BoE suspension underscores FX market limbo 5 Mar 2014 The central bank has suspended an official as it probes who knew what about alleged foreign exchange rigging. Being transparent may help avoid the mess it got into with Libor. But the move does not address the pressing need to clarify what is acceptable practice in FX.
SFR sale would transform French telecoms 5 Mar 2014 Vivendi may sell its mobile unit to Numericable or Bouygues for 15 bln euros or more. The first option creates a big “quad-play” rival to Orange. The second curbs competition in France’s tough mobile market. Failure will hurt whoever loses. And more M&A could follow.
Edward Hadas: The ongoing ethics struggle of banks 5 Mar 2014 The boss of Credit Suisse blamed a few private bankers for recent U.S. legal problems. The Employees Association wants management to take more responsibility. Such blame-casting misses the point. In too many businesses, the culture encourages ignoring the voice of conscience.
Energy titans tap yet another dry well: inequality 5 Mar 2014 The industry’s grandees are gathered for their annual confab in Houston, celebrating shale and lamenting higher costs. Amid the hoopla, Chevron CEO John Watson said renewable policies hurt the poor while BHP boss Andrew Mackenzie claimed oil can help them. That’s all a bit rich.
Bondholders will have to pay for Ukraine’s reset 5 Mar 2014 The country’s bonds keep sinking in spite of an upcoming IMF package. Creditors are facing either a soft debt rescheduling or more radical haircuts. The risks of austerity, devaluation and continued political uncertainty all point to the latter. Market prices still look rosy.
StanChart does just enough to ease capital doubts 5 Mar 2014 The emerging market lender fell off its growth pedestal in 2013, as rising bad debt and a goodwill charge dragged down earnings. There’s no prospect of an immediate pickup. But robust capital ratios and a higher dividend should help dispel lingering fears of an equity injection.
Carlyle’s $1.9 bln Korea deal bets paranoia pays 5 Mar 2014 The buyout firm is purchasing Tyco’s security business in South Korea for three times revenue and 11 times EBITDA. That looks punchy. Koreans are reluctant users of alarm systems - even safer Japan has more. If incomes continue to rise and inequality increases, that will change.
Singapore is not the world’s most expensive city 5 Mar 2014 A survey that labelled the city-state the world’s costliest place to live suffers from a flawed methodology. Measuring the price of bread or petrol in U.S. dollars is not the right comparison. Consumers care about quality of life - in the currency in which they earn their living.
Chinese solar troubles go deeper than debt 5 Mar 2014 LDK Solar is trying to avoid the fate of bankrupt rival Suntech. Yet even if it could restructure away its debts, LDK’s high costs make it look uncompetitive. Peers like GCL Poly seem overvalued, pricing in a solar renewal that may not last.
China’s internet still has room for the little guy 5 Mar 2014 Shares of YY, a lesser known social network, rose 14.9 pct after it beat estimates. YY has two things going for it: some unusual technology, and positive earnings. That may not be enough to elbow aside China’s tech giants, but down the line it might help it get bought by one.
Ken Moelis engineers the deal of his lifetime 4 Mar 2014 The investment banker is taking his eponymous 7-year-old firm public. It may be worth some $2 bln. By stretching the limits of corporate governance, Moelis will wield exceptional control. For potential investors this is a chance to grab onto his coattails – and not much more.
Freeport-McMoRan shows pay votes have some bite 4 Mar 2014 The copper miner is slashing base salaries for top execs including Chairman James Moffett after shareholders opposed pay practices twice in three years. Freeport needs to do more to put governance on a sound footing. But the changes show say-on-pay isn’t a toothless tiger.
Markets too bullish on Putin’s mind games 4 Mar 2014 The Moscow stock market rose more than 5 pct after President Vladimir Putin seemed to tone down his rhetoric on Ukraine. After a 10 pct fall the day before, investors focused on the good news. They may have misinterpreted the Russian leader’s cryptic pronouncements.
Apple CFO handover shows off big company mettle 4 Mar 2014 Peter Oppenheimer’s exit and move to Goldman’s board look well orchestrated, especially for tech-land. Investors want that from a $470 bln company with $159 bln in cash. The trick is to not let an establishment mindset take hold. Apple’s success is based on disruptive products.
Wall Street sings from same dismal FICC sheet 4 Mar 2014 Jefferies has joined Citigroup and JPMorgan saying trading revenue is down by at least 15 pct this year. Some pain was expected. What’s odd is that banks seem to be suffering equally. It’s a potentially worrying sign if even having a distinctive business model doesn’t help.
