Aurelia Butler

The framework gives fund managers more flexibility in share issuance and dividend payment, and allows them to set up multiple funds in a single VCC to reduce costs. VCCs can be used to set up a corporate structure for a stand-alone fund or for an umbrella fund with multiple sub-funds. They can be used for both traditional and alternative investment funds. Hong Kong also provides a similar structure.About 300 Singapore-based global and regional asset managers had incorporated or re-domiciled more than 400 of these companies by mid-October, the Monetary Authority of Singapore (MAS) said in an asset management survey.The new fund vehicle was launched with 20 VCCs in January 2020. Singapore also provides a grant to encourage more such funds to locate to the country.MAS is studying possible enhancements to the framework, including facilitating the conversion of existing investment fund structures, and allowing a wider range of entities to set up and manage a VCC, it said in the survey. Assets under management in Singapore rose 17% in 2020 to reach S$4.7 trillion ($3.5 trillion) from the year ago, driven by net inflows of funds and valuation gains, the central bank survey showed.The VCC structure has proved popular across a wide spectrum of asset managers, including family offices, hedge funds and private equity. Singapore’s allure has also been growing amid political uncertainty in rival hub Hong Kong. More

Factory gate prices in China rose at their fastest pace in 26 years in October, as crippling power shortages and record commodity prices hit the world’s second-biggest economy.China’s official producer price index increased 13.5 per cent compared with October 2020, according to figures released by the National Bureau of Statistics on Wednesday, its biggest monthly jump since 1995. The gain exceeded the 12.4 per cent rise forecast by analysts polled by Reuters, and outpaced September’s 10.7 per cent reading, which was also the highest since 1995.Factory gate prices refer to the cost at which wholesalers buy materials from producers, not taking into account transport and distribution fees.The acceleration in producer prices coupled with weakening manufacturing activity has raised fears of stagflation, complicating the country’s economic outlook as slowing growth poses a challenge to President Xi Jinping’s sweeping reforms of China’s business landscape.Rising commodity prices have also compounded the country’s energy woes. China is battling soaring coal prices after flooding in critical mining regions and the government’s clean energy goals reduced output, while widespread power rationing led to a second monthly contraction in manufacturing activity in October. Dong Lijuan, a senior statistician at China’s NBS, said the October PPI rise had resulted from the “tight supply of crucial domestic energy and raw materials”.Dong noted that rising oil prices, which last month topped $85 a barrel in the US, and coal, which reached Rmb2,301 ($360) a tonne in China, had contributed to the increase. Production material prices increased 17.9 per cent in October compared with the same period last year, Dong added, while prices in the coal mining and washing industries rose 103.7 per cent.But analysts at Citi forecast that PPI inflation was nearing a peak and would not remain elevated. And recent measures to contain spiralling costs, including coal miners’ pledges to cut prices as well as the waning energy crisis would help to damp inflationary pressures, analysts said.“Stagflation concerns should ease ahead,” the Citi analysts wrote in a note.

Still, some expect that central bankers in Beijing might be forced to provide more support to counter the slowing economic momentum. “We expect the [People’s Bank of China] to have more loosening bias for the rest of the year to buffer the economic slowdown,” said Jing Liu, a China economist with HSBC. Consumer price inflation also rose faster than economists had forecast in October, hitting a 13-month high. China’s CPI was up 1.5 per cent year on year, and 0.7 per cent compared with September. The cost of fresh vegetables jumped 16.6 per cent, further underpinning concerns that surging production costs were feeding in to essential goods.But Zhaopeng Xing, a China strategist with ANZ, said households’ slowing disposable income as well as mobility restrictions imposed to curb renewed outbreaks of Covid-19 would limit consumer rises.

