South Africa’s bank bail-in better than Portugal’s 11 Aug 2014 A public bailout for reckless ABIL is sub-optimal. But unlike Portugal’s BES rescue, senior creditors will take some losses. And while taxpayers remain exposed to the new bad bank, the political desire to maintain lending capacity to poorer citizens is understandable.
Pure politics can’t revive Italy’s coma economy 11 Aug 2014 Prime Minister Matteo Renzi offers promises and constitutional change, but has delayed tough reforms. Europe’s fourth-biggest economy is stuck in perma-recession. To awake from its deep sleep, Italy needs far more radical changes than are on offer.
Wary India investors can wet their toes with REITs 11 Aug 2014 Newly approved real estate investment trusts may hasten the return of the nation’s stagflation-scarred retail investors. Property can be a better alternative to gold and REITS may revive hunger for equities. Builders could use them to mend balance sheets, and fund new assets.
China’s e-commerce secret weapon: the delivery guy 11 Aug 2014 Fast, cheap delivery has fuelled online shopping, and the growth of companies like Alibaba and JD.com. Thank a plentiful workforce of low-cost couriers that U.S. rivals can only dream of. While that can last for a few more years, unhelpful demographic change is in the post.
Behold the unversion: an inversion in all but name 8 Aug 2014 U.S.-based data protection firm SafeNet may slash its tax rate as part of a cross-border deal. Instead of doing so by acquiring overseas, though, it is simply selling itself to Dutch digital security company Gemalto. It shows the limitations of a possible ban on inversions.
Pemex troubles could drag down Mexican oil 8 Aug 2014 The nation is lifting its 75-year ban on private drilling while easing costs at the state-owned energy giant. That may boost falling output but won’t do much to make Pemex more efficient. Without a broader overhaul of the company, plans for an oil and gas revival may flounder.
Credit score change tests U.S. bank reform resolve 8 Aug 2014 Revising so-called FICO math mainly reflects political pressure to help more Americans borrow. It’s a bit like the government’s push for home ownership before the 2008 crisis. So far, bank regulators are mostly still leaning the other way. But lenders can also play their part.
German entry into select bond club would bode ill 8 Aug 2014 Ten-year Bunds look set to fall below 1 percent for the first time. Germany would then join Japan and Switzerland in being able to borrow for so long for so little. But ultra-cheap debt seems to accompany weak growth and too-low inflation, and lead to desperate policy measures.
Metalworkers, not McKinsey, bend VW to their will 8 Aug 2014 The U.S. consultant has advised some of the most conservative institutions in the world – the Bank of England, even the Vatican. But that hasn’t stopped unions forcing the German carmaker to show it the door. It flags how hard it will be to execute VW’s turnaround plan.
BlackRock is right: European IPOs need more work 8 Aug 2014 The giant investor is griping again about new issues. In structure and deal volume, the market is far healthier than when BlackRock spoke out in 2011. Performance is OK, barring a few duds. But there are still too many banks per deal and buyers are still rushed into decisions.
Demographic doomsayers missing shades of grey 8 Aug 2014 Moody’s is the latest to predict slower GDP growth in ageing nations. Reality is likely to be much less gloomy. Besides, economic output is an especially poor gauge of prosperity when population gains slow and reverse. It’s the debt in the census trends that looks burdensome.
Malaysia throws airline investors a parachute 8 Aug 2014 The state investment fund is paying $436 million to buy out the remaining shares of Malaysia Airlines. The offer gives investors a price they last saw in February, before the already-troubled carrier was struck by two disasters. Taxpayers and employees may not be so fortunate.
China’s censors dim Tencent’s overseas push 8 Aug 2014 New rules to deter online rumours knocked $5.6 bln of market value off the owner of messaging app WeChat on Aug. 7. Tencent’s core gaming revenue shouldn’t suffer. But the crackdown comes amid a fierce global land grab by chat apps. China’s paranoia could help foreign rivals.
China’s antitrust drive: a guide for the perplexed 8 Aug 2014 Beijing’s competition agencies are on the warpath. Foreign automakers, consumer groups and tech firms have all faced scrutiny. Is China serious about breaking monopolies, or is it just practicing industrial policy in disguise? Breakingviews explains what’s behind the crackdown.
Private equity discord is best collusion defense 7 Aug 2014 Blackstone, KKR and TPG are paying $325 mln to resolve allegations that they conspired to limit buyout prices. Three other firms previously settled for less. Carlyle is holding out for now. Legally, there’s safety in numbers. Yet they can’t even agree on how to resolve the case.