CoCo pricing looks a little loco 4 Mar 2014 The newish market in contingent capital bonds is growing fast. But when it comes to pricing, it is immature. One example: investors ignore the way credit risk increases with maturity. Time may iron out pricing inefficiencies. The risk is that reality dawns after a sudden shock.
Talk of Russian asset freeze is empty rhetoric 4 Mar 2014 The U.S. and Europe are mulling a freeze on the western assets of Russian officials to punish Vladimir Putin’s actions in Crimea. That would be impossible to do legally and fairly. Better address the core of the problem: banks’ eagerness to accept shady money from Russia.
China’s savviest developer shows property strains 4 Mar 2014 SOHO’s earnings fell 47 percent in the second half of 2013. A shift from sales to letting means cash flows are dwindling. When the most financially sophisticated players show cracks, it’s time to worry. At least SOHO’s lenders are supportive. Lesser rivals may be less fortunate.
RWE stock electrified by misguided overconfidence 4 Mar 2014 The power generator endured an awful 2013, culminating in a net loss of 2.8 bln euros. The shares are up 41 pct since August, but Germany’s move to green energy remains a challenge and RWE might need a capital hike. This is still a risky stock.
Glencore resilience vindicates hybrid model 4 Mar 2014 The commodity trader’s revenue was flattish in 2013, despite weaker metals prices. Leverage will ease this year as capex falls and synergies from the Xstrata deal kick in. Glencore isn’t immune to falling prices but its integrated trading and mining model looks ever more attractive.
Li Ka-shing dual listing plan more than cosmetic 4 Mar 2014 The tycoon wants to list his A.S. Watson unit in London or Singapore as well as Hong Kong. For most companies the attractions of multiple listings are skin deep. But if the health and beauty retailer can claw its way into several benchmark indices, it could prove an exception.
Tobacco deal may work if survives regulatory fire 4 Mar 2014 Reynolds American might be mulling a bid for rival Lorillard. Similar deals suggest the Camel cigarette maker could sensibly stretch to offer a 30 pct premium. The strategic benefits are also fairly clear. But antitrust and other watchdogs may send any transaction up in smoke.
Sun Art shows foreign retailers can crack China 4 Mar 2014 The French-Taiwanese hypermarket operator boosted net profit by 15 percent last year, even as rival Wal-Mart struggled on the mainland and Tesco pulled out. Tight control of operating costs was crucial to its success. Encroaching online rivals make that all the more important.
Mexican oil cash cow could go dry absent tax fixes 3 Mar 2014 Pemex’s quarterly pre-tax profit dropped 30 pct to $10 bln, but the energy giant had to pay $16 bln in government levies. Investment and production predictably suffered. President Peña Nieto’s revenue-raising reforms and plans to let in foreign cash can’t be enacted too soon.
Soaring corporate legal eagles on precarious perch 3 Mar 2014 Credit Suisse and others are eschewing costly outside counsel in matters ranging from big cases to CEO advice at U.S. Senate hearings. But as the ex-law chiefs at Pfizer and Wellpoint can attest, that puts pressure on in-house attorneys. They’re easy targets if things go awry.
Crimea could be spark for bigger Western selloff 3 Mar 2014 Russia’s intervention in Ukraine has hit global stocks. Investors are likely to pull even more money out of emerging markets. Their faith in developed equities, especially in Europe, has survived previous stumbles. But it’s now on shakier ground given how expensive shares look.
Inverses Buffett and Icahn correlate many ways too 3 Mar 2014 The billionaires are touting their respective returns and investment approaches in shareholder letters. While time horizons and styles distinguish them, both outperform the market by playing hardball and trading on personal brands. Neither can be easily replicated either.
U.S. is minimum-wage laggard given its prosperity 3 Mar 2014 With Washington considering a higher pay floor and Peru’s prime minister losing his job over the issue, a Breakingviews analysis shows global minimum wages as a percentage of per-capita GDP vary widely. By this measure, the U.S. and, say, Mexico have plenty of space to lift pay.
Slicing the cake better can make it bigger 3 Mar 2014 A new IMF study finds inequality makes economies smaller. Efforts to redistribute income may make growth higher and more sustainable. That looks right. But the challenges are huge. Governments must be honest and get the policies right. The study’s lessons could be misapplied.
Ukraine crisis dents EU banks’ recovery plans 3 Mar 2014 Shares in France’s SocGen and Austria’s Raiffeisen have fallen sharply. European banks have been looking to Russia to juice up humdrum returns and/or weak capital positions. While Russian lenders like Sberbank are more at risk, the fallout could mess up a few turnaround plans.