Friday, 21 December 2012

Abchat Weekly Wrap Up: To believe or not to believe, that is the fiscal questions

It has been a week of yet further uncertainty and indecision surrounding the impending US ‘fiscal cliff’. News came this morning that negotiations are far from nearing the end, as John Boehner’s proposed tax bill has been vetoed. His rejected ‘Plan B’ vote, although generating a $3.9 trillion tax cut and maintaining 99.8% of American’s current tax rates, would have resulted in higher taxes for the high earners, earning more than $1m.

This rejection resurfaces prior fears that the US will fail to strike a deal before the 31st December, and possibly losing its triple A rating. The realization that the country may enter another recession is a gloomy reality. This news has, once again, left the international stock and bond markets open and vulnerable. The FTSE All-World equity index is retracting 0.3% from hear 17-month highs, the Asia-Pacific region dropped 0.6% and most notably, the S&P 500 futures index lost 50 points, or 3.5%, in the 15 minutes following the cancelled ‘Plan B’ vote.

Given that these talks have now been ongoing for almost two years and the global economy’s future teetering on its outcome, has led us to draw one simple conclusion: the White House and the Congress have a majority of Mayan believers, and an urgency to strike a deal is immaterial as the day of the fiscal cliff is never actually going to come to pass! Instead, their meeting-to-meeting deliberations are actually just a mere excuse to watch The Lord of the Rings trilogy back-to-back…

Ofcom names the seven bidders auctioning it out for the 4G mobile bandwidth services. Competing in the auction, due to start in January, are: Everything Everything, two Hong Kong telecoms groups PCCW and Hutchison Whampoa, BT, MLL Telecom, O2 network owners Telephonica and Vodafone.

A report published this week from Standard & Poor suggests big global Pharma companies will remain relatively immune from the effects of the ongoing patent-cliffs facing their lucrative drugs. Moreover, the ratings agency forecast the sector will continue to expand by 3-5% over the next five years.

Failed electronic retailer, Comet, underwent its last day of trading this week after falling into administration last month. Business Security, Vince Cable, has called for an investigation into the Company’s collapse which has resulted in a $50m tax-payers bill.

China looks to relax the rules required for overseas listings to try and clear the backlog of domestic IPOs awaiting approval. The new rules will lower various thresholds, including both net income and net asset values, to allow more small private enterprises to list internationally.

STOCKWATCH: The FT is suggesting 2013 could be the year for contrarian investors. These investors could see their luck change in this forthcoming year, with Japanese equities leading the winning tips. Additional controversial tips include Ghanaian bonds and Ukrainian treasury bills.

We attended the CBBC: China Association Christmas Lunch, featuring Richard Graham MP. We heard many inspiring facts about how the UK is making headway with trade from China, and how UK businesses need to support the government to strengthen trade and investment going forward.

Abchaps attended the brilliant Northland Capital Christmas Party, a great opportunity for a catch up with familiar faces.

Lawyers Dechert announced that their partnership has increased with 12 promotions. The three in London are Abigail Bell and Christopher Gardner from the financial services practice, focus on alternative investment funds, whilst Timothy Lindsay from the International Dispute Resolution practice advises clients on international arbitration matters.

Brokers Westhouse Securities have appointed Harinder Sandhu to its institutional sales desk. Previously asset manager in GLG Partners’ UK alpha select team, Sandhu has also held senior roles at UBS Global Asset Management.

Lawyers SJ Berwin have strengthened their tax and international funds practices with David Huff. Huff spent the last 24 years at 3i, where his most recent position was as director of tax. Other previous posts include chairman of the BVCA, the private equity and venture capital trade body.

Co-opperative Group poaches Euan Sutherland from Kingfisher as their new Chief Executive.

Ho-Ho-Phobia - A profound fear of rotund, bearded men in red suits and black boots; outbreaks of which usually surface in late November.

We Make London are showcasing some of the UK’s most talented designer-makers this Saturday at Old Spitalfields Market, 11am – 5pm, featuring locally produced handmade products of jewellery, fashion, illustration and more.

Pop-up Screens are running a festive series of classic Christmas films over the weekend at the Dray Walk Gallery off Brick Lane, complete with oodles of snow, santa’s grotto and a full bar.

Buckingham Palace are again opening their doors for public tours of their State Rooms tomorrow. Open until the 3rd January, the ticket includes a festive glass of champagne.

There are plenty of free carol services over the next few days, including a Family Carol Service at St Paul’s Cathedral on Saturday at 1pm and a midday Christmas Eve Crib Service at Westminster Abbey.

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Friday, 14 December 2012

Abchat Weekly Wrap Up: Pride Comes Before a Call

It has been a week since the suicide of the nurse at the centre of the ‘Kate Hoax’ and in that time, the name Jacintha Saldanha has been in the news far more than the Duchess of Cambridge herself. While public figures must make their peace with media scrutiny, in the wake of the Leveson report on the ethics of the press, the whole incident is proof that the heavy weight of the media can be fatal to vulnerable individuals who have no wish for the spotlight.

