China gives pointers in West’s war on bank culture 20 Nov 2014 Chinese bankers who allegedly helped a rogue CEO siphon off $102 mln have some things in common with London’s abusive FX traders. Institutions are sprawling, regulators weak and loyalties mainly local. At least China’s willingness to micromanage ought to help curb bad behaviour.
Brazil faces its come-to-Corcovado moment 19 Nov 2014 A corruption scandal at $63 bln national oil champion Petrobras is unfolding quickly with news that one executive has been fired and about 15 more fingered. Writedowns could hit $15 bln and political fallout may spread. The debacle affords Brazil an opportunity for major reform.
Pharma market failure gets a charitable cure 19 Nov 2014 The Cystic Fibrosis Foundation helped fund a successful treatment for the deadly lung disease, stepping up when private investors wouldn’t. Its reward: $3.3 bln for rights to the new medication. So-called venture philanthropy could be the model for kick-starting drug development.
Booming euro zone surplus is sign of sick economy 19 Nov 2014 The single currency region has a higher current account surplus than China, and it’s rising. Credit German export strength and recovering periphery economies, but blame weak domestic demand. That creates a major global imbalance. There’s nothing to celebrate.
Activist row bigger than Keystone for TransCanada 19 Nov 2014 A sparring match with a dissident investor may be more important than the fate of the $35 bln Canadian group’s tar sands pipeline. Bay Street has welcomed activists, and the regulatory environment is favorable. But for now, TransCanada appears to have shareholders on its side.
Areva holders pay for years of state blunders 19 Nov 2014 The French nuclear plant maker lost a fifth of its market cap after a profit warning. The state still owns 90 percent of the group, limiting the damage. But the collapse is an opportunity to review a long series of destructive government errors, both industrial and political.
Parcel pressure weakens Royal Mail investment case 19 Nov 2014 Package delivery is one of the few sources of growth for the UK postal company. But online giant Amazon is now doing its own shipping, leading Royal Mail to cut its revenue aspirations in parcels from 4 pct to 1-2 pct. Grim trading reality is out of kilter with the share price.
Deutsche’s CoCo buyers are not totally irrational 19 Nov 2014 Bank debt that turns into equity when shares are losing value hardly sounds appealing, but the German lender has sold a $1.5 bln tranche of it at a relatively low spread. Why? There’s a 7.5 pct yield, and ECB bond-buying creates scarcity while EU stress tests give comfort.
Rushed BES sale would compound Lisbon’s bank folly 19 Nov 2014 The Bank of Portugal thinks Banco Espirito Santo’s healthy rump can be sold early next year. But dashing to offload Novo Banco could leave other domestic banks with losses. Unless Portuguese bank regulation wants to take another reputational hit, a sale shouldn’t be fast-tracked.
How to make Japan’s tax timetable more credible 19 Nov 2014 Prime Minister Shinzo Abe is seeking a fresh political mandate to delay next year’s planned increase in the sales tax by 18 months. But fragile demand means investors will be sceptical of the new schedule. A better strategy would be to link the tax hike to growth in real wages.
Better returns a bonus from China’s FDI tune-up 19 Nov 2014 The country has $5.9 trillion of foreign assets. But almost two-thirds are currency reserves held by the central bank. The result is that China earns less on these assets than it pays to overseas investors. Rising outbound investment suggests that may slowly change.
Rob Cox: Good news for guns is bad for gunmakers 18 Nov 2014 A Republican U.S. Senate puts a bullet in new federal firearms controls. Yet Colt, maker of the gun that won the West, is short of cash, Moody’s downgraded Remington and shares of Ruger and Smith & Wesson have been clobbered. The industry does better with guns in a corner.
Rupert Murdoch’s M&A arsenal loses some firepower 18 Nov 2014 Time Warner thwarted the mogul’s $80 bln bid in part by denigrating non-voting Fox stock on offer. Now, sister company News Corp’s owners have protested loudly over their dual-share structure. The attention on Murdoch’s weak governance could be costly in future acquisitions.
Uber is one startup that needs to grow up fast 18 Nov 2014 The taxi app’s disregard for rules has spurred it toward a $30 bln valuation. But execs who threaten to “dig up dirt” on critics, employ unsavory tactics against rivals and post stats on clients’ one-night stands pose an existential risk. Such laddishness is bad for business.
Deutsche trading exit as much about bank as market 18 Nov 2014 The German giant is quitting parts of a once-lucrative product it used to dominate – credit default swaps. Regulatory changes are in part to blame. CDS can still be useful tools. But weaker balance sheets than U.S. peers’ make it hard for Deutsche and European banks to trade.
