expected, without providing specific
guidance.
Carillion’s warning follows others
Electric market
How catalytic converters work
Exhaust gas from engine
1 2
How lithium-ion
batteries work
Anode
Lithium ions
Lithium-ion battery market
Battery pack level ($bn)
Portable
Automotive
Others*
2005 2010 2012
FT graphic Sources: Avicenne Energy; Thomson Reuters Datastream * Others include electric bike, industrial and medical lithium-ion batteries
For anyone in doubt about the poten-
tial scale of this market, then they
should take a look at Tesla’s vast “Giga-
factory”, under construction in the
Nevada desert. There, Panasonic will
manufacture lithium cells for 500,000
cars that the company expects to roll off
the production lines this decade.
The chemical groups are fully aware
of the prospects in this market, stepping
up preparations for the rise of electric
vehicles in recent months.
In June, BASF said it would plough
€400m into building plants to produce
cathode materials in Europe, with raw
materials supplied by the Russian met-
als refiner Norilsk Nickel.
“[This] will result in a robust supply
chain and enable BASF to expand its
production of battery materials on a glo-
global warming emissions of
comparable gasoline-powered vehicles.
But there has been little research on
the environmental impact from the
mining of lithium, nickel and cobalt,
which are blended with manganese to
form the battery cathode in most
electric vehicles.
“As we move away from oil
dependency, are we getting into
lithium dependency? And what could
be the impact and risks with this,
especially for automakers?” Enrico
Colombo, an associate analyst at
Sustainalytics in Frankfurt, said.
Extraction of lithium from brine
beneath the deserts of Chile and
Argentina mainly relies on the sunlight,
but also uses water from water-scarce
regions.
The lithium is also further processed
from Mitie and Capita, which both said
there had been a slowdown in the
awarding of contracts following the UK’s
vote to leave the EU.
The company announced that Rich-
ard Howson had stepped down as chief
executive after five years “with immedi-
ate effect” and was being replaced tem-
porarily by Keith Cochrane, a non-exec-
utive director and former chief execu-
tive of Weir Group and Stagecoach.
A search for a permanent chief execu-
35% £695m
Fall in Carillion’s Company’s net
share price after borrowing in the
warning and first half, against
report of review £586.5m last year
★ FINANCIAL TIMES 13
COMPANIES
lysts said. In contrast, Johnson Matthey
has only a “modest position in battery
materials”, UBS said. BASF has also so
far failed to establish itself in the NMC
market, according to Liberum.
Substrate coated with catalyst Housing Gas to atmosphere 1 Exhaust gases from an internal In the case of Johnson Matthey, it pro-
combustion engine containing duces another cathode variety called
pollutants such as carbon monoxide lithium iron phosphate, or LFP, com-
and nitrogen oxide enter the converter mercially, but is scaling up in other
materials.
2 The gases enter a honeycomb structure Although LFP does not have the range
coated with catalysts of NMC batteries in terms of distance, it
3 is perceived as safer and has a better life-
3 The catalysts change the chemical cycle (how many times a battery can be
structure of the gases, either removing charged without serious degradation).
Companies such as them or converting them to harmless LFP batteries are bigger and found in
Johnson Matthey apply gases such as nitrogen and oxygen heavy-duty vehicles.
the catalyst coatings to Critically, it is the ability to travel fur-
the converters’ substrates ther with the more dense NMC batteries
that gives it the most potential for mass-
2 market, light-duty passenger vehicles.
Companies such 1 When a lithium-ion battery is “For us as an industry to transition
Load as Umicore make discharging, lithium ions flow from
Separator
the cathodes for the anode to the cathode through the ‘The vast majority of our
lithium- ion batteries electrolyte and across the separator
investment goes to battery
1 Cathode 2 Electrons also flow from anode to materials because of . . .
cathode, creating the current to power
Electrolyte devices such as an electric motor demand for our products’
3 When charging (not shown), the flows
are reversed and pivot more to EVs, we need to
develop more specific materials [with]
higher-energy density that address a lot
of the range issues, while through tech-
nology we also address safety and life-
time,” says Alan Nelson, chief technol-
Platinum prices Chemical groups’ stock performance ogy officer at Johnson Matthey.
35 LME, $ per troy ounce Share prices (rebased) However, success largely depends on
1200 Johnson Matthey China, which accounted for more than
30 160
BASF 40 per cent of the electric cars sold
25 1100 Umicore worldwide last year. Its carmakers are
140 expected to shift from LFP towards
20
nickel-rich cathodes as China’s subsidy
15 1000 120 policy for EVs has this year specified the
use of higher energy density batteries,
10 which mean a bias towards NMC.
900 100
The worry for Umicore is that Chinese
5 competitors develop similar quality
0 800 80 material. “This is a risk the market is
2015 2020 2016 17 not pricing into Umicore [shares] at the
2016 17
moment,” warns Pieter Busscher, a fund
manager at RobecoSAM.
bal scale,” says Kenneth Lane, president
of BASF’s catalysts division.
That followed Umicore’s announce-
ment in May of a €300m investment to
increase its output of components for
lithium-ion batteries sixfold by 2020.
Some investors and analysts think
Umicore will be the overall winner from
the disruption of the car market as it has
the lead in so-called nickel manganese
cobalt batteries, or NMC, which are
likely to become the standard for elec-
tric vehicles as they allow motorists to
drive for longer on a single charge. This
explains the outperformance of the
group’s share price against its rivals in
the past year-and-a-half.
“We see Umicore as better able to
compensate for its future loss of com-
bustion engine technologies,” UBS ana-
before it ends up in a battery.
A growing amount of lithium is
coming from hard rock in Australia,
which is then sent to be processed in
China, a country that still relies on coal
for the majority of its electricity.
Umicore says it is scaling up its
technology to recycle used lithium-ion
batteries, which could cut down the
energy footprint of mining battery raw
materials. The company says it expects
a large amount of batteries to come on
to the market around 2025.
David Deak, the chief technology
officer at Lithium Americas, says
that once recycling takes off, the
manufacturing energy footprint, or
land required to absorb CO2 emissions,
and the cost of the battery could drop
by well over 50 per cent.
Henry Sanderson
tive was under way and Mr Howson
would stay with the company for up to a
year to help the transition, the group
said. The chairman Philip Green said
Carillion would miss its debt reduction
targets for 2017 and that “we have there-
fore concluded that we must take imme-
diate action”.
As well as speeding up measures to
cut debt, he said Carillion would be
“undertaking a thorough review of the
business and the capital structure”.
The company said that late payments
on construction contracts and a fall in
working capital due to contracts not
being replaced meant average net bor-
rowing in the first half would be £695m,
compared with £586.5m last year.
See Lex
14
Industrials
Norsk Hydro to take full control of Sapa
Aluminium producer
agrees deal for partner’s
share of joint venture
OWEN WALKER — LONDON
Norwegian aluminium producer Norsk
Hydro has agreed to buy the 50 per cent
stake in Sapa it did not already own, as
the European industry consolidates in
response to a glut of supply from China.
The cash deal, which gives Sapa an
enterprise value of NKr27bn ($3.2bn),
would make Hydro the second-largest
Norwegian company after Statoil, the
News publishers join forces to face digital challenge
US groups lobby Congress to
allow ‘cartel’ to negotiate
with Facebook and Google
MATTHEW GARRAHAN AND
SHANNON BOND — NEW YORK
DAVID BOND — LONDON
On both sides of the Atlantic, news pub-
lishers are starting to think about doing
the previously unthinkable: making
alliances with former foes and competi-
tors to stop their readers and revenues
being subsumed by the twin digital
forces of Facebook and Google.
The News Media Alliance, which rep-
resents almost 2,000 publishers in
North America, this week called on the
US Congress to allow them to negotiate
collectively with digital distributors.
“It’s a difficult environment for any kind
of legislation right now, but we have to
try,” said David Chavern, chief executive
of the NMA.
It is unclear if Congress will grant an
exemption, which would effectively
clear publishers to operate as a cartel.
But such is the publishers’ desperation
that all options are being considered:
print advertising revenues, once the
bedrock of the industry, have collapsed,
with big titles such as the New York
Times and Wall Street Journal hit by
Personal & household goods
Louis Vuitton watch connects elite travellers
HARRIET AGNEW — PARIS
Louis Vuitton has launched a smart-
watch for the globetrotting elite that
looks indistinguishable from its iconic
mechanical Tambour watch but
includes the gadgetry associated with
wearable technology.
Michael Burke, its chairman and chief
executive, said: “What’s distinctive is
that it’s not technology informs aesthet-
ics, it’s the reverse: beauty informs tech-
nology. We don’t want it to look like a
connected object, we want it to look like
a mechanical watch.”
The new Tambour Horizon notifies its
wearer of phone calls, text messages and
emails, and includes two features aimed
at the kind of upscale travellers that are
Louis Vuitton’s best customers.
A “My Flight” feature keeps departing
travellers informed of flight times, ter-
energy group. Aluminium has been one
of the best performing industrial metals
this year, with confidence rising that
Chinese authorities will tackle excess
supply from domestic producers.
Sapa is the world leader in extruded
aluminium products used in construc-
tion and carmaking, and was formed in
2013 as a joint venture between Hydro
and Orkla, the Norwegian consumer
goods supplier. It has 22,400 employees
in 40 countries. The original agreement
between the two companies stipulated
joint ownership for at least three years.
“[Buying] Sapa will enable us to
assume global leadership, establish a
Media. Survival strategy
revenue declines of more than 20 per
cent in 2016. Digital subscription sales
have offered some respite, but with dig-
ital advertising failing to grow as quickly
as print advertising is declining, the
industry is nearing a crisis point.
It is not just revenue that publishers
fear they are losing to the digital giants.
Many readers now access news and
information through social media sites
and search engines, meaning publishers
no longer have a direct relationship with
readers or access to data about their
audiences.
“News is valuable and it’s right to
expect it to be valued,” Mr Chavern said.
On the publishers’ agenda are negotia-
tions over sharing advertising revenue
and reader data, support for subscrip-
tion models and preserving the identity
of individual news brands on digital
platforms.
“You have two companies with these
massive online positions, yet individual
companies can’t get together to talk to
them,” he added. “It’s an imbalance that
needs to be addressed.”
Google and Facebook are on track to
control 60 per cent of the US digital
advertising market this year, according
to research group eMarketer, cementing
their role as gatekeepers to the online
revenues publishers need, as traditional
print sales erode.
minal and gate information, reports of
delays and the number of hours remain-
ing before landing. The other function,
“City Guide”, lets users tap Louis Vuit-
ton’s guides to seven international cities.
The watch has a built-in geolocation
function that indicates nearby restau-
Tambour Horizon looks traditional
but features luxury city guides
★ FINANCIAL TIMES
COMPANIES
platform for growth, and provide
responsible operations and sustainable
solutions for the future low-carbon
economy,” said Svein Richard Brandt-
zaeg, Hydro’s chief executive.
Hydro said it planned to make
NKr200m ($24m) of synergies a year
from the deal, which is expected to com-
plete in the second half of the year pend-
ing regulatory approval.
It said it would help finance it through
bond issues in Norway and interna-
tional markets this year. It intended to
keep its dividend policy of returning 40
per cent of net income to shareholders.
Shares in Orkla rose 2.44 per cent to
Newspaper and magazine owners are
suffering steep declines in their print
businesses. Magna Global, the media
buying agency, forecasts global newspa-
per ad revenues will drop 9 per cent and
magazine ad sales 10 per cent this year.
Last month, a group of international
publishers, including the Washington
Post owner and Amazon founder Jeff
Bezos and John Elkann, chairman of
Exor, the company that owns 43 per
cent of The Economist, met in Turin to
discuss how newspapers should tackle
the disruption from the tech groups.
Speaking at the conference, Mr
Digital v print ad spending
US only ($bn)
Facebook
Google
Newspapers
2008 09 10 11 12 13
Source: eMarketer
rants, hotels, historical landmarks and
tourist attractions in real time.
“The connected watch market is
pretty competitive with traditional
watch makers competing with tech
players like Apple,” said Anne Le
Borgne, a senior portfolio manager at
CPR Asset Management. “The luxury
players have a chance to differentiate on
the design.”
The Apple Watch is now bigger than
any Swiss watch brand bar Rolex,
according to a report from UBS this
month. The wider wearables market
now sells 30m-40m items annually,
while the Swiss watches industry sells
about 28m, the report said.
Louis Vuitton’s French rival Hermès
collaborated with Apple on a connected
watch. And TAG Heuer, which is also
part of LVMH engineered a connected
watch in collaboration with Intel.
NKr86.15 on the news while Hydro
shares traded up 0.74 per cent to
NKr49.07. Orkla’s share price is up 12.3
per cent for the year, while Hydro’s
shares are up 23.9 per cent.
Orkla has sold several subsidiaries in
recent years, including a specialist
chemicals division. “The [Sapa] sale is a
natural consequence of our strategy of
becoming a focused branded consumer
goods company,” said Peter Ruzicka,
Orkla chief executive.
European companies have suffered in
recent years as aluminium production
in China has surged. But there are signs
that Chinese authorities are trying to
Elkann, who is also head of the Agnelli
family and the owner of Fiat and Juven-
tus Football Club, said time was running
out to forge a workable relationship
with Google and Facebook.
“There will be a window of opportu-
nity in the next 12 to 18 months to estab-
lish a relationship and find a way to
make payments work. We must protect
what people buy and we must prevent
piracy,” he said.
Newspaper groups in the UK have
been talking for months about forging a
joint advertising sales house to give
them a stronger bargaining position
50
Forecast
40
30
20
10
0 some titles. Meanwhile Bloomberg, the
14 15 16 17 18 19
Industrials
Siemens to sue over gas turbines in Crimea
GUY CHAZAN — BERLIN
Siemens, the German engineering
group, said it would pursue criminal
charges against Technopromexport
after it emerged that two of the gas tur-
bines it sold the state-owned engineer-
ing company had been moved to Cri-
mea in violation of EU sanctions.
The EU blocked the supply of energy
technology to Crimea in the wake of
Russia’s annexation of the peninsula in
2014, which was seen as a breach of
international law.
That has hindered Russian plans to
build two new power stations in the
region, which has suffered from wide-
spread electricity outages in recent
months.
The power plants, which are being
built by Technopromexport, were
designed to run on Siemens turbines.
curb the domestic market. In an effort
to lower air pollution, China issued a
directive this year to cut aluminium
production around Beijing during the
winter. The authorities have also
announced plans to crack down on ille-
gal aluminium smelters.
Mr Brandtzaeg said Hydro’s expertise
in renewable energy was helping it win
business from companies manufactur-
ing automobiles for more environmen-
tally conscious consumers. “Customers
are concerned about reducing their car-
bon footprint overall — not only about
lowering their emissions,” he said.
See Lex
9%
Forecast
decline in global
newspaper
advertising
revenues for 2017
60%
Proportion of US
digital ad market
to be controlled
by Google and
Facebook
News groups
are making
less from print
as digital fails
to compensate
David R Frazier/Alamy
with advertisers. With print advertising
revenues continuing to plummet —
Daily Mirror publisher Trinity Mirror
recently reported a 21 per cent fall in the
26 weeks to July 2 — groups are taking
increasingly radical steps to slash costs
and find ways of unlocking new reve-
nues.
However, the joint sales initiative was
dealt a blow earlier this year when Trin-
ity Mirror and DMGT, parent company
of the Daily Mail, pulled out of the
project. The remaining publishers,
including Rupert Murdoch’s News UK,
are still in talks.
Publishers are also responding by
tightening their belts and turning to dig-
ital paywalls, as they search for ways to
offset print losses that have yet to be
matched by digital gains.
The Wall Street Journal is scaling back
print production outside the US and
ending distribution of its print edition in
Europe, while The Guardian is shifting
to a smaller print format. The Journal
and the New York Times are offering
redundancy pay-offs to staff, while
Time Inc, owner of Fortune, People and
Sports Illustrated magazines, recently
eliminated 300 jobs and is looking to sell
US financial news and information com-
pany, is putting 88-year-old Business-
week magazine behind a paywall.
Russia wants the plants to be fully
operational by next March, when the
country marks the fourth anniversary
of the takeover of Crimea and votes in a
presidential election in which Vladimir
Putin is expected to run — and easily
win a fourth term.
But Siemens’ intervention shows how
deeply the sanctions are biting, narrow-
ing the options available to Russian
companies reliant on western technol-
ogy, particularly in the strategically vital
energy sector.
Meanwhile, the volume of sanctions
has increased in recent weeks, with
the US Senate last month approving
measures that will punish Moscow
further.
The new sanctions, which m ust still
be approved by the House of Represent-
atives, could affect oil and gas pipeline
projects such as Nord Stream 2, a flag-
Tuesday 11 July 2017
Oil & gas
Abu Dhabi
state oil group
to float stakes
in services
businesses
SIMEON KERR — DUBAI
Abu Dhabi’s state-owned oil company
plans to float stakes in its services
businesses and expand investment
opportunities with foreign firms to
boost the Gulf emirate’s private sector
economy.
Abu Dhabi National Oil Company
(Adnoc) said initial public offerings of
minority stakes in some services busi-
nesses with “attractive investment and
growth profiles” would support private
sector growth in the UAE.
It added that the public would be
allowed to invest alongside Adnoc to
benefit from future growth.
Gulf energy producers are using pri-
vatisation to modernise the industry
and raise money as the region faces a
sustained slump in prices that has put
budgets under pressure. Adnoc has shed
thousands of jobs in the past 18 months
to slash costs amid a broader fiscal
squeeze in the UAE capital.
Saudi Aramco is planning an IPO
next year that it hopes will value the
largest oil producer at $2tn to kick-start
ambitious domestic economic reform
efforts.
Other Gulf producers, including
Oman, Qatar and Kuwait, are also look-
ing at floating energy assets that have
long remained firmly under state
ownership.
But Adnoc said there would be no IPO
of its holding company, which will
remain fully owned by the government
of Abu Dhabi.
‘Shifting trends create
a new energy landscape
where new rules of
engagement are required’
Sultan Al Jaber, Adnoc’s chief execu-
tive, said the company also planned to
create co-investment opportunities
with partners across oil and gas produc-
tion, energy transportation, refinery
and petrochemicals output.
“Shifting global trends are creating a
new energy landscape where new rules
of engagement are required,” said Mr
Jaber.
Adnoc last year renewed oil conces-
sions with overseas companies such as
BP and brought in a Chinese consor-
tium. Other equity partners include
Total of France and Inpex Corporation
of Japan.
Adnoc said it would explore new part-
nerships including production conces-
sions for companies that partner with
Adnoc in other areas of the energy busi-
ness and the development of a regional
drilling company.
Adnoc is also considering a new infra-
structure venture to bundle energy
assets, such as oil pipelines and storage
facilities. The company also said it
would offer more downstream invest-
ment opportunities in refineries and
petrochemicals output.
Mr Jaber, who is also a UAE minister
of state, said Adnoc would select new
partners on their ability to secure better
access to global markets for Adnoc’s
products, as well as their willingness to
share technical expertise and develop
technologies.
“Expanding our partnership
model . . . will enable us to accelerate
our growth, increase revenue and
improve integration across the Adnoc
value chain,” said Mr Jaber.
“It will also spur domestic economic
growth as well as bring new
jobs and benefits to the UAE and its
citizens.”
ship project for the Kremlin-controlled
gas monopoly Gazprom, which is set to
start pumping natural gas from Russia
to Europe in 2019.
Siemens said in a statement that it
had received information “from reliable
sources” that at least two of the four gas
turbines delivered to a project in the
southern Russian town of Taman had
been moved to Crimea, “against our
will”.
It said the move constituted a “clear
breach” of Siemens’ contracts, which
“forbid our customer from making
deliveries to Crimea”.
The company said it would request
that Russian authorities launch crimi-
nal charges against those responsible for
the diversion, take legal action to halt
any further deliveries to Crimea and
have the turbines returned to their orig-
inal destination in Taman.
Tuesday 11 July 2017 ★ FINANCIAL TIMES 15

COMPANIES

Support services Banks

GLP auction hit by worries over China assets Russia central

Warburg Pincus is one of
only two bidders for the
Singapore-listed group
HENNY SENDER — HONG KONG
JEEVAN VASAGAR — SINGAPORE
The auction of Global Logistics Proper-
ties, one of the world’s largest ware-
house operators, has run into trouble
amid concerns over the future control of
the company’s China assets, considered
the jewel in its crown.
Just two bidders submitted offers last
week for the Singapore-listed company,
which is seeking to become the largest
Asian private equity buyout of the year.
One of them, Warburg Pincus, submit-
Shipping
ted a non-binding bid and may with-
draw if concerns about the China opera-
tion cannot be satisfied, three people
briefed on the offer said.
The private equity firm’s concerns
relate to provisions in the 2014 agree-
ment governing the sale of about one-
third of GLP’s China business to a group
including GLP’s chief executive Ming
Mei and Beijing-based Hopu Invest-
ment Management.
The provision effectively gives that
group veto power over many of the
things that GLP’s new owner might want
to do with the China assets, the people
said.
The only other bid for GLP, which has
an enterprise value of about $15bn,
comes from a consortium led by Mr Mei
that includes Hopu but has a different
composition from the 2014 group.
Warburg and Mr Mei, who like all of
the bidders and potential bidders for
GLP have signed non-disclosure agree-
ments, declined to comment.
The sale of GLP, which has Singapore
state investor GIC as its largest share-
holder, has been dogged by allegations
that the process is flawed. Several other
private equity groups declined to bid for
GLP because they believed Mr Mei’s bid
made other submissions pointless.
Some of those investors now allege
that some terms of the sale of the Chi-
nese stake were not fully disclosed to
GLP shareholders and that those terms
make GLP less attractive to would-be
buyers.
“There are additional reserved mat-
ters which would be triggered in the
event of a delisting or even the depar-
ture of Mr Mei,” said one investor who
withdrew from the process. “These pro-
visions hinder the ability of a potential
acquirer to realise the full value of the
group.”
The circular that was given to share-
holders in April 2014 before a vote on
the China stake sale made clear that the
2014 Hopu-led consortium was being
given a veto over certain decisions.
GLP declined to comment. “These
rights are standard rights for a minority
shareholder to protect their interest to
make sure the business operates in a
consistent manner,” one person close to
GLP said.
Shareholders approved the circular
by a 95 per cent margin.
However, the investors who looked at
buying GLP said that when they asked
for more information as part of the auc-
tion, they were given access to the full
shareholders’ agreement on the trans-
action. They found Mr Mei’s group was
given additional veto power that was not
specifically laid out in the circular.
A person close to GLP said these pow-
ers were not included in the circular
because they were not considered
“material facts that a reasonable share-
holder needed to know”.
Orient Overseas deal will make
bank starts
winding up
lender Yugra
MAX SEDDON — MOSCOW
Russia’s central bank has begun to
wind up Yugra, the country’s 33rd larg-
est lender by assets, in what could
become one of the country’s largest
banking collapses in recent years.
The central bank said in a statement
yesterday that it had placed Yugra
under temporary administration for six
months, which could lead to the bank’s
closure. Russia’s deposit insurance
agency will control Yugra while the cen-
tral bank investigates its “unstable”
financial position.
“This measure will allow the interests
of the bank’s depositors and creditors to

