When war divides the family

Good morning dear readers,

Have you and your relatives experienced something similar to what I did in the past three days? The presents had been unwrapped and the raclette had been eaten when the conversation turned to the war in Ukraine. Now, for the first time, I personally heard those positions that I had previously only known from the darker corners of social media:

  • “One party is never solely to blame for a war.”
  • “Ukraine also committed war crimes in Donbass.”
  • “Western arms shipments only prolong the suffering on both sides.”

I was shocked and countered with all the arguments that you, the reader of this morning briefing, should be familiar with. We didn’t convince each other that Christmas Eve. But at least we got up from the table after two hours of debate without falling out. No small feat when it comes to conflict management.

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Even on Christmas Day, the Russian attacks did not abate. If you want to catch up on the military and diplomatic situation after the holidays (and hopefully trust us more than the relevant Telegram channels), I recommend the constantly updated Handelsblatt Ukraine blog.

Oil production plant in Russia: The heavy dependence on raw material exports is a danger for the Russian economy.

(Photo: IMAGO/ITAR-TASS)

I find the results of the economic sanctions against Russia to date rather sobering: The International Monetary Fund (IMF) estimates that Russian economic output will have fallen by 3.4 percent in 2022. It’s a severe recession, but it doesn’t mean the country’s full economic collapse that Western optimists predicted after the initial sanctions packages.

Many economists are now assuming that the decline may not be as sudden as initially assumed, but will last longer. The IMF forecasts that Russian economic output will fall by a further 2.3 percent in 2023. The World Bank even sees a decline of 3.6 percent. The Russian central bank assumes that the gross domestic product will fall by one to four percent.

The causes are not only the Western sanctions, but also the men drafted into the army whose manpower is lacking in the Russian economy.

Since the outbreak of the corona pandemic three years ago, hardly any business people or tourists have traveled to China – the entry and quarantine conditions have been too deterrent so far. Now the reversal in Chinese corona policy is also affecting travel rules: From January 8, people entering the country would no longer have to quarantine, China’s National Health Commission said on Monday. So far, five days of quarantine in a state-controlled facility and three more days of isolation at home have been mandatory. In addition, the issuing of visas for business travelers will be made easier, it said. However, travelers entering China must still undergo a PCR test 48 hours before departure.

Whether stock prices rise or fall, a trend never seems to change: Measured in terms of market capitalization, the dominance of US corporations continues to increase. So also this year. According to Handelsblatt calculations at the end of the year, 62 of the top 100 largest companies in the world in terms of stock market value are US companies – more than they have been for a good five decades. With a value of the equivalent of two trillion euros, Apple remains the most valuable company. It is followed by Microsoft and the state oil company Saudi Aramco from Saudi Arabia.

With SAP in 91st place, Germany has only one company among the top 100 for the first time. Siemens did not make it into the ranking. The Dax title Linde improved by 18 places to rank 59. But since the merger with Praxair, Linde has had its headquarters in Ireland.

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Another novelty: In view of the large price losses in 2022, especially in the IT industry, the US stocks among the top 100 are no longer overvalued, but are now even cheaper than the European stocks in terms of the ratio of share price to earnings.

Why are German companies in particular falling further and further behind in terms of market value? In addition to two obvious factors (company size and future viability of the business model), Handelsblatt stock expert Ulf Sommer identified another indicator: the return on sales. 73 companies in the top 100 will achieve double-digit net profit margins in 2022. With these companies, ten or more percent of net profit is left over from sales. Only a handful of companies in the Dax 40 operate so profitably. At the top, Apple generates a net return on sales of 25.3 percent. Colleague Sommer’s conclusion: “The high margins impressively reflect how important profitability is for investors and thus for the stock market value.”

Globalization is under pressure. Free trade, the guarantor of our prosperity, has a hard time against the siren songs of protectionism. The news that reached us over the Christmas period from South Korea was all the more encouraging: As reported by “Spiegel”, the country has lifted its import ban on sex dolls.

South Korean customs have repeatedly confiscated such dolls under a rule prohibiting the import of goods that “harm the country’s fine traditions and public morals.” Importers had complained about this several times and won the law in court.

I wish you a good start in the days between the years, no matter what beautiful traditions you spend this time with.

Best regards

you

Christian Rickens

Editor-in-Chief Handelsblatt

PS: At this point, I and the Morning Briefing team would like to thank you for the numerous letters this year. Even if I unfortunately no longer have the time to answer every email personally – I promise that I will continue to read them all very carefully.

At the end of 2022, we are interested in how you view the coming year: Which topics will be decisive – for Germany, the economy and for you personally? What challenges do German companies have to face, what opportunities are there? How will the stock markets fare? Write us your opinion in five sentences [email protected]. We will publish selected articles with attribution on Thursday in print and online.

Morning Briefing: Alexa

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