Raphael Stevens

If you want to be liked, don’t be a short-seller. Some other investors might defend you, at least in the abstract, as an important part of a healthy and efficient market. But to most you are—at best—a ghoul who profits from the misfortune of others. At worst, you are a corporate raider who bets that honest firms will go bust and then spreads lies about them until they do. Even your defenders will melt away if you pick the wrong target (shares they own) or the wrong moment (a crash in which many are losing money but you are making it).Since the authorities are often among these fair-weather friends, the list of historical short-selling bans is long. It features 17th-century Dutch regulators, 18th-century British ones and Napoleon Bonaparte. The latest addition, issued on November 6th, came from South Korea’s Financial Services Commission. It has caught the zeitgeist well, and not just among the army of local retail investors who blame shorts for a soggy domestic stockmarket. Wall Street’s “meme stock” craze also cast amateur traders as the heroic underdogs, pitted against villainous short-selling professionals.Meanwhile, one of America’s best-known shorts, Jim Chanos, wrote to his investors on November 17th to announce the closure of his main hedge funds. “Our assets under management just fell to the point where it was no longer economic to run them,” he explains, defining that point as “a few hundred million”. At its peak in 2008, a few years after predicting the downfall of Enron, an energy company, his firm was managing “between $6bn and $7bn”. Since being set up in 1985 its short bets have returned profits of nearly $5bn to its investors.The shorts who remain in the game, then, face two threats. The first is an old one: that regulators, egged on by those who view short-selling as immoral, will clamp down on their business model. The second, more insidious, threat is that investors have lost patience with that business model and no longer want to put their money into it. Should short-sellers fall prey to either danger, financial markets will be worse at allocating capital, and those who invest in them will be worse off.Start with the charge that betting on asset prices falling is immoral. This view holds that short-sellers drive down prices, hurting other investors’ returns and making it harder for companies (or even governments) to raise capital. Most obviously, it ignores the fact that the shorts’ biggest targets tend to be those, like Enron, that have themselves defrauded investors. Short-sellers are the only people with a strong financial incentive to uncover such frauds and bring them to light, saving investors from even greater losses in the long run. The same is true of firms that are simply overvalued. Had shorts managed to puncture the dotcom bubble earlier, or the more recent ones in SPACs and meme stocks, fewer investors would have bought in at the top and lost their shirts.Meanwhile, there is scant evidence that short-selling depresses prices. A study of six European countries that temporarily banned short-selling during the crash of March 2020, by Wolfgang Bessler and Marco Vendrasco of the University of Hamburg, found that these bans failed to stabilise stockmarkets. Instead, they reduced liquidity, increasing the gap between “buy” and “sell” prices and thereby making transactions more costly. Moreover, the shares of smaller firms—often painted as victims of bigshot shorts—suffered more from a deterioration in market quality.What short-sellers can do, if they head off the second threat and convince their investors to stick with them, is alert the rest of the market to assets they believe to be overvalued. They are often successful in this endeavour: take Adani Enterprises, a vast Indian conglomerate that was loudly shorted by Hindenburg Research in January, and whose share price is down 39% since the start of the year. Such arguments might be self-interested, but so are those of any fund manager talking up their book.The difference is that the longs are backed by investment banks, public-relations advisers and the companies themselves, all with a clear interest in selling optimism and hype. Markets work better, and capital is allocated more efficiently, when there are also killjoys willing to take the opposing side. And with stockmarkets, especially America’s, close to their all-time highs, the insurance against a crash that short-selling funds provide may be particularly valuable to investors. After all, notes Mr Chanos, the fact that it is so out of fashion means it is cheaper than ever.■Read more from Buttonwood, our columnist on financial markets: Investors are going loco for CoCos (Nov 23rd)Ray Dalio is a monster, suggests a new book. Is it fair? (Nov 16th)Forget the S&P 500. Pay attention to the S&P 493 (Nov 8th)Also: How the Buttonwood column got its name More

