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Trump blocks US investment in firms linked to Chinese military – Aljazeera.com

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United States President Donald Trump has signed an executive order that blocks US investment in firms Washington believes are linked to China’s military.

United States President Donald Trump has signed an executive order banning US investments in Chinese firms Washington claims are owned or controlled by the Chinese military, ramping up pressure on Beijing after the US election.

The order, which was first reported by Reuters, could affect some of China’s biggest companies, including telecoms firms China Telecom Corp Ltd, China Mobile Ltd and surveillance equipment maker Hikvision.

The move is designed to deter US investment firms, pension funds and others from buying and selling shares of 31 Chinese companies that were designated by the defence department as backed by the Chinese military earlier this year.

The order will ban any transaction by US investors in their securities starting on January 11, nine days before Trump is due to leave office and Democratic President-elect Joe Biden is scheduled to be inaugurated.

In his executive order, Trump said he found China was “increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses, which continues to allow the PRC to directly threaten the United States homeland and United States forces overseas”.

The move indicates Trump, who was defeated by Biden in the November 3 election, is seeking to take advantage of the waning months of his administration to ramp up pressure on Beijing.

Thursday’s action is likely to further weigh on already fraught ties between the world’s two biggest economies, which are at loggerheads over intensifying strategic rivalry, China’s handling of the coronavirus pandemic and its move to impose security legislation on Hong Kong.

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Drugmaker Merck divests investment in Moderna – TheChronicleHerald.ca

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(Reuters) – U.S. drugmaker Merck & Co said on Wednesday it has sold its equity investment in Moderna Inc, after benefiting from a surge in the stock price of the vaccine developer this year.

Merck did not disclose the details of the sale proceeds, but said it expects to record a small gain from the sale in the fourth quarter of 2020. (https://bit.ly/3og5kil)

Moderna’s shares have risen more than seven-fold this year, valuing the company at $55.80 billion as of Tuesday’s closing price.

Moderna is one of the front-runners in the race to develop a coronavirus vaccine, and on Monday filed for U.S. emergency use authorization of its vaccine.

Merck, which had invested $50 million in Moderna in 2015, said it would retain exposure to the company indirectly through its investment in venture funds.

(Reporting by Manas Mishra in Bengaluru; Editing by Anil D’Silva and Shinjini Ganguli)

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Amid slump, BMO exiting energy investment banking outside of Canada – The Globe and Mail

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Bank of Montreal is reshaping its investment and corporate banking division in a major way by winding down its energy sector coverage outside of its home market.

Going forward the bank’s investment dealer, BMO Nesbitt Burns, will devote its energy sector resources to the Canadian market, employees were told Monday. The move is expected to affect the bank’s long-standing Houston office, and the news comes amid a prolonged slump in the energy sector – particularly for U.S. shale producers.

“We’re allocating our resources to businesses where we are well-positioned from a market share position and to deliver strong returns now and in the future,” BMO said in a statement to the Globe. “As part of these efforts, we’ve made the financial decision for an orderly wind-down of our non-Canadian investment and corporate banking energy business.”

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The bank’s energy business, which includes investment banking and corporate lending, will now focus on the Canadian market where BMO said its “competitive positioning is strongest, our financial opportunity is most attractive, and we have a deep and long-standing commitment to supporting clients.”

BMO has a rich history in Houston, having opened its doors there in the early 1960s. Former chief executive Bill Downe, who retired in 2017, spent his early days as a credit analyst and corporate lender in the energy-focused Houston office.

The bank’s American energy business has been known for its acquisitions and divestitures arm, which focused on trading land assets. BMO has also advised on large U.S. deals, including serving as Spectra Energy Corp.’s financial adviser on its $37-billion sale to Enbridge in 2016.

But in recent years the outlook for U.S. energy has shifted dramatically, as the boom supported by shale oil and gas flamed out. Many producers created a bubble by overpaying for shale assets, often with a lot of debt, only to find out many of the wells are not as prolific as once hoped.

At the same time, the outlook for energy prices has taken a hit. Not only has the pandemic altered energy demand, but there has also been an oversupply of oil, which is expected to suppress prices for the near future.

