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Swire’s ‘next chapter’ ends as scion leaves Hong Kong

Swire’s ‘next chapter’ ends as scion leaves Hong Kong
Swire’s ‘next chapter’ ends as scion leaves Hong Kong


Merlin Swire’s appointment as chair of the storied Hong Kong trading house in 2018, which bears his family’s name, was billed as the beginning of the group’s “next chapter”.

The 47-year-old was the first member of the family since the 1860s to hold the role of “taipan”, the traditional name for the head of a British-owned, colonial-era Hong Kong trading house.

But three years later, that chapter seems to have ended to the surprise of some observers of the company, given the crisis facing the group in Hong Kong. It announced last month that he would be returning to London to run the Swire holding company, leaving the airline-to-property group, whose flagship is Cathay Pacific Airways, facing some of the biggest challenges in its history.

The 205-year-old company has been rocked by political turmoil on its home turf and by the Covid-19 pandemic. Cathay is struggling for survival and Swire’s vast Hong Kong property portfolio has taken a hit.

“In the whole of the company’s history, it’s the worst time to have a stint as taipan,” said Richard Harris, a fund manager at Hong Kong-based Port Shelter Investment Management.

The departing chair’s replacement is Guy Bradley, previously head of Swire’s property business. That indicates the group is likely to focus more on real estate and less on Cathay, which has been pummelled by the closure of international borders.

But analysts question whether the leadership change will be enough to get the conglomerate back on track.

“They need to adjust their strategy . . . They need a shake-up to get everybody to wake up,” said Kevin Au, director of the Centre for Family Business at the Chinese University of Hong Kong. “Swire has been too conservative . . . because of the history of their success.”

Swire family tree

John Samuel Swire, son of John Swire, founder of a Liverpool textile company, started trading with China in 1861 and opened a company branch in Hong Kong in 1870. Merlin Swire is John Swire’s great-great-great-grandson.

Investors and observers say Merlin Swire is leaving Hong Kong having made only a modest impact on the conglomerate’s empire in Asia. A year after he took the helm, Cathay staff participated in anti-government protests in the territory, prompting China to threaten the company with regulatory action. After Merlin Swire met government officials in Beijing, Cathay ousted chief executive Rupert Hogg while chair John Slosar resigned shortly after.

Those developments, while appearing to smooth relations with Beijing, underscored how the Communist party government increasingly expects the Swire group to publicly support its positions even when they clash with UK foreign policy.

Chinese President Xi Jinping walks alongside Merlin Swire at an annual roundtable summit of the Global CEO Council in Beijing in 2018
Chinese president Xi Jinping, second from right, alongside Merlin Swire, far right, at an annual roundtable summit of the Global CEO Council in Beijing in 2018 © AFP via Getty Images

In 2018, the group hailed Merlin Swire’s appointment and move to Hong Kong as a sign of the company’s unwavering commitment to the former British colony. “This move back to Hong Kong reflects how important Hong Kong is to the group’s business,” the company said.

Today, Hong Kong has become a drag on its performance. Swire Pacific announced a rare underlying annual loss in March of HK$3.9bn (US$502m), as the pandemic hit Cathay and its Hong Kong property business. Jardine Matheson, a rival colonial-era trading house that has diversified more extensively in south-east Asia, clocked a US$1bn underlying net profit for the same period.

Hong Kong, while part of China, is also separated from the mainland by border controls, meaning Cathay has no domestic market to fall back on. Hong Kong’s coronavirus quarantine measures, among the world’s toughest, have not helped.

Swire Pacific’s financial performance hits turbulence

“Cathay is in ICU [intensive care] for the foreseeable future,” said David Blennerhassett, an analyst at Ballingal Investment Advisors.

Swire needs to “try something different” and focus on the mainland Chinese property unit previously run by Bradley, said one senior Hong Kong businessman familiar with the company.

Swire’s other interests include bottling Coca-Cola in China, marine services for the energy industry and Taikoo Sugar, a business dating from the colonial era. But it is increasingly focusing on property in greater China, having developed mixed-use commercial and retail districts on the mainland.