From western Uganda, the East African Crude Oil Pipleine will run for 1,443km through farms, forests and rivers, until it reaches the Tanzanian coast. If, that is, anyone pays for it. Already, 27 banks have ruled themselves out as lenders. Shareholders, led by TotalEnergies, a French oil giant, are now courting Chinese firms as they try to raise $2.4bn in debt. In response, environmental and human-rights activists in six African and European countries protested outside Chinese banks, embassies and insurers on November 20th.The battle is a sign of things to come as Western lenders reconsider fossil fuels. Several banks, including Société Générale, say that they will no longer directly finance new oil and gas projects. G7 governments have also promised to wind down support for overseas extraction, albeit with some caveats and loopholes. “We need to recognise that you [can’t] just walk to Mayfair or the City and get a deal done,” says Rahul Dhir, the chief executive of Tullow Oil, which gets most of its barrels from Ghana. “You’re going to have to go to Cairo, you’re going to Lagos, you’re going to Beijing.”In Africa, the drilling continues, at least for now. Politicians argue that revenues can finance development, even though Africans are on the front line of climate change (and oil and gas often lead to corruption, not prosperity). Wood Mackenzie, a consultancy, foresees nearly $300bn of capital spending on extracting African oil and gas this decade. Apart from dipping into their own pockets, firms have three options: go local, woo traders or look east.African lenders, like the continent’s politicians, remain enthusiastic about fossil fuels. In South Africa, Standard Bank is expanding its oil-and-gas portfolio and acting as a financial adviser on the East African pipeline. The African Export-Import Bank, based in Cairo, is teaming up with oil-producing countries to launch an “African Energy Bank”, which will plug the gap left by traditional financiers. Such African multilaterals have helped keep the Nigerian oil sector afloat by assuming financial risks that deter local lenders, says Ayodeji Dawodu of BancTrust, an investment bank.Funding for existing projects also comes from trading firms such as Glencore and Vitol, which will arrange a multi-year loan in return for future barrels. “We have no ambition to replace banks, what we want is more barrels to trade,” says one financier. Prepayments of this sort are popular with midsize producers and national oil companies, in part because they can be organised quickly. Yet they can pose difficulties, too. Opaque deals with oil traders lay at the heart of recent debt troubles in the Republic of Congo and Chad, as state firms struggled to fulfil their commitments.The third option is to look east. Saudi Aramco is investing in Nigerian oil refineries; the Islamic Development Bank has pledged $100m to the East African pipeline. Most important is China, which has a long history of resource-backed lending, mostly through its state-owned financial firms. Despite a slowing economy, which has dragged on overseas lending, Chinese firms are making more direct investments in African oil and gas than ever.Nor is Western capital retreating altogether. Its oil giants will still provide funding for headline projects such as Namibia’s oilfields, which are probably the largest ever discovery south of the Sahara. There will still be money for gas, which has a cleaner reputation than oil. And although banks are nervous about supporting specific projects, they seem to be less worried about general-purpose finance, such as corporate loans or the underwriting of bond issuances. Western lenders contributed two-thirds of corporate financing for fossil fuels in Africa between 2016 and 2021, according to BankTrack and Milieudefensie, two Dutch ngos, and Oil Change International, an American one.Even so, the cost of capital is rising. Combined with weak demand, that could jeopardise assets in places like Angola and Nigeria. Extraction in Africa is pricey and carbon-intensive. McKinsey, a consultancy, reckons that 60% of the continent’s production could be uncompetitive by 2040 if rich countries stick to green commitments. Oil provides around 60% of fiscal revenues in the countries that export it; gas provides a rising share of the continent’s electricity. African governments complain they are being rushed into an energy transition on somebody else’s timetable. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Chinese buses are idling. Statements released by a handful of transport companies complain of deteriorating economic conditions and a lack of financial support. In October two in the city of Nanchong, in south-west China, said that they would halt services owing to a lack of finance from municipal authorities. These announcements may seem prosaic, but the intention is to do more than just inform riders about cancelled bus routes. They are aimed upwards at central authorities, says a former state official, and local authorities encourage the statements because they send a signal that all is not well in the provinces. Some have been even more direct, warning that they can no longer pay their debts. Across the country cadres are begging for bail-outs, in ways both subtle and direct. And there are signs that their efforts are beginning to persuade the higher-ups.Local cadres must overcome severe resistance. Officials in Beijing want to avoid picking winners and the moral hazard inherent in bailing-out poorly run localities. Property is at the heart of the problem. Over the past year local governments have used shrinking budgets to stop construction sites from shutting down. Some have drummed up demand by lowering downpayments or making mortgages more accessible. But these efforts seem to be failing. In the first half of November home sales by floor space fell by nearly 20% year on year. Local government land sales have plummeted, squeezing a vital source of income. And thousands of firms run by provincial officials, called local-government financing vehicles (lgfvs), face problems. Goldman Sachs, a bank, estimates that such firms sit on 61trn yuan ($8.6trn) in debt, equivalent to about half China’s gdp, and are struggling to make payments.Individual property developers are also hoping for rescues, and small banks require capital injections. On November 22nd Zhongzhi, one of China’s largest wealth-management companies, said that it was “severely insolvent” and unable to pay $36bn in debts, prompting a police investigation. Zhongzhi’s liabilities are heavily intertwined with developers, local