Year: 2009

Chinalco’s softening on Rio deal is small progress

21 May 2009

The Chinese aluminium group is reportedly willing to rejig its $19.5bn tieup with miner Rio Tinto. This reflects the fact that Rio s shares have shot up since the deal was proposed, and shareholders are unhappy with the transaction. But the mooted concessions are unimpressive.

Turning hedge fund tide is fuel for stocks

21 May 2009

Net outflows are dwindling, and the rally in equities could mean investors cancel redemptions or put new money to work this quarter. It s a fragile upturn that could easily reverse. But for now, the turn in hedge funds fortunes could be an accelerant for rising stocks.

Libor’s plunge could trap banks

21 May 2009

Bulging net interest margins borrowing cheaply and lending at higher rates help banks to earn their way out of problems. Trouble is, interbank rates are low largely because of government backstops. When they rise to market levels, it could crimp bank earnings.

UK commercial property slump yet to hit bottom

21 May 2009

The battered realestate market has already fallen over 40% since its peak. But rents are still sliding, and problems refinancing £40bn of debt due this year could spark forced sales. Peaktotrough values could be more than 50%.

Panmure parcel passed to the Gulf

21 May 2009

A scrum for the storied London broker has been won by a Qatari investment bank, which is taking a 44% stake in a recap. Previous owners include NationsBank, WestLB and Lazard. Panmure s tortured past doesn t bode well for its latest sugardaddy.

Dollar’s ugly decline may be short-lived

21 May 2009

A currency which pays no interest is unappealing when investors are regaining an appetite for risky assets, and the Chinese are unhappy with US money printing. Yet the dollar s decline could reverse if risk aversion returns and Europe follows the US to the printing presses.

Rio Tinto should line up mega rights issue

21 May 2009

The miner s value is up nearly 50% since a $19bn cash injection with Chinalco was agreed in February. A $12bn rights issue, plus asset sales or a dividend cut, is now clearly preferable to the deal with the Chinese group. Regulators may even hand Rio an excuse to change tack.

After Shell, investors should pick harder fights

20 May 2009

The 59% vote against bonuses for Shell execs is a watershed moment for shareholder protest. But directors pay is typically a large, slowmoving target. Will emboldened holders now engage with management on more knotty strategic questions? That would be a much bigger revolution.

AIG’s Asian IPO poses underwriter’s dilemma

20 May 2009

The prospect of fees on a $20bn IPO will have banks jostling for position. But finding a buyer to derail the float would be even more profitable. UBS and Credit Suisse advised bidders in AIG s failed auction earlier this year. The potential conflict may be a blessing in disguise.

More to mini-boom in US IPOs than meets the eye

20 May 2009

Three companies raising half a billion bucks sounds like a drop in the bucket. But strong demand and robust pricing for riskier companies suggest a latent desire by investors to put money to work. That's a critical component in any economic recovery.

Healthy corporates exploit debt investor woes

20 May 2009

Alliance Boots bought back some of its debt at almost half of face value. Boots may have been Europe s largest leveraged deal. But it still has the financial resources to exploit pennypinched debt investors. The window for other corporates to follow suit won t be open forever.

Trading and drinking: an expensive cocktail

20 May 2009

A threehour lunch has turned into a twoyear ban for a Morgan Stanley oil trader who took out a big alcoholinduced short position. Unable to explain the outsized risk, he was eventually dismissed. He may have made money but it s still a sobering tale for traders everywhere.

Porsche’s call for help could stay unanswered

20 May 2009

The German sportscar maker is looking for foreign investors to help clean up its balance sheet ahead of a tentative merger with Volkswagen. But it's hard to see what Porsche can sell besides its options to buy 20% more of VW. And Porsche isn't exactly investorfriendly.

LSE’s independence could be under threat again

20 May 2009

The exchange snubbed takeover offers at the top of the market and bought Borsa Italiana instead. Now writedowns on the deal have pushed it to a loss. Meanwhile, costs are high and market share is slipping. New CEO Xavier Rolet should beware the prospect of a fresh bid interest.

Search engines multiply, but answers don’t

20 May 2009

Microsoft is set to launch its latest effort to crack Google s dominance in search. Sites like Wolfram Alpha are trying to find safe and profitable niches. Sadly, Google s wouldbe rivals have mostly done better at generating hype than results.

