Year: 2009

Trade trouble has favoured poor over rich in Asia

22 Sep 2009

The ADB s updated forecasts show Asian growth recovering overall. But wealthy countries are growing slower than forecast six months ago, while poorer ones in the region are doing better. The recent trade disruption may have speeded the shift of activity to lowercost economies.

Junk borrowers trade death row for long jail time

22 Sep 2009

Resurgent debt markets have helped several highyield borrowers refinance loans, averting death by bankruptcy in the short term. But with interest costs most likely at least doubling, their cash flows will be squeezed condemning some to protracted pennypinching, if not worse.

Eurozone recession is over but pain will persist

22 Sep 2009

The French economic model has excelled, but it has been very expensive. Meanwhile, Germany awaits an export revival. But the real pain is in Europe s periphery in economies that are uncompetitive, debtridden and unable to devalue. The eurozone s recovery in 2010 will be faint.

Wynn IPO owes more to greed than Lady Luck

22 Sep 2009

Gaming mogul Steve Wynn plans to float his Macau business for 34 times earnings, a premium to listed peers. That buyers will pay such prices is hard to square with reality, even in China s Las Vegas. Speculative fever has spilled out of the casino and into the stock market.

Santander goes bananas with E30bn Brazilian IPO

21 Sep 2009

Spain s largest bank has valued its Brazilian unit at the high end of analysts expectations, and more or less in line with peers. But there doesn t seem to be much of an IPO discount for the stake being floated. Even if the market is redhot, investors should be asking for one.

Europe’s banks are right to fear leverage ratios

21 Sep 2009

The continent s bankers are up in arms about proposed new capital rules. They claim they will be unfairly disadvantaged visàvis US banks. Harmonizing regulation will require change on both sides of the Atlantic, but Europe s lenders may find it harder to adapt than US peers.

Canada’s loonie among the least loony currencies

21 Sep 2009

Canada has avoided excessive stimulus and government spending during the recession. Its banks are relatively sound, and its commodities emphasis is a strength, at least for now. It's no wonder the loonie is again approaching parity with the US dollar it's a logical investment.

Pilgrim’s Pride investors should do the funky chicken

21 Sep 2009

Brazil's JBS is plucking the poultry company out of bankruptcy for $2.8bn meaning creditors are paid in full and equity holders even get a few nuggets. With stock prices buoyant, there's a chance other bust companies will also pay back more than was thought possible.

JPMorgan still taxed by Cazenove conundrum

21 Sep 2009

Momentum is building in talks for the US bank to take over its UK jointventure partner. Full control would offer cost savings and a simpler structure. But those benefits would be tiny set against the massive JPMorgan. And the costs could yet prove to be greater.

Goldman jump-starts Geely Auto’s credibility

21 Sep 2009

The US bank is buying a $250m convertible bond issued by the Chinese carmaker. That won't be enough for Geely to realise its dream of buying rival Volvo. But Goldman s celebrity endorsement will give Geely a boost in talks with governments and other vendors of auto assets.

Rights issue would get RBS facing the right way

21 Sep 2009

A £3bn£5bn share issue funded by institutions would still leave 80% of the UK bank owned by the state. But it would be worthwhile nonetheless. Such babysteps on the long road to private ownership would advertise investors confidence and give legitimacy to RBS s recovery plans.

Dell pays through nose in search for direction

21 Sep 2009

The US computer maker is acquiring Perot Systems for $3.9bn, a whopping 68% premium. It's a muffled echo of rival HP s purchase of EDS. Add in the high price and it seems like a bet that doing more IT services can somehow end Dell's floundering. That's wishful thinking.

Rusal may covet China for more than money

18 Sep 2009

Oleg Deripaska s aluminium group is looking to raise $23bn in a Hong Kong IPO to cut debt and let minority shareholders out. Eastern investors love commodities and have plenty of cash. And they re likely to be comfortable with the quirks that may feature in the float.

Inflation’s return will test Fed – and markets

18 Sep 2009

US prices are about to change direction. A 2%plus inflation rate is possible by year end. But investors still expect the nearzero funds rate to continue for a long time. If they re wrong, financing conditions could get tighter fast, taking the bounce out of the bubbly markets.

PAI Partners extends olive branch to investors

18 Sep 2009

The French private equity firm will let backers reduce commitments to its latest, E5.4bn fund by as much as half. After a few painful hits, which also soured relations with lenders and led to a management overhaul, PAI hopes this peace offer will lead to recovery. Good luck.

