AFP

Japan’s SoftBank Group on Friday posted a net profit in the second quarter, partly thanks to gains from the recent reduction of its stake in Chinese e-commerce giant Alibaba.

But falling share prices for many of its tech start-up ventures continue to hurt the company’s balance sheet.

The investment behemoth has made huge bets to find and grow new tech companies around the world — making its earnings vulnerable to fickle market forces.

SoftBank’s results have lurched between dizzying highs and lows in recent years, while China’s crackdown on its tech sector has also taken a toll on the company.

In August, the group announced it would sell down some of its shares in Alibaba, reducing its stake in the Chinese tech giant to around 15 percent from 24 percent.

This helped boost SoftBank’s earnings in the second quarter for a net profit of 3.03 trillion yen ($21.4 billion).

Over the first half of this financial year, however, it suffered a net loss of 129 billion yen, brought down by its record net loss in the first quarter.

SoftBank’s performance in the April-to-June quarter was dragged down by a global tech share rout, triggered by interest-rate hikes by the US Federal Reserve and other central banks to tackle inflation.

The bleak investment climate caused losses in SoftBank’s investments in ventures from US food delivery app DoorDash to South Korean e-commerce brand Coupang.

And the trend continued in the second quarter, which saw investment losses on its two main tech-focused funds of 1.4 trillion yen (nearly $10 billion).

– ‘Very pessimistic’ –

CEO Masayoshi Son said in August that he expected the “winter” for tech start-ups will continue, pledging to cut personnel at the group’s tech-focused Vision Fund.

In September, SoftBank confirmed to AFP that 30 percent of its investment advisors would lose their jobs.

Son is known for his unconventional and often sanguine presentations at earnings announcements, where he highlights the thinking behind sometimes controversial decisions, such as investing generously in risky ventures like the troubled WeWork.

In a change of tack for the company, however, Son on Friday let Chief Financial Officer Yoshimitsu Goto do most of the talking at a post-results press conference.

Goto said the company did not know when the difficult period for technology-related shares would end.

“Looking at just the market over the past month, there has been a slightly more positive change,” he said.

“But basically, we are very pessimistic.”

“We could make a lot of money if we knew when (share prices) will recover, but honestly, we don’t know,” Goto said, adding that the future for the company was difficult to predict given the current geopolitical situation.

Commenting on the recent drama surrounding crisis-hit cryptocurrency platform FTX.com, Goto reassured listeners that SoftBank’s “investment in these virtual currencies and crypto assets is extremely small”. 

Regarding plans to take its microchip powerhouse Arm Holdings public, the company said that an IPO would be tricky within the current financial year, but that it hopes to move forward with the plan by the end of the 2023 calendar year.

Elon Musk’s ownership of Twitter descended deeper into chaos as key security executives resigned from the platform, drawing a sharp warning from US regulators.

The walkouts came after a turbulent launch of new Twitter features following the Tesla and SpaceX owner’s $44 billion buyout of the influential messaging app.

Musk warned employees Thursday that the site was burning through cash dangerously fast, raising the specter of bankruptcy if the situation was not turned around.

“I’ve made the hard decision to leave Twitter,” tweeted chief security officer Lea Kissner, who reportedly stepped down with other key privacy or security executives.

In the most extraordinary exit, US media reported that Yoel Roth — the site’s head of trust and safety — stepped down just a day after staunchly defending Musk’s content moderation policy to advertisers.

Late on Thursday, Roth’s Twitter bio identified him as “Former Head of Trust & Safety at @Twitter.”

Media reports had said Robin Wheeler, who held a key role linking Twitter with advertisers and was considered a key Musk ally inside the company, was leaving but late Thursday she tweeted: “I’m still here.”

The site’s update included a launch of the long-awaited Twitter Blue subscription service, which allowed users to pay $7.99 per month for a coveted blue tick, as well as a separate gray “official” badge for some high-profile accounts.

But on Wednesday Musk scrapped the new gray label almost immediately, overshadowing the launch of the paid service, which is only available on the mobile app on iPhones and in the United States.

The launch also saw the emergence of a flurry of fake accounts as users used the opportunity to impersonate celebrities and politicians such as NBA star LeBron James or former British prime minister Tony Blair.

– ‘Deep concern’ –

The chaos drew a rare warning from the Federal Trade Commission, the US authority overseeing consumer safety that had put Twitter under watch for past security and privacy breaches.

“We are tracking recent developments at Twitter with deep concern,” an FTC spokesperson said in a statement.

“No CEO or company is above the law, and companies must follow our consent decrees,” the spokesperson added, referring to past commitments by Twitter to obey US privacy rules.

Violating FTC decisions could cost Twitter millions of dollars in fines.

Musk fired half of the 7,500 employees of the California company a week ago, 10 days after buying the site and becoming its sole owner.

For the first time since the layoffs, the 51-year-old entrepreneur on Thursday addressed his remaining employees and urged them to help the site reach one billion users, according to employee text messages seen by AFP.