Merlin Swire will still occupy an important role as head of holding company John Swire and Sons, which sits above Hong Kong-listed Swire Properties and Swire Pacific. “The really important strategic decisions are still made by the family in London,” a person familiar with the company said.

A guest at a dinner party attended by Merlin Swire described him as quiet and observant. “He was one of the most unassuming, humble people I have met in business,” said a former business partner.

Insiders said Merlin Swire and his family take the underground or taxis in London, while the former business partner told the Financial Times he flew with Australian low-cost carrier Jetstar on a trip to New Zealand.

Swire Pacific bets big on property

According to a person who worked closely with Merlin Swire, his tenure represented a “decent minimum” but he “never quite clicked” with his position as chair. Swire defended his record, saying its leadership had “done an excellent job maintaining our progress” and the company was focused on “sustainable growth”.

Some Hong Kong establishment figures say Merlin Swire is just one in a long line of leaders at Swire and Jardines who never picked the Asian city as their long-term home.

“There’s more prestige being back in London than being in Hong Kong, where it’s hot and humid and crowded,” a veteran Hong Kong businessperson familiar with the company said. “When you are extremely wealthy, you can have that option and hire good people to run things for you.”

Some company insiders said they were not surprised at Merlin Swire’s move back to the UK. The need for a leadership change so that Bradley could boost the business’s focus on property became clear, they said, when the pandemic first hit Cathay financially last year.

A former Swire executive said the big challenge for Bradley would be repositioning the company. Swire’s recent losses in Hong Kong office and retail properties have been partly offset by its China real estate business, which has been boosted by the country’s economic rebound from Covid-19.

However, a slightly greater share of the company’s property assets by square feet are still in Hong Kong and most of those in mainland China have already been developed. Swire said it had a “good pipeline” across mainland China, Hong Kong, Indonesia and Vietnam.

“In China, they are moving very, very slow, they are very conservative,” the former Swire executive said. “The Swire family needs to show how confident they are in China . . . and put their money where their mouth is.”



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Covid outbreak at Chinese port exacerbates global supply chain delays

Covid outbreak at Chinese port exacerbates global supply chain delays
Covid outbreak at Chinese port exacerbates global supply chain delays


Weeks of disruption at one of the world’s largest container terminals in southern China have put a huge strain on the already-stretched global shipping industry, worsening supply chain delays for manufacturers and retailers around the world.

Yantian terminal in Shenzhen closed for almost a week in late May after port workers tested positive for Covid-19; weeks later, productivity has only recovered to about 70 per cent of normal levels.

Yantian handles 13m 20-foot shipping containers a year, making it the third-largest terminal in the world. But congestion at the facility, operated by Hong Kong-headquartered Hutchison Ports, has spilled over to other nearby terminals such as Nansha and Shekou. Local authorities in the region blocked roads and closed off some business zones in a bid to stop the spread of the virus.

The situation exposes the vulnerability of global shipping to future delays if even relatively minor outbreaks occur in Chinese port cities. Lars Jensen, chief executive of consultancy Vespucci Maritime, said the incident highlighted the risk of an even more disastrous shutdown if the virus hit bigger ports such as Shanghai.

“The Chinese authorities are attempting to crack down hard on the smallest outbreaks . . . It only takes a few single cases to shut down large areas. We could see much larger impacts,” he said.

At the height of the disruption, Leslie Wang, a clothing factory owner in Guangzhou, told the Financial Times the situation was “like a nightmare”.

Although she tested all her workers for the virus and kept production lines running, “the goods have been piled up at the freight company and cannot be shipped at all”, she said earlier this month.

Ocean shipping has been under immense stress since late last year as pandemic-related controls, such as border restrictions, caused a shortage of empty containers. The situation was worsened by the Suez Canal blockage in March, which resulted in further delays.

Shipping companies are also struggling to keep up with rising demand for their services after the pandemic fuelled a boom in online shopping, and as advanced economies recover from last year’s historic recession.