The media quickly homed in on the fact that such poor imitations of the Royals fooled the nurses, leaving them open to ridicule and humiliation – but at that point still anonymous. The breach of confidence was embarrassing for the hospital but no individuals were named and shamed and details about Catherine were largely in the public domain already. Aside from being a morally questionable prank using a hospital patient for entertainment, can the DJs actually be blamed for the death? Neither the presenters, nor anyone else could reasonably have predicted the tragedy that unfolded. Both the media and public certainly have experience of inappropriate prank calls; the voicemail Russell Brand and Jonathon Ross left for Andrew Sachs in 2008 was both incredibly personal and offensive. How far do prank calls need to go before broadcasters learn their lesson?

Jacintha’s death was in no way targeted or premeditated, but it was also no accident. It is difficult to say where the blame lies and it certainly doesn’t lie squarely with one party. Both the media and the public, who reacted so strongly to the hoax on social networks, surely had a hand.

Perhaps without the increasingly competitive nature of the media and its hunger for any snippet relating to the Duchess of Cambridge, the story of the Australian hoax may not have come at such a high cost.

Abchaps were in Moscow this week for a site visit with our newest Russian resources client.

We attended the EV Investor Club breakfast, hosted by K&L Gates LLP featured key note speaker Lord Drayson and presentations from some exciting companies in the EV sector, and had a number of electric vehicles on display. Read more on the Electric Vehicle event.

Our Life Sciences team participated in the 12th annual Genesis 2012, hosted by One Nucleus and SCRIP Intelligence, which featured some great talks from Rt Hon David Willetts MP, SCRIP Editor Mike Ward and Baroness Susan Greenfield. #genesis2012

Abchaps also enjoyed a Clay Shoot Day with Crow Clarke Whitehill.

UBS faces $1 billion fine to settle allegations that it manipulated Libor.

The UK Government gives fracking the backing as Ministers approve Cuadrilla’s request to resume their shale gas exploration in Lancashire.

HMV announces the Group is in talks with banks to discuss its future following a tough first half year of trading. The Group, who reported losses of £36.1m and a 10% slump in like-for-like sales, hold £176m of debt but claim that administration is not “part of [their] plan”.

Diageo called time on its potential acquisition of the tequila brand, Jose Cuervo earlier this week. Speculation now shifts towards a potential buy-out of Beam, the bourbon whiskey producer and owner of the Sauza tequila brand, from the Japanese brewer Suntory.

STOCKWATCH: FTSE 100 company Whitbread plc, saw shares jump over 4% to 2530p following the reporting of strong interim figures on Monday morning. Their coffee house brand, Costa, saw sales continue to out perform its previous trading period and growth continued to be forecast; aided by the mis-fortunes currently faced by rival Starbucks.

Robert Finlay has joined Westhouse Securities this week from Canaccord Genuity. He has been appointed Head of Corporate Finance and Corporate Broking and joins along with Finlay Thompson who boosts the company’s sales team and specializing in oil and gas.

Paul Compton has left WH Ireland and Richard Killingbeck, Head of Private Wealth Management, will assume the duties of acting Chief Executive.

Ken McMeikan will be joining private equity owned Brakes Group as Chief Executive, leaving his post as Chief Executive at Greggs, the bakers.

- drilling down whilst injecting water, sand and chemicals to create mini explosions to shatter and crack hard shale rocks to release the gas from within.

Popular landscape photographer Ansel Adams’ exhibition: Photography from the Mountains to the Sea at the National Maritime Museum is causing quite a stir. It is on until April 2013 and is definitely worth the £7 visit.

Get festive with
Carols by Candlelight at Union Chapel in Upper Street, free entry on Sunday evening.

Do your Christmas stocking shopping at the pop-up
Kilburn to Kensal Winter Market at the Albert which finishes on Sunday.

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Electric vehicles are the new black

The electric vehicle market is changing rapidly. Previously, they have tended to conjure images of boxy, plastic-looking automobiles reserved for eco-friendly motorists. But the electric vehicle industry is revamping its image and is now a fast-growing market of attractive cars, which the top automotive manufacturing names are tapping into.

Electric vehicles are not purely about saving money on fuel. Climate change is also a critical issue for many drivers, with July 2012 being the hottest month in US history, and hurricane Sandy another extreme weather condition. Electric vehicles are also essential for the UK consumer market, since 25% of the UK’s generating capacity of non-renewable energy sources will come to an end over the next 10 years.


