Saudi Arabia’s sovereign wealth fund is seeking to use its financial muscle to lure international health and technology companies to set up operations in the kingdom.
The $400bn Public Investment Fund is “already in discussion with a number of companies in the health sector”, governor Yasir al-Rumayyan told the Financial Times.
It is holding talks with electric car start-up Lucid Motors, in which it invested $1.3bn to acquire a 67 per cent stake, to establish a manufacturing facility in the kingdom, and with “many” companies in SoftBank’s Saudi-backed $100bn Vision Fund, he said.
“The next step is to go forward in getting them to the kingdom,” Mr Rumayyan said.
Crown Prince Mohammed bin Salman has earmarked the PIF as central to grandiose plans to modernise the kingdom and create new industries that reduce dependency on oil, with the aim to hit $1tn in assets under management by 2025. But the kingdom has struggled to attract foreign investment outside the energy sector.
The fund has pledged to spend $40bn in the domestic economy annually over the next five years.
As it focuses more at home, Mr Rumayyan said the fund’s international exposure would come down to about 20 per cent of assets under management during the next five years, from nearly 30 per cent after it poured at least $7.7bn into US and European stocks in the first quarter of last year to take advantage of the market volatility. Still, in absolute terms, foreign investments will continue to grow, he said.
Analysts have questioned how the PIF will be able to finance its vast commitments, particularly as Saudi Arabia has been hit by the coronavirus pandemic and low oil prices.
But Mr Rumayyan said funding would come from a combination of loans, dividends from its holdings, government cash injections and the privatisation of Saudi companies it owns, beginning as early as this year.
Last year, the PIF received $40bn from the central bank’s foreign reserves, and was the main beneficiary of the December 2019 stock market listing of oil company Saudi Aramco, which raised $29bn by releasing just a small slice into public hands.
Mr Rumayyan said Riyadh might consider listing more shares in Saudi Aramco “if the valuation is right”, and that the state oil company itself was considering a “massive” programme of asset divestments.
“Historically speaking, [Saudi Aramco] used to do everything themselves . . . they had their own airports, their own fleets, their own pipelines,” he said. “Now if it makes sense for us to divest some of these assets, we’re definitely going to do it. It could include anything except the main operations.”
Mr Rumayyan, who is also chair of Saudi Aramco, said the PIF would need additional government cash injections, but insisted that would happen only when the central bank’s reserves, which fell to about $444bn in the middle of last year, were replenished.
He also rejected concerns that Saudi Aramco, which has been the bedrock of the economy, was in danger of becoming a cash machine for the sovereign wealth fund.
“We have governance in both companies . . . The PIF way will never allow one party to put the pressure on the other one,” he said.
As part of its effort to diversify the economy, the PIF has established more than 30 domestic companies over the past three years, in sectors from defence to waste recycling. It is also overseeing the development of three so-called “giga-projects” — Neom, a futuristic $500bn “mega city” development, Qiddiya, a more than $15bn sports and entertainment complex, and a high-end Red Sea tourism project expected to cost at least $10bn.
But it has drawn criticism that it is crowding out the private sector by dominating the domestic economy.
“They are increasing the risk and the leverage of the state to the detriment of the private sector, it’s becoming a state enterprise,” said a Gulf analyst. “They think the solution to Saudi Arabia’s problems is the PIF but it has not been proven yet.”
However, Mr Rumayyan insists the PIF has been nurturing the private sector. “We are paving the way for them to come in,” he said.
The 20 best-performing hedge fund managers of all time made $63.5bn for investors during the coronavirus-driven market turmoil in 2020, making it the industry’s best year of gains in a decade, despite a tough 12 months for US giants Bridgewater Associates and Renaissance Technologies.
The top 20 managers, led by funds including Chase Coleman’s Tiger Global and Izzy Englander’s Millennium Management, made half of the overall hedge fund industry’s gains last year, according to research by LCH Investments — a fund of hedge funds run by the Edmond de Rothschild Group.
The gains highlight how some of the industry’s biggest names were able to navigate last year’s volatility, in which the S&P 500 posted its fastest descent into a bear market. Many were able to profit from opportunities thrown up in March’s sell-off and the subsequent huge rally in risky assets. In 2019, the top 20 managers made around one-third of the overall industry’s gains.
“Those managers able to differentiate between sector winners and losers made spectacular gains [in 2020],” said Rick Sopher, LCH’s chairman, adding that human traders often performed better than computer-driven strategies.
The upbeat performance of some hedge funds comes after years of often muted returns. Ken Heinz, president of data group HFR, said that last year “must be one of the best if not the best year for the industry”.
Mr Coleman’s New York-based Tiger Global, a so-called Tiger cub started by managers who came out of Julian Robertson’s Tiger Management, entered the top 20 moneymakers of all time, in 14th place. It made $10.4bn of profits after betting on rising stock prices, according to LCH, the highest gain among any of the top 20.
Dropping out of the top 20 was Jim Simons’ Renaissance, after its Institutional Diversified Alpha fund lost 32 per cent and its Institutional Equities fund lost 20 per cent, according to numbers sent to investors, one of a number of quant funds to lose money.
Ray Dalio’s Bridgewater also suffered, losing $12.1bn for investors last year after being hit by the market sell-off. Mr Dalio told the Financial Times last March that “we stayed in our positions and in retrospect we should have cut all risk”. Its Pure Alpha fund, which seeks to profit from macroeconomic trends, lost 7.6 per cent last year, although its All-Weather funds made 9.5 per cent. Despite its losses last year, Bridgewater remains top of the list of all-time managers since inception with $46.5bn of profits.
Among other funds to profit was Mr Englander’s Millennium, which manages $46.7bn in assets and made $10.2bn last year, according to LCH. The fund, which limited losses during the spring market turmoil, made around 25 per cent last year, including large gains in December, according to numbers sent to investors. Those earnings helped lift it to seventh in the list of gains since inception, up from 12th last year.
Ken Griffin’s Citadel, which runs $30bn in assets, made a return of 24.4 per cent in its Wellington fund, said a person who had seen the numbers, and $6.2bn of gains last year, according to LCH. Steve Mandel’s Lone Pine gained $9.1bn, which moved it up to third from fourth in the all-time list.
Bank bosses will be the subject of intense scrutiny when Europe’s earnings season kicks off this week.