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There is no alternative to staying invested – The Globe and Mail

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While the current investment environment is very challenging, investors increase their risks if they bet on the hot sector of the day or pull out their money and default to cash.

Bulat Silvia/iStockPhoto / Getty Images

The current investment landscape is not an easy one to navigate. Technology stocks are trading at record highs; value stocks have been underperforming for years, although they have recently shown signs of life; bond rates are close to zero; and holding cash is a money-loser once inflation is taken into account. So, what are financial advisors and investors to do?

While the current investment environment is very challenging, the biggest risk that most investors with a long-term horizon face is not losing money, but not having enough of it. That’s why there’s no alternative to staying invested in a well-diversified portfolio.

Although there’s no magic formula, there are some prudent steps that can be taken to get through these challenging times. Here are three simple and proven investment strategies to consider:

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1. Avoid extremes

There’s a growing group of investors who think they should concentrate their portfolios on a few big technology stocks – especially because of their strong performance during the COVID-19 crisis. That’s because the dopamine hit investors get when they make a correct bet on the market direction is often very stimulating.

That effect becomes difficult for investors to control and, as long as it’s working, they’re encouraged to take on more and more extreme bets on the market’s direction. They will consider it a better strategy than diversification.

The problem with this approach is that no stock or sector outperforms the market all the time. One day, something else will replace the performance generated by the big technology stocks – and nobody knows what that will be.

That’s why good advisors preach diversification even if it makes many investors feel remorseful in the short term. These advisors will also remind investors that diversification means getting the good, missing out on the extraordinary, but preventing the tragic.

For investors who are adamant on making such bets, advisors can suggest that they set up a “fun portfolio” in which they can place a smaller amount of money in a self-directed account. That will allow them to attempt to time the market without putting all of their assets at risk.

It’s an easy way for investors to fulfill that urge while ensuring most of their assets remain in well-diversified portfolios.

2. Prevent the default to cash

Faced with one of the most challenging investment environments in decades, some investors will shy away from investing altogether and default to cash. Although a global pandemic and growing geopolitical tension are two very good reasons to stay on the sidelines right now, there’s a big risk in doing so.

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Holding too much cash in a portfolio leads to a vicious cycle. When the market goes up, investors tell themselves they’ll wait for the next correction; then, when the market goes down, they’ll say that they’ll wait for it to drop further. As such, investors who succumbed to a “cash addiction” in 2000, 2008, or even this past March paid a heavy price. Of course, it’s easy to look back at these dates in hindsight and say that investing during these periods was a no-brainer, but that’s never the case.

Finally, the accompanying table shows the lousy returns cash has provided to investors during the past 10 years. It’s very difficult for investors to reach their life goals if they get a negative real rate of return 10 years in a row. That’s why advisors help fight the addiction to cash among some investors by focusing on their financial plans, making sure they stay invested, and by helping them manage the inevitable cycles of fear and greed.

Annual return on cash, adjusted for inflation

Year Return (%) CPI (%) Real return (%)
2019 1.65 2.25 -0.60
2018 1.38 1.99 -0.61
2017 0.56 1.87 -1.31
2016 0.51 1.50 -0.99
2015 0.63 1.61 -0.98
2014 0.91 1.47 -0.56
2013 1.01 1.24 -0.23
2012 1.01 0.83 0.18
2011 1.00 2.30 -1.30
2010 0.54 2.35 -1.81

Source: FTSE 91-day T-bill total return and Canadian consumer Price Index (YOY, NSA)

3. Focus on preparation more than predictions

Predictions are about trying to forecast the future while preparation is about setting the right expectations for whatever may hold. Investing has a lot more to do with preparation as it’s very difficult to foresee what will happen in the future correctly.

Good advisors can help investors prepare by performing a “pre-mortem” of their investment portfolios to know what could go wrong and how they should react if those scenarios were to happen. For example, advisors can help investors prepare for a situation in which tech stocks could fall by 25 per cent in a short time – and whether they should buy more shares or liquidate their positions.

Preparing for these situations ahead of time allows investors to follow a process instead of their emotions when these events happen. That leads to better results in the long term.

Jonathan Durocher is president of National Bank Financial Wealth Management.

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