Cosco push Cosco world’s third-biggest

shipping line
Top 10 shipping companies by market
be defended,” Yugra said in a statement.
Regulators have shut down more
than 300 banks since Elvira Nabiullina

underlines share (%) became governor of the central bank in

2013, promising to clean up the sector.
Yugra’s troubles show that not even

Beijing’s
politically well-connected lenders are
16.4 APM-Maersk 16.4 safe from regulators. The bank is owned
by Alexei Khotin, Russia’s 95th richest

growing
man according to Forbes, and a sponsor
of the Night Hockey League, where the
star player is President Vladimir Putin.
Mediterranean

trade clout 14.7 14.7 Mr Khotin could not immediately be

BEN BLAND — HONG KONG
In May, Orient Overseas Container Line
christened the biggest container ship
the OOCL Hong Kong — a bold state-
ment, given that the industry has been
hit hard by overcapacity.
Two months on, and the controlling
family is selling the seventh-biggest
container shipping line to China Cosco
Shipping, its China state-owned rival.
The $6.3bn cash deal symbolises Bei-
jing’s ambitions to dominate trade, the
deepening consolidation in a challenged
industry, and the eclipse of Hong Kong’s
role as China’s gateway.
The proposed acquisition of Hong
Kong-listed Orient Overseas (Interna-
tional) Limited, OOCL’s parent, will
push Cosco from fourth to third in terms
of container-shipping market share,
increasing pressure on its biggest com-
petitors, Denmark’s Maersk and Swit-
zerland-based Mediterranean Shipping
Company.
The deal is the fourth big consolida-
tion announced in the past year and fol-
lows the bankruptcy of Hanjin, the
Korean line, a trend one executive called
“four weddings and a funeral”.
“The competitive environment, per-
sistent oversupply, and resulting pres-
sures on freight rates have driven indus-
try consolidation,” says Mariko
Semetko, an analyst at Moody’s.
“We expect that this trend will
continue.”
At a time when Chinese regulators are
asking for a cooler, more rational
approach to foreign acquisitions, the
deal — which is being funded by a bridg-
ing loan from the Bank of China —
underlines Beijing’s desire to see Cosco
become a dominant participant in ship-
ping and port operations.
“This is a very significant acquisition
for Cosco,” says Corrine Png, who runs
The OOCL Hong an equity research house called Crucial
Kong, the biggest Perspective in Singapore.
container ship. “The other companies should be wor-
Cosco’s $6.3bn ried because Cosco is only a few percent-
deal for the line age points short of Maersk and MSC in
shows deepening market share, and in five years they
consolidation in could be the largest player.”
the sector and Shipping analysts say the proposed
highlights the acquisition, which was announced on
eclipse of HK’s Sunday and requires regulatory
role as gateway to approval in the US and Europe as well as
the mainland the backing of minority shareholders,
Focke Strangmann/EPA
will not only boost Cosco’s share but
enable it to improve its efficiency
thanks to Orient Overseas’ superior IT
and fleet management systems.
Cosco, which was formed from the
merger last year of two state-
owned predecessors, is set to become
the largest operator on the US-Asia
route, while taking advantage of Orient
Overseas’ foothold in the niche
refrigerated container business and get-
ting control of its state-of-the-art, auto-
mated container terminal in Long
Beach, California.
“Cosco can learn a lot from Orient
Overseas because it is a much better-
run company,” says Ms Png.
The family of C.C. Tung, whose
brother C.H. Tung was the first chief
executive of Hong Kong after the hando-
ver in 1997, has agreed to sell its 68.7 per
cent stake to Cosco and its junior part-
ner in the acquisition, Shanghai Inter-
national Port Group, triggering a gen-
eral offer.
The completion of the deal will mark
the end of an illustrious history in ship-
ping for the family business, which was
founded by C.C.’s father C.Y.
Setting the stage for the ambitions of
his sons, in the early 1980s he operated
the longest-ever ship, the Seawise Giant.
A person familiar with the transac-
tion says that the Tung family came to
recognise that it could not compete in a
climate of overcapacity and consolida-
tion, even though freight rates started to
recover last year.
“The current situation was just not
sustainable, then this deal came along at
the right valuation,” he says.
The sale of Orient Overseas to a Chi-
Shipping Co reached for comment yesterday.
Yugra went from being the 272nd-
largest bank in Russia in 2012 to enter-
ing the top 35 three years later after
11.2 CMA CGM Group 11.2 aggressively growing its business. Dur-
ing that time, the bank ramped up lend-
ing to companies in real estate, con-
struction and energy, including assets
8.4 Cosco Shipping 11.6 in Mr Khotin and his father’s empire.
Signs of problems at Yugra have
Hapag- emerged over the past year. The central
7.2 Lloyd bank gave it 10 reprimands, ordering it
7.2
to form reserves, said Anna Orlenko,
Evergreen head of the central bank’s oversight
5.0 Line
5.0 department. “They did make a few
3.2 OOCL* steps to solve the problem but it clearly
2.8 Yang Ming Marine 2.8 wasn’t enough,” said Alexander
Transport Danilov, an analyst at Fitch.
2.7 Hamburg 2.7 In May, the bank’s auditor, BDO, said
2.6 NYK Line 2.6 Yugra had attempted to pass off a
Rbs29bn capital injection from share-
* OOCL is OOIL operating shipping subsidiary holders as operational revenue that
Source: Alphaliner
would have given it a profit. By that
time, the central bank had banned
nese state-owned company underlines Yugra from accepting new deposits.
how Hong Kong is being eclipsed by the Yugra attracted at least Rbs1.88bn in
mainland, with the ports of Shanghai, the last year by giving new deposit-
Shenzhen and Ningbo already shipping holders shares, allowing them to bypass
more containers than Hong Kong. regulations, Ms Orlenko added.
At a valuation of 1.4 times price to Valery Pozdyshev, a deputy central
book, Cosco is paying a 15 per cent pre- bank governor, said yesterday that reg-
mium to the sector average, which ana- ulators suspected Yugra had submitted
lysts say is a fair price given the possible false accounts to regulators for months,
synergies for Cosco. as well as stripping assets and perform-
The Chinese group, which has been ing “manipulations” with client
buying ports, including deals in accounts. Mr Pozdyshev said that
Spain and Greece, will need approval Rbs170bn of Yugra’s Rbs196.8bn in
from the Committee on Foreign Invest- assets was eligible for record insurance
‘The other ment in America given Orient Overseas’ payments of up to Rbs1.4m ($20,000),
US business. starting in two weeks.
companies Analysts say that there may be Alexei Nefedov, Yugra’s chief execu-
should be some opposition from rivals and tive, denied the bank had filed false
politicians, amid a growing climate accounts, stripped assets, or violated
worried . . . of protectionism. regulations. “We are not losing faith and
in five years But they expect regulators to we are making every effort to ensure
approve the deal, given that Cosco and that these issues are settled with the
they could Orient Overseas were part of one of the central bank in the near future,” he said.
be the main shipping alliances and the Mr Khotin, he said, “plans to support
enlarged Cosco will still only be the the bank until its full financial recovery
largest third-biggest operator. — the main thing is that we be allowed
player’ See Lex to do this”.

Financial services Technology Pharmaceuticals

Dublin emerges as top choice Thaw begins in funding freeze Regulator’s move lets buyout
for post-Brexit bases in EU for European tech start-ups
LAURA NOONAN — NEW YORK
Dublin is the most popular destination
among the leading financial services
companies which have already made
statements on where they plan to set up
their post-Brexit EU bases, a report
from EY shows.
Banks, insurers, asset managers and
funds are seeking new EU homes
because they fear Brexit will mean the
loss of the “passport” which allows them
to conduct business across Europe from
their London bases.
Frankfurt has garnered recent head-
lines for winning business, with Japa-
nese banks Daiwa and Nomura saying
they would set up EU bases there.
But the EY study, based on statements
from 222 of London’s biggest financial
services companies, said that so far 19
had spoken of a move to Dublin, while
18 have mentioned Frankfurt. Luxem-
bourg comes third, with 11 mentions.
“The variety of locations being
announced highlights that no one Euro-
pean centre is emerging as a compelling
alternative to London,” said Omar Ali,
EY’s UK financial services leader.
Insurers, including Legal & General
and Standard Life, are leading the
charge to Dublin, while Luxembourg is a
groups raise offer for Stada
favourite with wealth and asset manag-
ers, six of which have named it as a
Brexit option. Frankfurt is expected to
win most of the investment banks,
though EY said that so far Dublin and
Frankfurt were tied for investment
bank business, followed by Paris.
Mr Ali said the number of companies
that had spoken publicly of plans to
move operations from London had risen
only slightly since March, when 53 had
made statements — of those, 15 did not
say where they would go.
“The difference three months on from
the triggering of Article 50 [on March
29] is that we are seeing major financial
brands put their contingency plans into
action,” he said. “This process will only
accelerate as firms finalise their submis-
sions to the regulators on their Brexit
plans.”
Executives say they will have to make
decisions before the UK agrees its exit
deal, because the plans can often
involve lengthy regulatory processes.
The leading EU cities have all begun
charm offensives to win post-Brexit
business, with Frankfurt promising to
change labour laws to exempt “risk tak-
ers”, Paris stressing its quality of life and
Dublin boasting of its deep pool of Eng-
lish-speaking workers.
ALIYA RAM — LONDON
Partech Ventures, the France-based
investment firm, has closed a €400m
fund to invest in European and US tech-
nology start-ups amid signs that the
funding freeze after the UK’s vote to
leave the EU is beginning to thaw.
The fund is the seventh of its kind from
Partech and is being backed by the
European Investment Fund, a public-
private partnership in the EU, and Bpi-
france, France’s sovereign wealth fund.
It has also attracted corporate invest-
ment from the French lottery, Accen-
ture, Cisco Systems, Nokia, Adecco,
L’Oréal and Unibail-Rodamco. Jean-
L’Oréal, the cosmetics company, is
among investors in the Partech fund
Marc Patouillaud, co-managing partner
at Partech, said the fund differed from
others of its kind because it would invest
in Europe and the US. Two-thirds of its
investments will focus on European
start-ups developing emerging technol-
ogies such as virtual reality, while the
rest will go into companies in Silicon
Valley, where Partech has an office.
“It is very important to select the best
deal by benchmarking on a worldwide
basis rather than just focusing on a sin-
gle continent or country,” he said.
European tech funding slowed
sharply after the vote for Brexit in June
last year. Start-ups that already lag
behind counterparts in the US and Asia
in attracting early-stage investment saw
venture capital activity drop by a third
in the third quarter, according to Dow
Jones VentureSource.
This year, a number of large venture
capital groups have started multimil-
lion-dollar funds focused on the sector.
In February, Atomico closed a $765m
European tech fund to help new busi-
nesses expand.
However, Brexit continues to cast a
pall with venture capitalists concerned
about the movement of skilled entre-
preneurs, access to the single market
and regulations for UK-based start-ups.
JAVIER ESPINOZA
PRIVATE CAPITAL CORRESPONDENT
Germany’s financial regulator, BaFin,
has cleared the way for Bain Capital
and Cinven to return with a fresh and
higher offer for Stada, the generics
drugmaker, in what is set to be Europe’s
largest buyout in four years.
The private equity consortium bidding
for the maker of copycat drugs such as
generic Viagra has secured an exemp-
tion from a one-year exclusion period,
meaning it can submit a renewed volun-
tary public takeover approach.
The approval of an exemption came
as Bain and Cinven announced they had
increased their bid by €0.25 to €66.25 a
share, €16m above the first offer and
valuing the group at €4.1bn, according
to the company. Stada, whose chief
executive and head of finance stepped
down with immediate effect last week,
said it supported the revised offer.
The acceptance threshold for the new
bid has been lowered to 63 per cent from
an initial 75 per cent bar, and the accept-
ance period has been cut to four weeks.
Late last month, Bain and Cinven’s
initial bid failed after they were unable
to secure sufficient backing from Stada
shareholders.
The buyout groups will now be able to
tender a renewed voluntary public offer
for Stada without having to adhere to
the one-year exclusion period.
“We believe that enabling Bain Capi-
tal and Cinven to submit an improved
offer is in the best interest of the com-
pany and our shareholders,” said Engel-
bert Coster Tjeenk Willink, chairman of
Stada’s executive board.
Stada’s shares rose 1.3 per cent in
afternoon trading to €65.38.
Bain and Cinven had received accept-
ances from 65.52 per cent of sharehold-
ers for their original offer, just below
their 67.5 per cent target.
The initial bid failed due to factors
including some hedge funds refusing to
tender their shares in the hope of forc-
ing the bidders to pay a higher price.
Bain and Cinven have received irrevo-
cable acceptances from those investors,
including some of the funds that held
back from the previous offer.
Bain and Cinven fought off bids from
another private equity consortium
comprising Advent International and
Permira. They are “unlikely” to return
with a fresh bid because of the hurdles it
has to overcome, a person familiar with
the process said.
See Lex
16 FINANCIAL TIMES Tuesday 11 July 2017

MARKET DATA

WORLD MARKETS AT A GLANCE FT.COM/MARKETSDATA

Change during previous day’s trading (%)
S&P 500 Nasdaq Composite Dow Jones Ind FTSE 100 FTSE Eurofirst 300 Nikkei Hang Seng FTSE All World $ $ per € $ per £ ¥ per $ £ per € Oil Brent $ Sep Gold $

-0.155% -0.97% -0.31%

No change No change
0.17% 0.29% 0.07% 0.26% 0.42% 0.76% 0.63% 0.33% 0.113%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Jun 11 - - Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul
15,423.09 12,815.72 20,080.98 2,381.69 2,382.10
2,433.79 2,429.41 7,449.98 20,013.26
15,105.09 7,350.92 12,437.46
Day 0.17% Month -0.10% Year 14.06% Day 0.52% Month -2.38% Year 5.92% Day 0.26% Month -2.06% Year 11.86% Day 0.39% Month -2.95% Year 29.17% Day 0.76% Month 0.34% Year 32.93% Day 0.09% Month 0.02% Year 21.34%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore
50,510.15
6,321.76 1,534.39 10,978.30 26,030.29 3,246.35
3,237.05
6,170.70 49,081.73 1,500.77 25,500.06
10,509.50
Day 0.29% Month -0.61% Year 24.48% Day 0.90% Month 2.94% Year 10.45% Day 0.42% Month -2.19% Year 15.80% Day 0.20% Month -4.27% Year 28.39% Day 0.63% Month -2.04% Year 24.00% Day 0.54% Month -0.24% Year 14.03%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
62,755.58 62,814.90 21,122.42 21,190.67 3,364.53 31,715.64
21,430.27 5,299.71
21,182.53 3,307.72 31,213.36
5,165.64
Day 0.07% Month 0.74% Year 18.09% Day 0.79% Month 0.98% Year 18.21% Day 0.40% Month -2.53% Year 23.26% Day 0.84% Month 0.32% Year 31.89% Day 0.00% Month 1.72% Year 7.51% Day 1.13% Month 1.45% Year 16.92%

Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous
Argentina Merval 22069.05 22027.84 Cyprus
CSE M&P Gen 76.20 76.96 Italy FTSE Italia All-Share 23371.29 23184.21 Philippines Manila Comp 7837.47 7889.33 Taiwan Weighted Pr 10289.91 10297.25 Cross-Border DJ Global Titans ($) 273.55 272.59
Australia All Ordinaries 5762.90 5743.90 Czech Republic
PX 999.00 992.18 FTSE Italia Mid Cap 39350.91 39094.77 Poland Wig 60803.62 60707.52 Thailand Bangkok SET 1569.44 1569.64 Euro Stoxx 50 (Eur) 3478.81 3463.84
S&P/ASX 200 5724.40 5703.60 OMXC Copenahgen 20
Denmark 995.05 989.05 FTSE MIB 21190.67 21015.10 Portugal PSI 20 5171.12 5153.96 Turkey BIST 100 100084.37 100627.01 Euronext 100 ID 993.64 989.63
S&P/ASX 200 Res 3354.30 3361.10 EgyptEGX 30 13342.09 13369.88 Japan 2nd Section 6179.83 6145.27 PSI General 2831.68 2817.94 UAE Abu Dhabi General Index 4410.50 4396.35 FTSE 4Good Global ($) 6072.39 6052.41
Austria ATX 3152.51 3124.61 Estonia
OMX Tallinn 1168.27 1171.03 Nikkei 225 20080.98 19929.09 Romania BET Index 8117.09 8044.79 UK FT 30 3204.80 3196.40 FTSE All World 307.60 306.60
Belgium BEL 20 3845.08 3835.82 Finland
OMX Helsinki General 9751.12 9694.55 S&P Topix 150 1308.33 1302.20 Russia Micex Index 1924.22 1912.48 FTSE 100 7370.03 7350.92 FTSE E300 1500.77 1494.42
BEL Mid 6394.96 6380.18 France
CAC 40 5165.64 5145.15 Topix 1615.48 1607.06 RTX 1005.42 995.24 FTSE 4Good UK 6556.67 6541.87 FTSE Eurotop 100 2939.12 2927.48
Brazil Bovespa 62814.90 62322.40 SBF 120 4117.62 4101.33 Jordan Amman SE 2183.49 2176.10 Saudi-Arabia TADAWUL All Share Index 7203.99 7266.43 FTSE All Share 4027.69 4020.82 FTSE Global 100 ($) 1507.68 1501.39
Canada S&P/TSX 60 891.06 Germany
886.36 M-DAX 24452.30 24431.27 Kenya NSE 20 3604.06 3580.52 Singapore FTSE Straits Times 3246.35 3229.01 FTSE techMARK 100 4494.58 4509.53 FTSE Gold Min ($) 1389.33 1418.53
S&P/TSX Comp 15105.09 15027.16 TecDAX 2188.25 2173.22 Kuwait KSX Market Index 6723.57 6680.13 Slovakia SAX 334.51 334.51 USA DJ Composite 7440.82 7435.24 FTSE Latibex Top (Eur) 3940.60 3941.60
S&P/TSX Div Met & Min 643.59 655.45 XETRA Dax 12437.46 12388.68 Latvia OMX Riga 980.63 968.94 Slovenia SBI TOP 801.45 801.45 DJ Industrial 21430.27 21414.34 FTSE Multinationals ($) 1758.42 1752.55
Chile IGPA Gen 24499.51 24286.47
Greece Athens Gen 843.83 837.43 Lithuania OMX Vilnius 601.79 602.94 South Africa FTSE/JSE All Share 52187.92 51900.26 DJ Transport 9685.45 9694.94 FTSE World ($) 544.87 543.12
China FTSE A200 9423.08 9420.68 FTSE/ASE 20 2182.42 2169.84 Luxembourg LuxX 1663.81 1656.64 FTSE/JSE Res 20 31739.74 31381.51 DJ Utilities 704.77 702.04 FTSEurofirst 100 (Eur) 4224.44 4208.71
FTSE B35 9000.71 8988.96
Hong Kong Hang Seng 25500.06 25340.85 Malaysia FTSE Bursa KLCI 1757.13 1759.93 FTSE/JSE Top 40 45976.56 45670.49 Nasdaq 100 5684.99 5656.47 FTSEurofirst 80 (Eur) 4818.00 4798.04
Shanghai A 3364.53 3364.35 HS China Enterprise 10214.58 10251.83 Mexico IPC 50510.15 50059.02 South Korea Kospi 2382.10 2379.87 Nasdaq Cmp 6170.70 6153.08 MSCI ACWI Fr ($) 463.96 463.25
Shanghai B 330.08 330.74 HSCC Red Chip 3955.55 3954.17 Morocco MASI 12354.35 12125.68 Kospi 200 311.46 310.66 NYSE Comp 11766.29 11752.98 MSCI All World ($) 1913.18 1909.01
Shanghai Comp 3212.63 3212.48
Hungary Bux 35724.92 35503.69 Netherlands AEX 512.05 509.91 Spain IBEX 35 10509.50 10488.80 S&P 500 2429.41 2425.18 MSCI Europe (Eur) 1561.36 1560.98
Shenzhen A 1992.78 2006.19
India BSE Sensex 31715.64 31360.63 AEX All Share 780.48 777.18 Sri Lanka CSE All Share 6758.24 6737.50 Wilshire 5000 25249.17 25219.16 MSCI Pacific ($) 2538.13 2561.37
Shenzhen B 1157.50 1156.63 Nifty 500 8556.95 8479.45 New Zealand NZX 50 7583.95 7622.13 Sweden OMX Stockholm 30 1624.81 1617.00 Venezuela IBC 123451.19 123749.70 S&P Euro (Eur) 1602.16 1594.90
Colombia COLCAP 1470.32 1481.32
Indonesia Jakarta Comp 5771.51 5814.79 Nigeria SE All Share 32459.17 32354.78 OMX Stockholm AS 581.48 578.99 Vietnam VNI 766.56 775.73 S&P Europe 350 (Eur) 1543.60 1536.95
Croatia CROBEX 1871.97 1871.97
Ireland ISEQ Overall 6922.24 6875.21 Norway Oslo All Share 768.54 762.61 Switzerland SMI Index 8943.84 8886.95 S&P Global 1200 ($) 2137.08 2131.37
Israel Tel Aviv 100 12.89 12.93 Pakistan KSE 100 46273.81 45222.15 Stoxx 50 (Eur) 3130.77 3116.31
(c) Closed. (u) Unavaliable. † Correction. ♥ Subject to official recalculation. For more index coverage please see www.ft.com/worldindices. A fuller version of this table is available on the ft.com research data archive.

STOCK MARKET: BIGGEST MOVERS UK MARKET WINNERS AND LOSERS

AMERICA LONDON EURO MARKETS TOKYO Jul 10 %Chg %Chg Jul 10 %Chg %Chg Jul 10 %Chg %Chg Jul 10 %Chg %Chg
ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's FTSE 100 price(p) week ytd FTSE 250 price(p) week ytd FTSE SmallCap price(p) week ytd Industry Sectors price(p) week ytd
traded m's price change traded m's price change traded m's price change traded m's price change Winners Winners Winners Winners
Tesla 26.3 316.73 3.51 Hsbc Holdings 184.9 738.30 11.70 Nestle N 295.5 75.29 0.59 Toyota Motor 468.1 6187.00 30.00 Worldpay 373.00 33.3 57.8 Computacenter 875.00 10.9 11.6 Cape 262.50 44.6 81.3 Nonlife Insurance 3144.37 2.6 14.3
Nvidia 19.1 151.58 4.82 Rio Tinto 163.6 3398.50 -12.29 Santander 280.9 5.81 0.00 Softbank . 459.8 8928.00 -6.00 Barratt Developments 591.50 5.2 27.7 Virgin Money Holdings (uk) 297.10 10.1 -1.7 Novae 703.50 23.4 2.8 Food & Drug Retailers 2855.93 1.4 -7.3
Amazon.com 17.6 996.70 17.94 Shire 132.2 4186.50 -115.75 Roche Gs 251.9 219.07 -0.64 Mitsubishi Ufj Fin,. 387.5 749.30 -4.70 Persimmon 2375.00 4.8 33.7 Intermediate Capital 906.50 6.6 29.8 Oxford Biomedica 10.75 17.8 160.6 Aerospace & Defense 5327.98 1.4 15.0
Apple 11.4 144.85 0.67 British American Tobacco 131.5 5210.00 -14.77 Novartis N 240.5 72.20 0.59 Kddi 326.7 2909.00 -80.50 Easyjet 1414.00 4.8 41.5 Thomas Cook 94.85 5.9 7.5 Fenner 336.00 15.3 41.8 Banks 4513.54 1.1 9.2
Facebook 10.7 153.38 1.94 Bae Systems 116.7 630.00 3.74 Allianz Se Na O.n. 232.9 180.00 1.25 Canon . 266.7 3748.00 96.00 Int Consolidated Airlines S.a. 633.50 4.4 43.8 Beazley 512.50 5.3 32.7 Empiric Student Property 111.50 14.0 19.9 General Financial 10507.33 1.1 12.9
Costco Wholesale 7.0 151.85 -2.26 Unilever 104.0 4204.50 20.75 Intesa Sanpaolo 227.0 2.86 0.02 Sumitomo Mitsui Fin,. 253.6 4373.00 1.00 Rolls-royce Holdings 932.00 4.2 39.8 Aveva 2022.00 4.9 9.0 Mj Gleeson 678.00 8.9 26.2 Mining 15321.82 1.0 3.6
Alphabet 6.2 947.36 6.55 Bhp Billiton 102.9 1263.50 -6.55 Unicredit 202.1 17.52 0.02 Sony 235.3 4318.00 73.00 Rsa Insurance 643.00 3.6 9.0 Berkeley Holdings (the) 3330.00 4.7 18.7 Games Workshop 1290.00 7.5 80.8 Industrial Engineering 11396.52 0.9 11.1
Alphabet 5.2 925.09 6.50 Prudential 101.4 1798.50 3.93 Unilever Dr 192.0 48.46 0.40 Tokyo Electron 214.6 15580.00 350.00 Standard Chartered 812.40 3.5 22.5 Countryside Properties 356.60 4.6 43.8 Puretech Health 131.63 7.1 13.1 Food Producers 8363.29 0.8 4.1
Microsoft 4.7 69.97 0.51 Royal Dutch Shell 100.0 2059.00 10.07 Total 182.5 42.76 0.30 Mizuho Fin,. 204.3 204.60 -1.30 London Stock Exchange 3731.00 3.1 28.3 Wizz Air Holdings 2564.00 4.5 40.5 Xaar 399.25 6.5 -0.5 Household Goods 18543.65 0.6 15.7
Bank Of America 4.7 24.77 -0.07 Wpp 93.1 1567.00 4.47 Telefonica 172.9 9.01 -0.04 Fuji Heavy Industries 182.9 4118.00 32.00 Taylor Wimpey 180.00 2.9 17.2 Lancashire Holdings 736.00 4.3 5.9 Huntsworth 64.50 5.5 70.8 Mobile Telecommunications 4942.73 0.6 9.4
Tesco 171.05 2.4 -17.2 Just Eat 673.50 3.7 15.8 Foxtons 96.25 5.1 -3.9 Beverages 18366.65 0.6 9.9
BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's
Schroders 3225.00 2.3 6.6 Bellway 3060.00 3.5 23.5 Treatt 468.00 4.3 87.3 Real Estate Investment Trusts 2936.33 0.6 0.9
price change chng% price change chng% price change chng% price change chng%
Ups Ups Ups Ups Losers Losers Losers Losers
Frontier Communications 16.21 15.15 1429.69 Worldpay 373.00 57.56 15.62 A.p. M__ller - M__rsk B A/s 1842.23 69.92 3.95 Mitsui O.s.k.lines, 356.00 17.00 5.01 Convatec 304.20 -5.1 29.7 Carillion 117.10 -34.4 -47.9 Ophir Energy 74.50 -11.0 -22.1 Health Care Equip.& Services 8020.09 -2.4 9.5
Liberty Global 24.30 2.54 11.67 Sophos 453.70 15.18 3.37 A.p. M__ller - M__rsk A A/s 1738.69 63.20 3.77 Taiyo Yuden Co., 1827.00 72.00 4.10 Johnson Matthey 2775.00 -4.2 -12.8 Nostrum Oil & Gas 444.00 -12.3 15.6 Hss Hire 56.50 -9.5 -32.3 Chemicals 12648.94 -2.2 2.9
Liberty Global 24.73 2.43 10.90 hcape 776.50 17.53 2.31 Alfa Laval Ab 18.65 0.56 3.11 Tosoh 1219.00 41.00 3.48 Fresnillo 1430.00 -3.6 15.7 Hochschild Mining 254.80 -6.8 16.8 Premier Oil 47.50 -6.9 -35.8 Oil Equipment & Services 11780.23 -2.1 -27.7
Mosaic (the) 24.04 1.44 6.37 Jpmorgan Indian Investment Trust 740.50 15.30 2.12 Cnh Industrial 10.37 0.26 2.57 Nichirei 3230.00 105.00 3.36 Next 3693.00 -3.3 -24.5 Aggreko 851.00 -6.7 -7.3 Hollywood Bowl 159.75 -6.2 -4.4 Oil & Gas Producers 7491.40 -1.7 -11.8
Cf Industries Holdings 29.27 1.38 4.95 Wizz Air Holdings 2564.00 45.90 1.83 Arcelormittal Sa 20.55 0.47 2.34 Konami 6160.00 200.00 3.36 Wpp 1567.00 -2.5 -13.4 Balfour Beatty 257.70 -6.2 -5.9 Connect 106.00 -6.0 -30.6 Fixed Line Telecommunication 3332.71 -1.3 -20.3
Anglo American 1068.00 -2.3 -10.3 Essentra 540.50 -6.0 17.5 Sportech 100.50 -5.9 14.4 Media 7569.98 -1.2 -3.5
Downs Downs Downs Downs
Burberry 1620.00 -2.3 8.1 Domino's Pizza 266.50 -6.0 -26.1 Nanoco 39.25 -5.9 -11.7 Gas Water & Multiutilities 5790.36 -1.2 -4.2
Best Buy Co 53.98 -3.89 -6.72 Carillion 117.10 -69.04 -35.94 Seadrill 0.30 -0.01 -3.70 Kddi 2909.00 -80.50 -2.69
National Grid 931.10 -2.1 -10.1 Pershing Square Holdings Ltd 1108.00 -5.2 - Speedy Hire 55.00 -5.8 7.6 Automobiles & Parts 7643.14 -1.0 -1.7
Gap 21.28 -1.36 -6.01 Dunelm 581.50 -37.28 -6.01 Oci 18.77 -0.45 -2.32 Toshiba 255.60 -6.30 -2.41
Whitbread 3814.00 -2.1 1.7 Electra Private Equity 1668.00 -5.2 -65.3 Porvair 522.50 -5.8 19.1 Industrial Metals 2552.27 -0.9 13.3
Macy's 21.46 -1.22 -5.38 Aldermore 216.00 -8.90 -3.96 Telecom Italia R 0.63 -0.01 -2.32 Dentsu . 5130.00 -110.00 -2.10
Mediclinic Int 721.00 -2.1 -6.3 Petrofac 437.20 -5.1 -49.7 Fuller, Smith & Turner 1045.00 -5.6 4.6 Pharmaceuticals & Biotech. 13950.41 -0.8 3.7
Kohl's 36.33 -1.91 -5.00 Sanne 640.50 -25.50 -3.83 Hennes & Mauritz Ab , H & M Ser. B 21.71 -0.44 -1.97 Nippon Telegraph And Telephone 5230.00 -64.00 -1.21
Ashtead 1567.00 -2.1 -1.8 Ocado 276.10 -4.4 4.7 Up Global Sourcing Holdings 193.50 -5.3 - Tobacco 57177.32 -0.6 8.2
Autonation 40.02 -1.78 -4.26 Euromoney Institutional Investor 1076.00 -36.14 -3.26 Telecom Italia 0.79 -0.01 -1.80 Ntt Docomo,. 2622.50 -27.50 -1.04
Smith & Nephew 1303.00 -1.8 7.1 Ashmore 337.00 -4.3 18.9 Findel 195.00 -5.0 1.6 Industrial Transportation 3061.28 -0.5 0.3
Based on the constituents of the S&P500 and the Nasdaq 100 index Based on the constituents of the FTSE 350 index Based on the constituents of the FTSEurofirst 300 Eurozone index Based on the constituents of the Nikkei 225 index
Based on last week's performance. †Price at suspension.

