Bloomberg

(Bloomberg) — Ukraine clinched a deal with Elon Musk’s Space Exploration Technologies Corp. to get thousands more Starlink antennas to help keep people on line amid Russia’s attacks on infrastructure, Mykhailo Fedorov, deputy prime minister and minister for digital transformation, said in an interview in Kyiv.

The International Monetary Fund, meanwhile, approved a new four-month program for Ukraine that doesn’t envisage lending money but could serve as a bridge to a multi-billion-dollar loan package if successful. 

(See RSAN on the Bloomberg Terminal for the Russian Sanctions Dashboard.)

Key Developments

• Ukraine to Get Thousands More Starlink Antennas, Minister Says
• Putin Says Russia-Belarus Drills to Go On as Ally Hints on Arms
• EU Agrees to Cap Gas Prices at €180 Temporarily to Ease Crisis
• Canada to Pursue $26 Million in Assets From Russia’s Abramovich

On the Ground

Russian forces launched four missile attacks, 60 air strikes and more than 80 salvos from multiple-launch rocket systems over the past day, Ukraine’s General Staff said on Facebook. Ukrainian troops repelled attacks near 10 settlements in the Luhansk and Donetsk regions, including Bakhmut, according to the statement.

(All times CET)

More Than Half of Kyiv Has Power Problems, Ukrenergo Says (11:30 a.m.)

Less than half of power demand in Kyiv city is being met on Tuesday following Russian drone attacks, national grid operator Ukrenerego said on Telegram.

City authorities are prioritizing the supply of electricity to key infrastructure as the country’s energy system continues to experience a significant power deficit, Ukrenergo said.

Putin Says Situation in Southeastern Ukraine ‘Extremely Difficult’ (11:15 a.m.)

President Vladimir Putin said the situation in southeastern Ukrainian regions occupied by Russia is “extremely difficult,” following Ukraine’s success in wresting back control of an increasing part of this territory.

Putin referred to Donetsk, Luhansk, Zaporozhzhia and Kherson as “new regions of Russia,” in a video address on Tuesday marking a holiday dedicated to the country’s security agencies. 

Russia annexed the four provinces in September but has been steadily losing ground there in the face of a Ukrainian counter-offensive. Last month Russia withdrew from Kherson City, the only regional capital it controlled since invading Ukraine 10 months ago.

Ukraine to Get More Starlink Antennas (8 a.m.)

“SpaceX and Musk quickly react to problems and help us,” Fedorov said in the interview, adding that he spoke directly with Musk. “Musk assured us he will continue to support Ukraine. When we had a powerful blackout, I messaged him on that day and he momentarily reacted and has already delivered some steps. He understands the situation.”

More than 10,000 devices, which provide internet service beamed down from satellites, will be sent to Ukraine, according to Fedorov.

Starlink played an important early role in the war, as Russia’s military focused on destroying communications. But Musk, SpaceX’s chief executive officer, drew the wrath of Ukrainians in October when he tweeted that Kyiv should remain neutral — an apparent suggestion that it not join military alliances like NATO — and should cede territory to Russia in exchange for a peace deal.

Kyiv Has Significant Power Cuts, Mayor Says (7:41 a.m.)

Periods of power cuts will be extended in the capital, Mayor Vitali Klitschko said on Telegram. There is enough power to supply critical facilities and about 20% of residents.

The oldest line of Kyiv’s subway network was partially closed for passengers due to a voltage drop, the subway operator said on Telegram. Two other lines resumed operation.

Ukraine Gets IMF Nod for Non-Cash Program (1:21 a.m.)

The IMF executive board discussed so-called program monitoring with board involvement, or PMB, for the war-torn nation on Monday, the Washington-based lender said on its website.

The PMB “is tailored to Ukraine’s exceptional circumstances,” and helps the nation’s government implement prudent policies and catalyze donor financing,” IMF First Deputy Managing Director Gita Gopinath said.

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©2022 Bloomberg L.P.

(Bloomberg) — Volkswagen AG is requiring employees at one of its factories in southern China to work extended hours to compensate for production losses after staff came down sick with Covid, a person familiar with the matter said, as a wave of infections snakes across the country.

