Panama Papers rock financial world

A huge leak of documents has rocked the financial world revealing how some among the rich and powerful use tax havens to hide their wealth.

The files leaked from a Panamanian law firm called Mossack Fonseca contain 40 years of data and include information on more than 210,000 companies in 21 offshore jurisdictions, from Panama to Hong Kong.

The files show how Mossack Fonseca clients were able to launder money, dodge sanctions and avoid tax.

In one case, the company offered an American millionaire fake ownership records to hide money from the authorities in direct breach of international regulations that stop money laundering and tax evasion.

More than 60 relatives and associates of heads of state and other politicians are implicated.

For instance, the files reveal a suspected billion-dollar money laundering ring involving close associates of Russia’s President, Vladimir Putin.

Also mentioned are the brother-in-law of China’s President Xi Jinping; Ukraine President Petro Poroshenko; Argentina President Mauricio Macri; the late father of UK Prime Minister David Cameron and three of the four children of Pakistan’s Prime Minister Nawaz Sharif.

The documents show that Iceland’s Prime Minister, Sigmundur Gunnlaugsson, had an undeclared interest linked to his wife’s wealth. He is now facing calls for his resignation.

The scandal also touches football’s world governing body, Fifa, the BBC reported.

Although there are legitimate ways of using tax havens, most of what has been going on is about hiding the true owners of money, the origin of the money and avoiding paying tax on the money.

The 11.5 million documents were obtained by the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ).

It is the biggest leak in history, dwarfing the size of those released by the Wikileaks organisation.

http://www.lankabusinessonline.com/panama-papers-rock-financial-world/

Is it the beginning of the end for Apple's strong run?

Stock fell into bear territory for first time this month

The domestic Chinese market has been in meltdown over the last few weeks. First, the government moved to curb volatility by clamping down on short selling.

Then, China surprised investors by weakening its currency by almost 2% after a weekend of poor trade data and prompting a sell-off in global equities at the end of the month.

As a technology manager, what happens in China – and itsimplications for the wider economy and Asian consumer – is obviously a concern. We have around 5% of our portfolio in China, albeit in Hong Kong listed shares rather than in the A-share market. 

The Chinese economy is undoubtedly slowing and, while we do not believe there will be a recession, there is pressure on certain sectors. Some companies selling into China's economy will be vulnerable. For example, sales in the auto industry, where competition is increasing, have been disappointing. 

A number of industrial companies, such as Otis Elevators, have shown real weakness too. There is also pressure on luxury goods because of the crackdown on corruption.

But the slowdown may well be beneficial for other sectors, like internet companies, where we have a number of holdings. These companies are still seeing strong revenues because pricing is generally better on the internet and there are still lots of great deals at a time when consumers are becoming more price sensitive. 

Falling apple

There are fears it could be the beginning of the end for Apple's outperformance too. Most recently, Apple fell into bear market territory for the first time in several years this month. But Apple shares also saw a significant dip when the group announced its results in mid-July.

On the face of it, this is slightly baffling. Its results were still well within its guidance. Certainly, the company missed projections for revenue forecasts and its iPhone sales were not as strong, but it is still predicting £1bn in sales for the Apple Watch. 

Part of the problem is that Apple has been exceeding expectations for so long, an expectation that it will beat them all is now baked into the share price. One analyst suggested Apple shareholders had become 'spoilt' by the company constantly beating estimates. We believe it probably is the end of Apple's outperformance.

While there is good new user conversion within the US, outside the US, it is mostly a replacement cycle. In China, for example, Apple has been successful at getting the high end of the market, but we are sceptical about the extent to which it will make inroads further down the value chain. It has strong competitors in Xiaomi, a privately owned Chinese electronics company, and others.

Bad deals

Meanwhile, elsewhere in the tech sphere, Microsoft recently wrote down $7.6bn in connection with its Nokia deal as the reprioritisation of the business continues. This is more than the $7.2bn it paid for the phone group in the first place and confirms the view that this was one of the worst deals in corporate history. 

The premise on which the deal was done was fundamentally flawed and the consultants who dreamt it up were guilty of some woolly thinking.

Certainly, Nokia was the number two player in the phone business, but their analysis neglected to note that Apple makes 90% of the profits in the mobile phone business. The second largest player makes no money at all. This meant Microsoft spent its giant cash pile on a business that, in effect, has no return.