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US adds drone maker DJI and 7 other Chinese companies to investment blacklist – CNN

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Hong Kong (CNN Business)The United States has added drone maker DJI and seven other Chinese companies to an investment blacklist, raising even more pressure on businesses in the world’s second largest economy.

The US Treasury Department announced Thursday that it has placed investment restrictions on the firms due to their roles in facilitating human rights abuses against China’s Uyghur Muslims in Xinjiang and other ethnic and religious minorities.
As a result, American investors will be barred from buying or selling shares of the companies.
“Today’s action highlights how private firms in China’s defense and surveillance technology sectors are actively cooperating with the government’s efforts to repress members of ethnic and religious minority groups,” said Brian Nelson, undersecretary for terrorism and financial intelligence. “Treasury remains committed to ensuring that the U.S. financial system and American investors are not supporting these activities.”
The news was widely expected after being first reported by the Financial Times earlier this week.
DJI and the seven other companies are already on the US entity list, which means they are barred from buying US products or importing American technology without a special license.
Dozens of Chinese companies and organizations were added to that export blacklist by the US Commerce Department on Thursday, in a bid to limit China’s use of US technologies for military purposes and for alleged human rights violations.
Thursday’s twin announcements came a week after Treasury slapped similar economic sanctions against two Chinese politicians and a Chinese artificial intelligence firm, SenseTime.
The drone maker declined to comment ahead of the US Treasury’s announcement on Wednesday. Instead, it referred CNN Business to a previous statement made in response to earlier restrictions last December, when it said it had “done nothing to justify being placed on the entity list.”
DJI added at the time that it was also “evaluating options to ensure our customers, partners, and suppliers are treated fairly,” without elaborating further. It declined to provide an update or comment on those plans this week.
Washington’s latest clampdown could create financing headaches for the upstart drone maker, which is privately held and headquartered in Shenzhen.
DJI currently counts Silicon Valley heavyweights such as Sequoia Capital China and Kleiner Perkins as investors. Sequoia Capital China declined to comment and Kleiner Perkins did not respond to a request for comment on whether the restriction would complicate their investments.
But according to a person familiar with the matter, Sequoia’s investment in DJI is handled by Sequoia Capital China, which operates as a separate legal entity from the US firm.
That means it would likely not be impacted by any restriction barring American investment in DJI, the person said.

Turning up the heat

Washington has been piling pressure on Chinese companies recently.
Last Friday, artificial intelligence startup SenseTime was also hit by the same US Treasury blacklist as DJI, two years after one of its subsidiaries was put on the entity list in 2019.
Similarly, the Treasury Department said that the decision to block SenseTime was due to the role its technology allegedly played in enabling human rights abuses against the Uyghurs and other Muslim minorities in Xinjiang.
SenseTime has strongly denied the accusations. But on Monday, the company postponed its stock market debut in Hong Kong, where it was set to start trading as soon as this week.
The firm said the delay was “to safeguard the interests of the potential investors of the company,” and allow them to “consider the potential impact of” the US move on any investments.
Separately, the FT reported earlier this week that US officials were deliberating whether to stiffen rules about selling to one of China’s top chipmakers. No action was taken Thursday, however.
The company, Semiconductor Manufacturing International Corp (SMIC), has been on the US entity list since last year. But “the decision included a provision that critics said created a loophole that some companies had exploited,” according to the FT.
SMIC did not respond to a request for comment.
However, since it was put on the entity list, “the company has faced tremendous challenges in production and operations,” SMIC’s acting chairman and chief financial officer, Gao Yonggang, said last month.
Separately, last year the US Department of Defense also added the firm to a list of companies the agency claims are owned or controlled by the Chinese military. That decision means Americans are banned from investing in SMIC.
China’s Foreign Ministry criticized the United States on Wednesday after reports of Washington’s planned crackdown.
At a briefing, spokesperson Zhao Lijian called on the Biden administration to stop “politicizing” technological and economic issues by “generalizing the concept of national security.”
“Stop abusing state power to unreasonably oppress specific sectors and enterprises of China,” Zhao said, warning that sanctions on companies such as DJI would threaten global industrial and supply chains, and undermine international trade rules.
“China will, as always, firmly defend the legitimate rights and interests of Chinese companies,” he added.
— CNN’s Beijing bureau and Jill Disis contributed to this report.