Lord Paul Drayson, an entrepreneur and former Minister of Science, who spoke at this week’s EV Investor Club’s breakfast conference on cleantech technology, was emphatic that if electric vehicles are to have a future, they must be more glamorous and exciting to all motorists but crucially, the younger generation. This is why he has come up with the FIA Formula-E Championship. In May 2014, 100% electric cars will race on city circuits across the globe in “a street racing festival that leaves no trace.” The event is targeted at a younger market. The races, short but intense, will be streamed live on social media sites and involve what Lord Drayson described as ‘tag-racing’, where in each race the driver takes a pit stop, running 100m to the next car, so the first one can be recharged. In the final race there will be a ‘tweet to boost’ competition running alongside it, where each car will get a power boost in accordance to the size of its twitter support. These electric car races will be going to cities across the globe. First stop will be Rome where the cars will be showcased on a circuit around the Colosseum. With pictures of racing cars to rival McLaren’s, electric cars look set to become a powerful force in the market.

What about the price tag?

Electric supercar Lightning CarsFurther illustrations of the evolving electric vehicle market came from Iain Saunderson of Lightning Cars, cars which he described as ‘reassuringly expensive’ due to the high-tech technology involved. Although each car comes with an eye-watering €350,000 price tag, they were obviously attractive enough for an audience member to ask Saunderson whether there was an order book, after the presentation. Michael Boxwell’s Bluebird supercar was equally popular with the audience, and is even a contender for the 2013 UK land speed record, a further testimony to just how far technology for electric cars has come.

Beyond the UK market, thriving Australian based electronic scooters business VMoto is now dual listed on the AIM market in London and the ASX market in Australia, and now the number one selling brand in Europe. VMoto’s Michel Fulton explained how prices have come down so they are almost on a par with petrol scooters, with the added benefit that they run at one tenth of the cost.

Chargemaster Charging Points

But what will enable the electric vehicle industry to really take off is accessible charging for consumers. David Martell of Chargemaster described how his charging-point business has grown to be the biggest provider in Europe. Having recently sealed a transaction with Electromotive, Chargemaster now has a 48% share of the European market. Its charging-points are being installed in car parks, shopping centres, hotels, train stations and supermarkets such as Asda and Waitrose, ready for a market which Martell estimates is growing at a rate of 40% per annum.

With the cost of electric vehicles reducing (Renault now offering an electric car priced comparably to their popular Clio model), new marketing initiatives are ensuring that they will become increasingly desirable to a younger target market. As the market grows, electric vehicles will make a real difference to our environment, save consumers money on running costs, and offer another exciting global sporting competition.

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Friday, 7 December 2012

Abchat Weekly Wrap-Up: Britain is open for Business

City chatter this week has centred on the Chancellor’s Autumn Statement with just about every group of people, from the richest and poorest to the much maligned ‘squeezed middle’ claiming to bear the brunt of the spending cuts. Mr Osborne was forced to admit that the period of austerity (buzz word of 2012?) will continue for the next six years, way into the next government, and that overall the economy has actually contracted again this year.

While banks were hit with yet more tax, it was not all doom and gloom; the majority of businesses, and particularly SMEs, should welcome the statement. In a bid to make Britain a more competitive and attractive place to do business, companies will benefit from reduced corporation tax and an increase in the annual investment allowance, which should hopefully encourage capital investment through stocks and shares ISAs. As those who work with SMEs will know, any moves to encourage investment in small companies will be extremely welcome. With the introduction of the Business Bank, there should (eventually) be funds in place to improve lending to small businesses also.

We must hope that the result of these measures will do what the government intends – kick start the economy, stimulating the growth and confidence this country so desperately needs.

The Government’s Autumn Statement was unveiled this week and George Osborne has placed business at the centrepiece for economic recovery. The aim is to harness the private sector’s £750bn cash pile to stimulate growth through a range of incentives; including corporation tax cuts, a 10-fold increase in the small businesses annual investment allowance and a £5bn boost to capital projects.

Large multinational businesses came under scrutiny this week as it emerged that many were paying little or no corporate tax. Famous firms revealed to be funnelling UK generated profits offshore include Starbucks, Amazon and Google.

Cineworld splashed out £47.3 million this week to snap up the arthouse group’s Picturehouse. Despite the concerns over the movie giant spoiling the quirkiness and ‘local’ vibe of the Picturehouse’s cinemas, the Group stresses that nothing would change under the new ownership.

As Japan’s government revealed its new energy policy, the DPJ has pledged to reduce the country’s reliance on nuclear energy following their Fukushima plant disaster last year. For now, the forecast for Japan could see it rise to being the next frontier in innovative energy efficiency and renewable technologies.

STOCKWATCH: Apple’s market value was slashed by £35bn as the Company suffered it’s biggest one-day drop in 4 years. Wednesday saw shares plummet 6.4pc amid concerns of losing market share in China.

Abchaps hosted a fantastic Christmas Future Faces party this week, entertaining a great mix of the City’s Future Faces with live music from the Robbie Boyd Band and delicious canapés including mini Abchurch logo Christmas cakes.

We held a brilliant China Market Lunch, where industry specialists discussed China’s manufacturing rebound and the audit crackdown by the US SEC.

