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The City braces for Brexit



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Brexit: the City’s mad holiday dash

There’s just a little over a month until the clock strikes midnight in Brussels (11pm UK time) on December 31, and with the new year comes the end of Britain’s transition period after leaving the EU. 

London’s vast financial services market has long prepared for this moment with the worst-case scenario in mind — a stand-off on trade talks between the two sides with no compromise in sight. 

Boris Johnson, UK prime minister

Those fears worsened when the UK insisted it was leaving the single market and waving goodbye to the passport that allowed banks, lawyers and brokers to base themselves in the City and sell their services around the bloc.

The most straightforward way to serve customers within the bloc is to be based in the EU, but that doesn’t resolve all issues. Capital, trading and advice is global. Even as a third country, the UK would need certain permissions from Brussels to accept EU business.

With just five weeks to go, trade talks have yet to be finalised as the City throws together some last-minute arrangements. 

In a flurry of activity this week, Paris snagged a new share trading hub for Goldman Sachs and a dual listing for FTSE 100 stalwart Segro.

On Monday, European regulators finalised a late change seeking to avoid chaos in £15tn of derivatives contracts held between UK and EU counterparties. On Wednesday, they insisted outposts of EU banks in London would have to trade certain derivatives in the EU.

In the short term, it’s inevitable that some businesses will leave the City after January, though nobody can say exactly how many.

Other financiers think the loss of that business is a price worth paying. They believe moving away from the status quo could help UK finance form new partnerships that would offset lost business with the EU, now just under 40 per cent of the UK’s trade in financial services, Lex points out.

Benefiting the UK is the fact that London’s pool of capital and expertise is unmatched in Europe. As both sides adjust to their new reality next year, DD will be watching to see if London’s gravitational pull reasserts itself and demands for mutual market access return.

Bertelsmann wins the battle of the books

Can Rupert Murdoch really be a victim?

On Wednesday, Bertelsmann announced its acquisition of book publisher Simon & Schuster for $2.2bn, concluding a hot auction where the German media titan outgunned the likes of France’s Vivendi and Murdoch’s News Corp.

Thomas Rabe, Bertelsmann’s chief executive © Bloomberg

Bertelsmann already owns the leading publisher, Penguin Random House, so its added market share with S&S will take it above 30 per cent of the mark.

News Corp’s chief executive Robert Thomson has cried foul and warns the German publisher will become a “behemoth of books”. Where would a dominant player leave his HarperCollins unit? Book sales had already become stagnant before the pandemic, and the dominance of Amazon and Apple have further squeezed the prospects of publishing houses.

Besides the House of Murdoch, voices such as the Authors Guild and the Open Markets Institute announced their opposition to the deal. As Lex explains, ViacomCBS received a blowout figure more than twice initial expectations for its publishing arm, proceeds it can deploy back into its streaming business.

Rupert Murdoch and his son, Lachlan © Bloomberg

But to get its cash, the recently reunited media conglomerate still needs to cinch the deal. The company seems confident enough, noting on Wednesday that it expects a termination fee in the event that the deal is scuttled. 

Book publishing is a relatively small, if prestigious, part of the media ecosystem — consolidation has been a way for players to survive, which is no doubt what the Germans will argue over the Murdochs’ protests.

Delhi’s blacklist of Chinese apps ticks longer

When India banned TikTok over the summer, hundreds of millions of users were forced to find other means to seek community, voice their political views, and dance away those lockdown blues.

A tense border clash with China, which claimed the lives of 21 Indian soldiers, prompted Prime Minister Narendra Modi’s government to pull the plug on more than 200 Chinese apps, among them ByteDance’s addictive video platform.

Now, as the government blacklists 43 additional apps, Indians will have even more empty slots on their smartphones to fill with homegrown alternatives — where Alibaba’s online shopping site AliExpress, forlorn TikTok users’ second-draft pick Snack Video, and a plethora of Chinese-made dating apps used to reside.

© AFP via Getty Images

In India’s socially distanced, increasingly digitised economy, local rivals have been quick to capitalise on the growing nationalist anger against Beijing.

Indian TikTok challengers Roposo, Chingari and Mitron are fighting for control of a ByteDance-free frontier, for example. 

Meanwhile, Chinese investment in the country has slowed to a crawl as New Delhi vets all incoming capital for potential “opportunistic takeovers”.

This leaves question marks lingering over key partnerships such as Alibaba’s investments in Indian payments company Paytm and food delivery start-up Zomato, as well as Tencent’s backing of education app Byju’s and fantasy sports platform Dream11.

Narendra Modi, Indian prime minister, and Donald Trump, US president, in New Delhi in February © Reuters

If Modi, who touts the slogan Atmanirbhar Bharat, or “self-reliant India”, gets his way, the country will grow more independent in the months to come. 

Or, he could find some common ground with the incoming US administration against China’s growing economic prowess. Depending, that is, on whether Joe Biden can overlook Modi’s declaration made earlier this year: “Namaste Trump!”