Musk also warned that the company was bleeding cash and expressed fear about the effects of the poor economy on his newly bought business.

“You may have noticed I sold a bunch of Tesla stock. The reason I did that is to save Twitter,” he is reported to have said.

Wedbush analyst Dan Ives warned that the Twitter episode could have serious repercussions for electric car manufacturer Tesla.

“Brand destruction is our biggest worry with this Twitter circus show. It’s that simple and I can’t ignore it for Tesla stock,” Ives wrote on the site.

Twitter is also crippled by the decision of advertisers to stay away from the platform, concerned about Musk’s plans.

The tycoon announced he was ending work-from-home policies at Twitter, which had been a widespread practice at the San Francisco-based company.

“If you don’t show up at the office, resignation accepted,” he told employees.

China announced the relaxation of some of its hardline Covid-19 restrictions on Friday, a day after authorities had vowed to stick to a zero-tolerance virus approach despite mounting economic damage.

The country is the last major economy welded to a strategy of stamping out Covid flare-ups as they occur, through a combination of snap lockdowns, mass testing and lengthy quarantines.

Top leaders had pledged to stick “unswervingly” to the policy, which has forced business closures, roiled international supply chains and weighed heavily on growth.

But a notice from the country’s disease control agency on Friday said the Politburo Standing Committee — the seven-man apex of power in China — met Thursday to rubberstamp limited relaxations.

According to the notice, the quarantine period for inbound travellers will be cut from 10 days to eight, consisting of five days in a state isolation centre and three days at home.

It said that travellers would only be required to show one negative Covid test within 48 hours of boarding flights to China, a reduction from two tests. 

– Relaxing strict policies –

The new rules single out “important business personnel” and “sports groups” as examples of privileged groups permitted to skip quarantine as long as they remain in a virus-secure “closed loop” for the duration of their stays.

The notice said that a so-called “circuit breaker” mechanism on inbound flights would be abolished, bringing an end to a policy that saw temporary cancellation of flight routes if a certain proportion of passengers tested positive.

Now scrapped is the requirement to identify and isolate “secondary close contacts” — those who may have come into contact with infected people.

A domestic Covid risk system has been reduced from three tiers to two, with areas to be labelled as either “high-risk” and subject to curbs, or “low-risk” with minimal restrictions.

People travelling from high- to low-risk areas will be required to undergo seven days of isolation at home, instead of staying in centralised facilities.

Places will be defined as “low-risk” if they record zero new infections for five successive days.

Workers in “closed-loop” environments where exposure to Covid is higher — such as cabin crews, airport staff and quarantine hotel personnel — will undergo shortened quarantines, the notice said.

Chinese stocks listed in Hong Kong soared on Friday following the news, with the Hang Seng’s China Enterprises Index up nearly eight percent in afternoon trading.

The wider Hang Seng Index was also up 7.5 percent.

“I believe this will have a very positive impact on the market and boost investor confidence, but the actual effects will also depend on how the policies are enforced at the local level in the next few months,” said Henry Gao, associate professor at the Singapore Management University.

China’s foreign ministry on Friday downplayed the perceived loosening of restrictions, emphasising that domestic outbreaks are still “severe”.

“China has introduced these measures to make our prevention and control more scientific and precise. It doesn’t mean we have relaxed containment or are even giving up altogether and ‘lying flat’,” spokesman Zhao Lijian said at a routine briefing.

– ‘Unswerving’ commitment –

China has reopened far more slowly than most other countries, a move that has kept infections to a minimum.

The country has recorded just over 5,200 Covid deaths, compared with more than a million in the United States.

But pandemic fatigue has begun to set in as the onerous curbs show little sign of letting up, with grinding lockdowns of the kind that hit Shanghai earlier this year sparking isolated public protests.

And the economic impact has been so severe that analysts now expect China to miss its stated annual growth target of around 5.5 percent by a wide margin.

Adding to the difficulties are shifting and sometimes contradictory demands from Beijing, which incentivise local governments to carry out extreme measures.

China’s top leaders have repeatedly vowed not to waver from the zero-Covid policy, but officials have also criticised heavy-handed enforcement such as excessively bureaucratic local curbs.

Friday’s notice added to the chorus, “strictly forbidding” pre-emptive or overly lengthy lockdowns, unapproved school closures and arbitrary suspensions of work and traffic.

It vowed to “speed up” Covid booster vaccination coverage, especially among the vulnerable older population and boost reserves of antiviral treatments.

China recorded 10,535 new domestic cases on Friday, the vast majority of which were asymptomatic, according to the National Health Commission.

Japan will pour half a billion dollars into a new project to develop and make next-generation microchips, the government said Friday, as the global shortage of semiconductors sparks economic security concerns.

Eight major companies including Sony, SoftBank, Toyota and telecoms giant NTT have joined forces for the venture, the industry ministry said.

Named Rapidus, the new firm says it aims to mass-produce next-generation semiconductors by 2027.

The pandemic has fuelled a global shortage of semiconductors, an essential component of nearly all modern electronics, from smartphones to kitchen appliances and cars.

