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Good morning from the Financial Times.
Today is Wednesday, October 8th, and this is your FT News Briefing.
First Brand's bankruptcy is hitting a big European lender and the electric vehicle revolution might be slowing down.
Plus, investors are snapping up stocks and bonds across emerging markets.
I'm Mark Filippino, and here's the news you need to start your day.
Switzerland's largest bank is caught up in the first brand's drama.
There's a UBS fund that has 30% of its portfolio tied to the American Auto Parts Group.
Now to drill down on that a bit.
This is UBS O'Connor, a private credit and commodity specialist owned by the Swiss bank.
Clients are bracing for big losses from the fund related to first brands.
It went bankrupt last week.
Bankruptcy filings show that all in all, UBS has more than 500 million worth of exposure to first brands.
UBS is just one of many investors to be hurt by the implosion of the Ohio based industrial business.
Some of the biggest names on Wall Street, such as Blackstone, were also hit.
It looks like gas is back in fashion.
U.S. carmakers in particular are refocusing on petrol and hybrid vehicles.
Maybe not a huge surprise there, but companies in Europe, Japan and South Korea are also postponing their electric vehicle plans.
My colleague Kana Inagaki has been following Petro's resurgence.
Hi, Kana.
Hi.
Okay, so Kana, remind me, what was driving the push to EVs in the first place?
Yeah, so I think one of the biggest drivers, obviously, the regulatory environment globally.
You know, the rules were the strictest in Europe, but there were also rules to reduce greenhouse gas emissions in the US as well.
So that kind of forced carmakers to invest heavily in electric vehicles.
You know there was progress made in terms of battery costs and also the battery technology as well, you know, which raised hopes that electric vehicles would become as attractive as patrol vehicles for consumers.
And why are they shifting back now?
How do car makers feel about the shift?
So the biggest driver of this shift back towards petrol, but also hybrid vehicles as well, is the big change in Donald Trump's policy.
He's known for his anti-electric vehicle policies and he's ended the very generous credits for EV purchases also in September.
There's an industry-wide recognition that, even though sales of electric vehicles are rising, the pace of that rise has not been as fast as people expected.
And so a lot of carmakers in Europe are also calling for a bit more flexibility.
And the truth is, you know, carmakers are excited by the revival of petrol.
I mean Ford's chief executive, Jim Farley, has called this, you know, a multi-billion dollar opportunity.
Other carmakers may not be as vocal as Ford, but I think it is true that many carmakers are relieved that there is a longer life for the internal combustion engine.
So it sounds like this is a pretty global phenomenon.
Are there any exceptions?
Yes.
So the obvious exception is China, where the sales of electric vehicles have surged.
There's also increasing popularity of plug-in hybrids as well.
Prices of electric vehicles in China have come down as well.
So consumers also find it quite attractive to buy electric vehicles as opposed to, you know, patrol vehicles.
And the price parity there is, you know, shrinking quite rapidly.
Is there any concerns by the fact that Western carmakers are ceding ground to China on the electric vehicle front?
So the biggest worry, I think, for the industry is that as companies refocus their efforts into expanding the patrol and hybrid lineup in markets like the US, you know, Chinese players will keep on advancing in electric vehicle technology and also in terms of advanced software that are installed in electric vehicles.
And so that technology gap between the Chinese rivals such as BYD and the other Western legacy carmakers will expand.
And to be fair, the carmakers are not giving up investing in electric vehicles.
They are still going to invest heavily, and they have already invested heavily.
So that's not going to change.
It's a question of doing both.
That is my question.
And I'm curious to know whether or not this pivot back towards petrol sends mixed signals to consumers.
I think it is extremely complex.
And I think a lot of companies call this strategy the multi-energy sort of strategy.
Companies like Toyota and BMW have often argued that.
You know, I think those companies that are able to have this kind of flexibility will probably be stronger in this kind of era where it's very difficult to predict which way the consumers will go to and the pace of the transition is going to be very difficult to predict.
I mean those who have, you know, made a radical pivot, like Porsche, are suffering now because they now have to move back to, you know, providing various options.
Those that already do have that kind of flexibility are able to navigate this complex environment.
Kana Inagaki is the FT's industry editor.
Thanks so much, Kana.
Thanks so much.
International investors are returning to China's startup scene.
Now they're not rushing back in, but a few small venture capital fundraisings show that investors are cautiously willing to give China another shot.
Sources tell the FT that several of the top VC funds were close to raising a little more than a billion in total dollar-denominated funds this year.
Now, to put this into perspective, these numbers are still modest compared to previous years.
Investors have been skeptical about China because of its tech crackdown and US rules restricting American investment in AI.
But there are signs that conditions in China are starting to thaw.
President Xi Jinping held a high-profile meeting with entrepreneurs in February.
Plus, the Hong Kong stock market is booming.
Emerging market stocks are enjoying their biggest rally in 15 years.
This is thanks to a combination of a sliding dollar and bargain valuations.
To talk about this, I'm joined by Joseph Cotterill, who writes about emerging markets for the FT.
Hi, Joseph.
Hi, Mark.
So just put this into context for us.
Just how big is the rally compared to advanced markets?
So the S&P 500 US index is up 15% year to date.
The MSCI Emerging Markets Benchmark, which is a dollar index of 24 large emerging markets, is up about 28.
It's not just emerging stock markets.
It's also the local currency bonds of these countries as well.
And a JP Morgan index of these debts is up about 15%.
This is coming after a lost decade or more where they were really overshadowed by US markets.
Now, which EM countries are we talking about here?
Which have been most attractive to bond investors?
It's important to remember, first of all, that for all of these countries, more or less the most important factor has been the weaker dollar.
So that's made emerging market stocks and bonds much more attractive in dollar terms.
But what is driving the local currency bond trade in particular is something called real yields.
So when you look at high interest rates in countries such as Brazil and South Africa, subtract their inflation rates from that, the so-called real terms yield is quite high compared to US treasuries or other developed market government debts.
Brazil is a good example.
Local interest rates in Brazil are about 15%.
And that is because the central bank there has been very cautious about inflation.
So they've been reluctant to massively cut rates.
And that has created a real yield that's quite high.
Are there other factors driving this emerging markets comeback?
Just like in developed stock markets, AI and tech has become quite a large part of benchmarks.
In that MSCI benchmark that I mentioned at the beginning, fully 11 of that index by weight is one stock.
That is Taiwan Semiconductor Manufacturing Company, which is probably better known these days for supplying NVIDIA with lots of chips.
However, if you were to invest in the benchmark as a whole, a tenth of your investment would be that one company.
That reflects the AI frenzy that's going through markets, but it also reflects the concerns many have, which is is this a bubble?
So, in that sense, whether you're investing in DEM or EM, you are grappling with the same issues around AI.
Now Joe, I know it's hard to predict these sort of things, but can we expect this rally to continue?
I mean what would need to happen for emerging markets to keep up the pace that they're on right now.
Emerging market stocks, compared to the US, are relatively cheap when you look at their price as a multiple of earnings.
It's about 14 times for that MSCI benchmark compared to 22, 23 times for the S&P 500.
So that cheapness might mean the rally continues.
However, we also have to bear in mind a really important variable in emerging markets this year has been the weakening dollar.
It's weakened at the fastest pace since the 1980s.
Can that continue into 2026?
We don't know.
That will be up to decisions in Washington.
Joseph Cotterill is the FT's Emerging Markets Correspondent.
Thanks so much, Joseph.
Thank you very much, Mark.
The latest episode of The Next Five podcast is all about the future-looking CFO.
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