Bloomberg

China Crackdown Rocks Investors: ‘Everybody’s in the Crosshairs’

(Bloomberg) — Beijing’s clampdown on the booming private education industry has shocked even some of the most seasoned China watchers, prompting a rethink of how far Xi Jinping’s Communist Party is willing to go as it tightens its grip on the world’s second-largest economy.

The crash in tutoring stocks that began on Friday spread this week across the tech sector and beyond, after authorities confirmed reports they would ban a swathe of the education industry from making profits. It’s the government’s most extreme step yet to rein in private businesses that regulators blame for exacerbating inequality, increasing financial risk and — in the case of some tech titans –- challenging Beijing’s authority.

With losses in Chinese tech and education stocks now exceeding $1 trillion since February, the questions reverberating across trading desks from Shanghai to New York are where regulators might strike next and whether markets are properly discounting regulatory risk. Property-management and food-delivery companies were among the biggest losers on Monday after Beijing signaled tighter rules for both sectors.

While some investors say the selloff has created buying opportunities, ongoing clampdowns on everything from internet platform operators to commodities producers and China’s gargantuan real estate industry suggest plenty of room for more surprises — especially for international investors as Xi’s government shows less concern than its predecessors did about spooking foreign capital.

Goldman Sachs Group Inc.’s sales desk summed it up this way in a note to clients: “Even when you think China risk is priced…it can get worse.”

Monday’s rout underscored just how widespread that concern has become. All 10 industry groups in the MSCI China Index posted declines as the gauge sank 5.6%, the most since March 2020. The selloff was all the more striking given MSCI’s All-Country World Index jumped on Friday to within a hair’s breadth of its all-time high. The China gauge dropped another 1.5% at 10:37 a.m. on Tuesday, extending its slide from this year’s peak to 28%. It’s now trading at about 1.3 times book value, the biggest valuation discount on record relative to global peers.

In the U.S., the Nasdaq Golden Dragon China Index plunged 7% Monday to close at its lowest level in 13 months. The gauge — which tracks 98 of China’s biggest firms listed in the U.S. — posted its two-day drop since 2008 and has lost $769 billion in value since reaching a record high in February.

“Everybody’s in the cross-hairs,” said Fraser Howie, an independent analyst and co-author of books on Chinese finance who has been following the country’s corporate sector for decades. “This is a very difficult environment to navigate, when over the weekend your business can basically be written down to zero by state edict, how on Earth are you to plan for that?”

Regulatory risk is nothing new in China, but rarely have global investors had to cope with such an onslaught of rules that threaten to curb growth and in some cases decimate entire business models. Beijing’s surprise scuttling of Jack Ma’s initial public offering of fintech giant Ant Group Co. in November looks increasingly like the high-water mark for an era of relatively loose regulation for the country’s private sector.

Among the investment firms selling on Monday was BNP Paribas Asset Management, which oversees about $559 billion worldwide and was already underweight China heading into the rout. “Investors are looking to figure out if there are more sectors that can face this,” said Zhikai Chen, the firm’s head of Asian Equities. “We are reducing some exposure.”

Chen said it’s too early to judge whether the Chinese government’s attitude toward the private sector has permanently shifted, noting that authorities have in some ways made it easier for companies and investors to access capital markets in recent years.

But that was also true for the education industry –- a darling of Wall Street — until regulators began signaling a potential clampdown earlier this year. The rules were ultimately stricter than even some of the most bearish predictions, banning companies that teach school curriculums from making profits, raising capital or going public. They have effectively obliterated the model underpinning a $100 billion industry.

“What has happened in the education/tech sector could happen in other sensitive and strategic sectors, such as media, healthcare or whatever,” said Claude Tiramani, a Paris-based fund manager at LA Banque Postale Asset Management SA, who oversees about 600 million euros ($708 million) in investments. “Because of these uncertainties, I think the Chinese market could get de-rated.”

Tiramani, who holds companies including New Oriental Education & Technology Group and Tencent Holdings Ltd., said he raised the cash position to the maximum allowed in his portfolio in the last three months, and took advantage of any bounce-back to “substantially” reduce exposure to technology companies.

The clampdown in some ways mirrors Beijing’s broader campaign against the growing power of Chinese internet companies, including Didi Global Inc. to Alibaba Group Holding Ltd. But it also stems from a deeper backlash against an industry that has been criticized for putting too much pressure on children, burdening parents with expensive fees, and exacerbating inequality. China’s government has been prioritizing efforts to boost the country’s birthrate as it tries to prevent an aging population from further weighing on economic growth.

