China’s growth hinges on wild west 31 May 2011 Poorer western cities like Chongqing are catching up the richer, but slowergrowing east. This month's trade fair shows how cheap labour is attracting multinationals and investment. A relative lack of exports and of stateowned enterprises, once a hindrance, now looks a blessing.
Ashland’s bold $3.2 bln M&A bet pays off for now 31 May 2011 The U.S. chemicals group has gone out on a limb with the leveraged purchase of International Specialty Products, a company twothirds its size. But the deal effectively rerates Ashland, while providing bankable synergies. If only corporate finance worked this well more often.
Wall Street keeps feasting on Lehman’s carcass 31 May 2011 The investment bank's collapse has generated $1.2 bln of fees for bankers and lawyers so far. That's more than AIG, Citi and GM combined. A more structured winddown process for Lehman would have spared the economy some and still kept advisers happy.
Coal biggest winner from Merkel’s nuclear decision 31 May 2011 Shuttering Germany's nuclear power plants will boost renewable energy businesses including First Solar, whose shares rose 5 percent. But the German chancellor's greatest gift is to the coal industry, purveyor of the dirtiest and, on average, the most dangerous source of energy.
Policymakers must hold nerve as economy softens 31 May 2011 Global data is suddenly weaker, prompting fears of renewed economic downturn. The soft patch is for real. But some slowing is necessary to curb oil prices that are fuelling inflation and hurting consumers. To respond with more money printing would be a big, inflationary mistake.
Cup loss wouldn’t be end of the world for Qatar 31 May 2011 Even if it happened, losing the right to host the soccer World Cup might do no more than dent the $77 bln of infrastructure spending promised by the Gulf nation in the run up to 2022. But it would be more than just embarrassing to be stripped of the chance to hold the event.
Nokia’s new warning spells double trouble 31 May 2011 Investors have taken fright at more grim news from the handset maker, sending the shares down 18 pct. The direct cause is the rapid decline of its legacy business. But the reaction also shows the market's doubt that Nokia's tieup with Microsoft provides a way out of the hole.
Investors have a simple antidote to IPO greed 31 May 2011 BlackRock has written to advisers complaining about aggressive pumping of new issues. The fund manager's concerns are legitimate, particularly when it comes to private equity exits. But the most effective response to overpriced offerings is to not buy the shares.
Italy’s slow justice finally snares central banker 31 May 2011 The former governor of the Bank of Italy, Antonio Fazio, has been sentenced to four years in jail for helping rig a takeover battle in 2005. Though the crime is ancient history, his conviction suggests Italy's justice system can hold the powerful to account eventually.
U.S. housing double-dip highlights black spots 31 May 2011 A new low for the S&P/CaseShiller index doesn't mean trouble everywhere DC area prices are rising. But in five of its 20 regions, prices are at or below 2000 levels, while two more have seen 50 pct falls. In those troubled areas, housing miseries will infect the real economy.
Food inflation favors corporate strongmen 27 May 2011 Fickle weather, decreasing farmland and more mouths are pushing up prices of wheat and other soft commodities. Companies are now being forced to pass along these costs to consumers. Big brands and proactive market leaders, like McDonald's and Pepsi, stand to brave the storm best.
Backing Lagarde gives China IMF bargaining power 27 May 2011 China isn't seeking the IMF top job, but has a shot at a deputy role. It may feel that a director from an emerging country wouldn't be as good at promoting the reforms it advocates, which France also defends. Keeping a low profile is in Beijing's interest.
EU should hold the line on Basel III 27 May 2011 The European Commission is poised to give banks an easier ride on global regulatory reforms, according to reports. But if they do, U.S. and Asian regulators will have an excuse to follow suit. Individual EU states should be allowed to be tougher than Basel. But not more lenient.
Spain’s risky bank IPO can fly at the right price 27 May 2011 It sounds like a joke: a summer IPO of Spain's biggest savings bank as the euro zone crisis rages on. But Bankia has a tasty investment story based on restructuring potential. It just needs to show it won't need more capital post float and that it can deliver the strategy.
Glencore banks don’t merit full IPO kicker 27 May 2011 The commodity trader's bookrunners sold its $10 bln IPO during a resources selloff, wooing big names to the register. But they tripped on the pricing. Glencore may well disburse an $83 mln discretionary bonus on top of fees of $170 mln. But it's hard to say it's all deserved.
