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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

When a Chinese spy balloon burst off the coast of South Carolina last year, so did investors’ view of Chinese stocks, according to UBS.

Bear with them here and rewind to February 2023. Chinese equities had already been selling off hard for two whole years, when the Pentagon shot down a balloon that had been drifting across American airspace, antagonising already tense relations between Washington DC and Beijing.

At around the same time, several “long-standing valuation relationships broke down” and the market basically “stopped responding to solid [return on equity] improvements of [China-listed] stocks,” says UBS.

Correlation does not imply causation . . . but the chart does look nice:

UBS’s strategy team led by Sunil Tirumalai upgraded China to “overweight” in April of this year, which turned out to be a good call. They argue in a note published on Friday, assuming the price-to-balloon-book discount should no longer apply, that recently resurgent Chinese stocks still have some catching up to do:

A market that at current levels of ROE should have traded at a 15% premium to [the] rest of EM, has fallen to a 50% discount. Even if the China equities close only a third of this gap — that is still a 40% upside from [current market prices] on what is still the largest EM market.

UBS funded its China upgrade five months ago by downgrading semiconductor-heavy Taiwan and Korea to “neutral”, on the observation that many of the “largest stocks in the China index have been generally fine on earnings/fundamentals”.

The country’s underperformance was “purely due to valuation collapse,” UBS said at the time: most MSCI China earnings were never really affected by the implosion of the property sector or geopolitics, and there was a “growing trend of China companies giving positive surprise[s] on dividends/buybacks”.

By April, the internet groups that account for almost two-fifths of the weight of the MSCI China had been reporting healthy earnings growth for several months, it told clients:

More cautious is JPMorgan, whose strategists moved Chinese stocks to “neutral” from “overweight” in the first week of September.

China’s Covid reopening in late 2022 preceded a three-month 50 per cent gain for the Hang Seng China Enterprises Index (HSCEI), JPM notes, while ETF purchases by the country’s “national team” of sovereign wealth funds at the start of this year had helped to boost the same index by around 40 per cent by the end of May:

Referencing these past events, one can make the case for the HSCEI to rally another 20% from current levels over the next 2-3 months as part of a “tactical” bounce (i.e., without having to turn structurally bullish on China).

“Structurally bullish” perhaps underplays the mood swing. Last week’s massive demand-side stimulus measures have for some investors detoxed the country’s once “uninvestable” equities markets.

On Friday, for example, hedge fund billionaire David Tepper told CNBC he was inclined to buy more of “everything”, enticed by US-listed Chinese stocks with “single-multiple PE’s” and “double-digit growth rates” as well as what he described as PBoC governor Pan Gongsheng’s borderline “jovial” press conference.

Others seem to agree:

Some of the past week’s jump would have been driven by short covering — Bank of America’s latest survey of global fund managers, published two weeks ago, showed that one in five investors thought “short China equities” was the most crowded trade. 

But JPM reckons “most of the buying has come via longs added,” with hedge funds having last week notched the “strongest 1wk buying of local China stocks that we’ve seen over the past ~7 years”.

Other analysts point out that the rally will live or die on the appetite of domestic, rather than foreign, investors. And they haven’t been hungry for a while.

Funds announced last week, including a CNY500bn swap facility and CNY300bn relending facility, represent less than 2 per cent of China’s total listed onshore market cap, according to Barclays — the implication being that more will be needed to sustain stock market inflows from previously consumption-averse consumers and households.

UBS, on the other hand, thinks last week’s policies already “directly address” this problem:

We’ve been of the view that the primary drag on China equities have not been foreign selling (China UW level in EM funds has been largely flat for two years), nor weak company fundamentals — but a lack of domestic flows support. China’s post Covid experience has been unique in that the big savings from lockdowns have not hit the stock markets. A high real interest rate scenario encouraged savings over consumption and bank deposits over risky market investments. The outsized policy actions earlier this week and the specific liquidity support to markets directly address this, in our view.

Whatever one makes of the rally, and however long it lasts, the optimum strategy seems clear: sell everything if you spot another balloon.

TENS of thousands of households will get huge council tax reductions of up to 100% after a vital scheme was extended.

Officials at Durham County Council last week approved the continuation of the Council Tax Reduction scheme for households on low incomes.

