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ISSUE 36


China's virtual coin fundraising ban just the start of tighter regulations: Yicai

 

China is poised to further tighten rules on virtual currencies after regulators on Monday banned virtual coin fundraising schemes, Chinese financial news outlet Yicai reported citing sources.

 

China banned and deemed illegal the practice of raising funds through launches of token-based digital currencies, targeting so-called initial coin offerings (ICO) in a market that has exploded since the start of the year.

 

Yicai’s report late Monday cited a source close to decision-makers as saying the announcement on the ban was just the start of further follow-up regulations of virtual currencies.

 

In total, $2.32 billion has been raised through ICOs globally, with $2.16 billion of that being raised since the start of 2017, according to cryptocurrency analysis website Cryptocompare.

 

Bitcoin rival Ethereum, which token-issuers usually ask to be paid in and which has seen dramatic growth this year, fell sharply on the news. It was down almost 20 percent on Monday at $283, according to trade publication Coindesk.

 

Bitcoin was also down 8 percent, while the total value of all cryptocurrencies was down around 10 percent after China’s ban was announced, according to industry website Coinmarketcap.com.

 

By – Reuters

Taxify takes on Uber in crowded London taxi-hailing market

 

Estonian start-up Taxify is to go head to head with Uber in London’s highly competitive taxi-hailing market, and also has Paris in its sights.

 

Taxify said it will launch services across London on Tuesday after signing up 3,000 private hire taxi drivers, who have been vetted to ensure they meet local licensing requirements.

 

It marks a major move forward for Taxify after missteps by the Silicon Valley giant already allowed it to make inroads in several cities in central and eastern Europe and Africa.

 

In London, it enters a crowded market where the city’s famous black cab taxi drivers and private hire taxi firms such as Addison Lee compete with ride-hailing apps including Gett and Hailo, which is now part of Daimler’s MyTaxi. Uber counts 40,000 drivers and has 3 million London users, who take 1 million trips a week.

 

Taxify is a fraction of Uber’s size - being active in just under 25 cities compared to Uber’s presence in nearly 600 cities worldwide - but runs on a lower cost business model, allowing passengers to pay marked-down fares and letting drivers retain a bigger share of the profits.

 

Taxify said on Monday it would take a 15 percent commission on rides booked through its online platform, versus the 20-25 percent Uber charges in London. Taxify also said it will accept cash as well electronic payments from riders, unlike Uber.

 

“We will always be cheaper than Uber,” company founder and Chief Executive Markus Villig said in a telephone interview with Reuters.

 

Uber has struggled over the past year with legal setbacks, workplace harassment scandals, driver protests and bitter disputes among directors. Over the past year it has pulled back from China, Russia and several eastern European countries, while retaining minority stakes in joint ventures in those markets.

 

In a bid to stabilize the company, it fired its pugnacious co-founder and chief executive Travis Kalanick in June and last week named Expedia Inc CEO Dara Khosrowshahi to lead the company.

 

From its home base in the Baltics, Taxify first staked out major cities in central and eastern Europe. Over the past year, it has vaulted into several of Africa's biggest cities, where Villig says he expects to overtake Uber by the end of 2017.

 

Bolstered by recently announced financial backing from China's DiDi, Taxify aims to expand into five more cities by the end of the year, including Paris, Villig said in a phone interview.

 

DiDi Chuxing, China's largest ride-hailing firm, is seeking to turn up the heat on ride-sharing pioneer Uber via a string of deals with regional rivals in Southeast Asia, the Americas, Europe, the Middle East and Africa.

 

“Ride-sharing has been monopolized by Uber,” Villig said. “Now it is getting clear that in most markets there will be major competitors.”

 

“Competition is a good thing as it raises service levels across the board,” an Uber spokesman said in a statement.

 

By – Reuters

United Tech to buy Rockwell Collins for $30 billion, combine aerospace operations

 

Aerospace supplier United Technologies Corp has struck a $30 billion agreement to buy avionics and interiors maker Rockwell Collins Inc, the companies said on Monday, in a deal that bulks up UTC’s power with plane makers by creating one of the world’s largest makers of civilian and defense aircraft components.