As a consequence, the cost of sending a 40-ft container on the Asia to North Europe route recently topped $11,000 for the first time, up from about $8,500 in mid-May and $2,000 last October, according to Freightos.

Line chart of Freightos Baltic container indices showing Shipping costs soar

Although Rolf Habben Jansen, chief executive of Hapag-Lloyd, said that “I would like to think that we’ve had the worst behind us”, he warned that “we also didn’t see Yantian coming and there have been other surprises over the last couple of quarters”.

The disruption at Yantian and its impact on shipping costs could add to global inflationary pressures, some economists warned when the outbreak first hit. This added to concerns that surging factory gate prices in China, fuelled by a commodities rally, will raise prices for its exports.

But Larry Hu, chief China economist at Macquarie Group, said that overall, Chinese exports helped keep the rate of price growth down. “The share of China in global exports has reached [a] new high, in response to the pick-up in goods demand globally and the constrained production elsewhere,” he said. “Otherwise, the global inflation pressure could be even higher.”

Peter Sand, chief shipping analyst at Bimco, said he did not think that “freight rates are putting wood on the [inflation] fire”.

In a bid to work around the disruption, shipping companies have been diverting hundreds of vessels to other ports and some ships are skipping southern China to dodge the backlogs. The average waiting time for ships entering the terminal has hit 16 days, according to Maersk, the world’s largest container shipping company.

Line chart of Global reliability schedule (% on time) showing The pandemic has created massive shipping delays

Electrical systems maker Eaton has 25 of its containers held up in southern China, according to Klaus Gaeb, its vice-president of supply chain in Europe. As a result, the company will have to wait an extra two weeks to receive the supplies. That followed a two to three month wait for items in 45 containers that it had to reorder because the original goods got stuck during the Suez Canal blockage.

Shippers have been hunting for alternatives such as air and rail to get goods from Asia to Europe but those options have become increasingly difficult to pursue. Gaeb said prices to haul goods across Eurasia have more than doubled from pre-pandemic levels to $36,000 per truck.

The delays will persist for manufacturers and retailers across the world for the rest of the year, as will limited availability on cargo ships and record-high freight rates, shipping industry figures said.

Otto Schacht, executive vice-president of sea logistics at Kuehne+Nagel, one of the world’s largest freight forwarders, said the timing of the latest disruption was particularly unfortunate because shipping is close to entering peak season when retailers stock up for the return-to-school and end-of-year buying.

“How quickly are we back at pre-Covid supply chain reliability? Probably six to nine months,” he said.

Jensen of Vespucci Maritime said the Yantian backlog “serves to push the point of time further into the future when we revert to normality”.

“There’s a significant risk that we push the point of return into 2022,” he warned.

Additional reporting by Wang Xueqiao in Shanghai, Qianer Liu in Shenzhen and Patricia Nilsson in London

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China squeezes bitcoin mining and trading

China squeezes bitcoin mining and trading
China squeezes bitcoin mining and trading


This article is an on-site version of our #techFT newsletter. Sign up here to get the complete newsletter sent straight to your inbox every weekday

China has taken another bite out of bitcoin’s potential, stepping up restrictions on cryptocurrency mining and ordering banks to block crypto-related transactions. The news drove bitcoin’s price 10 per cent lower to a two-week low today.

China’s central bank warned several of its largest state-owned banks and Jack Ma’s Alipay to “investigate and identify” bank accounts facilitating cryptocurrency trading and block all corresponding transactions, reports our Beijing bureau.

It had called in the Agricultural Bank of China, China Construction Bank and ICBC among others to discuss “providing services for cryptocurrency transaction speculation”. The regulator wants the financial groups to identify and block all transfers to accounts held by cryptocurrency exchanges and other offshore middlemen. The central bank is steering citizens towards using its own digital currency, which it has started testing in large-scale pilots.

“Bitcoin trading in China will continue but become less liquid, and spreads will increase,” said Leo Weese, co-founder of the Hong Kong Bitcoin Association. “People will limit themselves to trading with their friends and trusted friends-of-friends.”