The German carmaker has arranged for staff in several workshops at a plant it operates with China FAW Group Co. in Foshan, Guangdong province to work 11 hours a shift, two shifts a day, for at least three days, as it seeks to make up for lost output before the year’s end, according to the person familiar with the plans, and a company memo seen by Bloomberg News.

Workers at the plant generally work eight hours per shift. The stepped-up schedule started Dec. 19 and will run through Dec. 21 and applies to some employees on the welding, painting, general assembly and repair lines, the person said, asking not to be identified because they aren’t authorized to speak publicly.

The alterations were made after too many workers got Covid and called in sick, the person said. A representative for VW in China didn’t immediately respond to a request for comment.

China is witnessing a surge in Covid infections after it abandoned stringent pandemic restrictions last month and plunged headlong into reopening. The sudden transition from a nation determined to eliminate Covid to one that’s resigned to live with it poses particular challenges for manufacturers, which need a certain volume of working staff to meet delivery targets. A wave of infections could disrupt global supply chains and the wider economy.

While the first big Covid outbreaks since the shift have been concentrated in major cities like Beijing, there are signs of spread into manufacturing regions already. Covid has ripped through a workshop at BMW AG’s factory in Shenyang, northern China, with a new group of workers brought in to replace the sick.

Read more: China’s Factories Hoard Medicine, Split Shifts as Covid Descends

VW has several large production hubs in China including Changchun in the north, Shanghai in the east and Foshan in the south. All three of those saw fallout earlier this year from China’s hardcore Covid Zero policy, including weeks-long lockdowns. The automaker at times kept plant workers on site under so-called closed-loop systems to keep production running.

Despite those efforts however, VW still had to occasionally shutter production or change production schedules. 

The latest move to salvage production before 2022 closes out shows some manufacturers are making every effort to meet output targets despite rising Covid case numbers. There have been reports of companies asking workers to come in even if they’re sick or to come back after a few days of rest.

FAW-Volkswagen’s Foshan plant has an annual production capacity of 600,000 units and makes both VW and Audi models.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Volkswagen AG is requiring employees at one of its factories in southern China to work extended hours to compensate for production losses after staff came down sick with Covid, a person familiar with the matter said, as a wave of infections snakes across the country.

The German carmaker has arranged for staff in several workshops at a plant it operates with China FAW Group Co. in Foshan, Guangdong province to work 11 hours a shift, with two shifts operating each day, for at least three days, as it seeks to make up for lost output before the year’s end, according to the person familiar with the plans, and a company memo seen by Bloomberg News.

Workers at the plant generally work eight hours per shift. The stepped-up schedule started Dec. 19 and will run through Dec. 21 and applies to some employees on the welding, painting, general assembly and repair lines, the person said, asking not to be identified because they aren’t authorized to speak publicly.

The alterations were made after too many workers got Covid and called in sick, the person said. A representative for VW in China didn’t immediately respond to a request for comment.

China is witnessing a surge in Covid infections after it abandoned stringent pandemic restrictions last month and plunged headlong into reopening. The sudden transition from a nation determined to eliminate Covid to one that’s resigned to live with it poses particular challenges for manufacturers, which need a certain volume of working staff to meet delivery targets. A wave of infections could disrupt global supply chains and the wider economy.

While the first big Covid outbreaks since the shift have been concentrated in major cities like Beijing, there are signs of spread into manufacturing regions already. Covid has ripped through a workshop at BMW AG’s factory in Shenyang, northern China, with a new group of workers brought in to replace the sick.

Read more: China’s Factories Hoard Medicine, Split Shifts as Covid Descends

VW has several large production hubs in China including Changchun in the north, Shanghai in the east and Foshan in the south. All three of those saw fallout earlier this year from China’s hardcore Covid Zero policy, including weeks-long lockdowns. The automaker at times kept plant workers on site under so-called closed-loop systems to keep production running.

Despite those efforts however, VW still had to occasionally shutter production or change production schedules. 

