Wary Chinese shoppers pressure consumer earnings 28 May 2014 Chinese consumption is flagging. That’s bad for supermarket operator China Resources Enterprise, whose profits fell even as revenue rose. Noodle-maker Tingyi and paper group Vinda spent more to reach thrifty customers. The trend calls high sector earnings multiples into doubt.
Qihoo disrupts the disruptors of Chinese internet 28 May 2014 The software company doubled its revenue in the first quarter, and has won 25 pct of China’s search market in just two years. Its business model – free anti-virus apps – makes it an unlikely foil to giants like Baidu. But an early march into mobile gives Qihoo nuisance value.
U.S. energy independence death greatly exaggerated 27 May 2014 A new government report slashes California’s estimated oil endowment by 96 pct, roughly halving the nation’s supply of frackable crude. But it only impacts total resources, not reserves that can be drilled profitably. These remain intact, as do U.S. hopes of curbing oil imports.
Guest view: Let sun shine on corporate donations 27 May 2014 Fresh from governance wins on dual-class shares and golden parachutes, Teamsters boss James Hoffa is taking aim at the growing role of companies in U.S. elections. Investors ought to know about these campaign contributions, he says. And it’s up to the SEC to force disclosure.
P2P looks more enticing than Lloyds’ TSB 27 May 2014 Hedge fund Marshall Wace is offering immediate returns of up to 15 pct for investors in its new peer-to-peer lending vehicle. Lloyds’ soon-to-be listed TSB retail bank offers single-digit returns now and no dividends until 2018. To secure interest, a hefty discount is warranted.
Pilgrim’s Pride positions itself atop food chain 27 May 2014 The U.S. poultry group is offering $6.4 bln for Hillshire Brands, two weeks after the sausage maker proposed to buy Pinnacle Foods. The earlier deal hasn’t satisfied investor palates. Intended or not, though, it did at least smoke out a strategically and financially superior bid.
Patent trolls again elude would-be captors 27 May 2014 The U.S. Supreme Court roughed up the infringement-lawsuit racket by giving its targets more leeway to recoup legal fees. New coverage for such costs provides a workaround, however. And with legislation just killed to rein in trolls, they seem free to prey on companies unscathed.
Italy’s lesson for Europe: do your homework 27 May 2014 Matteo Renzi’s European election triumph will supercharge his reforms. The solid showing for a mainline party, despite a sickly economy, demonstrates that a strong domestic politician can be more appealing than euro-bashing. Hollande and Cameron could learn from the Italian PM.
Tighter regulations test illiquidity taboo 27 May 2014 Investment banks have pulled back from some once-lucrative trading businesses. Shareholders may regret the earnings hit and clients may bemoan wider spreads from less liquidity. That, though, may help the economy if the effect is mostly to reduce unhealthy financial activity.
Modi’s slimmed-down team can speed Indian reforms 27 May 2014 The prime minister’s newly inaugurated ministerial team is a third smaller than the previous government. Merging ministries like coal and power will enable Narendra Modi to quicken notoriously slow decision-making. That’s key to sustaining investors’ revived confidence.
Piketty spreadsheets set bad Excel example 27 May 2014 Authors who submit data to scrutiny deserve applause. The Financial Times’ critique of the French economist’s work shows it’s also risky. In a broad study, errors are almost inevitable. But Piketty could have helped himself – and the dismal science – with better Excel etiquette.
China’s state-private battle takes to the skies 27 May 2014 Spring Airlines is typical of companies taking on government-backed rivals with a good idea and a knack for cutting costs. Help can come from unexpected places, like vain local authorities. Even if the upstarts don’t win the war, China is better off for their efforts.
Hugo Dixon: EU leaders need to kickstart reform 26 May 2014 Much of Europe’s political elite was mauled in elections for the pan-continental Parliament. The convincing response is to reform. This means choosing a dynamic team to run the Commission, boosting competitiveness, and stopping EU meddling in things best left to individual states.
Failed bid would leave Astra under pressure 26 May 2014 Pfizer looks foolish for the way it handled a $119 bln offer for the UK drugmaker. But its shares have barely suffered. Astra remains independent and yet it is now under more scrutiny. Some of its shareholders welcomed a possible takeover - and could again.
U.S. firms get caught in China spying crossfire 26 May 2014 China has threatened to block foreign companies due to a cyber espionage row with the United States. For most groups, the People’s Republic is still a small proportion of sales, but a bigger share of potential new orders. China’s weapon is shutting them out from future growth.
