Hong Kong’s steep slide shows misplaced priorities 1 Nov 2022 Economic activity plunged 4.5% in the third quarter as consumers and companies slashed spending. The government is trying to rally support for fintech and finance, but appears to have no clear plan to help mundane sectors like real estate and retail which are the biggest drags.
Blackstone strikes twice with Emerson carve-out 31 Oct 2022 The buyout firm is taking control of the U.S. industrial group’s heating and aircon division for $4.4 bln. The deal resembles Blackstone’s 2018 purchase of Thomson Reuters’ data business. The buyer flipped that at a profit within a year; a repeat is not out of the question.
Tesla investors have reasons to fret over Twitter 31 Oct 2022 Boss Elon Musk’s new $44 bln social-media toy offers the potential benefit someday of being hitched to an “everything app.” That possibility looks slim, however, compared to the risks of divided attention, conflicts of interest and geopolitical blowback to the whole empire.
Capital Calls: Axing the tweeps 31 Oct 2022 Concise views on global finance: Elon Musk looks set to eliminate jobs en masse at Twitter, which augurs significant downsizing across Silicon Valley.
Brazil gives flagging climate fight a timely boost 31 Oct 2022 Luiz Inácio Lula da Silva beat Jair Bolsonaro in the Latin American state’s presidential election. He could curb deforestation that makes the country a big greenhouse gas emitter. It’s a bright spot in a year when public and private sector momentum on climate change has slowed.
Europe’s pain will be ultimately worth it 31 Oct 2022 The European Union faces a tough period as the energy crisis bites and debt troubles return. But the bloc could have the world’s cheapest and cleanest energy by the mid-2030s and it will probably emerge stronger geopolitically, says Hugo Dixon.
Foxconn factory chaos bursts China’s Covid bubble 31 Oct 2022 The Apple supplier is scrambling to stem a potential 30% fall in iPhone shipments from a key factory as workers flee infection controls. Such disruptions are a recurrent risk under Beijing’s pandemic policy. It’s a big incentive to shift supply chains elsewhere, however painful.
Bank of Japan fiddles while bond market burns 31 Oct 2022 The yen is one of the world’s most popular funding currencies, but the central bank’s struggle to prop it up and hold interest rates down is tipping fixed-income traders into revolt. Policy tweaks might help, but passivity puts the yen’s global stature at risk.
Exxon and Apple are in a similar boat 28 Oct 2022 Exxon’s quarterly profit was its largest ever, at $20 bln, and nearly as high as Apple's. But the oil giant, once the world's most valuable firm, is worth a fifth of Apple. Newfound respect for earnings, and the recognition that beliefs are fleeting, could partly close the gap.
It’s hard to squeeze pet food out of Colgate tube 28 Oct 2022 Pushy investor Dan Loeb makes a valid point that the toothpaste maker’s Hill’s division would be worth more as a stand-alone company. Breakingviews’ calculations suggest a potential 16% uplift in value. There also would be some adverse effects, however, which undermine the case.
Capital Calls: NatWest nerves 28 Oct 2022 Concise views on global finance: Shares in the government-backed UK lender fell 8% after it revealed an impairment charge 43% above what analysts had expected.
Michael Klein’s fourth act may be his toughest 28 Oct 2022 The former Citigroup rainmaker who went solo and then launched $5 bln of SPACs is now set to run Credit Suisse’s advisory unit. It’s odd for a director to parachute into the C-suite, but the bank had no better pick. The bigger issue is CS First Boston’s clunky ties to its parent.
Risky debt selloff has much further to run 28 Oct 2022 Investors are dumping corporate bonds as interest rates rise. Relatively safe investment grade securities have fallen harder than those issued by junk-rated borrowers, which hit $650 bln last year. That will reverse as high-yield debt starts pricing in defaults and a recession.
America throws South Korean chipmakers for a loop 28 Oct 2022 Samsung and SK Hynix dominate the memory market and can adjust output to protect profits as demand falls. But that flexibility will be eroded under Washington's export curbs against China, where the pair have factories. It's an example of the unforeseen effects from the tech war.
Fear makes Macquarie shareholders reasonable 28 Oct 2022 The $42 bln Aussie financial powerhouse’s value has finally dropped to a level justified by its profitability. That’s mostly thanks to boss Shemara Wikramanayake’s warnings that earnings might slow. If skies clear, irrational investor exuberance could revive in a flash.
