Key events
UK government cuts stake in NatWest
In the UK, the government has cut the taxpayer’s stake in NatWest bank, which it bought in the financial crisis.
NatWest has agreed to buy around 469m shares from HM Treasury at a price of 268.4p per share – the price at which they closed on Friday night.
This will cost £1.3bn, and reduce government’s stake in NatWest to 38.69% from around 41% today.
NatWest’s CEO, Alison Rose says the deal “demonstrates positive progress” on the bank’s strategic priorities and the path to privatisation.
Rose adds:
NatWest Group’s robust balance sheet and capital generation allow us to continue lending responsibly and supporting the customers and communities we serve whilst delivering sustainable returns to our shareholders, including the government.”
At its peak in 2009, the UK government owned 84% of NatWest – which was previously called Royal Bank of Scotland before a post-crash rebrand.
Victoria Scholar, head of investment at interactive investor, explains:
Last month the government announced a two-year extension to its trading plan. The Treasury is aiming to return NatWest to private ownership by 2025-2026 while attempting to ‘achieve the best value for the taxpayer’.
In April, the government’s shareholding stood at 42%, down from a peak of 84%, falling further again this week.
Shares in NatWest have struggled this year, caught up in the banking sector turmoil with the collapse of SVB and the rescue deal for Credit Suisse. However, with shares up almost 15% year-on-year to Friday’s close, the government clearly decided that now is a good moment to sell some shares.
Jefferies analysts expected limited impact on Micron, though.
They argue that its major customers in China are consumer electronics firms such as smartphone and computer manufacturers, not infrastructure suppliers.
In a research note, Jefferies say:
“Since Micron’s DRAM and NAND products are much less in servers, we believe most of its revenue in China is not generated from telcos and the government.
Therefore, the ultimate impact on Micron will be quite limited.”
It generated $5.2bn of revenue from China including $1.7bn from Hong Kong last year, about 16% of its total revenue, according to Jefferies.
The announcement that Micron had failed China’s security review helped to boost shares in some local chipmaking-related firms on Monday
State media reported that domestic players could benefit from the move.
Shares in Ingenic Semiconductor,a fabless semiconductor company based in Beijing, are up 2.5% in late trading, while Shenzhen Kaifa, which designs, tests and manufacturers semiconductors, are 2% higher.
Some of Micron’s major rivals also saw their shares gain. SK Hynix are up 0.8%, although Samsung Electronics dipped back after an early rally.
Shares in Chinese chip-related stocks had also jumped in April when Beijing launched the probe into Micron.
Bernstein analysts said in a note that:
“As China’s domestic memory suppliers are not competitive in technologies and capacity, China would need to resort to Samsung, SK Hynix, Kioxia, Western Digital or other foreign suppliers as the alternative to Micron.
Beijing’s move against Micron brings fresh uncertainty to the other US chipmakers that sell to China, the world’s biggest market for semiconductors.
Holden Triplett, founder of Trenchcoat Advisors and a former FBI counterintelligence official in Beijing, says (via Bloomberg):
“No one should understand this decision by CAC as anything but retaliation for the US’s export controls on semiconductors.
“No foreign business operating in China should be deceived by this subterfuge. These are political actions pure and simple, and any business could be the next one to be made an example of.”
Introduction: China bars Micron chips in escalation of tech clash with US
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Tensions between Washington and Beijing are rising after China announced that products made by US chipmaker Micron Technology have failed to pass a cybersecurity review.
China’s government told users of sensitive computer equipment they must stop buying products from Micron, the biggest US memory chipmaker.
Micron, China says, had failed a network security review announced last month, meaning operators of key infrastructure are now barred from buying from the company.
Announcing the move, the Cyberspace Administration of China (CAC) said:
The review found that Micron’s products have serious network security risks, which pose significant security risks to China’s critical information infrastructure supply chain, affecting China’s national security.
The decision could include sectors ranging from telecoms to transport and finance, according to China’s broad definition of critical information infrastructure.
Micron, which is headquartered in Boise, Idaho, makes products including DRAM chips, flash memory, and solid state hard drives. through its Crucial, Ballistix Gaming and SpecTek brands.
The move escalates the ongoing US-China row over technology and security. Last November, the Biden administration banned approvals of new telecommunications equipment from China’s Huawei Technologies and ZTE, saying they posed “an unacceptable risk” to U.S. national security.
A spokesperson from the US Commerce Department has criticised China’s move, saying:
“We firmly oppose restrictions that have no basis in fact,”
“This action, along with recent raids and targeting of other American firms, is inconsistent with [China’s] assertions that it is opening its markets and committed to a transparent regulatory framework.”
Shares in some rival chipmakers rose on the news (more on that shortly…).
The Micron ban came as G7 leaders, who met in Hiroshima last weekend, announced they want to de-risk from China, rather than decouple.
Joe Biden explained:
“That means taking steps to diversify our supply chains.”
Rishi Sunak went further, saying China poses the biggest challenge to global security and prosperity of our age.
The UK PM warned that China has the “means and intent to reshape the world order”, and that G7 leaders had shown “unity and resolve” in confronting the problems posed by Beijing.
The agenda
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10am BST: Eurozone construction output for March
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2pm BST: Bank of Israel interest rate decision
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3pm BST: Eurozone consumer confidence flash estimate for May