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Around 53,800 people in County Durham currently benefit from the discount, the local authority said.

Of this number more than 41,000 people receive the maximum 100% discount.

But Durham is not the only council to offer the scheme, which provides a vital lifeline to thousands of households struggling to make ends meet.

Council Tax Reduction is available nationwide to those who are on a low income or claim benefits.

If you are eligible you usually will not get an actual payment.

Instead, the council will reduce the amount of tax you have to pay.

You can apply if you own your home, rent, are unemployed or are working.

The amount you get depends on several factors including: where you live, your income, the number of children you have, the benefits you claim, your savings and pension.

Whether you qualify or not will depend on your council’s individual criteria.

How do I apply?

You need to apply directly to your local council to receive the discount.

There should be information on its website about the types of discounts and exemptions available and how to apply for them.

You can find out who your local council is by visiting gov.uk/apply-council-tax-reduction.

In your application your local council will ask you for details about your income and circumstances so they can work out if you are entitled to the reduction.

They will then calculate your bill and will tell you how much council tax if any you need to pay.

What help is available?

Milton Keynes

Milton Keynes residents who are on a low income can apply for a council tax reduction of up to 80% of their tax bill.

Those who have reached the age of 66, at which point they can claim pension credit, can get help with up to 100% of the cost of their Council Tax.

You can apply for the deduction through the council’s online portal.

Once your claim has been processed the discount will usually start on the Monday after the council received your complete claim form.

The discount will be paid directly into your Council Tax account and you will then receive a reduced bill.

Leeds

Households in Leeds can apply for a council tax discount of up to 75%.

The size of the discount depends on your income.

To be eligible you must not have savings, investments or property worth more than £16,000 unless you or your partner claim Pension Credit.

If you are a pensioner then you may be able to claim a 100% discount but the size of the reduction depends on your income and situation.

You can apply through the council’s online form or by calling 0113 222 4404.

Manchester

In Manchester council tax support is available but it will not cover all of your bill.

Working-age people in the city who are liable for Council Tax must still pay at least 15% of their bill.

Council tax reductions will only help with the remaining 85%.

However, residents who are pension-age can still get help which will pay for their whole bill.

Generally, the less income you have the more help you can get to pay your council tax bill.

But if you have £16,000 or more in savings then you do not qualify for any support.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

A SEASIDE town in Cumbria that’s won multiple awards is a well-kept holiday secret among travellers in the know, thanks to its unspoiled surroundings and spectacular sunsets.

Silloth in Allerdale, Cumbria, has been known since Victorian times for the quality of its air, the abundance of rare wildlife and its spectacular sunsets. And not much has changed since then.

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It has several beaches, two of the most famous ones being West Beach and Grune Point.

West Beach is a large, sandy beach with dunes and views of the Solway Firth and the Scottish landscape, including the hills of Southern Galloway and the Lake District Fells.

Grune Point is a long, sandy shingle beach that sticks out into the Moricambe estuary and is a great spot for bird watching.

The beaches are some of the best places to watch Silloth’s famous sunsets, which are considered so good because of the town’s location and views.

If you don’t make it to the beach, another popular spot to catch one is Silloth Promenade – a traffic-free walkway which also has views of Solway Firth and Scotland.

The town’s Green is one of the largest and longest greens in the country, dating back to the 1860s.

 It’s located in the Silloth conservation area and close to the Hadrian’s Wall World Heritage Site, and has been awarded the Green Flag Award several years in a row for its high environmental standards, excellent visitor facilities, and beautiful maintenance.

It’s now recognised as one of the best parks in the country.

Among the things to do there is a water play area, which is a big hit during the summer months with children of all ages.

Silloth has won several awards over the years, including the Coastal Resort Trophy and Best Sustainable Development Town in 2016.

The town has also played host to lots of big events. For 21 years it held a music and beer festival, with Allerdale beers and local acts.

But the organises announced this year they’d made the “difficult decision” for it to come to an end.

The Silloth Vintage Rally however, still takes place across two days every year.

It’s a free, family-friendly event that takes place on Silloth Green, showcasing hundreds of vintage vehicles, including steam engines, stationary engines, commercial and military vehicles, classic cars, vintage tractors, and classic motorbikes.

If you can’t wait for the rally to come around, Silloth has its very own Motorcycle Museum.