Brazil can buoy Sea’s growth ambitions 28 Oct 2022 The Singaporean games-to-payments group is exiting smaller countries and cutting costs to satisfy impatient investors. But it is making progress in the fast-growing Latin American market, where losses are narrowing. A $6.5 bln cash pile suggests Sea can stay the course.
Twitter deal sadly upholds primacy of shareholders 28 Oct 2022 Elon Musk bought the social media firm for $44 bln after failing to wriggle off the hook. Stakeholders including the company, its employees, its new owner, its creditors and the world as a whole are probably worse off. But, hey, at least shareholders made out like bandits.
Apple isn’t safe when neighborhood is aflame 27 Oct 2022 The iPhone maker’s steady growth and policy of returning cash looks far more attractive than cyclical and splurging peers like Meta Platforms. Yet a rising dollar and declining consumer demand are making Apple’s valuation far less attractive than it used to be.
Amazon gets irrationally swept up in tech angst 27 Oct 2022 The online retailer lost $200 bln of market value after its Christmas outlook spooked investors. The results are decent, however, with strong contributions from retail and cloud. A fresh focus by fund managers on profit diverges from the company’s ethos, which poses a problem.
Zuckerberg motivates supervoting stock resistance 27 Oct 2022 The tech tycoon’s virtual reality push has cost investors in Meta Platforms more than $600 bln this year after a 20%-plus drop on Thursday. Unhappy shareholders who ceded control can only sell. It’s a painful reminder to force other startups to sunset dual-class share structures.
Capital Calls: ECB’s bank-earnings squeeze 27 Oct 2022 Concise views on global finance: Seeking to shrink its balance sheet, the European Central Bank introduced less favourable terms for cheap loans it offered to lenders during the pandemic.
Western economies rediscover meaning of scarcity 27 Oct 2022 For several decades, constraints on supplies of labour, energy and capital appeared to have all but disappeared. Now they are back, humbling leaders like former British Prime Minister Liz Truss. Allocating scarce resources means more state intervention, writes Edward Chancellor.
Adidas’s Kanye West bet is still in credit 27 Oct 2022 The 18 bln euro sportswear maker severed ties with the musician over offensive comments. In this Viewsroom podcast, Breakingviews columnists discuss how the financial benefits to Adidas nevertheless outweighed the costs. That may spur other brands to pursue outspoken stars.
New Shell boss has scope for a green power splurge 27 Oct 2022 The $190 bln oil major could double net income to $40 bln in 2022. Rather than launching more buybacks, incoming CEO Wael Sawan could eye up a mid-sized European renewables player like $19 bln SSE. It would speed Shell’s green energy mission without messing up its finances.
Italy’s new premier starts with a big faux pas 27 Oct 2022 Giorgia Meloni vowed to hike a 2,000 euro cap on cash payments, reversing attempts to boost electronic transactions. That will make it harder to track 100 bln euros of annual untaxed revenue. With debt at 147% of GDP, Italy cannot afford to be complacent on chronic tax evasion.
Credit Suisse begins perilous ride to right place 27 Oct 2022 CEO Ulrich Körner will raise $4 bln of capital to finance redundancies and a halving of the investment bank. After several botched strategies, Credit Suisse is now pointing in the correct direction. But ongoing heavy losses, and low 2025 targets, imply a messy few years ahead.
Tesla’s China price cut plays offence and defence 27 Oct 2022 Elon Musk’s $700 bln carmaker says lower production expenses prompted it to lop up to 9% off the cost of vehicles in the country. But it also smacks of a price war in the world’s largest auto market where BYD is gaining ground. Either way, the move sends strong signals to rivals.
China’s top brewer buys the dip on premium liquor 27 Oct 2022 State-backed China Resources Beer is bagging a bargain, paying $1.7 bln for control of the country's fifth-largest baijiu maker - one of the largest such transactions on record. Given soft demand and tax hike risks, more deals may follow. Local politics will complicate them.
Meta’s spending splurge starts to look troubling 26 Oct 2022 Facebook’s $370 bln parent company plans to invest almost 10% of its value on capex this year, partly to fund its metaverse strategy. In 2021, operating cash flow left room to do so. Third-quarter earnings suggest a slouch toward 2020 figures, which raises fresh concerns.
Detroit automakers head for light at end of tunnel 26 Oct 2022 Supply woes wrecked Ford’s quarter, but it can take heart from its crosstown rival, which bounced back from issues of its own. Economic threats loom, but GM’s unexpected $4.3 bln in operating profit suggests the industry could yet emerge smoothly from pandemic turmoil.