Hi all — James here. These are critical days for the future of Hong Kong, with everyone scrabbling to understand the implications of the new national security law imposed by China. Our scoop this week (The Big Story) looks at the squeeze upon big US tech companies that run cloud services in the territory. The take-home message seems to be: agree to surrender client data to authorities or move cloud services offshore.

Elsewhere, it has been a big week for Huawei in the UK — and not in a good way (Mercedes’ Top 10). Meanwhile, India’s ban on 59 Chinese mobile apps has driven a surge of traffic towards domestic alternatives (Best of Comment). For a counterintuitive read, check out the positive impact of Covid-19 on some tech share prices (Smart Data). And for a treat, try John Thornhill’s piece on why digital nomads are migrating to Estonia (Mercedes’ Top 10). Take care, as ever; until next week.

The Big Story — Exclusive

Big US tech companies are at loggerheads with Hong Kong’s financial regulator. Google, Amazon Web Services and Microsoft are refusing to agree to a proposal that would involve handing over customers’ banking records, a stance that may force them to move data centres out of the territory.

This exclusive report in the Financial Times says Beijing’s imposition of the new national security law for Hong Kong has hardened opposition among the US tech giants to the handing over of personal data to the Securities and Futures Commission.

Key implications: The SFC’s demands for access to banking data stored by tech companies’ cloud servers have been in place since last year. But the new law has made acceding to the SFC’s dictates “politically impossible”, one insider said.

Under the new law, tech company executives could face fines and even jail terms if they do not comply with orders to co-operate. If big tech companies cannot live with this — because of client privacy concerns — they may have to leave Hong Kong.

Upshot: The issue has broad implications. Many companies from several industries store customer data in Hong Kong-based servers. The new law jeopardises the privacy of all that data, potentially causing a mass relocation of data storage out of Hong Kong.

Mercedes’ top 10

  1. Huawei has learnt its fate in the UK, with the government announcing it would be banned from supplying new equipment for 5G networks after December 31 and its existing equipment stripped from the next-generation mobile infrastructure by 2027.

  2. Two months after Masayoshi Son suggested that he was misunderstood like Jesus Christ, the founder of Japan’s SoftBank has performed at least one miracle: resurrecting its share price. Catch the FT’s exclusive interview with SoftBank executive Marcelo Claure here.

  3. Staying with SoftBank, this rare opinion piece by its finance chief Yoshimitsu Goto seeks to demystify the group’s balance sheet.

  4. Facebook and Sony are going all in on gaming devices. Facebook’s Oculus, the market leader for virtual reality headsets, is eyeing growth of 50 per cent on a year ago, while Sony has nearly doubled production orders for its upcoming PlayStation 5.

  5. When Japan kicked off the 5G race in March, it was expected to ignite the market. Take-up has been slow, however, so wireless carriers including KDDI are getting inventive with some low-cost options for cash-strapped small businesses and local governments.

  6. China is looking at testing its digital currency with the country’s food delivery companies including Meituan-Dianping, according to a Bloomberg report.

  7. Chinese autonomous driving start-up WeRide has begun testing driverless vehicles on the open road, a milestone previously only reached by Google’s Waymo in the US.

  8. Lenovo is betting that PC makers will benefit from the global shift to working and studying from home, estimating a 30 per cent increase in the total available market. This week the Chinese group unveiled a PC with a foldable screen and detachable keyboard. It’s called the ThinkPad X1 Fold.

  9. Fancy working as a graphic artist on a beach in Bali, sipping daiquiris while emailing Los Angeles? John Thornhill explains how new rules in Estonia can make the dreams of digital nomads a reality.

  10. Tuna sashimi anyone? Japan’s Dentsu has come up with an app that assesses the quality of tuna for commercial buyers who find it difficult to visit suppliers abroad due to coronavirus.

When sages speak

  • This is an insightful summary by Casey Newton of the predicament TikTok finds itself in, wedged between China’s increasingly extraterritorial regulatory reach and the company’s big markets in the US and elsewhere.