The museum displays a range of production and Grand Prix bikes that have been raced by Jim Snaith at iconic circuits including the Isle of Man TT and Daytona. 

The museum is run by Snaith, and he shares his first-hand knowledge with visitors. 

Entry is free and donations are welcome.

Silloth’s location is also ideal for exploring the Lake District.

Drive around 45 minutes south east and you’ll find yourself in Keswick.

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The UK’s best seaside town was revealed in July this year by Which?

Banburgh in Northumberland topped the list, making it four years in a row that the north east town has claimed the title.

Former central banker Mark Carney has warned there will be “significant stranded assets” in commercial real estate as governments push to reach net zero, highlighting the risks to property owners and lenders from older buildings that cannot adapt.

Property investors are facing a double whammy from the sharp fall in asset values caused by higher interest rates, and increasingly urgent demands to invest in energy efficiency.

Stranded assets are often associated with fossil fuels that will be phased out through the green transition, but Carney underscored that there are also older buildings that “aren’t going to make it” as countries regulate to cut greenhouse gas emissions across all sectors.

“There will be a tail of stranded assets . . . which are going to have to turn over and be refurbished if possible or knocked down and repurposed,” he said.

European real estate investors need to increase their annual capital spending by 30 per cent to get on top of upgrading buildings, according to a report this week by investment manager AEW. It found that the energy performance of European buildings was significantly behind the progress needed under the Paris agreement, where countries across the world agreed to limit the global temperature rises.

At the COP28 climate conference in Dubai last year, countries agreed to double the rate of energy efficiency improvements by 2030.

But in some cases, such as older, poorly located office buildings, the upfront cost may be uneconomic due to a lack of demand or low rents for the space.

Trying to knock down buildings that are deemed obsolete — such as the Marks and Spencer Oxford Street flagship or the former Museum of London — can also cause controversy, since preserving existing structures saves carbon from building materials such as steel and concrete.

Operating buildings account for 26 per cent of global energy-related emissions, according to the International Energy Agency, which has warned that faster progress is needed to put the property sector on track to net zero by 2050.

Commercial buildings in the UK face a tough series of deadlines to upgrade their energy efficiency ratings by 2030. About 12 per cent of commercial properties missed an energy rating deadline last year, according to the Centre for Cities.

Carney warned investors about banking on these deadlines slipping. “There will be people . . . who either implicitly or explicitly think that these timelines are going to shift, or that somehow or another it is not going to become a binding constraint. But that is a big risk to take,” he said.

Carney, who is chair of Brookfield Asset Management, was speaking in London for the opening of Eden Dock, a new waterside garden at Canary Wharf, which is co-owned by the Canadian asset manager. He said adding biodiversity to urban settings was another key challenge for landlords, alongside reducing emissions.

Dutch bank ING last month warned 2,000 of its biggest clients, including commercial real estate developers and owners, that it would stop providing them with financing if they failed to make sufficient progress on tackling their climate impacts. It found that commercial real estate was a laggard compared with other sectors when it came to disclosing climate impacts.

But despite climate risks for the sector, Carney said he was not concerned about risks to financial stability from the property sector.

“I am very sanguine about commercial real estate risks in the financial sector as a whole, because the risk is more broadly spread, there is less liquidity pressures than would have come in a bank-based commercial real estate sector,” he said. “And I think that the work out process is proceeding for those assets that need to be worked out.”

Standard Life has partnered with Raindrop and launched a free-to-all pension-finding tool to help Britons track down their missing pensions.

This comes as Standard Life research has shown that 19% of people with multiple pensions believe they have lost track of at least one pension pot.

Standard Life, part of Phoenix Group, said that despite the benefits of consolidating pensions, such as a greater ability to track performance and boost understanding of how much is being saved for the future, 73% of those with more than one workplace pension said they have not consolidated.

Just under a third (32%) are unsure of how to start consolidating and 12% find the process too difficult.

It has been estimated that 2.8 million pension pots in the UK, valued at over £26.6bn, remain unclaimed. Additionally, the average person has at least 11 employers in their working lifetime.

In order to find a lost pension, a user just needs to provide their former employer’s name and the time period they worked for the company. This is in contrast to supplying details of the pension provider “as is often the case when consolidating pension pots”.

