China may challenge U.S. for shale supremacy 5 Sep 2011 The U.S. so far stands alone in significantly exploiting shale gas, but Chinese major Sinopec is now planning a serious push. Even if geography doesn’t favour Chinese shale, a lack of legal and political roadblocks to drilling mean its ambitions could be more than a pipe dream.
Libya should adopt oil-wealth transparency 5 Sep 2011 The country’s new leaders must decide how to manage Libya’s oil wealth after funding reconstruction. Opaque handouts might be a tempting way to win tribal loyalties. But it would be better to copy oil-rich Norway and create a transparent and accountable sovereign fund.
Beijing’s role in CCB share sale is troubling 5 Sep 2011 China’s main foreign reserve fund has reportedly bought shares sold by Bank of America in the Chinese lender. The price looks low, and the shares yield more than US Treasuries. But increasing state exposure to banks, and using reserves to stabilise their share prices, isn’t wise.
Obama’s smog backdown won’t help sick U.S. economy 5 Sep 2011 The White House has bowed to critics in Congress and industry, who said new air quality rules would kill jobs. Polluters have previously exaggerated the costs of EPA regulations, and health-related savings matter, too. The rationale for caving in is a smokescreen for politics.
Asian bonds offer new-style refuge in market panic 5 Sep 2011 If markets swoon anew, as negative economic signals suggests they might, Asian bonds and CDS both stand to gain ground. In the past, the two have moved in opposite directions. Their altered relationship offers a handy storm shelter for investors while it persists.
Brazil can’t solve fiscal woes with rates alone 2 Sep 2011 Cutting the benchmark Selic rate to 12 pct isn’t inflationary, since CPI is only 7 pct and global rates are ultra-low. However the government runs big deficits in a huge boom with high commodity prices. That could boost prices down the road - or worsen any downturn.
Running for president like a hedge fund manager 2 Sep 2011 White House hopeful Jon Huntsman aims to employ a fund-of-funds approach to policy: Combine the best off-the-shelf economic plans on taxes, debt and energy into one broad proposal. Even if Republican voters don’t invest in the underdog’s offering, his opponents might want to.
Market worries and volatility will outlast summer 2 Sep 2011 Investors back from the beach will be rested for the next round of rollercoaster trading - a taste of which came on Friday. The concerns behind August’s bout still haven’t been addressed. European debt trouble, the weak U.S. economy and political conflict spell more wild rides.
LSE’s pricey LCH tilt anticipates boom in clearing 2 Sep 2011 So the London Stock Exchange is interested in LCH.Clearnet after all – and seems ready to pay a big price for the clearing house. Synergies appear limited. LSE CEO Xavier Rolet may be banking on an explosion of clearing in products that previously changed hands privately.
Narrow self interest is equity vigilantism’s flaw 2 Sep 2011 Bond investors have history when it comes to intimidation. To judge by recent performance, their strong-arm tactics can pay off, too. But while it may look tempting, and shareholders must fight hard, the vigilante approach is misplaced.
China small-stock boom puts big banks in the cold 2 Sep 2011 The likes of CICC and Goldman Sachs have dropped off China’s IPO league tables. A shift to second-tier stock markets favours nimbler and smaller underwriters. With Shenzhen’s boards raising twice what the main Shanghai exchange did this year, the big guys must adjust.
How to get Spain working again 2 Sep 2011 With elections looming, political parties must come up with sensible solutions to tackle a 21 percent unemployment rate. Cutting social security contributions makes sense, but it’s harder than it looks.
More winners than losers if AT&T deal fails 1 Sep 2011 The operator’s top brass and lawyers will obviously look awful if the $39 bln deal collapses. It’s not yet obvious how T-Mobile and Verizon would fare. But telecom equipment and handset firms, as well as the likes of Sprint, LightSquared and Crown Castle all stand to gain.