Video: Is China’s economic model broken? More

The trading climate in the $22tn US government bond market has become less hospitable, adding to choppy moves in securities that act as a foundation of the global financial system.Liquidity — the ease with which an investor can buy or sell an asset — has deteriorated in recent weeks, data show, adding to pressure on regulators to improve a market long viewed as a haven during times of trouble.But regulators are far from any solution, according to a progress report released this week by a federal working group charged with assessing the structure of the US Treasury bond market.The report, part of a review commissioned after Treasury markets were thrown into chaos at the start of the coronavirus pandemic, detailed why there have been liquidity problems in recent years. It also outlined familiar solutions, such as increased transparency and oversight and central clearing.It stopped short of making any policy recommendations and did not suggest a timeline for the work.Thanks for reading FirstFT Europe/Africa. Here’s the rest of today’s news — GaryFive more stories in the news1. Facebook whistleblower calls for online harm controls Frances Haugen warned that the EU and the UK “will have missed a huge opportunity” if they do not broaden the scope of new digital laws to force tech companies to keep harmful content off their sites. She testified before the European Parliament on Monday. 2. GE to split into healthcare, energy and aviation companies General Electric plans to break into three separate companies, effectively ending its status as America’s best-known industrial conglomerate after years of trying to respond to flaws in its model exposed by the financial crisis. 3. EU accuses Belarus’s Lukashenko of exploiting migrant crisis EU and Polish officials believe the surge in migrants on the bloc’s eastern border is being engineered by Belarusian strongman Alexander Lukashenko in retaliation for the Brussels’ support of the country’s opposition, which has faced a vicious crackdown, and in an effort to force sanctions relief. 4. DoorDash buys Finland’s Wolt in €7bn deal DoorDash has reached an all-stock deal worth €7bn to acquire Wolt. The Helsinki-based delivery operator has more than 4,000 employees and operates in 23 European markets including Germany, where DoorDash is eager to gain a foothold.

The deal would be the most expensive takeover yet in Europe’s hyper-competitive rapid delivery market © AFP via Getty Images

5. Macron pushes Covid boosters for over-65s President Emmanuel Macron has announced that over-65s in France will need Covid-19 booster jabs if they want to eat out or make long-distance journeys from next month, a move that suggests all French adults will eventually require a third injection against the virus to live normally.COP26 digest The UN has found that 2030 climate targets are still far off track from Paris agreement goals and would increase temperatures up to 2.7C by 2100.A global deal to eliminate new car emissions by 2040 is struggling to attract support from carmakers and governments including the US and China.Global greenhouse gas emissions from agriculture and food production have risen 17 per cent over the past 30 years, according to UN data.About 130 fashion brands have pledged to halve greenhouse gas emissions by 2030, but the industry will fall well short based on its present trajectory.US Democrats attending COP26 attempted to inject a positive tone into talks that remain stymied by a lack of political capital in Washington.

A battle is brewing over how soon after the end of COP26 countries will submit new climate targets to the UN © Reuters

The day aheadInflation data The US reports monthly inflation data, which are forecast to show consumer prices rose 5.8 per cent in October year on year, the highest level of increases since 1990. Germany also reports inflation data.Rivian begins trading The Amazon-backed electric vehicle maker is set to list in New York in the biggest initial public offering for a US company since Facebook’s debut in May 2012.Earnings Results are expected from ABN Amro, Adidas, Allianz, Crédit Agricole, EDF, Infineon Technologies, Marks and Spencer and Walt Disney. Read the full list here.What else we’re readingEngland’s GP shortage points to need for new model The much loved general practitioner is a national trope. But burgeoning demand from a population needing ever more complex care, with fewer doctors to deliver it, is putting the model under strain and driving demands for radical reform.‘Britain’s game of Brexit chicken will end badly’ In threatening to repudiate its deal with the EU, the UK is undermining its credibility as a reliable partner. This is dangerous not just for the UK, writes Martin Wolf, but also for the EU and wider west.The WFH revolution has not benefited everyone Older people were staying in work for longer — until the pandemic hit. Now an army of “Covid retirees” is heading for the labour market exit, writes Sarah O’Connor. Looming clash over Argentina’s $57bn bailout As Argentina faces down a deadline to repay billions of dollars from a record-breaking $57bn IMF bailout, the leftwing government in Buenos Aires needs a fresh deal to unlock more cash to relieve an economic crisis. But President Alberto Fernández is hardening his line ahead of midterm elections on Sunday.Asia opens its post-Covid economies China may have among the most severe restrictions on the continent, but critics argue that curbs are still too strict in countries such as Japan, South Korea and Singapore as they begin to open up. “Politically and for businesses this [route] has been contentious,” said one executive.Do you think Covid restrictions are still too stringent where you live? Tell us what you think in our latest poll.

