Posts from Monday Feb 1 2010

The little bucket shop of horrors

The high risk nature of small cap shares is demonstrated in the sample of transactions reviewed, which covered 19 different small cap stocks. Analysis has shown that the value of these stocks has decreased significantly since the point of purchase to December 2009. Nine stocks lost 100% of their value, and seven stocks lost between 29% and 91% of their value. Only three stocks gained in value. The performance of small cap stocks as measured by the AIM index over the same period was a decrease of 41%.

That comes from a Final Notice the FSA has just handed to an outfit called Falcon Securities for numerous failings by its subsidiary Montague Pitman Stockbrokers in dealing with clients. Read more

…this is an M&S pay deal

It has taken a couple of months, but Marks & Spencer has finally revealed the cost of luring Marc Bolland from Wm Morrison.

And he didn’t come cheap. In fact, this looks like it might trigger a couple of red-top alerts from the corporate governance brigade. Read more

Volcker rule hits JPM’s Sempra deal

Ah, the Volcker rule: a godsend for non-bank associated market makers and trading houses — including the big physical commodity trading business — but not so good for trading divisions found within commercial banks.

Phibro’s Andrew Hall must be particularly pleased with himself for breaking out of Citigroup when he did. Since Phibo is now part of energy group Occidental, Hall’s trading activities will certainly not be affected by the prospective implementation of the Volcker prop trading rule. Read more

The latest Fed-Web offering

Is a training site for bank directors. It looks like this:

Why the need?  Read more

Introducing, the death index

We’ve written about the rise of death bonds before.

That term relates to the secondary-market trading of life insurance policies and securitisation trends within the general life-settlement industry. But there is another breed of death-related market in the making. Read more

Of vacuums and central bank policies

FT Alphaville noted earlier today the extent to which the US government is propping up the housing market. Programmes such as the Hamp are explicitly aimed at supporting house prices; while the Federal Reserve is due to buy $1.25 trillion worth mortgage-backed securities (MBS).

Moral (housing) hazard aside, the government’s support poses a major problem for the US economy. It means when the US government finally does withdraw its extraordinary policies there will be no one that can easily step in to take its place. Read more

Lunch Wrap

On FT Alphaville Monday morning,

– Taking (a) Notice in GreeceRead more

The UK/US natgas divergence

See that. That’s the rather spectacular divergence between UK NBP gas prices and US Henry Hub prices of late. Read more

How do you say ‘Notice’ in Greek?

Mark Wednesday in your European Sovereign Struggle calendars.

For that’s the day, February 3, that the European Commission is expected to publish its review of Greece’s Stability Programme. EU members are required to submit these programmes to the Commission every January for review, but, given recent Hellenic tribulations, it’s no surprise that Greece’s will attract extra attention this year. Read more

Markets Live transcript 1 Feb 2010

Live markets commentary from 

The Asian anti-inflationary effect

Last Friday, the Indian central bank surprised markets by holding rates while lifting its cash reserve ratio by 75 bps to 5.75 per cent. They had been anticipated to hike rates by 25bps while lifting the cash reserve ratio by 50 bps.

The move now leaves BNP Paribas’ FX team, for one, convinced that Asia-wide anti-inflationary moves will follow — particularly in China. Read more

US Housing Bubble v2.0

Here’s one thing that the Sigtarp’s quarterly report to Congress, released on Saturday, made very clear: propping up house prices is now an explicit goal of the US government.

So explicit in fact, that the Special Inspector General for the Troubled Asset Relief Program has knocked up this little chart to show how various policy programmes (Hamp, MHA, etc.) lead to higher houseprices: Read more

Shock, horror: ‘irresponsible’ pricing in China IPOs

Beijing’s regulators have injected a few more jitters into China’s nervy but always hyperactive stock markets – taking a swipe at “irresponsible” pricing of IPOs.

As the FT notes on Monday, the statement has fuelled speculation that Beijing could temporarily halt the new issue market in order to introduce fresh pricing rules. Read more

Is this the big one?

Two big investment banks, UBS and JPMorgan, are on Monday asking themselves whether the current bear is “the big one” in terms of market corrections, or just a minor hiccup.

 Read more

What a difference six months makes, in the CEE

In early 2009, central and eastern Europe (CEE) was the region “most blighted by the financial crisis”, as Lex reminded us last week. There were real concerns for foreign banks with big CEE exposure – above all from Austria, Italy and Scandinavia.

And you might recall, the IMF was preparing to bail out some of the region’s most stricken countries and rating agencies were moving to downgrade big lenders to the region, amid a general feeling of crisisRead more

Preview (Frank Timis update)

By Matthew Kennard, our man-on-the-ground at the mining industry’s annual jamboree in South Africa.