“I don’t think this is so much about foreign investors, I think it is more about trying to restore equality for K-12 education,” said Joshua Crabb, a senior portfolio manager at Robeco in Hong Kong.

Still, it’s a reminder for global investors of the importance of tracking the Chinese government’s shifting priorities.

The temptation is to view the market in a similar way to major peers like the U.S., but Beijing often moves more quickly and decisively because it lacks checks and balances, said an executive at one of the world’s biggest private equity firms who has backed at least one U.S.-listed Chinese education company. He asked not to be identified given the sensitivity of the subject. Another private equity investor who focuses on Asia called the crackdown a wake-up call for investors who have overlooked Chinese regulatory risks in recent years.

New Oriental Education & Technology Group’s Hong Kong shares still had 13 analyst buy ratings and just one “underweight” as of Monday, according to data compiled by Bloomberg, after plunging more than 40% for a second straight session. It fell another 4% on Tuesday.

Food-delivery giant Meituan, with 56 buys and no sells, has tumbled 20% this week after the government posted notices that online food platforms must respect the rights of delivery staff and ensure workers earn at least the local minimum income. The stock has lost half its value since mid-February.

Meanwhile, Evergrande Property Services Group Ltd. has slumped 16% this week after major Chinese policy-making bodies collectively issued a three-year timeline for bringing “order” to the property sector, long under scrutiny due to an excessive buildup of leverage among home-buyers and developers. The announcement detailed punishments for a range of transgressions by businesses in real estate development, home sales, housing rentals and property management services.

Read more on Evergrande’s challenges here.

Some investors have been seeking shelter in strategic sectors viewed as beneficiaries of Xi’s policies. These include electric vehicle makers and companies involved in transporting and storing cleaner energy that may help China’s plans to become carbon neutral by 2060. Local analysts have also advocated buying shares of semiconductor makers as the nation seeks technological self-sufficiency.

For Jian Shi Cortesi, a portfolio manager at GAM Investment Management in Zurich, the key is to avoid companies that the government might determine are benefiting a “small group at the expense of broader prosperity.” Those businesses are likely to face tighter regulation, Cortesi said, pointing to live streaming as one area that may be vulnerable. At the same time, she’s looking for chances to buy shares that have been unduly punished in the selloff.

“Many high-growth Chinese companies have already dropped by half in the past few months and many investors have started to panic — all these tell us it is the time to look for good opportunities to enter,” Cortesi said. “Of course, it’s important to be selective.”

(Updates with Tuesday trading in Hong Kong.)

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©2021 Bloomberg L.P.

U.S., China Leave Room to Talk After Contentious Meetings

(Bloomberg) — The U.S. and China left open the possibility of a summit between their presidents, despite a contentious day of talks in which Beijing outlined a series of demands that Americans showed little willingness to meet.

Foreign Minister Wang Yi reiterated requirements from Beijing in Monday’s talks in Tianjin with Deputy Secretary of State Wendy Sherman, namely that the U.S. stop criticizing China’s political system, drop all sanctions and tariffs, and stay out of Hong Kong, Taiwan and Xinjiang affairs.

Senior Biden administration officials told reporters afterward that Sherman was focused on setting guardrails on ties, rather than negotiating specific issues. They described the discussions as forthright and professional, even if they were at times tough.

The talks in Tianjin — about 60 miles (100 kilometers) east of Beijing — could be the first step toward a meeting between President Joe Biden and China’s Xi Jinping, possibly at a Group of 20 summit in October. “The president continues to believe in face-to-face diplomacy” and expects that will happen “at some point,” White House Press Secretary Jen Psaki told reporters when asked whether the differences aired in Tianjin would prevent a Biden-Xi summit.

The challenge facing Washington and Beijing is showing they can get to grips with their disagreements without appearing to domestic audiences to be giving ground. That is proving a tall order given the sour feelings many in the Chinese government still harbor after the trade war that erupted under former President Donald Trump, and amid a range of disagreements.

“Both sides are trying to seek a complete victory over the other, leaving little room for compromise,” said Shi Yinhong, director of Renmin University’s Center on American Studies in Beijing. “It will be a surprise if two countries can find a solution to any of the major issues.”