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Toronto index set for biggest weekly drop since early December

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Canada’s main stock index fell on Friday as weaker crude oil prices weighed on energy stocks, putting the benchmark index on course for its biggest weekly drop since early December.

At 9:35 a.m. ET (14:35 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 141.11 points, or 0.67%, at 20,917.07. It hit a more than two-week low in the previous session.

The index has lost 2.4% so far this week, hurt by higher bond yields as expectations build that central banks will hike interest rates over the coming months to tame unruly inflation.

The healthcare and technology sectors have dominated the weekly losses, dropping 7.4% and 4.5%, respectively.

On Friday, the energy sector led the declines with a fall of 1.9% as an unexpected rise in U.S. crude and fuel inventories profit-booking pressured crude oil prices.[O/R]

The financials sector slipped 0.8%, while the industrials sector fell 0.5%.

The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.4% on weaker copper prices. [MET/L]

On the economic front, data showed Canadian retail sales rose 0.7% to C$58.08 billion ($46.40 billion) in November on higher sales at gasoline stations, and building materials and gardening equipment and supplies dealers.

“Canadian retail sales for November grew less than expected, while new house price inflation plateaued at a high level, another sign of stagflation in the North American economy,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

HIGHLIGHTS

The TSX posted one new 52-week highs and 10 new lows.

Across all Canadian issues there were two new 52-week highs and 55 new lows, with total volume of 32.05 million shares.

 

(Reporting by Amal S in Bengaluru; Editing by Aditya Soni)

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CAPP expects oil and gas investment to rise 22 per cent this year to $32.8 billion – Energeticcity.ca

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But CAPP president Tim McMillan pointed out that in spite of the fact that oil prices are at seven-year highs and companies are recording record cash flows, capital investment remains well below what it was during the industry’s boom years. In 2014, for example, capital investment in the Canadian oilpatch hit an all-time record high of $81 billion, capturing 10 per cent of total global upstream natural gas and oil investment.

“Today we’re at $32 billion, and we’re only capturing about six per cent of global investment,” McMillan said. “We’ve lost ground to other oil and gas producers, which I think is problematic for a lot of reasons . . . and it leaves billions of dollars of investment that is going somewhere else, and not to Canada.”

Investment in conventional oil and natural gas is forecast at $21.2 billion in 2022, according to CAPP, while growth in oilsands investment is expected to increase 33 per cent to $11.6 billion this year.

Alberta is expected to lead all provinces in overall oil and gas capital spending, with upstream investment expected to increase 24 per cent to $24.5 billion in 2022. Over 80 per cent of the industry’s new capital spending this year will be focused in Alberta, representing an additional $4.8 billion of investment into the province compared with 2021, according to CAPP. 

While the 2022 forecast numbers are good news for the Canadian economy, McMillan said, it’s a problem that companies aren’t willing to invest in this country’s industry at the level they once did. 

He said investors have been put off by Canada’s record of cancelled pipeline projects, regulatory hurdles and negative government policy signals, and many now see Canada as a “difficult place to invest.”

However, Rory Johnston, managing director and market economist at Toronto-based Price Street Inc., said laying the decline in the industry’s capital spending at the feet of the federal government is overly simplistic.

He added while current “rip-roaring, amazing” cash flows and a period of sustained high oil prices will certainly give some producers the appetite to invest this year, Johnston said, it will likely be on a project-by-project basis and certainly on a smaller scale than the major oilsands expansions of a decade ago.

“You have global macro trends across the entire industry that have begun to favour smaller, fast-cycle investment projects — and most oilsands projects are literally the polar opposite of that,” he said.

One reason capital spending isn’t likely to return to boom time levels is because companies have become much more cost-efficient after surviving a string of lean years. And that’s not a bad thing, Johnston said.

“The decade of capex boom out west was tremendously beneficial for Canada and Albertans, but it also caused tremendous cost inflation,” he said.

“While what we’re seeing right now is not as construction-heavy and not as employment-heavy —and those are two very, very large downsides — the upside is that you’re much more competitive in a much more competitive oil market,” Johnston said.

