The Financial Daily : 2020-08-21

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INTERNATIO­NAL Friday, August 21, 2020 In U. S.- China tech war, investors bet on China's localisati­on push struck a partnershi­p with Huanghe Technology, which makes servers and PCs using Kunpeng technologi­es. In May, IT distribute­r Digital China ( 000034. SZ) said it was building plants to make PCs and servers using Kunpeng CPUs. Also in May, China Telecom said it would procure up to 56,314 servers in 2020, one- fifth of them using Kunpeng and Hygon Dhyana chips, which rival U. S. brands Intel and AMD in a move seen as a gesture of Beijing's localisati­on push. "China must promote domestic replacemen­t to avoid being strangled, even as its current technology lags by far," Zhang Chi, chairman of Xin Ding Capital said during an investor roadshow for Haigon Informatio­n Technology, maker of Hygon Dhyana chips. Some 95% of Chinese servers use CPUs from Intel. It would be disaster, Zhang said, "if one day, Trump bans Intel from selling CPUs to China." Zhang expects Chinese government agencies t o replace all computers using U. S. chips in the next five years, echoing views of many analysts. National Software & Service, which makes operating systems that compete with Windows and middleware that aims to rival IBM and Oracle, expects revenue this year to jump 70% to 10 billion yuan. Beijing Kingsoft Office Software this week posted a 143% jump in first- half profit and said China's need for informatio­n security is boosting sales. Beijing Baolande Software Corp ( 688058. SS) also sees government­s and finance clients as new growth engines thanks to replacemen­t demand, investor relations official Guo Xing said. But Brian Bandsma, New York- based portfolio manager at Vontobel Asset Management, said the opportunit­ies in replacemen­t demand would be limited, given less competitiv­e local offerings and what may be longer- than- expected adoption rates. "Companies like Microsoft have been around for decades and have a very complex piece of software that's being heavily used by multiple industries. There's a reason why Microsoft is in the position it's in," said Bandsma. "There's probably too much optimism baked into valuations in terms of what these local companies are going t o get out of China's f ocus on domestic suppliers." SHANGHAI: As the U. S.- China "tech war" widens, investors are betting on China's efforts to replace U. S. technologi­es with indigenous applicatio­ns to run networks in the state sector. In recent months, local government­s and state firms such as China Telecom have announced plans and procuremen­ts aimed at fostering a home- grown tech ecosystem to displace gear from the likes of Intel, Microsoft, Oracle and IBM. An index tracking Chinese IT stocks . CSIINT has jumped nearly 30% this year, doubling blue- chip gains . CSI300. "We're seeing more U. S. actions against China, and the future tends to be ' one world, two systems'," said Wu Kan, portfolio manager at Soochow Securities Co, who has invested in local tech leaders including China National Software & Service Co Ltd ( 600536. SS), China Greatwall Technology Group ( 000066. SZ) and Beijing Kingsoft Office Software ( 688111. SS). "Any segment that faces decoupling risks represents big investment opportunit­ies." Some market watchers warn valuations of China tech stocks are getting frothy at roughly 60 times trailing earnings, noting Chinese firms could take years to catch- up to establishe­d global players. But Wu said price levels are justified by growth potential and direct government backing. The Trump administra­tion has recently strengthen­ed restrictio­ns on China's Huawei Technologi­es and sanct io ned China- owned apps TikTok and WeChat. Washington also rolled out a "Clean Network" initiative to exclude Chinese tech firms perceived as threatenin­g national security. Under U. S. pressure, Chinese vendors are poised to gain local market share, said Jie Lu, Robeco's China research head. "China will ramp up the investment and R& D intensity for critical industries such as semiconduc­tors," Lu said. Dongxing Securities predicted that a retooling would create a 1 trillion yuan ($ 144.46 billion) opportunit­y over the next three years for local vendors. KUNPENG PUSH Local government­s are rushing to form industry federation­s to promote the use of Huawei's Kunpeng processing technologi­es. Last week, China Unicom's Wuchang subsidiary Chinese insurance tech firm Waterdrop raises $ 230 million, plans U. S. IPO Israeli forces kill Palestinia­n in West Bank, military says he was planning attack Iran says it detained a UAE ship and its crew on Monday DUBAI: Iran seized a United Arab Emirates- registered ship violating its territoria­l waters t his week, Iran's Foreign Ministry said on Thursday, adding that UAE coastguard­s killed two Iranian fishermen on the same day. Tensions have risen between t he t wo oi l- ric h countries which face each other across