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Retailers lose love for Asia: Snarled supply chains force manufacturing exodus to Balkans, LatAm

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November 9, 2021

By Siddharth Cavale and Corina Pons

(Reuters) – Major clothing and shoe companies are moving production to countries closer to their U.S. and European stores, smarting from a resurgence in cases of the Delta variant of the coronavirus in Vietnam and China that slowed or shut down production for several weeks earlier this year.

The disclosures come amid a massive shipping logjam that is driving up costs and forcing companies to rethink their globe-spanning supply chains and low-cost manufacturing hubs in Asia..

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The latest example is Spanish fashion retailer Mango, which told Reuters on Friday it has “accelerated” its process of increasing local production in countries such as Turkey, Morocco and Portugal. In 2019, the company largely sourced its products from China and Vietnam. Mango told Reuters that it would “considerably” expand the number of units manufactured locally in Europe in 2022.

Similarly, U.S. shoe retailer Steve Madden on Wednesday said it had pulled back production in Vietnam and had shifted 50% of its footwear production to Brazil and Mexico from China, while Rubber clogs maker Crocs said last month it was moving production to countries including Indonesia and Bosnia.

Bulgaria, Ukraine, Romania, the Czech Republic, Morocco and Turkey were some of the countries drawing new interest from clothing and shoe producers, though China continues to produce a large share of the apparel for U.S. and European clothing chains.

“We are seeing a lot of growth in freight and trucking activity in the former Soviet Republics … a big rise in Hungary and Romania,” said Barry Conlon, chief executive of Overhaul, a supply chain risk management firm.

In Turkey, apparel exports are expected to reach $20 billion this year, an all-time high, driven by a spike in orders from the European Union, Turkey’s Union of Chambers Clothing and Garment Council data showed. In 2020, exports totaled $17 billion.

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In Bosnia & Herzegovina, exports of textiles, leather and footwear amounted to 739.56 million marka ($436.65 million) in the first half of 2021, which was higher than for all of 2020.

“Many companies from the European Union, which is our most important trading partner, are looking for new suppliers and new supply chains in the Balkan market,” said Professor Muris Pozderac, secretary of the association of textile, clothing, leather and footwear in Bosnia & Herzegovina.

In Guatemala, where Nordstrom significantly shifted its private-label volume production in 2020, clothing exports were a touch over $1 billion as of the end of August this year, up 34.2% from 2020 and even 8.8% higher than in 2019.

To be sure, many companies are also still heavily reliant on Vietnam, where recent production stoppages have caused significant disruptions. Vietnam’s government said in October that it will fall short of its garment exports target this year, by $5 billion in a worst-case scenario, due to the impacts of coronavirus restrictions and a shortage of workers.

Factory inspections in Vietnam – a proxy for retailer manufacturing orders – fell 40% in the third quarter versus the second quarter, with production during those months quickly moving to Bangladesh, India and Cambodia. Inspection rates in Vietnam were still hovering at lower levels in the fourth quarter, with a small uptick seen in late October, said Mathieu Labasse, vice president of QIMA, a supply-chain quality control and auditing firm that represents more than 15,000 brands.

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Apparel maker VF Corp and outdoor gear maker Columbia Sportswear were among companies that warned that there would be delays in fall and spring collections and in some cases insufficient size assortments.

Michael Kors handbags maker Capri Holdings said on Wednesday that it would not have the inventories it wanted for the holiday season, while athletic gear maker Under Armour said on last Tuesday it was canceling purchase orders from Vietnam just to help get “the factories get back up and caught up.”

($1 = 1.6937 marka)

(Additional reporting by Ceyda Caglayan in Istanbul and Diego Ore in Mexico City; Editing by Steve Orlofsky)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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