30SC

Luxury faces tough quest for next big market

27 Aug 2015

China’s slowdown and weaker currency have hit share prices of bauble-peddlers LVMH and Swatch. The hunt is on for luxury’s next hotspot. India and Brazil show promise, but a mix of scale, rising incomes and inequality is elusive. Better opportunities may be closer to home. 

Stock rout will blow hole in China’s deal pipeline

27 Aug 2015

The selloff has brought an abrupt end to a record-breaking run for share sales in the People’s Republic. This will hurt local brokers, which dominate onshore listings, more than foreign banks. A sharp slowdown in Chinese M&A, up 70 pct so far this year, also looks inevitable.

Monsanto leaves Syngenta facing awkward questions

26 Aug 2015

The world’s largest seed maker has given up pursuit of its Swiss rival. The $46 bln deal required aggressive assumptions and carried risks. Syngenta’s management now needs to prove its reluctance to talk was worth it. 

Investors struggle to find true safe havens

26 Aug 2015

Boltholes like U.S. and German bonds or the Swiss franc are benefiting less than might be expected amid equity swings and concern over a slowing China. Investors are rightly wary of once-safe assets that have moved erratically of late. The mystery is where they are going instead.

China’s sensible rate cut sends dangerous signals

25 Aug 2015

The central bank has lowered interest rates by a quarter point and reduced the amount lenders must hold in reserve. It helps ease the slowdown and offsets capital outflows. But by responding to two days of stock market turmoil, policymakers run the risk of stoking moral hazard.

Miners’ dividends are a fragile commodity

25 Aug 2015

BHP Billiton has raised its payout even as prices fall. That helps win investor support for its aggressive iron ore production strategy. Yet across the sector, funding generous payouts will become tough unless supply and demand rebalance. There is little to suggest they will.

Investors’ self-doubt worsens equity woes

24 Aug 2015

Global equities are extending declines. Valuations can’t quite explain the depth or breadth of losses. Investors’ low conviction in past asset allocation decisions could have more to do with it. So might waning faith in policymakers riding to the rescue.

ABN Amro’s IPO could prove sweetly timed

21 Aug 2015

The Dutch bank’s second-quarter earnings doubled to 600 mln euros, justifying state zeal for a reprivatisation. ABN’s first sale may end up a third below the government’s in-price, like the UK’s selloff of RBS. But with the domestic economy firing, pressing ahead makes sense.

Markets fear central bankers are only human

20 Aug 2015

Unexpected events like China’s devaluation and commodity price drops are having a surprisingly big effect on long-range market inflation expectations. Previously, investors tended to look past such phenomena. But trust in policymakers’ ability to offset shocks is at a low ebb.

Glencore tripped up by faith in rational markets

19 Aug 2015

The commodity trader’s earnings have disappointed as copper and coal have tumbled. Anticipating the market is getting harder because both rivals’ behaviour and Chinese demand for raw materials are even more unpredictable. Glencore is thus focusing on what it can control: cash.

Indian e-tailer’s funds will disappear in a flash

19 Aug 2015

Online marketplace Snapdeal is raising $500 mln from investors led by Alibaba and Foxconn valuing it at $5 bln. Securing more big-name backers is a coup for the Indian start-up. But the huge discounts it offers to lure buyers and sellers means the new funds won’t last long.

Sizing up FX rigging damage is imperfect science

18 Aug 2015

There are ways of guessing how much currency rate manipulation cost some investors on some days. Settlements by banks in the U.S. have set the ball rolling. But these are just estimates, and sometimes there may have been gains. Nuisance value may matter more than client losses.

Bangkok attack shakes Thai economy’s last support

18 Aug 2015

The deadly bombing of a shrine will scare off tourists whose numbers were up 29 pct this year. It’s another jolt to an economy already grappling with flat exports and weak private investment. Military rulers have been slow to boost public spending. That’s making things worse.

Japan GDP drop shows limits of cheap yen

17 Aug 2015

The annualized 1.6 pct drop in second-quarter output will put pressure on the Bank of Japan to print more money. But instead of lifting inflation and wages, monetary easing may only depreciate the yen. With a weak currency losing its power to stimulate, the gains may be limited.

Hugo Dixon: Greece may not need debt haircut

17 Aug 2015

No single measure, such as debt to GDP, adequately captures how unsustainable Athens’ balance sheet is. Most other yardsticks show Greece needs debt relief. But cutting the face value of its borrowings is probably not required.

Shire can’t easily pay more for Baxalta

14 Aug 2015

The pharma group’s all-stock $75 bln merger approach has been rejected by its rival. Shire’s bid relies on aggressive claims to boost revenue, which Baxalta disputes. Breakingviews’ model shows Shire chief Flemming Ornskov can’t dig much deeper without bold assumptions.

Greek bank bail-in threat starts to recede

13 Aug 2015

Savers have rightly feared their deposits may get turned into equity. Draft proposals for Athens’ new bailout imply this may be unnecessary. It probably isn’t enough to entice private investors, but boosting depositor confidence is an important step in clearing up Greece’s mess.

Alibaba’s golden-child status hangs by a thread

12 Aug 2015

The Chinese e-commerce group’s disappointing quarterly revenue growth pushed the shares close to last year’s float price. Investors haven’t much challenged founder Jack Ma’s free rein so far. A weakening business and over $100 bln of lost market capitalisation may change that.  

China’s yuan devaluation push looks far from done

12 Aug 2015

The central bank weakened the official exchange rate by another 1.6 pct against the U.S. dollar. It’s a clear sign the new “market-oriented” yuan is heading down. Until China uses its foreign exchange hoard to prop up the currency, investors will assume there’s further to go.

Greece deal leaves euro intact but fragile

11 Aug 2015

Athens may get its bailout after Prime Minister Alexis Tsipras gave in to reform demands. Quitting the euro is much less likely. It suggests currency union can bear the near-exit of a peripheral state. Economic rifts between core members, though, remain the big future risk.