Across the continent, executives are struggling to shake off lingering regulatory probes, shareholder pressure and boardroom bust-ups that could lead to further upheaval among the industry’s power players.
Just over a year ago, the European banking sector underwent the biggest shake-up of its top ranks since the financial crisis. Following a spate of industry scandals, boards turned to a crop of low-key leaders.
But already questions are being asked about how long those replacements will last. Ongoing dramas surrounding some banks are proving an unwelcome distraction for those tasked with steering them through the biggest global crisis for a generation.
“During the coronavirus pandemic we need bank CEOs to be looking through their front windscreen rather than their rear-view mirror,” said Joseph Dickerson, an analyst at Jefferies. “This crisis has thrown up huge strategic opportunities and challenges for banks — CEOs must not get distracted.”
Here are those in the spotlight:
Ralph Hamers, UBS
Ralph Hamers will present his maiden quarterly results as chief executive of UBS on Tuesday. But his future at the world’s biggest wealth manager is already in doubt.
The surprise decision by a Dutch court last month to reopen an investigation into his personal role in a huge money-laundering scandal at his previous employer, ING, threatens to derail his first year running the Swiss lender — even if he is exonerated.
The prospect of regular meetings with prosecutors in The Hague — combined with Mr Hamers’ aversion to air travel and restrictions amid the pandemic — only add to the potential disruption.
Discussions have taken place among board members about potential replacements should Mr Hamers have to step aside. A person briefed on the talks insisted they were informal, and said the 54-year-old had the board’s full backing.
One top-20 shareholder described the situation as “surprising and annoying”. This person added: “The bad optics of money laundering matter a lot. The board should have known and they should have found somebody else. They are getting a free pass on this.”
Mr Hamers was handpicked by UBS chairman Axel Weber, and his appointment was given the green light by headhunters and Finma, the Swiss financial regulator.
Despite having joined UBS nearly five months ago, with his first two months spent shadowing predecessor Sergio Ermotti, Mr Hamers has made just one public appearance so far. The Dutchman will not provide a strategic update this week to coincide with his first three months in charge, as analysts had hoped.
Jean Pierre Mustier, UniCredit
Jean Pierre Mustier may have left his role as chief executive of UniCredit by the time the Italian bank reports its full-year results on February 11.
When the 60-year-old former paratrooper announced last month that he was retiring from UniCredit after falling out with the board over strategy, he said he would leave no later than the group’s annual general meeting in April.
But Mr Mustier has agreed to step aside as soon as the bank names a successor, which the board hopes to do by the time it meets to sign off the results on February 10. It is a tight deadline given there is no obvious, baggage-free successor in a crowded field of candidates.
The frontrunner is Andrea Orcel, the former head of UBS’s investment bank, who has been out of work since leaving the Swiss lender for Santander in 2018. When Santander withdrew its offer because of a disagreement over pay and profile, Mr Orcel began a €100m lawsuit against the Spanish bank, which is due to restart in March.
In order to take up the UniCredit post, the 57-year-old Italian would need to untangle himself from that high-profile lawsuit and potentially forfeit millions in deferred pay still owed to him by UBS. Mr Orcel is favoured by UniCredit’s international shareholders, who are drawn to his global banking experience and are increasingly frustrated by the board’s domestic focus and lack of tech expertise.
He is also the preferred choice of some Italian backers, including the billionaire businessman Leonardo Del Vecchio, a top-10 shareholder at UniCredit and an influential voice among its other investors.
But lurking in the background for any incoming chief executive is the prospect of UniCredit being forced by politicians to take over the beleaguered state-owned lender Monte dei Paschi di Siena — a deal heavily opposed by shareholders.
“Every candidate for the CEO job has said that if the right conditions are met, they would pursue the takeover,” said a person involved in the talks. “But the board are scared of how shareholders will react.”
Mark Tucker and Noel Quinn, HSBC
The duo atop HSBC have endured a chastening few years. Mark Tucker and Noel Quinn are under pressure from shareholders to show they can better harness the lender’s position in fast-growing Asian markets, while slashing costs and simplifying the sprawling behemoth.
Since Mr Tucker took over as chairman in September 2017 — firing his first chief executive within 18 months and installing Mr Quinn in his place — the shares have plunged 46 per cent. HSBC has also become caught in the geopolitical tensions between the US and China.
Alongside the bank’s results on February 23, Mr Quinn will unveil a second strategic refresh in as many years. This may include the sale or exit of its US retail business and a further shrinking of its struggling European operations and investment bank. The capital freed up will be redeployed in Asia, where it already makes 90 per cent of its profit.
HSBC — which employs 233,000 people in 64 countries — may also have to increase its programme of 35,000 job cuts, announced barely a year ago, as ultra-low interest rates and slowing global trade continue to weigh on revenue.
Mr Tucker said at a conference last week that “the world had changed” in the 11 months since its last strategic update. “Economic realities mean that what we were planning to do in February we need to be even more urgent in doing.”
Thomas Gottstein, Credit Suisse
Credit Suisse’s results on February 18 will cap Thomas Gottstein’s first year as chief executive, which has been a baptism by fire for the 57-year-old banker.
Mr Gottstein in December told the FT he hoped Switzerland’s second-biggest lender would start 2021 with a “clean slate” after his first year in the post was pockmarked by the fallout from a succession of embarrassing legacy compliance and lending failures.
But already this month the bank revealed it has had to set aside $1.1bn for legal costs related to US residential mortgage-backed securities, in addition to a $450m impairment charge on the value of its holding in hedge fund York Capital Management, which is closing down its European business.
As a result, Credit Suisse will post a fourth-quarter loss, despite strong performance for its investment bank in the final three months of the year.
Further bad headlines are to come. Mr Gottstein rose to chief executive after his predecessor, Tidjane Thiam, was forced out following revelations of corporate espionage. A Finma probe into the affair is due to conclude this spring.
Meanwhile, Mr Gottstein’s main ally in the boardroom, chairman Urs Rohner, will be replaced by outgoing Lloyds Bank chief executive António Horta-Osório in April. Mr Horta-Osório will press his chief executive to close the gap on fierce Zurich rival UBS. “You can hardly accuse Antonio of being a pushover,” said a person who has known the Portuguese banker for years.
Frédéric Oudéa, Société Générale
As the longest-serving chief executive of one of Europe’s largest banks, Frédéric Oudéa’s future at Société Générale has been the subject of speculation for several years.
