Business

HONG KONG — Hong Kong's next leader John Lee is inheriting a once vibrant Asian business hub mired in its third year of pandemic isolation, but he may prioritise security over an economic reboot, business leaders and observers say.

Lee, a former security chief, is expected to be confirmed Hong Kong's next chief executive on Sunday by a committee of 1,463 elites.

He has promised a "results-oriented" government and a new chapter for the southern Chinese city — although his manifesto announced few major policy shifts. 

Business leaders have expressed concern over Lee's lack of details on how he might kickstart the city's fortunes, including moving beyond Chinese-style travel curbs that have left the city cut off and sparked an exodus of talent.

"In order to reboot Hong Kong's reputation as a business hub, we need a COVID exit plan," said Kristian Odebjer, head of the Swedish Chamber of Commerce in Hong Kong.

Tara Joseph, former head of the city's American Chamber of Commerce, said travel connectivity was a key first step for Hong Kong to regain its international stature after "so much reputation damage".

But Lee appeared to brush aside those concerns last week, saying that he will instead prioritise reopening the border with mainland China — signalling any immediate policy U-turn is unlikely.

Lawmaker and businessman Michael Tien said the coronavirus has trapped Hong Kong's leader between a rock and a hard place, no matter who fills that seat.

"Our country is going for zero-COVID while the rest of the world is living with the virus," Tien said.

"Hong Kong is stuck in the middle."

The city was slammed by an Omicron-fuelled outbreak which killed more than 9,000 people and contributed to a four percent drop in economic output for the first quarter.

Siddharth Sridhar, a microbiologist at the University of Hong Kong, said Hong Kong was enjoying a "grace period between waves" and that Lee must waste no time in getting the elderly vaccinated.

In recent weeks outgoing leader Carrie Lam has eased some pandemic restrictions, including reducing quarantine to seven days and allowing non-residents in for the first time in some two years.

Last week Lee told reporters he would continue "a good balancing act" between keeping the virus out and the economy afloat.

His 44-page manifesto did not specifically address the coronavirus, aside from vowing to learn from the pandemic and set up a new emergency procedure to deal with future threats.

Lee spent some four decades within Hong Kong's security services, prompting questions over his business acumen in a city that markets itself as the financial gateway between China and the world.

"The choice of John Lee illustrates Beijing's priorities of security and control in Hong Kong," former US chamber head Joseph said. 

"He will be the first HK leader with no business background." 

Lawmaker Tien said Lee would be receptive to outside opinions — a compliment echoed by many of Lee's supporters.

"Lee won't listen in matters of security, but in other areas he has no choice, he must listen and consider opinions," Tien said.

Discussing his own governance style, Lee said he was a pragmatist eager to streamline procedures for greater efficiency.

Pro-Beijing business mogul Allan Zeman, who praised Lee's policy ideas, said "[Lee] came from the police and police used to make things happen".

Lee was among 11 top Hong Kong and Beijing officials sanctioned by the US Treasury in 2020 in the wake of China's imposition of a sweeping security law aimed at snuffing out dissent.

Last month, YouTube suspended Lee's campaign channel citing the need to comply with sanctions.

Lee has defended his role in crushing the 2019 democracy protests and recently said his government will prioritise livelihood issues over democratisation.

He has presented himself as a no-nonsense leader who can get things done and cut through red tape.

AMMAN — Arab Bank Group reported net income after tax for the first quarter of 2022 of $166 million compared to $128.3 million for the prior period, recording an increase of 29.4 per cent, according to a bank statement.

The group loan portfolio grew by 5 per cent to reach $35.2 billion as of March 31, compared to $33.5 billion for the same period last year, while customer deposits grew by 3 per cent to reach $47.3 billion compared to $45.8 billion for the same period last year. The increase in loans and deposits in most areas of operations are in line with the bank’s sustainable growth strategy to expand and diversify its clients and deposit base. The group maintained its strong capital base with a total equity of $10.2 billion.

In the statement, Sabih Masri, chairman of the Board of Directors, said the results achieved by the bank in the first quarter of this year, reflect its strong financial position and its ability to deliver sustainable performance, while prudently managing the regional and global developments.

Randa Sadik, chief executive officer, stated that the underlying performance of the group continues on its growth path with first quarter results driven by an increase in core banking income and a lower cost of risk, highlighting that the bank’s net interest and commission income increased by 6.3 per cent compared to prior period, despite ongoing market volatilities.

