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Hong Kong defends its dollar peg in both directions

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THE Hong Kong dollar is one of the most and least manipulated monies in the world. For over 34 years the territory’s monetary authority, the HKMA, has kept it pegged to America’s currency at around HK$7.80 to the dollar, resisting all temptations to let it fall or rise. In 2005 it refined the peg with two promises: to buy dollars at the price of HK$7.75 and to sell them for HK$7.85.

The strength of the Hong Kong dollar has obliged the HKMA to keep the first promise many times since. Its purchases of American dollars have even drawn the accusation that it manipulates its currency for competitive advantage.

In fact, the HKMA has always been ready to manipulate its currency upwards, too. But since 2005 it has had no occasion to, until last week. On April 12th the Hong Kong dollar weakened to HK$7.85, forcing the authority to buy HK$51bn over the next few days in exchange for American dollars.

The Hong Kong dollar’s weakness reflects the gap between rising American interest rates and...Continue reading

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A Victorian survivor in fund management

WHEN the Foreign & Colonial Government Trust was launched in 1868, The Economist had its doubts. “The shape is very peculiar,” we worried, adding that “the exact idea upon which it starts has never been used before.” Some of the trust’s promises were “far too sanguine to ever be performed”. Nevertheless, we concluded that: “In our judgment, the idea is very good.”

That turned out to be one of this newspaper’s more successful forecasts. One hundred and fifty years later, the trust is still going strong, having delivered a compound annual return of 8.1%. It now looks after a portfolio of £3.5bn ($5bn), rather than the £588,000 it raised at launch.

In its own way, the trust is an example of how much the financial sector has changed—and how much it has stayed the same. The idea of a pooled portfolio seems commonplace now, but at the time it was revolutionary.

This was the 19th century, when Britain was confident of its worldwide role. The...Continue reading

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Six precepts every investor should remember

SIR ELTON JOHN has a three-year farewell tour planned. This columnist has only a few weeks to go, before heading off to a new Economist beat. So it seems like a good idea to summarise some of the themes which have dominated this blog. 

To start, long-term investing. Here are a set of precepts every investor should remember.

  1. You can't start too early. Albert Einstein may not have said that compound interest is the eighth wonder of the world but it is a good motto to remember. Buttonwood started a pension plan for his daughters when they were three years old. Let us assume a return of 4% a year. That means a sum doubles in 18 years, quadruples in 36 and rises eightfold in 54. Looked at another way, say you have a set sum in mind for retirement. If you start saving at 20, you need to contribute only half as much money a month, as if you start...Continue reading

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One person dies after an engine explodes on a Southwest flight in America

A SOUTHWEST AIRLINES flight became the stuff of nightmares on April 17th when a jet engine apparently exploded in mid-air and a passenger was partially sucked out of a window before being rescued by fellow flyers. The flight from New York’s LaGuardia airport was bound for Dallas, but at 11:30 am, when it was near Philadelphia, the left engine blew up, according to multiple reports. Details are still unconfirmed, but according to reports by passengers and media, a piece of shrapnel from the engine shattered a window in the cabin, and a woman was partially sucked out of the hole. Other passengers scrambled to assist and pulled her back in. Oxygen masks were released in the cabin, and the plane dropped from 32,500 feet at a rate of more than 3,000 feet per minute before levelling out at about 10,000 feet, according to NBC, a broadcaster. The pilots were able to...Continue reading

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One person dies after an engine explodes on a Southwest flight

A SOUTHWEST AIRLINES flight became the stuff of nightmares on April 17th when a jet engine apparently exploded in mid-air and a passenger was partially sucked out of a window before being rescued by fellow flyers. The flight from New York’s LaGuardia airport was bound for Dallas, but at 11:30am, when it was near Philadelphia, the left engine blew up, according to multiple reports. Details are still unconfirmed, but according to reports by passengers and media, a piece of shrapnel from the engine shattered a window in the cabin, and a woman was partially sucked out of the hole. Other passengers scrambled to assist and pulled her back in. Oxygen masks were released in the cabin, and the plane dropped from 32,500 feet at a rate of more than 3,000 feet per minute before levelling out at about 10,000 feet, according to NBC, a broadcaster. The pilots were able to make a safe landing at Philadelphia...Continue reading

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After a good run of growth, China’s economy braces for bumps

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JUST a few years ago Wuhan, a sprawling metropolis in the middle reaches of the Yangtze River, exemplified China’s economic woes. Municipal debt had soared. The most senior local official was known as “Mr Dig Up The City”, a reference to his zeal for grandiose construction projects. A movie theme park, intended as a landmark, closed after failing to draw crowds. It would take nearly a decade, it was estimated, to sell all of Wuhan’s vacant homes.