Line chart of $ per coin showing Bitcoin slides on fears of regulatory crackdown

Elsewhere, officials in all of China’s hubs for mining operations followed Inner Mongolia and released further measures targeting bitcoin creators. Sichuan, a hydropower-rich province in south-west China, has ordered the 26 largest local mines to stop operating while an investigation is carried out. Sichuan was seen as a last resort location for mining operations pushed out of provinces that rely on coal-fired power plants for electricity.

Meanwhile, the central banker overseeing the European Union’s development of a digital euro has been speaking to the Financial Times about its advantages. Fabio Panetta, an executive board member at the European Central Bank, told us it would boost consumers’ privacy and protect the eurozone from the “threat” of competing cryptocurrencies that could undermine the bloc’s monetary sovereignty.

The Internet of (Five) Things

1. German regulator launches Apple probe
Germany’s antitrust watchdog has launched a probe into whether Apple has established market dominance through its “digital ecosystem”, making it the fourth US tech giant the agency has targeted this year. The Federal Cartel Office said on Monday it would look at whether Apple exerted market dominance through its integration of hardware products with digital services such as the App Store, iCloud, or Apple Music. Meanwhile, Margrethe Vestager, the EU’s head of digital and competition policy, has rejected the idea that its forthcoming Digital Markets Act (DMA) will only target American tech companies.

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#techFT brings you news, comment and analysis on the big companies, technologies and issues shaping this fastest moving of sectors from specialists based around the world. Click here to get #techFT in your inbox.

2. Tech investor says UK still in 19th century
A “deep sickness” in UK capital markets has stifled the growth of homegrown tech entrepreneurs and left London’s blue-chip FTSE 100 looking like an index from the 19th century, according to James Anderson, joint manager of Baillie Gifford’s Scottish Mortgage Investment Trust. His early bets on Facebook, Amazon and Tesla have made him one of the world’s most successful investors.

3. Volvo and Northvolt to build gigafactory
Volvo Cars and Northvolt will set up a joint venture to build a new battery gigafactory in Europe and develop energy cells for the Swedish premium carmaker and its electric-only sister brand Polestar. Northvolt, Europe’s great battery hope founded by former Tesla executives, is backed by investors including Volkswagen and Goldman Sachs and valued at about $12bn.

4. Malaysian mobile megamerger
Malaysia’s Axiata and Norway’s Telenor have agreed to merge their mobile operations in the south-east Asian country, creating a $12bn entity that will seek to capture rising demand for digital services. The deal, announced on Monday, comes two years after the pair abandoned plans to merge their regional operations in a deal that would have created the biggest telecoms operator in south-east Asia.

5. Ackman Spac invests in music catalogues
A blank-cheque company backed by hedge fund billionaire Bill Ackman is to buy a 10 per cent stake in Universal Music Group, Taylor Swift’s label, for $4bn. The deal is the first of its kind for a special acquisition company and comes as music catalogues soar in value.

Tech week ahead

Monday: Activision Blizzard faces a contentious vote on its chief executive’s $155m pay package after delaying the showdown in what critics say was an effort to avoid an embarrassing rebuke.

Tuesday: Amazon’s two-day Prime Sale ends.

Wednesday: The new UK £50 note enters circulation and features Alan Turing, one of the UK’s greatest scientists, on his birthday. Masayoshi Son, SoftBank chairman and CEO, will address the company’s annual meeting amid rising calls for share buybacks after the company recorded a $45bn net profit for the year to March 31.

Thursday: Microsoft unveils its “next generation of Windows” at an event presented by Microsoft CEO Satya Nadella and chief product officer Panos Panay.

Friday: Days after an independent investigation found that Toshiba executives colluded with Japan’s trade ministry to pressure shareholders over their votes at last year’s general meeting, investors will gather again to elect a new board of 11 directors.

