The Sino-U.S. confrontation flares up in the Middle East
April 8, 2021 (Thursday) Clear weather and sudden thunderstorm possible
・Hitachi <6501> [Close 5,046 yen] on the 7th, plans to sell Hitachi Metals, a listed subsidiary <5486> [Close 1,813 yen] to a U.S. investment fund Bain Capital and domestic fund Japan Industrial Partners (JIP) and other U.S.-Japan fund alliance.
The sale price is expected to exceed 800 billion yen.
Hitachi is speeding up concentration and selection of IT-based businesses to compete with European and American giants such as Siemens.
・Toshiba <6502> [Close 4,530 yen] on the 7th received a buyout proposal exceeding 2 trillion yen from U.K. investment fund CVC Capital Partners, and the board is deliberating.
The deepening clash with activist investors who rescued the 2017 management crisis, and a temporary shareholder proposal in March was approved.
Some executives view the privatization proposal as an opportunity to break with activists and push a growth strategy.
From CVC’s buyout proposal, a premium of about 30% over the share price (as of the 6th, 3,830 yen) appears to have been offered.
・Tokyo on the 7th prepared to request the national government to apply “priority measures to prevent the spread” (similar to a state of emergency) measures for COVID-19,
・Prime Minister Yoshihide Suga on the 7th met with Hiroshi Kishi, Chairman of the All-Japan Federation of Fisheries Cooperatives (the all-Japan fishermen’s union).
Tokyo Electric Power Company Holdings <9501> [Close 353 yen] commented that it would “decide soon” on disposal of treated water accumulating at the Fukushima Daiichi Nuclear Power Station, and that no direction has been determined yet.
Katsuyuki Kaneko, Minister of Economy, Trade and Industry, attended the discussions. If the current pace of treated water increases, tank capacity would be exceeded by autumn 2022.
From decision to release, regulatory procedures and construction would take about two years, and even now there would be no time to meet the autumn 2022 capacity overflow.
・Regarding the massive loss related to Arquegos Capital Management,
Financial Services Agency and Bank of Japan <8301> [Close 36,900 yen] will cooperate to grasp the true state of domestic financial institutions.
The deal with a so-called “family office” investment firm is heavy because it posed a loss risk on the scale of several hundred billion yen for major financial institutions.
In addition to risk management in these transactions, they will also thoroughly inspect whether other financial institutions have similar problems.
・In transactions related to Arquegos, Credit Suisse Group incurred losses on the order of 520 billion yen.
Nomura Holdings <8604> [Close 584.6 yen] announced a potential loss of about 220 billion yen.
Family offices exist in more than 10,000 firms in Europe and the U.S., with assets under management approaching six trillion dollars, according to surveys.
・Europe, increasing interest in Asia, takes a hard stance on North Korea policy.
Europe, aligning with the U.S. on human rights diplomacy, is moving to rethink its Asia-wide diplomacy including policy toward China.
・Deepening U.S.-China confrontation spilling into the Middle East.
At the Iran nuclear deal participants’ meeting in Vienna, China supported Iran’s position and sharpened its cooperation.
Iran, aware of the U.S.-China confrontation, weighs both sides to try to break the containment surrounding Iran.
・Toshiba <6502> [Close 4,530 yen] on the 7th revealed that it received a buyout proposal from U.K. investment fund CVC Capital Partners.
If realized, Toshiba’s shares would be privatized, ending the conflict between Toshiba and activist shareholders.
Eager to speed up management decisions, Toshiba has been given a breakthrough, but three hurdles lie ahead.
For CVC, investing alone with a buyout of about 2.3 trillion yen is risky.
If the perception grows that CVC’s bid is “cheap,” there is a view that other funds may issue counteroffers to win Toshiba’s battle.
There are also legal risk concerns. Ensuring transparency in decision-making is a prerequisite for obtaining shareholders’ understanding.
Regulatory coordination with authorities also awaits.
Domestic companies involved in defense-related businesses may face pre-disclosure requirements if a foreign investor holds 1% or more of shares, with the state reviewing.
・The G20 Finance Ministers and Central Bank Governors’ Meeting is held online on the 7th.
For developing countries where COVID-19 vaccine rollout is slow, debt-service relief measures will be extended by six months to the end of 2021, among other fiscal support measures.
Without disclosing details of lending by China, the largest lender, the gap with developed countries remains.
・IMF published on the 7th that the global budget deficit for 2021 is expected to be 8.6 trillion dollars (about 950 trillion yen) according to fiscal monitor.
Down 5% from 2020, yet 2.7 times higher than 2019, continuing at a historically high level.
The United States accounts for about 40% of it; it drives global economic recovery and contributes to U.S. interest rate rises and dollar strength.
・Bank of Japan <8301> [Close 36900 yen] released its quarterly report on the 7th, stating that as of the end of fiscal year 2020 (as of March 31), BOJ total assets stood at 714 trillion yen, up 109 trillion yen from the previous year’s end.
The growth rate of 18% was the largest since the end of fiscal year 2016.
・One year has passed since Wuhan, Hubei Province, where the new coronavirus first spread in China, began city lockdowns.
Retail sales and travel income remain below the national average, and economic recovery remains incomplete.
The impact is especially severe for small and medium-sized stores. There is domestic and international criticism of government’s opaque disclosure of information.
・On the 7th, the Reserve Bank of India held its monetary policy meeting and kept the policy rate at 4%.
A cut in policy rates is off the table for five consecutive meetings. While watching inflation, the policy stance remains accommodative given a rapid rise in COVID-19 cases.
・As of 4:00 PM on April 7, global COVID-19 infections (deaths) by country/region, according to Johns Hopkins University: World total 132,470,000 (12,234 deaths)
U.S. 30,847,166 (915) Brazil 13,100,580 (4,195) India 12,801,785 (630) France 4,902,025 (426) Russia 4,546,307 (382) United Kingdom 4,379,033 (20)
Italy 3,686,707 (421) Turkey 3,579,185 (211) Spain 3,317,948 (128) Germany 2,909,902 (109) Colombia 2,468,236 (231)
From here, published on [Corona Morning Premium]
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