governments and wealthy urban investors, meaning they pose risks of financial contagion. The firm will probably require some form of state-brokered bail-out.Will officials give in to the demands? They seem to have realised the scale of damage that could be caused by forced deleveraging in the property sector, says Zhang Zhiwei of Pinpoint Asset Management. According to Bloomberg, a news service, banks are being asked to supply unsecured short-term loans to a handful of developers. Prices of developer bonds traded in Hong Kong have risen recently on reports that authorities are drawing up a list of 50 firms eligible for new financing through banks, bonds and equities.This news came after unconfirmed reports in mid-November that the government would provide 1trn yuan in low-cost financing for affordable housing and urban renovation. Another 1trn yuan in government bonds was issued in October. Some of the cash will probably find its way to local officials hoping to pay down debts. The plans imply that the central government is willing to print money in order to avert a collapse of local governments and the property market. They will be music to the ears of desperate local apparatchiks.Analysts are yet to call the moves a bail-out. lgfvs have been swapping high-cost loans for special refinancing bonds that carry lower interest rates. This is easing the crushing repayment pressure many poor cities are under but, crucially, the towering debts are not being wiped clean. The 1trn yuan for urban renovation, if it materialises, will probably encourage more people to buy homes, but millions of others are still waiting for the delivery of properties for which they paid upfront. Many will not be built on time, if at all. Zhongzhi’s liabilities are to wealthy investors; the state will be reluctant to rescue all of them.A true bail-out would give developers access to copious credit, as would be needed to restore confidence in the property market. Demand for land would rise, giving local governments more income. Shadow banks such as Zhongzhi might even be able to recoup debts from developers. There have been signs of such a move. The city of Shenzhen said it would provide enough cash to a large local developer for it to avoid default. Reuters, a news agency, reported that Ping An, an insurance firm, was tapped to bail-out Country Garden, one of China’s largest developers. Ping An denied the story, but the rumour has raised expectations that something is coming.The plan to provide just 50 developers with liquidity indicates that officials still do not want to bail out everyone. They think that they can protect healthy but illiquid firms, and let insolvent ones fail. The desire to weed out duds has already prevented the creation of a lender of last resort for the companies, says Larry Hu of Macquarie, an investment bank. Therefore officials must also get banks to lend, says Mr Hu. This has not worked in the past. As always, the more cash Beijing hands out, the more others come begging for help. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Not much unites the world these days. Yet there is one sentiment shared by many people, regardless of nationality: pessimism about the economy. Just one in ten Americans thinks they are better off than a year ago, according to a recent poll conducted for The Economist by YouGov. Similar negativity shows up in surveys elsewhere.Such glumness persists in America despite the remarkable feat performed by its economy: workers’ real wages are significantly higher than before the covid-19 pandemic—even after controlling for inflation. Those on low incomes have done particularly well, benefiting from tight labour markets since 2021.Average weekly earnings for the country’s workers reached nearly $1,170 in October, up by around 3% in real terms since the end of 2019. The lowest quartile of earners has seen average annual nominal pay rises of 5.6% per year since the beginning of 2020, compared with 3.8% for the highest quartile, according to figures compiled by the Federal Reserve Bank of Atlanta.image: The EconomistAs ever with economic data, it is possible to tell different stories. Much depends on the choice of baseline. Incomes surged early in the pandemic on the back of the government’s giant handouts. Relative to that heady period, real incomes are lower today. The choice of deflator also matters. The oft-cited consumer-price index exaggerates how much inflation erodes wages because it fails to capture how people adjust spending patterns amid rapid price increases.Like America’s economy, Britain’s has produced growth in real wages despite the pandemic: inflation-adjusted pay 1.5% higher than it was at the end of 2019. As in other countries, there is also a bright spot at the bottom end of the jobs market. A 9.7% increase in the minimum wage this year and a further 9.8% increase scheduled for next year help explain that. But official figures may overstate the increase, since other sources, such as tax receipts, point to slightly weaker growth. Moreover, on a longer time horizon, real wages remain 4.7% below their peak, which was reached in February 2008. The government’s forecasting office estimates that wages will not regain that level until 2028.The effects of a tight labour market take longer to appear in Europe, since most of the continent’s workers have pay set by collective-bargaining agreements. These tend to run for a year or more, and do not respond quickly to inflation. Real wages under collective-bargaining agreements in the euro zone thus dropped by 5.2% last year as inflation hit.But since then wage agreements have ticked up. In the Netherlands, which has some of Europe’s most up-to-date figures, annual growth in negotiated wages has reached 6% this year, even as inflation has dropped to zero. As inflation falls elsewhere, too, and new agreements come into force, real wages are likely to rise further. In Germany, for instance, federal-government employees will receive nominal wage rises of as much as 16.9% next year, with the heftiest rises accorded to those on the lowest wages.■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Zepz, which is backed by TCV, Accel, Leapfrog and other major venture capital funds, told CNBC exclusively that it laid off 30 roles across its people and marketing functions.
In May, Zepz cut 26% of its workforce, citing duplication of roles that resulted from its acquisition of Sendwave, another money transfer service.
The business was last valued at $5 billion, making it one of the largest and most valuable fintech companies in Europe.