In a report released this week, the International Energy Agency (IEA) hiked its oil demand growth forecast for the coming year by 200,000 barrels a day, to 3.3 million barrels a day. 

According to the IEA, global oil demand will exceed pre-pandemic levels this year due to growing COVID-19 immunization rates and the fact that the new Omicron variant hasn’t proved severe enough to force a return to strict lockdown measures.

This report by The Canadian Press was first published Jan. 20, 2022.

Amanda Stephenson, The Canadian Press

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Cash-flow investing isn't just a strategy for your grandparents – Financial Post

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Cash-flow investing is increasingly attractive during times of increased market volatility

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The outlook on the Omnicron variant of COVID-19 on global markets is changing by the minute, but I am reminded of a tried-and-true approach that can provide investors with some peace of mind during uncertain market conditions: focusing on the value quality that cash flow adds as opposed to movements in the asset price.

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Cash-flow investing, in basic terms, means purchasing an asset that provides income at regular intervals versus one solely based on price appreciation. Whether it is monthly, quarterly, semi-annual, etc., you will receive regular cash distributions that can be reinvested or used to finance your lifestyle.

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Considered a relatively conservative approach to investing, acquiring cash-flow-producing assets can be attractive for a number of reasons.

First, the asset will provide value on a regular basis regardless of its current market price. A temporary drop in value can be viewed as positive for cash-flow investors because they can now use the distribution amount to buy more of the asset at a distressed price, hence increasing their future cash-flow amount.

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Secondly, dividends or proceeds from cash-flow investments can be used to fund lifestyle expenses in retirement without eating into your overall pot of capital.

This shift in focus from market price to value can help diversify investment portfolios and mitigate the impact of public market uncertainty. Ultimately, cash-flow investments provide flexibility to rebalance, protection against market volatility, and peace of mind that you’re earning sustainable income with less concern about the economic impact of current events.

For example, in February 2020, we switched our monthly cash-flow-producing assets from reinvest to pay out for many clients when public equity markets sharply reacted to COVID-19 uncertainty. This free cash flow allowed us to purchase dividend-paying equities at a large discount for the ensuing six months until they reached their pre-pandemic valuations.

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Dividend-paying equities are just one of several types of cash-flow investments.

Real estate : Cash flow is the result of proceeds from rent collected. The value of the property will likely appreciate over the long term, but the cash flow produced monthly or annually is relatively consistent. The goal here is for the income from the property to cover all your costs on the property and provide a steady profit.

Investing in a real estate fund can be an excellent source of passive income and provide steady long-term returns. Real estate funds can have a similar return to individual property ownership without the added stress of personally maintaining the property.

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Mortgage funds : Cash flow comes from regular loan interest repayments over the term of the loan. Loans are often secured by real property with a varying loan-to-value ratio.

Private assets : Assets such as private debt offer higher-yielding returns with significantly lower volatility than publicly traded securities. By their nature, private assets are not subject to the same whims of the crowd that the public markets are.

Dividend-paying stocks : Arguably the most volatile cash-flow-producing investment available to the average retail investor. The income from dividend-paying stocks can be less consistent than other cash-flow-generating assets. Also, your investment value can fluctuate depending on market events and the company’s performance. One strategy for mitigating some of the volatility is to invest in a fund focusing on long-term growth in a large number of dividend-paying stocks.

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Bonds or bond funds : Bonds, essentially the debt of companies or governments, can provide relatively low returns, but are generally viewed as safe investments depending on their rating. Again, a way to protect your bond investment and still see regular cash flow is to invest in a bond fund that provides diversification across the bond market.

As a whole, cash-flow investing helps protect investors in volatile markets while also taking advantage of temporary market troughs. This is one strategy I would recommend to all investors regardless of portfolio size. If there’s one thing I’ve learned over the past number of years, there’s never a wrong time to start.

James McCarthy, CIM, is a senior wealth associate/client relationship manager at Nicola Wealth. This article should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. All investments contain risk and may gain or lose value. Nicola Wealth is registered as a portfolio manager, exempt market dealer and investment fund manager with the required provincial securities commissions.

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