How disconnected are China’s investors from reality? 13 Mar 2008 Very, if China Railway Construction s poor debut up just 28% is any indication. Nothing changed in China s huge infrastructure story. That the retail investors who determine the price baulked at this IPO shows just how divorced they are from the fundamentals.
Freddie and Fannie should raise more capital 13 Mar 2008 If they have called the housing market right, they may not need more. But that s a big if. And with capital tight, they can't easily help the US mortgage market their public mission. Raising new equity would dilute shareholders. But if it's spent wisely, they could benefit.
SEC loophole helps Halcyon float 13 Mar 2008 You can't blame the hedge fund firm for selling to an alreadylisted Spac. Speed and certainty made the deal attractive with IPO conditions treacherous. But as with all Spac purchases, Halcyon hasn't been through the usual SEC disclosure rigmarole. Investors should take note.
Unicredit limits subprime damage to flesh wound 13 Mar 2008 The Italian bank's flat fourthquarter profits aren't great. But at least, in avoiding US suprime damage, it doesn't look a hostage to credit markets. Unicredit's modest performance is down more to its hunger for deals. That is something it can fix itself.
Bebo valuation pokes a hole in social networking’s bubble 13 Mar 2008 Facebook s skyhigh theoretical value makes AOL s $850m offer for rival Bebo look paltry. It s more like News Corp s purchase of MySpace in 2005. But social network growth has rocketed since then. Why not their values? Maybe buyers have learned how hard it is to make money.
CPDOs 13 Mar 2008 Constant proportion debt obligations were supposed to help keep CDS markets stable. Instead, they've made matters much worse.
It’s not Charming to sue activists 12 Mar 2008 Plussize apparel seller Charming Shoppes is suing a pair of activist hedge funds. But as in some other cases, the rabblerousers' gripes merit real answers. Taking the argument to a courtroom looks like a play to avoid giving shareholders the explanation they deserve.
Fortis’s ABN Amro chickens come home to roost 12 Mar 2008 The BelgoDutch bank is raising an extra E2bn, reportedly from China, to shore up its capital base. It seems now to be selling some of its asset management business. Subprime is part of the problem. But Fortis s expensive ABN Amro purchase is the main cuprit.
Book review: The New Cold War 12 Mar 2008 In The New Cold War, Edward Lucas argues that the West must stand its ground in the face of bullying from a resurgent Russia.
Socially responsible investors should learn from short sellers 12 Mar 2008 Al Gore is riding the SRI investing boom. But like most other dogooders, his $5bn fund is longonly. That may sound more righteous than shorting stocks. But SRI funds with the courage of their convictions should bet against the irresponsible, too. That might help their returns.
Dubai tries to pick off Colonial’s crown jewels 12 Mar 2008 The Dubai fund aims to buy only the troubled Spanish property company s good rental business, leaving shareholders with cash and a rump of risky assets. The majority shareholders have agreed to sell, but Colonial s beleaguered banks still have to sign off, which could be tricky.
Kazakh miners in murky £20bn merger talks 12 Mar 2008 The preliminary discussions between ENRC and Kazakhmys about forming a Kazakh resources champion are likely to hinge largely on politics and the machinations of local oligarchs. Minority investors in both Londonlisted companies will have to keep their fingers crossed.
Should the US government insure muni bonds? 12 Mar 2008 It might bring in some welcome revenues. But Rep. Barney Frank s proposal that the federal government get into the muni bond insurance business doesn t solve any problems. Better to eliminate the dualrating system for munis. That would remove the need for as much insurance.
Strong dollar talk is pie in the sky 12 Mar 2008 With current US monetary and fiscal policies, jawboning won t lift the currency. On its own, simple market intervention would waste billions. A durably stronger dollar won t come until policies are eventually tightened. Then it would be tough on US exporters.
