19/09/2024

BIZ & FINANCE THURSDAY | SEP 19, 2024

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US delays decision on Nippon Steel deal

Dalio, GIC chief cautious on global outlook SINGAPORE: Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, and Lim Chow Kiat, the boss of Singapore’s sovereign wealth fund GIC, are increasingly cautious on the year ahead due to political risk and uncertain global growth prospects. However, both said yesterday they remained committed to investing in China, despite challenges such as rising debt problems and geopolitical tension. Dalio said geopolitical issues and the cost of climate change and its implications for financial markets were among factors that could create negative risks for global investors in the next year. “The surprises are more on the downside than the upside,”Dalio said at the Milken Institute Asia Summit 2024 in Singapore. Dalio said despite the US having a lot of positives, there is a risk around an orderly transition of power. Lim said GIC has to be more selective in terms of finding investment opportunities rather than making wholesale big market allocations. “It (the market) has priced in a soft landing, which is wonderful. It also has priced in significant growth coming from the tech sector, so to that extent we will be a bit more cautious,” Lim said, referring to the US, its single largest country exposure at 39% of its portfolio. The US will remain a key market for GIC regardless of the outcome of the upcoming election, Lim said, adding the country has a huge private sector with“a lot of good assets for us to be investing in”. Lim said GIC continues to invest in China, though deal flows have been “extremely slow”. “This may take a while for things to work through, but certainly as the second largest economy in the world with great entrepreneurs, it is a place that we cannot miss out.” – Reuters Microsoft-BlackRock team to raise US$100b for AI data centres SAN FRANCISCO: Microsoft and investment powerhouse BlackRock on Tuesday said they have teamed up to raise as much as US$100 billion (RM424 billion) for data centres and infrastructure to power artificial intelligence. The alliance includes Global Infrastructure Partners and the advanced technology investment firm MGX, created in Abu Dhabi this year, according to a joint release. “We are committed to ensuring AI helps advance innovation and drives growth across every sector of the economy,”said Microsoft CEO Satya Nadella. “The Global AI Infrastructure Investment Partnership will help us deliver on this vision.” Microsoft has invested heavily in artificial intelligence, including pouring more than US$10 billion into ChatGPT-maker OpenAI. “The capital spending needed for AI infrastructure and the new energy to power it goes beyond what any single company or government can finance,”said Microsoft president Brad Smith. The partnership will initially seek US$30 billion of private equity capital from investors, looking to ramp up that amount as high as US$100 billion including debt financing, according to the companies. Investments in expanding or building data centres and creating new sources of power for them will be mostly focused in the United States, with the remainder made in US partner countries, according to the group. Nvidia will support the partnership with expertise, and Microsoft will provide technical advice along with funding, the release said. “Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution,” Nvidia CEO Jensen Huang said in the release. – AFP

both countries,” deputy chief Cabinet secretary Hiroshi Moriya told reporters yesterday. CFIUS is concerned Nippon Steel’s merger could hurt the supply of steel needed for critical transportation, construction and agriculture projects, it said in its August letter to the companies, exclusively obtained by Reuters. It also cited a global glut of cheap Chinese steel, and said that under Nippon, a Japanese company, US Steel would be less likely to seek tariffs on foreign steel importers. It added that decisions by Nippon could “lead to a reduction in domestic steel production capacity”. In a 100-page response letter to CFIUS, also exclusively obtained by Reuters, Nippon Steel said it will invest billions of dollars in US Steel facilities that otherwise would have been idled, “indisputably” allowing it to “maintain and potentially increase domestic steelmaking capacity in the United States”. The company also reaffirmed a promise not to transfer any US Steel production capacity or jobs outside America and would not interfere in any of US Steel’s decisions on trade matters, including decisions to pursue trade measures under United States law against unfair trade practices. The deal, Nippon added, would “create a stronger global competitor to China grounded in the close relationship between the United States and Japan”. Robust CFIUS reviews take 90 days but it is common for companies to withdraw their filings and resubmit them to give them more time to address the panel’s concerns. – Reuters In a filing with the Securities and Exchange Commission, Alaska said that subject to some remaining conditions, “Alaska and Hawaiian expect to consummate the merger on or about Sept 18, 2024”. Alaska Airlines added in a statement that the commitments it agreed to align with plans it announced when it signed the transaction. The combined airline is expected to have a fleet of over 360 aircraft, servicing nearly 140 destinations. Based in Seattle, Alaska Airlines mainly serves the western United States. – AFP

pushes the decision past the election in November,” said Nick Klein, a CFIUS lawyer with DLA Piper. The deal has become a political hot potato. This month, Vice-President Kamala Harris, the Democratic presidential nominee, said at a rally in Pennsylvania, the swing state where US Steel is headquartered, that she wants the firm to remain “American owned and operated”, echoing a view held by President Joe Biden. The White House reiterated that position on Tuesday. Harris’ Republican rival Donald Trump has pledged to block the deal if elected. Both candidates have sought to woo union votes. Postponing the decision to after the US elections will “dial down” the political temperature but does not guarantee approval, said David Boling, a former US trade official who is now an analyst at Eurasia Group. “Regardless of the CFIUS review, Nippon Steel still must reach an agreement with the United Steelworkers. Without that, it’s very hard to see this deal happening.” The United Steelworkers Union, which vehemently opposes the deal, said on Tuesday “nothing has changed regarding the risks that Nippon’s acquisition would pose to national security or the critical supply chain concerns that have already been identified”. The deal is being closely watched in Japan, a close US ally and its biggest foreign investor. “Further strengthening economic relations, including expanding mutual investment between Japan and the US are essential for States, and ensure competitive access at the Honolulu hub airport. “We have secured binding protections that maintain critical flight services for communities, ensure smaller airlines can access the Honolulu hub airport, lower costs for families and service members, and preserve the value of rewards miles against devaluation,” Transportation Secretary Pete Buttigieg said in a statement. “This more proactive approach to merger review marks a new chapter of DOT’s work to stand up for passengers and promote a fairer aviation sector in America.”

WASHINGTON: The American national security panel reviewing Nippon Steel’s US$14.9 billion (RM63 billion) bid for US Steel let the companies refile their application for approval of the deal, a person familiar with the matter said, delaying a decision on the politically sensitive merger until after the Nov 5 presidential election. The move offers a ray of hope for the companies, whose proposed tie-up appeared set to be blocked when the Committee on Foreign Investment in the United States (CFIUS) alleged on Aug 31 the transaction posed a risk to national security by threatening the steel supply chain for critical US industries CFIUS needs more time to understand the deal’s impact on national security and engage with the parties, the person said on Tuesday. Refiling sets a new 90-day clock to review the proposed tie-up and make a decision. The review was expected to take close to the full 90 days, another person familiar with the matter said. Nippon Steel declined to comment while CFIUS and US Steel did not immediately respond to requests for comment from Reuters. “Extending the timeline takes some pressure off the parties and, importantly, o National security panel extends review timeline to after presidential election NEW YORK: Alaska Airlines won regulatory approval on Tuesday for its US$1.9 billion (RM8 billion) purchase of Hawaiian Airlines, under the condition it maintains the value of loyalty points and keeps servicing key routes. The two US airlines announced the deal in December 2023 but has since needed to undergo federal regulatory approval. In giving the green light on Tuesday, the US Department of Transportation (DOT) said both airlines have to “protect the value of rewards” customers have earned, maintain services on key Hawaiian routes to the continental United

Alaska-Hawaiian airlines merger wins regulatory approval

An Alaska Airlines aircraft flying past the tail of a United Airlines aircraft as it lands at Reagan National Airport in Virginia. – REUTERSPIC