Sadik said the Arab Bank group enjoys strong liquidity in the form of a granular deposit base and strong capitalisation where loan-to-deposit ratio stood at 74.3 per cent and the capital adequacy ratio is at 16.5 per cent in accordance with Basel III regulations. Sadik added that the asset quality of the group remains high, with credit provisions held against non-performing loans exceeding 100 per cent.

Masri concluded by expressing his confidence in the group’s ability to maintain its leading position and to capture new business opportunities to deliver sustainable profitable growth.

NEW YORK — ExxonMobil and Chevron reported soaring profit on Friday despite lower oil and natural gas volumes as the petroleum giants return billions of dollars to shareholders in the wake of lofty crude prices and refining margins.

Both US oil giants scored huge profit increases propelled by crude prices that rose after the Russian invasion of Ukraine. But both companies have thus far avoided additional capital spending increases to fund drilling and development in spite of a tightening global energy outlook.

"We continue to invest prudently," said Kathy Mikells, chief financial officer of ExxonMobil, which increased spending on share buybacks by $20 billion.

"We're going to stay disciplined on capital. We've given you a range, we've stuck within the that range ever since we started putting it out there," said Mike Wirth, chief executive of Chevron, which raised its plans for share buybacks to $10 billion per year after previously targeting $5 to $10 billion per year.

Both oil giants are implementing planned 2022 capital spending increases, but ruled out additional investment. 

Part of the reticence to spend more to drill comes as the oil giants ramp up investment in hydrogen, carbon capture and storage and other low-carbon ventures amid pressure from environmental, social and governance investors.

Russia hit 

After a dreadful 2020 amid COVID-19 lockdowns that devastated petroleum demand, oil companies returned to profitability in 2021 and have continued to see earnings soar this year.

ExxonMobil's first-quarter profits more than doubled to $5.5 billion, as a strong market for energy commodities more than offset $3.4 billion in one-time costs connected to its withdrawal from the vast Sakhalin offshore oil field following Russia's invasion of Ukraine.

Revenues rose 52.4 per cent to $87.7 billion. At Chevron, profits came in at $6.3 billion, more than four times the year-ago level on a 70 per cent rise in revenues to $54.4 billion.

Friday's eye-popping profits could add to cries of oil industry "profiteering" from congressional Democrats, who plan legislation in the wake of painful gasoline price hikes. Petroleum industry officials have dismissed the effort as "political posturing".

Oil prices have generally lingered above $100 a barrel after spiking to around $130 a barrel in early March shortly after Russian invasion of Ukraine. 

Natural gas prices have also been elevated amid worries over the reliability of Russian supplies to Europe, while refining profit margins are "above the 10-year range, with the tight supply/demand balance expected to persist", as ExxonMobil put it. 

Wirth said there are few signs of immediate relief in the tight oil market, given rising demand as more economies ease COVID-19 restrictions, moves by some oil majors to cut petroleum investment in favor of low-carbon energy and other factors.

"Inventories are quite low, demand is still strong and economies at this point seem to be handling it," Wirth said on a conference call with analysts. "At some point, particularly if prices were to move higher, I do think it starts to be a bigger drag on the economy."

But the oil market remains cyclical and "the supply response is coming", he said.

Not chasing growth 

Although both companies have announced plans to lift production later this decade, output dipped in the first quarter of 2022.

ExxonMobil's oil and gas output declined three per cent from the 2021 period, with the company pointing to severe cold weather that crimped output in Canada, as well as scheduled maintenance activity in Qatar and Guyana.

While Chevron touted a 10 per cent jump in US oil and gas production following an aggressive ramp-up in the Permian Basin in Texas, overall oil and natural gas volumes fell 2 per cent from last year's level.

Factors in Chevron's production decline included lower output in Thailand and the effect of lost output from a project in Indonesia where the contract expired.

Chevron Chief Financial Officer Pierre Breber said the company's record in the Permian Basin shows its ability to grow output efficiently as he confirmed the company would not lift its capital budget beyond the current range of $15 to $17 billion in 2022.

"We can sustain and grow our traditional energy business at very reasonable rates," Breber said. "We don't need to grow faster. We don't get paid for that. There's no time in our history where the market has valued growth."

Shares of ExxonMobil shed 2.2 per cent to $85.25, while Chevron dropped 3.2 per cent to $156.67.

WASHINGTON — The International Monetary Fund (IMF) Executive Board on Friday approved a two-year, $9.8 billion credit line for Colombia that the South American country can use to help its economy weather shocks from abroad.

"The new arrangement under the Flexible Credit Line will reinforce market confidence and provide added insurance against external risks," such as high inflation and the fallout from the war in Ukraine, IMF Deputy Managing Director Antoinette Sayeh said in a statement.