Raindrop’s technology then begins the tracing process, which on average takes just 4-6 weeks. During this time, a dedicated case manager is on-hand to provide updates on the process.

Once a person’s lost pensions have been traced, they will be better informed about their income prospects and able to take the necessary steps to prepare for their retirement.

Standard Life managing director of retail direct Dean Butler said: “We know that people who actively plan for their retirement are more confident and financially secure but if you don’t know where all your savings are, you can’t begin to calculate their value, making planning unnecessarily difficult.

“Sometimes people have a vague idea of having a pension with a previous employer, but just don’t know how to go about finding it. Our new pension-finding service removes the major hurdles that people face and allows them to regain control of their pensions savings. We want to help them trace any missing pensions, so they don’t ever lose them again and are better prepared to organise their retirement savings.”

Raindrop co-founder Vivan Shridharani added: “Millions of UK savers have lost pensions, often unsure of how to begin their search. As each new generation has more jobs than the last, the number of lost pensions continues to grow. We’re committed to helping savers, with a simple solution to easily find their lost pensions and help them better prepare for their financial future.

“By partnering with Standard Life, one of the UK’s largest pensions providers, we hope to empower savers to locate lost pots and take control of their long-term financial planning.”

Since the launch of Raindrop, a pension-finding platform, in 2021, it has located over £325m in lost pension savings across more than 27,000 pots.

In order to obtain these results, Standard Life commissioned Opinium to conduct research among 2,000 UK adults between 6 and 10 September 2024.

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Star corporate raider Carl Icahn has offered his longtime chief financial officer, Ted Papapostolou, a juicy new contract extension to 2028. But it comes with some onerous strings attached.

There’s no doubt Papapostolou deserves a payday, having spent a lot of time extinguishing fires recently. First came last year’s short attack by Hindenburg Research, which sent the shares of Icahn Enterprises LP (IEP) tumbling. More recently, Papapostolou had to settle SEC charges over pledging company securities as collateral for personal loans.

So, Icahn is paying up. He’s granted Papapostolou a $2.2mn salary package, plus an incentive-based package worth up to $17mn that rewards him if IEP recovers some of its value. Unfortunately for us, Papapostolou has offered his omertà in exchange. 

According to the offer letter (FTAV’s emphasis below):

You further agree not to write a book or article about the Designated Entities, Mr. Icahn, his family members, or any of the respective affiliates of any of the foregoing, in any media and not to publish or cause to be published in any media, any Confidential Information, and further agree to keep confidential and not to disclose to any third party, including, but not limited to, newspapers, authors, publicists, journalists, bloggers, gossip columnists, producers, directors, script writers, media personalities, and the like, in any and all media or communication methods, any Confidential Information.

It’s a shame Papapostolou is barred from sharing the internal workings of Icahn’s empire with gossip columnists, authors and publicists. Even his friends and family seemingly won’t hear a peep, except the fact that, yes, he once served as chief financial officer of IEP. 

In furtherance of the foregoing, you agree that following the cessation of your employment hereunder, the sole and only statements you will make about or concerning any or all of: Mr. Icahn, his family members, and the Designated Entities . . . is to acknowledge that you are or were employed by the Company, and were its Chief Financial Officer.

But seems Papapostolou missed out on some of the more restrictive provisions affecting Icahn employees, like onetime chief financial officer of Icahn-owned refinery CVR Energy, Tracy Jackson. She agreed to keep the terms of the 2021 separation between herself, a spouse and a tax attorney (and a government agency, in the event of a subpoena). 

We’d also love to know what Aris Kekedjian, a former General Electric executive who worked as IEP’s chief executive for just seven months before resigning, has to say. The same goes for David Willetts, who moved over to run Icahn-owned car mechanic Pep Boys after a brief stint at the top (his stint at Pep Boys proved equally brief, with the company announcing last week that Willetts has already left). 

The circle running IEP is small, with under 50 employees at the Sunny Isles Beach, Florida-based conglomerate according to LinkedIn. 

Hopefully a few escape the no-book no-blog agreement so a lucky reporter can package the tale of IEP into a warts-and-all bestseller, rather than a bland, hagiographic HBO series.

Further reading:

– Icahn seen clearly now the gains have gone (FTAV)