London landmark property deals capture new mood

18 Sep 2009

The owner of the Canary Wharf financial district is supersizing a share issue to £900m with the support of sovereign funds. Meanwhile, Blackstone is buying into London s traditional financial centre. The deals solve twin debt problems and sum up the crisis in miniature.

Lloyds caught between markets and politics

18 Sep 2009

The UK bank has at last declared its wish to go back on a provisional deal to buy the state s loanloss insurance. To do so would require a mega capital increase which market exuberance makes increasingly realistic. The snag is the thorny politics of the situation.

Pay structures belong under regulators’ purview

18 Sep 2009

Incentives influence behaviour. So the Federal Reserve should scrutinise pay practices as it considers US banks' safety and soundness. Making this focus clear has benefits too. It may encourage banks to restrain themselves, and it gives examiners clout if they don't.

Emerging markets on course – if richer places allow

17 Sep 2009

Their tight finances helped many avoid overdoing economic stimulus, and they now enjoy relatively cheap money and reviving trade. Risks include a renewed credit crunch and creeping protectionism elsewhere. They need to watch for these dangers as well as do the right thing.

Why big oil is striking black gold

17 Sep 2009

Oil and gas majors have made four big discoveries in three weeks. It s no surprise that finds are coming thick and fast. Better technology makes them possible, stable regulatory regimes foster confidence to invest, and expected high oil prices make costly projects seem viable.

AMR shareholders should temper their enthusiasm

17 Sep 2009

The American Airlines parent raised $1bn by selling frequent flier miles upfront and secured $1.9bn by hocking assets. The stock soared as concerns about liquidity dissipated. But the cash may end up diverted to purposes that don't create much additional value.

Irish banks may escape nationalisation gallows

17 Sep 2009

The state is to buy E77bn of bad loans at a 30% discount. That s still a premium to market rates. Twinned with improved market sentiment, it means AIB and BoI can probably raise needed capital privately. But Ireland s national debt and economic woes should give investors pause.

Senior creditors finally get a consolation prize

16 Sep 2009

Bankrupt chemical company LyondellBasell is offering senior creditors the chance to buy extra stock as it exits Chapter 11. It doesn't make up for being squashed by earlier bankruptcy lenders. But it's worth watching as a way to give frustrated creditors a few additional options.

Airline recovery still pie in the sky

16 Sep 2009

Things appear to be looking up for airline investors. The traffic slump is easing. August was Heathrow s busiest month ever. And the broader economy is turning. But one crucial element is missing from the apparent airline recovery: pricing power. That may never quite come back.

Greece could still derail Europe’s recovery

16 Sep 2009

The recent rally in the country's government bonds is impressive. But the trend is not based on fundamentals. It reflects a carry trade among domestic banks funded by cheap ECB liquidity. The pressure on Greece may have eased, but the situation remains precarious.

Barclays outsources $12bn of its wild-days legacy

16 Sep 2009

The UK bank spent the crisis spooking the market by punting on its own balance sheet and refusing state aid. Now it is swapping out volatile cashflows on billions of risky assets. The deal is more cosmetic than economic. But it suggests a new responsiveness to investor sentiment.

Dollar tumble reflects hope, and a little fear

16 Sep 2009

The currency of the crisis home country was perceived as a safe haven in troubled times. Now that traders think times are less troubled, they are selling dollars to fund more adventurous bets. But there is also a lingering concern that the greenback has deep structural flaws.

Japan’s new government should stimulate markets

16 Sep 2009

Hirohisa Fujii, the new finance minister, is a fiscal conservative and will cut back stimulus. That lessens the risk that Japan might spend its way into further trouble. With yen intervention unlikely and a focus on the domestic economy, it really could be a new dawn.

Facebook digs infrastructure moat deeper

16 Sep 2009

The firm said in the past its operations throw off more cash than they consume. So the news that operating profits cover capital expenditures may not surprise until you realise it added 50m users over 3 months. This selffinanced infrastructure buildout is significant.

Gas price drop casts doubt on oil-based contracts

16 Sep 2009

On the nascent spot market, natural gas prices are down 40% this year, while oil is up. Winter should see some narrowing of the gap, but the disconnect reflects a durable technological change. The likely result is more volatile prices for Russia and Algeria.