WaMu shareholders deserve their rights 12 Mar 2008 The giant thrift wants to raise capital and Tosca, a big shareholder, rightly wants a slice. But WaMu shouldn t give the hedge fund or anyone a sweetheart deal. A rights issue would spread the pain and potential gain fairly among all its shareholders.
European power giants should hop the pond 12 Mar 2008 The Continent's big utilities may have hit a wall in terms of intraEuropean consolidation. But new opportunities lie in the US. The fragmented US power market is in dire need of capital and can give the Europeans more bang for their buck.
Ford is wrong to sell Land Rover 12 Mar 2008 Tata is finalising its purchase of Ford s UK luxury brands, probably for more than $2bn. The price reflects Land Rover s surprising turnaround. Tata is taking a big risk. But Ford would have been better off selling its more troubled premium brand Volvo.
Banks should be told to top up capital 12 Mar 2008 Emergency liquidity injections, like the Fed s $200bn yesterday, are largely a result of inadequate capital in the financial system. A healthier mediumterm solution is for the banks to strengthen their capital. If their share prices tank, so be it.
Europe needs to unclog its derivatives plumbing 11 Mar 2008 EU regulators want to increase competition in the clearing and settlement of derivative trades. But moves by two exchanges to take their clearing inhouse would have the opposite effect. It won t be easy to stop them, but regulators should try.
US mortgage bailout options 11 Mar 2008 Pressure is growing in Washington to aid underwater homeowners. Robert Cyran handicaps the various government bailout plans.
Don’t mourn dying Vale-Xstrata deal 11 Mar 2008 It's hard to see how the Brazilian miner can overcome the obstacles to making a compelling offer for its UK rival. But unlike BHP Billiton's synergyled bid for Rio Tinto, this isn't a deal anyone really needs.
Make budget simplicity the helmsman’s course 11 Mar 2008 Alistair Darling must present a budget for an economy so far largely untouched by the credit crunch, but which could soon be hit hard. The UK chancellor's best course is to acknowledge the pending damage to growth and revenue, and trim accordingly.
Fed’s liquidity tsunami raises troubling expectations 11 Mar 2008 Its plan to swap $200bn of Treasuries for mortgage securities will help stabilise that market though not in time to salvage most brokers firstquarter earnings. But it now needs to manage expectations so it isn t seen as Wall Street s lender of first, rather than last, resort.
Multilaterals will find life easier when liquidity tightens 11 Mar 2008 The Asian Development Bank is looking at relaxing its social and environmental standards bilateral aid donors like China provide money with fewer conditions. It should wait. Tightening world liquidity will leave ADB and other multilateral banks with much less competition.
Carlyle fund’s woes highlight uncharacteristic strategy 11 Mar 2008 The firm s Carlyle Capital affiliate is on the brink after making a relatively simple, if highly leveraged, bet on agency securities. That seems almost naive compared to the diverse and sophisticated investing Carlyle is known for. And it may not be what investors expected.
Close Bros. needs to prove itself 11 Mar 2008 Four months ago, the UK merchant bank said a 950pashare proposal was too low. With the shares now at 590p, it has a lot of ground to make up. Close needs a substantial reshaping. But it s not apparent that CEO Colin Keogh has a clear plan for change.
US health insurers swamped by rising costs 11 Mar 2008 They enjoyed a shortlived reputation as a safe haven from economic storms. Wellpoint s warning of increased competition and healthcare inflation looks like the first break in the dike. Investors are bailing.
Will America have a Northern Rock moment? 11 Mar 2008 Probably not, but some US banks could be in for a hairy ride. They don t have the funding mismatch that helped whack the UK mortgage lender. But many do have gargantuan real estate exposures. With few if any prospective white knights, their access to new capital looks uncertain.
No compensation without regulation 10 Mar 2008 Banker pay must be regulated but not micromanaged. The industry s oneway incentives have led it to run amok with other people s money. Regulators should set a general principle that headsIwintailsyoulose compensation structures are not acceptable.