Stateless HSBC starts to look more Chinese

20 May 2009

Issuing yuan bonds and applying to list in mainland China show HSBC jostling to be Beijing s favourite foreign bank. It faces stiff competition from China s fastgrowing staterun lenders. If being stateless has been an asset for HSBC, looking Chinese may now count for more.

California’s entrepreneurs aren’t going anywhere – yet

20 May 2009

The Golden State faces a host of problems stemming from its ballooning $21bn budget deficit. They ll likely lead to higher taxes, more regulation and fewer services. That will scare off some of California s entrepreneurs. But the alternatives aren t much better.

Expect classic EC fudge on aid for UK banks

20 May 2009

Lloyds has warned that the European Commission could force it into asset sales to satisfy stateaid rules. But the prospects of such a move are slim. The likelihood is that Europe will force those UK banks enjoying state support to do things they planned to do anyway.

Derivatives volume collapse doesn’t mean less risk

19 May 2009

For the first time since the market revved up ten years ago, the notional amount of all derivatives fell by 13.4% in the second half of last year. That doesn t mean less risk, though. The market value of the remaining contracts jumped, as did their gross credit exposure.

Gatwick auction moribund – but not quite dead

19 May 2009

BAA says the sale of the London airport is still on. But the highly leveraged airports operator got only one fully funded bid and it was painfully low. No wonder BAA has appealed the mandated breakup. A delay would buy precious time, and might keep it from crystallising a loss.

UK hears echoes of 1930s – and 1970s

19 May 2009

Falling UK retail prices threaten a depression in wages and earnings. With unemployment spiralling, the deflationary menace is real. Perhaps current policies can restart the economy. But still more money printing and a bout of high inflation might prove the unlovely solution.

Right principle, wrong principal

19 May 2009

US banks still need lots of capital and private equity has money to put to work. Private equity shops are bidding for a Florida bank and one firm is buying a Michigan bank. But US regulators still don t love these matches, Robert Cyran and Richard Beales explain.

China tries to take baby step away from dollar

19 May 2009

The dollar won t easily be displaced as the reference currency for commodities and almost everything else. A move to price ChineseBrazilian trade in local currencies is just a gesture. But it could be preparation for a new world order where the US can t fund its debt in dollars.

AIG may find Asian IPO a tough sell

19 May 2009

The crippled US insurer wants to float the Asian business it couldn t unload earlier this year. But if rivals weren t prepared to pay $20bn for it, why should the public? Chinese investor exuberance will be a help, but that might not overcome the economic headwinds.

US sets low bar for Tarp warrant value

19 May 2009

So far, only one bank Old National Bancorp has bought back warrants issued to the Treasury to give taxpayers the chance of some bailout upside. Even on kind assumptions, the bank looks to have gotten the best of the deal. Use our new calculator to evaluate other cases.

Tesla investment gives Daimler sex – and green – appeal

19 May 2009

The German automaker bought a 10% stake in the Silicon Valley startup. Tesla s $110,000 electric sports cars certainly bring some sex appeal to the boring Mercedes maker. But with new CAFE standards taking effect, Tesla s battery technology is the real prize.

New opposition leader raises hope of Japan revival

19 May 2009

Since Taro Aso became its leader, Japan s ruling LDP has added bigger public deficits to a debt of 160% of GDP, producing a deep recession. In this summer s election the new opposition leader, marketoriented and opposed to the central bureaucracy, may give voters a way out.

Risks to Vodafone growth story are priced in

19 May 2009

Results from the world s largest mobile operator show recessionary scars, with £5.9bn of writedowns scattered across its empire. There could be more slips. But Vodafone s share price gives little credit to its emergingmarkets growth prospects and scope for costcutting.

Lloyds’ headhunters have their work cut out

18 May 2009

Wanted: experienced toptier banker, untainted by credit crunch, to chair UK s largest mortgage lender. Excellent opportunity to become national pariah by firing thousands due to UK banking s biggest ever merger. Must enjoy government red tape and being paid less than peers.

Long-term peace could turn Sri Lanka into Taiwan

18 May 2009

Sri Lanka has achieved reasonable economic growth in spite of its civil war. If peace lies ahead, the best way to quiet remaining unrest is through rapid growth. That could be achieved by becoming India s lowtax, highskill neighbour, like Taiwan s relationship with China.