Rampaging animal spirits birth biotech unicorn 18 Dec 2014 The public offering of Juno Therapeutics presents an apt finale to the best year for biotech IPOs. It’s only a year old and revenue free, but its cancer fighting technology is hot. Juno’s $2 bln valuation shows capitalism’s ability to catalyze investors’ hopes and resources.
U.S. bank watchdog judging cost cuts just right 18 Dec 2014 The FDIC’s latest belt tightening means its budget is now 42 percent lower than at its peak. With the OCC warning of lower lending standards, that might sound worrisome. But the FDIC’s actually shifting resources to where they’re needed most – a sign it’s learned from the crisis.
Putin takes up residence in alternate reality 18 Dec 2014 The Russian president insists that prosperity is around the corner if his countrymen can only endure another two bad years. But as sanctions and weak oil prices push Russia towards recession, no serious reform is in sight. Putin’s optimism should be a cause for serious pessimism.
Moscow’s bank largesse has risky quid pro quo 18 Dec 2014 Russia is mobilising state resources and tweaking prudential rules so that banks can avoid capital hits from the current turmoil. Similar measures helped Western banks in 2008. The risk is that the Kremlin will demand credit growth and forgo prudent borrowing.
Aer Lingus attractive yet tricky target for IAG 18 Dec 2014 The Irish carrier has rebuffed an approach by the owner of British Airways. At the right price, Aer Lingus looks like a natural partner for IAG. But its unwieldy shareholder structure – including a large holding by Ryanair – and anti-trust concerns will be obstacles.
Royal Mail points to lesser role for bookrunners 18 Dec 2014 Last year’s much criticised privatisation of the UK postal company did not go so badly after all, a report has found. But it still offers lessons for improving the process of IPO price discovery. Technology can help, as would bookrunners relaxing their grip on information flow.
James Gorman can leave Brian Moynihan in slow lane 18 Dec 2014 The Morgan Stanley and BofA CEOs each marks five years in charge in 2015. Neither has had an easy time of it. Gorman, though, ought to be able to lead his firm back above a 10 pct ROE – an important, if humdrum, ambition. Moynihan’s lending behemoth remains a ways off that.
Swiss give positive lesson in negative rate policy 18 Dec 2014 A safe-haven currency can invite economic trouble. The Swiss central bank is up to the challenge. It started with market intervention and has now introduced a negative overnight rate. The Swiss realise that money is more of a policy tool than a store of value.
Europe’s bank supervisor constricted by slump 18 Dec 2014 The ECB wants to follow its stress test with further harmonisation of European lenders. But as the central bank toys with QE, financial stability may take a back seat. The reform agenda of supervisory chair Danièle Nouy will have to accommodate fears for the area’s growth.
China’s superlative growth looks hard to sustain 18 Dec 2014 Assume the economy expands as briskly in the next 20 years as in the past decade. Its share of world GDP could top 35 percent, a Breakingviews calculator shows. A static workforce would have achieved heroic productivity gains. If it doesn’t, China’s slowdown has only just begun.
Avon exposes ugly side of doing business in China 18 Dec 2014 The U.S. cosmetics company’s Chinese subsidiary gave officials handbags, holidays and cash to access a huge market. The rationale: muddy markets make dirty hands. Avon has learned its lesson with a $135 mln fine. Elsewhere in China, the belief that bribery pays remains engrained.
Uncle Sam closer to nixing one of dumbest policies 17 Dec 2014 President Obama intends to relax the U.S. embargo on Cuba. The egregious restrictions failed in their intent, won little support abroad and served only domestic political purposes. Removing trade barriers will bring a mini economic windfall and, ultimately perhaps, freedom.
Fed builds in wiggle room for rate surprises 17 Dec 2014 The U.S. central bank now puts “patience” above needing “considerable time” for changing monetary policy. It suggests Chair Janet Yellen is focusing more on data than anything else. That could stoke interpretive disagreements on the committee – but also spark unexpected hikes.
Rob Cox: Sony email shareholders would like to see 17 Dec 2014 The hacking scandal at the Japanese conglomerate’s Hollywood studio isn’t just embarrassing. It’s a business problem for a company already struggling to turn itself around. Herewith, a fictional selection of internal messages Sony’s board ought to be fielding.
Europe could edge past U.S. in race to courthouse 17 Dec 2014 New rules and bank scandals boost financial fraud and class-action filings in Britain. Patent combatants flock to German judges. And spats over failed investments clog EU courts. The upshot: a lawsuit boom that may topple America as the world’s business litigation capital.