MusicConcert halls do not often ring with chanting from the audience, but the Barbican did last week. With tongue in cheek, life-long Arsenal fan Mark-Anthony Turnage wrote a score depicting the team’s league-clinching win over Liverpool in 1989, which was shown alongside a film of the match.

‘Up for Grabs’ combines Mark-Anthony Turnage’s twin loves of music and football © BBC/Tom Howard More

A strangely paradoxical feature of current markets is how global capital manages to be both supportive and subversive of the environmental, social and governance agenda that has been a central focus of investor attention around the COP26 climate change summit.Equity funds with socially responsible investing or ESG mandates have attracted twice as much money in the year to date as their counterparts without them, according to data provider EPFR.Yet this push for decarbonisation and social responsibility, which is as much an asset management marketing ploy as a token of virtue, is primarily an equity market phenomenon.In the much larger global bond market, BBVA Global Markets Research has estimated that in late 2020 the stock of green, social and sustainable bonds had yet to reach $1tn out of a market total of $128tn. While this green exposure is rising fast from a low base, it is indisputably minuscule.The great majority of this market is ethically value free. ShareAction, a non-profit responsible investment research group, found last year, for example, that 84 per cent of asset managers had no public policy against purchasing sovereign bonds from countries under international sanction for human rights abuses.One consequence of this in the fund management fraternity is that global capital is rewarding China, the world’s biggest polluter and a country criticised over human rights. Despite increasing geopolitical tension between Washington and Beijing, foreign direct investment in China is running at record levels, while inflows into onshore Chinese debt reached $186bn in 2020. Even after market jitters over regulatory risk arising from Beijing’s “common prosperity” agenda and rising default risk in the real estate sector, foreign holdings of Chinese bonds jumped about 30 per cent in 2021 to more than Rmb3.9tn, according to central bank figures. For debt investors, the bait lies in the fact that the Chinese sovereign debt market has long been offering a significantly higher yield than the US Treasury market. With much lower inflation than in the US, real yields on Chinese government IOUs are also positive. So for global investors the search for yield trumps ESG considerations. At the same time, the progressive inclusion of Chinese bonds into the big global indices ensures that passive fund managers which track them continue to pour yet more money into China.The ESG sensitivity of the global bond market is nonetheless set to increase because the advanced country central banks are committing to greening the portfolios of bonds they have acquired through their asset purchasing programmes. China’s foreign exchange regulator’s numbers show that central banks account for $264bn of the outstanding $512bn balance of foreign held Chinese debt. The Chinese government debt market is relatively illiquid as the commercial banks that are the chief participants in the market buy and hold to maturity. So rising central bank exposure to it reflects a growing tendency to prioritise diversification and the search for yield over liquidity and security.It also suggests that central banks such as the European Central Bank and those eurosystem central banks that hold renminbi denominated assets may be caught in an internal green-brown carbon conflict.

Policymakers at COP26 have been looking to asset managers and owners to do much of the work on decarbonisation, both in terms of financing the overhaul of the carbon intensive capital stock and pressuring companies to aim for net zero emissions. Yet there is a limit to what they can do given that many big emitters of greenhouse gases are state owned or private and thus not much beholden to institutional investors. In addition, fund manager BlackRock’s chief executive Larry Fink has warned that pressure on public companies to pursue net zero targets — while leaving private ones out of the spotlight — is creating an opportunity for “the biggest capital markets arbitrage in my lifetime”.He has a point, though the transfer of dirty assets from public to private equity also entails the biggest regulatory risk on the planet. This is because the Paris and Glasgow objectives are unlikely to be achieved without more widespread use of carbon pricing which would severely impair the value of dirty assets. Yet private equity managers know that carbon pricing and tougher regulation of heavy emitters is politically fraught. So their absorption of quoted companies’ carbon intensive assets may continue for a while [email protected] More