EU needs more confidence for big investment push 18 Nov 2014 There is conceptual agreement on a 300 bln euro investment plan, but a spat on funding. The idea is to rally private investors around public seed money. Governments are willing to take first losses but outsiders will stay away unless politicians put on a better show.
AstraZeneca struggles to advance value defence 18 Nov 2014 The UK pharma group fought Pfizer’s $120 bln bid in May by promising growth. It’s now reiterating punchy sales targets and casting oncology as a new growth driver. In fact, the Astra story has only inched forward. Its defence has been aided most by U.S. curbs on tax-driven M&A.
Foreign banks’ tricky call on Hungary: stay or go? 18 Nov 2014 Prime Minister Viktor Orban wants more of the banking sector owned domestically, and one foreign lender has already quit. The concern is that high-handed regulation intensifies. Yet Budapest’s bank supervision is not yet so unreasonable to make leaving a no-brainer.
Fragile demand syndrome isn’t Japan-only 18 Nov 2014 The sharp demand slowdown after a small tax increase shows how sensitive consumption in ageing and rich countries can be. Japan’s lack of immigrants makes it especially vulnerable, but Europe and the U.S. are not exempt. Demand stimulus will always be on the agenda.
EasyJet can finally close valuation gap on Ryanair 18 Nov 2014 Europe’s second-largest no-frills carrier has set the tone in the sector in recent years. Better customer service on cheap flights propelled a 13 pct rise in earnings. A weak euro may hurt, but the strategy is solid. A 10 pct discount to Ryanair is hard to justify.
Investors carried away with HK Exchange’s options 18 Nov 2014 Expectations for the link-up with Shanghai have boosted shares of the Hong Kong stock market’s owner by 33 pct this year. The tightly-controlled scheme alone doesn’t justify the rally. Investors are betting the connection will get bigger and broader. They will need to be patient.
Indonesia edges away from wasteful handouts 18 Nov 2014 A hike to domestic fuel prices will free up $8 billion that can be used to make manufacturing in the archipelago more competitive. Falling global oil prices should soften the blow for consumers. New President Joko Widodo’s next big task is to scrap such subsidies completely.
Valeant’s activist deal too clever by half 17 Nov 2014 The $45 bln drug company’s tilt at Allergan alongside Bill Ackman’s Pershing Square leaves it with just a modest windfall to show for a seven-month campaign that risked legally questionable tactics. Valeant boss Michael Pearson’s M&A experiment is not one to repeat.
Markets get shot at crisis early warning system 17 Nov 2014 U.S. financial watchdogs now have access to oodles of new data about the $400 trln swaps industry. Mined properly, the information could highlight trends and oddities in time to head off disaster. Breakingviews suggests six dials for regulators to add to their dashboard.
Bill Ackman comes out top in $66 bln pharma deal 17 Nov 2014 The activist will reap more than $2 bln from Actavis buying Allergan. It’s a steep price - cost cuts alone cannot justify the premium paid. And losing bidder Valeant has been hauled over the coals. It will, at least, get a $400 mln consolation prize from former ally Ackman.
Baker Hughes wins tactical $35 bln battle 17 Nov 2014 Playing hard-to-get squeezed a premium north of 50 pct out of Halliburton. The larger U.S. oil services group’s target of $2 bln in annual cost savings just about justifies the price it is paying. But integration challenges and competitive concerns make that look aggressive.
Bond issue disclosure: how not to do it 17 Nov 2014 Shares in Spanish renewables group Abengoa tanked last week amid confusion about a subsidiary’s debt that was variously “recourse,” “non-recourse” and “guaranteed.” The company has now clarified the situation. Issuers this reliant on the debt markets can’t afford such botches.
Regulators wake up to banker salary problem 17 Nov 2014 BoE Governor Mark Carney says we may need global rules to “put fixed pay at risk.” The context is Europe’s bonus cap, which is pushing up bank salaries. Carney thinks a U.S. idea of paying partly in bonds could apply to base compensation. It’s logical – if tricky to implement.
Investors might get hurt in French privatisations 17 Nov 2014 The government is planning to sell 5-10 billion euros of assets this year, starting with stakes in state-owned utilities. That’s welcome, but in the process Paris wants to increase its voting rights of the remaining stakes, disadvantaging outside shareholders.
Guest view: German growth fears are overblown 17 Nov 2014 Recent data from Germany is not as bad as it looks, and EC growth forecasts for the country are too gloomy. Europe’s largest economy is competitive enough to spur growth across the continent next year, says Mark Haefele, global chief investment officer at UBS Wealth Management.