Other festive networking events Abchaps enjoyed this week include Seymour Pierce and Moore Stephens Corporate Finance Mines & Money event; Daniel Stewart Christmas party; Baker Tilly’s Young Professionals drinks and Bates Wells & Braithwaite’s Caribbean themed Christmas Party.

At our Christmas Party this week, the team were treated to an evening at Jamie Oliver’s recently opened Recipease in Notting Hill. We learnt how to make Jamie’s American green chili before sitting down to eat our own delicious (and some not so!) interpretations.

As the City starts to wind down for Christmas, rumour has it that Hector Sants, former head of the FSA, has been offered a job by Barclays just a few months after it was fined almost £60m by the FSA for the libor rigging scandal. Sants is keeping his options open as Reuters reports he is also in talks with Deloitte to join as a Partner.

BlackRock has announced the appointment of Olivier Defaux to its financial institutions group in its London office while Westhouse Holdings has appointed Simon Pettitt to head up the stockbroker’s fixed income business. Last week Canaccord Genuity appointed Adrian Haxby as Head of European Investment Banking.

In the professional services space, Deloitte has brought in Angus Wildblood as analytics partner in its enterprise risk services practice and KPMG this week appointed senior M&A investment banker Rama Ayman to head its global Metals & Mining Corporate Finance practice. BDO has strengthened its international private wealth team with three appointments.

City veteran Tony Nutt, a central figure at Jupiter Asset Management, head of the UK equities desk and runner of two of its best known funds, has announced his desire to step down and retire from the industry.

In a Media Move, Gerard Baker was named as Editor in Chief at Dow Jones and the Wall Street Journal.

"Fungibility" - The ability to exchange or substitute a security for another security of the same type.

Feast festival at Islington Square is underway, following their sold-out summer event they are now getting festive. They have transformed a Victorian sorting office into a festive Christmas banquet which brings together some of London’s most exciting chefs including HIX, Mishkin's, Ceviche, Gordon Ramsay’s York and Albany, alongside our Capital’s street food heroes, all accompanied by some brilliant live music.

Head to the Southbank Centre to see Art of Change: New Directions from China on until Sunday, presenting groundbreaking Chinese art. The first of its kind, the exhibition is entirely focused on large-scale contemporary installation and performance art from China, over the last 30 years.

Everyman Cinema has relocated to the Old Vic Tunnels under the streets of London for fully festive snow-capped screenings of classic films including The Princess Bride, Back to the Future, It’s A Wonderful Life and more. There’s plenty of Christmas food and cocktails to accompany your visit to the alpine forest of Christmas cinematic magic.

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Starbucks needs to do more than sell coffee; it needs to pay its taxes!

Global giants Starbucks, Google and Amazon have recently been accused by a committee of MPs, of an ‘immoral’ use of complex company structures to avoid paying tax on profits generated in Britain. As the saying goes, “turkeys don’t vote for Christmas” so unless the many loopholes in the tax system are closed and public pressure on such multi-nationals continues, firms will continue this trend of tax avoidance. Given the austerity measures and the fact that everyone is being asked by the Government to tighten their belts, this is extremely unpalatable to the public.

Loss making Starbucks

Despite the fact that Starbucks represents almost one third of the UK coffee shop market, it has paid corporation tax only once in the past 15 years. The worlds biggest coffee chain and the second biggest café-restaurant chain in the world has only paid £8.6m tax on £3bn sales since 1998 McDonald’s by comparison, had a tax bill of over £80m on £3.6bn of UK sales and KFC, the 3rd largest global café-restaurant chain by market cap, incurred taxes of £36m on £1.1bn pounds in UK sales.

One of the key ways in which Starbucks has dodged corporation tax is that on paper, it makes a loss in the UK, so over the past three years, technically the company has reported no profit, and therefore paid no income tax, on sales of £1.2bn.

The company can do this because of a particular scheme in which the UK unit pays a royalty fee amounting to six per cent of total sales for the use of its ‘intellectual property’ to European headquarters in the Netherlands. This results in the UK division being left to report annual “losses”.


Starbucks is now in talks with HMRC and the Treasury about how it can improve its position, "We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more. As part of this we are looking at our tax approach in the UK” an official statement said. Campaign group UK Uncut said this announcement was "a blatant admission of guilt" that Starbucks had intentionally avoided tax.

Certainly HMRC and the Treasury need to be more assertive towards closing these loopholes that allow companies to hide profits. Margaret Hodge, Chairwoman of the Public Accounts Committee voiced popular opinion, stating “these global companies are making money in the UK. All we are saying is that if you have economic activities in the UK you are making profits and tax is payable on that".

In his Autumn Statement, while George Osborne dangled some carrots in front of British Businesses, he also had a huge stick, promising to clamp down on those not playing by the rules.

Kris Engskov, managing Director of Starbucks UK, announced that they would pay “a significant amount of tax during 2013 and 2014, regardless of whether the company is profitable.” I think this offer to pay corporation tax amounting to £20 million over the next two years has no legal grounding and is just a stunt. The only real answer is to close the tax loopholes that allow Starbucks to get away with this in the first place.