Last spring the French lender was hit by heavy losses as revenues in its equities trading division collapsed almost 99 per cent as a result of companies cancelling dividend payments during the early stages of the pandemic.
In the face of criticism that under Mr Oudéa’s leadership SocGen had become too reliant on complex equity derivatives products, the 57-year-old Frenchman said the bank would slash the risk being taken by the structured products teams. He has also set about closing 600 branches in an attempt to cut €450m of costs.
SocGen is one of the worst-performing European bank stocks over the past 12 months, down 44 per cent. Its price-to-book value is less than half of its peers.
When Mr Oudéa presents the bank’s results on February 10 shareholders and analysts will be looking for signs that his risk and cost reduction plans are bearing fruit. Elsewhere, talks between SocGen and Amundi over the sale of the former’s fund management arm have cooled in recent weeks.
Though Mr Oudéa’s contract is due to run until 2023, the sudden availability of his former Ecole Polytechnique classmate Mr Mustier has reignited speculation over whether Mr Oudéa will see it through to the end.
The head of Germany’s financial watchdog suggested Wirecard might be the victim of an elaborate plot by short sellers even after the company discovered that €1.9bn of its stated cash was missing, according to three people briefed on the matter and a document seen by the Financial Times.
Felix Hufeld, president of BaFin, raised the possibility with Wirecard chairman Thomas Eichelmann, according to these sources, in a phone call that took place last June after the payments group’s auditor EY was informed by two banks that documents purporting to confirm the company’s cash position were “spurious”.
Two of the people said Mr Hufeld told Mr Eichelmann that he thought there was a 50-50 chance that the reported missing cash was part of an attack by investors betting against the company’s share price.
The documented incident shows how strongly BaFin clung to the notion that Wirecard was a victim rather than a perpetrator of fraud even after EY refused to audit its 2019 results.
For years, BaFin had dismissed reports of fraud at Wirecard and filed a criminal complaint against FT reporters, alleging they colluded in market manipulation. The case was dropped after Wirecard filed for insolvency, having acknowledged the €1.9bn probably did “not exist”.
BaFin said Mr Hufeld had several phone calls with the chairman, but denied that at that point he believed short sellers might be behind the group’s woes.
Finance Minister Olaf Scholz eventually needs to act . . . Business as usual is over
“In mid-June, BaFin did not have any insights about potential short seller attacks against Wirecard. In his talks with Wirecard’s supervisory board, Mr Hufeld at no point described such a scenario as likely,” BaFin said, adding that the written summary of the call seen by the FT was “evidently wrong”.
Mr Eichelmann declined to comment.
According to the document seen by the FT, Mr Eichelmann on June 18 briefed the supervisory board about his conversation with Mr Hufeld. According to that account, the BaFin president pointed out that “the content and wording” of the letters from two separate Manila-based banks to EY was “very similar”.
Mr Hufeld also was said to have noted that one of the letters was signed by a vice-president, a relatively low-ranking employee. He was reported to have said that the documents would appear like “co-ordinated statements” and may represent “a campaign that is directed against the company”.
One person with knowledge of the discussion said Mr Eichelmann was “really perplexed” about Mr Hufeld’s assessment as it sounded similar to the view of Wirecard’s then-chief executive Markus Braun. Until Mr Braun was pushed out of the company on June 19, he stressed that the bank letters reflected a “misunderstanding” which would be resolved soon. He is now in police custody.
In a separate, earlier conversation with Wirecard representatives on June 17, a different BaFin employee expressed disbelief about the letters in which the two banks pointed out that previous balance confirmations were “spurious”.
BaFin told a lawyer working for Wirecard that it was “incomprehensible” how two letters from banks could “call all facts that were previously audited [by EY] into question”.
The Philippine central bank a few days later said Wirecard’s missing cash never entered the country’s banking system and the company disclosed that the money probably did “not exist”.
Wirecard, which later acknowledged that large parts of its Asian business were a sham, filed for insolvency within a week.
BaFin has long been under fire for its mishandling of early warning signals of misconduct at Wirecard. After short sellers in 2016 published fraud and money-laundering allegations, the regulator discussed the “homogeneous cultural background” of investors betting against the company, noting they were “mainly Israeli and British citizens”.
In 2019, it temporarily protected Wirecard from short sellers, brushing aside Bundesbank concerns and filed the criminal complaint against the FT journalists.
At the same time, dozens of BaFin employees were heavily trading Wirecard shares and derivatives, with some of them breaching disclosure rules. One of the employees left BaFin at the end of November after his contract was terminated.
Fabio De Masi, an MP for the leftwing Die Linke party, called for the dismissal of Mr Hufeld and BaFin vice-president Elisabeth Roegele, who is in charge of securities supervision.
“Finance Minister Olaf Scholz eventually needs to act. Mr Hufeld and Ms Roegele allowed themselves to be used by Wirecard and even believed in a conspiracy when Wirecard was already collapsing,” he told the Financial Times, adding that a “clean break” was needed to restore the reputation of Germany’s financial regulators. “Business as usual is over,” said Mr De Masi.
“Work is supposed to bring us fulfilment, pleasure, meaning, even joy,” writes Sarah Jaffe in her book, Work Won’t Love You Back. “The admonishment of a thousand inspirational social media posts to ‘do what you love and you’ll never work a day in your life’ has become folk wisdom,” she continues.
Such platitudes suggest an essential truth “stretching back to our caveperson ancestors”. But these fallacies create “stress, anxiety and loneliness”. In short, the “labour of love . . . is a con”. This is the starting point of Ms Jaffe’s book, which goes on to show how the myth permeates diverse jobs and sectors.
The book serves as a timely reminder of the importance of re-evaluating that relationship. “The global pandemic made the brutality of the workplace more visible,” the author tells me over the phone from Brooklyn, New York. Ms Jaffe, who is a freelance journalist specialising in work, points out that the past year of job losses, anxiety about redundancy, and excessive workloads has demonstrated to workers the truth: their job does not love them.
Work is under scrutiny. The economic fallout of the pandemic has made a great many people desperate for paid work, disillusioned with their jobs or burnt out — and sometimes all three. It has illuminated the stark differences between those who can work from the safety of their homes and those who cannot, including shop workers, carers and medical professionals, who have to put themselves in potentially hazardous situations, often for meagre pay. The idea of self-sacrifice, and that you should put your clients, your patients or your students before yourself, Ms Jaffe says, “gets laid on very thick [with] teachers or nurses”.