 

Farmington, Connecticut-based United Technologies will pay $140 per share for Rockwell Collins, split between $93.33 per in cash and $46.67 in stock, according to the companies. The price represents a 17.6 percent premium to Rockwell’s $119 share price before news of the talks emerged on Aug. 4.

 

Shares of Cedar Rapids, Iowa-based Rockwell Collins closed at $130.61 on Friday. U.S. markets were closed on Monday for the Labor Day holiday.

 

The acquisition price implies a total transaction value of $30 billion, including Rockwell Collins’ debt, and a total equity value of $23 billion. United Tech said it plans to fund the cash portion through debt issuances and cash on hand.

 

Under the deal, the companies said that Rockwell Collins and UTC’s aerospace systems segment will be combined to create a new business unit named Collins Aerospace Systems.

 

“This acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems,” UTC’s chairman and chief executive officer, Greg Hayes, said in the statement.

“Together, Rockwell Collins and UTC Aerospace Systems will enhance customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and more connected,” he said.

 

SUPPLIERS VS PLANEMAKERS

 

The creation of a new giant in the top echelon of aircraft parts makers comes as planemakers Boeing Co and Airbus SE are trying to capture more of the profits earned by their suppliers. Both are pushing suppliers to lower prices and are moving into the high-margin aftermarket arena for parts and services that suppliers now enjoy.

 

In a move seen as a threat to Rockwell, Boeing said in July that it would build up its own avionics business.

 

Last week, Airbus urged supplier UTC to stay focused on fixing industrial problems that have delayed new aircraft deliveries.

 

If plane makers “are going to take more of the aftermarket or demand more of the aftermarket, we’re going to have to think about how we price our products,” Hayes told analysts in July.

 

By making more of the components needed on each aircraft, analysts say, United Technologies likely will gain some leverage to resist such pressures.

 

The deal also follows a wave of consolidation among smaller aerospace manufacturers in recent years that was caused in part by the need to invest in new technologies such as metal 3-D printing and connected factories to stay competitive. A combined United Technologies and Rockwell Collins could similarly invest, and their broad portfolios have little overlap.

 

United Technologies makes Pratt & Whitney jet engines used by Airbus, Bombardier Inc, Embraer SA and other plane makers. It supplies engines for Lockheed Martin Corp’s F-35 Joint Strike Fighter. It also supplies such key components as landing gear, air conditioning systems and engine covers to a wide range of jetliners.

 

Rockwell Collins is a major avionics supplier to Boeing and Airbus and other plane makers. In April it added passenger seating, cabin interiors, lavatories and galleys through its $6.4 billion acquisition of B/E Aerospace.

 

The two companies have spent a month trying to reach an agreement, and their combined sales would be more than $62 billion, compared with about $95 billion for Boeing.

 

United Technologies expects to close the purchase in the third quarter of 2018. The company, with a $94.2 billion market value, also owns Otis Elevator and air conditioner maker Carrier.

 

Rockwell Collins has a market value of $21.2 billion.

 

The deal, which includes $7 billion in Rockwell’s debt, is expected to save more than $500 million by the fourth year after its completion, the companies said.

 

Morgan Stanley & Co LLC was the financial adviser to United Tech, and Wachtell, Lipton, Rosen & Katz was its legal adviser.

 

J.P. Morgan Securities LLC and Citigroup Global Markets Inc were Rockwell’s financial advisers, while Skadden, Arps, Slate, Meagher & Flom was its legal adviser.

 

By – Reuters

Hong Kong's Economy May Soon Be Eclipsed by the Chinese City Next Door

 

Hong Kong is on the verge of seeing its economy surpassed in size by the former fishing village Shenzhen, a role reversal long foreshadowed by China’s massive supply of cheap labor and subsidized capital.