Sherman’s trip is part of a broad U.S. diplomatic push in the region, as Biden attempts to extract American forces from Afghanistan and bolster Washington’s frayed foreign relationships to better answer the challenges posed by China. Blinken is slated to visit India this week while Secretary of Defense Lloyd Austin is traveling to Singapore, Vietnam and the Philippines.

The U.S.’s effort to balance criticism and outreach was illustrated in the State Department’s summary of the talks. After recounting a litany of complaints — from “the anti-democratic crackdown in Hong Kong” and “the ongoing genocide and crimes against humanity in Xinjiang” to Beijing’s conduct in cyberspace and “across the Taiwan Strait” — the department shifted tone to conclude that “the deputy secretary affirmed the importance of cooperation in areas of global interest,” including climate change, drug trafficking and weapons proliferation.

But Vice Foreign Minister Xie Feng, who met with Sherman before Wang, warned that the relationship was “in a stalemate and faces serious difficulties.” Xie presented the No. 2 American diplomat with two lists of demands he portrayed as necessary to stabilize ties, including “U.S. wrongdoings that must stop” and “key individual cases that China has concerns with,” according to the official Xinhua News Agency.

Among China’s demands were ending U.S. efforts to extradite Huawei Technologies Co. Chief Financial Officer Meng Wanzhou from Canada. The publication of such requirements makes it more difficult for Biden to grant any of them, as the Democratic president faces domestic pressure to avoid looking soft on Beijing.

Xie’s remarks show that the talks were “very tough indeed” and “look like a continuation” of the tense meetings in March in Alaska, said Zhu Feng, a professor of international relations at Nanjing University. “His comments are also aimed at giving the Chinese public confidence that the government will not succumb in the face of heightened pressure from the U.S. side.”

China Crackdown Rocks Investors: ‘Everybody’s in the Crosshairs’

Earlier this month, Xi signaled that his government would be more assertive on the world stage, saying at a speech marking the 100th anniversary of the ruling Communist Party that his people “will never allow any foreign forces to bully, coerce and enslave us.” Xie used the meeting to take a swipe at Sherman’s boss, Secretary of State Antony Blinken, who said earlier this year that Washington’s dealings with Beijing were the defining test of the century.

“The Chinese people look at things with eyes wide open,” Xie said, according to a statement released by the Foreign Ministry. “They see the competitive, collaborative and adversarial rhetoric as a thinly veiled attempt to contain and suppress China.”

Sherman’s visit follows a series of Biden administration actions challenging China’s red lines on what it considers its internal affairs, prompting Beijing to protest and announce fresh sanctions against Americans including former Commerce Secretary Wilbur Ross. Sherman raised U.S. concerns about Beijing’s policies in Hong Kong and Xinjiang, and urged the Asian nation to stop its economic coercion of allies, U.S. officials said.

The U.S. and numerous allies this month blamed the hack of Microsoft Corp.’s Exchange email server software to actors affiliated with the Chinese government and said Beijing’s leadership was responsible for an array of “malicious cyber activities.” The U.S. also charged four Chinese nationals linked to the Ministry of State Security with a campaign to hack into computer systems of companies, universities and government entities.

China and the U.S. are also at odds over the coronavirus. The White House said on Thursday China was “stonewalling” a World Health Organization probe into the origins of SARS-CoV-2, including the possibility that it escaped from a lab. Wang, the Chinese foreign minister, dismissed that effort before meeting Sherman, telling Finnish Foreign Minister Pekka Haavisto that “the political virus” seeking to blame Beijing for the pandemic also needed investigation.

Still, Sherman’s discussions with Chinese diplomats offered both nations a chance to at least manage their many differences.

“The only positive signal is the two countries agreed to keep in touch,” said Shi, the academic. He described that as the “minimum” they could do to prevent a complete falling out.

(Updates with Chinese foreign minister in second paragraph.)

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©2021 Bloomberg L.P.

Goldman Asset-Management Arm Files to Offer a Crypto-Related ETF

(Bloomberg) — Goldman Sachs Group Inc.’s asset-management arm filed an application Monday with the U.S. Securities and Exchange Commission to offer an exchange-traded fund focused on securities of cryptocurrency-related companies.

The Goldman Sachs Innovate DeFi and Blockchain Equity ETF would track the Solactive Decentralized Finance and Blockchain Index, the filing said. The Fund would invest at least 80% of its assets, exclusive of collateral held from securities lending, in securities, depositary receipts and stocks of companies included in the index.

