How sanctions against Russia could backfire 26 May 2022 The threat of financial punishment did not prevent President Vladimir Putin from invading Ukraine. History shows that economic penalties can stoke conflict by pushing countries to be more self-sufficient, Edward Chancellor writes. Investors risk being stuck with stranded assets.
Renault split requires very careful driving 26 May 2022 The $7.7 bln French carmaker may separate its electric and fossil fuel units. That could boost a lagging valuation and open the door to fresh capital, but would also increase costs and complexity. It’s a risky manoeuvre, but CEO Luca de Meo has few other options.
Seizing oligarch assets is a slippery slope 26 May 2022 The EU hopes to confiscate $31 bln of yachts and villas from blacklisted billionaires. Washington is mulling similar steps. However wrong Russia’s invasion of Ukraine may be, short-circuiting the criminal process to seize property risks weakening trust in Western rule of law.
HSBC’s jarring ESG message, Davos in spring 26 May 2022 The bank’s head of responsible investing believes policymakers are exaggerating the financial risks of climate change. In this Viewsroom podcast, Breakingviews columnists discuss the ramifications of those remarks. Plus: The World Economic Forum is back, but the mood is dour.
UAE’s $20 bln chemical IPO is pricey for a reason 26 May 2022 ADNOC and Borealis’ joint venture Borouge is to be Abu Dhabi’s largest listing. The company is priced at a premium to rivals like BASF and SABIC, at a time when higher shipping costs are starting to bite. Yet the group’s cash and dividend profile support a princely valuation.
Twin crises will help Asian debt funds thrive 26 May 2022 Covid-19 and war in Ukraine are curbing the risk appetite of banks that already neglect all but the region’s best borrowers. The situation opens the door for funds like KKR’s new one. A pan-regional approach also learns from previous missteps in India.
China’s real estate renovation is too cosmetic 26 May 2022 The central bank joined wider efforts to help the property sector by cutting five-year lending rates to 4.45%. Banks remain sceptical of developers however, and bonds are trading at distressed prices. Lack of faith in the industry’s foundations make it harder to build a recovery.
Icahn squanders golden chance to shape McDonald’s 25 May 2022 The activist’s campaign to shake up the chain’s board with two directors over claims of the mistreatment of pregnant pigs is likely to fail. ESG issues can usher in change as Exxon can attest. But Icahn’s focus is too narrow, and McDonald’s board – and business – could use help.
Unicorns’ hard times point to M&A stampede 25 May 2022 Of the 2,300 private firms with valuations above $1 bln in the past decade, one-third managed to go public. Volatile markets now make that door inaccessible. As investors seek proof in their paths to profit, combining forces with rivals is the least-bad option.
Bear market spells mauling for American workers 25 May 2022 Profitability at companies from Amazon to Starbucks is falling, and so are share prices. One of the few things they can control to try and recoup lost valuations is the size of their workforce. Gains employees have made over the past two years are now likely to go into reverse.
Global stability partly hangs on Saudi reinvention 25 May 2022 The kingdom’s efforts to shape its image go so far as branding a café at Davos bearing the crown prince’s name. Worldwide demand for oil and gas amid the Ukraine war gives Saudi extra power and a chance to realign itself politically. There’s much more work to do.
U.S. sanctions give Russia default it doesn’t need 25 May 2022 The Treasury won’t let Moscow pay U.S. bondholders, tipping it into default. The move further isolates Vladimir Putin but will have minimal impact. It’s a surreal twist given Russia can still pay its debts, while battlefield foe Ukraine urgently needs relief but isn’t getting it.
Russia fossil fuel embargo has an inexorable logic 25 May 2022 Western allies are discussing buyer-imposed caps or tariffs to shrink Russia’s oil and gas revenues. But the measures would keep money flowing to Moscow, and could trigger the abrupt end of Russian imports they are meant to delay. Better to jump straight to an embargo now.
Capital Calls: Airbnb, Prudential, Glencore 25 May 2022 Concise views on global finance: The $68 bln vacation-booking platform will shut its Chinese business; the insurer appoints a new CEO – finally; the commodities giant has a $10 bln reason to keep its nose clean, after a $1.5 bln settlement for corruption allegations.
Alibaba’s overseas growth push faces European test 25 May 2022 The $223 bln Chinese e-commerce giant hopes to offset sluggish growth at home by expanding in the region via its Southeast Asian offshoot, Lazada. But with a European market share of less than 5%, and entrenched rivals like Amazon, Alibaba may struggle to justify the investment.