Argentina’s president was in no mood to compromise. Agreeing a quick deal with the IMF would mean “going down on my knees and complying with the creditors’ demands”, Alberto Fernández bellowed to a crowd of trade unionists in Buenos Aires last week. “That’s not what a Peronist does. We know who we represent: we represent you, not the creditors.”As a March deadline looms for Argentina to repay billions of dollars to the IMF from a record-breaking $57bn bailout, the leftwing government faces an economic crisis and needs a fresh deal with the fund to unlock more cash. But instead of pushing for an agreement, Fernández and his key ministers are hardening their line ahead of midterm elections on Sunday, in which the governing Peronist party may lose its senate majority. They have surprised IMF officials by insisting on big concessions, such as lower interest rates and much more time to pay.“I have become increasingly pessimistic,” says a source close to both sides in the talks. “Right now, it’s so uncertain that anything could happen.”At stake is the reputation of the IMF as it tries to help key emerging market economies out of pandemic-induced recessions and the future path of Argentina, a G20 member and major grain exporter which risks cutting itself off from the international community and retreating into isolation.Most economists agree that failure to reach a deal with the IMF by the end of March would be disastrous. It would mean Buenos Aires falling into arrears with the fund, a move which would cut off credit from other multilateral lenders. With private investors already shunning Argentina after it defaulted briefly on their debt last year, a confrontation with the fund would leave Argentina an international financial pariah.Yet for a hard core of the governing Peronist party, such a result would be hailed as a victory, proving that Argentina can defy the international financial system and pursue its own nationalist path towards economic development. “The IMF’s relationship with us is not one of a creditor to a debtor,” says Juan Grabois, leader of a radical grassroots social movement allied to the ruling coalition. “It’s the relationship of a scammer to someone they’ve scammed. For us, the IMF is the devil.”‘Only game in town’ The IMF’s $57bn bailout to Argentina was controversial from the start. Agreed in haste in 2018 when Mauricio Macri, the pro-investor president, hit a markets crisis that triggered a two-week run on the peso, the loan was approved amid strong support from Donald Trump, the then US president, for the Argentine leader, whom he considered a political soulmate. Concerns about making such a large loan to a country that had already been bailed out 21 times in six decades by the fund were waved aside.“We were the only game in town,” Christine Lagarde, who was president of the IMF at the time, said in 2019 when justifying the bailout. “There was nobody else at the time to invest in the recovery process . . . and given the size of the challenge, we had to go big.”The payment timetable for the $57bn loan aroused particular ire among critics in Argentina. They pointed out that while the IMF disbursed almost all the money before Macri faced re-election in October 2019, most of the repayments were bunched into two later years, 2022 and 2023. In the event, Macri lost a primary by a landslide two months before the main election, markets plunged again and the IMF stopped the payments. Only $44bn out of the agreed $57bn was disbursed by the time Macri left office in December 2019 after a heavy election defeat and handed over an economy already in recession to Fernández.“The loan from the fund was very obviously to finance Macri’s campaign,” says Santiago Cafiero, Argentina’s foreign minister. “The biggest loan in the history of the fund was used to finance capital flight in 2018-19, the fund has a big responsibility for that . . . there were inadequate procedures in the fund.”Gerry Rice, the IMF’s director of communications, said last week that “we continue to work toward a programme that can help Argentina and face the challenges of the moment and set the basis for inclusive growth”. Rice has previously rejected Peronist claims that the fund broke its own rules with the bailout to Macri’s government.Those briefed on the negotiations have been particularly concerned that economy minister Martín Guzmán, Argentina’s chief negotiator and formerly a moderate voice in the government, has toughened his line. In October, he accused the IMF of using the loan to finance Macri’s election campaign. In an interview with the Financial Times, he blamed the IMF for Argentina’s looming shortage of dollars next year. “The reason why Argentina faces a problem in its balance of payments in 2022 is precisely because of the presence of the IMF loans”, he said. Argentina is due to pay the fund a total of nearly $19bn next year.Such statements, says the source close to the talks, “affect how the fund’s shareholders see the country. It makes them less willing to accept a programme”.Benjamin Gedan, who runs the Argentina project at the Wilson Center, says: the government’s arguments about the bailout “are completely irrelevant”. “The Peronists for domestic political purposes want to re-litigate the terms of the last bailout rather than have a conversation about managing debt, the deficit and inflation. [They] say there is a tactical advantage to doing this but the reality is that the IMF leadership and board will judge a new programme on its merits,” he adds.Ground control to Fernández As the mood between Argentina and the IMF sours, the economy is stuttering.Cut off from most sources of international finance, the government has resorted to printing money to help fund its deficit, fuelling inflation which is topping 50 per cent a year. To conserve scarce foreign currency, strict capital controls limit the amount of dollars Argentines can buy and the black market dollar has rocketed to almost the official rate. Ministers have ordered a price freeze to control the cost of more than 1,400 household items.“Macri’s big idea was for Argentina to be part of the world,” says a second source close to the debt talks. “That is not part of the current Peronist ideology.”A viral video meme, “The Dollar Goes to the Moon”, conveys vividly the sense of despair in the country. Using footage from the film Apollo 13, it shows mission control with the countdown to lift-off under way. The flight director runs through a pre-launch checklist: “Economy?” “Stagnant,” comes the reply from colleagues in mission control. “Investment?” “Zero.” “Country risk?” “Through the roof.” “Small businesses?” “Bankrupt.” “Inflation?” “Rising.” “Price controls?” “In progress.” “Taxes?” “169 and counting”, and so on.