Yet there are those in another category — artists and precarious academics — for whom work has always been deemed intrinsically rewarding and a form of self-expression. They are said to be lucky to have such jobs, because plenty of others are clamouring to take their place. Even here, the pandemic has changed perceptions. Social restrictions have curbed some of the aspects of white-collar work that made it rewarding, such as travel and meeting interesting people, that perhaps masked the repetition of daily tasks, the insecurity or poor conditions.
Meanwhile, Ms Jaffe says, a small number of workers, such as those who have been furloughed on full pay, have been given the time to think: what do I do with the time I used to devote to work? “It’s so beaten into us that we have to be productive,” says Ms Jaffe. “I’ve seen so many memes that are like, ‘if you haven’t written a novel in lockdown, [you’re] doing it wrong’.”
Among the affluent, work used to be something done by others, yet there have long been philosophical debates about whether it could be enjoyable. In the 1800s, Ms Jaffe points out in her book, the British designer and social campaigner William Morris pitched “three hopes” about work: “hope of rest, hope of product, hope of pleasure in the work itself”.
The decline of industrial jobs in the west, and the rise of the service economy, emphasised working for love. Nursing, food service and home healthcare, “draw on skills presumed to come naturally to women; they are seen as extensions of the caring work they are expected to do for their families”, Ms Jaffe writes. Among white-collar workers, the fetishisation of long hours in the late 1980s and 90s was accompanied by an individualistic capitalism. For many industries — notably, media — the idea of work as a form of self-actualisation intensified as security decreased.
Ms Jaffe says that there are overlapping experiences shared by those in the service sector who sit behind desks and those who stand on their feet all day. For example, the notion of the workplace as a family is a refrain in offices but it is most explicit for nannies. In the book, she tells the story of Seally, a nanny in New York who decided to live with her employers between Mondays and Fridays when the pandemic struck — leaving her own kids at home.
Seally told Ms Jaffe that she was worried about her own kids, whether they were doing their schoolwork properly: “At least I call and say, ‘Make sure you do your work’.” But she appreciates the importance of her job. “I love my work,” she said, “because my work is the silk thread that holds society together, making all other work possible”. The pandemic has reinforced the idea that the home is also a workplace and the author wants professionals who hire domestic workers and nannies to understand that and compensate accordingly for the critical role they play in facilitating their ability to do their jobs.
Perhaps the posterchild of insecure white-collar workers are interns, who have traditionally been unpaid. (In the UK, interns are eligible for pay if they are classed as a worker.) Too often, the book argues, interns have been given meaningless work with the prospect of a contract dangled in front of them, to no avail. Working conditions can also be poor — although few are as horrifying as the North Carolina zoo intern Ms Jaffe cites in the book who was killed by an escaped lion, “whose family told reporters she died ‘following her passion’ on her fourth unpaid internship”. The conditions for interns may be set back by the pandemic as so many graduates — and older workers hoping to switch industries — fight for jobs.
Ms Jaffe steers clear of advice. This is not a book that will guide readers on finding a job worthy of their devotion, though she knows that some glib tips would boost sales. “You’re told that you should love your job. Then if you don’t love your job, there’s something wrong with you,” she says. “[The problem] won’t be solved by quitting and finding a job you like better, or a different career, or deciding to just take a job that you don’t like.”
What she hopes is that people who have a nagging sense that their “job kind of sucks, they don’t love it” will realise they are not alone. But they can do something about it, for instance joining a union or pushing for fewer hours. This needs to be supported by “a societal reckoning with jobs”. Do people need, for example, 24-hour access to McDonald’s and supermarkets, she asks?
Ms Jaffe wants people to imagine a society which is not organised “emotionally and temporally” around work. As she writes in the book: “What I believe, and want you to believe, too, is that love is too big and beautiful and grand and messy and human a thing to be wasted on a temporary fact of life like work.”
A casual observer on Moscow’s Pushkin Square on Saturday could have been forgiven for mistaking the scene for events that have wracked neighbouring Belarus for the past five months.
One protester held up a white-and-red flag, the symbol of the protests against Belarusian strongman Alexander Lukashenko. Others chanted “Long live Belarus!” as cars honked in support and blared “Changes”, a Soviet dissident rock anthem adopted by protesters there. Baton-wielding riot police in balaclavas and body armour beat people in videos that circulated widely on Twitter and Telegram.
If the rally — which attracted an estimated 40,000 people in Moscow and thousands more in 110 other cities nationwide — had more than a whiff of Minsk to it, the sudden outburst of anti-government sentiment only a short walk from the Kremlin has put Russia in a similar bind to Mr Lukashenko.
As protests surged, Mr Lukashenko asked Russia to send riot police, warning “if Belarus falls, Russia will be next”. Wary of antagonising Belarusians against Moscow, Vladimir Putin, Russia’s president, declined the request.
But after the arrest of opposition activist Alexei Navalny prompted Saturday’s protests — the largest anti-Putin rallies in years — the Kremlin’s own heavy-handed crackdown risks misjudging public sentiment and legitimising a national movement against it much as Mr Lukashenko’s did, analysts say.
Police detained 3,345 people on Saturday, according to independent monitor OVD-Info, which said the arrests were a record in its decade of tracking them.
Saturday’s protests were also the first under Mr Putin’s rule where Russians fought to break through barricades, free detainees from custody, or threw snowballs to drive back police, which state media claimed led to about 40 officers sustaining injuries.
“Nobody thought this could happen before, just like in Belarus,” said Andrei Kolesnikov, a senior fellow at the Carnegie Moscow Center. “But the rise in protest activity shows you that a huge number of people are unhappy with the government . . . People aren’t coming out for Navalny so much as they are because they’re tired of corruption and bad governance.”
Mr Navalny, a 44-year-old anti-corruption activist, was jailed this week upon returning from Germany where he had been recovering from a nerve agent poisoning he said was ordered by the Kremlin. He now faces up to 13 and a half years in prison on two separate charges he claims are retribution for his activism.
The day after his arrest, Mr Navalny released a two-hour video investigation claiming oligarchs had spent billions on a lavish palace for Mr Putin on the Black Sea coast. The video racked up 78m views on YouTube by Sunday and clearly inspired some of the protesters.
