—— Evergrande Ordered to Liquidate; U.S. Cloud Firms May Need to Disclose Chinese Clients; Amazon Abandons iRobot Acquisition; U.S. Consumers Optimistic About Housing Recovery; Chinese AR Glasses Company Raises $60 Million; U.S. Stocks Face Profit Compression Risks; IBM Issues Ultimatum to Executives
1. Evergrande Ordered to Liquidate
On Monday, a Hong Kong court judge, Linda Chen, issued a liquidation order for Evergrande, one of the largest victims of China’s property crisis. The company is still burdened with over $100 billion in debt and shows almost no signs of recovery.
Regulators need to ensure that Evergrande’s unfinished housing projects are completed and that the financial system and investor confidence are maintained.
According to Bloomberg, most of Evergrande’s bonds traded last Friday at only 1.5% of their face value, indicating that investors do not expect the company to repay these loans.
Evergrande’s market capitalization is now just $275 million, less than 1% of its peak value.。
______
2. U.S. Cloud Firms May Need to Disclose Chinese Clients
Today, U.S. President Biden proposed a measure requiring cloud companies like Amazon and Microsoft to investigate and identify Chinese companies using their platforms to develop AI applications. This move is likely to escalate tensions between the two countries.
Biden also wants these firms to disclose the names and IP addresses of these foreign companies and allocate specific budgets to investigate any suspicious activities.
Biden believes that China’s development of AI and other cutting-edge technologies is posing significant competitive pressure on the U.S.
This measure follows Biden’s earlier actions to limit the export of advanced chips to China and sanction certain Chinese companies.
______
3. Amazon Abandons iRobot Acquisition
Due to a threat from European antitrust regulators to block the deal, Amazon decided to abandon its $1.4 billion acquisition of robot vacuum maker iRobot.
However, this may not be entirely bad for Amazon, as iRobot’s profits have been declining in recent years.
Amazon, which already has a massive presence in retail, cloud computing, and entertainment, faces intense scrutiny from global regulators on any acquisition moves.
Amazon will pay a $40 million breakup fee to iRobot.
______
4. U.S. Consumers Optimistic About Housing Recovery
According to Bloomberg’s Markets Live Pulse survey, 236 respondents expect the 30-year mortgage rate to fall to 5.5% by the end of this year.
57% of respondents believe that real estate will be a better investment this year compared to last year.
The housing market typically sees an uptick in sales after the Super Bowl, and experts expect the market to have hit bottom in 2023 and begin its recovery.
Despite signs of recovery in residential markets, commercial real estate, such as office buildings, is still struggling.
______
5. Chinese AR Glasses Company Raises $60 Million
Xreal, a Chinese augmented reality (AR) glasses company, revealed that it is raising $60 million at a valuation of over $1 billion.
Xreal’s key supply chain partners are also participating in the funding round, which will help the company increase production and invest in product development.
Xreal’s CEO Xu Chi stated that the company has enough funds to fulfill all of its orders for this year but needs new funding to carry it through 2025.
Meta remains the leader in the mixed-reality space, with Sony and ByteDance also competing closely. Xreal holds 4% of the market share.
______
6. U.S. Stocks Face Profit Compression Risks
UBS strategists believe that slowing economic growth is likely to begin impacting corporate revenue expectations, and the U.S. stock market, currently at high levels, could face a challenging phase.
Analyst Andrew Garthwaite suggested that rising employee wages and interest costs will start to impact profit margins.
The U.S. stock market has reached new highs, with investors reflecting expectations of Fed rate cuts in prices, and even seeing weak economic data as positive.
UBS sees consumer staples, pharmaceuticals, and software sectors as performing relatively better.
______
7. IBM Issues Ultimatum to Executives
IBM today issued a “final ultimatum” to all of its managers, requiring them to work in the office or at client sites for at least three days per week, regardless of their current location.
Senior Vice President John Granger wrote that HR will track managers’ office attendance, and those who fail to meet the minimum requirement will be fired.
Managers who live more than 50 miles from IBM office locations must either relocate or leave the company by the end of August, with only military or medical exceptions allowed.
IBM is focusing its core operations on software and services while capitalizing on AI opportunities.
______
This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.