A shuttered store for rent in downtown Buenos Aires © AFP via Getty Images

Then the controller presses a button and a giant US dollar soars into space, to the despair of watching Argentines. “Damn, I didn’t buy,” sighs one. The clip has been shared 2m times across different social media platforms.“The checklist in this rocket launch scene was perfect for our country,” says Andy Olivera, a comedian from Buenos Aires who co-produced the meme. “Our biggest concern as voters in Argentina is the economy, that’s why this video is so popular. People are poorer. It’s simple.”Economists see a moment of reckoning approaching. “Inflation and the foreign exchange gap are at near multi-decade highs; the fiscal deficit is too wide for a country with limited market access; the central bank’s balance sheet has deteriorated markedly, with net FX reserves dwindling. And import and capital restrictions limit activity and cloud the growth outlook,” said Fernando Sedano of Morgan Stanley in a recent report.The government dismisses such gloom. “Argentina is on the correct path,” says Cafiero. “The problem is the debt, the problem is not our path of economic recovery.” Yet bankers in Buenos Aires blame government policies for scaring away investors. As one put it: “Argentina has a viable economy but it is financially bankrupt. It’s like a company which keeps producing but can’t finance itself.”The prospect of IMF negotiations not succeeding before the March deadline for a $2.8bn repayment to the fund is causing alarm. Both sides repeat mantras about making constructive progress, even though officials say privately that few real advances have been made so far.“The chances of a deal have declined significantly,” says the second person close to the talks. “I would still put it as the most likely outcome but there are some people . . . who already think the probability is much lower”.The key sticking points are Argentina’s demands for surcharges to be dropped on the interest rates it pays to the IMF and to have more than the standard 10 years for repayment. For its part, the IMF wants to see a credible plan to cut the country’s fiscal deficit over the next few years.With Argentina’s net foreign currency reserves running low, economic logic suggests that even a bare-bones deal would be the best outcome for both sides, yet the politics of a deal are becoming increasingly complex in Argentina. The Peronist coalition is likely to suffer a heavy defeat on Sunday, something that would sharpen internal divisions ahead of the next presidential campaign in 2023. The radical wing, led by Cristina Fernández de Kirchner, the influential vice-president, believes the answer is to reinforce nationalist policies, step up government controls on the economy and insist the IMF gives way. Analysts say Guzmán is under heavy pressure from hardliners to take a tougher line with the fund. In what was widely seen as a shot at the economy minister, Kirchner implied that the government had erred by not spending enough in an open letter published after the Peronists suffered a drubbing in primary elections in September.

Labour unions and civil society groups protest against the IMF in Buenos Aires in October © Anadolu Agency via Getty Images