Numerous crypto-related companies have been going public, or discussing the potential of doing so, in recent months — offering more options for equity investors looking to get into the space. The U.S.’s biggest crypto exchange, Coinbase Global Inc., debuted in the spring. Exchanges like Kraken and FTX have been mulling going public as well, and there are also vehicles like the Grayscale Bitcoin Trust.

Goldman is hoping to offer exposure to decentralized finance or DeFi, which is one of crypto’s hottest growth areas. These are apps that allow for peer-to-peer lending, borrowing and trading, and they hold a total of about $64.5 billion in funds, according to tracker DeFi Pulse. The other area of the ETF’s potential investment, blockchain, could include any companies that develop digital ledgers for applications like payments.

Goldman has been ramping up its cryptocurrency work in recent months. It’s restarting its crypto trading desk to help clients like hedge funds deal in publicly traded futures tied to Bitcoin. In June, it also announced plans to offer options and futures trading in Ether, the second-largest cryptocurrency after Bitcoin.

Goldman has filed for an ETF at a time when Bitcoin has been stuck in a trading range of about $30,000 to $40,000 for weeks, well off its mid-April record near $65,000.

Goldman is planning to offer the ETF “as soon as practicable after the effective date of the Registration Statement,” the filing said. Shares of the fund are expected to be listed for trading “on a national securities exchange.”

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Fink, Schwarzman Join CEOs Urging Infrastructure Plan’s Passage

(Bloomberg) — The heads of BlackRock Inc., Blackstone Group Inc. and Morgan Stanley are among chief executive officers who wrote to congressional leaders on Monday urging them to move swiftly to pass a bipartisan infrastructure bill that senators and the White House are negotiating.

“We urge you to seize the moment and act quickly to pass this bipartisan initiative,” reads the letter, which is addressed to Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy.

The letter — signed by more than 140 executives — came as Senate infrastructure talks suffered a setback Monday after Republicans rejected an offer meant to address all outstanding issues from the White House and Democrats, calling into question goals of passing a $579 billion measure before Congress’s August recess.

The letter includes the signatures of Laurence Fink of BlackRock, Stephen Schwarzman for Blackstone, James Gorman of Morgan Stanley, Stephen Squeri for American Express Co. and John Zimmer for Lyft Inc.

The effort was organized by the Partnership for New York City, an influential group of corporate leaders. Bloomberg LP, the parent company of Bloomberg News, is a member of the group but did not sign the letter.

Some of the signatories are allies of President Joe Biden, including Microsoft Corp. President Brad Smith, 32 Advisors Llc CEO Robert Wolf and Penny Pritzker, chair and founder of PSP Capital Partners Llc, all of whom raised money for Biden’s 2020 campaign. Pritzker also served in President Barack Obama’s cabinet as commerce secretary. Others, such as Schwarzman, were vocal supporters of former President Donald Trump.

Trump said in a statement on Monday that Democrats were playing his fellow Republicans “for weak fools and losers” in pushing for a bipartisan infrastructure agreement.

The plan that lawmakers and the Biden administration have drafted “reflects priorities shared by labor, business and state and local governments, as well as the American people,” the executives say in the letter. “It will leverage significant private investment and generate a strong return for the federal government.”

Other business organizations, including the U.S. Chamber of Commerce and the National Association of Manufacturers, have also called on lawmakers to pass an infrastructure bill. Last week, the leaders of those groups and of labor unions met with Biden at the White House to emphasize the support the bill has from two sides that usually sit on the opposite sides of negotiating tables.

(Updates with Trump statement, in seventh paragraph.)

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Intel Pledges to Retake Innovation Crown, Changes Yardstick

(Bloomberg) — Intel Corp., playing catch-up in semiconductor technology after losing its long-held dominance, vowed to become the industry leader again in 2025 by rethinking some of the fundamentals of how chips are made, and signed up rival Qualcomm Inc. as a manufacturing customer.

Santa Clara, California-based Intel aims to step up innovation and is changing the approach used to measure progress in chip production, arguing that the current system gives competitors Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. an unfair advantage.

Chief Executive Officer Pat Gelsinger — an Intel veteran who rejoined the business after a stint at VMware Inc. — took the helm in February with a mission to restore the chipmaker’s former glory. Under his predecessors, Intel suffered yearslong delays bringing new types of manufacturing technology online. That has cost it market share and even led some customers to design their own chips.

