Stocks and Funds
Alibaba’s founder, chairman and spiritual sultan will continue to exert near-total control of the Chinese e-commerce giant even after its massive IPO. For prospective shareholders, the question is whether Ma can be trusted to act in their interest. The answer is a qualified yes.
Lending at the likes of PNC and U.S. Bancorp is up, and less cash is needed against bad loans. But low interest rates are keeping returns tepid. That raises the risk some may cut corners. It also means there may be no big earnings boom before the economy slows again.
The Kentucky Fried parent earned respect – and profits – less by currying favor with Beijing, more by doing good business. Innovations like a safe food-supply chain benefited the country. But having created the standard, Yum is now struggling to revitalize its recipe.
Merrill Lynch’s last boss has been doing penance running lending minnow CIT for four years. Now he’s spending $3.4 bln to buy OneWest, the remains of a bust bank revived by fellow Goldman alums. It’s a smart deal that restores Thain’s membership in the SIFI club, if only just.
Bids and Buyouts
Most Fox believers are relegated to owning non-voting stock, the same second-tier paper on offer to Time Warner shareholders. While there’s broad investor overlap in the two companies, the record shows a clear distaste for the imperialistic ways of media mogul Rupert Murdoch.
The Spanish bank won an auction for the bailed-out Catalunya Banc. BBVA was willing to sacrifice 55 basis points off its capital ratio to double market share in rich Catalonia. The price reflects government guarantees, and confidence that banks have turned the corner.
Andrea Bonomi’s Investindustrial is offering 790 mln euros for the all-inclusive holiday group. This may not be a five-star price but it blows a rival Franco-Chinese bid out of the water. And investors have spent years in the wilderness. This is an offer the board can recommend.
The U.S. pharmaceutical group’s fifth offer, at $55 bln, finally persuaded its UK rival to sell. A 53 pct premium is a hefty price to pay given the modest synergies and potentially ephemeral tax arbitrage savings. Shire’s rare-disease drugs, however, should have lasting benefits.
Money and Markets
Jean-Claude Juncker, the European Commission’s president-elect, has embraced the goal of creating such a framework. But so far it is more of a slogan than a set of policy actions. Here’s an attempt to flesh out the idea.
Senegal is raising $500 mln abroad. Borrowing from West African franc zone governments is set to jump 50 pct to $7.2 bln in 2014. But big trade deficits mean the region would struggle to cope with a sudden withdrawal of foreign liquidity – a frequent shift in emerging markets.
The Mexican billionaire wants to combine fewer weekly hours with longer working lives. That plan would waste the competence of the relatively young, while leaving many older workers with the wrong skills. Enhanced mid-life education would be a better use of leisure time.
Lenders’ $3 trln holdings of public debt are not falling fast enough. That could be problematic for the prime minister. Once monetary stimulus dries up, banks may rattle the financial system by turning panic sellers. Bank of Japan minutes show Shinzo Abe’s team knows the risks.