U.S. bank boss ouster undermines cult of CEO 1 Sep 2011 Surprise changes at the top, especially ones with mealy-mouthed excuses, don’t typically go down well with investors. But BNY Mellon became about $1 bln more valuable after the departure of boss Bob Kelly. Evidently investors, like the board, considered him entirely dispensable.
Irene should blow U.S. utility deal off course 1 Sep 2011 The $4.2 bln merger of Northeast Utilities and NSTAR is up for approval. But blackouts following the hurricane have exposed NU’s deficiencies serving customers despite charging America’s highest rates. Regulators should ensure service is on a better track before they OK any deal.
Japan’s LCD bailout puts state in reformist role 1 Sep 2011 Its big manufacturers have long placed job security over profits. So Tokyo has devised a face-saving way for Hitachi, Sony and Toshiba to spin off their ailing LCD units. A state-funded joint venture subsidizes R&D - and the social cost of consolidation that companies fear most.
Big pharmacy deal confronts past and now present 1 Sep 2011 Wall Street is betting there’s almost no chance trustbusters will approve the $29 bln acquisition of Medco by rival Express Scripts. Though overly pessimistic, two nixed healthcare mergers in the late 1990s and the challenge to AT&T’s deal provide good reason for skepticism.
ECB may need tough love for Italy 1 Sep 2011 Italian politicians seem to be flip-flopping over austerity measures. The risk is that the final package lacks credibility, or that structural reforms to promote growth are watered down. The ECB must be ready to turn up the heat by cutting back on its bond purchases.
BP needs to make unhappy TNK-BP marriage work 1 Sep 2011 There’s no easy way out of BP’s self-created mess in Russia. The oil group may be tempted to stop working with its difficult oligarch partners at TNK-BP. But a divorce would be difficult and costly. BP may be better off making the best of this troubled, yet lucrative, marriage.
Gold miners no longer leveraged play on the metal 1 Sep 2011 The yellow metal’s price is up 29 pct in 2011, but mining shares are flat. Australia and Peru recently showed how governments grab more when prices rise; costs go up with prices, too. With mining investors also discounting price spikes, the shares aren’t shining for gold bugs.
More U.S. mortgage help isn’t needed 1 Sep 2011 There’s talk of yet more help for careworn borrowers. Washington has already made Herculean efforts. Some were valuable, but there’s no magic bullet and the modest returns are diminishing. It would be better for lawmakers to deploy precious capital, real and political, elsewhere.
Deutsche Telekom may be stuck with U.S. mobile 1 Sep 2011 It’s hard to see attractive alternative M&A options if the $39 bln sale of T-Mobile USA to AT&T falls through. DT may have to live with the business. But for CEO René Obermann it’s not a killer blow. He has the protection of a $6 bln breakup package and a good track record.
Euro zone should slow down on austerity 1 Sep 2011 Portugal is the latest troubled euro member to tighten its budget another notch. But from Italy to Ireland, heavily-indebted countries need growth. As the threat of recession rises, sometimes-costly structural reforms should take precedence over fetishist austerity.
IMF looks less wrong than Europe on bank capital 1 Sep 2011 The global fund has enraged euro zone politicians with draft findings showing a 200 bln euro hit for European banks from sovereign debt. True, the IMF’s methodology may be too conservative. But compared to the inadequate EU stress tests, the findings are probably more reliable.
Underwriters’ caution weakens Greek bank deal 1 Sep 2011 Investment banks are hesitating about underwriting Alpha and Eurobank’s 1.25 bln euro capital hike. The share issue carries unusual risks given the difficulties facing Greece and its lenders. But if the experts are struggling to price the risk, other investors won’t be inspired.
Shadow banking in China needs restraint 1 Sep 2011 Banks in China may be lending hand over fist, but they’re not alone. Companies, ill-understood trusts and even individuals have pushed credit growth to more than double Beijing’s official target. Reining in this lending will be painful but it would be worse to let it run riot.