For investors, Monday’s announcement wasn’t especially reassuring, according to Wedbush Securities analyst Matt Bryson. It served as a reminder of how much time and money the comeback plan will take, he said.

“There’s no guarantee,” Bryson said. Even based on Intel’s own timeline, it will take years for the company to catch up with TSMC.

Intel shares slipped 2% in extended trading on Monday, after climbing to $54.31 in New York. The stock is up about 9% this year.

Intel is still the biggest chip manufacturer, but it has lost its technology edge to the industry’s top so-called foundries, TSMC and Samsung. These businesses handle semiconductor production for other companies, letting Intel rivals take advantage of the most advanced facilities without having to run their own factories.

The industry measures manufacturing prowess by the size of some the microscopic features of chips. The smaller the number — measured in nanometers, or billionths of a meter — the more advanced the design. TSMC is on 5 nanometer and currently shifting to 3 nanometer. Intel is on 10 nanometer and moving to 7.

But Intel doesn’t think that’s a true reflection of its relative capabilities, and so the company is changing the terminology. What was previously designated as an advanced version of 10 nanometer will now be called “Intel 7.” And what the company was going to call 7 nanometer will be called “Intel 4.”

Wedbush’s Bryson doesn’t see the new benchmark as particularly necessary.

“The people you’re selling to understand very well that there are differences,” he said.

Qualcomm Deal

A successor node to be called 20A, debuting in 2024, will be used by Qualcomm, Intel said. Qualcomm, the biggest maker of smartphone chips, in the past has used TSMC and Samsung to build its products.

Qualcomm has a complicated relationship with Intel: The San Diego-based company’s fledgling efforts to get into the PC market with laptop processors competes directly with Intel’s main business.

Intel’s 20A node is being named to represent the transition of the industry beyond the nanometer era into measurements that are made in angstroms, or hundred millionths of a centimeter. The nanometer number, long an industry standard, was originally a way to measure the transistors that make up processors.

Now, Intel’s customers want it to use a numbering system that more accurately reflects the relative strength of its technology, according to Sanjay Natarajan, an Intel senior vice president. The numbers used by competitors are more about marketing, he said.

Amazon Agreement

The company also announced advances in some of the fundamentals of chip manufacturing that it said will help vault its offerings forward. That includes a new design for transistors, a different way of connecting and powering them, and chip-packaging innovations that will make products smaller.

Amazon.com Inc.’s AWS cloud computing unit, an Intel processor chip customer that has started designing its own chips, will use Intel to package its in-house processors, Intel said on Monday.

Transistors are the microscopic switches that give chips their basic function. A modern microprocessor from Intel has billions of them crammed into areas the size of a thumbnail. Packaging is the process by which the silicon and electronics of a chip are encased in plastic with the connectors that are needed to link them with the rest of the device they are part of.

(Updates with analyst’s comment in fifth paragraph.)

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©2021 Bloomberg L.P.

G.I. Joe Film, Shyamalan’s ‘Old’ Struggle to Attract Fans

(Bloomberg) — North American theaters suffered their second straight weekend of falling ticket sales, with only a modest turnout for a new installment of the G.I. Joe franchise, called “Snake Eyes,” and “Old,” an M. Night Shyamalan horror film.

The two movies generated about $30 million combined, researcher Comscore Inc. estimated Monday, in line with industry estimates. That total is slightly less than what “Space Jam: A New Legacy” made in its debut last weekend and half what Walt Disney Co.’s “Black Widow” took in two weeks prior.

The performance shows the industry is struggling to maintain momentum and recover from the effects of the coronavirus pandemic. Earlier in July, it appeared that a slate of potential blockbusters might spark a triumphant return. But the recovery has slowed, with many moviegoers taking advantage of online viewing opportunities for new features and watching at home in large numbers.

“While the weak results are no joy to theater operators, the pullback was anticipated and we don’t believe it marks a shift in consumers’ interest in returning to theaters,” Geetha Ranganathan, a Bloomberg Intelligence analyst, said in a note.

Both “Old” and “Snake Eyes” are premiering exclusively in theaters. That’s unusual for the pandemic era: Studios have chosen to release many of their 2021 films online and in theaters at the same time — to help their new streaming services and reach consumers who may still be wary of public gatherings.

Industry Tension

That’s been a source of tension between studios and theater owners. The National Association of Theatre Owners excoriated Disney in recent days for releasing the big Marvel picture “Black Widow” online, saying it’s hurt revenue for the entire industry.

