G20’s growth pledge is missing a demand booster 24 Feb 2014 The world’s largest nations have vowed to raise collective GDP by an extra 2 percent in five years. Tinkering with regulation and labour markets may raise productivity. But with wages stagnant and governments reining in spending, there may not be anybody to buy the higher output.
China’s yuan slide not nice but necessary 24 Feb 2014 The currency has reversed course, rapping the knuckles of investors who had been betting on continued gains. The unwinding of speculative trades could remove a useful source of inflows, and add pressure to the parched system. Still, adding more market forces is mostly helpful.
Sinopec spinoff shows desire to pump valuation 24 Feb 2014 The Chinese oil giant plans to sell up to 30 percent of its marketing division, which operates 30,000 forecourts and brings in half the group’s revenue. Exposure to China’s consumer boom should lure investors. More importantly, it suggests Sinopec is serious about boosting value.
Letter from the Editor: Asian Edition 21 Feb 2014 From next week, Breakingviews will add a fourth daily email produced by our expanded team in Hong Kong, Singapore and Beijing. The new edition allows us to deliver our views in a more timely fashion during the Asian working day, and to better pace our output globally.
JPMorgan in awkward place in Essar Energy buyout 21 Feb 2014 The investment bank led the troubled Indian group’s London IPO, and remains a house broker. So it’s far from ideal that JPMorgan is now advising independent directors on a potential buyout by the majority owners. Board members urgently need a fresh outside perspective.
Buffett’s folksy ways evoke quainter trading days 21 Feb 2014 The Omaha billionaire pulled the plug on hedge funds buying a feed from his Business Wire. Buffett has expressed distaste for high-speed trading, too. Though it can be parasitic, there are also benefits. Nostalgia is best reserved for Cherry Coke, not open-outcry stock dealing.
Big Consumer struggling to manufacture growth 21 Feb 2014 The industry’s annual U.S. confab is chock-a-block with whiz-bang products like Bluetooth-enabled toothbrushes and funnel-cake corn dogs. But it’s just empty calories if it doesn’t lead to robust top lines. Cost-cutting alone can’t justify today’s expensive share-price multiples.
Spain’s BBVA keeps banking’s tech enemies close 21 Feb 2014 The lender believes Google and its ilk will wreak havoc on traditional banking. To defend itself, BBVA has paid $117 million for Simple, a U.S. mobile banking company. The deal increases the possibility that banking’s technological disruption will come from inside.
Modern financial arts get special exhibition 21 Feb 2014 Washington’s Corcoran Gallery, with its de Koonings and Twomblys, is being carved up like a common conglomerate. Los Angeles hosted a hostile museum takeover bid and artwork features in Detroit’s restructuring. A blank spreadsheet can sometimes inspire as much as a canvas.
RBS finally and rightly heads back whence it came 21 Feb 2014 The UK bank is likely to further cut back its investment bank next week, leaving a once-proud money spinner humbled. It’s taken six years for the 80 pct state-owned lender to wise up. RBS could have saved an awful lot of bother by returning to retail and business banking sooner.
Italy needs fewer bad banks – not a big new one 21 Feb 2014 Italian banks need to shed their bad debts to start lending again. But selling poor credits to a national “bad bank” would require likely Prime Minister Matteo Renzi to pump in capital Italy doesn’t have. A mix of bank resolutions and private-sector opportunism is a better cure.
Spanish real estate offers some IPO drought relief 21 Feb 2014 Two property funds are planning Spain’s first IPOs since 2011. Investors would get a direct play on the recovery of the country’s real estate market. But prices keep falling and competition for deals is tough. Much still depends on managers’ ability to spot bargains.
Thai telco bets on yield to defy political turmoil 21 Feb 2014 Protests and low valuations make it an odd time for Jasmine to seek $1.4 bln by spinning off its broadband infrastructure assets. With interest rates expected to rise, issuers are under pressure to act while they can. But winning over investors may require a sweet dividend.
How on earth can Facebook justify WhatsApp price? 20 Feb 2014 It takes extraordinary suspension of disbelief – and a new Breakingviews calculator – to see how the social network can bring the messaging startup’s $19 bln valuation in line with its own. WhatsApp must double its user base and persuade them to pay more. It’s a big stretch.
Miners are finding that disinvestment pays 20 Feb 2014 For an industry wrestling with the end of a once-in-a-lifetime demand surge, big miners aren’t faring badly. Prices are still high, and results at Rio Tinto and BHP Billiton show austerity working. Supply trends favor lower ore prices, but diggers may reap big profits for a while yet.
