Evonik finally gets its IPO chemistry right 26 Feb 2013 The German specialty chemicals group has aborted IPO plans three times since 2008. As it prepares to try again, investors should think afresh. Evonik is handsomely profitable and well positioned for growth. It looks like an attractive investment.
Carney calls for trustworthy banking. Good luck… 26 Feb 2013 The next Bank of England governor gave a strong speech in London, Ontario on the need for virtue in an industry that rather relies on trust. But his fine words won’t be heard in London, England. That requires something more like a conversion - which is not in sight.
Wage subsidy could blunt Singapore’s edge 26 Feb 2013 The city-state’s plan to subsidise 40 percent of pay increases for low-wage earners is the wrong answer to growing inequality and falling margins. Companies will be left with bloated wage bills when the subsidies end in 3 years. A small economy can’t afford such distortions.
Hugo Dixon: Italy could reignite euro crisis 26 Feb 2013 The disastrous election has echoes of last year’s first inconclusive Greek election - except that Italy is much bigger. The country faces political paralysis, while its economy is shrinking and its debt is rising. The ECB safety net has holes in it and contagion could return.
Germany loses Italian election 25 Feb 2013 Italian voters rejected the euro zone’s prescription of austerity and reform. The centre-left is ahead, but Silvio Berlusconi’s anti-euro coalition is leading in the Senate. Germany’s preferred candidate, Mario Monti, was trounced. Markets should brace for a few chaotic weeks.
Apple’s halo loses shine in investor fight 25 Feb 2013 Greenlight Capital founder David Einhorn won a legal point, but better governance wasn’t his main objective. Apple and its lawyers come off amateurish. Calpers, despite worthy aims, looks careless. The SEC also missed a trick. The result is a distraction for shareholders.
RBS, UK set for responsible Citizens decision 25 Feb 2013 The British government-owned bank may soon reveal plans to float its U.S. lender. That should assure taxpayers that RBS is trying to raise capital and focus on its core business. And listing a minority stake allows the still-ailing bank to book Citizens’ earnings for a while yet.
$6.6 bln won’t be enough to end Elan’s rash dreams 25 Feb 2013 The biotech has grand M&A plans after selling rights to a blockbuster drug for $3.25 bln. Royalty Pharma’s indicative offer is based on the notion that it will invest more wisely than Elan’s current bosses. It’s a credible premise, but a 4 percent premium won’t seal the deal.
Corporate hybrid boom retreads bank capital fiasco 25 Feb 2013 Corporate hybrids, securities that blend debt and equity, are booming. They give companies tax-efficient cheap capital, and investors yield. But the more the market grows, the greater the fallout if issuers, like banks during the last crisis, actually use their equity features.
Kenya’s next leaders need to avoid spending spree 25 Feb 2013 The priority in next month’s election is to prevent the unrest that followed the 2007 poll. With that caveat, boosting economic growth - now running around 5 pct - requires lower interest rates. That means deficit-narrowing fiscal discipline, not Western-style stimulus.
Moody’s shaming brings UK gain in currency war 25 Feb 2013 The loss of triple-A is humiliating, but that’s now history. The lingering effect of Moody’s action is a weaker pound, and that should serve to stimulate exports, GDP growth and inflation. If so, there’s less risk of unlimited BoE money printing when Mark Carney takes charge.
Pearson confronts harder financial times 25 Feb 2013 The media group has focused more keenly on educational publishing. But the digital revolution is transforming the staid world of textbooks. Making a successful switch will take time and money. And a fresh pledge to retain the Financial Times might disappoint some investors.
Cyprus vote lobs bailout ball into Europe’s court 25 Feb 2013 In choosing the conservative candidate as their next president, voters in the island state have expressed their strong support for a euro zone bailout and tacitly accepted some reform-induced pain. Cypriots have delivered their part of the deal. Now Europe must do the same.
Why Kuroda is a better choice for BOJ chief 25 Feb 2013 The next central bank head will have to print money aggressively and defend a weak yen vigorously. ADB chief Haruhiko Kuroda’s diplomatic savvy and readiness to take risks make him a better choice than previous favourite Toshiro Muto, whose BOJ record did not inspire confidence.
Asia’s property taxes are covert capital controls 25 Feb 2013 Hong Kong has hiked real-estate stamp duty in the latest effort by Asian city-states to cool demand. But local first-time buyers are exempt. As long as low rates push investors to seek hard assets in safe havens, pressure to discriminate against foreign speculators will increase.