The latest move to salvage production before 2022 closes out shows some manufacturers are making every effort to meet output targets despite rising Covid case numbers. There have been reports of companies asking workers to come in even if they’re sick or to come back after a few days of rest.

FAW-Volkswagen’s Foshan plant has an annual production capacity of 600,000 units and makes both VW and Audi models.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Listen to Bloomberg Crypto on the iHeartRadio App, Apple Podcasts or Spotify.

In the aftermath of the FTX collapse — one of the most significant crypto exchanges in the industry — investors and hedge funds are increasingly questioning the future of crypto. 

FTX was once among the top centralized exchanges, a haven for professional and amateur investors. But now, billions of investors’ dollars have disappeared and its former CEO, Sam Bankman-Fried, has been arrested and denied bond, facing conspiracy and fraud charges. 

Earlier this month, Binance, the largest exchange by volume and a former rival of FTX, suffered a wave of withdrawals after releasing its “proof-of-reserves” report, a sign of persistent jitters among investors and crypto proponents.

Bloomberg reporter Justina Lee joins senior editor Anna Irrera to discuss.

Subscribe to the Bloomberg Crypto Newsletter at https://bloom.bg/cryptonewsletter 

This podcast is produced by the Bloomberg Crypto Podcast team: Supervising producer: Vicki Vergolina, Senior Producer: Janet Babin, Producers: Sharon Beriro and Muhammad Farouk, Associate Producers: Mo Andam and Ty Butler. Sound Design/Engineer: Desta Wondirad.

 

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — British Airways services suffered hours-long delays after a failure involving flight-planning software led aircraft to be held on the ground.

Only around 50% of British Airways flights were in the air in the early morning Tuesday compared with a week earlier, aircraft-tracking website Flightradar24 said. The airline confirmed that it had suffered a “technical issue” with its flight-planning system which was later resolved.

The problem stemmed from a failure of software that BA pilots access via Apple Inc. iPads, people familiar with the matter said. That system was in the process of being upgraded, according to the people, who asked not to be identified discussing internal concerns.

“Our teams have now resolved a temporary issue that affected some of our long-haul flight planning systems overnight, which resulted in delays to our schedule,” British Airways said in an emailed statement. “We’re sorry for the disruption caused to our customers’ travel plans.”

Passengers complained of the upheaval, with some saying on Twitter that operations appeared to have been disrupted for hours.

British Airways, a unit of IAG SA, which also controls Iberia of Spain and Ireland’s Aer Lingus, said there was no safety issue. Short-haul flights and long-haul services that had already departed weren’t affected.

The glitch is the latest in a series of software or hardware-based failures to afflict airlines and adds to challenges for BA that include staff shortages and a looming strike by Border Force officials at its London Heathrow base, just as the company enters one of the most intense travel periods of the year.

 

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — British Airways services suffered hours-long delays after a failure involving flight-planning software led aircraft to be held on the ground.

Only around 50% of British Airways flights were in the air in the early morning Tuesday compared with a week earlier, aircraft-tracking website Flightradar24 said. The airline confirmed that it had suffered a “technical issue” with its flight-planning system which was later resolved.

The problem stemmed from a failure of software that BA pilots access via Apple Inc. iPads, people familiar with the matter said. That system was in the process of being upgraded, according to the people, who asked not to be identified discussing internal concerns.

“Our teams have now resolved a temporary issue that affected some of our long-haul flight planning systems overnight, which resulted in delays to our schedule,” British Airways said in an emailed statement. “We’re sorry for the disruption caused to our customers’ travel plans.”

Passengers complained of the upheaval, with some saying on Twitter that operations appeared to have been disrupted for hours.

British Airways, a unit of IAG SA, which also controls Iberia of Spain and Ireland’s Aer Lingus, said there was no safety issue. Short-haul flights and long-haul services that had already departed weren’t affected.

The glitch is the latest in a series of software or hardware-based failures to afflict airlines and adds to challenges for BA that include staff shortages and a looming strike by Border Force officials at its London Heathrow base, just as the company enters one of the most intense travel periods of the year.

 

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Investors remained cautious about PLDT Inc.’s shares following the record plunge this week after the Philippines’ largest phone company by revenue said it found 48 billion pesos ($867 million) in unaccounted spending.