Job moves

Smart reads

‘Uncle Dupie is Dead’, ran a headline of a local Delaware paper when activist investor Nelson Peltz announced plans to merge the chemical group DuPont, a corporate hometown hero of Joe Biden, with Dow Chemical Co in 2015. The company’s plight is a window into how the future president will confront business in the White House. (WSJ)

Stuck in transit Beijing’s decision to halt Ant Group’s would-be groundbreaking IPO has left some investors wary that the Communist party is seeking to “turn the clock back” on the Chinese tech sector’s increasing power. But it may also be a case of the wrong business model at the wrong time. (FT)

Schooling the streaming giants Netflix and its peers rarely strike a content deal without barring the programme from rival platforms. But one “Baby Shark”, the tune that helped South Korean children’s music producer SmartStudy rake in $88m in sales last year, is here to change all that. (FT)

News round-up

Salesforce in talks to buy Slack in huge cloud software deal (FT)

ByteDance gets seven more days to resolve TikTok US ownership (FT)

EY faces mounting pressure to disclose Wirecard details to German parliament (FT)

Odey calls on Rio Tinto to change Oyu Tolgoi funding (FT + Lex)

COVAXX gets supply deals worth $2.8 billion for potential COVID-19 vaccine (Reuters) 

Future to buy GoCompare in deal valuing comparison site at £594m (FT)

US clears Intuit’s $7 billion deal for Credit Karma after divestiture (Reuters)

It’s a hard SPAC life, for us (Alphaville) 

Google ordered to hand over emails in £453m divorce battle (FT)

Real estate brokerage compass taps banks for IPO (BBG)

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Global house prices: Raising the roof




Global house prices: Raising the roof

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Missing Belarus activist found hanged in Kyiv park




Belarus updates

A Belarusian opposition activist has been found hanged from a tree in a park near his home in Ukraine, a day after he was reported missing. Local police said his death could have been made to look like suicide.

Vitaly Shishov, who led the Kyiv-based organisation Belarusian House, which helps Belarusians fleeing persecution find their feet in Ukraine, had been reported missing by his partner on Monday after not returning from a run.

Shishov’s death follows weeks of increased pressure in Belarus by authorities against civil society activists and independent media as part of what the country’s authoritarian president Alexander Lukashenko has called a “mopping-up operation” of “bandits and foreign agents”.

Many Belarusians have fled the country since Lukashenko launched a brutal crackdown last summer after nationwide protests erupted following his disputed victory in presidential elections. About 35,000 people have been arrested in Belarus and more than 150,000 are thought to have crossed into neighbouring Ukraine.

Franak Viacorka, an aide to Belarusian opposition leader Sviatlana Tsikhanouskaya who met UK prime minister Boris Johnson on Tuesday in London, said Shishov’s death was “absolutely shocking and unexpected to all of us”.

“He [Shishov] and his friends helped people who were moving to Ukraine,” Viacorka told the Financial Times. “They were very helpful, especially for those who have just arrived and didn’t know what to do.”

Viacorka said many activists living in Ukraine, such as Shishov who fled Belarus in 2020, had “complained about possibly being followed, and receiving threats”.

Kyiv park where Vitaly Shyshov’s body was found
The Kyiv park where Vitaly Shishov’s body was found after he failed to return home following a run © Gleb Garanich/Reuters

Downing Street said that after meeting Tsikhanouskaya, Johnson condemned the Lukashenko regime’s severe human rights violations. “The UK stands in solidarity of the people of Belarus and will continue to take action to support them,” a spokesperson said.

Ukrainian police have now launched a criminal case for the suspected murder of Shishov, including the possibility of “murder disguised as suicide”.

Yuriy Shchutsko, an acquaintance and fellow Belarus refugee who found Shishov’s body, ruled out suicide, pointing out that Shishov’s nose was broken.

“I suspect this was the action of the [Belarus] KGB . . . we knew they were hunting for us,” he told Ukrainian television.

Ihor Klymenko, head of the National Police of Ukraine, subsequently said Shishov’s body had what appeared to be “torn tissue” on his nose and other wounds, but stressed it would be up to medical examiners to determine if these were caused by beatings or the result of suicide.

There was no immediate comment from Lukashenko or his administration.

Belarusian House said: “There is no doubt that this is an operation planned by the Chekists [the Belarusian KGB] to eliminate someone truly dangerous for the regime.

“Vitalik was under surveillance,” it added. “We were repeatedly warned by both local sources and our people in the Republic of Belarus about all kinds of provocations up to kidnapping and liquidation.”

Adding to the swirl of attention on Belarus this week, Tokyo Olympics sprinter Krystsina Tsimanouskaya on Monday took refuge in Poland’s embassy after alleging she had been taken to the airport against her will, having criticised her Belarusian coaches.

The athlete has said she feared punishment if she went back to Belarus but has so far declined to link her problems to the country’s divisions.

Shishov’s death comes five years after Pavel Sheremet, a prominent Belarus-born opposition figure and journalist, was killed in an improvised bomb explosion in downtown Kyiv while driving to work at a local radio station. Lukashenko has ruled Belarus since 1994.

Ukrainian authorities at first suggested Belarusian or Russian security services could have been involved in the hit, as Sheremet was close to opposition movements in Russia as well.

Instead, officials charged three Ukrainian volunteers who supported war efforts against Russia-backed separatists in eastern Ukraine — although they steadfastly denied involvement and authorities were unable to provide a motive in what has been widely described as a flimsy case.

Additional reporting by Jasmine Cameron-Chileshe in London

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EU pledges aid to Lithuania to combat illegal migration from Belarus




EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.

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