Dividend reform won’t fix China SOE money-go-round 6 Feb 2013 State-owned firms hoard cash, but making them hand over more of their earnings won’t help. Many already pay more than required, and profit figures can be fudged. Besides, the cash is currently recycled to other SOEs. Reform should start by channeling dividends to better causes.
Polyus sale could leave gold deal bulls hanging 6 Feb 2013 Russian billionaire Mikhail Prokhorov’s potential exit from Polyus, the Siberian gold miner, has revived talk of a tie-up with fellow Russian producer Polymetal. An enlarged national player might please the Kremlin, but the industrial logic of gold mergers is weak.
Japan’s inflation worrywarts good for risky assets 6 Feb 2013 With Prime Minister Shinzo Abe stoking inflation expectations, the country’s pension fund won’t be the only one paring exposure to government bonds. Many Japanese investors will start shopping abroad. From Italian bonds to Russian roubles, riskier investments will get a boost.
Hack attacks may be West’s cue to try harder 6 Feb 2013 China’s alleged attacks on U.S. companies are a new twist on an old theme: outsiders wanting in. China sees itself as the ultimate underdog, so the urge to snoop should fall as it matures. Meanwhile, fears of hacking may spur useful new initiatives in potential targets.
Murdoch and Malone make better allies than rivals 5 Feb 2013 The media moguls are squaring off again. John Malone’s Liberty Global wants to buy Britain’s Virgin Media - a rival to the Rupert Murdoch-backed BSkyB. But the two UK companies complement each other. Collaboration would work in their favour, leaving third player BT as the loser.
Ally so close to paying back Uncle Sam, yet so far 5 Feb 2013 CEO Mike Carpenter threatened to pick up his ball and go home in a spat with creditors of ResCap, its bankrupt mortgage unit. But Ally is better off playing nice. The auto lender may be profitable again, but investors won’t go near Ally until its mortgage exposure is resolved.
U.S. fiscal fix will only hold until 2015 5 Feb 2013 Washington’s budget number-crunchers say deficits will now decline for a few years. That buys breathing room. But medium and long-term problems persist because of rising healthcare and retirement outlays. Lawmakers still need to tackle these tricky areas - ideally before 2016.
Warning: it’s not just the hacks being hacked 5 Feb 2013 The New York Times and other media outlets may think network intrusions from China are payback for probing the Beijing regime. But PRC news paranoia is only a small part of a big story. Other Western companies should read between the lines, and beef up inadequate cyber-defenses.
Hollande adds to currency wars cacophony 5 Feb 2013 The French president fears that the euro’s strength against other currencies threatens economic reforms. He suggests setting a medium-term target for the common currency’s exchange rate. This puts him at odds with the ECB and with Germany - a bad idea in itself.
Big majors yet to master oil game’s new landscape 5 Feb 2013 In spite of record Brent prices in 2012, the industry’s results are unimpressive. A foggy production outlook shows oil majors are struggling to make ever more complicated projects work. Better cashflows should materialise in the future, but for now low valuations look justified.
DoJ deals $4 bln-plus downgrade to S&P, Moody’s 5 Feb 2013 The rating firms’ successful legal defenses to date and a booming debt market may have persuaded shareholders that good times were back. But a U.S. government suit against S&P, though a long shot, is a sharp reminder that subprime sins haven’t been forgiven or forgotten.
Dell’s $24 bln LBO involves a club of one 5 Feb 2013 And Silver Lake, the sole private equity firm included, isn’t even really the club. Michael Dell is contributing his 14 pct stake in the PC maker, cash and an investment from his MSD Capital. Time was mega-deals needed a team of buyers. For now, they remain more exclusive.
Petrobras proving better at finance than oil 5 Feb 2013 Brazil’s state oil giant generated a 53 pct gain in quarterly profit by selling government bonds. The company’s costs are soaring, production is falling and debt is growing. Financial dealings couldn’t preserve the dividend - and suggest Petrobras is running short of ideas.
Liberty’s tilt at Virgin shows cautious deal fever 5 Feb 2013 The U.S. cable group’s renewed interest in UK-based peer Virgin Media comes as Dell nears a jumbo buyout. The structure of any Virgin deal is unclear. But there’s logic in using debt to fund a $20 bln bid for a stable UK cable firm, whether by Liberty or private equity.
KPN’s $5.4 bln cash call avoids breaking junk taboo 5 Feb 2013 The Dutch operator is the first European telco to ask shareholders for fresh funds in this cycle, with a colossal rights issue. A big spectrum bill, failed disposals, and tough competition left few options. Debt is cheap but losing investment-grade status remains a step too far.