Don’t take IMF words on Greece at face value 27 May 2011 Listen to what Athens, the euro zone and the IMF itself say about its lending practices and one might think Greece will go bust if it hasn't signed a comprehensive new reform plan within a month. Time is ticking and pressure mounting, but the deadline isn't quite that hard.
Virtual Bitcoins are appealing but probably doomed 27 May 2011 An online currency is no less real than a printed one. The preordained supply and decentralized nature of Bitcoins have intrigued geeks and paranoid inflationistas alike, and their value in dollars has rocketed. But this abstract gold may not survive such a bubble.
Microsoft’s Ballmer hardly the worst veteran CEO 27 May 2011 It's true the software giant has missed many opportunities under his watch, as hedge fund boss David Einhorn said this week. But it doesn't obviously mean he will go. On a total shareholder return basis, other longterm bosses including GE's Jeff Immelt have fared worse.
Russia’s capital outflow should worry investors 27 May 2011 Billions of dollars are fleeing Russia each month. There are several shortterm explanations, but it's also clear that Russians are increasingly loath to invest in their own country. That sends a disturbing signal that confidence in the economy's prospects is lacking.
Mets deal gets even a financial star starry-eyed 26 May 2011 David Einhorn, the hedge fund boss who famously shorted Lehman, is poised to buy a $200 mln stake in New York's lesser baseball team. Yet the managers of the Bernie Madoffstricken Mets share some of the bankrupt bank's flaws. Sports investments are just different.
Courts are bad medicine for U.S. healthcare reform 26 May 2011 Five partyline rulings on the Obama plan suggest politics matter on the bench. Similar concerns may explain why Republicans blocked a recent liberal judicial nominee. Healthcare reform is Exhibit A why politically charged issues without clear legal answers don't belong in court.
No easy way of moving UBS’s investment bank 26 May 2011 UBS may make its investment bank a separate, nonSwiss entity. But only divestiture would guarantee capital benefits, and at the huge cost of losing private banking synergies. A less radical move, ringfencing it as a subsidiary, could cut capital charges whatever the location.
Multinationals propping up U.S. economic growth 26 May 2011 While first quarter GDP growth was a sluggish 1.8 pct, much of it inventory buildup, private sector growth was 3.6 pct and GNP growth was 3.1 pct. With the government now reining in spending, corporations active overseas are providing the economic stimulus.
Deutsche Bank needs to get grip on CEO succession 26 May 2011 Two years after Josef Ackermann extended his contract, the German lender is no nearer to choosing his replacement. Though the decision is not straightforward, the uncertainty risks paralysing the bank. A bungled handover would also be a sour end to Ackermann's strong reign.
ECB would survive a peripheral default 26 May 2011 Haircuts on Greek, Irish and Portuguese government borrowings sufficient to cut their debt/GDP ratios to 90 percent would only knock 20 percent off the central bank's capital. The real danger would come if governments were foolish enough to let peripheral banks also melt down.
Hedge fund financial mechanics show up Uncle Sam 26 May 2011 As Treasury struggles to break even with GM, Delphi's hedge fund owners may double their money with an IPO. The auto parts maker looks worth about $10 bln after emerging from bankruptcy in 2009. The investment objectives were different, but the results still contrast starkly.
Emerging markets evolving but still mispriced 26 May 2011 The draws of emerging and frontier economies include stellar growth potential, youthful populations and, sometimes, maturing domestic markets. Mexico still can t claim the stability of France, however. The similar pricing for their risk suggests an adjustment is on the cards.
Big banks made an early start in punishing Libya 26 May 2011 A report on the $53 bln Libyan sovereign fund's investments names banks that will now be embarrassed by their links with Gaddafi. But it's worse for those that also designed lossmaking products. And the logic behind some of the fund's investment decisions begs explanation.
IPO mountain too hefty for Hong Kong 25 May 2011 Volumes expected this year exceed what was sold in 2010, a record year. Jostling with Western issuers like Prada is a slew of Chinese banks needing equity. A bull market would struggle to absorb it all. As it is, liquidity is trickling away amid nerves over a Chinese slowdown.
Diageo should enjoy tequila, in moderation 25 May 2011 The UK drinks group is on the M&A trail again, eyeing up tequila maker Jose Cuervo. A limited number of targets means Diageo has been an infrequent acquirer, and can now afford to fill gaps in its liquor cabinet. With no auction in prospect for Cuervo, Diageo needs to stay sober.