CURRENCIES
DOLLAR EURO POUND DOLLAR EURO POUND DOLLAR EURO POUND DOLLAR EURO POUND
Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's
Jul 10 Currency Mid Change Mid Change Mid Change Jul 10 Currency Mid Change Mid Change Mid Change Jul 10 Currency Mid Change Mid Change Mid Change Jul 10 Currency Mid Change Mid Change Mid Change
Argentina Argentine Peso 16.9850 0.0100 19.3433 0.0072 21.8479 -0.0175 Indonesia Indonesian Rupiah 13397.5000 -5.0000 15257.7414 -8.9913 17233.2975 -30.4056 Poland Polish Zloty 3.7191 -0.0025 4.2355 -0.0037 4.7839 -0.0098 ..Three Month 0.7778 0.0011 0.8852 0.0010 - -
Australia Australian Dollar 1.3167 0.0016 1.4996 0.0015 1.6937 -0.0002 Israel Israeli Shekel 3.5518 0.0144 4.0449 0.0155 4.5686 0.0121 Romania Romanian Leu 4.0133 -0.0039 4.5705 -0.0054 5.1623 -0.0122 ..One Year 0.7789 0.0011 0.8846 0.0011 - -
Bahrain Bahrainin Dinar 0.3773 - 0.4297 -0.0001 0.4853 -0.0007 Japan Japanese Yen 114.1950 0.2050 130.0508 0.2054 146.8897 0.0597 Russia Russian Ruble 60.2688 -0.2750 68.6370 -0.3280 77.5241 -0.4620 United States United States Dollar - - 1.1388 -0.0002 1.2863 -0.0018
Bolivia Bolivian Boliviano 6.9100 - 7.8694 -0.0017 8.8884 -0.0124 ..One Month 114.1948 0.2047 130.0508 0.2054 146.8897 0.0596 Saudi Arabia Saudi Riyal 3.7501 0.0000 4.2709 -0.0010 4.8238 -0.0068 ..One Month - - 1.1387 -0.1493 1.2864 -0.0018
Brazil Brazilian Real 3.2623 -0.0313 3.7153 -0.0365 4.1963 -0.0462 ..Three Month 114.1945 0.2040 130.0509 0.2055 146.8895 0.0593 Singapore Singapore Dollar 1.3853 0.0034 1.5776 0.0035 1.7819 0.0019 ..Three Month - - 1.1383 -0.1492 1.2867 -0.0018
Canada Canadian Dollar 1.2877 -0.0014 1.4664 -0.0019 1.6563 -0.0041 ..One Year 114.1929 0.2007 130.0510 0.2058 146.8897 0.0586 South Africa South African Rand 13.4388 0.0063 15.3047 0.0038 17.2863 -0.0160 ..One Year - - 1.1365 -0.1492 1.2878 -0.0018
Chile Chilean Peso 666.9750 0.0350 759.5834 -0.1245 857.9339 -1.1484 Kenya Kenyan Shilling 103.9500 0.0500 118.3833 0.0313 133.7115 -0.1216 South Korea South Korean Won 1149.4000 -4.9000 1308.9924 -5.8650 1478.4803 -8.3684 Venezuela Venezuelan Bolivar Fuerte 10.0028 0.0328 11.3916 0.0348 12.8666 0.0243
China Chinese Yuan 6.8017 0.0018 7.7461 0.0004 8.7491 -0.0099 Kuwait Kuwaiti Dinar 0.3033 0.0001 0.3454 0.0000 0.3901 -0.0004 Sweden Swedish Krona 8.4392 0.0041 9.6110 0.0025 10.8554 -0.0099 Vietnam Vietnamese Dong 22750.0000 5.5000 25908.8165 0.6712 29263.4678 -33.6933
Colombia Colombian Peso 3065.3500 -27.6550 3490.9692 -32.2578 3942.9782 -41.1077 Malaysia Malaysian Ringgit 4.2965 -0.0020 4.8931 -0.0033 5.5266 -0.0103 Switzerland Swiss Franc 0.9668 0.0023 1.1010 0.0024 1.2436 0.0012 European Union Euro 0.8781 0.0002 - - 1.1295 -0.0013
Costa Rica Costa Rican Colon 572.0650 0.1900 651.4953 0.0754 735.8507 -0.7789 Mexico Mexican Peson 17.9679 -0.1951 20.4627 -0.2267 23.1122 -0.2835 Taiwan New Taiwan Dollar 30.5680 -0.0320 34.8123 -0.0440 39.3198 -0.0959 ..One Month 0.8779 0.0002 - - 1.1294 -0.0013
Czech Republic Czech Koruna 22.9021 0.0147 26.0820 0.0111 29.4590 -0.0220 New Zealand New Zealand Dollar 1.3761 0.0009 1.5671 0.0007 1.7701 -0.0013 Thailand Thai Baht 34.0960 - 38.8302 -0.0084 43.8579 -0.0610 ..Three Month 0.8775 0.0002 - - 1.1293 -0.0013
Denmark Danish Krone 6.5300 0.0016 7.4366 0.0003 8.3995 -0.0096 Nigeria Nigerian Naira 314.7500 - 358.4525 -0.0776 404.8648 -0.5632 Tunisia Tunisian Dinar 2.4397 0.0046 2.7784 0.0046 3.1382 0.0015 ..One Year 0.8757 0.0002 - - 1.1287 -0.0013
Egypt Egyptian Pound 17.8767 0.0297 20.3589 0.0294 22.9949 0.0063 Norway Norwegian Krone 8.3435 -0.0197 9.5020 -0.0245 10.7323 -0.0403 Turkey Turkish Lira 3.6121 -0.0171 4.1136 -0.0204 4.6462 -0.0285
Hong Kong Hong Kong Dollar 7.8131 0.0016 8.8979 -0.0001 10.0500 -0.0119 Pakistan Pakistani Rupee 105.2000 -0.6750 119.8069 -0.7948 135.3194 -1.0577 United Arab Emirates UAE Dirham 3.6730 - 4.1830 -0.0009 4.7246 -0.0066
Hungary Hungarian Forint 270.4878 -0.0065 308.0446 -0.0740 347.9301 -0.4923 Peru Peruvian Nuevo Sol 3.2565 0.0050 3.7087 0.0049 4.1889 0.0006 United Kingdom Pound Sterling 0.7774 0.0011 0.8854 0.0010 - -
India Indian Rupee 64.5338 -0.0675 73.4942 -0.0928 83.0101 -0.2024 Philippines Philippine Peso 50.6900 0.1100 57.7282 0.1128 65.2029 0.0510 ..One Month 0.7776 0.0011 0.8853 0.0010 - -
Rates are derived from WM Reuters Spot Rates and MorningStar (latest rates at time of production). Some values are rounded. Currency redenominated by 1000. The exchange rates printed in this table are also available at www.FT.com/marketsdata
UK SERIES
FTSE ACTUARIES SHARE INDICES www.ft.com/equities FT 30 INDEX FTSE SECTORS: LEADERS & LAGGARDS FTSE 100 SUMMARY
Produced in conjunction with the Institute and Faculty of Actuaries Jul 10 Jul 07 Jul 06 Jul 05 Jul 04 Yr Ago High Low Year to date percentage changes Closing Day's Closing Day's
£ Strlg Day's Euro £ Strlg £ Strlg Year Div P/E X/D Total FT 30 3204.80 3196.40 3198.50 3203.00 3198.00 0.00 3391.10 3060.90 Personal Goods 22.74 Beverages 8.71 NON FINANCIALS Index 2.21 FTSE 100 Price Change FTSE 100 Price Change
Jul 10 chge% Index Jul 07 Jul 06 ago yield% Cover ratio adj Return FT 30 Div Yield 1.53 1.54 1.54 1.53 1.53 0.00 3.93 2.74 Forestry & Paper 20.05 FTSE SmallCap Index 8.66 Mining 2.07 3I Group PLC 904.00 5.50 Marks And Spencer Group PLC 339.00 -5.50
FTSE 100 (100) 7370.03 0.26 6496.46 7350.92 7337.28 6682.86 3.81 0.90 29.12 165.15 6145.61 P/E Ratio net 29.13 29.05 28.95 29.21 29.12 0.00 19.44 14.26 Electronic & Elec Eq 18.52 Tobacco 8.55 Construct & Material 1.73 Admiral Group PLC 2020 -11.00 Mediclinic International PLC 721.00 -10.00
FTSE 250 (250) 19357.41 -0.19 17062.96 19395.14 19369.06 16706.39 2.72 1.65 22.25 293.08 14066.93 FT 30 since compilation: 4198.4 high: 19/07/1999; low49.4 26/06/1940Base Date: 1/7/35 Household Goods & Ho 15.51 Financials 8.43 Real Est Invest & Tr 0.71 Anglo American PLC 1068 17.00 Merlin Entertainments PLC 473.30 0.10
FTSE 250 ex Inv Co (207) 20696.08 -0.26 18242.96 20750.68 20721.41 17932.44 2.77 1.68 21.40 320.00 15344.37 FT 30 hourly changes Aerospace & Defense 14.07 Banks 8.27 Consumer Services 0.65 Antofagasta PLC 824.00 8.50 Micro Focus International PLC 2202 -1.00
FTSE 350 (350) 4081.98 0.18 3598.14 4074.57 4067.37 3671.63 3.62 1.00 27.65 86.42 6838.47 8 9 10 11 12 13 14 15 16 High Low Nonlife Insurance 13.63 Leisure Goods 8.21 Tech Hardware & Eq -0.18 Ashtead Group PLC 1567 23.00 Mondi PLC 2021 21.00
FTSE 350 ex Investment Trusts (306) 4047.29 0.18 3567.56 4040.01 4032.86 3646.87 3.66 0.99 27.55 86.61 3492.87 3196.4 3206.6 3204.7 3204.5 3202.4 3197.5 3199.1 3203.2 3209.7 3209.8 3196.4 Industrial Metals & 13.02 Life Insurance 7.70 Automobiles & Parts -1.27 Associated British Foods PLC 2966 -4.00 Morrison (Wm) Supermarkets PLC 242.80 1.70
FTSE 350 Higher Yield (118) 3794.64 0.20 3344.86 3787.08 3780.99 3481.15 5.09 0.72 27.12 106.54 6656.78 FT30 constituents and recent additions/deletions can be found at www.ft.com/ft30 Financial Services 12.93 Software & Comp Serv 7.59 Telecommunications -1.85 Astrazeneca PLC 5130 - National Grid PLC 931.10 -3.60
FTSE 350 Lower Yield (232) 3978.53 0.16 3506.95 3972.07 3964.36 3496.05 2.01 1.76 28.26 51.44 4361.07 Consumer Goods 11.85 FTSE 250 Index 7.29 Media -3.49 Aviva PLC 536.00 1.00 Next PLC 3693 -73.00
FTSE SmallCap (289) 5582.33 -0.12 4920.65 5588.79 5581.90 4573.53 2.77 1.36 26.59 80.79 7999.12 Industrial Eng 10.98 Technology 6.66 Gas Water & Multi -3.84
FTSE SmallCap ex Inv Co (154) 4908.16 -0.47 4326.39 4931.37 4913.62 3996.87 2.94 1.68 20.28 76.21 7396.02 FX: EFFECTIVE INDICES Industrials 9.43 Health Care 4.93 Utilities -4.18
Babcock International Group PLC 864.50 -9.50 Old Mutual PLC 191.40 -0.30
Bae Systems PLC 630.00 12.50 Paddy Power Betfair PLC 8000 -75.00
FTSE All-Share (639) 4027.69 0.17 3550.28 4020.82 4013.80 3611.02 3.59 1.01 27.61 84.28 6822.24
Jul 07 Jul 06 Mnth Ago Jul 10 Jul 07 Mnth Ago Travel & Leisure 9.41 Pharmace & Biotech 4.42 General Retailers -5.01 Barclays PLC 207.70 -0.45 Pearson PLC 690.50 5.00
FTSE All-Share ex Inv Co (460) 3971.70 0.17 3500.93 3965.08 3957.92 3572.00 3.65 1.00 27.36 84.54 3483.47 Health Care Eq & Srv 9.35 Food Producers 3.83 Electricity -5.71 Barratt Developments PLC 591.50 2.00 Persimmon PLC 2375 9.00
FTSE All-Share ex Multinationals (577) 1213.20 -0.03 886.34 1213.53 1212.34 1076.54 3.16 1.26 25.08 22.46 2174.60 Australia 94.51 93.83 92.61 Sweden 78.65 78.16 76.86 Equity Invest Instr 9.17 FTSE All{HY-}Share Index 3.81 Food & Drug Retailer -7.38 Bhp Billiton PLC 1263.5 21.00 Provident Financial PLC 2330 -42.00
FTSE Fledgling (97) 10022.10 0.00 8834.17 10022.01 10011.77 7632.98 2.98 1.39 24.05 160.53 18823.63 Canada 90.94 90.48 86.93 Switzerland 160.24 175.20 161.37 Real Est Invest & Se 9.08 Chemicals 3.12 Oil & Gas Producers -11.82 BP PLC 443.75 -0.25 Prudential PLC 1798.5 18.50
FTSE Fledgling ex Inv Co (47) 14129.46 -0.18 12454.69 14154.69 14127.52 9726.98 3.94 1.95 13.01 246.39 25909.55 Denmark 109.22 108.92 108.98 UK 77.00 77.36 77.43 Support Services 9.03 Basic Materials 2.98 Oil & Gas -12.19 British American Tobacco PLC 5210 -9.00 Randgold Resources LD 6765 100.00
FTSE All-Small (386) 3884.66 -0.11 3424.21 3888.94 3884.19 3170.74 2.78 1.36 26.46 56.50 7146.18 Japan 134.12 134.75 140.49 USA 102.14 101.76 102.39 Mobile Telecomms 8.84 FTSE 100 Index 2.91 Fixed Line Telecomms -20.27 British Land Company PLC 609.00 1.00 Reckitt Benckiser Group PLC 7671 3.00
FTSE All-Small ex Inv Co Index (201) 3681.93 -0.46 3245.51 3698.95 3685.86 2977.80 2.97 1.69 19.88 57.44 7029.65 New Zealand 121.13 120.45 119.10 Euro 92.57 91.37 91.32 Industrial Transport 2.47 Oil Equipment & Serv -24.62 Bt Group PLC 288.40 1.20 Relx PLC 1635 3.00
FTSE AIM All-Share Index (804) 958.70 -0.03 845.07 959.02 956.05 715.40 1.69 0.80 73.47 6.98 1055.69 Norway 86.75 86.58 86.36
Bunzl PLC 2244 -12.00 Rentokil Initial PLC 273.90 2.20
FTSE Sector Indices Source: Bank of England. New Sterling ERI base Jan 2005 = 100. Other indices base average 1990 = 100. Burberry Group PLC 1620 10.00 Rio Tinto PLC 3398.5 36.50
Oil & Gas (17) 7834.47 -0.12 6905.85 7843.68 7877.37 8134.08 6.61 0.40 37.75 259.92 7254.65 Index rebased 1/2/95. for further information about ERIs see www.bankofengland.co.uk Carnival PLC 5125 -30.00 Rolls-Royce Holdings PLC 932.00 -4.50
Oil & Gas Producers (10) 7528.31 -0.13 6635.97 7538.10 7571.72 7795.46 6.65 0.41 36.47 251.49 7216.87 Centrica PLC 206.70 -1.00 Royal Bank Of Scotland Group PLC 256.40 -2.30
Oil Equipment Services & Distribution (7)12606.02 0.38 11111.82 12557.78 12530.02 14503.57 5.01 -0.21 -95.04 306.86 9839.96 FTSE GLOBAL EQUITY INDEX SERIES Coca-Cola Hbc AG 2229 8.00 Royal Dutch Shell PLC 2059 -1.50
Basic Materials (30) 5259.76 1.10 4636.32 5202.37 5217.26 4079.18 2.38 1.07 39.36 95.40 5379.18 Compass Group PLC 1581 4.00 Royal Dutch Shell PLC 2041 -3.00
Chemicals (8) 13494.23 -0.06 11894.75 13502.24 13554.20 12383.35 2.31 2.29 18.89 219.92 12121.22 Jul 7 No of US $ Day Mth YTD Total
YTD Gr Div Jul 7 No of US $ Day Mth YTD Total YTD Gr Div Convatec Group PLC 304.20 2.70 Royal Mail PLC 414.50 4.20
Forestry & Paper (1) 23753.89 1.05 20938.32 23507.06 23377.77 16525.46 2.39 3.36 12.48 375.43 25911.93 Regions & countries stocks indices % % % retn
% Yield Sectors stocks indices % % % retn % Yield Crh PLC 2779 7.00 Rsa Insurance Group PLC 643.00 8.00
Industrial Metals & Mining (2) 2749.20 0.46 2423.33 2736.54 2765.00 1434.93 0.47 21.53 9.94 13.01 2412.23 FTSE Global All Cap 7734 525.53 0.2 -0.8 11.39.7 748.26
2.4 Oil & Gas Producers 109 314.80 -0.5 -0.5 -10.4 518.06 -8.8 4.0 Croda International PLC 3849 -1.00 Sage Group PLC 676.00 4.50
Mining (19) 14669.17 1.24 12930.43 14489.08 14534.27 11254.47 2.41 0.77 54.14 273.28 7852.24 FTSE Global Large Cap 1441 462.39 0.1 -0.8 11.69.9 675.33
2.5 Oil Equipment & Services 28 303.91 -0.2 -0.2 -13.1 439.70 -12.6 3.4 Dcc PLC 6945 50.00 Sainsbury (J) PLC 246.10 -0.30
FTSE Global Mid Cap 1648 707.93 0.2 -0.8 11.29.9 956.38
2.1 Basic Materials 259 461.10 -0.2 -0.2 9.2 704.51 11.0 2.4 Diageo PLC 2284 23.00 Schroders PLC 3225 68.00
Industrials (111) 5401.34 0.14 4761.11 5393.90 5374.31 4557.65 2.28 0.87 50.71 71.12 5582.39
Construction & Materials (16) 7009.87 -0.22 6178.98 7025.01 7007.85 5459.64 2.13 0.30 155.06 106.52 7452.36 FTSE Global Small Cap 4645 744.23 0.4 -0.2 8.3 973.16
9.4 1.9 Chemicals 122 700.39 -0.1 -0.1 11.1 1076.05 12.9 2.5 Direct Line Insurance Group PLC 363.70 0.30 Scottish Mortgage Investment Trust PLC 397.10 1.80
Aerospace & Defense (9) 5522.29 0.54 4867.73 5492.79 5425.67 4654.35 2.18 -2.15 -21.40 63.69 5930.65 FTSE All-World 3089 306.60 0.1 -0.8 11.59.9 461.12
2.4 Forestry & Paper 16 272.63 -0.2 -0.2 14.5 464.06 17.1 3.2 Easyjet PLC 1414 -5.00 Segro PLC 483.00 1.60
General Industrials (6) 5031.82 0.03 4435.39 5030.48 4980.26 3881.51 2.53 1.35 29.34 56.24 5718.19 FTSE World 2542 543.12 0.2 -0.8 11.49.8 1096.48
2.4 Industrial Metals & Mining 70 388.80 -0.3 -0.3 7.4 591.24 8.7 2.4 Experian PLC 1573 7.00 Severn Trent PLC 2190 -18.00
Electronic & Electrical Equipment (10) 7367.09 0.46 6493.87 7333.31 7292.06 5894.38 1.72 1.95 29.86 54.61 6716.97 FTSE Global All Cap ex UNITED KINGDOM In 7408 545.10 0.2 -0.7 11.39.8 764.33
2.3 Mining 51 536.10 -0.5 -0.5 4.5 815.25 6.3 2.2 Fresnillo PLC 1430 10.00 Shire PLC 4186.5 -138.00
Industrial Engineering (12) 12535.26 0.87 11049.45 12427.09 12377.34 9434.95 2.12 1.42 33.11 171.69 15308.77 FTSE Global All Cap ex USA 5840 474.02 -0.4 -1.3 11.6 723.09
13.7 2.9 Industrials 546 374.12 0.2 0.2 12.9 539.07 14.3 2.0 G4S PLC 327.00 -0.50 Sky PLC 996.00 6.00
Industrial Transportation (7) 4862.07 0.43 4285.76 4841.43 4906.02 4434.05 4.11 1.20 20.34 135.28 4389.12 FTSE Global All Cap ex JAPAN 6447 538.04 0.3 -0.5 11.59.9 773.28
2.4 Construction & Materials 114 521.84 -0.1 -0.1 13.3 786.48 14.9 2.0 Gkn PLC 326.90 -0.60 Smith & Nephew PLC 1303 -2.00
Support Services (51) 7568.44 -0.04 6671.35 7571.77 7566.98 6688.89 2.24 1.86 24.03 98.66 7883.89 FTSE Global All Cap ex Eurozone 7082 541.33 0.2 -0.7 10.49.0 755.76
2.3 Aerospace & Defense 26 665.88 0.8 0.8 17.9 950.91 19.3 2.0 Glaxosmithkline PLC 1616 1.50 Smiths Group PLC 1624 -1.00
FTSE Developed 2099 493.26 0.2 -0.7 11.39.7 707.98
2.4 General Industrials 57 243.12 0.1 0.1 3.3 378.22 4.8 2.5 Glencore PLC 301.05 3.80 Smurfit Kappa Group PLC 2380 -
Consumer Goods (42) 22059.02 0.20 19444.34 22015.78 21880.44 20635.90 3.07 1.75 18.62 404.59 16322.64
FTSE Developed All Cap 5670 518.64 0.2 -0.7 11.09.5 735.45
2.3 Electronic & Electrical Equipment 71 409.74 -0.1 -0.1 19.2 540.46 20.2 1.6 Hammerson PLC 575.00 4.00 Sse PLC 1470 -4.00
Automobiles & Parts (1) 7682.30 -0.18 6771.71 7696.40 7705.80 6566.03 2.71 1.89 19.55 138.65 7405.14
FTSE Developed Large Cap 912 455.20 0.2 -0.7 11.39.7 663.28
2.5 Industrial Engineering 101 738.53 0.0 0.0 17.2 1049.46 18.8 2.0 Hargreaves Lansdown PLC 1285 8.00 St. James's Place PLC 1194 -
Beverages (5) 18396.67 0.92 16216.10 18228.21 18139.38 17254.58 2.61 1.52 25.27 202.35 12977.29
FTSE Developed Europe Large Cap 227 359.21 -0.2 -1.1 12.5 602.98
15.4 3.4 Industrial Transportation 99 644.11 0.3 0.3 14.4 928.50 15.9 2.2 HSBC Holdings PLC 738.30 10.10 Standard Chartered PLC 812.40 9.60
Food Producers (10) 8395.78 0.10 7400.62 8387.44 8420.24 8270.08 2.01 2.13 23.39 92.91 7258.06
FTSE Developed Europe Mid Cap 315 573.60 -0.2 -1.7 16.5 862.62
18.9 2.7 Support Services 78 327.80 0.4 0.4 11.0 451.80 12.3 1.8 Imperial Brands PLC 3435 -19.50 Standard Life PLC 407.90 2.30
Household Goods & Home Construction (16)15515.24 0.16 13676.21 15490.78 15404.38 13683.84 3.18 1.98 15.92 335.31 11035.74
FTSE Dev Europe Small Cap 708 814.41 0.1 -1.4 17.4 1185.66
19.6 2.4 Consumer Goods 431 471.22 0.0 0.0 12.7 697.64 14.3 2.4 Informa PLC 660.00 2.00 Taylor Wimpey PLC 180.00 1.60
Leisure Goods (2) 6055.05 0.46 5337.34 6027.43 5958.37 4728.77 6.10 0.84 19.51 158.08 5512.42
FTSE North America Large Cap 290 519.02 0.6 -0.3 8.5 706.88
9.7 2.1 Automobiles & Parts 106 388.53 -0.1 -0.1 5.6 556.78 7.5 2.7 Intercontinental Hotels Group PLC 4293 30.00 Tesco PLC 171.05 0.55
Personal Goods (6) 31567.07 0.56 27825.40 31389.78 31091.37 27011.11 2.64 3.03 12.51 442.96 21331.91
FTSE North America Mid Cap 387 764.67 0.7 0.3 6.5 969.57
7.4 1.7 Beverages 46 614.52 0.2 0.2 11.4 921.96 12.8 2.6 International Consolidated Airlines Group S.A. 633.50 5.50 Tui AG 1134 5.00
Tobacco (2) 57177.42 -0.27 50400.14 57333.45 56913.79 57431.75 3.59 1.24 22.53 1304.93 36995.59
FTSE North America Small Cap 1435 783.56 0.8 0.6 5.0 965.26
5.8 1.6 Food Producers 107 601.56 -0.4 -0.4 5.7 915.65 7.4 2.3 Intertek Group PLC 4223 28.00 Unilever PLC 4204.5 26.50
Health Care (22) 10300.25 -0.62 9079.36 10364.16 10303.47 10393.92 3.39 0.72 41.12 210.03 7954.40
FTSE North America 677 346.71 0.6 -0.2 8.2 483.31
9.3 2.0 Household Goods & Home Construction 49 455.61 0.4 0.4 12.7 668.87 14.3 2.4 Itv PLC 177.50 0.90 United Utilities Group PLC 864.00 -6.00
Health Care Equipment & Services (10) 8142.23 -0.10 7177.12 8150.18 8150.25 8130.47 1.26 2.47 32.12 71.49 7070.93
FTSE Developed ex North America 1422 250.77 -0.5 -1.6 12.1 411.40
14.3 2.9 Leisure Goods 31 214.05 -0.2 -0.2 33.8 281.35 34.8 1.3 Johnson Matthey PLC 2775 -9.00 Vodafone Group PLC 219.95 1.20
Pharmaceuticals & Biotechnology (12)13858.34 -0.68 12215.70 13953.40 13861.49 14010.88 3.66 0.64 42.62 300.97 9540.81
FTSE Japan Large Cap 180 348.06 -1.2 -3.4 2.1 Personal Goods
6.8 450.51
8.0 80 682.82 0.1 0.1 18.1 956.03 19.4 1.9 Kingfisher PLC 306.50 1.60 Whitbread PLC 3814 -29.00
Consumer Services (93) 4930.21 -0.09 4345.83 4934.66 4940.11 4548.27 2.78 1.92 18.74 85.59 4647.01 FTSE Japan Mid Cap 313 569.50 -1.3 -4.2 10.2 707.47
11.2 1.7 Tobacco 12 1476.79 -0.1 -0.1 16.6 3051.96 18.7 3.4
Food & Drug Retailers (7) 2982.01 0.13 2628.55 2978.21 2989.47 2681.83 1.44 2.15 32.29 31.26 3495.50 Land Securities Group PLC 1020 6.00 Wolseley PLC 4700 20.00
FTSE Global wi JAPAN Small Cap 794 626.00 -1.4 -3.0 12.2 805.08
13.4 1.8 Health Care 183 481.95 0.2 0.2 13.9 694.42 15.4 2.0 Legal & General Group PLC 264.10 -3.00 Worldpay Group PLC 373.00 4.60
General Retailers (28) 2394.24 -0.66 2110.45 2410.06 2407.00 2422.84 3.24 2.10 14.68 45.50 2751.28
FTSE Japan 493 147.55 -1.2 -3.6 2.0 Health Care Equipment & Services
7.5 214.29
8.7 68 822.29 0.6 0.6 19.5 958.81 20.3 1.1 Lloyds Banking Group PLC 66.56 0.03 Wpp PLC 1567 -2.00
Media (22) 7666.82 0.11 6758.07 7658.23 7738.03 7484.58 3.15 1.75 18.14 140.24 4747.98
FTSE Asia Pacific Large Cap ex Japan 551 656.12 -0.4 -0.7 15.8 1030.88
17.7 2.9 Pharmaceuticals & Biotechnology 115 341.95 0.1 0.1 11.7 515.16 13.5 2.4 London Stock Exchange Group PLC 3731 -2.00
Travel & Leisure (36) 9329.82 -0.07 8223.95 9336.63 9282.79 7948.89 2.67 1.95 19.21 166.10 8880.13
FTSE Asia Pacific Mid Cap ex Japan 413 882.61 -0.4 -0.3 16.0 1326.01
17.4 2.7 Consumer Services 382 427.23 0.1 0.1 8.3 570.67 9.3 1.7
Telecommunications (6) 3331.39 0.43 2936.52 3317.04 3306.91 3796.88 5.56 -0.01 -3194.6 94.42 3765.20 FTSE Asia Pacific Small Cap ex Japan 1451 544.40 -0.3 -1.2 12.0 804.62
13.2 2.6 Food & Drug Retailers 55 282.65 -0.2 -0.2 -0.1 394.11 1.2 2.1
0
Fixed Line Telecommunications (4) 3398.48 0.33 2995.66 3387.16 3391.58 4610.01 5.04 1.27 15.64 7.92 3071.13
FTSE Asia Pacific Ex Japan
FTSE Emerging All Cap
964 519.27
2064 704.92
-0.4
-0.4
-0.6
-1.5
15.8 866.36
17.7 2.9 General Retailers
12.6 1053.29
14.5 2.9 Media
121 585.01
79 323.78
0.2
-0.2
0.2
-0.2
7.4 759.98
6.5 434.09
8.3
7.5
1.5
1.7
UK STOCK MARKET TRADING DATA
Mobile Telecommunications (2) 4935.25 0.47 4350.27 4911.94 4887.87 5170.47 5.78 -0.48 -36.35 194.42 5064.92 FTSE Emerging Large Cap 529 665.27 -0.4 -1.7 12.4 1001.95
14.4 2.9 Travel & Leisure 127 444.98 0.5 0.5 16.9 601.25 18.1 1.7 Jul 10 Jul 07 Jul 06 Jul 05 Jul 04 Yr Ago
Utilities (7) 8216.53 -0.42 7242.62 8251.39 8156.06 9493.61 5.07 1.67 11.78 239.18 9422.47 FTSE Emerging Mid Cap 461 889.59 -0.4 -0.9 11.8 1316.92
13.6 2.8 Telecommunication 94 158.24 -0.3 -0.3 -1.7 297.12 0.8 4.2 SEAQ Bargains 8617.00 6996.00 6996.00 6302.00 7223.00 8329.00
Electricity (2) 8671.26 -0.20 7643.45 8688.96 8570.90 9375.64 5.67 2.05 8.61 149.05 12389.94 FTSE Emerging Small Cap 1074 741.39 -0.2 -0.9 14.4 1059.80
15.7 2.6 Fixed Line Telecommuniations 43 128.66 -0.4 -0.4 -8.5 266.16 -5.7 4.8 Order Book Turnover (m) 255.24 277.92 277.92 359.04 221.27 233.47
Gas Water & Multiutilities (5) 7652.55 -0.48 6745.49 7689.75 7605.28 8999.53 4.91 1.55 13.15 249.14 8820.57 FTSE Emerging Europe 115 341.40 -1.1 -1.4 1.5 535.00
4.1 4.3 Mobile Telecommunications 51 173.31 -0.2 -0.2 8.5 291.89 10.5 3.5 Order Book Bargains 890188.00 913307.00 913307.00 1071811.00 1020753.00 754262.00
Financials (295) 5206.05 0.47 4588.97 5181.60 5179.14 3961.32 3.48 1.05 27.41 110.21 4844.61 FTSE Latin America All Cap 234 836.47 0.5 -0.7 10.78.9 1290.12
2.9 Utilities 167 266.38 0.1 0.1 8.1 518.01 10.3 3.7 Order Book Shares Traded (m) 1313.00 1322.00 1322.00 1615.00 1643.00 1303.00
Banks (12) 4457.45 0.77 3929.11 4423.41 4424.83 3090.07 3.96 0.63 39.80 108.61 3315.42 FTSE Middle East and Africa All Cap 242 671.07 -0.7 -4.2 2.0 1048.09
3.9 3.2 Electricity 109 291.96 0.0 0.0 7.3 560.70 9.4 3.7 Total Equity Turnover (£m) 7857.13 8036.98 8036.98 7757.91 7658.96 7574.86
Nonlife Insurance (10) 3591.74 0.36 3166.01 3578.91 3555.36 2949.01 3.00 1.68 19.83 60.87 6341.33 FTSE Global wi UNITED KINGDOM All Cap In 326 335.58 -0.3 -2.3 10.1 3.7 Gas Water & Multiutilities
7.8 562.88 58 280.53 0.2 0.2 9.3 561.14 11.8 3.8 Total Mkt Bargains 1028191.00 1040330.00 1040330.00 1184658.00 1136103.00 850001.00
Life Insurance/Assurance (10) 8675.77 0.30 7647.42 8649.42 8644.86 6279.80 3.57 1.25 22.37 210.60 8522.32 FTSE Global wi USA All Cap 1894 597.22 0.7 -0.2 8.1 789.48
9.2 1.9 Financials 699 234.86 0.0 0.0 10.1 384.32 12.2 2.9 Total Shares Traded (m) 5559.00 4823.00 4823.00 4507.00 4155.00 4493.00
Index- Real Estate Investment & Services (19) 2710.00 -0.44 2388.78 2721.95 2709.42 2382.92 2.59 1.54 25.09 35.28 7250.88 FTSE Europe All Cap 1444 419.87 -0.2 -1.2 13.2 680.52
16.0 3.2 Banks 247 212.11 -0.2 -0.2 10.1 373.08 12.5 3.3 † Excluding intra-market and overseas turnover. *UK only total at 6pm. ‡ UK plus intra-market turnover. (u) Unavaliable.
Real Estate Investment Trusts (34) 2678.26 0.33 2360.81 2669.51 2667.32 2559.99 3.65 1.25 21.92 61.66 3358.30 FTSE Eurozone All Cap 652 412.54 -0.1 -1.1 16.5 674.91
19.3 3.0 Nonlife Insurance 68 253.59 0.5 0.5 9.3 368.88 11.4 2.3 (c) Market closed.
General Financial (31) 8995.16 0.17 7928.96 8980.03 8978.35 7237.26 3.26 2.14 14.35 159.32 10344.47 FTSE RAFI All World 3000 3035 6398.90 -0.1 -0.4 7.2 8461.92
9.1 2.9 Life Insurance 52 223.95 0.1 0.1 11.8 358.28 13.9 2.9
Equity Investment Instruments (179) 9568.81 0.25 8434.61 9544.73 9540.09 7973.14 2.37 1.21 34.75 123.16 5240.98 FTSE RAFI US 1000 997 10488.47 0.5 0.2 3.4 13755.86
4.6 2.4 Financial Services 150 269.90 0.2 0.2 12.0 371.72 13.2 1.9
Non Financials (344) 4693.80 0.06 4137.44 4690.99 4680.60 4438.05 3.63 0.99 27.69 97.79 6958.78 FTSE EDHEC-Risk Efficient All-World 3089 368.90 0.2 -1.2 10.2 513.85
11.6 2.2 Technology 182 228.90 0.9 0.9 17.9 280.61 19.0 1.5 All data provided by Morningstar unless otherwise noted. All elements listed are indicative and believed
Technology (16) 1990.70 0.14 1754.74 1987.87 1977.87 1575.65 2.24 1.38 32.24 28.57 2564.26 FTSE EDHEC-Risk Efficient Developed Europe 542 310.01 -0.1 -2.0 15.8 474.15
18.1 2.6 Software & Computer Services 88 396.28 0.9 0.9 19.1 462.45 19.7 0.9 accurate at the time of publication. No offer is made by Morningstar or the FT. The FT does not warrant nor
Software & Computer Services (12) 2261.00 0.30 1993.00 2254.13 2239.95 1958.53 2.18 1.47 31.22 34.30 3077.38 Oil & Gas 146 335.90 -0.4 -1.9 -10.5 541.16
-9.1 3.9 Technology Hardware & Equipment 94 171.59 0.8 0.8 16.6 219.07 18.1 2.2 guarantee that the information is reliable or complete. The FT does not accept responsibility and will not be
Technology Hardware & Equipment (4) 1969.38 -1.44 1735.95 1998.12 2012.66 1783.51 2.88 0.73 47.57 12.16 2308.84 Alternative Energy 9 110.91 -0.4 -0.4 20.7 150.24 21.7 1.6 liable for any loss arising from the reliance on or use of the listed information.
Real Estate Investment & Services 107 322.12 -0.8 -0.8 16.7 537.51 18.7 2.6 For all queries e-mail ft.reader.enquiries@morningstar.com
Hourly movements 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 High/day Low/day The FTSE Global Equity Series, launched in 2003, contains the FTSE Global Small Cap Indices and broader FTSE Global All Cap Indices (large/mid/small cap) as well as the enhanced FTSE All-World index Series (large/
FTSE 100 7384.95 7374.29 7372.43 7371.18 7365.17 7347.55 7349.59 7369.45 7384.63 7386.28 7344.38 mid cap) - please see www.ftse.com/geis. The trade names Fundamental Index® and RAFI® are registered trademarks and the patented and patent-pending proprietary intellectual property of Research Affiliates, LLC
(US Patent Nos. 7,620,577; 7,747,502; 7,778,905; 7,792,719; Patent Pending Publ. Nos. US-2006-0149645-A1, US-2007-0055598-A1, US-2008-0288416-A1, US-2010- 0063942-A1, WO 2005/076812, WO 2007/078399 A2,
Data provided by Morningstar | www.morningstar.co.uk
FTSE 250 19410.83 19394.69 19365.65 19360.02 19313.03 19296.23 19338.02 19331.65 19362.45 19411.65 19295.11
FTSE SmallCap 5588.51 5592.96 5588.37 5586.16 5582.70 5580.00 5581.79 5583.34 5583.11 5593.39 5579.04 WO 2008/118372, EPN 1733352, and HK1099110). ”EDHEC™” is a trade mark of EDHEC Business School As of January 2nd 2006, FTSE is basing its sector indices on the Industrial Classification Benchmark - please see
FTSE All-Share 4036.28 4031.11 4029.18 4028.38 4024.06 4015.73 4018.10 4026.58 4034.25 4036.28 4015.25 www.ftse.com/icb. For constituent changes and other information about FTSE, please see www.ftse.com. © FTSE International Limited. 2013. All Rights reserved. ”FTSE®” is a trade mark of the London Stock Exchange
Time of FTSE 100 Day's high:14:54:00 Day's Low13:08:15 FTSE 100 2010/11 High: 7547.63(29/05/2017) Low: 7099.15(31/01/2017) Group companies and is used by FTSE International Limited under licence.
Time of FTSE All-Share Day's high:07:03:00 Day's Low12:01:00 FTSE 100 2010/11 High: 4130.15(29/05/2017) Low: 3858.26(31/01/2017)
Further information is available on http://www.ftse.com © FTSE International Limited. 2013. All Rights reserved. ”FTSE®” is a trade mark of the
London Stock Exchange Group companies and is used by FTSE International Limited under licence. † Sector P/E ratios greater than 80 are not shown.
For changes to FTSE Fledgling Index constituents please refer to www.ftse.com/indexchanges. ‡ Values are negative.