Friday, 30 November 2012

Will the Media save Cameron in the defence of Freedom?

Today, David Cameron rejected the central recommendation of the Leveson Report that a law is needed to underpin a new press regulator. The report, a culmination of more than a year of investigations, recommended legislation that “would enshrine, for the first time, a legal duty on the government to protect the freedom of the press.” I would argue, as Mr Cameron does, that this sounds more like interference rather than protection.

Cameron’s opposing of statutory control has caused a divide within the Coalition and Parliament. Deputy Prime Minister Nick Clegg and opposition leader Ed Miliband want to see such a law implemented without delay and both are at risk of being labelled illiberal, opportunistic politicians who are jumping at the chance of the short-term advantage. The Prime Minister stated that the central recommendation of the Leveson Inquiry introducing new press laws would “cross the Rubicon” and undermine the centuries-old principle of free speech. He further urged the House of Commons, a “bulwark of democracy”, to think “very, very carefully” about such a move.

Leveson is firmly of the belief that the British press – all of it – serves the country very well for the vast majority of the time, and that press freedoms are a constitutional necessity and principle and part of our national culture. But he also states the very purpose of the press is to hold those with power to account and that there is “no argument but that changes do need to be made”.

In his reaction to the report, Mr Cameron is clearly trying to give the media a chance to right itself by installing its own stronger and better equipped regulator. The press, operating properly and in the public interest, is one of the true safeguards of our democracy and is something that Government should not interfere with.

According to the BBC’s political correspondent, Nick Robinson, “The Prime Minister knows he has given his opponents yet another stick to beat him with. He also knows, however, that the press are firmly on his side.”

But Culture Secretary Maria Miller points out the challenge Cameron faces, saying that “the gauntlet has been thrown down” to newspapers to clear up their own mess and self-regulate. If this challenge is taken up quickly it will rescue Cameron and enshrine him as a defender of the freedom of the press. However, if self-regulation is not improved in a timely fashion, public opinion may well force Parliament to follow the recommendations of the inquiry. But then, where would this regulation end?

I certainly agree with Mr Cameron in that the press needs to operate in a free manner, un-impeded by law and governed by itself. OFCOM needs to be given more teeth and the media must be allowed a chance to improve its own standing. The future of freedom of press is down to the press to gets its act together. Fast.

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Abchat Weekly Wrap Up: By George, it's a Canadian

Wow… Who would have guessed that old Sir Mervyn King’s replacement would be the spitting image of Hollywood heartthrob, George Clooney? This is the chat circulating the tabloids about George Osborne’s latest appointment. Being compared to such a high profile and charismatic individual will bring about high expectations. To the broad sheet readers amongst you, this is really the key – whilst Mark Carney does come with some considerable pedigree, managing expectations will be his primary task. In his current role as the Governor of the Bank of Canada, Carney has performed an excellent job by keeping Canada relatively recession proof – which is essentially why his appointment is followed by so much expectation. George Osborne has also talked up Carney’s credentials by describing him as “quite simply the best and most qualified person in the world to be the next Governor”.

Carney will have some testing times ahead, notably the high possibility that he will witness Britain losing her AAA credit rating. It will be seen by the public as the Chancellor’s fault, however the spill-over effect this would have for Carney will be bad – mainly a fall in the pound. Carney would have to intervene on the Bank’s behalf very early on in his tenure – probably before he has gotten used to the different regulatory structure. Carney will also have to tackle corporation tax, and encourage more start-ups and entrepreneurs to come to the UK and give us the economic spark we need!

One has to admire George Osborne for this appointment, and maybe this will pave the way for more members of Her Majesty’s Commonwealth to help us in our hour of need.

Governor of the Bank of Canada announced as next Governor of the Bank of England

Key points of the Leverson Enquiry:

• New self-regulation body recommended
• Independent of serving editors, government and business
• No widespread corruption of police by the press found
• Politicians and press have been too close
• Press behaviour, at time, has been ‘outrageous’
Underemployment affects 10.5% of UK workforce

Our CIPR Committee Member Jo attended the CIPR Corporate and Financial Group Annual Dinner with the very entertaining guest speaker Nick Hewer of Countdown and The Apprentice

We attended
CBBC’s first webinar on Effective Due Diligence in China LINK

Abchicks enjoyed the
Crowe Clark Whitehill Women in Business Christmas Shopping Event

We took some lucky guests to see Chelsea play Fulham at home, where the West London rivals played out a bore draw. New Chelsea manager, Rafael Benetiz failed to inject any testosterone into the ever declining Fernando Torres. This is now two points from a possible six (and still without a goal) for Rafa, who will have done himself no favours with Chelsea’s mid week showing.