 

Shenzhen -- less than 20 miles north of central Hong Kong -- will see its gross domestic product jump to $350 billion in 2018, ahead of its rival’s projected $345 billion, according to an analysis by Michael Parker, head of Asia Pacific strategy at Sanford C. Bernstein & Co.

 

Yet while Shenzhen has amply demonstrated the ability to take the original Hong Kong trade-and-manufacturing prototype to new heights, in one main area it’s the ex-British colony that still reigns supreme. Hong Kong has kept its prominence as a financial center, with its influence highlighted most recently by the opening of a gateway to the mainland’s bond market.

 

“There’s almost a false premise here that it has to be one or the other, whereas they’re competing in different streams,” Parker said in a phone interview. “Hong Kong is continuing to benefit from its proximity” to the mainland, and Shenzhen is boosted by “the maturation of the services and technology sector” in China, he said.

 

In less than 40 years, Shenzhen’s population has ballooned to more than 11 million people from 30,000, government data show -- well ahead of Hong Kong’s 7.39 million. Meanwhile, Shenzhen’s annual GDP gains have averaged nearly 10 percent since 2010.

 

Hong Kong, however, has averaged about 3 percent annual growth in the past seven years as the city struggled with a downturn in tourism spending, pro-democracy protests in 2014 and the world’s most-expensive housing market. It’s projected to expand less than 3 percent in each of the next two years, according to analyst estimates compiled by Bloomberg.

 

Like London

 

But the distinction between the two Pearl River Delta ports showcases China’s challenge to replicate developed-world standard financial infrastructure, even as its economy keeps expanding in excess of 6 percent.

 

“It’s always going to be the financial hub and the gateway -- you’re never going to get rid of it,” Stephen Innes, the Singapore-based head of trading for Asia Pacific with Oanda Corp., said of Hong Kong. “It’s like London going through Brexit: obviously it’s not going to be the same place anymore but it will still remain the financial center.”

 

Shenzhen has shined amid China’s efforts to move up the value chain and go beyond cheap manufactured goods like plastic toys and simple textiles like T-shirts. The city is now an information-technology hub, with sector giants including Tencent Holdings Ltd., ZTE Corp. and Huawei Technologies Co. all based there -- a jump Hong Kong has struggled to make.

 

Hong Kong’s role as a bridge for foreign investors to China’s wealth will be key to its future, says Dong Chen, senior Asia economist with Pictet Wealth Management. As entrepreneurs expand their businesses in Shenzhen, they will inevitably need to tap Hong Kong’s deep talent pool for high-end financial services, he said.

 

With specializations including investment banking and legal services, Hong Kong has maintained a stark gap with Shenzhen in output per person, projected at about 60 percent in 2018, Chen said. Hong Kong’s per capita GDP came in at just under $44,000 in 2016, compared with about $25,000 in Shenzhen, Hong Kong Trade Development Council data show.

 

“The rise in Shenzhen in general should benefit Hong Kong,” Chen said. “Hong Kong was like a role model to some extent to many coastal cities in China -- Shenzhen included -- by offering free markets. Shenzhen definitely is a very good student.”

 

By – Bloomberg

Chinese logistics firm Best, backed by Alibaba, launches $932 million U.S. IPO

 

UBest Inc, a Chinese logistics company backed by Alibaba Group, has launched an up to $932 million initial public offering, seeking funds to expand its logistics and supply chain network, develop new technology and open more of its convenience stores.

 

The Hangzhou-based company is offering 53.56 million new American Depositary Shares (ADS), each representing one class A ordinary share, in an indicative range of $13 to $15 each, according to a filing with the U.S. Securities and Exchange Commission on Wednesday.

 

Existing shareholders including private equity firms CDH Investments, China Renaissance Capital, state-owned Everbright Financial Holding Investment Holding and a unit of Goldman Sachs Group Inc, are selling another 8.54 million ADSs.

 

The company plans to use $300 million of the proceeds to expand its convenience stores and its logistics and supply chain services, with another $100 million set aside for technology investments and the remainder for general corporate purposes and potential acquisitions.

 

By – Reuters

 

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