t he Gulf since l ast week's agreement between the Gulf state and Tehran's arch- fo e Israel to normalise ties. "On Monday, an Emirati ship was seized by Iran's border guards and i ts crew were detained due to illegal traffic in our country's waters," state TV quoted the statement as saying. "On t he same day, UAE guards shot dead two Iranian fishermen and seized a boat." The statement said Iran summoned the UAE charge d'affairs in Tehran over the incident. The UAE foreign ministry declined to comment when contacted by Reuters. State news agency WAM reported on Monday that the Gulf state's coastguard­s had tried to stop eight fishing boats which violated the state's territoria­l waters northwest of Sir Bu Nu'Ayr i sl and, without reporting any casualties. "The UAE authoritie­s ... in a note on Wednesday, hav e expressed their deep regret over the i ncident and announced their readiness to compensate for all the damage caused," Iran's statement said. JERUSALEM: Israeli soldiers fi red at Palestinia­ns who were to believed to be preparing to attack Israeli cars in the occupied West Bank on Thursday, the military said, and Palestinia­n officials said a Palestinia­n teenager was killed. A military spokeswoma­n said members of a "terrorist squad" were hit by the gunfire but she had no details on their condition. Palestinia­n health and municipal officials said Mohammad Hamdan, 16, was killed by Israeli forces and two other Palestinia­ns were wounded. The Hamas Islamist militant group issued a statement mourning his death. Imrad Zahran, chairman of the local council of Hamdan's village, said the three youths were near a road used by Jewish settlers when the soldiers shot them. The military spokeswoma­n said the soldiers opened fire after spotting Palestinia­ns carrying flammable material and preparing tyres which they planned to ignite and use to attack passing Israeli vehicles. Zahran said two of the Palestinia­ns shot by the troops were treated in Palestinia­n hospitals and that the military, which had taken Hamdan away, later informed him that he had died of his wounds. A Palestinia­n health official also said Hamdan was killed. The military spokeswoma­n said the shooting occurred at a spot where similar attacks against Israeli vehicles have been carried out in the past. Palestinia­ns regard Jewish settlement­s, seen as illegal by most countries in the world, as a bid by Israel to exert permanent control over the West Bank and destroy their aspiration­s for statehood. Israel has pledged to annex parts of the West Bank but suspended implementa­tion at the United States' request as part of a normalisat­ion deal with the United Arab Emirates last week. Israel captured the West Bank in the 1967 Middle East War. Palestinia­ns seek the territory for a future state that would include the Gaza Strip and East Jerusalem. HONG KONG: Chinese online in surance te chnology platform Waterdrop Inc has raised $ 230 million i n a new fu nding round l ed by rein surer Swiss Re ( SRENH. S) and Chinese in te rnet giant Tencent Holdings ( 0700. HK), i t said on Thursday. Waterdro p's existing i nves to rs, i ncluding I DG Capita l and Wisdom Choice Global Fund, also participat­ed, i t said i n a statement. Two s ou r c es wi t h kn owl ed g e of t he fu ndraising t old Reuters th at Waterdrop was valued at nearly $ 2 billion i n th e funding ro und. One of t hem said t hat Swiss Re i tself had in vested $ 100 million. Swiss Re declin ed t o comment on i ts in vestment size, but said t he company's participat­i on i n t he round was part of it s l ong- t erm commitment to China. The f un dr a i s i ng c omes a he ad of Waterdrop's in it i al public offer in g plan in t he United States, accordin g t o t wo separate people. The company has hired Bank of America ( BAC. N) an d Goldman Sachs ( GS. N) for t he fl oat, which could happen as earl y as t his year, t he people said. They added t hat preparati ons were stil l i n t he in it ia l stages. Waterdrop and the t wo banks declined t o comment. The sources could not be named due t o co nfidenti al i ty constraint­s. Founded i n 2016, Beijing- h eadq uarter ed Wat erd r op di s t r i b ut es i n s ur a nc e pol i ci es onlin e via Waterdrop Insurance Mall, provides i ll ness crowd- funding via i t s platform Wat erd r op Cr owdf und i ng , a nd op er at es mutual f unds. The i nsur ance b usi ness, with 120 million uniqu e policy holders, reported a t ot al written premium of $ 865 million i n t he f ir st half of this year, t he company said i n i t s st atement. I t expects t o double i ts to ta l written premium i n 2020. With t he new capital , Waterdrop said i t will ta p i nt o arti fic i al i ntellig ence and big dat a f or it s products and ser vices, and accel er ate i ts init ia t iv es in medical and healt hcare services. Waterdrop , f ounded by Shen Peng, a former executive at Chinese food delivery and l ocal services giant Meituan Dianping ( 3690. HK), also counts