“Our supporters voted for social assistance which didn’t happen,” says Eduardo Valdés, a Peronist congressman close to Kirchner. “Budgets which should have helped people were not fully spent.”With polls showing the opposition heading for a big victory in Sunday’s elections, Fernández and his ministers want to be seen to take a hard line with the fund. Horacio Larreta, the Buenos Aires mayor who is among the opposition’s most popular figures, has said the bailout deal is not good or bad in itself and that the best way to renegotiate it is to convince the IMF that Argentina has a sound economic plan.Guzmán said that the chances of an IMF deal by March depend “principally on the support of the international community for what Argentina is proposing”. He reiterated demands that the fund drop the interest surcharges it imposes on Argentina’s debt and give the country more time to pay.“It’s a kind of weird strategy in which Argentina puts something on the table that is very hard for the fund to deliver,” says the second person close to the talks. “And they have it lingering there as an excuse in case there’s no agreement on a policy programme.”The repeated Peronist outbursts against the fund have taken a toll in Washington — the US is the fund’s biggest shareholder. Officials close to the talks warn that among some of the IMF’s other larger shareholder nations, who must approve any new deal, patience with Argentina is wearing thin. “They are not the country you would want to make an exception for,” says one official familiar with the negotiations. Guzmán’s own credibility with markets has also declined as months have passed without progress on the IMF talks. Many believe he missed a golden opportunity to seal a deal with the fund last year, straight after successfully renegotiating $65bn of debt owed to international investors.“The [IMF’s] original plan was to have an agreement a year ago,” says the first source. “It was never the idea to get to the end of 2021 in this position. There were consistent warnings to Argentina that delaying would only make things more difficult”. “In two years, Guzmán has done nothing other than debt negotiations,” says Alfonso Prat-Gay, who was finance minister in Macri’s first year, before the IMF bailout. “The deal with private creditors last year just kicked the can down the road and nothing has been achieved with the IMF. It’s a fiasco.”‘Absolute nightmare’ Sergio Berensztein, an influential political consultant and newspaper columnist, thinks the most likely scenario is what he terms “mediocre muddling through”. “There will be a suboptimal deal with the fund, a small devaluation” and some modest reduction in the deficit. “It won’t solve anything fundamental,” he adds. Even if such a deal were struck, people close to the talks warn that it could quickly veer off track. A new IMF agreement would provide Argentina with fresh cash to repay existing debt to the fund. But a review of whether the country had met its obligations would be needed before every payment.“It would be an absolute nightmare,” says the first person close to the talks. “Every three months you would have a nail-biting panic over whether the review was on track and whether the IMF board would approve a disbursement.”

Asked about the chances of reaching an IMF deal by March, Guzmán told the FT: “It will depend principally on the support of the international community for what Argentina is proposing”.“We all think the same way,” says Cafiero, the foreign minister. “We want a good agreement, not a quick agreement. We need the fund to show willingness to advance on a . . . programme which includes the particularities of this country.”As the prospects of a deal by March fade, some are starting to prepare for a worst-case scenario. “I’m pretty sure that Argentina will go into arrears [with the IMF], either because the negotiation ends without a programme or as part of the negotiation,” says the second person familiar with the talks. “There seems to be a line of thinking within the Argentine government that arrears for the fund are more costly than for Argentina,” he says. “So they might play that card for a month to see if the fund is going to bend on some of Argentina’s demands . . . their policies are crazy.” More

As a child of the 1960s and 1970s, I remember my mother peering into her purse worrying about how she could stretch the household income to cope with inflation. She had an encyclopedic knowledge of supermarket prices, built from years of economising.The worst point was 1975, when inflation peaked at 24.2 per cent. For much of the past 25 years it has hovered at around 2 per cent. To many of those finding double-digit increases in energy bills and at the petrol pump, this new period of inflation may come as a shock.The factors driving it have evolved over the past six months. In the spring, prices were compared with those of a year earlier, in the depths of the first lockdown. It was not surprising if the prices of, say, second-hand cars were sharply higher. A car, second-hand or not, was of little value during lockdown. More recently, price rises seem to have been the result of scarcity, as companies struggle to keep pace with recovery. Tales of port blockages and driver shortages are global. Some of these blockages will no doubt start to clear, but others seem likely to persist.