Abchaps hosted a very interesting Market Lunch this week with guests from Cenkos, Cavendish, Dechert, Panmure Gordon, Reeves and Millnet Financial

Dechert has appointed Dmitry Kurochkin as a partner in the law firm’s dispute resolution practice. Previously head of litigation for central Europe, the Middle East and Africa at Herbert Smith, Kurochkin will be based in Moscow and will focus on litigation and arbitration matters.

Pinsent Masons has strengthened their corporate finance team with the addition of Jonathan Beastall, corporate finance specialist. He joins from Clifford Chance, where he was a partner for 19 years. Beastall specialises in advising clients on independent price offerings and other equity capital raising.

Cavendish Asset Management has appointed Liz Evans as director of portfolio management. She has been with the investment managers since 1987, and began as an analyst focusing on the UK before becoming a fund manager of their Asia Pacific Fund.

BNY Mellon has appointed Paul Solway as managing director and Regional Head of Equity Finance for Asia-Pacific (APAC). With over 20 years’ experience in the financial services industry, Solway will be based in Hong Kong and will be instrumental in developing a strong APAC equity financing business.

Ethical Vacuum” – Lord Justice Leveson’s damning view of the existence of social media and blogs

Ahead of the much talked about Rolling Stones 50th anniversary concerts, Hampstead’s Zebra Gallery is celebrating with a free exhibition that has many previously unseen photographs of the band.

Random International’s
“Rain Room” at the Barbican is causing quite a stir. Visitors and able to control the rain through motion sensors in the floor stopping the rain from pouring on you as you walk around the room. On until March, entry is free but be prepared to queue.

This weekend you can see the Kind Henry VIII’s
Tudor kitchens at Hampton Court Palace live in action. Historia food archaeologists are continuing their fascinating research project, experimenting with traditional recipes, ingredients and cooking methods.

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Thursday, 29 November 2012

Social Media: Fundamental to modern due diligence

When moving into any market, undertaking due diligence is essential. With the ever-expanding use of social media in China, it is proving a useful research tool to form part of this due diligence.

The CBBC’s new webinar series was launched this week by Pacific Strategies & Assessments' Shaghai Director, Greg Hallahan. The CBBC’s webinars offer ‘A China Expert on your Desktop’, and the first of these was on the topic of Effective Due Diligence.

The webinar explored the idea that “social media is a fundamental part of modern due diligence”, and to what extent this is true in China. The Chinese equivalent of Twitter, Weibo, provides a platform for advisers to do a basic level of investigation on companies and individuals prior to doing business. Even though Weibo is monitored by the Government, its instantaneous nature and sheer number of users undoubtedly makes it more transparent than other forms of media, which can make it invaluable when it comes to due diligence.

In addition to Weibo, online forums and bulletin boards enable the views of current and former employees to be taken into account when researching a potential client. This can be furthered by looking at current vacancies that the company is advertising to see whether the potential client is hiring and what positions within the company are changing.

Besides the informal information on the internet, Hallahan advised that “there is a wealth of information in the public domain within the PRC, you just need to know how and where to look”. He outlined how location within the country is key in terms of the information available; within tier one cities in the east of China the information regarding companies and individuals is of a very good standard and availability, but it may not be the case elsewhere.

Chinese companies are often part of a web of other companies that are inter-related on a management and investment level. The spread of wealth can make it complex to ascertain the ownership and management structure of a company at first glance. Hallahan advised that understanding the information that is available online becomes a lot easier when you have on the ground human intelligence.

Besides social media and desk top research, a crucial step for UK companies looking to move into the Chinese market is site visits, something Abchurch has much first hand experience of. Hallahan’s estimation is that one third of site visits that they undertake explore issues that they would been difficult to address from afar.

As a result of the growth in its usage, social media is a tool that is only going to grow in usefulness to undertake due diligence on any company, in any market across the world.

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Friday, 23 November 2012

FSA fines UBS: Who's banking on wholesale change?

This week the FSA issued one of the largest fines in its history, following the conviction and sentencing of rogue trader Kweku Adoboli for two counts of fraud by abuse of his position. In addition to Adoboli’s seven year prison sentence, UBS has been fined £29.7 million for system and control failing that allowed Adoboli to lose the bank £1.4 billion. The FSA’s view that UBS’s controls were “seriously defective” is an understatement.

This equates to the third largest fine the FSA has ever issued, beaten only by Barclays, which was fined £59.5m over the Libor scandal in June 2012 and JP Morgan which was hit for £33.3m in June 2010 for failing to protect client money.

In court, the jury was told the way in which Adoboli lost the money was “unprotected, unhedged, incautious and reckless”. In Adoboli’s defence argument, his lawyers made the point that the Swiss bank’s attitude to risk depended largely on how profitable it was and the culture was to ignore risk so long as it paid. But Perry Stokes the Deputy Chief Inspector outlined how this has become the “UK’s biggest fraud, committed by one of the most sophisticated fraudsters the City of London Police have ever come across.”

Adoboli’s actions cost fellow traders their jobs, prompted the resignation of the Chief Executive Oswald Gruebel and wiped £2.7bn from the UBS share price.