Some waved toilet brushes in reference to expensive home goods allegedly procured for the palace, while others chanted “Aqua disco!” in reference to a fountain outlined in the floor plans Mr Navalny published.
Despite threats of reprisals from security forces, Mr Navalny’s supporters are calling for new rallies next weekend in the hope they can seize the initiative.
“We know what we need to do, we know what we want, and we believe that we can get him out,” said Leonid Volkov, who runs Mr Navalny’s regional network from self-exile in Vilnius.
“Obviously, Alexei’s return has forced Putin into a very unpleasant choice. Either he arrests him, which is a bad option, or he doesn’t, which is just as bad an option.”
The Kremlin denies any involvement in Mr Navalny’s poisoning and says Mr Putin has no connection to the palace. It has also sought to play down the protests as the work of an aggrieved minority. “Many are going to say that lots of people came to the illegal protests. No, only a few came out, but lots of people vote for Putin,” Kremlin press secretary Dmitry Peskov said in a state TV interview on Sunday.
Anecdotal data from Saturday’s protests, however, suggests the dynamic may be changing. According to Alexei Zakharov, who led volunteers from a monitoring group in conducting 359 interviews in Moscow, 42 per cent of those who attended had never attended a protest before, while nearly half of them were women.
“One issue in common [with Belarus] is you’re seeing young people out there on the streets and that is lending a surge of energy and enthusiasm,” said Philip Worman, managing director of GPW, a political risk firm. “You have young people who don’t care any more, and that is slowly eroding away the collective national willingness for status quo, nostalgia and stability.”
Mr Navalny’s allies hope the public show of support will convince the Kremlin to release him. In 2013, Mr Navalny was sentenced to five and a half years on fraud charges, but an impromptu rally of up to 7,000 outside the Kremlin prompted a higher court to suspend his sentence the next day.
More recently, unauthorised protests in Moscow in 2019 helped secure a rare about-face for Ivan Golunov, an investigative journalist arrested on drug charges the police later admitted were fabricated.
The Kremlin, however, appears more resolved this time to remove Mr Navalny from the political playing field. State television said protesters had committed “atrocities” against police and claimed they were using “Maidan technologies” developed by US intelligence during protests in former Soviet states.
That mirrors claims by Mr Lukashenko, who has accused foreign powers of using Belarusian protesters as “cannon fodder” against his regime.
“Given the example of the political techniques tested in Belarus and Kyrgyzstan, we cannot rule out the possibility of similar destabilisation in our country,” Russia’s first deputy interior minster Alexander Gorovoi said on Thursday, ahead of the protests.
Mr Kolesnikov, however, said the Kremlin’s mistake was to “underestimate Navalny’s level of support”.
“When people saw what was happening to Mr Navalny live on TV, and then the film [about the palace], it provided a strong emotional impulse for them to take to the streets,” he added.
Shares in the electric car unit of China Evergrande, the world’s most indebted property company, surged to a record high after a $3.4bn cash injection boosted hopes for its stalled ambitions to rival the likes of Tesla.
The company’s Hong Kong-listed shares soared more than 60 per cent on Monday, a day after the group announced that strategic investors had bought a 9.75 per cent stake for HK$26bn (US$3.35bn).
Evergrande Auto, as the EV unit is known, has vowed to spend Rmb30bn ($4.6bn) between 2019 and 2021 building factories and acquiring technical expertise in its bid to become a global leader in electric cars.
But production delays, unfinished factories and the company’s naming in an industry investigation by China’s state planner have pilled pressure on Evergrande Auto, which has not begun commercial sales of its vehicles.
Evergrande’s pivot into EVs also coincided with Beijing increasing scrutiny of the property sector in a bid to cool red-hot prices, such as by limiting the amount developers can borrow.
Evergrande Group, the parent company, has a nearly 68 per cent stake in the EV unit.
The parent group’s early repayment of a $2bn bond this month helped ease investor concerns about Evergrande’s debt burden, which as of June stood at Rmb835.5bn. Last March, the company pledged to reduce its borrowings by Rmb150bn per year through to 2022.
Investors in the Evergrande Auto fundraising included Greenwoods Global Investment; Liu Minghui, chairman of China Gas; and Chan Hoi-wan, spouse of Joseph Lau, former chairman of developer Chinese Estate. They agreed to a one-year lock-up of shares.
Evergrande Auto said the funds would be used to invest in research and development, production and paying off debts.
Soaring interest in China’s electric car makers has helped propel shares of companies including Nio, Xpeng and Li Auto as investors seek out the next potential Tesla in the world’s largest EV market. But some are sceptical Evergrande Auto will be able to compete in the crowded field.
Nigel Stevenson, an analyst at Hong Kong-based accounting investigation firm GMT Research, said that most of the proceeds from Evergrande Auto’s capital fundraising could end up being passed on to the parent company. As of June, Evergrande Auto’s debt stood at Rmb75bn, most of which was either owed to or guaranteed by its parent.
“Evergrande Auto remains primarily a property company,” Mr Stevenson added. The company’s largest cash outflow in 2019 was investment in properties under development, he pointed out.
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This time last year, Mohammad could still just about afford fruit and chicken for his three children.
But as US sanctions and the coronavirus pandemic have devastated the economy and spurred inflation — almost tripling the price of fresh fruit — the unemployed 47-year-old and his family survive on bread, potatoes and eggs and only then because he has received state “bonuses”, sold some home appliances and dipped into his savings.
“I receive around 9m rials ($38) in monthly financial help from the government and spend around the same amount from my own money [and we still] live like war refugees,” said Mohammad, a polio survivor who stopped selling cigarettes three years ago because of his disability.
Millions have been pushed into extreme poverty over the past year, adding to pressure on the regime in an Iranian election year to resume talks on the nuclear deal with new US president Joe Biden.
The Islamic republic boasts that the economy has survived in the face of US sanctions and the coronavirus pandemic, in part because of non-oil exports such as petrochemicals and steel, bartering and the sale of small amounts of crude to China. But many Iranians are much poorer than they were when Donald Trump pulled the US out of the nuclear accord the Islamic republic had signed with major powers.
“More than 60 per cent of Iranian society live in relative poverty because the workers’ wages are enough for about a third of their costs of living,” said Faramarz Tofighi, head of the wages committee of the Islamic Labour Council, an industrial relations group. “Half of those who live below the poverty line struggle with extreme poverty.”