Tech tools — Angell e-bike

The Angell e-bike has élan, which seems appropriate given its French design and origins. It is sleek, stylish and one of the lightest bikes of its kind, weighing in at 15.9Kg. I was able to test ride it recently and relished the surge from its three power-assisted settings — the battery-saving Fly Eco, a regular Fly Dry mode and a Fly Fast one for maximum assistance. The handlebars have integrated buttons that switch between those power modes and turn the left and right indicators and the front and rear lights on and off. A central cockpit display links to your smartphone using Bluetooth and shows speed, battery life, time, distance, weather conditions, and power settings.

I had some quibbles with the battery, which slides on to a rear rack and sometimes became disconnected when riding, unless I kept the key in it so it was fully locked. If you leave the battery off the back for a few days when charging it, the central cockpit console can lose its own charge and curtail any power-assisted rides. I would also prefer a smartphone mount in the centre rather than have both an Angell app and the console screen. Like other smart e-bikes, the Angell has the ability to send a fall alert via text to a chosen contact, as well as automatic locking, motion sensing and geolocation features. It is another £2,000-plus e-bike, costing £2,600, compared to the new Cowboy 4 at £2,290.

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US punts negotiation ball back to North Korea

US punts negotiation ball back to North Korea
US punts negotiation ball back to North Korea


SEOUL – Echoing a classic Martini advert of the 1970s, the US special envoy to North Korea says American negotiators are ready to meet their North Korean counterparts and talk anytime, anywhere.

“We continue to hope that [North Korea] will respond positively to our outreach and our offer to meet anywhere, anytime without preconditions,” Ambassador Sung Kim said in Seoul on Monday.

His comments came three days after North Korea signaled, via comments from national leader Kim Jong Un, that it was ready to either talk to or confront the United States. Experts told Asia Times then that the implied emphasis was on “talk”, an analysis that appears to be born out by the US response.

The US envoy arrived in South Korea on Saturday for discussions with his South Korean and Japanese counterparts. None of the three states are currently engaged in negotiations with North Korea.

Talks between the US and North Korea, and collaterally South Korea and North Korea, have essentially dwindled away to nothing after a high-potential Pyongyang-Washington summit in Hanoi, Vietnam, ended without a deal in 2019.



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China cracks down on iron ore market

China cracks down on iron ore market
China cracks down on iron ore market


Beijing has launched a review into record prices for key steelmaking ingredient iron ore, opening a new front in its campaign to suppress high commodities prices.

In a statement issued on Monday, the National Development and Reform Commission, China’s top economic planning agency, said it would investigate “malicious speculation” in the iron ore market and “severely punish” any wrongdoing.

The move marks the latest step by Chinese policymakers to cool soaring commodity markets, which have pushed up factory gate prices in China to their highest since the 2008 financial crisis and threatened to squeeze industry profits.

Chinese authorities made a pledge last week to release government stockpiles of industrial metals to tackle concerns over shortages and high prices. China is the world’s biggest consumer of seaborne iron ore, absorbing more than 70 per cent of global production.

“What [this intervention] tells me is they’re very very frustrated, they’re trying to reduce the inflation risk that high commodity prices pose to the economy,” said Tom Price, head of commodities strategy at Liberum.

Iron ore futures tumbled on the news, with the most active contract on the Dalian Commodity Exchange down 9 per cent to $173 a tonne.

In the physical market, where miners and steel mills buy and sell, iron ore was down 5 per cent at $206.55, according to a price assessment from S&P Global Platts.

The price of iron ore surged to a record high of more than $230 a tonne in May on strong demand from China and supply disruptions in Australia and Brazil. That delivered a huge windfall to big producers, a group that includes Rio Tinto, BHP Group and Vale.

The NDRC said in a statement it would “closely scrutinise changes to spot prices, swiftly investigate irregular transactions and malicious speculation, and . . . will severely punish and publicly expose acts such as monopolistic behaviour, spreading around information about price increases, driving up prices and hoarding”.

High metals prices and falling consumer growth have squeezed Chinese heavy industry, with the producer price index climbing 9 per cent in May while consumer prices have remained unchanged.

