China rate scare reminds watchdogs of hidden risks 1 Nov 2023 A liquidity squeeze spooked the country’s money market just as top regulators completed a twice-a-decade summit to outline Beijing’s financial plan. Overnight rates as high as 50% may prompt more monetary loosening. Yet local government debt problems require more drastic surgery.
Aussie winemaker ferments risky US deal vintage 1 Nov 2023 Treasury Wine is spending $900 mln on California’s fast-growing Daou. It’s the latest step in the Penfolds maker’s recovery from Chinese tariffs that corked a third of earnings. But listed US rivals have struggled. And the $5.5 bln buyer has suffered American hangovers before.
Uncle Sam provides shaky base for Caterpillar 31 Oct 2023 The equipment maker beat third-quarter profit forecasts with help from Washington’s infrastructure bill. Yet half of the $550 bln package has been spent, and Caterpillar’s backlog is shrinking. Like other government-supported spending, federal aid can only help for so long.
Broadcom can brave China’s sword of Damocles 31 Oct 2023 The chipmaker expects to seal its strategically shaky VMware deal as Beijing’s blessing pends amid escalating geopolitical tension. In 17 months of waiting, however, its rising shares have lifted the purchase price by 16%, to $80 bln. Boss Hock Tan is better off taking the blade.
Tough dealmaking conditions dull Waystar’s shine 31 Oct 2023 The healthcare technology firm is angling for a stock-market listing on the back of rapid, acquisition-fueled growth. With a sale looking difficult and heavy debt bearing down, an IPO may be its private equity backers’ best option, but a mooted $8 bln valuation looks steep.
Vodafone CEO’s iffy Spain deal is better than none 31 Oct 2023 Margherita Della Valle is selling her unit in the country for 5 bln euros to a tiny investment vehicle. Part of her payment comprises shares in the highly leveraged buyer, which is yet to raise equity of its own. But even if that effort fails, the deal still works for Vodafone.
Israel’s war is a risk and opportunity for Saudi 31 Oct 2023 Hamas’s attacks complicate Mohammed bin Salman’s aim to build relations with the Israeli state, Gulf expert Kristian Coates Ulrichsen says in this Exchange podcast. But if the Saudi crown prince can use his leverage to help Palestinians, it may help his image at home and abroad.
Sluggish BP earnings exacerbate its green dilemma 31 Oct 2023 The $105 bln UK giant missed quarterly net profit forecasts by 20% after weak gas results and a big wind writedown. That casts doubts on its clean energy division’s profitability while adding pressure to up its oil and gas game. Tackling both challenges requires creativity.
Big government will drive the next market cycle 31 Oct 2023 Politicians are at their most interventionist in decades. Though a return to the stagnant, centralised economies of the 1970s is unlikely, subsidies and inflation will influence asset values. Fund managers need to pick investments that may benefit from the state’s visible hand.
BOJ chooses slow path out of zero-rate limbo 31 Oct 2023 Japan’s central bank again tweaked its policy to permit slightly higher yields on 10-year government bonds as it inches back to positive interest rates. The snail’s pace is understandable. Yet with bond yields rising across the developed world, it remains a loose-money outlier.
Capital Calls: Pfizer pessimism 31 Oct 2023 Concise views on global finance: A glut of vaccines has gutted Pfizer’s valuation, leaving it lower than it was before the pandemic. That’s an over-reaction, even if its Covid-19 therapies prove worthless.
Disney walks open-eyed towards Reliance mousetrap 31 Oct 2023 Bob Iger’s $147 bln media giant may sell a majority stake in its India business to Mukesh Ambani’s conglomerate, per Bloomberg. The division is losing money and subscribers, mostly to a Reliance-owned rival. A deal at half the value when Disney took control would be a victory.
Biden AI plan is one step in avoiding crypto trap 30 Oct 2023 The president’s new executive order aims to set regulatory guardrails for artificial intelligence. It still leaves a big hole for Congress to fill. Failing to set coherent rules risks the kind of piecemeal enforcement that hobbled crypto, but for a technology with higher stakes.
US oil deals create big fish in vast ocean 30 Oct 2023 Exxon’s $60 bln deal for Pioneer and Chevron’s $53 bln Hess offer will make the giants even bigger. But they will only have 12% of US petroleum production and 5% of global share. Success depends on higher commodity prices. Big Oil may not control as much as it wants.
HSBC’s profit resilience may face sterner tests 30 Oct 2023 Europe’s largest bank doubled third-quarter earnings and is buying back $3 bln of stock, despite a hit from Chinese real estate. Yet the benefit of higher rates is wearing off while costs are stubbornly rising. CEO Noel Quinn’s targets leave room for bigger setbacks.
