Glencore’s capital promises are those of a trader 20 Aug 2014 The $80 bln trader-miner is returning $1 bln of cash and has set out a framework for capital management, with wiggle room. That makes sense – miners need flexibility on M&A and capex. Glencore’s owner-manager ethos gives credibility to its broad commitment to shareholder returns.
Bank of England split adds muddle to confusion 20 Aug 2014 Two of the nine members of the UK central bank’s rate-setting committee voted to increase rates. There is good evidence of job market tightening. But inflation is still falling. Markets don’t know which way to turn. Neither, it seems, does the BoE.
Edward Hadas: Time to retire unemployment 20 Aug 2014 The world’s central bankers are discussing “labour market dynamics” at this week’s annual Jackson Hole conference. A good place to start is with the most widely-used monitor, the unemployment rate. It is well past its sell-by date. A “bad job index” would serve a better purpose.
Fed adds urgency to Indonesia’s fuel reform test 20 Aug 2014 President-elect Joko Widodo’s first big challenge will be to rethink the country’s $30 billion energy subsidy. Though higher fuel prices will be unpopular, the handout boosts the trade deficit. That makes Indonesia extra vulnerable to capital flight when U.S. interest rates rise.
China e-commerce groups fight for pseudo-supremacy 20 Aug 2014 Market share is a big driver of value, but with so many ways to carve up a $308 bln sector, everyone seems to be number one for something. On the measures most relevant for shoppers, Alibaba is the clear victor. But JD.com looks better placed for a richer, more discerning China.
U.S. farm credit looks safer than houses 19 Aug 2014 Washington’s $200 billion-plus subsidized agricultural lending complex includes Farmer Mac, a rural copy of ill-fated Fannie Mae and Freddie Mac. Despite a hot farmland market, though, the system looks ruggedly capitalized enough to avoid the bailout fate of the home-loan behemoths.
Carillion’s new Balfour offer still falls short 19 Aug 2014 The plan to merge the UK construction groups always looked fraught. The potential for cost savings is high, but Carillion has left questions about execution risk unanswered. Its proposal is also less generous than its 36 pct premium claim implies. Balfour can remain stony-faced.
Brasilia’s amateur electricians spark power crisis 19 Aug 2014 President Dilma Rousseff chose the wrong tool to reduce the country’s sky-high electricity bills. Back in 2012, she forced utilities to cut prices. Helped by a drought, that has brought financial losses and bailouts. Now Brazil faces rationing, a bump in prices, or both.
BHP spin-off won’t appeal to commodity players 19 Aug 2014 The mining giant plans to hive off some assets into a new company. The prices of nickel and aluminium, two of its key products, are rising. Investors could use the new firm to follow the trends. But they probably won’t. There are purer plays and better-diversified producers.
Beware of surges in infrastructure investment 19 Aug 2014 When growth is slow or when resource wealth is pouring in, developing country governments often ramp up investment programs. An IMF paper shows these surges don’t boost GDP, largely because so much money is wasted. State investments should progress with the rest of the economy.
Sinopec petrol sale attracts a motley bunch 19 Aug 2014 The Chinese oil giant is seeking investors for its vast network of filling stations. Retail, energy, technology and private equity groups are keen. With a price tag of $16 bln for a minority stake, they will have to club together. That will make it harder to exert influence.
China bank capital raisings look opportunistic 19 Aug 2014 Lenders like ICBC and CCB are issuing bonds and preference shares at competitive prices. They can do so because of hazy reform prospects and the appearance they don’t need the money. Yet growing lending and rising bad debts mean the case for investing in the instruments is weak.
Buyout fund investors may need parcel protection 18 Aug 2014 As companies flex their stock and synergy muscles in this year’s M&A revival, private equity firms have resorted to buying mainly from each other. So-called pass-the-parcel deals tend to generate weaker returns. Limited partners could justifiably seek curbs on their use.
Dollar store bid battle leaves value on the table 18 Aug 2014 Dollar General’s $9.7 bln offer for rival U.S. discount retailer Family Dollar tops an earlier bid from Dollar Tree. The new suitor is also offering all cash instead of part shares and may be a better fit. But there’s room for either to lob in a few more singles to clinch a deal.
Rocket Internet’s booster ups risk-reward profile 18 Aug 2014 The German dotcom duplicator says it’s worth 4.3 bln euros after fresh investment. That’s a third more than its value a fortnight ago, with new assets. Investors in a possible IPO would still need to stomach a combination of emerging-market, early-stage investing and tech risks.