G20 can get past angry stares and platitudes 20 Feb 2014 This weekend, the world’s leading finance ministers will probably argue about U.S. monetary policy and then agree on a bland statement. That would be an opportunity missed. Now is the right time to work hard on safety rules for capital controls and current account excesses.
Nigeria’s oil scandal may yet help it emerge 20 Feb 2014 President Jonathan suspended the central bank chief after he pointed a finger at the state oil company. Local markets roiled, but Nigeria’s non-petroleum economy is actually growing smartly. With any luck, more attention on corruption will curb one of the country’s biggest drags.
ECB uses poor measure to dismiss disinflation fear 20 Feb 2014 The euro zone central bank’s non-worry about deflation is partly based on the market’s long-term inflation expectations. But the ECB’s pet measures look too far in the future to be helpful. And the chosen gauges are so placid that they will probably only move after it’s too late.
WhatsApp’s Chinese copycat deserves its premium 20 Feb 2014 Tencent’s WeChat app is worth around $30 bln. That’s more than the $19 bln Facebook paid for its U.S. rival, even though the Chinese version has two-thirds as many users. But customer numbers matter less than the ability to make money. WeChat’s prospects justify a higher valuation.
BAE investors shoot first, ask questions later 20 Feb 2014 Europe’s largest defence contractor spooked shareholders with a gloomy 2014 outlook and a $1.5 bln writedown. As with Rolls-Royce, investors have been slow to price in the effects of lower U.S. military spending. But the reaction - a 9 pct slump in BAE shares - looks overdone.
No algorithm makes Facebook-WhatsApp deal compute 20 Feb 2014 Mark Zuckerberg’s social network is spending some $19 bln for the 55-employee, 450 mln-user, no-ads messaging service. Facebook says growth is the point, not making money. That’s the kind of magical thinking shareholders signed up for when they surrendered control to the founder.
Rakuten’s buying spree getting harder to justify 20 Feb 2014 The Japanese e-commerce group’s $900 million purchase of online chat app Viber looks a bargain compared with WhatsApp. But Rakuten’s track record is patchy: it has written off $400 million on past acquisitions since 2012. Deals may create buzz, but investors want earnings.
Tesla delivers enough to keep faithful charged up 20 Feb 2014 Elon Musk’s electric carmaker unveiled improving margins, decent sales targets for this year and the prospect of cutting the cost of producing the batteries for its vehicles. That sent the stock to new highs, but at $27 bln Tesla’s valuation is rooted in hope, not reality.
Apollo and TPG try to stack the deck at Caesars 19 Feb 2014 The private equity duo gambled poorly with a 2008 buyout of the casino empire, which has hired Lazard to help it restructure. A $24 bln debt marker led the firms to stash some Caesars aces elsewhere. Junior bondholders are learning that even with a bad hand the house has an edge.
NAFTA’s three heads could haggle better than one 19 Feb 2014 The United States, Canada and Mexico are negotiating separate pacts with EU and Pacific Rim nations. A combined effort, however, would offer more leverage and lead to simplified commerce within North America. The trade accord’s 20th anniversary is a good time to show solidarity.
British retail IPOs: watch the back of the queue 19 Feb 2014 Investors are hungry for new issues, consumers are cheering up, and buyout firms have plenty to offload. So a whole basketful of retailers is set to float. The best have shaken things up by ruling a niche, offering bargains or embracing online. Others will be a harder sell.
Santander gains cheap foothold in France 19 Feb 2014 The Spanish bank is in talks to finance Peugeot’s future sales in 11 European countries as the French state leaves the carmaker’s finance arm. Santander gets access to millions of captive clients and some legacy loans at a discount. Peugeot will benefit from cheaper funding.
EU left with a few bad choices on Ukraine 19 Feb 2014 After clashes left more than 25 dead in Kiev, EU governments want sanctions. But economic measures would be crude. More important, Europe must first decide whether to try to keep on dealing with Ukraine – or to write off partnering with the current regime as a lost cause.
Edward Hadas: AOL, solidarity and health insurance 19 Feb 2014 The head of AOL managed to say something really stupid about employee benefits two weeks ago, and to sound callous while he was at it. It’s a shame Tim Armstrong came off so badly, because he was grappling with a serious topic without an easy solution: How to share costs fairly.
BTG Pactual suffers surprisingly few growing pains 19 Feb 2014 The investment bank run by André Esteves has bought rivals, added staff and is beefing up commodities – a business its Wall Street peers are trimming. And Brazil, its home market, is struggling. Yet last year’s net income only took a 14 pct hit. That shows remarkable resilience.