However, commodity prices have suffered a sharp retreat over the past week, hit by the hawkish shift in tone from the US Federal Reserve and China’s interventions to try and curb inflation. Copper hit an all-time high of $10,500 a tonne on the London Metal Exchange last month but has since come back to about $9,000 a tonne.

The Bloomberg Commodity index peaked earlier in June but has since fallen off 5 per cent, with a drop in the gold price also contributing to its decline.

UBS analyst Myles Allsop said the iron ore price was approaching an “inflection point” through China’s tightening of credit and supply.

“Steel demand is also set to moderate in the second half [of the year] with China tightening credit,” he said. “Brazilian supply is lifting with Vale’s shipments up 14 per cent year to date.”

In London, shares in Rio fell as much as 3 per cent on the news before rebounding, as the FTSE 100 index rose as much as 0.7 per cent in morning trading.



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Up to 10,000 fans to be allowed in Tokyo Olympics

Up to 10,000 fans to be allowed in Tokyo Olympics
Up to 10,000 fans to be allowed in Tokyo Olympics


Up to 10,000 fans will be allowed at Tokyo Olympic events, organizers said Monday, warning competition could move behind closed doors if infections surge.

The decision, only weeks before the opening ceremony, ends months of speculation about whether spectators will be allowed at the pandemic-postponed Games. Overseas fans were banned in March.

“In light of the government’s restrictions on public events, the spectator limit for the Olympic Games will be set at 50% of venue capacity, up to a maximum of 10,000 people in all venues,” organizers said in a statement.

A decision on spectators at the Paralympics will be delayed until July 16, a week before the Olympics open.

And officials left open the possibility of a reversal if the virus rebounds.



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Olympic venues to cap number of spectators at 10,000

Olympic venues to cap number of spectators at 10,000
Olympic venues to cap number of spectators at 10,000


Japan will limit spectators at the Olympic Games to 50 per cent of a venue’s capacity capped at 10,000 people, a move that flies in the face of the country’s official medical advice.

The decision to push ahead with spectators at the games, even though most of the Japanese public will not be vaccinated against Covid-19, suggests prime minister Yoshihide Suga is willing to risk some extra infections in order to deliver a successful Olympics.

It marks a rejection of last week’s request by Shigeru Omi, the doctor leading Japan’s Covid-19 response, for organisers to hold the Olympics behind closed doors.

“We have prepared for the last eight years and we would like to make these games successful,” said Seiko Hashimoto, president of Tokyo 2020, in a press conference on Monday.

She said there were many examples of spectators attending sports events during the pandemic, both in Japan and abroad, and insisted the event could be held in safety.

Last week, Omi warned that the televised spectacle of stadiums full of spectators would send a contradictory message to the Japanese public that it was safe to relax their precautions against Covid-19.

If the Olympics were held with spectators, Omi said there should be tighter restrictions than for other sporting events, and they should be limited to Tokyo residents to avoid an increase in people travelling.

But while the organisers appeared to reject Omi’s requests, they said the rules could be changed if the coronavirus situation worsened.

“In the event a state of emergency is implemented at any time after July 12, limitations on spectator numbers will be based on the content of the state of emergency,” said Hashimoto. That could yet mean holding the games behind closed doors.

A state of emergency was lifted in Tokyo and Japan’s other big cities at the weekend with new nationwide Covid cases running at about 1,500 a day. Doctors are worried about a fresh wave of the disease, especially as the Delta variant becomes more prevalent.

The Olympics are due to start on July 23. Japan has so far given a first dose of vaccine to sixteen in every 100 people, with priority going to medical personnel and then the elderly.

Only one in ten Olympic events will be affected by the 10,000 maximum on capacity, said Hashimoto. That will include showpiece athletics finals in the Olympic stadium.

Restricting spectator numbers will mean a financial hit to the organisers. Hashimoto said ticket revenue would be less than half of the budgeted ¥90bn ($820m).

She said the organisers, the city of Tokyo and the Japanese government would discuss how to fill the gap in the budget. However, according to the contracts underpinning the games, the burden is likely to fall on Tokyo taxpayers.



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