Saeed Laylaz, a reform-minded economist, confirmed the figures cited by Mr Tofighi and said the number of those who struggled with extreme poverty had increased fivefold in the three years since the US quit the deal and reimposed sanctions. There are no official government figures available on poverty and experts rely on purchasing-power data to estimate deprivation.
Rising poverty has added to pressure on the regime to reopen talks with the US, said Mr Laylaz. “After the pandemic, if the Islamic republic cannot curb poverty, it could face political and social instability. The government has to compensate . . . for the huge pressure on people over the past three years.”
The official annual inflation rate is now 46.2 per cent compared with less than 10 per cent in May 2018 when the US pulled out of the agreement. The price of food and drink is higher again, with Iranians complaining that the cost of chicken, rice and eggs has almost doubled over the past year while the prices for beans and vegetable oil have increased by about three times. In a country where youth unemployment is 16.5 per cent, many workers have lost their jobs over the past year because of the pandemic.
Many would have starved if it were not for monthly government payouts to compensate for the cut in energy subsidies as well as payments to help ease the impact of the pandemic, analysts say.
Iran’s smart cash payment system covers around half of the 83m-strong population and targets those with no source of income. The poorest families — with an average of four members — are entitled to a minimum of 5.7m rials each month, enough to afford bread and potatoes. This has helped make bread “affordable for many families and helps them not to starve”, said Mr Laylaz.
Ghodrat, the janitor at a residential building in affluent northern Tehran said his monthly wage of 18.5m rials has increased to 24m rials since March but he still struggles to get by. He sends almost all his salary to his wife and two children in another city for them to survive. “I have never felt under such huge financial pressure in my life. I eat much less these days and rely on neighbours who sometimes give me food,” he said. “But it happens that I sleep hungry or only drink water or tea for breakfast.”
In Zahedan, one of the country’s more deprived regions, the situation is even worse, charity workers say. The charity Abid Vafamanesh supports 370 families, four times as many as it did last year, partly because of an exodus of poor people from bigger and more expensive cities. “Families with a couple of kids live in 12 sq m shelters. Breakfast has no meaning for them,” he said.
The risk for the regime is that this poverty could also have political consequences. In November 2019, protests by the poor were brutally suppressed. Hundreds of people were killed. “If we cannot curb the widening gap between the rich and the poor, we shall see an explosion of resentment and depressed feelings in the society,” said Mr Tofighi.
While Mohammad has pinned a lot of hope on Iran-US talks and the lifting of sanctions, he said corruption and mismanagement were equally big problems. Iranian leaders had to prioritise the “real needs” of people such as their dignity and basic economic issues, he said, over “fake needs” like regional issues and forcing women to observe laws on Islamic dress.
“Today, if my father dies, I cannot afford to travel to attend his funeral. This is not the way a nation can be treated,” he said. “This approach doesn’t even benefit rulers as people can be suppressed and killed today but they will take guns tomorrow to defend their right to live a dignified life.”
Screaming stock rallies and wild speculation by have-a-go amateur investors are stirring concerns among market veterans over a bubble to rival anything seen in the past century.
After a dramatic rebound from the coronavirus crash last March, benchmark equity indices have toppled a series of record highs in the early days of 2021. Bitcoin, the most speculative bet of them all, has raced to new extremes. Popular stocks like Tesla continue to defy efforts at sober valuation.
Baupost Group founder Seth Klarman has warned that investors are under the misplaced impression that risk in markets “has simply vanished”, likening them to frogs being slowly brought to the boil. GMO co-founder Jeremy Grantham has described the rally since 2009 as an “epic bubble” characterised by “extreme overvaluation”.
Fund managers are on alert for a pullback. “Timing the end of this frothiness is hard. It can go on longer than you think. I don’t see a huge move lower . . . But we have become more cautious,” said David Older, head of equities at Carmignac.
But with markets floating on an unprecedented wave of monetary and fiscal support, bond yields nailed near historic lows and investors — both institutional and retail — sitting on piles of excess cash, outlandish patterns in stock markets could persist for some time.
In a note in mid-January, analysts at Absolute Strategy Research produced a checklist of bubble indicators, setting the current rally in US “growth” stocks in the same context as the boom and bust in Japanese equities in the 1980s, the more abrupt rise and fall of dotcom stocks in the late 1990s and the long round trip in commodities stocks in the opening decade of the 2000s.
Common features include low interest rates, stock valuations that tower over earnings, runaway retail trading, and rapid accelerations in equity gains. On all these points, current market conditions look alarming. ASR points out that more than 10 per cent of stocks in the US blue-chip S&P 500 benchmark are 40 per cent or more above their averages of the past 200 days — a phenomenon seen only four times in the past 35 years.
“Clients are increasingly worried,” said Ian Hartnett, co-founder of ASR. But, he added, rallies could just be getting started, if interest rates remain low, and fund managers feel pressure to hop on the bandwagon. “There is career risk in the fear of missing out,” he said. “People find a way to rationalise every bubble. They have to explain to a chief investment officer, or to an investment committee, why they have gone long here.”
Some point to the explosion in trading by inexperienced amateurs as a particular concern. These investors, seen as flighty “weak hands” by professional fund managers, intolerant of losses and quick to exit bets, have been on the ascendancy as lockdown boredom encouraged them to the commission-free trading offered by start-ups like Robinhood.
In the US, Americans were turning to stocks as “the casinos are closed [and] a lot of sports are shut down,” said Mr Older at Carmignac. Much of their investment is, he noted, focused on “hyper growth” stocks such as electric vehicle makers. “There is no valuation ceiling for these companies,” he said.
But even given all these warning signs, investors are not staging any rush to the exits. In part, that is because the surge in retail trading may be less troubling than it looks. Unlike previous high-profile episodes of retail trading exuberance, analysts and fund managers suspect that the current bout may be more robust and less likely to saddle households with huge losses.
“It’s important to remember how retail investors are financing these purchases,” said Salman Baig, multi-asset investment manager at Unigestion in Geneva, drawing a contrast to events such as China’s 2015 bubble, where a rise in margin finance sent stocks soaring before a brutal crash.
“Now, household savings are high,” he added. “People have built up cash balances . . . It does not feel to us like a bubble. Rather, there are some expensive stocks where there could be a meaningful correction.”