UK RIGHTS OFFERS UK COMPANY RESULTS UK RECENT EQUITY ISSUES

Amount Latest Company Turnover Pre-tax EPS(p) Div(p) Pay day Total Issue Issue Stock Close Mkt
Issue paid renun. closing Accrol Group Holdings Pre 135.053 - 9.399 - 9 - 4 - Oct 11 6 - date price(p) Sector code Stock price(p) +/- High Low Cap (£m)
price up date High Low Stock Price p +or- AEW UK REIT Pre 6.099 4.636 5.04 4.83 2 2 Jun 30 4 3.5 06/29 5.00 AIM JAN Jangada Mines PLC 5.50 -0.25 5.75 5.00 1086.3
There are currently no rights offers by any companies listed on the LSE. 06/26 7.25 AIM TXP Touchstone Exploration Inc 8.13 -0.13 9.68 7.50 838.0

Figures in £m. Earnings shown basic. Figures in light text are for corresponding period year earlier. §Placing price. *Intoduction. ‡When issued. Annual report/prospectus available at www.ft.com/ir
For more information on dividend payments visit www.ft.com/marketsdata For a full explanation of all the other symbols please refer to London Share Service notes.
Tuesday 11 July 2017 FINANCIAL TIMES 17

MARKET DATA

FT500: THE WORLD'S LARGEST COMPANIES

52 Week 52 Week 52 Week 52 Week 52 Week 52 Week
Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m
Australia (A$) Finland (€) Japan (¥) Sweden (SKr) AutomData 104.59 -0.55 105.68 85.48 2.16 26.27 46794.65 Lockheed 285.94 0.74 286.95 228.50 2.50 22.45 82763.35
ANZ 28.74 0.12 32.95 23.00 8.22 14.17 64083.79 Nokia 5.49 0.01 5.96 3.66 - - - AstellasPh 1385.5 6.00 1779 1337.5 2.47 12.86 25100.54 AtlasCpcoB 292.70 4.00 309.30 197.80 - - - Avago Tech 239.98 0.36 256.78 151.94 1.26-492.58 97574.1 Lowes 77.30 0.15 86.25 64.87 1.80 24.37 65258.7
BHPBilltn 24.52 -0.07 27.95 18.60 2.42 38.47 59807.31 SampoA 46.60 0.67 47.28 35.57 - - - Bridgestne 4858 64.00 4936 3183 3.04 13.48 34590.41 Ericsson 61.55 0.50 67.75 43.19 - - - BakerHu 57.68 3.17 68.59 43.09 1.22 -12.71 24541.87 Lyondell 84.30 0.37 97.64 71.55 4.15 9.33 33956.46
CmwBkAu 82.81 0.68 87.74 69.22 7.19 15.47 108791.7 France (€) Canon 3748 96.00 3967 2808 4.22 21.84 43775.52 H&M 208.50 -4.40 279.90 199.60 - - - BankAm 24.77 -0.07 25.80 13.11 1.14 14.77 246458.78 Marathon Ptl 54.28 0.21 55.20 35.43 2.65 23.28 28157.07
CSL 133.32 -0.85 145.00 91.62 1.46 39.11 45948.33 Airbus Grpe 74.36 0.26 77.25 48.19 - - - CntJpRwy 17920 35.00 19835 16305 0.79 8.51 32326.46 Investor 406.40 0.30 425.60 272.80 - - - Baxter 60.65 -0.07 61.52 43.13 0.88 17.44 32973.53 Marsh&M♦ 78.12 -0.21 80.47 62.33 1.79 21.33 40166.18
NatAusBk 30.06 0.26 34.09 24.32 9.72 13.54 61077.81 AirLiquide 107.95 0.55 115.25 89.26 - - - Denso 4817 51.00 5323 3441 2.54 15.33 33495.59 Nordea Bk 109.40 0.70 115.70 67.85 - - - BB & T 45.28 -0.20 49.88 35.15 2.68 17.19 36734.79 MasterCard 122.72 0.52 126.19 87.94 0.69 31.15 129337.36
Telstra 4.36 0.04 5.86 4.00 9.58 15.00 39381.21 AXA 25.18 0.18 25.80 16.26 - - - EastJpRwy 10785 135.00 11290 8388 1.23 16.46 36777.13 SEB 103.80 0.10 107.30 68.70 - - - BectonDick 197.77 -0.02 198.09 161.29 1.45 31.94 44706.97 McDonald's 155.62 -0.65 156.56 110.33 2.42 26.73 126841.22
Wesfarmers 40.87 -0.04 46.06 39.52 6.66 119.53 35193.02 BNP Parib 65.56 0.04 68.40 38.02 - - - Fanuc 22060 335.00 23410 15755 2.38 28.88 39419.78 SvnskaHn 124.30 0.60 136.30 93.55 - - - BerkshHat 256950 170.00 266445 213030 - 18.22 197571.42 McKesson 165.23 0.55 199.43 114.53 0.70 6.90 34937.87
Westpc 30.87 0.28 35.39 28.08 8.68 14.21 79578.36 ChristianDior 241.90 1.90 257.95 143.05 - - - FastRetail 37180 360.00 44370 26105 0.96 36.63 34535.82 Swedbank 212.50 - 234.00 166.70 - - - Biogen 271.60 -2.33 307.33 226.69 - 16.54 57610.49 Medtronic♦ 87.42 -0.54 89.72 69.35 1.96 30.42 118806.11
Woolworths 25.77 0.27 27.72 20.52 4.24 12.51 25333.1 Cred Agr 14.66 -0.04 14.82 7.08 - - - Fuji Hvy Ind 4118 32.00 5016 3383 3.56 10.23 27737.34 Telia Co 38.44 0.12 41.30 33.93 - - - BkNYMeln 51.97 0.22 52.34 38.11 1.46 15.55 54042.41 Merck 63.15 -0.01 66.80 57.18 3.03 39.10 172725.64
Belgium (€) Danone 65.75 0.17 70.53 57.66 - - - Hitachi 701.00 2.70 709.90 411.00 1.96 13.54 29670.8 Volvo 149.00 1.20 152.00 81.00 - - - BlackRock 436.82 4.44 438.14 336.84 2.18 22.04 70614.52 Metlife 56.04 -0.13 58.09 38.86 2.94 -89.80 60295.29
AnBshInBv 98.30 0.94 119.60 92.13 - - - EDF 8.64 -0.10 12.23 7.33 - - - HondaMtr 3104 17.00 3675 2530.5 2.96 12.85 49237.49 Switzerland (SFr) Boeing 203.03 0.66 204.39 126.31 2.38 24.31 122545.05 Microsoft 69.97 0.51 72.89 51.55 2.21 29.96 540165.81
KBC Grp 67.75 -0.31 70.98 39.41 - - - Engie SA 13.16 0.07 15.21 10.77 - - - JapanTob 3857 -5.00 4432 3607 3.55 17.17 67551.12 ABB 23.80 - 24.89 18.70 3.16 24.42 54520.98 BrisMySq♦ 56.09 0.18 77.12 46.01 2.82 18.93 92404.6 Mnstr Bvrg 50.53 -0.17 55.50 40.64 - 39.61 28691.53
Esslr Intl 112.00 -0.40 124.55 93.41 - - - KDDI 2909 -80.50 3378 2745.5 3.08 12.45 65906.6 CredSuisse 14.63 0.11 15.74 9.82 4.59 -16.96 38678.59 CapOne 82.10 -0.40 96.92 63.13 1.74 13.36 39651.72 MondelezInt♦ 43.30 0.08 47.23 40.50 1.76 37.92 65698.14
Brazil (R$)
Hermes Intl 442.40 -1.50 468.30 333.70 - - - Keyence 49020 -50.00 52130 34390 0.25 - 52200.36 Nestle 82.90 0.65 86.00 71.45 2.69 30.44 266857.73 CardinalHlth♦ 77.27 0.08 85.52 62.70 2.39 17.93 24408.25 Monsanto♦ 118.05 0.05 118.97 97.35 1.88 32.03 51862.08
Ambev♦ 18.31 0.29 20.09 15.79 2.23 24.23 88216.69
LOreal 180.05 0.70 197.15 156.50 - - - MitsbCp 2390.5 -5.50 2705.5 1730.5 3.53 8.18 33285.86 Novartis 79.50 0.65 84.35 67.40 3.43 28.21 215183.25 Carnival 65.84 0.01 67.30 44.11 1.94 20.75 35333.45 MorganStly 46.00 -0.05 47.33 26.03 1.58 15.13 85089.98
Bradesco♦ 27.52 0.24 31.13 24.01 2.18 9.42 25766.9
LVMH 216.80 0.40 239.65 132.35 - - - MitsubEst 2038 26.50 2443 1753 1.03 26.13 24823.08 Richemont 78.30 0.80 85.90 65.60 2.13 34.38 42276.17 Caterpillar 108.10 1.18 108.18 75.78 2.93-420.32 63684.93 MylanNV 37.68 0.07 50.40 33.60 - 36.27 20195.79
Cielo 24.20 0.01 31.48 20.36 2.23 15.72 20153.55
Orange 14.05 0.04 15.80 13.04 - - - MitsubishiEle 1669.5 10.00 1802 1140 1.70 16.15 31391.51 Roche 241.20 -0.70 273.00 218.30 3.33 21.88 175277.33 CBS 63.47 0.66 70.10 48.88 1.08 17.62 23379.69 Netflix 152.64 2.46 166.87 84.50 - 192.71 65788.52
ItauHldFin 32.10 -0.18 36.38 23.82 4.67 8.46 32980.09
PernodRic 116.00 0.15 124.45 95.73 - - - MitsuiFud 2608.5 30.00 2863.5 2031.5 1.37 18.56 22646.63 Swiss Re 91.05 0.60 98.50 86.30 5.26 9.21 33910.43 Celgene 131.83 -0.73 135.18 96.93 - 48.18 102936.07 NextEraE 141.77 1.29 144.87 110.49 2.61 16.79 66371.42
Petrobras 12.68 - 19.72 12.13 - -15.74 28927.55
Renault 80.95 -0.30 90.76 65.67 - - - MitUFJFin 749.30 -4.70 778.80 434.20 2.18 14.33 92970.07 Swisscom 465.20 1.80 488.00 426.80 9.40 15.05 24925.8 CharlesSch 43.48 0.16 44.10 25.61 0.59 35.41 58138.54 Nike 58.51 0.53 60.33 49.01 1.20 23.58 77322.18
Vale 29.37 0.48 37.28 16.12 0.55 7.48 28963.86
Safran 82.00 0.03 82.79 58.46 - - - Mizuho Fin 204.60 -1.30 225.30 144.30 3.74 6.10 45489.87 Syngent 463.00 -6.70 471.20 360.50 2.57 34.61 42748.26 Charter Comms 335.00 2.57 355.00 227.63 - 17.73 90318.01 NorfolkS 123.09 0.75 125.31 84.67 1.90 22.98 35669.35
Canada (C$) Murata Mfg 16915 230.00 17740 10810 1.33 23.38 33366.9 Chevron Corp 103.07 -0.42 119.00 97.53 4.29 65.49 195272.47 Northrop 261.92 -0.07 263.74 206.69 1.39 20.64 45724.1
Sanofi 83.90 0.24 92.97 66.72 - - - UBS 16.94 0.10 17.49 15.11 4.99 17.22 67490.25
BCE♦ 58.02 -0.10 63.41 56.80 4.51 18.93 40568.2 NipponTT 5230 -64.00 5500 4156 2.42 12.69 96012.46 Chubb♦ 145.79 -0.73 148.32 121.48 1.96 15.79 68073.06 NXP 109.22 0.11 109.98 76.82 - 19.20 37790.43
Sant Gbn 47.33 0.22 52.40 32.85 - - - Zurich Fin 289.20 3.10 294.30 225.60 6.13 13.45 45268.53
BkMontrl 96.33 0.48 104.15 81.62 3.38 12.94 48823.8 Nissan Mt 1152 5.50 1220 938.90 4.39 6.59 42578.62 Cigna 170.10 0.49 173.21 115.03 0.02 23.34 43546.81 Occid Pet♦ 58.77 0.09 78.48 57.20 5.35 -43.10 44934.47
Schneider 67.64 0.24 74.50 49.90 - - - Taiwan (NT$)
BkNvaS♦ 78.59 0.25 82.30 63.24 3.75 13.17 73357.74 Nomura 664.30 7.20 784.00 357.20 3.17 9.60 20618.45 Cisco♦ 30.93 0.03 34.60 28.88 3.44 15.79 154626.68 Oracle 49.70 0.35 51.85 37.62 1.25 22.79 205593.1
SFR Group 29.54 0.41 32.78 19.51 - - - Chunghwa Telecom 108.50 - 125.50 99.50 4.99 21.09 27534.75
Brookfield 50.20 0.04 53.08 42.71 1.40 30.56 38540.99 Nppn Stl 2649 19.00 2912 1822.5 1.26 59.46 22044.76 Citigroup 67.65 -0.26 68.91 41.63 0.81 13.18 186257.89 Pepsico 115.27 -0.24 118.24 98.50 2.69 24.20 164663.34
SocGen 49.19 -0.24 52.26 26.32 - - - Formosa PetChem 103.00 -1.00 119.00 86.10 4.02 10.78 32098.1
CanadPcR♦ 210.70 1.24 218.78 170.02 0.94 21.11 23981.6 NTTDCMo 2622.5 -27.50 2946 2361 3.22 14.21 89553.85 CME Grp 124.88 0.05 127.96 98.41 1.82 29.40 42432.74 Perrigo 72.22 -0.25 99.14 65.47 0.85 -2.95 10355.44
Total 42.77 0.31 49.50 40.53 - - - HonHaiPrc 115.50 1.00 122.50 76.30 2.97 13.05 65475.94
CanImp 106.23 0.17 120.83 97.05 4.35 9.45 35978.04 Panasonic 1491.5 27.00 1578 895.60 1.71 16.30 32039.31 Coca-Cola 44.48 0.09 46.06 39.88 3.28 30.45 190043.44 Pfizer 33.52 0.17 37.39 29.83 3.74 27.38 200042.15
UnibailR 213.55 - 250.55 203.10 - - - MediaTek 247.00 -3.00 274.00 203.00 4.62 14.35 12779.91
CanNatRs 37.06 0.73 46.74 35.90 2.54-195.14 34967.77 Seven & I 4535 -25.00 4902 4148 2.09 39.32 35203.07 Cognizant 67.03 0.07 68.18 45.44 - 23.70 39480.46 Phillips66 82.59 -0.01 88.87 73.82 3.14 24.93 42624.61
Vinci 74.85 0.96 80.43 49.93 - - - TaiwanSem♦ 206.00 - 218.50 166.50 3.02 14.54 174746.65
CanNatRy 106.88 0.93 108.64 77.02 1.43 22.28 62578.33 ShnEtsuCh 9965 21.00 10395 5996 1.27 22.90 37706.93 ColgtPlm 73.55 0.21 77.27 63.43 2.19 25.98 64966.19 PhilMorris♦ 118.82 0.92 123.55 86.78 3.58 25.55 184544.47
Vivendi 19.76 0.21 20.82 15.96 - - -
Enbridge 51.14 -0.16 59.19 49.61 4.22 47.24 65091.81 Softbank 8928 -6.00 9521 5194 0.48 25.67 86051.89 Thailand (THB) Comcast♦ 38.89 0.32 42.18 30.02 1.51 20.06 184086.3 PNCFin 126.62 0.08 131.83 80.45 1.74 16.66 61271.6
GtWesLif 35.81 0.21 37.79 30.83 3.58 13.87 27532.91 Germany (€) PTT Explor 374.00 5.00 430.00 307.00 2.65 11.60 31330.84
Sony 4318 73.00 4408 2930 0.49 72.00 47795.31 ConocPhil 43.19 0.19 53.17 38.80 2.42 -33.32 53430.52 PPG Inds 111.21 0.21 113.49 89.64 1.48 50.28 28491.65
ImpOil 36.12 -0.05 48.72 35.85 1.63 14.17 23746.12 Allianz 180.00 1.25 180.60 119.00 3.81 14.59 92149.76
SumitomoF 4373 1.00 4768 2786 3.50 7.70 54150.06 United Arab Emirates (Dhs) Corning 30.35 0.07 30.62 20.57 1.90 8.06 27928.94 Praxair 133.40 0.34 138.69 111.89 2.34 24.38 38066.22
Manulife 24.93 -0.08 25.57 16.87 3.03 16.09 38284.98 BASF 81.47 0.35 94.32 65.77 3.44 17.72 85218.27
Takeda Ph 5694 57.00 5856 4321 3.33 36.93 39421.51 Emirtestele 17.35 - 20.20 17.10 4.81 16.32 41080.51 Costco 151.85 -2.26 183.18 142.11 1.21 26.46 66653.22 Priceline 1931.72 13.22 1935 1304.23 - 42.40 94929.43
Potash 22.23 1.19 26.62 19.93 4.77 35.71 14503.26 Bayer 110.40 0.45 123.90 86.03 2.19 20.30 103971.21
TokioMarine 4774 22.00 5441 3367 2.67 11.72 31480.7 United Kingdom (p) CrownCstl 99.25 -0.22 104.68 79.38 3.78 100.36 36336.29 ProctGmbl 87.67 0.02 92.00 81.18 3.14 23.81 224237.31
RylBkC 95.25 0.16 99.90 76.99 3.48 13.16 107803.23 BMW 81.62 0.24 91.76 65.30 3.79 7.52 55957.15
Toyota 6187 30.00 7215 5157 3.79 8.58 176786.76 AscBrFd 2966 -4.00 3183 2335 1.24 21.34 30203.83 CSX 54.90 0.05 55.31 26.07 1.35 29.16 50651.91 Prudntl 111.48 0.12 114.55 70.00 2.61 11.03 47824.92
Suncor En 36.65 -0.02 44.90 33.76 3.22 40.11 47464.17 Continental 191.40 2.70 210.35 158.20 1.89 14.06 43596.42
Mexico (Mex$) AstraZen 5130 - 5520 3996 4.31 24.03 83523.48 CVS 78.75 0.11 98.66 69.30 2.32 15.98 80230.14 PublStor 204.96 -2.07 258.69 200.65 3.71 28.91 35631.45
ThmReut 58.95 -0.09 62.83 52.01 3.07 29.87 32880.22 Daimler 63.36 -0.12 73.23 51.98 5.01 8.49 77196.72
AmerMvl 15.00 0.27 15.15 10.40 1.83 25.06 37188.58 Aviva 536.00 1.00 570.50 352.10 4.01 35.50 28019.23 Danaher♦ 82.64 -0.43 88.01 75.71 0.68 27.42 57362.1 Qualcomm 55.60 0.25 71.62 51.05 3.92 18.02 82145.47
TntoDom♦ 65.43 0.31 71.31 55.04 3.22 13.81 93863.16 Deut Bank 16.58 -0.10 19.97 9.90 - -21.06 39025.04
FEMSA UBD 175.60 0.07 184.10 28.35 1.40 167.79 - Barclays 207.70 -0.45 267.32 131.71 1.44 15.85 45504.5 Deere♦ 128.02 1.38 128.37 76.73 1.86 23.20 40948.75 Raytheon♦ 166.26 0.39 166.94 132.89 1.36 20.88 48394.55
TrnCan♦ 62.20 -0.07 65.24 57.36 3.70 115.97 42072.4 Deut Tlkm 15.70 0.13 18.15 14.06 3.39 270.77 85107.41
WalMrtMex 41.63 -0.06 46.10 34.70 1.32 25.56 40456.5 BP 443.75 -0.25 521.20 408.63 6.93 -28.69 112330.47 Delphi 90.32 1.20 90.41 60.50 1.34 20.61 24195.87 Regen Pharm 493.85 -2.65 543.55 325.35 - 58.05 51547.64
ValeantPh 21.65 0.78 42.25 11.20 - -4.02 5767.57 DeutsPost 33.15 0.32 33.57 24.29 2.48 16.34 45810.52
BrAmTob 5210 -9.00 5643.6 2879.89 2.96 22.50 124949.01 Delta 54.99 -0.47 55.75 35.84 1.39 9.90 40474.95 ReynoldsAm 64.41 -0.17 67.81 43.38 2.95 27.11 91894.52
E.ON 8.43 0.18 9.72 5.99 5.73 -6.98 21121.61 Netherlands (€)
China (HK$) BSkyB 996.00 6.00 1050 747.50 3.29 27.67 22023.38 Devon Energy 29.73 0.19 50.69 28.79 2.00 -1.64 15629.06 S&P Global 148.37 -0.42 150.40 107.21 1.01 17.95 38249.79
Fresenius Med 83.90 0.47 89.22 70.69 0.92 20.97 29354.85 Altice 19.99 -0.03 23.43 12.20 - - -
AgricBkCh♦ 3.41 -0.05 3.80 2.79 5.73 5.30 13415.96 BT 288.40 1.20 419.40 277.44 5.01 15.10 36950.8 DiscFinServ 60.93 -0.44 74.33 53.91 1.99 10.13 23165.02 Salesforce 88.48 0.56 91.99 66.43 - 468.38 63015.46
Fresenius SE 74.84 0.12 80.07 63.62 0.71 25.23 47175.36 ASML Hld 117.70 1.20 124.95 85.05 - - -
Bk China 3.59 -0.02 4.08 3.07 5.72 5.43 38422.76 Compass■ 1581 4.00 1765.92 1350.96 2.09 22.59 33445.2 Disney 103.57 0.25 116.10 90.32 1.50 17.93 162081.25 Schlmbrg♦ 65.39 0.31 87.84 64.15 3.18 -50.66 90857.89
HenkelKgaA 104.50 0.15 114.60 92.38 2.82 22.12 30918.22 Heineken 85.20 0.47 89.06 67.47 - - -
