Stock Market News Today 2018/08/27
Xiaomi corp >>> Xiaomi reports strong profits after rocky six months.
China’s smartphone giant made $2.1bn in second quarter helped by price increases for handsets.
Xiaomi’s revenues rose 68 per cent year on year in the three months to June. China’s smartphone giant Xiaomi has reassured investors with strong quarterly profits after an unexpectedly difficult IPO in Hong Kong last month.
The eight-year old company, which is now valued at $55.7bn, made Rmb14.6bn ($2.1bn) in the three months to the end of June, compared with a loss of Rmb7bn in the previous three months.
Xiaomi has had a rocky six months: it reported a $1bn quarterly loss ahead of its IPO in June, and the IPO achieved a valuation of $54bn, half the initial target of $100bn.
Shares subsequently fell below their IPO price, with the company blaming rising trade tensions between the US and China, but have recovered over the past three days.
Revenues rose 68 per cent year on year in the second quarter, helped by strong smartphone sales and increases in the average selling price of handsets. In the past two years, Xiaomi has bounced back from supply problems and overexpansion to become the world’s fastest-growing smartphone maker by handsets sold in the second half of last year. It is also one of the top five largest smartphone makers around the world.
Shou Zi Chew, the company’s chief financial officer, announced that western Europe would be Xiaomi’s “priority new market”. Over the past year, Xiaomi had expanded to Spain, Italy and France, and would enter “potentially many more [European countries] over the next six months,” said Mr Chew.
International sales accounted for 36.3 per cent of revenues in the past quarter and Xiaomi has become the top smartphone seller in India, according to Counterpoint consultancy. Xiaomi also claimed it was the second-biggest selling smartphone brand in Indonesia in the second quarter of this year.
Founder and chief executive Lei Jun said the group would continue its push into the upmarket smartphone market, but would also focus on introducing more “internet of things” products, such as smart lighting and robot vacuum cleaners, to international markets and expanding its range of internet services.
“Xiaomi will face some challenges as consumers look to upgrade their low-end devices to more expensive models. Currently, Xiaomi is very strong in the lower price segment,” said Ahmed Mohamed, analyst at market research firm IDC, who also remarked that Xiaomi faced fierce competition in China from Huawei and Oppo, which have also brought out premium models recently.
Smartphones are by far Xiaomi’s largest business, accounting for roughly two-thirds of the group’s total Rmb45.2bn ($6.6bn) in revenue in the last quarter. The remainder comes from smart devices connected to the internet of things and its internet services division. Some analysts have asked why Xiaomi should expect to be treated by investors as an internet company, rather than a hardware company.
“We are a new species . . . we are a combination of internet company, hardware company, and ecommerce company, and there’s no point trying to [put] us in any traditional bucket,” said Mr Chew.
Xiaomi indefinitely delayed a plan to become the first company to issue a new “China depositary receipt” type of equity days after regulators issued it with a list of 84 questions. One of them asked why Xiaomi described itself as an “internet company”.
The company has also proposed separating off its financial services subsidiary and expanding in this market.Xiaomi Finance made a loss in the first half of this year. “We are seriously studying the potential to develop a digital bank in Hong Kong,” said Mr Chew.
China A50 >>> China stocks lead Asia equities higher.
China-focused stocks were the top performers among a field of strong contenders in Asia on Monday as investors embraced positive momentum from Friday’s record close on Wall Street.
In China the CSI 300 index of major Shanghai and Shenzhen-listed stocks rose 1.9 per cent with gains across all market segments and in spite of data showing softer growth in profits at Chinese industrial groups in July.
The Hang Seng index rose 2.1 per cent with gains of more than 1 per cent across all segments and financials up 2.2 per cent. The Hang Seng China Enterprises index of major Hong Kong-listed Chinese companies climbed 2.7 per cent.
Seoul’s Kospi Composite index rose 0.4 per cent even as the industrial segment dropped 1.4 per cent, with stocks viewed as having exposure to a potential opening up of the North Korean economy hit by Donald Trump’s cancellation on Friday of a planned trip to the country by the secretary of state. Hanil Hyundai Cement, Busan Industrial and Dongyang Steel Pipe fell 11.6 per cent, 8.9 per cent and 8.7 per cent, respectively.
Tokyo’s Topix rose 1.2 per cent with gains across the board. In Sydney the S&P/ASX 200 added 0.3 per cent.
Bullish sentiment from Friday’s session on Wall Street – which saw the S&P 500 close at a record high after a dovish speech by Federal Reserve chairman Jay Powell – persisted on Monday as S&P 500 futures rose as much as 0.3 per cent to a record high of 2,884.5, according to Reuters data.
Euro Stoxx 50 >>> EU seeks to clamp down on privacy breaches after Facebook-Cambridge Analytica scandal.