This has forced businesses to slow manufacturing activity, and has prompted calls for governments and firms to secure chip supplies as geopolitics become increasingly volatile — especially concerning Taiwan, which has a huge chip-producing capacity.

Japan’s industry ministry said each company has invested around one billion yen ($7 million) in Rapidus, with MUFG Bank investing 300 million yen.

On top of this, the government has said it will grant 70 billion yen to the project.

At an unveiling of the new venture, Rapidus president Atsuyoshi Koike said economic security issues were “very problematic considering the global supply chain”, with many chipmakers based in China and Taiwan.

“It seems that everyone has come to understand the importance of semiconductors in recent years,” Koike told reporters, adding that “there has also been growing concern about the decline of the Japanese semiconductor industry”.

US officials have posited that the world is closer than ever to seeing a conflict over Taiwan, which China considers its own territory, to be taken one day, by force if necessary.

Given Taiwan ii top player in the semiconductor world, any move to invade would wreak havoc with global supply chains.

Washington recently introduced new measures to limit China’s access to high-end semiconductors with military uses, a move that has wiped billions from chip companies’ valuations worldwide.

The German economy ministry also has recommended that the sale of a chip factory to a Chinese-owned firm should be blocked as it poses a security threat, government sources said Tuesday.

Last year, Taiwanese chip giant TSMC and Sony said they would tie up on a new $7 billion plant in Japan.

Asian markets surged on Friday after a bumper session on Wall Street as lower US inflation dimmed expectations of more aggressive Federal Reserve rate hikes.

Hong Kong stocks rocketed more than 7.7 percent, while Tokyo’s key Nikkei index also surged, closing up almost three percent.

The gains extended global rallies after the US consumer price index (CPI) showed that the annual pace of inflation was a lower-than-expected 7.7 percent in October, down from 8.2 percent in September.

As US residents reel from sky-high costs, the central bank has moved forcefully to lower demand by raising the benchmark lending rate six times this year.

The latest inflation data should be welcome news to Fed policymakers because prices are “finally showing some response” to the steep rate hikes, said Rubeela Farooqi of High Frequency Economics.

“Inflation has finally started to drop like a rock in the US and this is the best news that anyone can expect,” added AvaTrade analyst Naeem Aslam.

The dollar slumped against rival currencies following the data release, and shares rallied as investors cheered the prospect of less hawkish moves by the central bank.

The Dow was up 3.7 percent at the close and the tech-heavy Nasdaq index soared 7.4 percent. 

Most Asian markets matched the upbeat mood, with the Hong Kong, Shanghai and Shenzhen indexes also buoyed by China’s announcement of a slight relaxation to its hardline Covid-19 restrictions.

Shanghai was up 1.7 percent, and Shenzhen closed up 1.3 percent.

Taipei jumped 3.7 percent, Seoul was up 3.4 percent and Sydney climbed 2.8 percent. Singapore rose 1.6 percent and Mumbai put on 1.7 percent.

European stock markets rose at the open Friday but failed to match the huge gains in Asia and on Wall Street.

“As expected, buying in Asia tech is standing out this morning,” Stephen Innes of SPI Asset Management said.

“But with investors still looking over their shoulders at the crypto schism and rising Covid cases in China, that tide that was lifting all boats is starting to recede in places,” he cautioned.

Trade may also be “dominated by profit-taking and position squaring” after the rallies overnight and ahead of a US market holiday on Friday.

The crypto world has meanwhile been rocked by a surprise decision from Binance, the world’s biggest cryptocurrency platform, to scrap a possible acquisition of rival FTX.com — plunging bitcoin to a two-year low.

Investor Louis Navellier said the US inflation data was “a welcome relief” for markets.

“(It) takes stocks back to green for November and should let the seasonal rally continue with a little less fear of the Fed and more optimism about (2023) earnings estimates,” he said in a note.

Daniel Berkowitz, senior investment officer for investment manager Prudent Management Associates, however, struck a note of caution.

“While it always feels good to see markets rally, we think this morning’s rally is bordering on silly,” he said.

“The market is reacting as if this is the continuance of a multiple-month, downward trend in inflation, and it is not.”

– Key figures around 0800 GMT –

Tokyo – Nikkei 225: UP 2.98 percent at 28,263.57 (close)

Hong Kong – Hang Seng Index: UP 7.7 percent at 17,325.66

Shanghai – Composite: UP 1.7 percent at 3,087.29 (close)

Pound/dollar: UP at $1.1722 from $1.1642 on Thursday

Euro/dollar: UP at $1.0233 from $1.0131

Dollar/yen: DOWN at 141.41 yen from 143.15 yen

Euro/pound: UP at 87.29 pence from 87.20 pence

West Texas Intermediate: UP 2.6 percent at $88.75 per barrel

Brent North Sea crude: UP 2.6 percent at $96.07 per barrel

New York – Dow: UP 3.7 percent at 33,715.37 points (close)

London – FTSE 100: UP 1.1 percent at 7,375.34 (close)