BkofComm♦ 5.49 -0.01 6.44 4.92 5.74 5.29 24601.79 Diageo 2284 23.00 2413.5 1896.15 2.52 25.63 73960.61 DominRes 75.73 -0.06 81.65 69.51 3.85 21.15 47633.09 Sempra Energy♦ 111.07 0.54 117.97 92.95 2.86 18.58 27859.84
Linde 169.05 3.35 179.70 119.55 1.67 30.35 35757.78 ING 15.60 -0.01 15.88 8.53 - - -
BOE Tech 1.39 0.08 1.98 1.30 1.51 18.15 35.40 GlaxoSmh♦ 1616 1.50 1745.56 1446.5 4.95 47.39 102225.99 DowChem♦ 64.81 0.92 65.47 48.09 2.92 15.40 79178.55 Shrwin-Will 352.67 0.64 362.57 239.48 0.99 28.26 32843.56
MuenchRkv 176.55 0.80 189.40 140.90 4.55 10.64 31217.06 Unilever 48.47 0.40 51.31 36.22 - - -
Ch Coms Cons♦ 9.95 -0.05 11.74 8.09 2.23 8.36 5638.42 Glencore 301.05 3.80 347.00 164.20 - -74.41 55742.48 DukeEner 83.69 0.27 87.75 72.34 4.17 20.86 58573.25 SimonProp 156.16 -0.48 229.10 150.15 4.38 25.95 48752.25
SAP 91.45 0.56 96.38 66.19 1.22 31.40 128137.05 Norway (Kr)
Ch Evrbrght 3.58 -0.04 4.06 3.29 6.21 4.87 3147.25 HSBC 738.30 10.10 741.80 439.73 5.63 130.33 190412.1 DuPont 83.00 0.97 83.93 61.79 1.88 27.08 71963.66 SouthCpr 35.72 0.74 39.50 24.90 0.66 29.68 27612.15
Siemens 120.35 -0.20 133.50 87.75 2.91 17.62 116675.41 DNB 141.60 -0.90 148.50 90.80 - - -
Ch Rail Cons 10.22 -0.02 11.98 8.61 1.73 8.53 2715.92 Imperial Brands 3435 -19.50 4154 3324 4.52 32.34 42360.27 Eaton 80.20 0.84 80.16 59.07 2.96 18.17 35873.46 Starbucks 57.87 -0.17 64.87 50.84 1.60 27.85 83801.55
Volkswgn 135.75 -0.45 157.40 116.05 0.08 11.32 45688.66 Statoil 137.50 1.50 163.50 123.90 - - -
Ch Rail Gp 6.18 -0.01 7.71 5.55 1.65 10.21 3327.96 LlydsBkg 66.56 0.03 73.58 49.20 3.53 27.73 61438.73 eBay 35.03 0.80 36.50 23.95 - 4.94 37914.3 StateSt♦ 91.33 0.46 91.99 52.88 1.67 16.66 34361.61
ChConstBk 5.94 0.01 6.71 5.15 5.38 5.48 182779.67 Hong Kong (HK$) Telenor 138.40 1.20 150.90 122.50 - - - Ecolab 132.48 -0.14 134.89 110.65 1.12 30.74 38425.21 Stryker♦ 141.05 -0.07 145.62 106.48 1.17 30.81 52719.56
Natl Grid♦ 931.10 -3.60 1229.83 929.60 5.10 17.82 41194.16
China Vanke 22.70 -0.85 24.10 15.16 3.69 10.31 3820.44 AIA 56.25 0.90 58.45 42.65 1.34 19.98 86926.81 Qatar (QR) Emerson 59.51 0.04 64.37 49.22 3.30 22.60 38349.79 Sychrony Fin 29.31 -0.39 38.06 26.01 0.44 11.13 23770.8
Prudential 1798.5 18.50 1831.5 1109.59 2.19 23.98 59821.03
ChinaCitic 4.75 -0.04 5.50 4.67 5.23 4.79 9047.61 BOC Hold 37.20 0.45 39.50 23.20 3.45 15.49 50339.44 QatarNtBk 124.60 1.60 173.00 121.70 2.63 8.97 31608.32 EOG Res 88.96 0.52 109.37 78.04 0.77 -80.82 51353.8 Target 50.31 -0.76 79.33 48.56 4.66 10.59 27756.44
RBS 256.40 -2.30 271.00 155.00 - -4.31 39168.31
ChinaLife♦ 23.95 0.10 26.05 16.50 2.05 29.76 22809.88 Ch OSLnd&Inv 23.35 0.15 27.85 20.15 2.53 6.49 32743.38 EquityResTP♦ 64.94 -0.04 71.53 58.28 3.19 27.45 23843.04 TE Connect 79.50 0.42 80.70 56.53 1.92 13.70 28224.67
Russia (RUB) ReckittB 7671 3.00 8110.43 6496 1.92 29.91 69361.27
ChinaMBank♦ 22.95 -0.10 24.30 16.56 3.54 7.97 13485.17 ChngKng 60.90 0.80 62.20 46.50 2.23 12.90 28900.19 Exelon 35.96 0.38 37.70 29.82 3.66 28.31 33302.44 Tesla Mtrs 316.73 3.51 386.99 178.19 - -67.08 52025.99
Gzprm neft 124.12 1.12 160.62 111.46 6.99 2.72 48754.18 RELX 1635 3.00 1728 1273 1.99 29.30 -
ChinaMob 80.75 -0.15 99.30 80.00 3.07 14.51 211618.42 Citic Ltd 11.50 0.06 12.78 10.66 2.74 9.70 42817.67 ExpScripts 61.55 -0.96 80.02 57.80 - 10.92 36946.25 TexasInstr 78.54 0.06 84.65 62.05 2.17 21.68 78251.27
Lukoil 2867 11.00 3582 2601 7.18 8.21 40461.48 RioTinto 3398.5 36.50 3718.5 2253.5 3.50 16.45 60329.57
ChinaPcIns♦ 31.70 -0.25 32.80 25.50 3.60 20.15 11260.2 Citic Secs♦ 15.76 -0.04 19.16 15.36 3.73 14.85 5886.65 ExxonMb 80.26 0.04 95.55 79.26 3.85 32.51 340061.74 TheTrvelers 126.50 -0.67 129.60 103.45 2.18 12.12 35346.1
MmcNrlskNckl 8492 119.00 11199 7677 8.62 14.94 22297.12 RollsRoyce 932.00 -4.50 943.90 635.00 1.26 -4.23 22060.28
ChMinsheng♦ 7.61 -0.02 9.48 7.33 4.24 4.94 6753.38 CK Hutchison 98.25 1.05 103.90 82.15 2.52 13.79 48510.43 Facebook 153.38 1.94 156.50 113.55 - 37.94 362710.36 ThrmoFshr♦ 178.04 0.55 178.29 139.07 0.35 31.53 69652.79
Novatek 638.30 -2.70 800.70 601.50 2.38 8.22 32157.18 RylDShlA 2041 -3.00 2295.5 1791 7.38 43.48 117528.97
ChMrchSecs RMB 17.28 0.01 20.09 15.57 2.36 18.64 12458.05 CNOOC♦ 8.52 -0.06 10.88 8.45 5.57-150.58 48687.16 Fedex 218.67 0.16 219.56 153.95 0.69 29.75 58466.88 TimeWrnr♦ 100.96 -0.28 102.45 74.27 1.64 18.59 78298.27
Rosneft 320.00 2.20 425.70 291.00 3.77 18.23 56271.56 Shire 4186.5 -138.00 5377 2707.19 0.58 111.38 48882.93
Chna Utd Coms RMB 7.47 - 8.05 3.89 0.78 554.42 23279.16 HangSeng 163.20 1.70 165.90 131.80 3.38 21.26 39934.57 FordMtr 11.28 0.02 14.04 10.67 5.12 5.53 44117.59 TJX Cos 69.12 -1.23 83.64 68.22 1.50 19.75 44463.26
Sberbank 154.90 2.74 185.34 130.35 0.23 13.31 55481.69 StandCh 812.40 9.60 821.60 566.90 - -69.23 34390.84
ChShenEgy♦■ 16.92 -0.06 20.60 13.42 2.21 12.66 7359.94 HK Exc&Clr 199.90 0.50 213.20 177.60 2.63 38.89 31510.73 Franklin♦ 45.69 0.27 45.79 32.94 1.71 14.33 25646.55 T-MobileUS 60.51 0.50 68.88 42.84 - 30.48 50273.88
Surgutneftegas 26.11 -0.30 33.09 24.09 - -10.84 15474.36 Tesco 171.05 0.55 219.40 153.00 - 211.17 18014.86
ChShpbldng RMB 6.21 - 8.14 5.87 - -84.20 16764.38 MTR♦■ 44.10 0.45 50.00 37.20 2.33 26.93 33380.95 GenDyn♦ 200.73 -0.53 205.17 139.10 1.60 19.00 60557.32 UnionPac 109.32 0.97 115.15 87.06 2.17 20.32 88269.26
Saudi Arabia (SR) Vodafone♦ 219.95 1.20 240.10 186.50 5.47 -32.84 75325.22
ChStConEng RMB 9.70 0.30 11.45 5.35 2.09 9.85 42336.48 SandsCh 34.40 0.20 39.30 25.25 6.05 27.88 35543.68 GenElectric♦ 25.98 -0.18 33.00 25.90 3.73 24.95 225565.94 UPS B 110.41 0.05 120.44 102.12 2.95 27.38 76047.13
AlRajhiBnk 65.00 -0.50 71.70 48.60 3.58 12.24 28165.17 WPP 1567 -2.00 1928.07 1486.02 3.08 14.51 25688.67
ChUncHK 10.84 0.40 12.10 7.75 1.84 202.36 33224.42 SHK Props 115.90 0.40 124.10 96.50 2.88 10.58 42962.12 GenMills♦ 53.58 -0.05 72.70 53.38 3.57 19.41 30921 USBancorp♦ 52.20 -0.26 56.61 39.84 2.16 15.38 87971.78
Tencent 271.60 2.60 288.40 178.50 0.17 47.71 329538.11 Natnlcombnk 50.50 -0.30 58.00 32.00 2.80 10.35 26931.9 United States of America ($)
CNNC Intl RMB 7.94 0.06 8.08 6.58 1.15 25.98 4937.52 GenMotors 35.04 0.10 38.55 29.27 4.46 5.27 52367.63 UtdHlthcre 187.38 -0.58 188.66 132.39 1.37 23.32 180570.9
SaudiBasic 101.40 -0.20 105.40 76.00 4.91 18.57 81115.68 21stC Fox A 28.14 0.24 32.60 23.33 1.32 16.68 29612.69
CSR♦ 6.87 -0.05 7.99 6.66 2.57 15.50 3843.43 India (Rs) GileadSci 69.51 0.26 88.85 63.76 2.86 7.14 90830.69 UtdTech 122.74 0.13 123.15 97.62 2.21 18.50 98338.66
SaudiTelec 74.00 -0.80 78.90 51.00 5.60 16.50 39464.56 3M 210.43 0.84 214.57 163.85 2.20 24.74 125677.12
Daqin RMB 8.90 0.04 8.94 5.98 5.13 15.94 19453.2 Bhartiartl 405.70 19.80 410.15 283.05 0.34 41.73 25130.18 GoldmSchs 225.62 0.34 255.15 148.31 1.19 11.69 88810.99 ValeroEngy 68.38 0.20 71.40 46.88 3.76 14.55 30581.68
Singapore (S$) AbbottLb 48.37 -0.08 49.59 37.38 2.22 52.83 83926.43
Gree Elec Apl 0.19 0.00 0.25 0.17 - -5.86 324.69 HDFC Bk 1676.35 9.15 1716 1158 0.54 34.57 66860.04 Halliburton 42.22 0.44 58.78 40.12 1.75 -10.48 36641.4 Verizon♦ 43.31 -0.17 56.25 43.18 5.46 14.08 176677.49
DBS 21.00 0.17 21.18 14.72 2.85 12.67 38545.99 Abbvie 72.21 0.18 73.67 55.06 3.29 19.11 114925.14
GuosenSec RMB 13.81 0.14 18.94 12.39 4.41 23.06 4456.78 Hind Unilevr 1096.25 -1.45 1129 781.95 1.54 51.85 36768.28 HCA Hold 85.74 -0.40 91.03 67.00 - 11.34 31458.4 VertexPharm 129.90 -0.45 137.26 71.46 - 180.40 32354.03
JardnMt US$ 64.10 -0.85 67.27 52.90 2.36 9.22 46349.66 Accenture 124.12 -0.09 128.47 108.83 1.92 17.86 82432.33
HaitongSecs 12.36 -0.08 15.24 12.28 4.30 14.32 5393.8 HsngDevFin 1638.85 9.70 1682.2 1183.15 0.90 26.48 40452.07 Hew-Pack 17.62 0.27 19.58 12.95 2.90 12.13 29651.95 VF Cp 56.38 -0.32 65.25 48.05 2.82 19.48 22577.76
JardnStr US$ 41.90 -0.77 43.78 29.33 0.72 8.62 46411.18 Adobe 142.34 0.12 147.45 95.34 - 52.56 70231.36
Hngzh HikVDT RMB 29.41 -0.72 40.16 22.61 1.07 34.11 31381.52 ICICI Bk 291.45 1.75 297.64 215.14 1.54 22.21 28960.19 HiltonWwde 62.01 0.25 67.79 46.09 1.29 87.38 20387.72 Viacom 33.64 0.44 46.72 32.68 4.12 9.41 11851.39
OCBC 10.80 0.11 10.95 8.27 3.40 12.52 32643.01 AEP 69.28 0.13 72.97 57.89 3.42 47.10 34065.81
Hunng Pwr♦ 5.43 -0.03 6.25 4.43 10.13 8.29 3266.72 Infosys 957.05 21.65 1196.05 901.00 2.70 15.36 34064.19 HomeDep 151.83 -0.40 160.86 119.20 1.86 23.02 181521.11 Visa Inc 95.08 1.16 96.60 74.79 0.66 45.98 175532.25
SingTel 3.90 0.04 4.36 3.59 4.51 16.22 45970.97 Aetna 154.00 0.12 155.15 104.59 0.67 46.49 51081.8
IM Baotou Stl RMB 2.38 - 2.44 1.96 - 128.32 7711.61 ITC♦ 333.30 -1.00 354.80 222.00 1.33 38.58 62762.77 Honywell 134.72 0.60 135.90 105.25 1.89 20.87 102702.2 Walgreen 77.05 -0.42 88.00 75.18 1.94 19.53 82450.93
UOB 23.31 0.09 24.02 17.51 3.06 12.24 27544.45 Aflac 77.76 -0.22 79.86 66.50 2.22 12.29 30858.79
In&CmBkCh♦ 4.87 -0.01 5.43 4.19 5.64 5.42 54099.6 L&T 1732.15 27.75 1833.95 1295.1 0.82 36.48 25053.82 HumanaInc 238.47 0.24 243.74 150.00 0.55 23.46 34414.06 WalMartSto 74.21 -1.13 80.48 65.28 2.69 16.96 223690.91
AirProd♦ 143.97 -0.04 150.45 129.00 2.52 20.28 31345.79
IndstrlBk RMB 17.12 0.03 17.58 14.99 3.62 5.96 47955.11 OilNatGas 162.40 2.80 211.80 144.67 2.06 16.92 32294.96 South Africa (R) IBM 153.43 0.49 182.79 147.79 3.75 12.28 144147.01 WellsFargo 55.50 -0.24 59.99 43.55 2.82 13.49 277351.15
Alexion 123.09 0.03 145.42 96.18 - 56.98 27640.66
Kweichow RMB 454.47 8.50 485.00 287.56 1.38 31.33 83935.53 RelianceIn 1492.85 1.70 1505 930.00 - 14.44 75217.99 Firstrand 48.11 -0.02 54.46 42.78 4.81 11.00 20081.69 IllinoisTool♦ 146.33 0.27 150.29 106.69 1.76 23.91 50548.12 Williams Cos 30.41 -0.01 32.69 20.44 5.75 -51.24 25122.88
Allegran 241.90 1.21 261.27 184.50 0.30 -22.16 81154.88
Midea 1.65 -0.01 1.87 1.62 6.36 22.16 45.41 SBI NewA 285.55 5.45 315.30 216.50 0.90 49.74 38195.27 MTN Grp 116.58 0.83 151.50 104.76 9.48 -79.14 16345.87 Illumina 169.33 -2.78 189.48 119.37 - 33.25 24722.18 Yahoo - - - - - - -
Allstate 89.05 -0.14 90.74 66.55 1.54 18.32 32460.33
New Ch Life Ins 41.20 -0.40 43.20 26.95 - 21.80 5453.05 SunPhrmInds 563.70 14.70 854.95 492.65 0.18 19.01 20957.84 Naspers N 2517.5 42.79 2846.5 1925.98 0.20 89.24 82100.85 Intcntl Exch 65.77 -0.15 66.90 50.85 1.08 26.66 38940.22 Yum!Brnds 73.39 -0.10 75.45 59.57 2.42 26.33 25556.63
Alphabet 947.36 6.55 1008.61 708.11 - 32.68 281960.13
PetroChina♦■ 4.77 -0.07 6.38 4.72 1.14 27.26 12881.09 Tata Cons 2434.95 103.00 2744.8 2051.9 1.95 17.85 72228.79 South Korea (KRW) Intel 33.47 -0.41 38.45 33.23 3.20 14.09 157632.36 Venezuela (VEF)
Altria 74.39 0.14 77.79 60.82 2.66 30.01 143695.1
PingAnIns 54.80 0.70 56.25 33.60 1.18 12.98 52236.26 Indonesia (Rp) HyundMobis 243000-2500.00 293500 212000 1.52 10.54 20579.92 Intuit♦ 131.84 -0.06 143.81 103.22 1.00 37.89 33779.64 Bco de Vnzla 800.00 -55.00 855.00 95.00 - - 1106.58
Amazon 996.70 17.94 1017 710.10 - 182.47 476398.66
PngAnBnk RMB 9.59 0.12 10.26 8.54 1.35 7.38 23853.35 Bk Cent Asia 18300 -200.00 18725 13250 0.99 20.70 33677.02 KoreaElePwr 41800 -700.00 63600 40050 5.01 4.39 23346.18 John&John 132.19 -0.35 137.00 109.32 2.49 21.60 356101.03 Bco Provncl 20000 -500.00 20500 2200 - 23.10 817.90
AmerAir 52.38 -0.65 53.38 29.70 0.79 12.33 25801.8
Pwr Cons Corp RMB 8.01 0.11 9.00 5.57 0.98 16.51 11305.44 SK Hynix 67300 700.00 69600 30550 0.94 10.96 42626.21 JohnsonCn 43.34 0.18 46.17 37.78 2.69 -31.07 40652.94 Mrcntl Srvcs 50000 500.00 50000 4785 0.05 68.00 1154.49
Israel (ILS) AmerExpr♦ 84.17 -0.16 85.88 59.50 1.53 14.77 75229.39
SaicMtr RMB 31.48 -0.57 32.84 19.76 4.39 10.68 51029.08 SmsungEl 2433000 40000 2445000 1449000 1.54 13.13 276593.39 JPMrgnCh♦ 93.25 -0.60 94.51 61.33 1.95 16.24 331298.95
TevaPha 113.00 -2.20 217.70 99.40 4.401545.66 32461.85 AmerIntGrp 63.02 -0.34 67.47 52.39 1.95 97.90 58107.19
ShenwanHong 0.22 -0.01 0.35 0.16 - -3.65 245.13 Spain (€) Kimb-Clark 127.74 0.94 136.87 111.30 3.00 20.49 45338.52 Closing prices and highs & lows are in traded currency (with variations for that
Italy (€) AmerTower♦ 131.96 -1.18 137.12 99.72 1.69 61.97 56084.25
ShgPdgBk RMB 12.53 -0.07 13.52 11.16 3.21 6.67 51772.47 KinderM 19.05 -0.13 23.36 18.31 4.60-120.21 42516.87 country indicated by stock), market capitalisation is in USD. Highs & lows are
Enel 4.80 0.08 4.99 3.57 3.26 16.93 55552.67 BBVA 7.52 -0.01 7.89 4.76 4.75 13.66 57119.92 Amgen 172.16 0.73 184.21 133.64 2.48 15.89 126606.31
Sinopec Corp♦ 5.79 -0.03 6.57 5.18 2.83 10.41 18906.99 Kraft Heinz 83.35 0.31 97.77 79.69 2.93 28.84 101489.71 based on intraday trading over a rolling 52 week period.
ENI 13.00 0.04 15.92 12.18 6.01 -5.00 53804.22 BcoSantdr 5.81 - 6.25 3.25 3.41 14.32 96470.5 Anadarko 43.54 0.18 73.33 42.58 1.41 -4.41 24397.17
Sinopec Oil RMB 3.30 - 4.51 3.02 - -2.92 1367.37 Kroger 22.75 -0.41 37.97 20.46 2.03 13.78 20414.63 ♦ ex-dividend
Generali 15.05 0.05 16.00 9.89 4.61 11.83 26768.88 CaixaBnk 4.27 0.01 4.47 1.94 3.39 24.68 29080.2 Anthem 191.79 0.18 194.94 114.85 1.33 22.63 50821.71
Denmark (kr) Iberdrola 6.72 0.05 7.30 5.53 5.96 16.43 47783.55 L Brands 44.03 -1.08 79.67 43.04 5.42 11.68 12629.71 ■ ex-capital redistribution
IntSPaolo 2.86 0.02 2.90 1.58 4.72 24.20 51657.07 Aon Cp 135.32 0.31 137.28 105.35 0.99 25.19 35463.31
DanskeBk 256.80 1.50 259.40 164.80 - - - Inditex 33.75 0.11 36.90 29.30 1.41 34.15 119774.31 LasVegasSd 62.18 0.41 66.22 43.51 4.78 26.28 49263.22 # price at time of suspension
Luxottica 51.35 -0.10 56.90 39.92 1.67 30.09 28359.08 Apple 144.85 0.67 156.65 96.05 1.62 16.41 755224.72
MollerMrsk 13710 530.00 13720 8285 - - - Repsol 13.48 0.04 15.22 10.81 4.50 12.42 22963.8 LibertyGbl 31.78 0.32 37.69 28.12 - 13.92 7536.93
Unicred 17.52 0.02 30.80 11.93 3.32 -1.81 44408.4 ArcherDan 41.14 -0.10 47.88 40.40 3.05 16.95 23382.21
NovoB 274.00 0.70 384.80 218.20 - - - Telefonica 9.01 -0.04 10.63 7.61 7.93 19.85 51715.99 Lilly (E) 82.40 0.11 86.72 64.18 2.56 38.70 90919.23
AT&T 37.01 0.03 43.48 36.10 5.43 16.93 227537.48