The company, through an internal audit, discovered a budget overrun from 2019 through 2022 for its network expansion, it said on Friday. The amount could be as high as 130 billion pesos, according to a Philippine Daily Inquirer report. The company will hold an investor briefing on Wednesday.

“PLDT will continue to be punished until investors are satisfied the problem has been addressed,” said Astro del Castillo, managing director at First Grade Holdings. Even then, it would take time for PLDT to rebuild investor trust, he added.

The episode underscores serious corporate governance concerns for a company that counts a large base of foreign investors but has the second-lowest percentage of independent directors among the 30 firms in the benchmark Philippine Stock Exchange Index. 

Here are three charts showing how shareholders fled the stock:

Volumes for PLDT spiked in the ten minutes before stock trading ended on Friday, with more than 100,000 shares changing hands. The bourse and the securities commission have said they are looking into this surge for possible violations given that it happened just an hour before PLDT’s statement highlighting the discovery.

PLDT’s record 19% tumble on Monday in Manila was driven by foreigners who exited the stock at the fastest pace ever, according to Bloomberg data. Together, they pulled out more than 696 million pesos from the stock — nearly 70% of total foreign outflow from the entire market that day. PLDT’s collapse also pushed the benchmark Philippine Stock Exchange Index down 1.3%.

The setback for PLDT allowed rival Globe Telecom Inc., a venture of Ayala Corp. and Singapore Telecommunications Ltd., to become the country’s most valuable telecoms firm. Globe added more than 15 billion pesos in market cap since Friday even as PLDT shed more than 60 billion pesos. 

–With assistance from Jeffrey Hernandez.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Chinese companies are set to tap the European market at a faster pace next year as lingering geopolitical risks and regulatory woes reduce the appeal of other offshore markets like the US.

Chinese solar power equipment company Longi Green Energy Technology Co. has selected banks for a sale of global depository receipts in Switzerland that could be as large as $4 billion, larger than any offering in Hong Kong this year. Other names in the pipeline include e-commerce platform Beijing United Information Technology Co. and energy drink maker Eastroc Beverage Group Co., Bloomberg News reported. 

Chinese GDRs boomed this year following a recently-expanded program between China and several European bourses that simplified listing process, allowing faster offerings than in onshore exchanges or in Hong Kong. While liquidity is lower in Europe, investors may be keen to tap the listings as an arbitrage chance to mainland shares.

The GDRs become fungible with onshore-shares after 120 days of trading. The GDRs are predominantly taken up by Chinese investors and most are waiting to convert them back to A-shares to pocket the price difference.

“We expect to see more GDR listings in the coming months with China emphasizing offshore capital raising,” said Mandy Zhu, head of China, global banking at UBS AG in Hong Kong.

Close to 30 Chinese companies have announced, or will “very soon” indicate, their intention to list in Switzerland, according to Hang Wang, partner and co-head of Baker McKenzie’ capital markets practice for Hong Kong and Mainland China in Beijing.

Chinese banks, namely China International Capital Corp., Citic Securities and Huatai Securities International are the major forces leading the charge to Europe. International banks such as UBS Group AG and Goldman Sachs are also taking a slice of the action.

“There have been a number of GDR deals in 2022, and the activity will continue into next year,” said Edward Byun, co-head of Asia ex-Japan equity capital markets at Goldman Sachs Group Inc. “We are focused on being a part of that flow.”

Though a 1% fee earned by underwriters through GDR offerings is not as enticing as those received through Hong Kong or US IPOs, GDRs take less time and resources to come to market. 

In addition to Switzerland, where eight offerings raised $2.4 billion this year, Frankfurt could see a buzz in the first quarter of 2023. Both CICC and Citic Securities acquired memberships and trading qualifications at the Frankfurt exchange.

“To be good at executing GDRs, banks need to have strong Chinese A-share coverage, a healthy balance sheet, and are able to loan out securities to participating investors of GDRs,” said Frank Yu, head of investment banking at CLSA, the offshore platform of Citic Securities.