The lack of awareness Adoboli had for risk highlights major flaws in the banking sector, in terms of rogue traders themselves and the negative public image of banking as a whole. There is clearly a fixation on profits at any cost in the actions of Adoboli and an encouragement on behalf of the management for him to take greater risks – just until the house of cards came tumbling down.

These issues need to be addressed if the sector is going to be considered credible and trust worthy. The threat of an imposing prison sentence and fines for potential rule breakers will help develop this. Unless the current underlying culture within banking is addressed, nothing will change. In order to reduce the risk of future rogue trading, there needs to be a change in values, where risk management is prioritised over a yearning for profits at any cost. As well as this, a personal approach where individuals take more responsibility for their actions is required. Additionally the FSA should continue to issue fines and sanctions in the event of future misconduct.

Senior managers of such institutions must review the pressure they put on junior members to succeed, seemingly at any cost.

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Abchat Weekly Wrap Up: UK Exports Emerge in Russia

The UK government recently learned that Russia has agreed to lift its 16-year ban on British beef and lamb, giving UK farmers access to a rapidly growing consumer and business market. The ban originated in 1996 following the outbreak of BSE in the UK and subsequent worldwide ban on British beef. The World saw it fit to lift the ban on British bovines in 2006, however the Russians only decided to follow suit yesterday following the Moscow visit of Nigel Gibbens, the UK’s chief veterinary officer. This six year wait could not have come at a better time, with the UK’s food exports booming, recently hitting levels of £10bn per year. It is encouraging to see British farmers being exposed to as many markets abroad as possible – and last year food and drink exports rose by 9% to £18.2bn so long may this positive rise in UK agricultural exports continue.

British food is starting to be recognised around the world for high quality and rigorous production standards, and the change in Russia’s stance highlights this. Hopefully this will help to level out the UK’s somewhat negative balance of trade and Russians can joy a real Aberdeen Angus Steak

Abchurch’s Creative Director went to Google’s London Headquarters for a seminar on Google’s expanding social media product suite

The Life Sciences Team hosted an exclusive Roundtable lunch with Dorsey & Whitney for some of the industry’s top thought leaders. There were insightful discussions including the dichotomy between the scientist and CEO, whether AIM is the right market for pre-revenue companies and the growing importance of China as a scientific hub

Our Resources Team hosted a Market Lunch which also brought up some useful discussions on the value of PCIMs

Abchaps attended a number of impressive seminars this week, including:

Bank of New York Mellon Investment Panel discussing topics such as mezzanine finance and agriculture

Gorkana Breakfast Briefing with Estates Gazette Editor Damian Wild on whether online media is killing traditional journalism

Angel News’ VCT & EIS Investment Forum where we were particularly impressed with the Social Impact VCT presentation

Abchaps also went go-karting with the Shore Capital team and enjoyed Farrer & Co Entrepreneurs Reception

Some of the team also attended a Finance Talking course on Financial Results & Annual Reports

Credit ratings agency Moody, downgrades France’s debt from AAA to AA1 amidst it’s economic challenges and the threats that poses to economic growth

UBS rogue trader Kweku Adopboli, who totalled up £1.3bn of rogue trade losses, was jailed for seven years

Swiss Bank now faces a £50 million fine by the FSA for management control failings

Argentina’s economy raises cause for concern after the US ruling orders the country to pay $1.3bn to hedge fund creditors. The US victory sparks fears that Argentina could face being plunged into another sovereign default

A deal is finally sealed between David Montgomery’s Local World and the Daily Mail & General Trust. The £52.5m deal see’s the purchase of Northcliff Media - the 80-plus regional titles, as well as a 40% stake in the new Local World venture

Stockwatch: After encouraging talks regarding the US deficit and the looming fiscal cliff, Wall Street’s S&P stocks saw closed on Monday with their biggest one-day gain in over two months

Moreover, the retail sector announces a 26.8% rise this year – well ahead of the 10.6% seen by the broader equity market, which is particularly timely as today marks the shopping frenzy of Black Friday

Numis announced this week a new mining team, with John Prior heading up the corporate finance side and Matthew Hasson appointed as director in specialist sales

BDO has strengthened its financial services team with the appointment of a partner, senior manager and a director

Angelos Anastasiou has joined Seymour Pierce as an analyst covering Utilities

Former head of BBC News Tony Hall has been appointed Director General at the BBC following the departure of George Entwistle

Stephenson Harwood has appointed Marta Garcia as a competition partner in its corporate practice

'Hair Cut' - When investors agree to take less than they are owed in a settlement of a debt. For example, if lenders agree to take a 50% haircut, they are agreeing to lose 50% of the money they lent

London's leading artist-led "The Other Art Fair" opened yesterday and is on until Sunday. Buy directly from over 100 of the UK and other global unsigned artists
Hyde Park's Winter Wonderland 2012 opens this evening for the festive season - it is on until 6th January
The Scandinavian Christmas market is on for this weekend only in Rotherhithe - no doubt you'll catch our Finnish Commercial Manager there!