FT 500: TOP 20 FT 500: BOTTOM 20 BONDS: HIGH YIELD & EMERGING MARKET BONDS: GLOBAL INVESTMENT GRADE
Close Prev Day Week Month Close Prev Day Week Month Day's Mth's Spread Day's Mth's Spread
price price change change % change change % change % price price change change % change change % change % Red Ratings Bid Bid chge chge vs Red Ratings Bid Bid chge chge vs
Fuji Hvy Ind 4118.00 4086.00 32.00 0.78 332.00 8.8 10.20 L Brands 44.03 45.11 -1.08 -2.39 -11.54 -20.8 -15.81 Jul 10 date Coupon S* M* F* price yield yield yield US Jul 10 date Coupon S* M* F* price yield yield yield US
IM Baotou Stl 2.38 2.38 0.00 0.00 0.19 8.7 9.68 ShenwanHong 0.22 0.23 -0.01 -6.09 -0.04 -16.9 -20.00 High Yield US$ US$
RelianceIn 1492.85 1491.15 1.70 0.11 112.85 8.2 11.77 Tesla Mtrs 316.73 313.22 3.51 1.12 -35.89 -10.2 -11.46 Navient Corporation 03/20 8.00 B+ Ba3 BB 111.62 3.49 -0.02 -0.58 2.10 SunTrust Banks, Inc. 01/28 6.00 BBB+ Baa1 A- 113.54 4.43 -0.02 -0.12 2.06
Bhartiartl 405.70 385.90 19.80 5.13 26.00 6.8 10.30 EDF 8.64 8.74 -0.10 -1.11 -0.91 -9.5 -10.72 High Yield Euro FleetBoston Financial Corp. 01/28 6.88 BBB Baa3 A- 120.65 4.45 -0.02 0.02 2.08
PingAnIns 54.80 54.10 0.70 1.29 3.35 6.5 5.28 Devon Energy 29.73 29.54 0.19 0.64 -3.05 -9.3 -8.66 Kazkommerts Intl BV 02/17 6.88 B Caa1 B 97.50 - 0.00 0.00 - NationsBank Corp. 03/28 6.80 BBB Baa3 A- 121.17 4.35 -0.02 0.13 1.98
Daqin 8.90 8.86 0.04 0.45 0.51 6.1 6.33 Hngzh HikVDT 29.41 30.13 -0.72 -2.39 -2.89 -8.9 -5.80 Oklahoma Gas & Electric Co. 04/28 6.50 A- A1 A+ 121.57 4.05 -0.02 -0.06 1.68
BHPBilltn 24.52 24.59 -0.07 -0.28 1.24 5.3 4.16 In&CmBkCh 4.87 4.88 -0.01 -0.20 -0.40 -7.6 -6.70 Emerging US$ Merrill Lynch & Co., Inc. 06/28 6.75 BBB+ Baa1 A 123.52 4.10 -0.02 0.07 1.73
Potash 22.23 21.04 1.19 5.66 1.08 5.1 -2.93 AgricBkCh 3.41 3.46 -0.05 -1.45 -0.28 -7.6 -5.01 Mexico 09/16 11.40 BBB+ A3 BBB+ 106.80 1.49 0.03 0.01 0.44 United Utilities PLC 08/28 6.88 BBB- Baa1 A- 119.51 4.66 -0.02 0.10 2.29
Sberbank 154.90 152.16 2.74 1.80 7.40 5.0 3.22 ChUncHK 10.84 10.44 0.40 3.83 -0.76 -6.6 -4.24 Brazil 01/18 8.00 BB Ba2 BB 102.09 3.95 -0.16 0.57 2.56
Peru 03/19 7.13 BBB+ A3 BBB+ 109.39 1.56 -0.01 0.06 0.17 Euro
Toyota 6187.00 6157.00 30.00 0.49 294.00 5.0 5.98 Bk China 3.59 3.61 -0.02 -0.55 -0.24 -6.3 -7.47 AT&T Inc. 12/29 2.60 BBB+ Baa1 A- 101.08 2.50 0.00 0.00 -
Priceline 1931.72 1918.50 13.22 0.69 88.59 4.8 4.84 Anadarko 43.54 43.36 0.18 0.42 -2.56 -5.6 -9.20 Peru 03/19 7.13 BBB+ A3 BBB+ 114.01 2.60 0.00 0.20 0.84
Brazil 01/22 12.50 BB Ba2 BB 113.05 8.90 -0.03 -0.22 6.97 AT&T Inc. 12/29 2.60 BBB+ Baa1 A- 102.28 2.38 -0.04 0.05 -
MollerMrsk 13700.00 13180.00 520.00 3.95 610.00 4.7 8.64 SimonProp 156.16 156.64 -0.48 -0.31 -9.02 -5.5 0.28 Citigroup Inc. 02/30 4.25 BBB Baa3 A- 117.42 2.33 -0.04 0.05 -
Amazon 996.70 978.76 17.94 1.83 43.04 4.5 1.86 ConocPhil 43.19 43.00 0.19 0.44 -2.47 -5.4 -3.53 Colombia 03/23 2.63 BBB Baa2 BBB 96.99 3.24 -0.03 0.23 1.31
Poland 03/23 3.00 BBB+ A2 A- 100.98 2.83 -0.02 0.35 0.91 HBOS plc 03/30 4.50 BBB- Baa2 A- 115.54 2.64 -0.04 0.24 -
Avago Tech 239.98 239.62 0.36 0.15 10.22 4.4 -1.48 GenElectric 25.98 26.15 -0.18 -0.67 -1.48 -5.4 -7.03
Turkey 03/23 3.25 - Ba1 BB+ 83.85 6.71 -0.10 -0.39 4.78 Yen
Netflix 152.64 150.18 2.46 1.64 6.47 4.4 -3.42 MediaTek 247.00 250.00 -3.00 -1.20 -13.50 -5.2 -1.40
Russia 05/26 4.75 - - BBB- 103.04 4.38 -0.02 0.30 2.01 Enagas Transportes, S.A.U. 09/39 3.23 A- Baa2 A- 106.57 2.85 0.00 0.01 -
Nppn Stl 2649.00 2630.00 19.00 0.72 111.00 4.4 9.64 Sinopec Corp 5.79 5.82 -0.03 -0.43 -0.30 -4.9 -10.09
SBI NewA 285.55 280.10 5.45 1.95 11.90 4.3 -1.04 Perrigo 72.22 72.46 -0.25 -0.34 -3.54 -4.7 0.94 Turkey 03/27 6.00 - Ba1 BB+ 104.51 5.47 -0.02 0.35 3.10 £ Sterling
GuosenSec 13.81 13.67 0.14 1.02 0.56 4.2 5.50 Petrobras 12.68 12.68 0.00 0.00 -0.60 -4.5 -7.98 Emerging Euro Electricite de France (EDF) 05/28 6.25 A- A3 A- 132.52 2.75 -0.04 0.23 0.38
Swedbank 213.50 212.50 1.00 0.47 8.20 4.0 0.85 Target 50.31 51.07 -0.76 -1.49 -2.34 -4.4 -11.52 Brazil 02/15 7.38 BBB- Baa2 BBB 111.75 0.73 0.00 0.00 0.09 HSBC Holdings plc 08/28 2.63 A A1 AA- 99.88 2.64 -0.04 0.19 0.27
RollsRoyce 932.00 936.50 -4.50 -0.48 35.50 4.0 2.81 ImpOil 36.12 36.17 -0.05 -0.14 -1.68 -4.4 -4.95 Mexico 02/20 5.50 BBB+ - BBB+ 113.51 0.28 -0.01 0.04 -1.11 Data provided by SIX Financial Information. US $ denominated bonds NY close; all other London close. *S - Standard & Poor’s, M -
Mexico 04/23 2.75 BBB+ A3 BBB+ 107.43 1.40 -0.02 0.13 -0.53 Moody’s, F - Fitch.
Based on the FT Global 500 companies in local currency Based on the FT Global 500 companies in local currency
Bulgaria 03/28 3.00 BB+ Baa2 BBB- 108.83 2.07 -0.04 0.04 -0.30
Data provided by SIX Financial Information & Tullett Prebon Information. US $ denominated bonds NY close; all other
London close. *S - Standard & Poor’s, M - Moody’s, F - Fitch.