Markets’ euro-jitters unjustified but helpful 5 Feb 2013 After a strong rally, a correction is almost inevitable, and potential bad news always lurks in Europe. But with the ECB calling the shots, political turbulence in Spain and Italy isn’t a big risk. Still, weak markets put welcome pressure on politicians to keep moving forward.
UBS lays foundations for investment-bank rebuild 5 Feb 2013 The Swiss bank has moved on from Libor woes, slashed risk and is buying back debt. It’s now in the vanguard on capital. True, the investment banking unit’s 60 pct payout ratio needs a chop, and a new bond-based bonus plan confuses matters. But the repair job is on track.
Soccer’s betting scam has echoes of Libor scandal 5 Feb 2013 Rigging the sports fixtures is like manipulating interest rates: both require collusion, are hard to detect, and were partly orchestrated in Singapore. Both also undermine confidence. In finance, the solution is to rely less on human judgment. Soccer cannot do away with referees.
Apple and Exxon may not be so different, after all 4 Feb 2013 The tech and oil giants share more than nearly identical U.S. market-leading values of about $400 bln. Both are threatened by shrinking margins and a struggle to replace their precious wares. Exxon has survived four times longer than Apple, but appears to be just as vulnerable.
Unlocking salary secrets could pay extra bonuses 4 Feb 2013 A new proposal in the U.S. Congress would allow employees to reveal their compensation freely. Though the aim is to curb gender discrimination, the effects are likely to be much more far-reaching. Such information should improve labor market efficiency and reduce inequality.
Equity split from commodities may be short lived 4 Feb 2013 Japan’s money-printing rivalry with the U.S. has swept stocks to multi-year highs while commodities lag on worries about slow global growth. The outlook is fundamentally good for both these asset classes, though, as long as central-bank cash keeps flowing into the system.
Commerzbank write-off highlights low-profit future 4 Feb 2013 The German lender has announced a 560 million euro writedown on deferred tax accruals. It won’t earn enough profit to offset past losses. It’s yet another sign of the industry’s declining profitability, and strengthens the case for a major restructuring of Commerzbank’s business.
U.S. venture capital needs a reboot 4 Feb 2013 A decade of insufficient shrinkage hasn’t fixed wimpy performance, which undershoots boring stock indexes. The dot-com boom is history, startups find capital elsewhere, and funds chase assets over returns. A few big names aside, investors need to strip VCs of their mystique.
UK shouldn’t quit the EU – it should join the euro 4 Feb 2013 After a bad crisis, the UK isn’t close to qualifying for the single currency, and the current prime minister isn’t tempted. But the reasons given for the last official rejection, in 2003, now look weak. The economic case against an independent pound is stronger than ever.
Weak yen makes Japanese electronics firms giddy 4 Feb 2013 Panasonic shares jumped 17 percent after losses were less bad than expected. Manufacturers have been so badly beaten up that even small changes in profitability have a big impact on expectations. Revenue is still shrinking, though. The recent rally is largely based on hope.
Hugo Dixon: Mario Draghi’s poisoned banking chalice 4 Feb 2013 The ECB is to gain huge power as the euro zone’s banking supervisor. But it will also be blamed when banks run into trouble. Draghi is already being criticised for failing to control Monte dei Paschi when he was at the Bank of Italy. The ECB faces even bigger reputational risks.
Steady U.S. job gains put pre-crisis peak in reach 1 Feb 2013 Creating the 3 mln or so positions needed to get back to the nearly 138 mln from 2008 no longer seems as daunting. The latest data indicate it could happen by mid-2014. Closing the yawning gap is an important milestone. Achieving “normal” will be the next big summit to scale.
2012 may be as good as it gets for Exxon 1 Feb 2013 The oil giant pumped out a near-record profit and its best earnings per share ever. But Exxon, like Chevron, is spending huge sums – almost $40 bln last year - to find and extract reserves. Holding output steady is tough enough. Unless oil prices jump, Exxon may have peaked.
HSBC/Ping An compromise saves face all round 1 Feb 2013 Chinese regulators have approved a Thai tycoon’s $7 bln purchase of HSBC’s stake in insurer Ping An. But the financing had to be rejigged. The Thais have rescued a juicy deal and the UK bank has avoided an embarrassing flop. The seemingly happy ending leaves much to be explained.
Markets made Ed Koch fiscally successful NYC mayor 1 Feb 2013 Koch was a great showman who helped to reverse the U.S. financial center’s decades of decay. Hizzoner, who died Friday, will go down as a budget balancer who managed to boost headcount. He got lucky: late 1970s inflation cut debt costs and the 1980s finance boom grew receipts.