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US and global markets sink as unrest in China spreads

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By Elaine Kurtenbach And Matt Ott in Bangkok

Wall Street is heading lower ahead of Monday’s opening bell amid widespread protests in China calling for Xi Jinping to step down and an end to one-party rule.

Futures for the Dow Jones industrials fell 0.5% and the S&P slipped 0.7%.

Crude prices neared a low point for the year partially due to unrest in China, and have fallen for three consecutive weeks. Crude prices are now negative for 2022 and, after soaring above $120 in June, a barrel of benchmark U.S. crude can now be had for less than $74 per barrel.

The upheaval in China is the greatest show of public dissent against the ruling Communist Party in decades. Protestors are railing against policies aimed at eradicating the coronavirus by isolating every case, a policy that may have contributed to the death toll in an apartment fire in Urumqi in the northwestern Xinjiang region.

“For investors, when it comes to China, trying to predict with any degree the reopening certainty that has no certainty, basis, or track record to go by is looking like a dangerous game in the context of the disquieting protests and the colossal challenge China’s leaders now have on their hands,” Stephen Innes of SPI Asset Management said in a commentary.

Rising numbers of COVID-19 cases could further disrupt manufacturing and transport, adding to headaches over supply chains and inflation.

Apple fell almost 2% in premarket trading as the China manufacturing closures have hit the iPhone maker especially hard. Apple had been warning of shortages for its latest model, the iPhone 14, since early this month. Analysts now say those shortages could be even worse than previously thought.

Dan Ives of Wedbush Securities said Monday that disruptions in China could cut the number of available Apple’s iPhone 14 models between 5% and 10% this quarter, with some Apple stores seeing inventory shortages of up to 40%.

“The reality is that Apple is extremely limited in their options for holiday season and are at the mercy of China’s zero Covid policy which remains a very frustrating situation for Apple as well as the Street,” Ives wrote in a note to clients.

Casino operators in China who also have been negatively impacted by China’s strict COVID-19 policies finally got some good news as Macao tentatively renewed the casino licenses of MGM Resorts, Las Vegas Sands and Wynn Resorts. Shares in the Las Vegas-based companies all rose between 2% and 6% in premarket.

In Europe at midday, Germany’s DAX and the CAC 40 in Paris each lost 0.9%, while Britain’s FTSE 100 gave up 0.4%.

In Asian trading Monday, Hong Kong’s Hang Seng fell 1.6% to 17,297.94 and the Shanghai Composite index lost 0.8% to 3,078.55.

Shares in telecoms equipment maker ZTE fell 4.2% after U.S. regulators banned sales of its products in the U.S.

The Federal Communications Commission said Friday it was banning the sale of communications equipment made by ZTE and Huawei Technologies and restricting the use of some China-made video surveillance systems, citing an “unacceptable risk” to national security.

Tokyo’s Nikkei 225 index shed 0.4% to 28,162.83 and the Kospi in Seoul lost 1.2% to 2,408.27. In Sydney, the S&P/ASX 200 declined 0.4% to 7,229.10 following the release of weaker than expected retail sales data.

Bangkok’s SET was 0.2% lower while the Sensex in Mumbai added 0.3%.

There are a number of highly anticipated economic indicators coming out this week. The Conference Board business group will release its report on consumer confidence and the U.S. releases its data on November employment on Friday.

Anxiety is riding high over the ability of the Federal Reserve to tame the hottest inflation in decades by raising interest rates without going too far and causing a recession.

The central bank’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March. It has warned it may have to ultimately raise rates to previously unanticipated levels to rein in high prices on everything from food to clothing.

Federal Reserve Chair Jerome Powell will speak at the Brookings Institution about the outlook for the U.S. economy and the labor market on Wednesday.

U.S. benchmark crude oil slid $2.40, falling to $73.88 per barrel on the New York Mercantile Exchange, and has now fallen for three consecutive weeks.