"The authorities intend to continue to treat this new arrangement as precautionary and to gradually phase out use of the instrument, conditional on a reduction of global risks."

The new credit line cancels a previous $17.2 billion arrangement agreed to in September 2020 to help the country cope with disruptions caused by the COVID-19 pandemic.

Colombia has had a Flexible Credit Line since 2009 and the IMF board has renewed it every two years, providing the country with money that could be deployed to head off a crisis.

Sayeh noted that Colombia "has very strong economic fundamentals" and "the authorities remain firmly committed to maintaining very strong macroeconomic policies going forward", noting its economy is recovering from the pandemic and the government is working to raise living standards.

"With a robust recovery underway but risks tilted to the downside, Colombia has taken steps to normalise policies from a crisis footing and manage higher inflation, while strengthening public finances and reducing external imbalances," she said in her statement.

SEOUL — South Korean tech company, Samsung Electronics, posted a near 60 per cent rise in first-quarter net profit on Thursday, largely driven by steady memory chip demand and brisk smartphone sales.

The world's biggest memory-chip maker is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled empires known as chaebols that dominate business in South Korea, Asia's fourth largest economy.

The conglomerate is crucial to the South's economic health — its overall turnover is equivalent to a fifth of the national gross domestic product. 

The firm said net profit in January-March was 11.32 trillion won ($8.9 billion) — up 58.6 per cent on-year, beating expectations, according to Bloomberg News.

The tech industry has been hit hard by a shortage of components for chipmaking, blamed on a boom in global demand for electronic products and disruption to supply chains caused by the pandemic.

But analysts say this has largely been benefitting Samsung.

Last year saw a surge in chip prices thanks to strong demand for those used in personal devices and data centres, helping the firm hit record annual sales.

Samsung's performance "continues to be lifted by the semiconductor segment, supported by memory chip — both DRAM and NAND — demand from data centres", said Gloria Tsuen, vice president of Moody's Investors Service.

Tsuen added that a disruption at a rival NAND flash chip plant — owned by American firm Western Digital and Japan's Kioxia — has also benefited Samsung "due to reduced market supply".

The firm's operating profit rose 50.5 per cent to 14.12 trillion won, while revenue was also up 19 per cent at 77.78 trillion won.

Keeping capacity high 

Samsung Electronics said it had "posted a record consolidated revenue for the third straight quarter". 

Samsung shares closed down 0.3 per cent in Seoul on Thursday.

Samsung has aggressively stepped up investment in its semiconductor business as the world battles chip shortages.

In November, it announced the building of a $17 billion microchip factory in Texas, which is expected to be operational by the end of 2024.

The firm is also investing in the development of advanced technologies such as artificial intelligence, robotics and 5G/6G communications.

"Memory chip makers generally need to keep capacity high to support technology migration," Tsuen said.

"Samsung is also in the foundry segment, and the new fab in Texas is an example of increased investment in that area as well," she said, referring to a semiconductor fabrication plant.

Samsung Electronics said its "memory business achieved a record-high in quarterly sales for servers amid solid demand".

In smartphones, the firm's new flagship lineup — the Galaxy S22 series — sold 60 per cent more than the S21 in its first three weeks in the United States, according to research firm Counterpoint. 

"Strong sales of the Galaxy S22 series since its launch in Q1 helped drive the revenue growth, on the back of Galaxy S22 Ultra with S-Pen garnering positive feedback from the existing Galaxy Note customers," Samsung said in a statement.

More than half of the Galaxy S22 series sold in the first quarter were the flagship S22 Ultra models — released after the Galaxy Note was discontinued, Sujeong Lim, a Counterpoint researcher, said.

"The Galaxy Note is a model series with higher level of customer loyalty among Samsung's models, and the S22 Ultra was able to respond to the waiting demand of these customers," Lim said.

"The price freeze, recovery from COVID, and the fact that it is the first Galaxy smartphone to be equipped with a 4nm processor appealed to customers."

But the firm is not without any challenges, analysts said.

Its "strong performance of semiconductors stems largely from external factors" such as the pandemic, Lim said.

"Considering inflation, the rise in interest rates and changes in consumption patterns post-COVID, it is difficult to bet that DRAM demand growth will continue through next year."

But despite other major risks in the macro environment — Russia's invasion of Ukraine and the COVID-19 lockdown in Shanghai — Tsuen said Samsung's credit profile is likely to "remain very strong".