BofA swaps legal fight for earnings battle 7 Aug 2014 A $16.5 billion settlement with the U.S. government would resolve most of the bank’s mortgage woes. But CEO Brian Moynihan needs to find up to $10 billion extra a year to create a respectable bottom line. That will require costs cuts, tax breaks and higher interest rates.
Rob Cox: Ushering Eric Cantor to revolving door 7 Aug 2014 The summer parlor game from Wall Street to K Street to Meadow Lane in the Hamptons is guessing where the former U.S. House majority leader will work after decamping from Congress. It’s easy to imagine how a recruiter might try to put his experience to good – and lucrative – use.
Colombia sets example for U.S. and Africa alike 7 Aug 2014 Small deficits and sound monetary policy contrast with Uncle Sam’s. And the Latam nation’s rapid growth puts similarly-sized South Africa and others in the shade. Peace, new infrastructure and pragmatism should help make President Santos’ second term another economic success.
Euro zone’s biggest problem is debt, not slow growth 7 Aug 2014 Growth is stumbling in Italy, Germany and elsewhere. That in itself would not be a huge problem – except that the sovereign debt mountain has kept growing even in “austere” years. This means states cannot spend their way out of trouble, and another crisis remains a real risk.
Portugal bank panic betrays more than bad judgment 7 Aug 2014 Investors are fretting that Portuguese banks will have to pay for BES’s bailout. That mistakenly assumes new “good bank” Novo Banco is worthless. A better target for scepticism is BES’s bad bank, which looks overvalued. The real problem is Lisbon’s ropey record on bank oversight.
Fiat-Chrysler can steer past bump in the road 7 Aug 2014 Fiat’s falling share price complicates its Chrysler merger. CEO Sergio Marchionne’s grand plan to unify the Italian carmaker and its American subsidiary will survive, but Fiat-Chrysler’s U.S. float may be delayed. The Fiat drop also presents a trading opportunity for the brave.
Yuan’s rise driven more by fear than fundamentals 7 Aug 2014 After months of weakening, the Chinese currency has reversed course. Policymakers are also rethinking their timetable for making it basically freely tradable. Even if intentions are good, fear of damaging capital inflows and outflows makes it hard for the central bank to let go.
China index: Beijing cleans up skies, not its act 7 Aug 2014 Air in the capital is the cleanest it has been since 2011, data shows. Dirty industrials are leaving town or even shutting down amid a weak economy, but that’s no real fix. Clean, sustainable growth across China needs robust institutions with persuasive carrots and sticks.
Walgreen encounters uncommon inversion boundary 6 Aug 2014 The drugstore chain will keep flying the U.S. flag even after buying the rest of Swiss-based Alliance Boots for $15 bln. A backlash against corporate emigration may have affected Walgreen’s decision, but harder numbers probably mattered more. Expect more tax arbitrage deals.
Edward Hadas: Why the global recovery is so slow 6 Aug 2014 Reducing GDP growth forecasts has become an annual ritual. The main problem isn’t bad monetary and fiscal policy, as the secular stagnation theory claims. Blame the stifling effect of excessive debt and asymmetric modern labour practices. The best cure is to focus on jobs.
Wall Street watchdog looks wimpy ducking court 6 Aug 2014 The SEC is using its own administrative judges to hear more complaints, as the Dodd-Frank law allows. That may make lawsuits easier to win, but it weakens judicial oversight and suspects’ legal rights. Stronger cases, not friendlier jurists, would serve the regulator better.
Forget Espirito Santo: EU bank reform is on track 6 Aug 2014 The implosion of the Portuguese bank is a bad precursor for Europe’s nascent banking union. The ECB shares some blame, but has yet to properly start regulating European banks. And BES’s incestuous structure and seemingly illegal activities should hopefully make it a one-off.
Deal rebound was bound to bring failed M&A 6 Aug 2014 Fox’s bid for Time Warner and Sprint’s tilt at T-Mobile US are the latest big deals to fall over. Collapses accompany M&A booms. Rising confidence spurs bidders to take bigger risks - and encourages targets to hold out for more. And the bolder the deal, the more regulators fret.
Dollar set to take pound’s strong currency title 6 Aug 2014 Sterling became the FX market strongman during the past year as investors started to believe the UK would be the first big economy to raise rates. They may be right. Even so, shifting market expectations of when U.S. rates will be hiked now look set to boost the dollar.
Bilfinger’s best option could be a breakup 6 Aug 2014 Two profit warnings in five weeks have wiped a third off the German industrial services group’s share price, costing the CEO his job. Unless it can be turned around, Bilfinger’s unwieldy structure and muted growth prospects make a breakup as plausible as a full sale.