Capital Calls: McDonald’s resilience 30 Oct 2023 Concise views on global finance: The Golden Arches’ global same-store sales rose 9% thanks to both selective menu-price increases and smaller meals in different markets. It demonstrates the company’s ability to keep pace with disparate economies’ stretched consumers.
Smithfield US homecoming looks like pig in a poke 30 Oct 2023 China’s biggest pork firm may relist its US unit in New York. With $7.6 bln in market cap, investors don’t seem to attach much value to its 2013 buy. Moving West is a hedge against geopolitics, but a revaluation is unlikely if the Washington-Beijing relationship remains fraught.
Israel war tests US appeal to global swing states 30 Oct 2023 US power in part hangs on its claim to pursue a principles-based foreign policy. The Gaza conflict has led to accusations of double standards. If these stick, the United States’ attempts to woo developing countries as part of its new Cold War with China could suffer.
Hedge fund battle turns mountain into molehill 27 Oct 2023 Daniel Och is backing a $720 mln sale of Sculptor, the investment firm he founded, after buyer Rithm raised its bid again. The extra $15 mln he gets seems out of proportion to his rage against earlier terms. Maybe sweating the small stuff is what makes millionaires billionaires.
Influencer model infects US political fundraising 27 Oct 2023 The US House elected a speaker after four people gave it a try. The chaos partly reflects how politicians now receive support. Social media enables them to reach voters without the backing of their party. The new way to create star power will disrupt politics as it has Hollywood.
Greenhill starts Mizuho with costly culture clash 27 Oct 2023 Scott Bok runs the M&A boutique, but also chairs the board of trustees at UPenn, where a fight over antisemitism has erupted. The Japanese bank is paying him generously to help its takeover plan thrive. A campus backlash led by Apollo’s boss threatens to exact a heavy price, too.
Capital Calls: Big Oil, Intel 27 Oct 2023 Concise views on global finance: Exxon returned $8 bln of cash to investors in the quarter, while Chevron returned some $6 bln. With investment rising and M&A on the table, investors are competing with new priorities; Intel shares jumped 10% after slowing declines in revenue.
UK banking pain is a warning for European lenders 27 Oct 2023 NatWest fell 10% after slashing its 2023 revenue target on Friday. Brits are looking for better savings rates, meaning banks have to pay up or lose customers. Continental peers, like UniCredit and CaixaBank, may be at risk of suffering the same plight as their British rivals.
Li Keqiang death dilutes China reform promise 27 Oct 2023 The premier’s 10-year tenure began with hopes for a market-friendly revamp. Efforts to make state firms more efficient through private capital had all but reversed course as he left office. His sudden passing will further weaken the case against Beijing’s sprawling interference.
Qatar can weather latest foreign stress test 27 Oct 2023 The Gulf emirate is under scrutiny for its links to Hamas, six years after a blockade by neighbours. One risk is that its $450 bln sovereign wealth fund gets a frostier reception. But Doha’s giant gas reserves and its role as mediator and US ally should protect its clout.
Stellantis’ China deal maths may amplify US woes 27 Oct 2023 CEO Carlos Tavares is paying up to speed up his green push. At 4.4 times sales, the $1.6 bln deal values Chinese upstart Leapmotor more richly than larger EV peers. Splurging on a rival in the People’s Republic is also a bad look as he negotiates tense pay talks with US workers.
The case for a career in bond investing 27 Oct 2023 Rising rates and volatile markets have hammered the conventional case for buying fixed income securities. But higher yields, pockets of value in credit and a possible weakening of the strong US dollar mean there are still opportunities in bonds for budding portfolio managers.
Japan Inc is only winner in nixed chip deal 27 Oct 2023 The collapse of Kioxia-Western Digital merger talks is bad for the two struggling companies, complicates Bain’s exit strategy and highlights investor-rival SK Hynix’s conflicts. But Tokyo now seems more open to cross-border deals, even for national champions. That’s a positive.
Germany faces tricky call on Siemens Energy aid 26 Oct 2023 The $6 bln firm’s shares slumped 34% on fears banks might not issue guarantees for its projects. Berlin would usually expect investors like parent Siemens, which has a 25% stake, to step in. Yet as Europe ramps up clean energy, there’s a case for state help for existing players.
Cooled auto hotheads give labor disputes hope 26 Oct 2023 Ford Motor’s new union agreement could cost $2 bln in pay rises. That stings, but is well short of earlier asks while also recompensing workers. Much about the agreement seems reasonable. As labor pressures continue, the agreement suggests sensible outcomes are possible.