Brent crude, which is used to price oil for international trading, sank $2.60 to $81.11per barrel.

The dollar fell to 138.32 Japanese yen from 139.28 yen. The euro rose to $1.0474 from $1.0379.

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Share debacle a rare setback for Indian tycoon Adani

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By Krutika Pathi in New Delhi

NEW DELHI (AP) — Indian billionaire Gautam Adani grinned as he posed this week for photos with Israeli leader Benjamin Netanyahu after acquiring one of the country’s main ports, in Haifa.

“I promise you that in the years to come, we will transform the skyline we see around us,” said Adani, his manner upbeat even as his business empire was losing billions. Investors have been dumping Adani shares for more than a week after U.S. short-selling firm Hindenburg Research put out a report alleging his businesses have engaged in fraud and stock price manipulation. The Adani group has denied this.

Before the debacle, Adani, 60, was Asia’s richest man and the third wealthiest in the world, according to Bloomberg’s Billionaires Index. Not anymore.

The massive losses are a rare setback for the coal mining tycoon from western India’s Gujarat state and raise questions about what lies ahead.

Expansion has been at the heart of Adani’s success story. The son of a middle-class family in the Gujarat capital, Ahmedabad, he quit college to become a diamond trader in the country’s financial capital, Mumbai. He returned home to join his brother in importing plastics before establishing Adani Enterprises in the 1980s, trading in everything from shoes to buckets.

Adani shifted to investing in ports, construction and coal mining as India opened up its economy in the 1990s. A new middle class emerged and the ambitious businessman placed bets on providing energy to serve them.

Adani’s first big project, Mundra Port, is now India’s largest commercial port and he is the country’s biggest private port operator. Within a decade, he also became India’s largest developer and operator of coal mines.

Today, Adani companies also operate airports in major cities, build roads, generate electricity, manufacture defense equipment, develop agricultural drones, sell cooking oil and run a media outlet. He has his eyes set on becoming the world’s largest renewable energy player by 2030.

Citing market volatility, late Wednesday his flagship Adani Enterprises scrapped a $2.5 billion share offering that, despite the bloodletting in the group’s shares and a 28% plunge that day in its own share price, had been oversubscribed.

In a video address Thursday, Adani said the share offering was canceled to “insulate investors from potential losses.”

“For me, the interest of my investors is paramount and everything else is secondary,” he said.

The share offering was seen as a test of investor confidence in the self-made industrialist, whose ascent has been celebrated as a symbol of India’s economic ambitions. The Adani Group said in a statement that canceling the offering would not “have any impact on our existing operations and future plans.”

The Adani Group said its balance sheet was “very healthy” and its history of servicing debt was “impeccable.”

Still, Brian Freitas, a New Zealand-based analyst with Periscope Analytics who has researched the Adani Group, said the collapse in share prices for India’s second-largest conglomerate may hinder its future plans for expansion.

“It’s going to be difficult for them to raise new money,” he said.

Adani shares are still losing value. Shares in Adani Enterprises tumbled 27% Thursday, while stock in six other Adani companies fell 5%-10%.

The tycoon, who favors a plain white shirt and dark trousers over fancy dress and is said to be affable and quiet spoken, slid from being the world’s third richest man to the 13th as his fortune sank to $72 billion, according to Bloomberg’s Billionaire Index. Prior to the Hindenburg report, his net worth was about $120 billion.

More vitally, the company is now without the funds it had hoped to raise in this week’s offering. Companies often launch such share offerings to finance growth while reducing debt.

“Thanks to the short-seller, Adani’s plans will get slowed down significantly,” said R.N. Bhaskar, a journalist who wrote a biography on Adani.

Analysts say that rapid expansion has largely been fueled by borrowing. The group’s debt stands at $30 billion, out of which $9 billion is from Indian banks, the group’s chief financial officer said recently.

After the stock rout of the past week, lenders may deem his group high risk and toughen their criteria for borrowing, like demanding higher interest rates or more collateral, said Freitas.

