The long-running tension between HSBC and its largest shareholder Ping An has come to a head.
Earlier this week
sources suggested that the Chinese insurer would support resolutions from retail investors on bringing dividends back to pre-Covid levels and structural changes, including spinning off its Asia business.
On Tuesday, Michael Huang, chair of Ping An Asset Management,
went public with its proposals that would see HSBC Group remain the “controlling shareholder of a separately listed Asia headquartered bank”.
Restructuring would “deliver material benefits to the group’s shareholders including valuation unlock, capital relief, long-term efficiency gains, geopolitical risk mitigation and competitive repositioning,” said Huang, who accused HSBC of exaggerating “many of the costs and risks.”
But HSBC is holding firm: “The board strongly believes that HSBC should focus on executing the current strategy that is delivering, and which the board is confident is the best and safest way to continue to deliver substantially more value for shareholders over the coming years.”
No major institutional shareholders have supported Ping An’s campaign, while proxy advisers Glass Lewis have openly opposed the resolutions from retail investors.
Is the only way up?
Hopes that BoE policymakers could halt rate rises when they meet next month may be off the cards.
Figures released by the ONS this week show that while labour shortages (which bumped up pay packets) are starting to ease,
wage growth is still hotter than expected. Average private sector wages, excluding bonuses, were up 6.9 per cent on the year in the three months to February.
Average public sector wages, excluding bonuses, also increased 5.3 per cent on the year.
Inflation was also higher than expected. CPI was predicted to reduce to 9.8 per cent last month. But it actually notched up an annual rise of 10.1 per cent, with core inflation remaining stable at 6.2 per cent.
But despite the data,
economists are upbeat and expect the government to hit its target of halving inflation by the end of the year. Most forecasts expect UK inflation will drop below the hallowed 2 per cent next year. Though it is worth noting that economists also think the BoE will need to raise interest raised above current levels to get there.
Chief economics commentator Martin Wolf was daring enough to ask
‘what next on interest rates?’ this week. The “return of inflation has changed the world” – but, he concludes, “not dramatically so”.
British business on the backfoot
But an anaemic economy, rising costs and wage pressures are spelling trouble for British businesses.
Insolvencies in England and Wales increased 16 per cent last month, compared with March last year. Figures from the Insolvency Service show there were 2,457 filings last month – the highest number since the agency began sharing comparable data in 2019.
And some of the growth and prosperity enjoyed by UK businesses is going abroad. “We have been in the middle of a problem of massive de-equitisation of the UK for the last 20 years,” Julia Hoggett, chief executive of the London Stock Exchange, said recently.
Part of the problem is that
pension funds are risk averse, drying up access to capital. This contrasts to other countries – such as Canada and Australia – where pensions have more regulatory space to invest in early-stage companies, listed companies and other asset classes.
“We have trillions of pounds sitting in pension funds that are not being used to invest in companies, drive growth or do a whole range of things that the economic viability of the country depends on,” says Sir John Bell, the Canadian-British chair of Immuncore.
But UK
pension funds aren’t delighted with the idea of being forced to invest in riskier assets – a move Chancellor Jeremy Hunt has not ruled out, though he would prefer to consolidate the market.
“Trustees are open minded about what we can do collectively to help the UK economy but it is essential that this operates in the interests of savers,” said Nigel Peaple, director of policy and research at the Pensions and Lifetime Savings Association.
A call to arms
Cabinet Office minister Oliver Dowden used his speech at the Cyber UK conference in Belfast this week to issue
a “call to arms” for businesses to strengthen their cyber security as “Wagner-like” Russian hackers look to attack critical British infrastructure.
“Businesses can’t afford to recklessly ignore cyber risks,” he said.
But many of them are, argues business columnist Helen Thomas. “The reality may be that a
universal level of cyber protection mandated by regulation is needed — given the evidence that many businesses either don’t know what to do or simply aren’t doing it.”
Does it pay to go green?
The
US looks set to enjoy a manufacturing boom as the Chips Act and the Inflation Reduction Act begin to work their magic.
The FT conducted some research looking at whether the legislation was paying off. And the results are huge, with about $204bn committed to large projects that will increase US semiconductor and clean-tech production as of mid April.
This is almost double the capital spending commitments made in the same sectors in 2021 and nearly 20 times the amount in 2019.
While not all these projects were a direct result of the legislation, they will probably be eligible. “This is a generational, transformational change that we’re seeing in America and our productive capacity,” said Scott Paul, president of the Alliance for American Manufacturing.
The G7 is also going green. After weeks of negotiations members committed
“to accelerate the phaseout of unabated fossil fuels so as to achieve net zero in energy systems by 2050”.
But, amidst opposition from Japan, members did not set a timeline for stopping coal-fired power stations, instead maintaining an existing commitment “to achieving a fully or predominantly decarbonised power sector by 2035”.
Meanwhile Legal & General Investment Management and Christian Brothers Investment Services
want to know exactly how much it will cost ExxonMobil to go green.
The investors have filed a resolution ahead of the oil and gas major’s AGM next month asking the board to share details transition costs.
“Exxon may assume an asset can operate indefinitely, but this may not prove out. Investors are simply asking: what is the total cost of meeting these liabilities?” said John Geissinger, chief investment officer at Christian Brothers Investment Services.
Too close for comfort?
Analysts have criticised a decision by Softbank to sell its VC arm to The Edgeof, a company established by Taizo Son – the brother of Softbank’s chief executive Masayoshi Son.
Even though there was “technically” no conflict of interest issue, Nicholas Benes, a corporate governance expert, said
there was an “optics problem”. “Even if it is a small deal . . . Mr Son’s shadow was in the background, even if he wasn’t physically in the room.”
Trouble is also brewing ahead of Barclays AGM next month. Proxy adviser ISS has said
shareholders should question the board over its continued support for former chief executive Jes Staley despite revelations about his close friendship with deceased sex offender Jeffrey Epstein.
“Staley had had previous occasion to defend his ethical conduct and the board to investigate his behaviour,” ISS said, referring to a 2018 investigation into his attempts to identify a whistleblower. “The question could be asked: ‘Was the board correct in supporting Staley (ie not dismissing him) for a second time?’”