Optimists also stress that professional investors are not demonstrating the same gung-ho attitude to risk-taking: instead, they continue to take precautions against the risk of a market setback. The Vix volatility index, a reflection of hedging against sharp moves in US stock markets, stands at more than 23 points, compared with a long-run average just below 20. At the start of last year, it was at 14 points.
“The fact that people are still nervous enough about future volatility suggests people are not all in,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley.
Echoes with previous precursors to market shake-outs are strong. But barring a near-unimaginable withdrawal of support from central banks, or a burst of inflation that seriously jolts the bond markets, many investors agree it is hard to imagine what could trigger a large reversal in risky assets.
“I don’t think the bubble bugles are acknowledging why stocks are so expensive,” said Michael Kelly, head of multi-asset investment at PineBridge Investments. “In 2021, markets are going up because earnings are going up and excess liquidity is still surging. We are in a structural growth in capital because of the rising savings rate and, on top of that, quantitative easing. We’ve never ever had that before.” It will take at least a decade for this to unwind, he believes.
Days after the United Arab Emirates rocked the Middle East by revealing it would normalise relations with Israel, the first publicly announced meeting took place between officials from the erstwhile foes. It involved two of the countries’ most powerful men, both of whom typically operate in the shadows.
On one side was Yossi Cohen, head of Mossad, Israel’s feared overseas spy agency; on the other was Sheikh Tahnoon bin Zayed al-Nahyan, the UAE’s national security adviser. The meeting in August last year in the UAE suggested that intelligence co-operation would be at the core of the new alliance. And it thrust Sheikh Tahnoon — who has emerged as one of the UAE’s most influential figures — into the limelight.
His rise over the past decade epitomises the nexus between power, business and national strategic interest in Gulf states such as the UAE, Saudi Arabia and Qatar, where a younger, tech-savvy and security-minded generation of royals have come to the fore. It also offers a glimpse into the inner workings of Abu Dhabi’s absolute monarchy, where the ruling family and a clique of trusted lieutenants dominate security and key sectors of the economy, blurring the lines between state and private enterprise.
“He oversees everything. He’s the trusted under-the-radar guy,” says Kirsten Fontenrose, former senior director for Gulf Affairs at the National Security Council in the Trump administration. “Part of that is mystique. He’s quiet and he’s always everywhere. He’ll be in the US, and the next thing you know he’s in Tehran, but he won’t have told you.”
A full brother of Sheikh Mohammed bin Zayed, Abu Dhabi’s crown prince and the UAE’s de facto leader, Sheikh Tahnoon manages a sprawling portfolio that straddles national security and the often opaque corporate sector in the oil-rich emirate.
His interests extend across an array of big businesses: chairman of ADQ, a state holding company set up two years ago which has rapidly become one of the emirate’s most active investors; he also chairs First Abu Dhabi Bank, the UAE’s largest lender, in which the government and ruling family have significant stakes; Royal Group, a conglomerate; and International Holding Company, another conglomerate spanning fisheries to healthcare whose assets quadrupled to about $4bn in 2020, the year Sheikh Tahnoon took over as chair.
In January he was named chair of Group 42, an Abu Dhabi-based entity set up in 2018 that describes itself as an artificial intelligence and cloud computing company. It was born out of Sheikh Tahnoon’s security role, and he has been considered its patron since its inception. Such developments are not dissimilar to ventures in Israel, where veterans of the Israel Defense Forces incubate tech companies while working closely with the IDF and defence industry.
And in a sign of how security, national strategy and royal or state-related interests often overlap, G42 was the first UAE company to open an office in Israel after normalisation. It has also partnered with Chinese company BGI to open a coronavirus laboratory in Abu Dhabi and conduct trials for a vaccine.
With the pandemic sharpening Abu Dhabi’s focus on health, technology and food security, companies affiliated with Sheikh Tahnoon have conducted a series of deals in areas of national strategic interest. ADQ acquired an indirect 45 per cent stake in Louis Dreyfus Company in November. The deal included a long-term agreement for the global merchant and processor of agricultural goods to supply the Abu Dhabi holding company with agri-commodities. It is part of a trend that has seen him become the most active member of the ruling family whose business interests overlap with the state’s.
But one consequence of the increased royal presence in business is a narrowing of the space for the private sector in an economy dominated by the state.
“If you have a guy who is playing poker and he starts with two aces, better not to play against him,” says a foreign executive with years of experience in Abu Dhabi. “You can’t compete against the royal family when all the big business is generated by the state.”
The blurring of lines between the state and royal interests has long been a characteristic of Gulf states. But it has become more pronounced, particularly in the UAE and Saudi Arabia, at a time when leaders of the two countries have become more autocratic, security conscious and determined to develop new sectors, often related to technological advances.
Steffen Hertog, a Gulf expert at the London School of Economics, says the leaderships are now more centralised, with more control and less of a “power balance between brothers, uncles and nephews”.
“It’s strategic, and more intended to have political control than rent-seeking, and very much under the control of MBZ in the UAE,” he says. “It’s a bit like the new generation of royals in Saudi Arabia who are all sidekicks of Prince Mohammed [bin Salman]. It’s [centralisation] being deployed more as a tool of the leader rather than the amorphous block that you had before.”
As chair of the Public Investment Fund, Prince Mohammed, 35, has transformed the country’s $400bn sovereign wealth fund into an omnipresent force, and his main tool to make overseas investments. Like his Emirati counterpart Sheikh Mohammed, the crown prince has also driven assertive foreign policies.
A younger generation of royals is also at the helm in Qatar, where Sheikh Tamim bin Hamad al-Thani became emir aged just 33. Under his watch, Sheikh Mohammed bin Abdulrahman al-Thani, a 40-year-old distant relative of the emir, has become a rising star as he has been promoted through the ranks to become the wealthy state’s foreign minister and most powerful investor as the hands-on chair of the Qatar Investment Authority.
Bio: Sheikh Tahnoon
Born December 4 1969, one of six full brothers who are the sons of Sheikh Zayed bin Sultan al-Nahyan, and his third wife Sheikha Fatima. He is a martial arts expert, avid cyclist, runner and a keen chess player
Set up First Gulf Bank aged 23
Appointed deputy national security adviser. Promoted to national security adviser in 2016
Appointed to the board of newly established Supreme Council for Financial and Economic Affairs
But, says Ms Fontenrose, Sheikh Tahnoon stands out both for the breadth of his role and his ability to remain under the radar. “I don’t think he has an equivalent in other Gulf countries,” she says.