  • In case you missed it, here is James’s LinkedIn Live conversation with Dan Wang, China tech expert at Gavekal Dragonomics. Dan offers some fascinating perspectives on whether the US and China are in a “cold war” and what to expect as tensions rise.

Best of comment

Soon after India announced it was banning 59 popular Chinese mobile phone apps, a local venture capitalist noticed a sharp rise in traffic to a number of Indian alternatives he had backed. “I never before realised the extent to which big tech stifles innovation and young start-ups,” he said.

Among the biggest beneficiaries of the ban have been Indian equivalents that compete with TikTok, the wildly popular short-video app owned by ByteDance that had about 270m viewers in India. These include Glance, which describes itself as the largest “made in India” content platform. A presentation describes its mission as “taking on the big giants from the US and China”. 

Naveen Tewari, who owns Glance, said the company reached 100m daily active users in “probably the fastest ever” time after the ban was announced. Other investors describe user numbers that went from a few 100,000 to tens of millions in 48 hours for some apps, thanks to the sudden void left by the departure of TikTok and other Chinese competitors.

Read the full story from Henny Sender, FT international finance correspondent, here.

Art of the deal

  • Walmart is leading a $1.2bn funding round into its Indian ecommerce service Flipkart as it faces challenges from the coronavirus pandemic and the entrance of rival platform JioMart.

  • Trax, the Singapore-headquartered retail tech unicorn, is looking into a US listing. The start-up, valued at close to $1.3bn in 2019, installs cameras on shop shelves to monitor how goods are placed, while its customer-facing apps help retailers understand how they react to prices and promotions.

  • Wavemaker Partners has closed its third south-east Asia fund at $111m, with backers including Concentric Equity Partners, Temasek, International Finance Corporation and Vulcan Capital.

  • Qualcomm has become the latest high-profile backer of India’s Reliance Jio Platforms, which has raised more than $15.7bn in the past 12 weeks from many investors. Qualcomm invested $97m for a 0.15 per cent equity stake.

  • Sony has bought a $250m stake — about 1.4 per cent — in the company behind Fortnite, as the Japanese group prepares for the launch of its PlayStation 5.

  • Flipkart, which competes with Amazon in India, has invested $35m in apparel group Arvind Fashions. The investment comes at a time when both Flipkart and Amazon have been expanding their private labels’ ecosystems in India.

  • Thailand's leading microchip designer, Silicon Craft Technology, has announced its plan to list on the country’s stock exchange. Chief executive Manop Dhamsirianunt said the IPO funds will be used in research and development on its core products including radio frequency identification chips.

Spotlight

Silicon Valley companies are jostling for a position in India, just as China tech is forced to retreat. Sundar Pichai, chief executive at Google and its parent company Alphabet, is the latest Big Tech boss attempting to position his company in one of the one of the world’s fastest-growing internet markets.

Google is planning to invest $10bn in India, naming this vague spending promise the “India Digitization Fund”. The pledge did not include specific details and was said to apply to the next “five to seven years”.

Google’s plan comes three months after rival Facebook invested $5.7bn in Jio Platforms, the fast-growing Indian telecoms company that has launched a series of digital services. Jeff Bezos, Amazon’s chief executive, also travelled to the country earlier this year to promise $1bn in investment and to support $10bn of Indian export sales over the next five years.

Smart data

Change in rankings by market capitalisation

Check out this chart on the titanic shifts in companies’ valuations during the coronavirus crisis. Nikkei studied data from QUICK FactSet and calculated the change in market cap rankings for the top 1,000 companies over the first six months of 2020. In tech, notice the rise of Tesla compared with Toyota, and the leap in China’s Meituan-Dianping compared with Alibaba. In semiconductors, Nvidia has surged up the rankings compared with a plateauing Intel. Elsewhere, the market cap of Sea Group, a south-east Asia gaming and ecommerce company listed on the New York Stock Exchange, now exceeds $57bn, making it the biggest company in the region.

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