WPP chair should be vertical as well as horizontal 17 Dec 2014 Martin Sorrell says the ad group’s Chairman-designate Roberto Quarta will help its “horizontality.” The word also sums up the partnership aspect of good CEO-chair relations. But given the WPP CEO’s run-ins with investors, Quarta will want to be a degree higher, not on a level.
M&A "clear day" defenses can cloud investor rights 17 Dec 2014 Anti-takeover protections adopted before threats arise are more apt to weather legal scrutiny. It’s one reason Allergan was able to resist Valeant’s $52 bln bid. When triggered reactively, they’re considered unfair surprises. Either way, shareholders often get unneeded cover.
German Mittelstand will survive higher death tax 17 Dec 2014 The country’s constitutional court has shot down the privileges benefitting the heirs of family firms. Bigger companies face a higher burden, but they can cope. The tax code will be fairer and fiscal revenue could be higher – all without harming Germany’s economic backbone.
Russia’s foreign banks have varying pain barriers 17 Dec 2014 With the Russian banking system hobbled by sanctions, Raiffeisen, UniCredit and SocGen are well placed to grab market share in commercial lending. The vital factor will be how insulated they are against the current turmoil. Some look better placed to tough it out than others.
Baidu’s Uber stake is more hype than substance 17 Dec 2014 The Chinese web giant is already behind rivals Alibaba and Tencent in mobile taxi-apps. Strategically the tie-up looks like a coup. But without financial terms, investors are left in the dark. Uber’s controversial track record and Baidu’s shrinking margins add to the uncertainty.
The too-big-to-fail club will shrink in 2015 17 Dec 2014 The list of global banks deemed systemically important has hardly changed since 2011. But membership now comes with ever-larger capital requirements and increased regulatory meddling. In an attempt to escape, some lenders will decide to become smaller or less interconnected.
Chinese companies will mostly stay at home in 2015 17 Dec 2014 Even with a slowing economy the People’s Republic offers lots of growth for home-grown corporations. Hostile regulators, stronger rivals, and cultural differences discourage foreign expansion. Though some will take the plunge anyway, in most cases overseas growth can wait.
SpiceJet rescue is no fix for India aviation woes 17 Dec 2014 The government is cajoling banks to lend to the indebted airline, which really needs more equity. The lifeline just might prevent a repeat of Kingfisher’s high-profile failure. But high fuel taxes and the lack of a bankruptcy law will keep the industry stuck in an air pocket.
TPG should let investors off the Li Ning treadmill 17 Dec 2014 The U.S. buyout firm is backing a $219 million capital raising by the Chinese sports brand it has failed to revive in almost three years. The cash will help. But if TPG really wanted to show confidence, it would team up with the company’s founder and take Li Ning private.
Bakries down but not out in $3.6 bln debt rejig 17 Dec 2014 The Indonesian family can no longer ignore the debt problem at Bumi Resources. Weak coal prices make the equity look almost worthless and creditors, including China’s CIC, face a big haircut. However, the powerful Bakries may still emerge on top – as they have before.
This is as good as global recovery gets 16 Dec 2014 Since 2009, each new calendar year has brought declarations of the end of the crisis and predictions of an economic upswing. This time the mood is gloomy, and with reason. Weak growth turns out to be the new normal, not part of the transition.
Shooting suit may bring capitalism to arms makers 16 Dec 2014 A U.S. law shields firearms firms from product liability, making litigation over a Connecticut school tragedy a stretch. But the exemption arguably gives the likes of Bushmaster an unfair edge. The case will succeed if it prods Congress to treat gun companies like any others.
Rosneft and Russia stuck in zero-sum game 16 Dec 2014 The state-owned oil group is hurt by sanctions and weak oil prices. It’s struggling with big debts taken on to buy TNK-BP. So it was very helpful that the central bank fast-tracked Rosneft’s recent rouble bond sale. But that just shifted risk to Russian lenders and the sovereign.
Jefferies closes annus horribilis on wicked downer 16 Dec 2014 The Wall Street firm racked up a $93 mln fiscal Q4 loss. Boss Richard Handler says a senior banker’s messy public divorce had no material effect. Poor trading, a bum acquisition and one big bad debt took their toll. It’s a damaging concoction that should be limited to Jefferies.
EU insurers’ solvency is shakier than it looks 16 Dec 2014 A quarter of Europe’s insurers would fail to meet a basic gauge of capital health if Japan-style low-yield conditions were to persist, recent stress tests found. But actual euro zone yields are even lower. With the bloc on the brink of deflation, that’s not a reassuring sign.