London-UK house-price divergence is manna for BoE 18 Aug 2014 Property asking prices in England and Wales are falling, led by the capital. London may now revert to underperforming, while nationwide house-price inflation settles to a safe level. The Bank of England could keep rates low and encourage price rises where they’re needed.
Brazilian broadband battle is all about Bollore 18 Aug 2014 Telefonica and Telecom Italia are vying to buy GVT from Vivendi for $9 bln or more. The stakes are high and everything hinges on the French group’s new boss, Vincent Bollore. He may see more value in an Italian deal - even if this recalls Vivendi’s unhappy conglomerate past.
German yield curve is the safest one to play 18 Aug 2014 The spread between short- and long-dated bond yields keeps shrinking in the UK, United States and Germany. Stronger economic activity explains the Anglo-Saxon moves, economic weakness drives the Teutonic trend. The trade that relies on euro zone frailty looks the least risky.
Fear is key to Ebola’s economic contagion 18 Aug 2014 The virus ravaging parts of Africa has yet to spread elsewhere. Yet Asia’s SARS crisis in 2003 showed how changes to behaviour can hurt growth and productivity more than an actual disease. Ebola seems harder to catch, but more deadly. That could make for a more pronounced effect.
Coke investment reveals half-empty idea bottle 15 Aug 2014 The beverage behemoth is paying $2.2 bln for 17 pct of the trendy energy-drink maker Monster. It goes to show that even a $176 bln global powerhouse with significant distribution and marketing advantages can struggle to stay ahead. At least Coke got the deal formula right.
Hollywood’s summer blockbuster: cinema survival 15 Aug 2014 The latest box-office slump is a movie seen many times before by U.S. exhibitors. Premier League soccer and 3D films may help underpin valuations for AMC, Regal and Cinemark, while China expansion should propel IMAX. The threat of new technology, though, is a real cliffhanger.
BHP cheer shows premium on focus 15 Aug 2014 The miner’s shares rose on news its demerger idea is nearer fruition. A split won’t transform the business, and it’s hard to see the separated $12 bln-plus unit being bid for. But simplicity is in vogue. So creating stocks for distinct investor bases can create shareholder value.
Edward Hadas: Illiberal economics is here to stay 15 Aug 2014 The majority of voters in Russia, Turkey and Hungary have all endorsed governments run by charismatic and bullying strongmen. China seems to be getting more authoritarian too. The economic problems with these arrangements are large. But that doesn’t mean the systems are doomed.
French carmaker teaches world about cheap autos 15 Aug 2014 Renault’s no-frills brand Dacia is Europe’s fastest growing carmaker. Quick gains in market share and rich margins are arousing the interest of rivals, including GM. But selling vehicles for as little as 5,995 pounds isn’t easy. It requires a rethink of all aspects of carmaking.
Alibaba deal spree turns from romance to thriller 15 Aug 2014 A Hong Kong-listed movie company has revealed accounting problems four months after the e-commerce giant bought a stake. It’s not clear whether Alibaba’s controls were flawed. But investors in its upcoming IPO may be less confident about the company’s investment binge.
Japan’s pension fix needs workers to toil longer 15 Aug 2014 Prime Minister Shinzo Abe wants funds to earn higher returns by switching into equities. But with life expectancy already above 80, sweating existing assets won’t suffice. Nor will overburdened workers pay more to expand the kitty. Raising the retirement age is Japan’s best bet.
Bain beats TPG in China store wars 15 Aug 2014 Each buyout firm is struggling to turn around a Chinese retailer that over-expanded in boom years. Bain’s investment in electronics seller GOME may pay off. But TPG, which bet on shoemaker Li Ning, looks to have bitten off more than it can chew.
U.S. commercial and legal reach pegged to dollar 14 Aug 2014 Whether fining foreign banks like BNP or barring U.S. firms from business with governments it wants to punish, Uncle Sam has huge global clout. Having big companies and banks is part of it, but issuing the world’s reserve currency – and clearing trades at home - may do more.
Venezuela digs way to distressed seller status 14 Aug 2014 The country wants to offload Citgo, its U.S. refinery and pipelines unit. It may be worth up to $15 bln, money that’s sorely needed thanks to President Nicolas Maduro’s barmy economic policies. And the drop in value of heavy-oil assets like Citgo owns makes it a bad time to sell.
Detroit faces bumpy road out of bankruptcy 14 Aug 2014 The Motor City has deals with most of its creditors, pending court approval later this month. Plans could still go sideways if holdout bond insurers persuade the judge they’re getting shafted. That’s a stretch, but the legal wrangling alone could slow the city’s momentum.