Cameron deserves some sympathy for losing triple-A 23 Feb 2013 The UK prime minister looks foolish and inept after Moody’s took away the UK’s top credit rating. He shouldn’t have tied his policies’ success to triple-A status. But other approaches would probably have ended in the same place, or worse.
Citi pay plan raises the bar, just not enough 22 Feb 2013 Shareholders forced the mega-bank to rethink its compensation scheme for top executives. New, more rigorous targets for boss Michael Corbat and others are overdue. One important performance metric, however, seems to keep expectations too low.
Bumi shows that small print is well worth reading 22 Feb 2013 It’s easy to mock the list of “risk factors” in prospectuses. Lawyers rattle off every imaginable thing that could possibly go wrong. The long and deadpan list can be funny and oddly terrifying. But it can be valuable too. Many of the risks at Bumi were hiding in plain sight.
U.S. housing quagmire embodied in JPMorgan deal 22 Feb 2013 The bank looks set to sell its first mortgage bond without government backing in years. That hints at a belief in such products among both lenders and investors. But until mortgage finance rules are clarified and Frannie’s funding advantage is withdrawn, these deals will be rare.
Review: How economics became the hijacked science 22 Feb 2013 Mainstream economics has been hijacked by vested interests and turned into an ideological weapon, Norbert Haering and Niall Douglas claim in “Economists and the Powerful”. Their case against the profession isn’t iron-clad, but it’s definitely thought-provoking.
Bumi debacle teaches some all too basic lessons 22 Feb 2013 Most of the mess at the London-listed Indonesian coal miner could have been avoided if Nat Rothschild and his backers had followed what should be standard practices for risky investments. Breakingviews has a check-list for future purveyors of exotic deal structures.
How it works 22 Feb 2013 What’s the best gauge of China’s growth? You decide. Breakingviews has picked ten indicators to pick from. We have crunched the numbers into an interactive “Tea Leaf” index, which allows readers to choose and combine their favourite measures.
Apple owners don’t need consumer-like innovation 22 Feb 2013 Investor David Einhorn’s idea of creating new preference shares is essentially an idea he proposed last year, with some fresh packaging. The trouble is it lacks the simplicity that is Apple’s hallmark. And for shareholders it’s not obvious “iPrefs” will have iPhone-like appeal.
Heinz deal suggests Big Food deserves a fresh look 22 Feb 2013 Strong brands and steady margins give food-makers’ strong finances a very long shelf-life. So makers of sauces, spreads and cereals may offer hidden value for patient investors. Warren Buffett-style bid or not, ConAgra, Danone, General Mills and others look cheap.
Soaring kiwi dollar tests faith in inflation goal 22 Feb 2013 New Zealand, which pioneered inflation targeting, faces its biggest test in 23 years. The central bank is under pressure to respond to capital inflows and the overvalued dollar. While it’s right to reject a Swiss-style peg, a single-minded focus on prices is no longer sensible.
New breed of jewel thief stalks M&A world 21 Feb 2013 Deals like the $8.2 bln sale of NYSE include so-called “crown jewel” lockups, which hand over valuable assets even if a transaction fails. Courts have looked askance at such side agreements, but they’re creeping back. The potential benefits may rob shareholders of a higher bid.
Market renaissance dethrones would-be debt kings 21 Feb 2013 The crisis in Europe put top-rated U.S. corporate debt on something of a safe-haven par with sovereign issuers. The return of big buyouts like Heinz and Dell and rising U.S. Treasury yields leave these bondholders vulnerable to big losses. Risk-free is now and forever a myth.
Gold melts as economy warms and Fed warns 21 Feb 2013 The price of the yellow metal has fallen by 12 pct since October, including a 3 pct drop after the U.S. central bank minutes suggested money printing might stop. Gold’s two-way bet - both safe-haven currency and speculative punt - looks to be ending. It has a long way to fall.
Miners’ boards need a tune-up for austerity era 21 Feb 2013 Of the four big miners to change CEOs recently, only BHP Billiton managed to do it smoothly. The bosses may have messed up, but company boards are not blameless. They need to do better as the commodity cycle enters a new - and more challenging - phase.
UK employment highs more puzzling than dazzling 21 Feb 2013 The number of employed people in the UK is at an all-time high. Very cheering news, except that the economy is flirting with a triple-dip recession. There are many explanations for the workers’ apparent low productivity, but none of them is fully persuasive. The mystery remains.