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Thursday, 22 November 2012

Is online media killing traditional journalism?

The idea that online media is killing traditional journalism is a concept strongly denied by Damian Wild, editor of the Estates Gazette. At yesterday’s Gorkana Breakfast Briefing, he explained that there is still money to be made in journalism, albeit with a few adaptations to their approach.
The Estates Gazette is a weekly business magazine published for the UK commercial property market. Like other traditional media providers, the circulation of its print edition is down, having peaked in 2007 at 28,000, it has been shrinking significantly and stands at just 19,000 today. Meanwhile, the Estates Gazette has adopted a subscription-based online news service, an approach which has failed for other news providers. So why is Wild so positive about the future of Estates Gazette?
Wild’s approach has been to appeal to an increasingly tech-savvy audience. The introduction of its iPad app has clearly been a hit with the Estates Gazette’s readers, since its digital readership is growing. Not only does the app allow readers to access content within hours of going to press rather than days, it also offers a more interactive approach. The online edition of the Estates Gazette has videos, podcasts, and offers opportunities for readers to express their views – and it seems that the Estates Gazette’s readers are prepared to pay for these services. Wild also described how this year the Estates Gazette hosted a live webinar from Cannes using the company iPad.
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It seems, therefore, that through innovative ideas and working with online media, rather than in competition with it, traditional journalism does still have a place in the current market.

Alongside the advertisements of plush properties which appear in the its print editions, perhaps the Estates Gazette should consider selling Apple some advertising space in the weeks leading up to Christmas - a few more iPads under the tree on Christmas day might actually boost their business – not kill it.

Alice Prentice

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Tuesday, 20 November 2012

Will a change in China's leadership bring about reform?

The 18th Communist Party of China National Congress resulted in only the second orderly transfer of power in the 63 years of Communist Rule. Xi Jinping will succeed Hu Jinatao in becoming General Secretary of the Communist Party of China.

By leading the smaller Politburo Standing Committee onto the stage at the Great Hall of People in Beijing, he signalled his procurement of the top role in the Party to China and the World. He will inherit the post of State president, adding to his status as Head of the Party and Chief of the Military, giving him extra clout within the committee.

The Politburo has been reduced from nine members to seven. The Party’s unofficial age restrictions mean that five of the Standing Committee will serve just one five-year term before stepping down to make way for a new crop of leaders in 2017. Both the reduction in number and age restrictions mean Xi will not be able to rely on the continuity and support of those around him for his entire term, as previous leaders have done. However he personally will rule China for the next decade.

Due to the Politburo operating by consensus, and with no outsider knowing how much gravitas Xi will carry within the Committee, it is hard to predict the outcome of the change in leadership. The new leaders however have been labelled “conservative” from the outset. Two particular members of the Committee will be staunch defenders of the state sector and orthodox socialist policies. They are the North Korean trained economist, Zhang Dejiang and the propaganda chief Liu Yunshan.

At the other side of the spectrum is the 7th man, the “floating voter” Zhang Gaoli. He has been blamed by many critics for a state run investment binge that built a financial district from scratch in the city of Tianjin, leaving it heavily in debt. Chinese analysts have referred to him as a ‘weather vane’ and during his time in charge of Shandong province, he forged economic links with South Korea and Japan. By most calculations the committee divides four to three in favour of cautious reforms.

The main resolution passed by the 18th Party Congress was named the Guiding Marxist document, however it did outline elements of a reformist manifesto. It spoke of a need to expedite economic change in China.

“Very few people know about who China's new leader will be, what he thinks”, said Minxin Pei, Claremont McKenna College. Within China, Xi is less famous than his wife, army general turned the folk singer Peng Liyuan, but this will undoubtedly change over the next decade.

Xi is often referred to as a ‘princeling’, the privileged son of a former leader. He has experienced both extremes of the Party - the benefits of being at the top and the results of being a target in governmental purge. Xi himself was sent away to ‘learn from the people’ when his father was purged from his position of power within the Party. This, combined with his military connections and support for state-owned industries, gives the expectation that he will be a rather conservative leader.

If Xi wants to reform the Party and the country, he has two major limitations: firstly, the system “is in favour of moderation, and nothing can change quickly. Steady as it goes, the political rhythm first has to be installed…. Significant shifts will come later”, (David Kelly, Director of the Beijing-based political think-tank China Policy.) Secondly, he will be constrained in his ability to set his own policies, due to having to consult with two retired presidents who have often clashed over the last decade. Senior leaders like former President Jiang Zemin appear to be keeping their fingers on the buttons of power long into retirement. As Kerry Brown, head of the Asia programme at Chatham House states, “the issue lies with who opposes you rather than who supports you.”

We will just have to wait and see what the effects of this change in leadership has in stall for the Communist Party, China and the resulting global knock-on effect.