The Big View

Chinese equities are ready for long march upwards

14 Dec 2023

Share prices and valuations in the world’s second-largest economy are near 2016 lows. Foreigners have retreated but any recovery will depend on Beijing and domestic buyers. Patient investors willing to stomach geopolitical tensions and other risks could earn big rewards.

Banks’ hidden losses are surprise survivor of 2023

13 Dec 2023

The same paper deficits that helped fell Silicon Valley Bank in March still burden lenders worldwide. Bank of America alone sits on $130 bln; US banks nurse a record sum. Investors are now better at telling what’s scary from what’s not, but fuzzy accounting remains unhelpful.

AI firms lead quest for intelligent business model

12 Dec 2023

Automating a swathe of tasks could help startups capture $140 bln in revenue. But even sector darling OpenAI is deeply unprofitable. To justify the billions invested by backers like Microsoft and Amazon, artificial intelligence will have to deliver lasting productivity gains.

How rich societies can live well with slow growth

11 Dec 2023

Advanced economies are expanding less rapidly, while ageing populations, conflict and climate change demand more resources. An acquisitive mindset leads to unhappiness and conflict. But if societies embrace a more purposeful, caring and greener future, they can flourish.

 

Energy transition investing is caught in traps

8 Dec 2023

COP28 attendees pledged to triple renewables, but there’s still no plan to quit fossil fuel. Brookfield’s $13 bln joint bid for Aussie emitter Origin lined up a poster child deal for how companies can make the leap. Its failure has lessons for the world’s broader efforts.

IPO wannabes dress up with few places to go

7 Dec 2023

Fast-fashion empire Shein tops the list of hotly anticipated market debuts, at a possible $90 bln valuation. Reddit, Golden Goose, Skims and CVC are among many others poised to sashay. There’s no red carpet awaiting yet; US and UK elections could make one even harder to roll out.

How a bold $60 bln deal went right yet so wrong

6 Dec 2023

Japan’s Takeda has cause to celebrate the fifth anniversary of its landmark acquisition of Irish peer Shire. Boss Christophe Weber achieved many aims, including broader reach and hefty cost savings. As with myriad mega-mergers, however, there’s little for shareholders to cheer.

Central bank blunders undermine tough rate talk

5 Dec 2023

Federal Reserve Chair Jay Powell and his peers say borrowing costs will stay high to curb inflation. Markets are ignoring them, pushing bonds to their biggest monthly gains since 2008 on hopes of easier policy. Past mistakes by policymakers suggest traders' scepticism is correct.

Imagine a better climate pact than COP

4 Dec 2023

The UN summit in Dubai, known as COP28, is unlikely to achieve much because all 197 states need to agree. If a few powerful nations set bold targets and then coaxed others to follow suit, progress would speed up. That will not happen unless the US and China take the lead.

 

Bank of England drags Bagehot into the shadows

1 Dec 2023

The 19th-century economist recommended lending freely to stem financial panics. Now watchdogs are pondering how to apply this principle to financial markets dominated by bond investors and unregulated entities. The UK central bank has an idea, but it only works in some cases.

Private-asset binge exposes insurance to new risks

30 Nov 2023

US insurers hoovered up private loans from buyout firms last year in a profitable game of pass-the-parcel. Their hoard of alternative assets has swelled 65% in five years, and regulators are struggling to keep up. The March banking panic shows what can happen when firewalls fail.

AI investments carry whiff of vicious circles past

29 Nov 2023

Turmoil at Microsoft-backed OpenAI lays bare governance risks for such tie-ups. A linked, and equally concerning, problem is tech titans injecting capital in exchange for revenue, inflating valuations in the process. The mutual back-scratching evokes dangers of the dot-com era.

Slowing China still leads the race for commodities

28 Nov 2023

The world’s second-largest economy may expand by a sub-par 4% next year. But that would be 27% of global growth. And Beijing’s shift from property to greener sectors will support its appetite for copper, steel and such. Investors looking just at the big picture risk missing out.

EU is ill-equipped to meet growing global threats

27 Nov 2023

The bloc would be more effective in a dangerous world if its 27 members could make decisions more quickly. The snag is that nationalistic currents make countries even more reluctant to give up their vetoes. It is not clear if the European Union can find a way to square the circle.

The future of interest rates is more surprises

24 Nov 2023

The return of inflation surprised central banks which until recently predicted rates would remain “lower for longer.” Economists and investors struggle to agree on what has changed or what will happen next. Those who assume current interest rates are normal may be in for a shock.

Every country needs an Inflation Reduction Act

23 Nov 2023

The US's $370 bln in green subsidies left allies fearing they’d be at a disadvantage. Now they’re realising that adapting the blueprint can unlock private capital, boost economies and speed up the energy transition. Funding remains a challenge, but not an insurmountable one.

Branding’s corporate titans face moment of truth

22 Nov 2023

Sales volumes at consumer goods giants are falling for the first time this century. Branded goods sell well when quality is tangibly higher and price premiums slim. With neither now the case, the valuation of $296 bln Nestlé, and rivals, may shrink in line with its KitKats.

EU fiscal pact ignores green elephant in the room

21 Nov 2023

The bloc’s budget goals failed to keep national debts in check. On average, they are now 83% of GDP, well above target. A revamp is a step forward. Yet with the climate challenge set to strain state finances, new rules alone will do little without more jointly funded investments.

World Bank and kin head for a $100 bln cash call

20 Nov 2023

Scaling up the Washington-based lender and other multilateral banks makes geopolitical sense and helps fight climate change. Sweating their balance sheets is a start. But eventually shareholders including the US will have to overcome domestic hurdles and put up more capital.

Multipolar world opens up surprising safe havens

17 Nov 2023

Despite geopolitical challenges the United States remains the world’s largest net debtor, owing the rest of the globe $18 trln. Yet increasing dependence on overseas equity investors makes it vulnerable. If the tide turns, fund managers may be better off in emerging markets.