Zepz, which owns the WorldRemit and Sendwave brands, has a headcount of around 1,600.
Sopa Images | Lightrocket | Getty Images

Zepz, the money transfer group that owns WorldRemit, made a fresh round of layoffs.
The British fintech unicorn, which is backed by TCV, Accel, Leapfrog and other major venture capital funds, told CNBC exclusively that it laid off 30 roles across its people and marketing functions.

“Zepz has entered a redundancy consultation which will could affect less than 2% of its global headcount,” a Zepz company spokesperson said in an exclusive statement to CNBC.
“Zepz values the contributions these colleagues have made to our company,” the spokesperson added.
“As part of the redundancy package, all impacted individuals will be offered support via our Employee Assistance Programme, including coaching, counselling, and re-employment support.”
“In line with our organisational values, our priority is ensuring all decisions relating to redundancies and restructuring are well-communicated and delivered with humanity while protecting the privacy of those impacted,” the spokesperson added.
That follows a separate round of layoffs the company embarked on earlier this year.

In May, Zepz cut 26% of its workforce, citing duplication of roles that resulted from its acquisition of Sendwave, another money transfer service.
Zepz hasn’t been immune to the effects of slowing momentum in the digital payments space, which has forced companies to cut back on costs and, in several cases, lay off staff.
The company reached profitability for the first time last year.
Zepz said that, with this in mind, its focus is on “innovation and continuous improvement for our users, delivering meaningful products that make finance more convenient and accessible to migrant communities.”
“To fully realise our mission to unlock the prosperity of cross-border communities, we sometimes need to make tough decisions,” Zepz told CNBC.
Zepz has long been touted as an IPO candidate in the U.K., but its timeline on reaching that goal is currently unclear. The business was last valued at $5 billion, making it one of the largest and most valuable fintech companies in Europe. More

Online investments app Robinhood said Thursday that it’s set to launch its platform in the U.K., in the company’s third attempt at cracking international expansion.
Features on offer by the firm include the ability to choose from 6,000 U.S. stocks including Tesla, Amazon and Apple, and 24-hour trading five days a week.
Robinhood CEO Vlad Tenev told CNBC that he doesn’t fear “deja vu” with the firm’s third attempt to launch in the U.K., adding he’s “confident we’ll be able to serve the customers here tightly.”

