BREAKINGVIEWS

Chip industry’s new paradigm looks like old one

16 November 2018

As cutting-edge semiconductors got harder to make and demand boomed from new fields like bitcoin mining, top manufacturers seemed invulnerable. Shrinking sales forecasts from Nvidia and Applied Materials show companies are as prone as ever to economic cycles and excess inventory.

Levi Strauss IPO would be financially retro

16 November 2018

The jeans group may go public more than 30 years after a family-led LBO. It has done well in the recent retail turmoil that hit the likes of Nordstrom and a mooted $5 bln valuation looks fair. But the skinny from Levi’s own ups and downs is that staying private is a better fit.

Watch UK bonds to see when there’s a real crisis

16 November 2018

The pound suffers every time concern flares that Britain may crash out of the European Union. But gilts strengthen since bleaker economic prospects make higher interest rates less likely. The clearest sign investors have had enough would be when both weaken at the same time.

Rates pain compounds UK banks’ Brexit misery

16 November 2018

Shares in British lenders fell after government resignations increased the chances of Britain failing to agree a deal with the EU. Investors are pushing back hopes for higher interest rates. That leaves banks stuck with low margins on top of political and economic uncertainty.

Europe can play a waiting game with Italian rebels

16 November 2018

Italy’s anti-austerity budget flouts Brussels’ fiscal rules. Declaring Rome in breach and imposing penalties would fuel euro scepticism ahead of key European elections. Better to tone down the rhetoric, and let a slowing economy and hostile markets weaken the executive’s hand.

Mozambique removes only part of tuna bond whiff

16 November 2018

The war-scarred African nation wants to restructure its defaulted obligation by linking repayments to future gas sales, giving bondholders extra security. But developing $50 bln of projects in such an exotic locale is unlikely to avoid snags. Delays could mess up creditors’ sums.

JD governance overhaul becomes more urgent

16 November 2018

The $35 bln Chinese web retailer is expected to post another fall in quarterly profit. Its shares are down by nearly half this year. A rape allegation against boss Richard Liu has left a cloud over JD. Walmart and other big backers have good reason to urge him to loosen his grip.

Asian IPO slump brings welcome valuation sanity

16 November 2018

Having raised $62 bln in nine months via 480 listings, economic anxieties have infected overheated equity markets in Hong Kong and beyond. Deals from Tencent and others are being delayed or repriced in an overdue correction. With luck, rationality will creep in elsewhere, too.

A cooling China may chill Sinochem Energy’s IPO

16 November 2018

The state giant wants to raise up to $2 bln by listing its trading and refining arm in Hong Kong. It can benefit from lower oil prices. But squeezed margins, volatile markets and jitters over demand at home won’t help. Smart pricing and Beijing’s support will make the difference.

Think D40 over G20 for China-U.S. trade détente

16 November 2018

Don’t expect a breakthrough when Donald Trump and Xi Jinping meet at the industrial nations’ summit. The 40-year anniversary of Deng Xiaoping’s market reforms on Dec. 18 offers a better opportunity for China to move past empty promises and becalm the intemperate U.S. president.

Mark Zuckerberg pushes wrong kind of independence

15 November 2018

Facebook’s CEO is setting up an external committee to police fake news and hateful content after more revelations about how he and others dealt with Russian meddling. But outsourcing decisions won’t fix Facebook’s culture. Removing Zuckerberg as chair would be a good first step.

GE may be canary in credit market’s coal mine

15 November 2018

The firm’s bonds tanked this week even as an asset sale briefly lifted its shares. That’s a warning shot for all credit investors. U.S. companies carry more debt than ever, and quality has deteriorated. Rising interest rates and slowing growth could make this a big problem.

Royal Mail’s last valuation crutch looks shaky

15 November 2018

The UK postal firm’s shares fell after it reported a 25 pct drop in operating profit. Rising costs, falling letter volumes and the need to invest will make it hard for the group to cover its generous dividend. A lower payout would give investors little reason to own the stock.