INTEREST RATES: OFFICIAL BOND INDICES VOLATILITY INDICES GILTS: UK CASH MARKET
Jul 10 Rate Current Since Last Mnth Ago Year Ago Day's Month's Year Return Return Jul 10 Day Chng Prev 52 wk high 52 wk low Red Change in Yield 52 Week Amnt
US Fed Funds 0.50-0.75 14-12-2016 1.00 0.50-0.75 0.25-0.50 Index change change change 1 month 1 year VIX 11.01 -0.18 11.19 23.01 9.37 Jul 10 Price £ Yield Day Week Month Year High Low £m
US Prime 4.25 16-12-2008 3.75 3.50 3.50 Markit IBoxx VXD 10.95 -0.10 11.05 23.23 3.59 Tr 8.75pc '17 101.07 0.14 55.56 27.27 600.00 -26.32 105.16 100.00 11.14
US Discount 0.75 16-12-2015 0.75 1.00 0.75 ABF Pan-Asia unhedged 181.15 -0.14 -0.84 4.58 -1.02 -2.27 VXN 16.83 0.02 16.81 23.35 9.75 Tr 5pc '18 103.11 0.26 -13.33 -16.13 136.36 333.33 108.18 103.10 35.24
Euro Repo 0.00 10-09-2014 0.05 0.05 0.05 Corporates( £) 337.88 0.07 -0.34 2.35 -1.91 4.54 VDAX - - - - - Tr 4.5pc '19 106.99 0.27 -10.00 -18.18 285.71 170.00 111.71 106.92 36.35
UK Repo 0.25 05-03-2009 0.25 0.50 0.50 Corporates($) 272.62 -0.16 -0.24 3.56 -0.24 3.56 † CBOE. VIX: S&P 500 index Options Volatility, VXD: DJIA Index Options Volatility, VXN: NASDAQ Index Options Volatility. Tr 4.75pc '20 111.82 0.28 -9.68 -20.00 250.00 47.37 117.02 111.69 33.31
Japan O'night Call 0.00-0.00 05-10-2010 0.00 0.00-0.10 0.00-0.10 Corporates(€) 222.42 0.03 -0.08 0.51 -0.78 0.58 ‡ Deutsche Borse. VDAX: DAX Index Options Volatility. Tr 1.5pc '21 103.75 0.43 -6.52 -10.42 95.45 22.86 106.04 103.47 32.46
Switzerland Libor Target 0.00-0.25 15-01-2015 0.00-0.75 -1.25--0.25 0-0.25 Eurozone Sov(€) 228.40 -0.12 -0.79 -1.84 -1.30 -4.37 Tr 4pc '22 115.97 0.52 -5.45 -7.14 73.33 40.54 121.31 115.73 37.95
Gilts( £) 315.87 0.10 -0.70 -0.38 -3.21 -2.80 BONDS: BENCHMARK GOVERNMENT Tr 5pc '25 129.82 0.95 -3.06 -2.06 37.68 37.68 138.11 129.09 35.08
INTEREST RATES: MARKET Global Inflation-Lkd 253.61 -0.36 -0.85 2.61 -2.29 -0.33 Red Bid Bid Day chg Wk chg Month Year Tr 1.25pc '27 99.17 1.34 -2.19 0.00 26.42 38.14 138.26 98.71 10.79
Over Change One Three Six One Markit iBoxx £ Non-Gilts 332.88 0.07 -0.34 2.00 -1.87 3.29 Date Coupon Price Yield yield yield chg yld chg yld Tr 4.25pc '32 134.43 1.64 -2.38 1.23 18.84 23.31 148.92 131.34 35.44
Jul 10 (Libor: Jul 07) night Day Week Month month month month year Overall ($) 236.36 -0.18 -0.29 2.35 -0.29 2.35 Australia 10/19 2.75 101.96 1.87 0.00 0.04 0.17 0.31 Tr 4.25pc '36 138.71 1.80 -2.17 0.56 16.13 20.81 155.77 134.98 29.76
US$ Libor 1.17389 0.000 0.001 0.002 1.22633 1.30522 1.46544 1.75761 Overall( £) 317.90 0.09 -0.60 0.31 -2.82 -1.06 11/28 2.75 99.38 2.81 0.01 0.07 0.26 0.00 Tr 4.5pc '42 152.07 1.91 -2.05 1.06 15.76 20.13 174.65 147.41 26.64
Euro Libor -0.42543 0.000 0.002 0.000 -0.39929 -0.37500 -0.30757 -0.18343 Overall(€) 225.28 -0.07 -0.58 -1.20 -1.14 -3.02 Austria 10/19 0.25 99.98 0.26 0.00 0.00 0.00 0.00 Tr 3.75pc '52 149.63 1.83 -2.14 1.10 16.56 22.00 177.28 143.66 23.59
£ Libor 0.21875 -0.001 -0.005 0.003 0.25419 0.29838 0.45200 0.65994 Treasuries ($) 222.76 -0.20 -0.32 1.66 -0.32 1.66 04/27 0.50 97.33 0.79 -0.02 0.07 0.28 0.00 Tr 4pc '60 167.34 1.75 -2.23 1.16 16.67 23.24 201.27 160.01 23.21
Swiss Fr Libor 0.000 -0.78160 -0.72640 -0.65140 -0.48880 FTSE Belgium 09/19 3.00 107.79 -0.49 0.00 0.00 0.00 0.00 xd Ex dividend. Closing mid-prices are shown in pounds per £ 100 nominal of stock. Red yield: Gross redemption yield.
Yen Libor 0.006 -0.01971 -0.00186 0.01471 0.11614 Sterling Corporate (£) 116.68 0.08 - - -1.66 -1.20 06/27 0.80 99.07 0.90 -0.03 0.09 0.31 0.00 This table shows the gilts benchmarks & the non-rump undated stocks.
Euro Euribor 0.001 -0.37200 -0.33100 -0.27200 -0.16100 Euro Corporate (€) 106.42 0.07 - - -0.95 -3.87 Canada 08/19 0.75 99.10 1.20 -0.01 0.00 0.31 0.00
Sterling CDs
US$ CDs
0.000
0.000
0.20000
1.21000
0.28000
1.32000
0.42500
1.43000
Euro Emerging Mkts (€) 775.22 10.70 - - -3.98 -12.21 06/27 1.00 92.13 1.88 0.00 0.00 0.39 0.00 GILTS: UK FTSE ACTUARIES INDICES
Eurozone Govt Bond 110.67 0.10 - - -1.75 -7.17 Denmark 11/20 0.25 101.88 -0.31 0.00 0.00 0.00 0.00
Euro CDs 0.000 -0.43500 -0.39500 -0.31500 11/27 0.50 97.69 0.73 -0.03 0.05 0.23 0.00 Price Indices Day's Total Return Return
CREDIT INDICES Day's Week's Month's Series Series Fixed Coupon Jul 10 chg % Return 1 month 1 year Yield
Short 7 Days One Three Six One Index change change change high low Finland 09/19 1.75 100.25 1.64 -0.01 -0.02 0.05 0.60
07/28 2.75 115.37 1.45 0.00 0.00 0.00 0.00 1 Up to 5 Years 96.25 0.07 2424.41 -0.53 -0.04 0.38
Jul 10 term notice month month month year Markit iTraxx 2 5 - 10 Years 184.08 0.20 3468.64 -1.68 -0.86 0.92
Euro -0.50 -0.35 -0.50 -0.35 -0.51 -0.36 -0.47 -0.32 -0.39 -0.24 -0.38 -0.13 Crossover 5Y 369.26 -12.07 35.21 40.34 390.04 288.69 France 11/20 0.25 101.80 -0.28 0.00 0.00 0.00 0.00
3 10 - 15 Years 213.30 0.36 4180.42 -2.63 -2.21 1.47
Sterling 0.15 0.25 0.15 0.25 0.23 0.33 0.35 0.50 0.50 0.65 Europe 5Y 85.00 -1.98 7.21 7.01 90.43 67.59 10/22 2.25 111.63 0.05 -0.03 0.00 0.00 0.00
4 5 - 15 Years 190.65 0.27 3638.65 -2.09 -1.47 1.23
Swiss Franc - - - - - - - - - - - - Japan 5Y 70.05 -2.51 2.21 -0.87 93.03 64.22 05/27 1.00 100.85 0.91 -0.03 0.08 0.30 0.00
5 Over 15 Years 331.07 0.81 5007.25 -3.92 -4.81 1.83
Canadian Dollar - - - - - - - - - - - - Senior Financials 5Y 111.86 -3.89 10.86 12.50 121.66 80.36 Germany 10/19 0.25 101.86 -0.57 0.00 0.00 0.00 0.00
7 All stocks 180.14 0.42 3527.42 -2.33 -2.39 1.61
US Dollar 1.16 1.26 1.20 1.30 1.22 1.32 1.24 1.34 1.39 1.49 1.73 1.83 08/23 2.00 112.22 -0.01 0.00 0.00 0.00 0.00
Markit CDX 02/27 0.25 97.29 0.54 -0.03 0.06 0.29 0.00
Japanese Yen -0.50 -0.20 -0.35 -0.05 -0.20 0.10 -0.20 0.10 -0.15 0.15 -0.10 0.20 Day's Month Year's Total Return Return
Emerging Markets 5Y 198.09 -3.26 -11.46 -11.68 218.09 197.56 08/46 2.50 127.91 1.34 -0.03 0.07 0.23 0.00
Libor rates come from ICE (see www.theice.com) and are fixed at 11am UK time. Other data sources: US $, Euro & CDs: Index Linked Jul 10 chg % chg % chg % Return 1 month 1 year
Nth Amer High Yld 5Y 328.29 0.17 -17.13 -10.17 353.95 327.35 Greece 04/19 4.75 102.01 3.55 -0.05 0.04 -1.37 0.00
Tullett Prebon; SDR, US Discount: IMF; EONIA: ECB; Swiss Libor: SNB; EURONIA, RONIA & SONIA: WMBA. 1 Up to 5 Years 313.85 0.01 -0.34 0.13 2464.77 -0.34 2.01
Nth Amer Inv Grade 5Y 63.53 0.28 -4.09 -3.35 69.24 62.53 02/27 3.00 88.77 5.33 -0.03 -0.03 -0.48 0.00
Websites: markit.com, ftse.com. All indices shown are unhedged. Currencies are shown in brackets after the index names. 2 Over 5 years 681.78 0.19 -5.35 2.03 5077.60 -5.31 2.57
Ireland 10/19 5.90 114.21 -0.33 0.00 0.00 0.00 0.00 3 5-15 years 474.16 0.07 -2.30 2.01 3668.73 -2.15 3.09
05/26 1.00 100.70 0.92 -0.04 0.03 0.26 0.00 4 Over 15 years 865.46 0.23 -6.35 2.04 6306.24 -6.35 2.40
Italy 10/19 0.05 99.92 0.09 -0.02 0.02 0.00 0.00 5 All stocks 618.83 0.17 -4.96 1.95 4677.14 -4.93 2.61
COMMODITIES www.ft.com/commodities BONDS: INDEX-LINKED 11/21 0.35 98.51 0.70 -0.04 0.07 0.18 0.00
06/27 2.20 99.44 2.28 -0.05 0.14 0.26 0.00 Yield Indices Jul 10 Jul 07 Yr ago Jul 10 Jul 07 Yr ago
Energy Price* Change Agricultural & Cattle Futures Price* Change Price Yield Month Value No of
03/47 2.70 87.46 3.40 -0.05 0.14 0.22 0.00 5 Yrs 0.57 0.60 0.25 20 Yrs 1.92 1.96 1.57
Crude Oil† Jul 43.91 -0.43 Corn♦ Sep 398.75 7.00 Jul 07 Jul 07 Prev return stock Market stocks
Japan 06/19 0.10 100.39 -0.10 0.00 0.00 0.00 0.00 10 Yrs 1.30 1.33 0.88 45 Yrs 1.73 1.78 1.42
Brent Crude Oil‡ 47.01 0.17 Wheat♦ Sep 546.50 14.25 Can 4.25%' 21 117.39 0.271 0.218 -0.43 5.18 72531.94 7
06/22 0.10 100.65 -0.03 0.00 0.00 0.00 0.00 15 Yrs 1.75 1.78 1.36
RBOB Gasoline† Jul 1.48 -0.02 Soybeans♦ Aug 1019.25 21.50 Fr 2.25%' 20 110.90 -1.237 -1.217 0.01 20.31 228147.00 16
06/27 0.10 100.05 0.09 0.01 0.01 0.04 0.00
Heating Oil† Jul 1.58 0.00 Soybeans Meal♦ Aug 338.00 8.90 Swe 0.25%' 22 113.20 -1.613 -1.598 -0.09 29.26 236426.76 8
06/47 0.80 97.76 0.89 0.01 0.04 0.07 0.00 inflation 0% inflation 5%
Natural Gas† Jul 2.92 0.07 Cocoa (ICE Liffe)X Sep 1464.00 -24.00 UK 2.5%' 20 369.20 -2.516 -2.527 -0.03 6.58 609469.50 27
Netherlands 01/20 0.25 102.00 -0.54 0.00 0.00 0.00 0.00 Real yield Jul 10 Dur yrs Previous Yr ago Jul 10 Dur yrs Previous Yr ago
Ethanol♦ - - Cocoa (ICE US)♥ Sep 1893.00 14.00 UK 2.5%' 24 365.00 -1.903 -1.901 -0.28 6.82 609469.50 27
07/27 0.75 100.09 0.74 -0.03 0.07 0.27 0.00 Up to 5 yrs -2.21 1.85 -2.20 -1.97 -2.92 1.85 -2.92 -2.47
Uranium† Jul 18.10 0.00 Coffee(Robusta)X Jul 2117.00 -23.00 UK 2%' 35 262.05 -1.485 -1.490 -1.28 9.08 609469.50 27
Carbon Emissions‡ - - Coffee (Arabica)♥ Jul 126.55 -2.10 New Zealand 04/20 3.00 101.90 2.29 0.01 -0.01 0.18 0.27 Over 5 yrs -1.47 24.07 -1.46 -1.45 -1.49 24.14 -1.48 -1.47
US 0.625%' 21 102.18 0.082 0.030 -0.28 35.84 1217838.89 38
White SugarX 383.10 -8.60 04/27 4.50 112.25 3.04 0.01 0.02 0.25 0.79 5-15 yrs -1.73 8.35 -1.72 -1.60 -1.84 8.36 -1.83 -1.70
Diesel† - - US 3.625%' 28 129.73 0.747 0.030 -0.65 16.78 1217838.89 38
Sugar 11♥ 14.12 -0.01 Norway 05/19 4.50 107.17 0.61 -0.01 -0.01 0.03 0.00 Over 15 yrs -1.44 29.28 -1.43 -1.43 -1.45 29.32 -1.45 -1.45
Unleaded (95R) - - Representative stocks from each major market Source: Merill Lynch Global Bond Indices † Local currencies. ‡ Total market
02/27 1.75 100.71 1.67 -0.01 0.04 0.22 0.00 All stocks -1.47 22.30 -1.46 -1.45 -1.50 22.40 -1.49 -1.48
Base Metals (♠ LME 3 Months) Cotton♥ Oct 68.70 -1.20 value. In line with market convention, for UK Gilts inflation factor is applied to price, for other markets it is applied to par
Aluminium 1914.00 -17.00 Orange Juice♥ 130.75 0.00 Portugal 06/20 4.80 113.22 0.26 -0.04 -0.01 -0.09 0.00 See the FTSE website for more details: http://www.ftse.com/products/indices/gilts
amount.
Aluminium Alloy 1635.00 5.00 Palm Oil♣ - - 04/27 4.13 108.50 3.10 -0.04 0.12 0.13 0.00
Copper 5807.50 -23.50 Live Cattle♣ Aug 115.25 0.00 BONDS: TEN YEAR GOVT SPREADS Spain 01/19 0.25 100.78 -0.25 0.00 0.00 0.00 0.00 All data provided by Morningstar unless otherwise noted. All elements listed are indicative and believed accurate
Lead 2280.00 -20.00 Feeder Cattle♣ Aug 145.50 0.23 10/27 1.45 97.07 1.76 -0.08 0.13 0.00 0.00 at the time of publication. No offer is made by Morningstar or the FT. The FT does not warrant nor guarantee
Nickel 8900.00 -80.00 Lean Hogs♣ Aug 91.68 0.00 Spread Spread Spread Spread Sweden 10/18 1.00 99.36 1.53 0.00 0.01 0.05 0.66 that the information is reliable or complete. The FT does not accept responsibility and will not be liable for any
Tin 19725.00 -10.00 Bid vs vs Bid vs vs 11/26 1.00 102.98 0.67 -0.01 0.03 0.28 0.00 loss arising from the reliance on or use of the listed information. For all queries e-mail
Zinc 2757.50 -30.50 % Chg % Chg Yield Bund T-Bonds Yield Bund T-Bonds Switzerland 07/20 2.25 108.87 -0.68 0.00 0.00 0.00 0.00 ft.reader.enquiries@morningstar.com
Precious Metals (PM London Fix) Jul 07 Month Year Australia 2.81 2.27 0.44 Italy 2.28 1.73 -0.09 06/27 3.25 132.29 0.01 0.00 0.00 0.00 0.00
Gold 1211.90 -3.75 S&P GSCI Spt 367.51 -0.62 2.65 Austria 0.79 0.25 -1.58 Japan 0.09 -0.45 -2.28 United Kingdom 07/19 1.75 102.94 0.30 -0.03 -0.04 0.22 0.00 Data provided by Morningstar | www.morningstar.co.uk
Silver (US cents) 1522.00 -62.00 DJ UBS Spot 82.39 -0.03 -4.64 Belgium 0.90 0.36 -1.47 Netherlands 0.74 0.20 -1.63 07/22 0.50 99.22 0.66 -0.04 -0.03 0.27 0.00
Platinum 911.00 6.00 R/J CRB TR 174.88 -1.98 -6.96 Canada 1.88 1.34 -0.49 Norway 1.67 1.13 -0.70 07/27 1.25 99.14 1.34 -0.04 0.01 0.30 0.00
Palladium 834.00 -1.00 M Lynch MLCX Ex. Rtn 231.14 -9.84 -33.05 Denmark 0.73 0.19 -1.64 Portugal 3.10 2.56 0.73 07/47 1.50 91.03 1.89 -0.05 0.02 0.22 0.00
Bulk Commodities UBS Bberg CMCI TR 13.49 0.88 - Finland 1.45 0.90 -0.92 Spain 1.76 1.22 -0.61 United States 06/19 1.25 99.73 1.39 -0.01 -0.02 0.00 0.00
Iron Ore (Platts) 64.55 0.20 LEBA EUA Carbon 5.04 0.00 -13.55 France 0.91 0.37 -1.46 Switzerland 0.01 -0.53 -2.36 06/22 1.75 99.16 1.93 -0.02 -0.01 0.00 0.00
Iron Ore (The Steel Index) 63.80 1.70 LEBA CER Carbon 0.20 -9.09 -50.00 Germany 0.54 0.00 -1.83 United Kingdom 1.34 0.80 -1.03 05/27 2.38 100.05 2.37 -0.01 0.02 0.15 0.00
GlobalCOAL RB Index 84.00 -1.00 LEBA UK Power 3180.00 154.40 158.54 Greece 5.33 4.79 2.96 United States 2.37 1.83 0.00 05/47 3.00 101.50 2.92 0.00 0.06 0.05 0.00
Baltic Dry Index 820.00 -2.00 Ireland 0.92 0.38 -1.45 Data provided by SIX Financial Information
Sources: † NYMEX, ‡ ECX/ICE, ♦ CBOT, X ICE Liffe, ♥ ICE Futures, ♣ CME, ♠ LME/London Metal Exchange.* Latest prices, $ Data provided by SIX Financial Information
unless otherwise stated.
18 ★ FINANCIAL TIMES Tuesday 11 July 2017

MARKETS & INVESTING

INSIGHT Trading room

Paul
Woolley Funds in Matalan ‘orphan’ swaps plan
Proposal to help retailer
replace existing £477m of
of a company by offering or withholding ers of such protection profit hand- ‘It’s possible Adding a complication, members of
finance in the pursuit of trading profits. somely. the Hargreaves family have bought
Matalan is viewed as a very high A Matalan spokesman declined to if you really some of these bonds at deep discounts.

Action needed to bonds promises windfall
stop quants making ROBERT SMITH
A group of hedge funds will help Mata-
mugs of the market lan replace its existing £477m of bonds,
in a move that promises a windfall for
the financiers as it would render worth-
less existing credit insurance contracts
they have sold to other investors.
credit risk by the bond market, with the
retailer carrying a triple-C rating.
Bankers and investors said the group
of hedge funds had sold a large amount
of contracts and received a premium for
insuring outstanding debt issued by
Matalan. This leaves the funds at risk of
having to pay buyers of the contracts
out, should the retailer fail.
However, the hedge funds that have
comment on “any potential specula-
tion” around a refinancing.
Two people familiar with the trade
said Matalan’s senior management is
unlikely to accept the hedge funds’ gam-
bit. The company’s founder John Har-
greaves is Matalan’s chairman, and his
son Jason is chief executive.
“My impression is that it’s just not
where their mindset is at,” said a bond
attract them
with price —
Investors said they believed the family
could own as much of half of the out-
standing second-lien notes.
but you’d The cost of buying CDS protection on
Matalan has fallen in recent weeks —
have to offer
to fund them
reflecting improved analyst expecta-
tions for earnings — but the funds are
said to have sold the protection at ele-
at a much vated levels several months ago.
better level At the time, the cost of buying Mata-

Q
uant investing is enjoying a new lease of
life thanks to the disappointing performance
of traditional active management — and is
being reinvented as an application of artifi-
cial intelligence.
Quant’s credibility comes from offering a systematic
approach to exploit systematic mispricing — especially in
equities. Two themes are common to most quant funds —
firstly, momentum models to take advantage of the pro-
pensity of prices to display momentum or trending, and
secondly, value models to exploit under-pricing in relation
to fundamentals. Both models do well over time, so who is
on the other side of the trades? Who is committing the sys-
tematic mistakes that are on offer? More precisely, which
funds are routinely selling cheap stocks and which are the
willing buyers of expensive stocks sold by momentum
investors when taking their short-term profits?
A compelling case can be made that most of what goes
wrong in asset pricing and asset management stems from
managers and mutual funds being judged on short-term
performance against market indices or peer group
returns. Tight tracking to market cap benchmarks obliges
managers to chase bubbles, overpaying for high-risk
stocks they do not like and selling low-risk ones they do
like. This effect can be powerful enough on its own to
explain the historic evidence that high-risk stocks deliver
lower returns than low-risk ones.
Most funds are pressured to respond in this way and the
predictability of their actions makes them vulnerable to
exploitation. Enter the momentum buyers. These are the
early-stage buyers of stocks on the rise, who need late-
stage buyers to sell to, hopefully at a profit. Logic suggests
that benchmarkers are the “patsies” that fulfil this role. If
so, the relatively small group of quant funds is making
money at the expense of the vast body of benchmarked
funds and will keep doing so
until the penny drops that
close tracking of market
Momentum
indexes is a mug’s game. investing pays
The corollary of high prices
for some stocks is low prices
no regard to the
for others. Quant funds simul- value or earning
taneously indulge in the sec-
ond part of their game, which
power of assets
is buying the neglected and
therefore cheap value stocks, implying a nice exercise in
opportunism. Benchmarking corrupts prices, then
momentum investors amplify the mispricing at the
expense of others and exploit the resulting distortions.
This is a stylised account and the reality is more messy.
But it goes a long way to explaining why momentum and
value work so well and why traditional asset management
struggles to deliver satisfactory results. While such con-
struction makes the private case for quant investing, it is a
sorry indictment of the social state of financial markets.
The three main strategies can be simply stated as value,
early-stage momentum, and benchmarking, which is a
composite of value and late-stage momentum. But with
conflicting incentives and differing horizons, the outcome
is an unsavoury cocktail of asset mispricing, bubbles and
crashes, secular over-pricing and the inversion of risk and
return, all with their damaging consequences for the allo-
cation of capital and the stability of the real economy.
Momentum investing pays no regard to the value or
earning power of assets and is merely shuffling short-term
gains and losses around different classes of asset owner. It
is a chronically unstable system and the opposite of the
picture of efficiency painted by standard finance theory.
When pension trustees hire quant managers, or private
investors buy mutual funds specialising in momentum,
they are fuelling strategies that feed off the opportunities
created by the benchmarked funds that they may also
employ. Investors are hiring managers to engage in damag-
ing battles with each other, in which the managers, with
their hefty fees, are the guaranteed winners. Opting out of
the battle by going passive is not a neutral default solution,
since it implies locking funds into a system that generates
corrupted asset prices, mostly at market extremes.
Policymakers are already concerned at the cost of asset
management fees but the senior issue is that of dysfunc-
tional markets. To address this, the choice is between edu-
cating investors on the damaging effects of benchmarking
and curtailing the use of momentum by taxing the perpe-
trators as traders rather than investors. Without action,
those using AI may make an even better job of exploiting
the weaknesses of the system to their own advantage.
Paul Woolley is a senior fellow at the London School of
Economics and former chairman of GMO Europe. Co-written by
Dimitri Vayanos, professor of finance at the LSE
The plan to “orphan” current credit
default swap contracts highlights the
pitfalls for users of such derivatives in a
market where specialist investors look
to make money from unorthodox
quirks in contracts that compensate
holders if companies default.
The proposal also underscores the
power of hedge funds to change the fate
Money floods into emerging market bond ETFs
Critics warn of ‘unprecedented’
damage if the flows of the
past two years change course
JONATHAN WHEATLEY AND
ROBIN WIGGLESWORTH
The first thing Michael Cirami looks at
when he gets to his desk each morning is
pages of data showing daily flows into
and out of emerging market debt
exchange traded funds.
“A year ago, I wouldn’t have been pay-
ing attention,” says Mr Cirami, portfolio
manager at Eaton Vance. “Now we
gather a lot of data and we monitor this
stuff.”
There is plenty to watch. In the first
half, ETFs investing in EM bonds took in
$13.5bn, according to EPFR, a flow mon-
itor — smashing last year’s $11bn record.
This year’s flows are equal to more
than two-fifths of the flows to all EM
bond mutual funds, even as talk in the
market turns to tighter policy from cen-
tral banks, which would normally damp
demand for fixed-income assets.
At BlackRock, the biggest fund man-
ager, EM bond ETFs took in more than
$10bn in the first half, more than double
the flows to BlackRock’s actively man-
aged EM debt funds.
Critics worry that the expansion of
the role played by ETFs in the EM bond
market will cause trouble if the inflows
of the past two years change course.
“There has been a tsunami of money
coming into EM debt,” says Robert
Koenigsberger, chief investment officer
of Gramercy. “[When the tide] goes out,
the damage is going to be unprece-
dented.”
Critics and advocates of ETFs empha-
sise their differences from standard
vehicles. They are like mutual funds in
that their portfolios expand or contract
as investors’ money flows in and out. Yet
they are also like closed-end investment
companies in that investors gain access
by buying and selling their shares on a
public exchange — with the difference
that managers can create or redeem
shares in line with demand.
While traditional funds may be more
or less actively managed, ETFs tend to
be passive index trackers, attempting to
match the ups and downs of a bench-
mark such as the S&P 500 or JPMorgan’s
MBI emerging market bond index by
assembling a portfolio of stocks or
bonds that as much as possible mirrors
the composition of the index.
Much of the appeal of EM debt ETFs is
the ease with which they can be bought
and sold on exchanges, unlike the bonds
in their portfolios that are often much
harder to trade. This gives retail inves-
sold CDS have offered to fully support a investor. “It’s possible if you really lan’s five-year CDS was $4m to insure
new bond issue from Matalan, so long as attract them with price — but you’d have than banks’ $10m notional of debt. On top of this,
the retailer issued the debt out of a new to offer to fund them at a much better the buyers must pay a 5 per cent annual
entity. This process “orphans” existing level than the banks have told them.” coupon to maintain the position.
CDS contracts written against the old Offering to fully refinance Matalan’s Hedge funds commonly cut deals with
entity, making them essentially worth- bonds takes a strong tolerance for risk, companies around orphan events in the
lessastheynolongerreferenceanydebt. particularly as the company has £137m run-up to the financial crisis, when
Such an outcome would burn inves- of second-lien debt — rated triple-C and liquidity in the single-name CDS market
tors who bought the CDS, while the sell- trading at a yield above 11 per cent. was greater.
Analysis. Capital markets
First-half 2017 smashes
2016 annual record
Yearly flows to EM debt ETFs ($bn)
15
10
5
0
-5
2007 09 11 13 15 17
2017 is Jan to Jun only
The steady advance of EM
debt ETFs
Accumulated flows ($bn)
150
Mutual funds
since Jan 2007
100
50
ETFs since 0
Mar 2007
-50
2007 09 11 13 15 17
Net flows to EMD ETFs were $44.2bn at Jun 2017,
almost half the $90.6bn to mutual funds
Source: EPFR
At BlackRock, tors access to attractive returns — 6 per their APs — will eventually have to sell ing asset push it up further by buying it
emerging cent for EM dollar bonds in the first half them if money flows out. If so, the risk of — that raises most concern.
market bond and 10 per cent for local currency bonds disruption seems clear. ETFs are highly “It’s hard to predict when people will
ETFs took in — formerly beyond their reach. liquid; bond markets by comparison are stop buying tulips,” says Mr Koenigs-
more than Brett Pybus, product strategist at highly illiquid, and EM bond markets berger at Gramercy. “But there is going
$10bn in the BlackRock’s iShares ETF business, says especially so. To make matters worse, to be an ‘I told you so’ moment.”
first half, more ETFs bring price discovery to an other- regulation and other changes have Something resembling that moment
than double the wise opaque market and argues that the sharply cut quantities of EM bonds that is taking place. Last week, more than
flows to the fund issue often raised about liquidity — that banks can hold on their balance sheets. $1bn flowed out of EM debt ETFs, wip-
manager’s bond ETFs are far more liquid, or trada- ing out a chunk of this year’s inflows and
actively ble, than their underlying assets — pushing EM bond ETFs into a year-to-
managed EM misses the point.
‘It’s hard to say when people date loss of 1.8 per cent, according to
debt funds “People say ETFs will be forced sellers will stop buying tulips. TrackInsight, an ETF data aggregator,
Victor J. Blue/Bloomberg
[in a falling market], but that’s not the after average gains of 4.4 per cent in the
experience,” he says.
But there’s going to be an year to mid-April.
ETFs are far more likely to adjust “I told you so” moment’ David Hauner, a strategist at Bank of
their holdings in kind, by handing America Merrill Lynch, describes last
$13.5 bn bonds to “authorised participants” — Mr Cirami says the price discovery week’s selling as a “mini Minsky
What ETFs the banks that handle the transfer of function of bond ETFs would be danger- moment” — a reference to Hyman Min-
investing in EM assets into or out of an ETF’s portfolio — ous in a falling market. “If you knew sky’s idea that low volatility encourages
debt took in during than by selling bonds for cash. everything was coming up for sale, excessive risk-taking, the unwinding of
the first half If the share price of an ETF gets out of would you step in? When the redemp- which magnifies an accompanying
kilter with its net asset value, he argues, tion basket gets passed on, the person it spike in volatility.
$1bn such APs will step in to buy its shares or gets passed to is going to do fundamen- “The big Minsky will come much later
Outward flow last its underlying bonds for arbitrage gains. tal analysis, which the other guy [who in the cycle,” he says, “when EMs funda-
week, pushing EM But critics insist that, just as EM bond bought the ETF] didn’t care about.” mentals which are currently pretty good
bond ETFs into ETFs have bought billions of dollars of It is this “herd behaviour” aspect of turn south, and people will be sitting on
a YTD loss of 1.8% assets as money has flowed in, they — or ETFs — in which investors chasing a ris- these ETFs and find there’s no liquidity.”