A woman’s silhouette holds a smartphone with the Robinhood Markets logo in the background.
Rafael Henrique | Sopa Images | Lightrocket | Getty Images

Online investments app Robinhood said Thursday that it’s set to launch its platform in the U.K. in early 2024, marking the company’s third attempt at cracking international expansion.
Features include the ability to choose from 6,000 U.S. stocks and 24-hour trading five days a week. Robinhood currently offers 24-hour trading in the U.S., allowing trades to happen outside 9:30 a.m. ET and after 4 p.m. ET.

Robinhood won’t offer U.K. stocks to begin with but will look to add them as it brings more products into the platform. The U.K. version won’t include options and other derivatives at launch, either.
Jordan Sinclair, Robinhood’s U.K. chief, said he expects 24-hour trading to be popular, as it will let users trade on market-moving news.
“You wake up in the morning, you read the news headlines, and then you have to wait,” Sinclair said. “Customers actually can make a trade and choose their investment strategy and actually act on that market news.”

Robinhood has already tried to launch in the U.K. twice.
A waiting list it rolled out in 2019 saw over 300,000 people sign up, but the company pulled the plug on its U.K. expansion plans, citing soaring demand at home during the Covid pandemic as interest in retail investing climbed dramatically.

Then, last year, it sought to acquire British crypto-trading app Ziglu. That deal faltered, however, and Robinhood was forced to write off the value of its investment, with the company reporting a $12 million impairment charge on the failed transaction.
Brits will be able to join a waitlist starting Thursday and will be notified when they can sign up for early access at a later point in time. In a bid to get more traction fast, Robinhood is also asking users to share a unique referral link with friends and family to move them up the queue.
“My aspiration is to be one of the largest employers in England, nothing would make me happier,” Tenev said. “And, you know, there’s a lot of great talent. So this, this could be a centre of excellence for Robinhood.”
Dan Moczulski, U.K. managing director of EToro, a rival stock trading platform, said the arrival of more competition in the retail trading market marks “an exciting time for the industry.”
“More competition will always be a good thing for investors,” Moczulski told CNBC. “As one of the leading trading and investing platforms in the UK, it also keeps us on our toes and pushes us to continue innovating and broadening our product range for our users.” 

Not scared of ‘deja vu’

Robinhood CEO Vlad Tenev said he doesn’t fear “déjà vu” with the firm’s third attempt to launch in the U.K.
“We’ve made sure we taken care of all of the details, the platform is much more robust,” Tenev told CNBC in an interview. “So I don’t think that it’ll be déjà vu. I think that we’re very confident we’ll be able to serve the customers here tightly.”

Robinhood is launching with a license from the Financial Conduct Authority, the U.K.’s markets regulator, and Tenev says the firm has a good relationship with the regulator.
The FCA has previously warned about “gamification” of investments, something the U.S. Securities and Exchange Commission is also worried about. When contacted by CNBC, an FCA spokesperson said the regulator wouldn’t comment on individual companies, but that companies are obliged to respect consumer duty standards set out by the regulator.
Regulators are concerned brokerage apps like Robinhood, eToro, and Public, which engage investors with stimulating features like push notifications, colorful graphics, and a game-like interface, may encourage excessive trading that harms investors but is profitable for market-makers.
Customer cash will be held in segregated accounts protected by U.S. Federal Deposit Insurance Commission insurance, Robinhood said, rather than the U.K. Financial Services Compensation Scheme. Robinhood users will be able to make a 5% annual yield on cash held in their accounts.
Robinhood won’t launch payment-for-order-flow in the U.K., which refers to the practice of routing trades through market-makers like Citadel Securities in return for a slice of the profits. PFOF is banned in the U.K. Instead, the firm expects to make money from other lines of business, including securities lending, margin lending, interest on uninvested cash, and its premium Robinhood Gold subscription service.
Payment for order flow can create conflicts of interest, critics say, as brokers have an incentive to direct order flow to market makers offering such arrangements over the interests of their clients. More