To be sure, the tide for GDRs may recede once the path for Chinese companies to maintain their listing in the US clears and as Hong Kong makes a comeback.

–With assistance from Swetha Gopinath.

(Corrects designation in second-to-last paragraph.)

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©2022 Bloomberg L.P.

(Bloomberg) — US lawmakers have agreed to a $1.7 trillion funding bill and plan to ram the compromise legislation through the House and Senate this week to avert a Dec. 24 government shutdown. 

The bill, which would provide funding for government agencies through the Sept. 30 end of fiscal 2023, includes $858 billion for national defense, a $76 billion increase over current levels. Domestic agencies would see a $773 billion level. 

It also would provide more than $45 billion to aid Ukraine in its defense against the Russian invasion. This tranche of aid may be the last for Ukraine for a while given significant House Republican skepticism about the war effort. The bill also includes $41 billion in disaster relief for communities affected by recent hurricanes and wildfires.

“The pain of inflation on American families is real, and it is being felt right now across the federal government,” Senate Appropriations Chairman Patrick Leahy said in a statement upon releasing the bill. “From funding for nutrition programs and housing assistance, to home energy costs and college affordability, our bipartisan, bicameral, omnibus appropriations bill directly invests in providing relief from the burden of inflation on the American people.”

The 4,155 page bill was filed after 1 a.m. Tuesday.  

The release of the bill was delayed for hours as Democrats squabbled over language related to the location of a new headquarters for the Federal Bureau of Investigation until a compromise was reached to satisfy lawmakers from Maryland and Virginia. The compromise, brokered by Senate Majority Leader Chuck Schumer, requires consultations with lawmakers from both states, according to an aide. 

In the overall bill, the majority Democrats agreed to a roughly 10% increase to defense funding while limiting non-defense funding to a 5.5% increase to gain enough Republican support to pass the measure under the Senate’s filibuster rules. Funding for veterans programs would receive a 22% increase, Leahy said. 

Each party underscored different parts of the package as accomplishments.

Republicans pointed out that the legislation would provide US troops with a 4.6% pay raise and expand a program to hire more police officers, by 32%. 

Democrats boasted that the legislation increases grants for child care by 30%, along with more money for the National Institutes of Health, the Environmental Protection Agency and the National Park Service.

The Senate will vote first and intends to pass the measure before Thursday, leaving the House no time to demand changes before the Christmas holiday. Meeting the deadline will require cooperation of all senators. 

 The sequence of votes is to help House Speaker Nancy Pelosi handle the tiny two-vote majority she now holds and insure her members back the bill. Some progressives are expected to oppose the large increases for defense and policing.  

House Republicans were left out of the negotiations and have argued that any bill should wait until at least January when they will take over the House. They are expected to mostly stick together in voting against the bill, heightening the need for Democrats to be unified. 

Senate Republican leaders have concluded that the narrow and fractious GOP House majority would be unable to complete the fiscal 2023 spending bill anytime soon, and instead chose to compromise with Democrats. Senate GOP leader Mitch McConnell portrayed it as a victory.

“President Biden wanted to cut defense spending and grow liberal domestic spending in real dollars,” McConnell said on the Senate floor. “But Congress is rejecting the Biden Administration’s vision and doing the exact opposite.”

For the GOP, that means foregoing a chance to claw back money for more Internal Revenue Service agents that was part of the Democrats’ Inflation Reduction Act, though Republicans were able to block any further increases to the IRS budget.

The bill continues funds for family planning but Democrats abandoned an attempt to green-light tax-payer funded abortions by stripping out the so-called Hyde Amendment containing the prohibition. 

Election Integrity

The legislation would change the way electoral votes are counted for presidential elections, clarifying that the vice president does not have the ability to toss out Electoral College votes. The inclusion of the Electoral Count Act is intended to prevent a repeat of the Jan. 6 insurrection, which was inspired by unfounded claims the 2020 election was stolen and that then-Vice President Mike Pence had the ability to declare Donald Trump the winner. 

Of interest to China-watchers: along with $2 billion in weapons funding for Taiwan, the bill also contains and a ban on downloading the social media app TikTok to government phones. A proposal to ban Chinese telecommunications company Huawei from the US banking system was not included, however. 