his ex- employer as an i nvestor. Germany issues travel warning for parts of Croatia Swiss government rejects push to appoint judges by lottery BERLIN: Germany issued a warning against travel to parts of Croatia on Thursday as Europe's la rgest economy battles t o contain a rising number of coronaviru­s cases during the summer season. The German f orei gn ministry advised against travel t o the regions of Sibenik- Knin and Split Dalmatia, which are popular with t ourist s, aft er t he publ i c he alth a ge ncy declared them coronaviru­s risk regions, making tests for returnees mandatory. The number of new cases in Germany has been risi ng steadily since early July and has accelerate­d in recent weeks. On Thursday, the number of confirmed cases climbed by 1,707 t o 228,621, marking t heir biggest daily increase since April 26. Imported cases of the coronaviru­s have risen to 39% of overall new infections in Germany this week, up from around 30% l ast week. Croatia is the source of the third- highest number of infections among people returning to Germany, after Kosovo and Turkey, according to data from t he Robert Koch Institute for infectious diseases. Concern is growing t hat people may be getting infected while visiting family members in those countries. Davor Bozinovic, Croatia's interior minister, said a ban on nightclubs staying open beyond midnight would likely be extended and added: "Less than 1% of tourists got infected ( in Croatia)." Statistics from the health ministry in North Rhine- Westphalia, Germany's most populous state and hit relatively hard by the pandemic, found more than a t hird of returnees who tested positive for coronaviru­s between July 1 and Aug. 16 came from Kosovo, with Turkey in second place at almost 20%. Those returning from more traditiona­l holiday countries, such as Spain and Greece, made up just 2.5% and 0.5% of positive cases in the state, respective­ly. Germany also urged people not to travel to the Valcea region of Romania, but removed a warning f or t he r egions o f I alo mita, Mehedinti and Timis. It also lifted a t ravel warning for Luxembourg. ZURICH: The Swiss government on Thursday rejected a proposal to appoint supreme court judges by lottery, a system it said would make the court appear less legitimate. Supreme court judges are members of political parties and rely on them to be elected and reelected, potentiall­y exposing them to political pressure. A referendum campaign, led by entreprene­ur Adrian Gasser, seeks to reform the system. But, ahead of a binding referendum on the issue required under the Swiss system of direct democracy, some legal experts and now the government have criticised the campaign's idea of drawing lots from a pool of suitable candidates. "( The appointmen­t by lottery) is based on chance rather than a democratic election and would thus be an outlier in the Swiss legal system," the government said in a statement, asking parliament to reject the initiative. The government said the current system, in which both houses of parliament elect judges for the court based in Lausanne, had proved its worth and also broadly mirrored the parties' relative strength in parliament. Gasser told Reuters the government's arguments were weak. "A lottery is more democratic than a political party procedure that excludes a big part of the population. Candidates without party membership cannot be appointed and women are also under- represente­d," Gasser said. He said campaigner­s would keep informing Swiss voters, who were largely unaware of judges' political ties. Legal experts, including the Swiss judges' associatio­n, have long called for an overhaul of the way supreme court judges are appointed. The issue came to the fore last year when the supreme court ruled in favour of releasing client data from Swiss bank UBS to the French tax authoritie­s, something the right- wing Swiss People's Party ( SVP) had strongly opposed. The SVP was furious because the judge who tipped the scales in the 3- 2 vote was one of its paid- up members. It threatened not to back his re- election. Estee Lauder forecasts profit below expectatio­ns, to cut up to 2,000 jobs CALIFORNIA: Estee Lauder Cos Inc ( EL. N) forecast firstquart er profit below Wall Street estimates on Thursday after posting a bigger- thanexpect­ed quarterly loss as travel restrictio­ns and store closures put in place to contain the spread of coronaviru­s dampened demand for its premium make- up brands. The M. A. C. brand owner also said it would cut about 1,500 to 2,000 jobs globally, including point of sale employees. It also estimated closure of 10%- 15% of its freestandi­ng stores. Cosmetics makers, including Estee Lauder, that rake in millions from sales at duty- free stores at airports, cruises and downtown locations have seen sales plummeting in its travel retail channel, as tourist spending has dried up due to restrictio­ns on overseas travel and COVID- 19 flare- ups in some tourist attraction­s. Estee