Broadcom will find VMware no Qualcomm, sadly 24 May 2022 Washington is unlikely to object to Broadcom’s bid for VMware the way it kiboshed a 2018 offer to buy wireless chip maker Qualcomm. The buyer is now American, the target has fewer securities ties, and a deal is more likely to be friendly. It’s also less desirable.
Snap! Elon Musk has another Twitter excuse 24 May 2022 The disappearing message app abruptly slashed its quarterly profit forecast, sending shares spiraling nearly 40%. That’s an ominous sign for Twitter, which like Snap, relies on brand advertisers. It also gives the Tesla boss another reason to bail on buying the social platform.
BoE pours cold water on bank global-warming panic 24 May 2022 The watchdog’s stress test showed UK lenders can weather a chaotic climate switch without a capital hit. For bank CEOs copping flak for funding polluters, it’s a let-off. The other lesson is that governments will get little help from financial regulators in greening the economy.
UK’s power tax plan may avoid tilting at windmills 24 May 2022 Shares in utilities like SSE and Drax dived after reports of Rishi Sunak eyeing up 10 bln pounds of excess profits. Windfalls from high power prices are hard to grab and North Sea oil is a better target. But the UK chancellor’s haul from power groups will still be far from zero.
Debt-market chaos makes bank deposits great again 24 May 2022 Rising rates and volatility are a problem for fintech upstarts, like Affirm, which rely on wholesale markets to fund loans. Old-school lenders, flush with cheaper deposits, don’t face the same funding pressure. It gives banks a window to strike back.
Capital Calls: Didi delists from the NYSE 24 May 2022 Concise views on global finance: Shareholders have voted to remove the beleaguered ride-hailing service from the Big Board. One way to play the company now is as a risky bet on which road Beijing’s regulators decide to take.
Explosives maker crosses its breakup wires 24 May 2022 Incitec Pivot unveiled plans to spin off its fertiliser arm. TNT rival Orica trades at a big premium, suggesting a split should lift the $5 bln market value. Unless CEO Jeanne Johns can allay investor fears about volatile agriculture markets, however, this demerger will be a dud.
Biden tries a new tool for handling China: realism 24 May 2022 At first glance a pact with India, Japan and Vietnam looks short on substance and skips sensitive issues. The U.S. also looks likely to drop many tariffs against China. But where his predecessors’ bids to woo or contain Beijing failed, Biden’s are at least likely to prove durable.
JPMorgan and its customers deserve more credit 23 May 2022 The U.S. lender may hit a profit target it thought it might miss, partly because households remain flush. That matters, because souping up the consumer bank is one reason for the lender’s big investment plans. The idea that Americans are holding up should help rivals too.
Broadcom’s build-up hints at future break-up 23 May 2022 A bid for $48 bln software firm VMware would fit with boss Hock Tan’s campaign to turn his chipmaker into a kind of tech conglomerate. The potential returns don’t look great, and nor does the logic. If Tan succeeds, it could bolster the case for rethinking Broadcom’s structure.
How to stop margin calls from blowing up markets 23 May 2022 After 2008, regulators pushed derivative trades away from banks and onto clearing houses with the power to request collateral. That cut the risk of blowups, but liquidity is still scarce during panics. The fix is to boost margin during good times, reducing the need for big calls.
HSBC’s green loose cannon misfires at a bad time 23 May 2022 The $123 bln bank has distanced itself from a senior executive who said investors needn’t fear climate risk. His message jars. The energy crisis gives lenders cover to go slow on restrictive net-zero goals, but stakeholders may demur if they fear this is what they really think.
Siemens Gamesa’s minorities can hold out for more 23 May 2022 The turbine maker’s parent wants to take it private at 18 euros a share, half its value in early 2021. After a slew of profit warnings, any exit looks tempting. But with big savings in store and 2.5 bln euros in the bank, Siemens Energy CEO Christian Bruch can afford to pay more.
Smaller, warmer Davos confronts a siloed world 23 May 2022 The Swiss confab of global leaders returns this week after a gap of over two years. Pandemic, war, and the unusual spring timing explain some notable absences. As markets tumble and economies turn inward, founder Klaus Schwab’s knack for brokering relationships faces a test.
U.S.-China divide creates fast lane for Hyundai 23 May 2022 President Joe Biden's meetings with South Korean conglomerates signal closer bilateral ties. Both sides can benefit from less reliance on Beijing. For the automaker, which just pledged to invest $10.5 bln in America, access to the growing U.S. market might be the biggest prize.