Financials

Lacklustre launch for LME gold contract as big bullion banks back rival venture
HENRY SANDERSON
An attempt by the London Metal
Exchange and a group of banks includ-
ing Goldman Sachs to grab a chunk of
London’s $5tn-a-year gold market
through a new futures contract got off to
a lacklustre start yesterday.
Launch-day trading totalled $56m,
compared with $24bn in the most active
Comex gold futures contract in the US,
as the LME has yet to attract the big
bullion banks JPMorgan and HSBC.
The two banks are supporting a rival
venture backed by the London Bullion
Market Association to improve trans-
parency after pressure from regulators.
Gold prices have risen 6 per cent this
year to $1,211 a troy ounce, though talk
of monetary tightening by central banks
has kept prices below the $1,300 a troy
ounce reached last summer.
“You still need to get liquidity and
momentum,” said Ross Norman, chief
executive of bullion broker Sharps Pix-
ley. “I remain to be convinced the world
needs another futures market or spot
market.”
A total of 41,500 troy ounces of gold
and 15,000 troy ounces of silver were
traded yesterday, the LME said. That
compares with a daily average of 20.8m
ounces transferred in the over-the-
counter market in May, worth about
$25.bn, according to the LBMA.
LMEprecious is a joint initiative
between the LME and the World Gold
Council, an industry body made up of
gold miners and six banks, including
Goldman Sachs and a unit of China’s
largest bank ICBC.
The contracts, called LMEprecious,
are centrally cleared and comprise spot,
daily and monthly futures for gold and
silver. They can be physically settled for
gold held in London, providing a link
with the city’s current over-the-counter
gold market.
“It brings together the daily structure
of the OTC market with the monthly
futures approach of existing interna-
tional exchange offerings, while also
providing a solution to pressing chal-
lenges such as ongoing regulatory
Gold price change, increased transparency
requirements and the threat of market
$ per troy ounce fragmentation,” Kate Eged, head of pre-
1300 cious metals at the LME, said.
The other banks that backed the
launch are Morgan Stanley, Natixis,
OSTC and Société Générale. Bank of
1250 China International, Commerzbank,
Marex Financial and Macquarie Bank,
also agreed to participate in trading.
1200 They want to change the way gold is
traded in London by moving it on to an
exchange from its current over-the-
counter market, where the large bullion
1150 banks transact directly with each other.
Jan 2017 Jul The largest bullion-trading banks,
HSBC and JPMorgan, however, were not
Source: Thomson Reuters Datastream
part of the initial group backing the
exchange. They are backing an initiative
by the LBMA to develop an electronic
trade depository platform, which is
being set up by London start-up Autilla
and technology provider Cinnober.
The LME will have to compete against
the existing Comex gold futures con-
tract run by CME Group in New York,
which is widely used by hedge funds,
banks and gold buyers to hedge their
exposure to prices.
Last year Intercontinental Exchange
also said it wanted to start a daily
futures gold contract based on gold held
in London. “This is all about jockeying
for position against the CME and ICE,”
David Govett, head of precious metals at
broker Marex Spectron, said.
Tuesday 11 July 2017 ★ FINANCIAL TIMES 19

MARKETS & INVESTING

Global overview
TRADING POST Markets update
Michael
Hunter
Sovereign debt edges back from S&P 500 index
Change on day 0.19%

losses as European equities climb

Ageing bulls might not have as much
momentum as raging bulls, but they
are moving nonetheless. That is the
message from Citi, which says the red
rag for the continued bull run is the
rosy outlook for earnings, although
some sectors look better than others.
The US bank’s preference is for
cyclical stocks over defensives, as the
global economic rebound takes hold.
Cyclicals are expected to benefit from
an 18 per cent increase in earnings per
share in 2017, compared with 5 per
cent for defensives. That leaves IT,
energy and financial stocks looking
promising, while healthcare and
utilities appear less appealing.
Notably, the US bank also expects
that “the sell-off in government bond
markets should begin to run out of
steam”, since “value will prevail”.
That could put the break on rising
bond yields at a time when returns
from equities are continuing to pick up.
“It is hard to see major rotation out
of equities into defensive assets just
yet,” says Citi’s Mark Schofield. “The
bull market in equities looks a bit old
and tired, but it is not yet dead.”
Geographically, the outlook for
earnings is brighter in continental
Europe and Japan, where Citi has
applied an “overweight” rating. It
has an “underweight” stance on the
UK, which faces “rising political risk”,
and Australia, since there are “better
opportunities” elsewhere in the
Asia region.
Citi is “neutral” on both emerging
markets and the US, forecasting a
“slight depreciation” over the coming
three months.
michael.hunter@ft.com
European and Japanese stocks
Indices rebased
140
Topix 130
120
110
Euro Stoxx 600 100
Jul 2016 2017 Jul
Source: Thomson Reuters Datastream
Yields on Bunds, gilts
and Treasuries fall during
a cautious session, while
US dollar hits two-month
high against the yen
DAVE SHELLOCK
US stocks started the week on a mildly
positive note as Friday’s non-farm pay-
roll report continued to cast a warm
glow over risk markets and participants
looked ahead to the forthcoming corpo-
rate earnings season.
Global government bonds recouped
some of their recent losses, while the
dollar continued to edge higher against
the euro and the yen.
Oil markets had a choppy session with
Brent attempting to establish a foothold
back above the $47-a-barrel mark,
while gold appeared to find a floor after
hitting a four-month intraday low close
to $1,200 an ounce.
By midday in New York, the S&P 500
equity index was up 0.1 per cent at 2,428
following Friday’s 0.6 per cent rise — but
was still more than 1 per cent short of
the record closing high set in the middle
of the previous month.
The technology-heavy Nasdaq Com-
posite was also 0.1 per cent higher on
Friday. While the tech sector was back
in favour, financials put in a relatively
muted showing ahead of the start of the
sector’s reporting season on Friday.
“US banks could struggle to deliver
profits in their investment bank seg-
ments after low [recent] levels of vola-
tility may have depressed earnings,”
said Kathleen Brooks, research director
at City Index.
The stock market mood was more
upbeat across the Atlantic where the
pan-European Stoxx 600 rose 0.4 per
cent and the Xetra Dax in Frankfurt
climbed 0.5 per cent. The UK’s FTSE
100 edged up 0.3 per cent.
Europe eyes Brexit bank bonanza: FT.com/video
Britain’s neighbours are looking to lure business from London
as the UK leaves the EU. The FT’s Patrick Jenkins reports.
In the fixed income arena, the yield on
the 10-year German bond fell 3 basis
points from Friday’s 18-month high of
0.57 per cent.
The yield had risen more than 30bp
over the past two weeks as comments by
European Central Bank president Mario
Draghi — plus other central bank heads
— focused attention on the withdrawal
of policy accommodation.
The 10-year US Treasury yield was
down 2bp at 2.37 per cent yesterday,
while the 10-year gilt yield fell 4bp to
1.27 per cent.
“Global markets have been character-
ised by the theme of rising bond yields
and we expect this to continue in the
week ahead,” said Viraj Patel, FX strate-
Simon Dawson/Bloomberg
gist at ING. “While the recent driving
force has been the breakout in 10-year
Bund yields, catalysts this week stem
from the US.”
These include the testimony on mon-
etary policy from Federal Reserve chair
Janet Yellen to Congress on Wednesday
plus the release of US producer and con-
sumer price data this week.
Last Friday’s US employment report
showed more jobs were created last
month than had been expected — but
wage growth remained subdued.
“The lack of inflation pressures con-
tinues to allow the Fed more leeway to
be cautious when normalising policy,”
said Lee Hardman, currency analyst
at MUFG.
2460
2440
2420
2400
Jun 2017 Jul
“As a result, we still believe that the US equities Gains for technology and
Fed is more likely to delay raising rates energy stocks provided some upward
further until December while it focuses momentum for the S&P 500 although
on beginning to shrink their balance the mood was cautious ahead of the
sheet very gradually from September.” start of the corporate earnings season
Meanwhile, the Bank of Canada this
week looks set to follow the lead set by FTSE 100 index
its US counterpart. Change on day 0.26%
According to the futures market, 7600
there was a 93 per cent chance of a 25bp
rate rise to 0.75 per cent when the BoC 7500
meets on Wednesday, while overnight 7400
index swaps were pricing in 46bp of
7300
tightening over the next 12 months, said
Jun 2017 Jul
Eric Theoret, strategist at Scotiabank.
“Policymakers have been clear in UK equities Mid-cap Carillion grabbed
expressing their desire to withdraw the the headlines, as its shares plunged 39
50bp of stimulus delivered in response per cent, after the outsourcing group
to the oil price shock,” Mr Theoret said. issued a full-year profits warning and
“The BoC’s tone will be crucial as we its chief executive stepped down
look to their assessment of the outlook
for growth and its implications for the Eurofirst 300 index
closing of the output gap.”
The US dollar was a shade higher Change on day 0.46%
1540
against its Canadian namesake yester-
day at C$1.2885 but still close to a 10- 1520
month low. 1500
The US currency was 0.1 per cent
1480
higher against a weighted basket of its
Jun 2017 Jul
main peers as the euro slipped margin-
ally to $1.1397 and the dollar rose 0.2 per European equities The basic materials
cent to a fresh two-month high against and tech sectors led the Eurofirst 300
the yen of ¥114.13. Sterling was down 0.1 higher, while Danish shipping group
per cent at $1.2875. Moller-Maersk jumped 4 per cent after
Brent oil was up 0.7 per cent at $47.02 some positive broker comment
a barrel after spending the session
swinging between a two-week low of
$46.11 and a high of $47.38. Nikkei 225 index
Analysts said the market remained (’000) Change on day 0.76%
20.4
concerned that efforts to restrain supply
may prove ineffectual in lowering oil 20.2
inventories. 20.0
“The oil market is thus likely to
remain capped in the low $50s this year 19.8
and next, with producers selling more Jun 2017 Jul
aggressively into rallies,” said BNP Pari- Japanese equities The softer tone of
bas. the yen in the wake of Friday’s US jobs
Gold held steady at $1,212 an ounce report helped push the Nikkei to its
after earlier touching $1,205, the lowest highest close in a week
since March.

Best Buy according to Amazon’s website, which

Wall Street
Best Buy knocked
as march of Amazon
leaves retail rattled
Joe Rennison and
Adam Samson
High-street electronics store Best Buy
led a sell-off across retailers yesterday
after news broke of Amazon’s rival
offering to Best Buy’s Geek Squad
installation service.
Best Buy skidded 7.6 per cent in mid-
morning action in New York. The stock
has still had a strong year, up 24.7 per
cent, hitting a high on May 25.
The move topped a bad day for retail,
with Gap falling 3.8 per cent to $21.77,
Kohl’s down 3.1 per cent to $37.04 and
L Brands down 2.6 per cent $43.92.
Amazon rose 1.6 per cent to $994.76.
The online behemoth has sent
shockwaves through various parts of
the retail sector with its increasingly
aggressive push into areas that was the
Share price ($) adds that it is “coming soon” to other
60 areas. In addition to offering another
55
50 avenue for its products, such as its Alexa
45 assistant, the offering could strike at
40 demand for Best Buy’s Geek Squad.
Dec 2017 Jul Geek Squad was started in 1994, and
2016
Sources: Thomson Reuters Datastream
made part of Best Buy in 2002. It offers
computer repair and electronics
Indices Close
Day's
change installation services and currently
S & P 500
DJ Industrials
2429.41
21430.27
4.23
15.93
employs 20,000 “agents”.
Best Buy does not disclose Geek
Nasdaq Comp
Russell 2000
6170.70
1204.70
17.62
-8.35
Squad revenues, but said its services
division accounted for about 5 cents of
VIX 11.01 -0.18
every $1 of sales in its latest fiscal year.
US 10 yr Treas Bd 2.37 -0.01
US 2 yr Treas Bd 1.39 -0.01
Geek Squad’s impact may stretch more
broadly, since it lures customers to
bricks-and-mortar stores.
Elsewhere, the S&P 500 inched 0.1 per
cent higher to 2,428, the Dow Jones
mainstays of bricks-and-mortar groups. Industrial Average traded flat at 21,422
Its planned acquisition of Whole Foods and the Nasdaq Composite rose 0.2 per
has shaken the grocery sector. cent to 6,166, boosted by positive
“Retail for the last several months sentiment towards tech companies.
has been hit because Amazon just keeps AutoNation underperformed, down
doing better and better and better,” 4.6 per cent to $39.86, despite growth in
said Michael Pachter, an analyst at used-car prices for the second month in
Wedbush Securities. a row, according to Mannheim’s used-
News website Recode highlighted vehicle index. The results stand in
Amazon’s “home services”, in which it contrast to broader expectations of a
offers consultations on “smart home downward trend in used-car prices.
solutions” and lets customers “set up a “The May and June index results
personalised shopping list for you based challenge concerns that increasing
off your needs and interests”. The wholesale supplies from near-peak off-
experts are “Amazon employees, not lease volumes and rising rental volumes
contractors”, Amazon notes. would lead to rapidly declining used-car
The service is available in parts of values,” said Jonathan Smoke, chief
Washington, Oregon and California, economist for Cox Automotive.

profitability rather than net flows,” said therapy at a Berlin conference.

London
Schroders gains
after RBC points to
‘attractive entry point’
Bryce Elder
Schroders led the blue-chip gainers
yesterday as financial stocks helped the
FTSE 100 inch higher.
RBC turned positive on Schroders
ahead of first-half results from the fund
manager due on July 27, though it
cautioned that net outflows are “likely
to underwhelm” following a £5.8bn
one-off redemption last quarter.
“We believe the focus should be on
RBC. “The underlying business is in
good shape and cost control will likely
surprise on the upside. Given Schroders’
relative share price underperformance
recently and a conservative consensus,
we believe current levels represent an
attractive entry point.”
Schroders closed up 2.2 per cent at
£32.25 in a mixed wider market. The
FTSE 100 took on 0.3 per cent, up 19.11
points, to 7,370.03.
Outsourcers slipped in the wake of a
severe profit warning from Carillion,
which wrote off £845m as part of a
contract review and accelerated a sale of
assets to cut debt.
While fears of a rescue rights issue
sent Carillion sliding 39 per cent to 117p,
Kier was down 2.3 per cent to £12.14 and
Serco lost 1.9 per cent to 110.1p.
Balfour Beatty slid 3.2 per cent to
253.1p, a move Merrill Lynch saw as
overdone. Carillion’s outlook for
services and its public-private
partnership contracts is unchanged and
the overlap between the two companies
is limited to one contract, said Merrill.
Competition fears weighed on
Shire, down 3.2 per cent to £41.87, after
Roche presented safety data for its
ACE910 experimental haemophilia
Earlier, Shire had obtained a
preliminary injunction in a Hamburg
court alleging that Roche had made
“incomplete and misleading
statements” about the inhibitor
therapy’s clinical profile.
Diageo gained 1 per cent to £22.84
after Goldman Sachs took the Smirnoff
maker off its “sell” list.
A 5 per cent discount to the European
staples sector “adequately reflects the
company’s growth and share challenges
in its core US market, balanced against
the potential for recovery elsewhere”,
Goldman said.
Car insurer Esure briefly hit a record
high then pared gains to close 1 per cent
lower at 300p as more as more than
three times the daily average volume
changed hands. The stock has been in
demand in amid rumours that Sir Peter
Wood, its chairman and 30.8 per cent
shareholder, might consider selling the
business.
Dunelm paced a sharp fall among the
retailers, down 6.1 per cent to 582.7p.
Forecast cuts followed last week’s
trading update from Dunelm, which
flagged that a greater reliance on
promotions and seasonal goods would
drag on margins.
20 ★ Tuesday 11 July 2017

SMART MONEY Analysis. Equities

Miles
Johnson
Tel Aviv exchange courts high-tech innovators
Snag is that such groups have Tel Aviv trading volumes
remain small for economy of
The funds that failed to no difficulty raising funds from
venture capital or private equity
Israel's size...
Monthly value of shares traded ($bn)

capitalise on the single JOHN REED — JERUSALEM

Johannesburg Stock Exchange
Oslo Børs
Tel Aviv Stock Exchange
biggest macro trade In Israel, a state nicknamed “Start-Up
Nation” for its leading edge in high-tech
40
30
innovation, the stock market should by 20
all expectations be a vibrant place.
10

K
arl Popper’s test for distinguishing between sci- The Tel Aviv Stock Exchange cer-
ence and pseudoscience was to ask whether a tainly looks the part, with a digital big
given theory was falsifiable or not. If an board hung in a gleaming white atrium 0
Jan 2017 May
idea could be proven or disproven using real- bisected by walkways in the bourse’s
world evidence, it could be useful. If, like astrol- new high-rise headquarters near Roths- ...and the exchange is outshone
ogy, it could not be, it belonged in the world of cranks and child Boulevard, where many tech com- by those from similar-sized
sophists. panies are based. countries
For investors, who each day listen to a cacophony of But the exchange has struggled to live Domestic market capitalisation (as %
views about the direction of the economy, there is up to this dynamic façade. Several com- of GDP)
0 100 200 300 400
a similarly useful rule of thumb: is this type of macro anal- panies have delisted in recent years, and
ysis offering any type of practical investment idea for the TASE lags behind rival exchanges in South Africa
which there is a reliable way of estimating its likelihood of other rich countries of Israel’s size on Singapore
Denmark
success? most indicators. Trading volumes on Philippines
Critics of the practice of trying to invest based on macro the market in the first half of this year Israel
Norway
economic forecasting have repeatedly argued that the averaged just over $400m a day. Ireland
answer to this question is almost always a “no”. It is all too Israeli companies that choose to go
Sources: Thomson Reuters Datastream; WFE
common, they argue, that vague macro observations are public can easily do so in New York or Bourse chief Ittai Ben-Zeev aims to exploit Israel’s position between the US and Asia — Quique Kierszenbaum
extrapolated into hollow and often meaningless invest- London, as dozens already have. In an
ment advice. At worst, they argue, the entire approach of era of 24-hour global trading, some new funds into the exchange from Asia both in Israel and in Silicon Valley, Slowly, however, the market is begin-
investing based on trying to predict macroeconomic Israeli businesspeople have been asking ‘The niche and North America.” where many have their front offices. ning to turn around. Last week Oramed
trends is little more than pseudoscience. whether their country needs a stock Mr Ben Zeev said he hoped to bring Google, Apple and other tech compa- Pharmaceuticals, a Nasdaq-listed Israeli
Warren Buffett has said that trying to invest based on exchange at all. will be, if new brokers to the exchange in coming nies have large operations in Israel, and company, announced a dual listing in
forecasting is a waste of time, believing that no person can All this presents challenges for Ittai you want to months, pending regulatory approval often buy the most promising concerns Tel Aviv. Among other benefits, it cited
have a sustainable edge over the rest of the market. Those Ben-Zeev, 42, a former Merrill Lynch by the Israeli Securities Authority. TASE before they contemplate going public. longer trading days that would allow
on the other side of this debate invoke the careers of investment banker who took over as the invest in officials are also looking at ways of The biggest such acquisition in Israeli more European and Asian investors to
respected macro investors such as George Soros and Paul TASE’s chief executive on January 1, Israeli exploiting Israel’s position between the history came in March when Intel buy its stock.
Tudor Jones, who have enjoyed success for decades at least with a brief to turn round an exchange US and Asian markets, and the fact that bought the pioneering autonomous By easing listing requirements, the
in part driven by their ability to interpret macroeconomic which barely broke even in 2016. innovation, it trades on Sundays, when most other driving company Mobileye for $15.3bn. TASE has ensured that companies can
trends and how these influ- He has been talking to Israeli compa- you come to exchanges are closed. “The biggest pool of liquidity in the start trading as easily as they would be
ence asset prices. nies, alongside regulators and rival “The niche will be, if you want to world is available to Israeli investors, able to on the Nasdaq. Liquidity was
But this year the advocates
If the trend is exchanges in other countries, in an the TASE’ invest in Israeli wisdom and Israeli which raises the question of why to go to helped when the exchange recently
of macro-driven forecasting your friend, effort to bring more initial public offer- innovation, you come to the TASE,” he the TASE,” says Leonard Rosen, CEO of raised the proportion of shares that
and trading — as opposed to ings and dual listings to Tel Aviv, and so said. “Right now, obviously we are not Barclays in Israel. companies listed on the Tel Aviv index
bottom-up investment
how did they attract more foreign investors. there, but when we look globally, this is On the demand side, Israelis have must have as a free float, causing some
research — are again in miss the rallies “When you look at Start-Up Nation, what we want to do — and the potential been shunning stocks for investments in longstanding family groups to sell some
retreat. Some of the best- people are fascinated by the stories of is there.” the surging real estate market. Exclud- of their holdings.
known macro-focused hedge
driven by QE? Israel,” he said in his first interview One of the challenges will be getting ing shares owned indirectly through Eight new companies registered for
funds have suffered a poor with the foreign press since taking the Israeli companies to list. Israeli high- mutual funds, only about 5 per cent of trading on the TASE in the first half.
first half, compounding years of mediocre performance job. “One of our key goals is to bring tech firms in particular have no prob- Israelis own shares, compared with dou- Aeronautics, a producer of drones was
since the financial crisis. The reflation trade — a bet based high-technology companies to the lem raising funds from venture capital ble-digit rates in the US and some other the largest new listing by a tech com-
on rising interest rates and economic growth driven by exchange and, in doing so, help us bring or private equity investors, who abound countries, Mr Ben-Zeev said. pany so far when it joined last month.
more expansionary politics in the US and Europe — has not
performed as expected.
This stuttering performance by macro hedge funds is
the latest setback in a series of false starts during the past Capital markets
five years. Macro funds in aggregate made just 1 per cent
last year, according to HFR, compared with 5.4 per cent for
the average hedge fund. The flagship fund of Brevan
Howard, once one of the largest hedge funds by assets, has
BoJ faces long battle to
suffered the worst first half of the year since it opened in
2003, losing 5.2 per cent. It has not been able to make more
suppress bond yields
than 3.93 per cent in a year since 2011.
A number of the hedge fund world’s macro blue bloods,
such as Louis Bacon’s Moore Capital and Mr Tudor Jones’s LEO LEWIS — TOKYO commitment to buy ¥80tn of
Tudor Management, have suffered poor results for the DAN MCCRUM — LONDON sovereign debt this year, the
first half and appear on track to post a fourth consecutive The Bank of Japan faces a official target, at a time when
year of mediocre returns. Some of these funds have been “protracted battle” for con- central banks appear to be
forced to reduce their fees to retain the interest of an trol over yields on the preparing for a co-ordinated
increasingly impatient client base. benchmark 10-year govern- reduction in stimulus.
Defenders of the once-celebrated macro traders argue ment bond, say analysts, as Robert Michele, head of
that they have been unable to make money because vola- markets and the sliding pop- fixed income at JPMorgan
tility has been so low. Macro trading, which typically ularity of Shinzo Abe Asset Management, said the
expresses views on the direction of the economy with bets threaten to push interest BoJ was “engaged in a closet
on currencies, interest rates and commodities, requires rates higher. tapering”. The asset manager
sustained trends in particular assets to make money. calculates that, based on the
When, as we have seen for long parts of the post-crisis Warnings of repeated sum- pace of bond buying so far
period, price movements are subdued, then these types of mer confrontations between this year, the BoJ is on track
traders tend to perform poorly. When rates start to finally the BoJ and the JGB market to buy only about ¥50tn
go up, their defenders argue, these types of funds will be come as investors spent yes- worth of JGBs.
able to profit handsomely and reward their patient clients. terday adjusting to governor Despite the impact of the
The question the frustrated investors of these hedge Haruhiko Kuroda’s decision BoJ move, which pushed
funds should be asking is why they have failed to capitalise to draw a line in the sand, yields down to 0.09 per cent
on arguably the biggest single macro trade of their genera- after the 10-year JGB yield yesterday, analysts believe
tion: quantitative easing. If, as the macro mantra goes, the crept above 0.1 per cent for coming weeks could see the
trend is your friend, why have the performances of this the first time since February. central bank’s commitment
type of funds largely missed the rallies in equities and By stepping in with an tested several more times.
bonds that many believe has been largely driven by central offer to buy an unlimited The pressure reflects how
bank intervention since 2008? If this sort of traders pride amount of JGBs on Friday, Japan’s position may be out
themselves on understanding, better than the rest of the traders said the BoJ was of step with the hawkish
market, how macro factors and markets interlink, it would deploying the most potent words of central banks in
seem reasonable for them to have ensured they did not weapon at its disposal as the other developed markets.
miss out on the impact QE was going to have on asset prices central bank defended its 10- The Fed is raising rates and
over a sustained period. month-old policy of holding others have signalled a move
the 10-year benchmark at towards tightening. Since the
miles.johnson@ft.com “around 0.0 per cent”. last week of June, the differ-
The move has dimmed ence between yields for 10-
talk that the central bank year JGBs and their German
might gradually raise its counterpart has widened by
intervention point from 0.11 27 basis points.
to 0.2 per cent — a latitude Japan’s persistently low
More comment and data on ft.com that, according to some, inflation and resistance to
would have signalled a turn- substantial wage rises, said
ing point and revived inter- Citigroup economist Kiichi
Y Fast FT Our global economies, headed est in Japan’s banking sector. Murashima, did not permit
team gives you market- by Brazil, Russia, India After Friday’s interven- the BoJ to consider policy
moving news and views, and China. tion, Deutsche Bank’s bank- normalisation. The move on
24 hours a day, five days ft.com/beyondbrics ing analyst Yoshinobu Friday signalled Mr Kuroda’s
a week. ft.com/fastft Yamada said the cap “makes thinking “that allowing even
Y Podcast The Hard
Y Alphaville Our Currency podcast takes a it difficult to justify a bullish the slightest rise in long-term
irreverent financial blog. look at what is driving stance on the bank stocks”. yields would be premature”.
Join Paul Murphy and the global currency Upward momentum in Looming over that, said Mr
Bryce Elder for the daily market. ft.com/podcasts yields had been driven in Murashima and other ana-
Markets Live session at part by weakness across lysts, was the risk that Japa-
Y Lex Video Analysis developed market bonds and nese politics drove rates
11am. ft.com/alphaville
and opinion from the from the BoJ’s reduced buy- higher over coming months.
Y beyondbrics News and team on the hot issues ing of JGBs with a maturity of The slump in support for Mr
comment from more affecting companies and between one and five years. Abe might raise doubts over
than 40 emerging markets. ft.com/lexvideo International investors the sustainability of the BoJ’s
have questioned the BoJ’s ultra-aggressive policies.