The EU is seeking the power to impose significant fines on European political parties who misuse voters’ personal data to influence elections, as Brussels moves to crack down on privacy breaches following the Facebook-Cambridge Analytica scandal.
The European Commission is drafting an amendment to existing party funding rules that would ban political groups from profiting from data collection of the sort alleged against Cambridge Analytica. The UK-based company that worked with Donald Trump’s presidential campaign is accused of improperly mining the data of millions of Facebook users.
Although the plans are still being finalised, the sanctions are likely to amount to around 5 per cent of the annual budget of a political party. “It is meant to ensure that something like Cambridge Analytica can never happen in the EU,” said one official.
The proposed legislative change will be the first time EU regulators have set their sights on the data collection activities of political parties. The fines will apply to European political families that combine national groups under EU-wide banners such as the centre-right European People’s Party, centre-left Socialists, or Eurosceptic European Conservatives and Reformists Group. The commission does not have the power to directly fine domestic parties.
The draft amendment will need the approval of EU governments and the European Parliament to come into force.
The proposal comes ahead of the European Parliament elections in May 2019, which Brussels officials fear will be the target of malign disinformation campaigns and sophisticated online voter targeting from Eurosceptic forces.
New penalties for political parties would be the toughest element of a broader package of measures to be unveiled next month aimed at countering online voter manipulation and personal data misuse for political purposes. Brussels will also issue recommendations to governments to clampdown on the practice of groups sending personalised political messaging to social media users without their consent — so-called “micro-targeting”. The EU will also demand that member states impose stricter transparency requirements on online political advertising in their national laws.
“We have to come closer to how political campaigning works in the offline world for the online world”, Vera Jourova, EU justice commissioner, told the FT last month. “Voters and citizens should always understand when something is an online campaign, who runs the campaign, who pays for it, and what they want to achieve.”
Although online voter targeting is not illegal, the EU wants political parties to ensure personal information collected from third parties such as data brokers has been obtained legally with the explicit consent of users.
Ms Jourova has said that the EU would not go as far as regulating online activity of any political group. “The internet is a zone for free expression. Everybody can be a journalist or an influencer and these are the things that we don’t want to touch”, she said.
The sanctions for pan-EU political parties would be on top of fines that EU governments can impose on organisations including domestic political parties that handle European citizens’ personal data under the General Data Protection Regulation. Fines under GDPR, regarded as the world’s toughest privacy framework, can amount to 4 per cent of a company’s global turnover or €20m, whichever is greater.
The commission is also drawing up plans to force social media groups such as Facebook, YouTube and Twitter to identify and delete online terrorist propaganda and extremist violence within an hour of detection or face the threat of fines.
US Corn >>> EPA move to water down standard could reduce demand for corn as producer profits slide.
American farmers became casualties of President Donald Trump’s trade wars when China raised tariffs on their soyabeans. Now they are fighting to save another market: corn.
Under Mr Trump, the federal environmental regulator has been watering down a government mandate for biofuel use, corn advocates say. The actions could suppress fuel ethanol companies’ demand for the yellow grain just as farm profits slide.
“Everything relative to ethanol has really been an uphill battle for us,” said Mark Recker, a farmer and president of the Iowa Corn Growers Association. “Although President Trump talks a lot about ethanol and wanting to build that industry and help corn farmers out, we’ve encountered a lot of things that have really worked counter to that.”
Mr Recker travelled to the Iowa State Fair last week to press his case at a meeting with Andrew Wheeler, acting administrator of the US Environmental Protection Agency. Underlining the farm lobby’s political clout, he was joined by Iowa’s governor, Kim Reynolds, and one of its congressmen, David Young. Both Republicans are in competitive races in the November elections, where the mandate is a critical issue for rural voters.
Iowa is the nation’s leading corn and ethanol producer. It is also a swing state that voted twice for Barack Obama, a Democrat, and then backed the Republican Mr Trump in 2016.
The industry blossomed thanks to the Renewable Fuel Standard (RFS), the federal mandate set by Congress in 2007. It required blending more and more ethanol and biodiesel into the motor fuel pool each year.
With domestic fuel demand more sluggish than expected, the targets have become unworkable. Under both the Obama and Trump administrations the EPA has invoked powers to tweak them, drawing lawsuits from various parties in the biofuels, farm and oil industries. As of a deadline last Friday, the agency’s proposed volumes for 2019 drew more than 286,000 public comments.
Congress mandated the use of 28bn gallons of biofuels next year. The EPA instead proposed requiring 19.88bn gallons to account for poor results from making ethanol from cellulosic materials such as wood fibre.
Even that level might be under threat. In the past two years the EPA has enraged the biofuels industry by exempting dozens of smaller oil refineries from the rules. The agency said such “hardship” waivers cut the equivalent of 1.5bn gallons from the mandate last year.