House of Commons
In recess until 1 September
Written by Li-Ann Chin, researcher
Edited by David Gaffney, partner
17 August 2020
Last Monday marked an apocalyptic moment for Hong Kong, as the city watched 200 policemen raid the offices of Apple Daily — a local pro-democracy tabloid — before apprehending media tycoon and high-profile Democrat, Jimmy Lai, under the jurisdiction of Beijing’s new national security law.
Lai’s arrest came as a crushing blow to press freedom in the territory, as fears of a wider crackdown have resulted in an uncertain future for the city’s media industry. One wonders if Beijing’s draconian new law has been designed to gradually rob Hong Kong of its financial hub status, as Silicon Valley companies reconsider their presence in Hong Kong and recent US sanctions prove to have significant implications for the American and international banks that operate in the city.
And yet, a new proposal by the Trump administration recommending Chinese companies are forcefully delisted if they do not meet American accounting standards appears to be the sudden windfall that Hong Kong desperately needs, as the US stock market crackdown leaves Nasdaq-listed Chinese companies no choice but to consider going public closer to home amid rising geopolitical tensions.
Some plans have already been put into motion. Spurred by the collective success Nasdaq-listed gaming company NetEase and JD.com enjoyed during their $2.7 billion and $3.7 billion debut in Hong Kong two months ago, it is reported that search engine Baidu, travel agency Trip.com and Chinese private school operator New Oriental Education & Technology Group Inc are likewise eyeing similar secondary listings in the city, signalling an abrupt end to Hong Kong’s previous IPO dry spell.
Seeking to capitalise on this, the Hong Kong stock market has launched the Hang Seng Tech Index which will feature 30 of the largest tech firms listed in Hong Kong and include internet giants such as Alibaba, Tencent and Ant Group. Head of macro and strategy research at China Renaissance Securities, Bruce Pang, has confirmed that the new technology-focused index aims to rival and beat Nasdaq in the US market for Chinese tech companies. In addition to this, China has announced new plans to merge domestic broker First Capital Securities with smaller rival Capital Securities, in a bid to take on Wall Street. According to the state-run China Securities Journal, the merger strategy is being encouraged by the China Securities Regulatory Commission.
In some ways, it seems the US clampdown on Chinese companies has, in fact, played right into Beijing’s hands.
England’s Exam regulator, Ofqual, has suspended the guidance it set out on Sunday, detailing how students can appeal their A-level and GCSE results, based on their mock exam grades. Hundreds of students have held a demonstration in central London, demanding clarity over the appeals procedure and calling for education secretary, Gavin Williamson, to resign.
Iranian president Hassan Rouhani has criticized the United Arab Emirates (UAE) for establishing diplomatic ties with Israel, warning against opening the region up. If the agreement leads to expanded Israeli influence in the region, Iran’s top military commander, Major General Mohammad Baqeri, has cautioned that Tehran’s attitude toward the UAE will change fundamentally and that the armed forces “will also deal with that country with different calculations.” (£)
In another blow to the country’s $175 billion tourism industry, Spain has announced that it will start shutting some 25,000 discos and nightclubs this week, as one of the 11 measures the country’s regional governments have agreed to take in order to curb recent spikes in coronavirus cases. (£)
Business and economy
Russia has reached an agreement in principle to conduct clinical trials of its controversial coronavirus vaccine in Saudi Arabia and the United Arab Emirates, according to Kirill Dimitriv, the head of its sovereign wealth fund. It plans to conduct trials in the Philippines and Brazil, as well as at home, starting this month. (£)
UK health secretary, Matt Hancock, has announced plans to axe Public Health England (PHE) and replace with a new body as early as next month. The new organisation – to be called the National Institute for Health Protection – will be responsible for protecting the UK against pandemics and will be created through the merger of NHS Test and Trace and elements of the existing PHE set-up.
The Self-Employment Income Support Scheme has been reopened by the UK government for the second time, allowing self-employed individuals impacted by COVID-19 to now apply for a second support grant. More than three million people may be eligible for the payment of up to £6,570 each, which chancellor Rishi Sunak said would be the final hand-out. The first grant, launched in May, saw £7.8bn claimed by 2.7 million people.
Columns of note
In The Guardian, Stephen Buranyi argues that eradicating “vaccine nationalism” will be crucial in ending the COVID-19 crisis. Drawing on previous examples of the US attempting to intercept other nations’ shipments of PPE gear at global ports, he cautions that unless countries cooperate, a successful vaccine could very well ignite a global frenzy.
In the Financial Times, Frederick Studeman argues that amid the current A-level results chaos, we cannot forget about the students who were midway through their course when the pandemic hit. This lockdown, he argues, has inflicted an enduring damage on an entire generation of pupils, from the loss of learning to “desocialisation” and the exacerbation of existing inequalities. (£)
The week ahead
Brexit talks between Britain and the EU are set to resume in Brussels this week, although they are not expected to begin in earnest until September.
The UK enters the new working week with fewer Covid-19 restrictions: bowling alleys, skating rinks and casinos will be allowed to open, while beauty salons, spas and barbers will be able to offer “close-contact services and treatment”. Indoor theatres, music and performance venues in England will similarly be able to reopen with socially distanced audiences, after a successful series of pilots.
In terms of economic data, the UK consumer price index data for July is due on Wednesday, when investors anticipate inflation will edge up to 0.6%. In addition, the UK will be publishing retail sales figures for July on Friday, alongside the launching of a flash Purchasing Managers Index survey on the same day. It is anticipated that the Eurozone, France and Germany will be doing the same. While figures are set to improve, worries about an increase in Covid-19 cases and companies laying off more workers are likely to weigh on sentiment.
UK retail watchers will focus on delayed full-year results from Mike Ashley’s Frasers Group on Thursday as a gauge of trading levels since stores reopened after lockdown. Profits at UK Housebuilder Persimmon are expected to be down on Tuesday, as investors begin looking for signs the property market has picked up after chancellor Rishi Sunak slashed stamp duty land tax.
In company news:
ByteDance faces a backlash from Chinese consumers, as users and observers in China labelled the company a “coward” for bowing to US pressure at a time of rising tensions between Washington and Beijing. On Friday, the Trump Administration issued an executive order requiring ByteDance to complete a sale of TikTok’s US operation within 90 days. (£)
Tesco chief executive Dave Lewis has outlined plans to add free delivery on the retailer’s Clubcard Plus loyalty scheme in a bid to confront Amazon’s attempt to muscle in on the British grocery industry.
Debenhams reportedly could be broken up as the retailer’s owners desperately hunt for a buyer. Frasers Group, Next and a Chinese consortium are among the parties showing interest as its hedge fund owners have enlisted advisers at Hilco, a restructuring firm, to draw up plans for liquidation if all other options fail. (£)
What’s happening today?
Int. economic announcements
(07:00) Producer Price Index (GER)
(10:00) Consumer Price Index (EU)
Extreme ironing is a sport that allows competitors to apply pressure and let off steam simultaneously.
House of Commons
In recess until 1 September
House of Lords
In recess until 2 September 2020.
No business scheduled