Welcome to the Mining Indaba 2010; I’ll be your guide through the biggest industry junket of the year taking place in sunny Cape Town over the next week. Read more

Further reading

Elsewhere on Monday,

– The stock market as Greek tragedy.
 Read more

Pink Picks

Comment, analysis and other offerings from Monday’s FT,

Clive Cook: America can square its fiscal circle
American voters want more public services than they are willing to pay for, writes the FT’s Crook. That is the country’s fiscal problem in one sentence. When it comes to public finance, the “live now, pay later” mentality that caused the economic collapse still prevails. Figures show a strengthening recovery in the last quarter of 2009. Welcome as that may be, even a sustained expansion cannot balance the books in the longer term. On current policies, the permanent gap between spending and revenues is at least 6 per cent of output. Read more

Snap news

Breaking pre-market news on Monday,

– Citigroup said to plan sale of $10bn private-equity unit – BloombergRead more

Overnight markets: Down

Asian stocks and currencies fell on Monday, as Chinese manufacturing data fuelled concerns that Beijing will rein in record lending growth, reports Bloomberg. Bond risk climbed on concern that Greece would need a bailout to repay its debts.

Asian markets (Mon)
Nikkei 225 up +4.26 (+0.04%) at 10,202
Topix down -3.35 (-0.37%) at 897.77
Hang Seng down -109.89 (-0.55%) at 20,012 Read more

Citi mulls sale of buy-out unit

Citigroup plans to sell or split off its $10bn Citi Private Equity unit, expanding the list of money-management businesses the US bank is disposing of to reduce debt, reports Bloomberg. Citi Private Equity oversees about $2bn of Citi’s money with the remainder from outside investors. Meanwhile, reports the FT, Vikram Pandit, Citi’s CEO, hit back at critics, insisting his strategy of international growth – particularly in emerging markets – will restore Citi’s performance.

US banks face insider probe

Neil Barofsky, the special inspector-general overseeing US financial rescue efforts, is to probe allegations of insider trading among bank executives and their associates. Eight of the largest US banks received between $2bn and $25bn in late 2008. Dozens more institutions followed and Barofsky, who oversees the Tarp scheme, is examining whether information was improperly conveyed to trading rooms as the government and banks exchanged information.

RBS Sempra sale hits snag

JPMorgan’s proposed £2.5bn takeover of RBS Sempra’s global commodities trading business has been bogged down amid the bank’s concerns that US proposals to curb banks’ proprietary trading could affect the deal. It is understood that RBS Sempra’s US unit could be sold separately, although JPMorgan is said to remain committed to buying RBS Sempra’s European operations and its global oil trading group, which together account for about 50% of the business.

Siam City bid in ‘crucial’ stage

The battle for control of Thailand’s Siam City Bank will enter a crucial stage this week when bidders, including HSBC, submit final offers. HSBC is likely to face stiff competition from Thanachart, a local lender 49% owned by Canada’s Bank of Nova Scotia, and Korea Development Bank when bids close Monday. The potential buyers are bidding for a government-held 47.5% stake in Thailand’s seventh-largest bank, with offers expected to top $800m.

HSBC ‘eyes China banks’

HSBC’s global head of strategy, Antonio Simoes, has moved from London to Hong Kong to help chief executive Mike Geoghegan prepare a bid for a large Chinese bank later this year, reports the Daily Telegraph. Simoes is among key directors leading the bank’s China expansion plans, following Geoghegan’s recent move to HK. Alongside John Thornton, chairman of HSBC North America, Geoghegan is thought to be eyeing a 51% stake in one of China’s three top banks: ICBC, Bank of China or China Construction Bank.

Morgan Stanley in growth push

Morgan Stanley plans to boost its underperforming securities business by hiring several hundred traders over the next few years, according to James Gorman, the new chief executive. Gorman, who took over as CEO from John Mack in January, told the FT that Morgan Stanley should “seriously grow” its business in areas such as equity derivatives and commodities, and could “easily be 25% bigger than we are”.

Permira, Lovering, eye DFS

UK buy-out house Permira and John Lovering, the veteran UK retail executive, have teamed up to prepare a bid for DFS, the sofa chain being sold by its founder Lord Kirkham. The auction of DFS, valued at about £500m, has drawn other buy-out groups including Advent International and Cinven. Any deal would hand a windfall to Lord Kirkham, who founded DFS 35 years ago and took it private again for £507m in 2004.

Banca Leonardo ditches buy-outs

Banca Leonardo, the Italian investment bank, is shutting its private equity division and writing down the value of its holdings by €70m ($97m) . The decision comes after huge losses seen in some of Italy’s biggest buy-out deals, including Candover’s €1.7bn purchase of yacht-maker Ferretti. Banca Leonardo’s unit is much smaller, and will return €259m, or €1 a share, to shareholders, write down some investments and pay out a further €20.7m from reserves.

Banks, insurers in longevity tie-up

Deutsche Bank, JPMorgan and RBS have linked up with Axa, Legal & General, Edi Truell’s Pension Corp, Prudential, and Swiss Re in a push to create a tradeable, liquid market in longevity and mortality risks. The move, the first major co-operative step to set up standardised products, comes as UK pension schemes focus on the risk that they will pay pensions to retirees for far longer than they have assumed.

UK to open up bond trade

Two of the UK’s largest banks are poised to join a push by the London Stock Exchange to expand the corporate bond market. RBS is preparing to issue a bond on the LSE’s electronic retail bond trading platform, which launches on Monday, and Barclays is expected to follow suit. As well as aiding price transparency, the LSE aims to attract retail investors by offering bonds in lots far smaller than the current  £50,000 units applying to most UK corporate bond issues.