The other big factor is wage inflation. Most of us have been happy just to be in work during the past couple of years, so there has been little pressure for wage increases. Now it is time for catch-up. Mix into this the way Covid-19 has led many to review whether they really need that low-paid job and suddenly many major employers are having to ratchet up wages significantly to attract and retain workers. Inflation, whether from wages, fuel or raw materials, reduces company margins, especially if not accompanied by booming economic conditions.How should this affect your choice of equity holdings? Some sectors, such as the hotel and entertainment trades, are enjoying a recovery, but rising labour and energy costs are squeezing profit margins. Share prices of many companies in these sectors have flatlined.Other sectors’ reputations for coping with inflation may prove exaggerated. Makers of popular consumer goods, for instance, tend to insist that their brands are strong enough to pass on any inflation costs in higher prices. The evidence suggests this is not always the case.Take Beiersdorf, which makes Nivea cosmetics. Analysts expect its operating margin (sales less the cost of making and selling the goods) to fall from 15 per cent in 2019 to around 12.8 per cent this year, according to Bloomberg. A small fall in operating margins may have a large impact on what is left for shareholders after interest and tax have been deducted — the net profit margin for Beiersdorf is falling from 10 per cent to about 9 per cent of sales. This partly explains why the shares have underperformed the global equity index by 25 per cent over the past year. Unilever, which makes Dove soap, Häagen-Dazs ice cream and many other well-known consumer brands, is in a similar position.By way of contrast, L’Oréal, one of our favourite holdings, seems able to pass on higher costs as their customers are prepared to pay a little more for their favourite perfumes and cosmetics. Net income margins are steady at 15.5 per cent and the shares have outperformed the index over the past year despite worries about fading demand from Asian consumers. The list of companies that claim to have “pricing power” is unrealistically long. It is time to question the numbers, examine costs closely and perhaps think more creatively. While my mother was worrying about how she was going to pay for the rising grocery bill, I was happily distracted, watching the TV Western, Casey Jones.Casey was the engineer on the Cannonball Express for the Midwest and Central Railroad. He had an unusually stressful job. Being taken hostage by mail robbers, foiling thieves looking for gold bullion and fending off Apaches was all in a day’s work (though I don’t recall him ever asking for a pay rise).US railroads still divert my attention today. The system there is very different from the UK’s. Beyond the commuter districts of big cities, the main business of railroads is carrying freight, not people.The US has about 700 companies, but most are small (literally in the case of the real Midwest Central Railroad, which is a narrow-gauge heritage line). We have holdings in two of the largest — Norfolk Southern and Union Pacific — each of which spans more than 20 states, covers more than 30,000 miles of track and is benefiting from the recovery in the US domestic economy.

Union Pacific announced its third-quarter results last month and reported operating revenue of $5.6bn — up 13 per cent. That is income before costs are taken into consideration. Rising fuel costs proved a drag, but the company still managed to achieve an increase in operating income — profit after costs — of 20 per cent. This is an example of a company that is managing to pass on rising costs.It is also one that is finding ways to reduce costs. The best US railroads have consistently invested in technology in recent years. Today, high-tech precision scheduling enables railroads to run longer, heavier trains — and to do so more safely. Union Pacific says that in the past year it has increased its average maximum train length by 4 per cent to 9,359 feet. You may need to re-read that sentence. Yes, that works out at 1.77 miles long. This may not please frustrated drivers stuck at railway crossings waiting for them to pass, but longer trains are helping reduce the industry’s carbon footprint. Nearly half of all long-distance freight in the US is carried by rail, yet it produces less than one-tenth of freight carbon emissions. Union Pacific and Norfolk Southern both say they move a ton of freight 444 miles on a single gallon of diesel.The industry continues to invest to improve its sustainability. Helping the environment and protecting investors from inflation. I’m sure Casey Jones would be pleased to hear it.Simon Edelsten is co-manager of the Mid Wynd International Investment Trust and the Artemis Global Select Fund More