The firm is supported by "its large net cash and leading market positions in key products", she said.

South Korea's second largest electronics maker LG Electronics said on Thursday that its first-quarter net profit rose 19.8 per cent on-year to 1.4 trillion won.

SYDNEY — Australia's annual inflation rate hit 5.1 per cent in the March quarter, the highest recorded since 2001, according to official data released on Wednesday.

The jump in consumer prices — driven by fuel and housing costs — was even higher than analyst expectations and has increased speculation that Australia's central bank may raise interest rates as early as next week.

It would be a bold move for the avowedly apolitical Reserve Bank of Australia (RBA), which would not want to be seen to be affecting the country's current election campaign. The last time the RBA raised rates during an election period was in 2007.

Pressure is rising, however, after the United States, New Zealand and Canada increased their rates.

Treasurer Josh Frydenberg said Wednesday that the inflation spike was due to price shocks beyond the government's control, including supply chain issues caused by the COVID-19 pandemic and Russia's invasion of Ukraine.

"What these numbers do not take into account the full effect of is the halving of the fuel excise," Frydenberg said.

The fuel tax cut was a key measure taken by the country's conservative Liberal government to ease cost-of-living pressures, along with a one-off Aus$250 ($179) payment to millions of Australians that was sent out Wednesday.

The cost of living has become a central issue in the Australian federal election campaign, due on May 21, as inflation outstrips the country's relatively flat wage growth — which was at 2.3 per cent annually in the December quarter.

Similarly, housing affordability has been hotly debated, with the country's mean house price hitting Aus$920,000 ($659,000) — and 1.2 million dollars in the most populous state of New South Wales — according to the statistics bureau.

NEW YORK — Billionaire Elon Musk is capturing a social media prize with his deal to buy Twitter, which has become a global stage for companies, activists, celebrities, politicians and more.

Despite its reach and impact, the San Francisco-based one-to-many messaging platform has struggled to generate the kind of revenue seen by social media peers such as Facebook and TikTok.

Since its founding in March of 2006, Twitter has amassed 217 million daily active users, more than 80 per cent of them outside the United States.

Twitter did not taste profit until the end of 2017, and the following year was its first to finish financially in the black.

Twitter reported a loss of $221 million last year.

While often associated with the giant Silicon Valley social media platforms, to the extent that co-founder and then-chief Jack Dorsey has been grilled by US legislators, it is vastly eclipsed by its peers when it comes to profit and share value.

A challenge that has vexed Twitter since its inception is how to weave in ads or other money-making tactics into the real-time flow of posts by users without ruining the experience people love on the platform.

The fleeting nature of tweets has meant that marketing messages in posts may not spend much time in the spotlight for Twitter users to see.

An added challenge is how to make sure ads, sometimes in the form of tweets promoted to the tops of feeds, do not wind up next to vitriol, misinformation or other troubling content that brands do not want to be associated with.

However, politicians, institutions and marketers have learned how to turn Twitter to their advantage with clever or controversial posts that get shared as "retweets". But while these can spark viral online conversations, they do not necessarily result in Twitter directly making money from them.

Town square? 

Some have opined that Twitter, while hard to squeeze money out of, has become an internet version of the "town square", and is so important that it should almost be considered a public utility and come with free speech protections.

Twitter was the preferred method of communication during former US President Donald Trump's four years in office, as opposed to press briefings at which he would face questions from reporters.

Investors had essentially steered clear of Twitter stock, which prior to Musk's uninvited takeover bid launched three weeks ago was worth 12 per cent less than it was priced when the company's shares first went public more than eight years ago.

Twitter last year introduced a "Blue" subscription tier offering exclusive content and features, and Musk has made it clear he is a fan of such models at the platform.

There is a risk though, that if Musk follows through on his vow to let people say pretty much anything they want on Twitter, moderate users will not want to pay subscriptions to be in a platform turned hostile, said Hargreaves Lansdown analyst Susannah Streeter.

Money over mindfulness? 

Musk taking Twitter private will provide more room to maneuver, but will not guarantee success, according to analysts.

As a private company, Twitter will be free to make changes that might irk shareholders or take longer than they like to pay off.

Musk and his partners buying Twitter will be able to focus more intently on the financial side of the business, and not fret over issues such as diversity that might be important to shareholders at a public firm.

Despite talk of making the software running Twitter more transparent, the business side would have to disclose less to the public as a private operation.

Musk will be able to shrug off concerns about the environment, diversity or political correctness and decide "to hell with it", running Twitter the way he thinks is best, William Lee of the Milken Institute said.