It’s easy to see why theaters are complaining. Heading into the weekend, domestic box-office sales for the summer — always the busy season for moviegoing — were down 75% from 2019 levels to around $1.08 billion, according to Box Office Mojo, an industry tracker.

Both of this weekend’s new releases were delayed by the closing of cinemas during the spread of Covid-19. “Old,” about a beach where people age extremely quickly, was initially scheduled to come out in February 2021. The film, by Comcast Corp.’s Universal Pictures division, led the box office this weekend with $16.9 million sales in North America.

“Snake Eyes,” which stars Henry Golding and tells an origin story tied to the Hasbro Inc. toy line G.I. Joe, was initially scheduled to premiere on March 27, 2020, a few days after all of Hollywood closed. With poor reviews from critics and about 15% of U.S. theaters still closed, it ranked No.2 this weekend, with $13.4 million opening sales.

Steep Drop

That’s far less than the other movies in the franchise. Two previous G.I. Joe movies collected more than $40 million over their opening weekends, in 2009 and 2013. The film is from ViacomCBS Inc.’s Paramount Pictures division.

Warner Bros.’ new “Space Jam” installment featuring LeBron James, inspired by the 1996 film starring Michael Jordan, fell to No. 4, with $9.58 million sales in its second weekend. “Black Widow” took the third spot with $11.6 million.

Theaters are on a long journey to recovery from the last 18 months. Part of that time they were closed entirely, and all new releases were delayed. They’ve slowly reopened, but with difficulties. Fears about the virus and mask mandates, as well as regularly changing rules, have made it tough to fill auditoriums. Cinemas are also highly dependent on new releases.

Overall, domestic box-office receipts for the top 10 pictures this weekend declined about 24%, to $67.1 million from almost $90 million last weekend.

(Updated with final weekend totals)

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©2021 Bloomberg L.P.

Elon Musk Says He May Skip Future Tesla Earnings Calls

(Bloomberg) — Elon Musk dropped a bit of a bombshell on Tesla Inc.’s earnings call: He won’t necessarily be doing the quarterly calls going forward.

“I will no longer default to doing earnings call,” Tesla’s chief executive officer said Monday. “Obviously I’ll do the annual shareholder meeting, but I think that going forward I will most likely not be on earnings calls unless there’s something really important that I need to say.”

Answering a question on whether he’d do interviews with YouTubers, Musk argued that there’s only so much time in the day, and if he’s doing interviews, he can’t be doing other work.

Over the years, Musk has been a central feature of the calls. For example, on a call in April last year, he went on a profane rant and accused authorities of “fascist” shutdown orders. On a call in 2018, Musk said analysts were asking “boring, bonehead” questions. “We’re going to YouTube. These questions are so dry. They’re killing me,” he said.

For more on Tesla’s second-quarter earnings, click here for our TOPLive blog.

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©2021 Bloomberg L.P.

Facebook Explores Integrating Oculus Workouts With Apple Health

(Bloomberg) — Facebook Inc. is exploring the idea of letting users synchronize workout data from Oculus virtual-reality headsets with Apple Inc.’s Health app on iPhones, according to code discovered in the Oculus iPhone app.

The feature would allow a user of the Oculus Move workout system to add data — like the number of calories burned — to the iPhone Health app. Code hidden in the Oculus app also references the ability to view Oculus workout data on the Oculus VR headset that was previously saved to the Apple Health app.

Facebook using Apple’s Health platform would represent the latest tie between the two tech giants, which have been partners and rivals over the years. The code in the Oculus app doesn’t mean that a launch is guaranteed or imminent, but it does indicate that it is a feature being explored inside the social-networking giant. A Facebook spokeswoman declined to comment.

Since launching in 2014, the Apple Health app has been able to store fitness and workout data from several third-party devices, including smart scales, blood-pressure checkers, sleep monitors and thermometers, as well as third-party workout apps. It’s also able to collect workout data from an Apple Watch or directly from an iPhone.

The code was discovered by iOS developer Steve Moser and shared with Bloomberg News. App code has revealed upcoming new features in the past. For instance, Bloomberg reported on code in Square Inc.’s app in May signaling plans for business checking and savings accounts. The new offerings were ultimately unveiled this month. Evidence of Netflix Inc.’s gaming plans also appeared in its app before the streaming platform announced its ambitions.