A former US diplomat describes Sheikh Tahnoon as “very much a man in the shadows”, adding: “He’s got a talent for where foreign policy and national security intersect.”
A son of Sheikh Zayed bin Sultan al-Nahyan, the UAE’s founding father, Sheikh Tahnoon is one of a group of six powerful full-brothers, headed by Sheikh Mohammed, who are known as the “Bani Fatima six” in reference to their mother. Others include Sheikh Mansour, the billionaire owner of Manchester City football club. Another is Sheikh Abdullah, the foreign minister.
With nine years of experience in the armed forces starting from 1991, Sheikh Tahnoon was appointed deputy to Sheikh Hazza, then national security adviser and another member of the “Bani Fatima six”, in 2013. He replaced his brother three years later.
His rise coincided with an era during which Sheikh Mohammed, known colloquially as MBZ, pursued an interventionist foreign policy, deploying Abu Dhabi’s capabilities to push back against Iran and Islamist movements across the region while narrowing the space for debate at home.
Today, MBZ is arguably the Arab world’s most influential leader, with Sheikh Tahnoon his point man. “MBZ has a small circle of people he talks these kinds of issues through with, and Tahnoon would be number one,” says another former western diplomat.
A year before Sheikh Tahnoon became national security adviser in 2016, the UAE deployed troops to Yemen as a senior partner of the Saudi-led coalition against Iranian-backed Houthi rebels. In 2017, the UAE joined Saudi Arabia in a regional embargo against Qatar. In Libya, it has supplied weapons and other support to Khalifa Haftar, the renegade general who in 2019 launched an offensive on Tripoli.
Foreign officials describe Sheikh Tahnoon as pragmatic, probing and analytical. The former US diplomat says he was the first senior Emirati to raise the prospect of the UAE pulling out of the war in Yemen, realising it could not be won, in 2016. That was three years before the Gulf state began withdrawing troops after Abu Dhabi and Riyadh had attracted widespread criticism for their role in the conflict.
The former diplomat adds that the sheikh gave the impression he was wary of the UAE’s support for Gen Haftar, recognising that he was “not a viable political leader” and an “erratic” military leader.
Those UAE interventions damaged the Gulf state’s image — UN experts have repeatedly accused the UAE of violating an arms embargo on Libya.
The US Defense Intelligence Agency “assessed” that the UAE “may provide some financing” for the Libya operations of Russia’s Wagner Group, which has deployed about 2,000 mercenaries to back Gen Haftar, according to a Pentagon inspector-general’s report released in November. The same month, Human Rights Watch released an investigation alleging that an Emirati company, Black Shield Security Services, recruited Sudanese as security guards and then dispatched them to fight in Libya. The rights group said it was “just one example of the UAE’s pernicious involvement in foreign conflicts”. The UAE’s foreign ministry did not respond to requests for comment.
The creation of companies such as G42 is viewed by knowledgeable observers as an extension of the emirate’s national strategic goals as it relies heavily on technology in sectors ranging from security to health. Its relationship with Israel is expected to focus on these and other areas such as agritech, with entities linked to the state and the ruling family likely to take the lead.
There have, however, also been allegations of a darker domestic aspect to the security-minded leadership. The UAE authorities — which have perceived threats from Sunni Islamists, Shia militants and Iran over the past decade — have been accused of using surveillance to monitor domestic critics and opponents. Ahmed Mansoor, an Emirati human rights activist, was sentenced to 10 years in prison in 2018 for insulting the “status and prestige of the UAE and its symbols”. Activists have alleged his phone was targeted by the security services using spyware produced by Israeli firm NSO Group.
G42 has invested in the messaging app. Osama al-Ahdali, who is part of Sheikh Tahnoon’s “executive network” of trusted lieutenants in business, according to a person close to the senior member of the ruling family, was until last month listed as a ToTok director. Hamad al-Shamsi, another member of his network and a former IHC board member, is the only director listed for G42. In addition, Mr Shamsi is general manager of the private office of Sheikha Fatima, Sheikh Tahnoon’s mother.
The person close to Sheikh Tahnoon says neither Mr Ahdali nor Mr Shamsi had or have executive roles at ToTok or G42.
G42 has been branching out. In October, Kabul announced the group was part of a consortium that signed contracts with the Afghan aviation authority related to “security services, operation management, ground handling and aviation systems and technology”.
“The line between royals and business [in Abu Dhabi] is getting blurred. I don’t think it exists now; it’s very hard to say what is the exclusive preserve of the private sector,” says the foreign executive. “I don’t think there are any credible private sector players in strategic sectors.”
“If you wanted to negotiate a commercial deal with the family, not at the palace, you would approach through Tahnoon,” says the foreign executive. “As soon as they [the sons] got their own pot of money when Sheikh Zayed died . . . some of the guys wanted to do their own stuff.”
Sheikh Tahnoon was always “very interested in business”, he adds. “He would talk about the subject you were talking about by referencing things he read in his briefings.”
Over the past two years the holding company IHC has been on a buying spree, including the acquisition of Trust International Group, a defence company, and other Royal Group assets. The pandemic has created new opportunities for companies affiliated to Sheikh Tahnoon, including Pure Health, a lab operator 30 per cent owned by IHC, and Tamouh Healthcare, which is owned by IHC and has been involved in the UAE’s testing programme.
The person close to Sheikh Tahnoon says he is a huge believer in “technology, especially in a post-Covid world”.
“He puts his money where his mouth is. He strives to scale his businesses through technology, AI and digitisation,” the person adds. “Economic security is a key component of any country’s national security objectives, especially in a country like the UAE, which aims to create a knowledge-based economy less reliant on oil.”
A veteran consultant in the region says the confluence of his economic and security roles make Sheikh Tahnoon the second most influential man in Abu Dhabi, after Sheikh Mohammed. But he adds that the royal could be reaching the peak of his power as the crown prince’s children, notably Sheikh Khaled bin Mohammed, take up prominent positions in security and economic policy.
“The big question is whether we have seen the high watermark of his influence,” the consultant says. “Or whether the emergence of a new generation of leaders means his responsibilities could diminish.”
Sheikh Tahnoon’s longevity may rest on the extent to which his projects boost the UAE economy, says another regional expert: “Who would be superman forever?”