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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Dear reader,
The UK parliament is still in recess but politicians are nonetheless managing to make waves in the City of London.
The Labour party has pledged to crack down even further on the tax perks enjoyed by “non-doms” living in Britain if it gains power.
UK chancellor Jeremy Hunt had already announced the abolition of the historic non-dom tax status in his March Budget. Yet Labour wants to go further, closing loopholes that were designed to ease the shift to a replacement residence-based tax regime.
Tax advisers warn this could be the final straw for many wealthy foreign nationals living in Britain. Lex argues non-dom reforms would likely have an outsized impact on the City: almost a quarter of non-doms work in finance, for example. You can read more on Lex’s take on the Labour proposals here.
Other stories that have been keeping us busy this week:
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Credit companies are having their day in the sun. Capital managers are buying up credit groups as the business of lending shifts away from banks, and as long-dated insurance premiums become the funding of choice. Wall Street is littered with examples — the latest being Blue Owl Capital’s recent acquisition of Kuvare Asset Management for up to $1bn, which Lex argues is a serious price for an asset manager that is only a decade old and manages $20bn. Credit managers should seize the moment to cash in.
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Another sector having something of a moment is beauty. Spanish beauty group Puig, owner of brands including Paco Rabanne, plans to list for a mooted valuation of up to €10bn. German beauty retailer Douglas staged an initial public offering in March, though its shares have not fared well since. The timing is not the greatest: industry-wide sales growth is expected to soften this year in line with the broader luxury slowdown. Even so, Lex believes Puig’s mooted valuation looks achievable. Read the full note here.
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Weak natural gas prices and strong storage levels should spell bad news for US explorers and producers. Yet Lex believes the worst of the gas glut is over for US drillers. Historically, sharp increases in US gas supply have been followed by rebounds in prices — obvious examples are in 2012, 2016 and 2020. Shares in US-listed gas-focused exploration and production companies have performed well in the year to date, helped partly by timely gas price hedging. Here we explain why we think there may be more to come for investors in US E&Ps.
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Europe has been trying to rebuild its solar panel manufacturing industry but China has what now seems to be a completely unassailable lead. Chinese solar-panel makers are expected to add even more capacity this year — enough in fact to cover the world’s total demand through 2032. Nevertheless, China’s victory has come at a high price for solar cell makers. Lex is not optimistic that the forecast will clear soon.
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Until this week, Chinese property developers could count on state-owned banks to have their backs. With state-owned China Construction Bank taking rare legal action against the troubled mainland developer Shimao Group, however, that is no longer a given. Lex argues that more Chinese lenders should take a tougher stance.
Quick links
Amazon opened its first physical store almost a decade ago but Lex believes its approach to bricks-and-mortar retailing remains decidedly experimental.
Readers have been keen to find out this week why job cuts at McKinsey reflect a more cyclical future for consultants.
Britons love to moan about Royal Mail. Lex delved into why in Italy, things are different with Poste Italiane.
Helen Thomas will be back next week. Have a great week,
Nathalie Thomas
Lex writer
Read the full article here