Facebook announced Oculus Move last year as a systemwide feature that can track calories burned and exercise activity during supported games. The functionality is still in its infancy, but Facebook executives have said that fitness will be a key component of virtual reality moving forward. Apple, meanwhile, is working on a mixed reality headset for as early as next year, and it’s looking to add health sensors to future AirPods earbuds.

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©2021 Bloomberg L.P.

SpaceX Challenged on Broadband Subsidies for Parking Lots

(Bloomberg) — The Federal Communications Commission is challenging a bid by Elon Musk’s SpaceX for $886 million in rural broadband subsidies, saying some of the money appeared headed for serving parking lots and airports with satellite-delivered broadband.

The company was among 197 winning bidders from an auction last year to be sent letters Monday by the FCC in an effort the agency said was an attempt to “clean up” the auction’s results. Other letter recipients included Charter Communications Inc., which won bids for $1.2 billion in subsidies, and Lumen Technologies Inc. which won $262 million.

The letters offer providers an opportunity to withdraw their funding requests from those places already with service or where significant questions of waste have been raised, the FCC said.

Also Monday, the FCC said it was ready to authorize more than $311 million in broadband funding across 36 states through the fund.

Space Exploration Technologies Corp., as it’s formally known, didn’t immediately respond to an email seeking comment, and a Lumen representative said the company was reviewing its letters.

Charter earlier told the FCC some of the places where it planned to use the subsidy already are slated for new broadband, and shouldn’t have been included in the auction. “The majority of these locations actually already have a provider offering service today or one that will soon do so,” the company said in a statement. “Support dollars should be preserved for deployment in truly unserved areas.”

The auction, known as the Rural Digital Opportunity Fund, is a centerpiece of FCC efforts to help extend broadband to areas with little or no service. The agency on Dec. 7 announced winning bidders to share $9.2 billion in subsidies over 10 years. The FCC considered 417 winning applicants.

SpaceX, among the top winners, had applied for $886 million in subsidies for service from its satellite fleet that’s already aloft. On Monday the FCC sent the company a 131-page list of census blocks. In those places questions had been raised about whether the proposed spending was duplicative or wasteful, the agency said in a letter.

“This program can do great things, but it requires thoughtful oversight,” said FCC Acting Chairwoman Jessica Rosenworcel. “That’s why we are refocusing the program on unserved areas and putting winning bidders on notice of their obligation to ensure that support goes to the areas that need it.”

The FCC in a press release about the letters cited “complaints that the program was poised to fund broadband to parking lots and well-served urban areas.”

The auction that began in October was designed to guide officials directing a pot of federal subsidies that are funded by fees on consumer telephone bills. The FCC designated discrete areas, and invited bids. The companies that offered to build broadband for the lowest price emerged as winners of subsidies.

SpaceX was approved last year for its plan to provide service to 642,925 locations in 35 states. But consumer advocates said those locations include places that didn’t fit the program’s goal of bringing service to rural people beyond the reach of broadband networks.

SpaceX’s chosen locations include two slivers by the Harlem River in the Bronx. Other spots selected by SpaceX include the terminals at Newark Liberty International Airport and Miami International Airport, according to research by the policy group Free Press.

The decisions were made with the FCC under Republican control, before the switch to Democratic leadership as administrations changed. Earlier, 160 House and Senate members urged the FCC to scrutinize recipients.

The policy group Free Press calculated that $111 million of Starlink’s subsidy is due to urban deployments. More than $700 million of the overall $9.2 billion in subsidies was awarded for deploying broadband in non-rural areas, the policy group said.

The program “was riddled with errors, waste and insufficient oversight,” the group said in a news release Monday.

(Updates with Charter, Lumen statements in fifth and sixth paragraphs.)

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©2021 Bloomberg L.P.

A Year After Security Law, Hong Kong Finance Hub Status Endures

(Bloomberg) — China’s overhaul of Hong Kong’s political institutions has crushed the pro-democracy movement and fueled warnings of an end to the city’s status as an international financial hub. Yet more than a year after the crackdown began, signs of an investor exodus are hard to find.

Shares of Hong Kong’s exchange operator have doubled since the start of 2020, reflecting confidence in the city’s ability to lure Chinese listings. The local currency is near the strong end of its trading band against the dollar, suggesting capital outflows aren’t a worry. Major global banks and financial institutions including BlackRock Inc. and Citigroup Inc. have maintained or grown their presence in the city. Employment in the finance and insurance sectors rose in 2020 from a year earlier.