These days, the city of 11m stands as a monument to China’s resilience. Its economy has accelerated even as the government has controlled debt more strictly. Five subway lines were opened or extended in the past two years alone; they are jammed in rush hour. Investment is pouring into semiconductor production, biotech research and internet-security companies. The glut of unsold homes is almost cleared.

China’s economy, like Wuhan’s, is in much better shape than was the case in late 2015. Then, the country was reeling...Continue reading

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A plan to put beds on planes

Airbus recently announced that it has entered into a partnership with Zodiac Aeropsace, a French aviation-equipment company, to develop “lower-deck modules with passenger sleeping berths.” In other words, passengers in need of 40 winks might eventually be able to go below decks to the cargo hold and sleep in bunk beds. The video released by the companies shows a clean, white, modern, and comfortable-looking space, although one conspicuously devoid of windows.

Starting in 2020, Airbus says, the beds will be available on its widebody A330 planes, and could possibly appear on A350s as well. The sleeper modules will be easily swapped in and out, the company...Continue reading

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Japanese e-commerce giant Rakuten struggles to retake the lead from Amazon

RAKUTEN is a jack-of-all-trades. Since pioneering e-commerce in Japan in 1997, it has been a rare example of a highly entrepreneurial Japanese firm. Today it spans more than 70 businesses providing credit cards, a travel agency, a golf-reservation system, matchmaking, wedding planning and insurance. It owns Viber, a calling and messaging app and has invested heavily in Lyft, a car-hailing service. Now it is adding another: on April 9th the government gave Rakuten a concession to operate Japan’s fourth mobile network (Rakuten currently runs mobile services using another operator’s infrastructure).

Rakuten sees this as the next step in building its “ecosystem”. It reckons it retains its approximately 95m registered users in Japan by being a trusted brand that can provide customers with everything they need at every stage of their life, and by rewarding their loyalty. Customers get points if they use their popular Rakuten credit cards, for example. These they can then spend on other...Continue reading

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Kinder Morgan’s attempt to build a pipeline reflects badly on Canada

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ALMOST all Canada’s oil and gas is landlocked, so getting it to market requires pipelines—lots of them. But building them requires skills more suited to circus artists than engineers. They must walk the financial high wire, jump through ever-changing regulatory hoops and juggle conflicting demands from environmental groups and numerous governments. The list of failures is long. It includes Northern Gateway, meant to bring Alberta crude to a port in northwestern British Columbia; Energy East, which would have linked Alberta to the Atlantic coast; Pacific Northwest, to bring gas to the west coast; and the legendary Mackenzie Valley gas pipeline, first proposed in 1974 and dropped in 2017 by its last, exhausted promoter.

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Upstart meal-kit companies may need a new recipe for growth

FOR all the allure of televised fare like “MasterChef” and “Chef’s Table”, the reality is that many people are loth to rustle up anything more taxing than a bacon sandwich. Cue the recent emergence of more than 150 companies to make cooking easier. Two of the largest, Blue Apron in America and Germany’s HelloFresh, deliver boxes of pre-portioned ingredients and easy-to-follow recipes to doorsteps worldwide for a fee of around $60 a week.

Blue Apron is also serving up a belly full of woe to investors. Less than a year after it went public in June with a $1.9bn valuation, its share price has fallen by 80%. Although the shares of HelloFresh, which debuted on Frankfurt’s stock exchange in November, have risen by 24%, analysts are concerned that both services may fall prey to competition not from rival startups, but from big grocers.

Supermarkets have gobbled up the meal-kit idea and made it their own. Instead of enrolling customers in a weekly menu of meals, these companies offer...Continue reading

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