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Daily briefing - 02 September 2019


Daily we write stories that essentially come down to one thing: a maturity mismatch.
P2P lending is a great idea, and many P2P lending platforms have succeeded. Many others have gone down in flames, including now Laocaibao, the Chinese P2P lender run by Dai Zhikang, chairman of Zendai Group. Zendai's lending platform ceased operating in mid-August, leading retail investors to gather outside the company's offices in Shanghai in the faint hope of getting their money back. It wasn't even a bank run: call it a fintech run. Mr Zhikang handed himself in to police this week, two weeks after the company collapsed amid charges of illegal fundraising and embezzled funds. "Losses -- in some cases amounting to billions of dollars -- have led to protests by ordinary people that have verged on mass unrest. Last year, two sporting stadiums in the city of Hangzhou, where many P2P companies are based, were converted into makeshift petition centres in order to handle the volume of complaints against online lenders. A number of business leaders in the P2P industry have fled China or vanished this year, while many others have been detained."

How desperate is Dubai for money? Bloomberg this morning trumpets the news that Dubai's biggest bank Emirates NBD is "raising the cap on foreign ownership" from five to 20 percent. The bank said it will also go to shareholders to approve a doubling of that limit to 40 percent. The wave of banking mergers in the UAE has been dressed up locally as a way to strengthen the financial industry but no one believes that, probably not even the expensive consultants and bankers who are giving this advice. Dubai's world-beating new airport is being quietly mothballed and businesses are shutting up shop as property prices continue to tank. Soon to be former billionaires are fleeing the country. Chief executive of Nomura Asset Management Dubai, Tarek Fadlallah, told Bloomberg: "Having foreign investors is great for local companies because it really raises the bar in terms of the requirements for transparency, for corporate governance, for profitability." Foreign investors might care to look at who owns the rest of Emirates NBD: the UAE government has a 55 percent share. (So there's little chance that the shareholders will turn down the bank's request to raise foreign ownership to 40 percent.) And, as per Mr Fadlallah's comment, having foreign investors is great indeed, but in this case completely unlikely, at least while all the smart money is flowing in the other direction.

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