The writer is international policy director at Stanford University’s Cyber Policy CenterAfter more than a decade, democratic governments are finally waking up to the hazards of commercial spyware. Recent media coverage has exposed how authoritarian regimes are using NSO Group’s Pegasus software to spy on journalists and politicians. The EU has now tightened its rules on the export of surveillance technology, and the US Department of Commerce last week determined that Israel-based NSO Group and three other hacking companies were “engaging in activities that are contrary to the national security or foreign policy interests of the United States”. However, these modest steps do not go far enough: what’s needed is a global standard to reign in technologies that violate the rights to privacy, free assembly as well as free expression. From crippling ransomware to questionable neural algorithms which use AI to identify suspicious non-verbal activity, to face and emotion-detecting technologies, there is a proliferation of software applications which conflict with liberal democratic values. Traditionally, export controls are imposed on products that threaten national security, such as those that could boost the manufacture of nuclear weapons. The EU has recently extended its export regime to include spyware technologies, and added human rights violations as a criterion for potential harm. But since the NSO Group is based outside the EU, it lies outside Brussels’ jurisdiction. Without a wider international agreement, options for curbing these companies are limited. The absence of global restrictions brings further credibility risks: how can liberal democracies lobby against human rights abuses by authoritarian regimes, when they are in effect permitting the development and marketing of digital weapons?While restricting exports may help prevent the flow of intrusive technologies from democracies to dictatorships, imports and domestic uses remain unaddressed. The Pegasus Project revealed how, in the heart of the EU, Hungarian prime minister Viktor Orban has deployed commercial surveillance systems to target the few remaining independent media outlets within his own country. Even some democratic states, such as the Netherlands, are guilty of procuring hacking and surveillance systems, but do not disclose which ones. Undoubtedly, they will claim these are only ever used to track down the most serious criminal and terror suspects. Yet this lends credibility and capital to an exceedingly harmful industry. If democracies are serious about curbing surveillance, they should exercise greater transparency and lead by example.More than ad hoc measures or restrictions applied to individual companies, the US should partner with the EU and other willing countries to set a new international standard for the use of, and trade in, spyware. This would be a tangible outcome for President Biden’s upcoming Summit for Democracy, a US-led virtual meeting in early December aimed at preventing authoritarianism, fighting corruption, and promoting human rights.Beyond spyware, a variety of other technologies deserve greater scrutiny and regulation. Illegitimate mass surveillance systems, facial recognition software and tools used for illegal cyber operations are traded across borders to facilitate repression, conflict, and instability. Poor cyber security is now a source of systematic risk which threatens national resilience. Greater co-ordination is necessary to ensure that technologies which are currently legal do not provide the means for widespread rights violations. Moreover, an international agreement between democratic states against malicious uses of technology will help set multilateral norms. UN human rights experts this week raised the alarm once more about how tech companies serve as modern-day “mercenaries”. “Private actors provide a wide range of military and security services in cyber space, including data collection, intelligence and surveillance,” they warned.In the future, a licensing requirement should be the default for tech companies that contravene the human rights standard of democratic states. This would ensure better controls of end use and exports. Regulation would also allow for mapping of how software is being deployed, and enable greater transparency. Equally, companies should strengthen their own risk-management. The very credibility of democracies is at stake when tech companies can undermine global security unhindered. More

BENGALURU (Reuters) – Malaysia’s battered economy likely slipped back into contraction in the third quarter as coronavirus-induced restrictions brought economic activity to a near-standstill, a Reuters poll found.After bouncing back from its worst recession in more than two decades in the second quarter, the Southeast Asian economy shrank 1.3% in July-September from a year earlier, according to the median forecast of 20 economists in the poll.Forecasts for the change in gross domestic product (GDP), due to be released on Nov. 12, ranged from -6.0% to +1.0%, underscoring widespread uncertainty around the economic impact of the COVID-19 pandemic.”The deceleration reflected strict movement restrictions to curb the more contagious Delta variant virus infections,” said Chua Han Teng, an economist at DBS Group (OTC:DBSDY) Research. “With much of the economy under harsh curbs, private consumption, investment, and manufacturing activities took a big hit.”Renewed COVID-19 lockdowns in the Southeast Asian country dampened a nascent economic recovery, pushing Malaysia’s central bank https://www.reuters.com/business/finance/malaysia-cbank-slashes-2021-growth-outlook-covid-19-surge-lockdowns-2021-08-13 to slash its 2021 growth forecast to 3.0%-4.0% from 6.0%-7.5% previously.After chopping its benchmark rate by 125 basis points last year as the pandemic took hold the central bank was expected to keep rates unchanged until the third quarter of next year, a separate Reuters poll showed.But the economy is expected to gain momentum, expanding 4.0% in the current three-month period as a ramped-up vaccination drive, a record government budget https://www.reuters.com/article/malaysia-economy-budget-idUSL1N2RP0N6 to spur post-pandemic recovery and gradual reopening have boosted hopes of a turnaround.The government expects Malaysia’s economy to grow 5.5%-6.5% next year, driven by normalisation of economic activity, resumption of projects, higher commodity prices and strong external demand.”We expect a strong recovery in the coming quarters as restrictions are eased further and normal economic life returns. This will also be supported by loose fiscal policy, with the recent 2022 budget targeting another ramp up in spending,” said Alex Holmes, emerging Asia economist at Capital Economics.”With vaccine coverage now among the best in the world, virus cases falling back sharply and the government easing restrictions, activity is rebounding strongly.”But several economists warned the bleaker outlook for China’s export market and continued pandemic fears pose downside risks to growth. China is Malaysia’s largest trading partner. More