China ruling does little to end foreign audit spat 26 May 2014 A Hong Kong judge says Ernst & Young should have handed papers on a Chinese client to local regulators. It has been too easy for auditors to use strict mainland rules as a shield. But the big problem remains unsolved: how accountants can satisfy two apparently opposing systems.
Economic nationalism can mar Indonesia’s prospects 26 May 2014 The country’s two presidential hopefuls are chanting the mantra of self-sufficiency. Deepening Indonesia’s engagement with the world is a more urgent priority. The economy needs a big productivity boost. That will elude it if politicians keep making a virtue of insular policies.
Hacked eBay exposes itself to another attack 23 May 2014 Carl Icahn buried the hatchet with the online auctioneer’s board before it came out that records of 145 mln customers were breached. Similar cracks just cost the boss of retailer Target his job. That leaves an opening for another investor to pressure eBay’s CEO and directors.
Colombia will have to settle for Latam second best 23 May 2014 President Juan Manuel Santos is on his way to winning re-election after helping propel his country’s economic fortunes. Nevertheless, Colombia faces serious geographic, political and social constraints. That means Chile should retain its singular gold-plated status in the region.
Barclays sets gold standard in bad culture – again 23 May 2014 The UK bank has been fined 26 mln stg for rigging gold reference prices. One of its traders legged over a client with a false sell order just a day after the bank’s Libor settlement. Barclays may be trying to change, but incidents like this show how far it has to go.
Bank of England can overlook Russia’s problems 23 May 2014 Rising house prices might encourage the British central bank to increase rates. But the boom is mostly in London, and has been amplified by a surge of flight capital from Russia. When that fades, the economy will look less unbalanced, and a strong pound may be less of a problem.
Spanish boards: a country for old men 23 May 2014 Company directors in Spain are older, and boards are larger and less diverse than the European average. The biggest groups have been run by the same bosses for over a decade. Change isn´t likely to come from within. It’s up to investors to demand a governance shakeup.
Unavoidable coup is awful for Thai economy 23 May 2014 The latest military takeover fills a power void, but won’t heal the country’s deep divisions. As in 2006, junta-initiated “reform” may be a ruse for the elite to deny political control to rice farmers. The increased risk of violent conflict leaves the economy further adrift.
Dull industrials could make shiny tax-arb targets 22 May 2014 Juiced up on drug deals that promise big tax savings, like Pfizer’s bid for Astra, bankers are pitching copycat transactions before Congress gets wise. Tyco, Ingersoll-Rand and Pentair went abroad during a previous exodus and may tempt acquirers seeking inversions of their own.
M&A targets can get stiffed when they "go shop" 22 May 2014 The tactic of seeking bids after signing up a buyer is meant to ensure top dollar. More often, it leads to low offers and sale prices, new research shows. Deals like Media General’s buyout of Lin Media suggest sellers are wising up, though, portending better value for investors.
Jumbo fine could help BNP out of U.S. morass 22 May 2014 The French bank’s penalty for alleged sanctions violations could reportedly entail short-term curbs on its U.S. business, with unpredictable consequences. If a bigger upfront fine offers the chance to avoid that outcome, BNP should go for it – even if dividends suffer.
Wal-Mart can win leading the way on minimum wage 22 May 2014 The mega-retailer’s labor costs would rise by $2 bln with a higher U.S. pay floor. But it also has more low-wage customers than employees, thus translating into a net gain in earnings, a Breakingviews analysis shows. Taking a stand on the issue could pay off for Wal-Mart.
Falling U.S. margin debt presages equity trouble 22 May 2014 A drop in loans which use shares as collateral has long spelled market trouble. A recent decline may be due to reduced investor optimism about growth and profits, or a somewhat less generous Fed. Either way, it looks like stock markets could flag, or fall, in coming months.
Hess $2.9 bln sale vindicates high-octane activism 22 May 2014 The oil industry laggard will shed its retail outlets to refiner Marathon and focus on lucrative exploration. Hedge fund Elliott can take credit for the transformation that has allowed Hess to catch up with rivals. It’s more evidence that uppity investors can drive useful change.
Cheap Japanese debt is secret sauce in Ragu sale 22 May 2014 Mizkan, a closely held rice-vinegar maker, is buying Unilever’s U.S. Ragu and Bertolli brands for $2.15 bln. Paying 3.6 times sales in the mature pasta-sauce market looks rich. For the Japanese buyer, the flavour is sweetened by low rates and a shrinking domestic market.