That comes even as surveys suggest growing concern among some expatriate executives about the crackdown’s impact on civil liberties and rule of law, following the mass arrest of pro-democracy advocates and threats to the free flow of information under the sweeping National Security Law imposed by China in July 2020.

For now, even as authorities enforce broad new powers to stifle dissent, they appear to have not yet crossed the financial industry’s red lines. Those include internet restrictions, currency controls, curbs on doing deals and changes to Hong Kong’s prized legal system that would impact global business, said Fraser Howie, an author of books on the Chinese markets and former managing director at brokerage CLSA Ltd.

“I see no evidence that the financial industry is actually going to be changing their actions because ultimately what they do is deals, and if you can still do a deal, they will do it,” Howie said.

Whether Hong Kong upholds its legal and regulatory standards will be critical, said Douglas Arner, a law professor at the University of Hong Kong and an expert on the city’s financial system. “If we were to start seeing a regulatory environment that no longer matched international standards and approaches, that’s the sort of thing that would indeed cause shifts,” Arner said.

Hong Kong optimists are betting the Communist Party simply has too much riding on the financial hub to allow its appeal to fade. The city’s role as a key fundraising center for Chinese firms is only growing as Beijing seeks to dissuade the nation’s firms from listing in the U.S. The central government has opened channels via Hong Kong to enable foreign capital to flow into the country’s financial markets, as well as let some money out. Hong Kong’s dollar is freely convertible, unlike China’s yuan.

Inflows suggest global investor confidence in the city remains high, a point that Hong Kong Chief Executive Carrie Lam regularly emphasizes when responding to critics. So much money poured into Hong Kong last year that the city’s monetary authority stepped in 85 times to prevent the local currency from strengthening past its permitted trading range.

Aggregate inflows of $50 billion — the most since 2010 — pushed a measure of liquidity in the financial system to a record in October. It hasn’t dropped since and the Hong Kong dollar remains firmly in the strong half of its trading band. Mainland capital has also come in at a record pace via stock exchange links in Shanghai and Shenzhen, including an unprecedented around $40 billion net inflow in January.

Companies have raised about $33 billion through Hong Kong listings in 2021, nearly double last year’s pace, data compiled by Bloomberg show. More Chinese firms are likely to shift listings to the city from the U.S. on expectations the approval process by Beijing will be less onerous. That’s helped make shares of Hong Kong Exchanges & Clearing Ltd. the world’s top-performing major bourse this month.

“U.S. capital markets are now less hospitable to Chinese firms due to geopolitical tensions and China’s domestic markets are not yet mature or open enough to fill the gap,” said Michael Hirson, head of China and Northeast Asia at Eurasia Group. “That leaves Hong Kong in a unique role, at least for the time being.”

There is still plenty to worry about for the city’s 200,000-strong financial industry. This month the Biden administration warned investors about the risks of doing business in Hong Kong, citing concerns about the security law, data privacy and access to critical business information. A bill to toughen legislation banning the publication of personal information to harass people — or “doxxing” — has raised concern about internet censorship. Businesses in the city may also get affected by escalating tensions between Washington and Beijing that include tit-for-tat sanctions.

In May, 40% of those who responded to a survey by the American Chamber of Commerce in Hong Kong said they might leave the city — highlighting the business community’s concerns over the national security law and the local government’s handling of Covid-19 outbreaks.

“Beijing’s crackdown on free speech and the imposition of its version of the rule of law, which could together block the free flow of information and denude investor protection, increases the flight risk of foreign businesses and investors,” said Eswar Prasad, who once led the International Monetary Fund’s China team and is now at Cornell University.

Banks so far appear to be digging in. For example, Citigroup Inc. said this year it will hire as many as 1,700 people for its operations in Hong Kong as part of a plan to capture more business in China’s Greater Bay Area. In April, the firm excluded its Hong Kong consumer operations from a decision to exit retail banking in 13 markets across Asia and Europe. The lender will instead focus on four regional wealth hubs, including one in Hong Kong.

BlackRock Inc.’s Larry Fink and Bank of America Corp.’s Brian Moynihan are among executives who’ve said as recently as this month that rising tensions between the U.S. and China had left them unfazed and won’t affect their operations in Hong Kong.

“Beijing is pushing boundaries –- not trying to kill the goose,” said Pauline Loong, managing director at research company Asia Analytica in Hong Kong.

More stories like this are available on bloomberg.com

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