“Equity investors are going to be wary because the stock isn’t doing well — if they can’t raise equity, they will have to go to the debt market,” he added. “Given the situation, foreign lenders will think twice before lending any new money to Adani.”

Despite Adani’s longstanding ties with Prime Minister Narendra Modi, a fellow Gujarati, and other powerful politicians, the government has so far remained silent on his recent troubles even as pressure from the political opposition for an investigation into Adani’s situation grows.

In recent years, Adani has pumped money into sectors like agriculture, defense and renewable energy — all seen as high priorities for the Indian government.

Like Adani’s commitment to the port in Israel’s Haifa, many of the group’s overseas infrastructure projects, in countries such as Sri Lanka and Tanzania, have served as an Indian counterweight to rival China’s holdings.

The Haifa deal was a coup for India, located close to another port managed by the Shanghai International Port Group.

“India is working with great fervor with Israel on defense and technology, and Adani now has a port there. You think the Indian government can sniff at that?” said Bhaskar. “The thing is, you can’t wish away Adani — because he is indispensable at this point.”

He expects Adani to remain undaunted.

“The more challenging a situation gets, the more defiant and creative he becomes to overcome it,” Bhaskar said.

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Senate passes Liberals’ controversial online streaming act with a dozen amendments

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By Mickey Djuric in Ottawa

Big tech companies that offer online streaming services could soon be required to contribute to Canadian content as a controversial Liberal bill gets one step closer to becoming law.

The Senate has passed the online streaming act known as Bill C-11 with a dozen amendments following a lengthy study by senators.

The bill would update Canada’s broadcasting rules to reflect online streaming giants such as YouTube, Netflix and Spotify, and require them to contribute to Canadian content and make it accessible to users in Canada — or face steep penalties.

Canadian Heritage Minister Pablo Rodriguez says he hopes the House of Commons will pass the bill next week after it reviews the Senate’s changes.

Senators made amendments intended to protect user-generated content and highlight the promotion of Indigenous languages and Black content creators.

They also included a change that would prohibit CBC from producing sponsored content, and another that would require companies to verify users’ ages before they access sexually-explicit material.

Rodriguez said Thursday that the Liberal government would not accept all of the Senate’s recommendations, but he didn’t say which ones he disagrees with.

“We’ll see when the bill comes back. There are amendments that have zero impact on the bill. And others that do, and those, we will not accept them,” the minister said Thursday during a Canadian Media Producers Association panel.

The Senate also removed a clause in the bill that Sen. Paula Simons described as giving “extraordinary new powers to the government to make political decisions about things.”

Ian Scott, the former chair of Canadian Radio-television and Telecommunications Commission, had told a Senate committee that some provisions in the bill did move the balance point “slightly closer to lessening the independence” of the regulator — though he insisted that it would remain independent.

The CRTC, now under the leadership of Vicky Eatrides, will be tasked with enforcing the bill’s provisions.

The Senate passed the bill on the anniversary of its introduction in the House of Commons.

Between the House of Commons and Senate, there have been approximately 218 witnesses, 43 meetings, 119 briefs and 73 proposed amendments, said Rodriguez.

“It’s the longest bill,” he said.

The proposed law has come under intense scrutiny amid accusations from companies and critics who said it left too much room for government control over user-generated content and social-media algorithms.

Rodriguez said tech giants can get creative with ways they promote Canadian content, such as with billboards, advertising or, if they so choose, tweaks to their algorithms.

The bill has also caught the attention of the United States. Its embassy in Ottawa recently said that it is holding consultations with U.S. companies that it is concerned could face discrimination if the bill passes.

Last week, two U.S. senators called for a trade crackdown on Canada over Bill C-11, saying that the prospective law flouts trade agreements.

“I’m not worried, because we think it complies with trade obligations,” Rodriguez said.

This report by The Canadian Press was first published Feb. 2, 2023.

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