Russia, not Ukraine, is Gazprom’s real problem 7 Mar 2014 The 20 pct slide in the gas giant’s shares during the Kiev-Moscow spat looks like an overreaction. Gazprom has become less reliant on Ukraine as a transit point. Its valuation reflects its status as a Kremlin tool. A chillier investment climate in Russia is a bigger threat.
What Putin wants matters less than what he doesn’t 7 Mar 2014 The Russian president fears real democracy in Ukraine as much as at home. And he’s afraid of a disruption of trade and financial ties if Kiev turns towards the EU. If the U.S. and Europe want Putin to back down, they have to convince him that he’s wrong on both counts.
Review: Why all you know about money is wrong 7 Mar 2014 Felix Martin says that money isn’t a commodity, but a system of credits. This insight allows his book to rewrite monetary history in an eye-opening way. It also suggests that the way economists approach finance and recessions is hopelessly wrong.
Springer’s lavish dividend will be hard to sustain 6 Mar 2014 Germany’s largest publisher has upped its dividend despite seeing profit fall. If Axel Springer emerges as a winner in digital publishing, it will be lauded for its commitment to its payout policy. But it has set itself a high hurdle given the changes buffeting its industry.
Market needs convincing that Bouygues can win SFR 6 Mar 2014 The family-backed group has bid 19 bln euros for SFR, Vivendi’s mobile unit. That’s far more than rival Numericable is said to be offering. Yet Bouygues shares are only pricing in a sixth of the promised benefits. Competition worries and a sweetened counterbid are real risks.
MPS farce veers between tragedy and redemption 6 Mar 2014 Shares in Italy’s rickety Monte dei Paschi soared on claims its main shareholder, a charitable trust, had cut its stake. But it hasn’t. With the shareholder needing to sell to support a rights issue and save MPS, the lender is stuck in limbo. This is no way to recapitalise a bank.
Italy’s Renzi off to a bad start 6 Mar 2014 Matteo Renzi has been forced to amend his electoral reform. The result could mean that Italy will remain ungovernable. The new prime minister’s hand is weaker, even though the risk of early elections has subsided. And serious economic reforms will be harder.
Regulator helps Aviva solve overhang problem 6 Mar 2014 The UK insurer is hacking back a complex corporate structure that entailed one part of the group lending heavily to another. Pressure from the UK supervisor was a factor. But Aviva aggressively went along to remove a key uncertainty. That will give investors comfort.
BoE suspension underscores FX market limbo 5 Mar 2014 The central bank has suspended an official as it probes who knew what about alleged foreign exchange rigging. Being transparent may help avoid the mess it got into with Libor. But the move does not address the pressing need to clarify what is acceptable practice in FX.
SFR sale would transform French telecoms 5 Mar 2014 Vivendi may sell its mobile unit to Numericable or Bouygues for 15 bln euros or more. The first option creates a big “quad-play” rival to Orange. The second curbs competition in France’s tough mobile market. Failure will hurt whoever loses. And more M&A could follow.
Edward Hadas: The ongoing ethics struggle of banks 5 Mar 2014 The boss of Credit Suisse blamed a few private bankers for recent U.S. legal problems. The Employees Association wants management to take more responsibility. Such blame-casting misses the point. In too many businesses, the culture encourages ignoring the voice of conscience.
Bondholders will have to pay for Ukraine’s reset 5 Mar 2014 The country’s bonds keep sinking in spite of an upcoming IMF package. Creditors are facing either a soft debt rescheduling or more radical haircuts. The risks of austerity, devaluation and continued political uncertainty all point to the latter. Market prices still look rosy.
StanChart does just enough to ease capital doubts 5 Mar 2014 The emerging market lender fell off its growth pedestal in 2013, as rising bad debt and a goodwill charge dragged down earnings. There’s no prospect of an immediate pickup. But robust capital ratios and a higher dividend should help dispel lingering fears of an equity injection.
Markets too bullish on Putin’s mind games 4 Mar 2014 The Moscow stock market rose more than 5 pct after President Vladimir Putin seemed to tone down his rhetoric on Ukraine. After a 10 pct fall the day before, investors focused on the good news. They may have misinterpreted the Russian leader’s cryptic pronouncements.
CoCo pricing looks a little loco 4 Mar 2014 The newish market in contingent capital bonds is growing fast. But when it comes to pricing, it is immature. One example: investors ignore the way credit risk increases with maturity. Time may iron out pricing inefficiencies. The risk is that reality dawns after a sudden shock.
Talk of Russian asset freeze is empty rhetoric 4 Mar 2014 The U.S. and Europe are mulling a freeze on the western assets of Russian officials to punish Vladimir Putin’s actions in Crimea. That would be impossible to do legally and fairly. Better address the core of the problem: banks’ eagerness to accept shady money from Russia.
RWE stock electrified by misguided overconfidence 4 Mar 2014 The power generator endured an awful 2013, culminating in a net loss of 2.8 bln euros. The shares are up 41 pct since August, but Germany’s move to green energy remains a challenge and RWE might need a capital hike. This is still a risky stock.
Glencore resilience vindicates hybrid model 4 Mar 2014 The commodity trader’s revenue was flattish in 2013, despite weaker metals prices. Leverage will ease this year as capex falls and synergies from the Xstrata deal kick in. Glencore isn’t immune to falling prices but its integrated trading and mining model looks ever more attractive.
Crimea could be spark for bigger Western selloff 3 Mar 2014 Russia’s intervention in Ukraine has hit global stocks. Investors are likely to pull even more money out of emerging markets. Their faith in developed equities, especially in Europe, has survived previous stumbles. But it’s now on shakier ground given how expensive shares look.
Slicing the cake better can make it bigger 3 Mar 2014 A new IMF study finds inequality makes economies smaller. Efforts to redistribute income may make growth higher and more sustainable. That looks right. But the challenges are huge. Governments must be honest and get the policies right. The study’s lessons could be misapplied.