The bill also contains changes to tax-shielded retirement accounts, would reauthorize Food and Drug Administration fees and finance Medicaid in Puerto Rico and other territories.

And it would provide $1.8 billion to boost semiconductor-related innovation authorized in Biden’s signature CHIPS act. 

Chopping Block 

Lawmakers were unable to attach a bevy of other congressional priorities to the must-pass legislation despite weeks of negotiations.  Among the items on the cutting-room floor are a deal on corporate tax breaks, including the expensing of research and development spending. Democrats had demanded a revival of the 2021 expanded child tax credit in exchange which Republicans deemed too costly.

An administration request for billions in coronavirus funding was ignored as was a last-minute attempt to attach changes for farm-worker visas and to impose new FDA oversight over commercial laboratory testing. 

West Virginia Senator Joe Manchin attempted to add changes to energy project permitting but he was rebuffed. 

Lawmakers are also forgoing the opportunity to attach an increase to the nation’s $31 trillion debt ceiling to the bill, setting up a fight next year with House Republicans. They plan to use the need to stave off a payments default in the second half of 2023 to seek cuts to domestic spending. 

–With assistance from Laura Davison and Laura Litvan.

(Updates with military pay, domestic spending, starting in ninth paragraph.)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Business is suddenly booming for China’s lemon farmers as citizens turn to natural remedies to fight a mounting wave of Covid infections.

“The market is very much on fire,” said one farmer called Wen, who only gave his surname when reached by phone. Wen grows lemons on about 130 acres (53 hectares) in Anyue, a county in the southwestern province of Sichuan that produces around 70% of the fruit in China. He said his sales have skyrocketed to 20 to 30 tons a day over the past week, from just 5 or 6 tons previously. 

The surge in demand for Wen’s lemons is coming from cities like Beijing and Shanghai, where people are rushing to buy foods rich in vitamin C to boost their immunity in the latest battle against the pandemic. As cold and flu medicines run short, it’s yet another example of how an unprepared public is being forced to contend with the government’s abrupt shift away from the Covid Zero policies that have ruled for the past three years. There’s insufficient evidence that vitamin C can treat or prevent Covid. 

“Lemon prices have doubled in the past four or five days,” said another farmer in Anyue, who goes by the name Liu Yanjing. Liu said he’s working 14 hours a day to deal with the orders flying in from all over the country. Prior to the latest surge, lemons were selling for 2 or 3 yuan per half kilo, or around 30 to 40 US cents. Now they’re 6 yuan, he said.

Sales of other fruits including oranges and pears are also soaring on Dingdong Maicai, an e-commerce platform selling fresh produce, according to local media. Canned yellow peaches are another item in demand, as some Chinese believe that the cold and sweet fruit can improve the appetite, especially when you’re sick. Sales of the product at Freshippo, a grocery chain owned by Alibaba Group Holding Ltd., have risen nearly 900%, according to one report.

Just last month, China’s fruit and vegetable farmers were fretting over tons of fresh produce that were piling up because of the effect of the country’s stringent virus curbs on transportation. The price of lemons in the villages of Anyue fell to almost to nothing as stockpiles built with no domestic or export markets to sell to, leading to heavy losses for farmers, according to Wen. That’s now all changed. 

“It seems people have suddenly realized lemons are good,” said his fellow farmer Liu. “I hope the awareness will last.”

The Week’s Diary

(All times Beijing unless noted otherwise.) 

Tuesday, Dec. 20

• China sets monthly loan prime rates, 09:15
• China Nov. output data for base metals and oil products
• China’s 3rd batch of Nov. trade data, including country breakdowns for energy and commodities

Wednesday, Dec. 21

• CCTD’s weekly online briefing on China’s coal market, 15:00

Thursday, Dec. 22

• Nothing major scheduled

Friday, Dec. 23

• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30

On The Wire

Chinese banks maintained their benchmark lending rates for a fourth month, with economists predicting a possible reduction to the mortgage reference rate in coming months to help the struggling property sector.

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©2022 Bloomberg L.P.