Lauder projected firstquart er adjusted profit per share to be between 80 and 85 cents. Analysts on average were expecting a pr ofit of $ 1.22 per share, according to IBES data from Refinitiv. Net sales fell to $ 2.43 billion in the fourth quarter from $ 3.59 billio n a year ago. Analysts on average had expected r evenue of $ 2.45 billion. Thai police arrest rappers and other activists over protests Japan awards COVID- 19 relief work to Deloitte affiliate after Dentsu controvers­y BANGKOK: Thai police said on Thursday they had arrested eight more activists, including two popular rappers, in a crackdown after more than a month of protests against the militaryba­cked government that have also challenged the powerful monarchy. The eight arrested overnight and on Thursday are charged with breaching internal security laws over a July 18 protest and defying an emergency decree that banned public gatherings to prevent the spread of the coronaviru­s, police said. "The arrests of the leaders that organised such activity are being processed based on the law," Jir apat Phumjit, deputy chief of the Metropolit­an Police Bureau told reporters. He said there were warrants for another four activists over that protest. Among t hose arrested on Thursday was Dechathorn "Hockhacker" Bamrungmua­ng, 30, from t he Rap Against Dictatorsh­ip group, which surged to popularity online last year. The other rapper held, Thanayut Na Ayutthaya, 19, also known as Elevenfing­er. All eight were later released on bail, a lawyer said. Protests have been held almost daily since mid- July to call for a new constituti­on, the departure of Prime Minister Prayuth Chan- ocha - a former junta leader - and an end to the harassment of government opponents. Some protesters have also called for curbs on the power of King Maha Vajiralong­korn, until recently a taboo. Prayuth rejects protesters' accusation­s that last year's election was manipulate­d by the army in his favour. He has said he is ready to speak to the students, but that criticisin­g the monarchy goes too far. Three other activists had been arrested earlier. They include Anon Nampa, a human rights lawyer who was the first to call openly for reforms at the palace. He was arrested on Wednesday for the second time this month over different protests and also released on bail. Six arrest warrants have also been issued over a demonstrat­ion last week at which students set out 10 demands for reform of the monarchy. The return of protests to Bangkok streets has unsettled investors by reviving memories of more than a decade of colour- coded clashes between supporters of they establishm­ent and their populist opponents before Prayuth took power in a 2014 coup. The Thai baht fell to a three- week low of 31.44 per dollar on Thursday and though the move was exacerbate­d by gains in the greenback it was the sharpest daily drop in a month. TOKYO: The Japanese government has signed a contract with a Deloitte- linked consulting group to distribute coronaviru­s relief payouts following public anger over a previous deal involving advertisin­g giant Dentsu ( 4324. T). Lawmakers and other critics questioned how taxpayers' money was spent under the previous subcontrac­ting scheme, and whether a small non- profit organisati­on was a front that would protect Dentsu from public scrutiny. The contract for the second round of payouts was awarded to Deloitte Tohmatsu Financial Advisory on Friday for about 42.8 billion yen ($ 404 million), according to a Ministry of Economy, Trade and Industry ( METI) document seen by Reuters on Thursday. The first round was contracted to the non- profit Service Design Engineerin­g Council, cofounded by Dentsu, under a $ 718 million contract. Service Design took a less than 1% cut of the awarded funds before passing on the rest to Dentsu, which in turn subcontrac­ted the work to over 60 companies, Reuters previously reported. Government officials have said the selection process for Service Design and Dentsu was fair and legitimate, and that no preferenti­al treatment was given. The Deloitte contract is smaller as fewer businesses would be eligible for payouts, said a METI official who declined to be named because he is not authorized to speak to the media. Dentsu previously said it would not bid for any future trade ministry projects following the furore that followed the initial contract. Sachiyo Kikuchi, spokeswoma­n at Deloitte Tohmatsu Financial Advisory, said Deloitte planned to work with partner companies to administer the project but declined to disclose further details. Deloitte bid in the first round but lost out to Service Design, METI said earlier.- Reuters PRINTED AND DISTRIBUTE­D BY PRESSREADE­R PressReade­r. com + 1 604 278 4604 O R I G I N A L C O P Y . O R I G I N A L C O P Y . O R I G I N A L C O P Y . O R I G I N A L C O P Y . O R I G I N A L C O P Y . O R I G I N A L C O P Y COPYRIGHT AND PROTECTED BY APPLICABLE LAW

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