Posts from Monday May 17 2010

Shell gives BP a lesson in PR (or does it?) updated

Update: May 18, 13.20 (BST).

Hands up, we were duped on this one. Shell say the release is a hoax. Read more

MUFG plans $1bn Yuan bond issue

Bank of Tokyo-Mitsubishi UFJ’s China unit said Monday it plans to issue 1bn yuan worth of bonds on China’s interbank bond market Thursday, the first yuan-denominated bond sale in mainland China by a foreign commercial bank, the WSJ reported. Bank of Tokyo-Mitsubishi UFJ (China) Ltd. said in a statement the two-year floating-rate bonds will use the three-month Shanghai interbank offered rate as the reference rate. Bank of China is the main underwriter of the deal.

Chinese court rejects Rio appeals

A Shanghai court rejected appeals by three former Rio Tinto employees of convictions for commercial crimes, the WSJ reported. The widely expected rejection marks an end to the legal process in a case that raised concerns among foreign businesses in China, the newspaper said. The Shanghai Municipal High People’s Court on Monday upheld a lower court’s decision in March to convict Liu Caikui, Ge Minqiang and Wang Yong of accepting bribes and taking commercial secrets. The Chinese nationals were sentenced to prison terms of seven, eight and 14 years, respectively, plus fines.

Samsung to spend $15.6bn

Samsung Electronics unveiled plans to more than double its spending on new factories and equipment to a record $15.6bn this year, a sign of confidence in the rebounding economy and its desire for a bigger lead in memory chips and in components used to make flat-panel televisions, the WSJ reported.

BP claims success in effort to siphon oil

BP said on Monday it hoped its emergency measures would eventually capture up to 5,000 barrels of oil a day from its leaking well in the Gulf of Mexico after reporting initial success in its fight to control the devastating spill, the FT said. The oil major also said it would never again try to produce oil from the well, although it did not rule out drilling elsewhere in the reservoir, according to an AP report. Separately, Dow Jones reported BP’s compensation payouts to people affected by spill would not be limited by the $75m  legal cap on such liabilities.

Thai rivals look to broker ceasefire

The Thai government on Monday said it is trying to broker a ceasefire agreement with the leaders of the protest movement that has occupied key parts of Bangkok for the past nine weeks raising hopes of a halt to clashes that have so far claimed 37 lives, the FT reported. But despite the hopes of an end to the violence, the two sides are still far from reaching agreement on the underlying political problems, including the protesters’s demand for the immediate resignation of Abhisit Vejjajiva, the prime minister.

Pru seeks to dispel doubts

Prudential on Monday sought to counter investor scepticism over its ambitious $35.5bn takeover bid for the Asian businesses of AIG as it launched its $21bn rights issue to fund the deal, the FT said. The offering, the second-biggest rights issue in sterling terms, was priced at a deep discount to attract support amid market turbulence. See FT Alphaville, here, and also Lombard on the Pru’s challenge.

ECB buys €16.5bn in bonds

The European Central Bank has bought €16.5bn of eurozone government bonds as part of an international rescue plan, amid investor concerns that the intervention is not yet big enough to stabilise debt markets, the FT reported. See also “Sterilised and scandalised” on FT Alphaville as well as details of analyst commentary.

‘Heightened levels of interbank funding could be with us for some time’

As tensions rise in the interbank markets, Brian Knight of Yelvington Research argues current levels might represent a ‘new normal’. Moreover, as FT Alphaville reported, increasing inter-bank scrutiny could put emerging market banks and countries under pressure. Read more

Tradebot shows Goldman what minting money really looks like

Both Goldman Sachs and JP Morgan were able to boast of having made money every single day in the first quarter of 2010. An impressive feat? Sure – but certain high frequency traders have made money every single day for four years. FT Alphaville has the details. Read more

Should CDS markets be more skeptical about European banks?

Moody’s Market Implied Ratings group — not the be confused with the ratings division — last week published some research into the reaction (or lack thereof) of the CDS investors to European banks’ “likely exposures to Greek obligations.” According to MIR, investors might soon wake up to the realities of these exposures – and European bank CDS could suffer as a result. Read more

CDS report: Euro freefall

European credit markets endured a difficult session today, easily underperforming their equity equivalents. The widening accelerated late in the afternoon as the euro came under renewed attack. The Markit iTraxx Europe index nearly 7bp wider at 115.5.bp, while the Markit iTraxx Crossover index was trading around 532bp, 27bp wider on the day. Unusually the Markit iTraxx SovX Western Europe index held up relatively well compared to the corporate indices, only widening by 3bp to close at 127bp.

But the fragility of the eurozone, particularly at the periphery, has been driving both the decline in the euro and the widening in credit spreads. The ECB revealed that it has bought  EUR16.5 billion of eurozone government bonds, and also announced that it will begin sterilising the purchases tomorrow by issuing one-week deposits. The figure was at the low-end of estimates and there are some concerns among investors that the central bank’s intervention won’t be enough. Peripheral sovereign spreads continued to widen today, with Greece (635bp, +30) and Portugal (285bp, +43) underperforming. Read more

The ECB’s €16.5bn bond-buying, in context

The European Central Bank has opened the kimono on the amount of bonds it has bought as part of its bid to stabilise securities markets — and a few analysts have delved inside, to consider how the programme is going.

First, Harvinder Sian of RBS: Read more

ECB puts a figure on its bond-buying

Mystery solved. The European Central Bank revealed on Monday that it had bought €16.5bn of eurozone government bonds as of last Friday.

Flashes, via Reuters: Read more

Would Pru/AIA be questionable even without Tidjane? (updated)

Prudential’s embattled boss is by all accounts starting to lash out, saying he has been the victim of a press campaign against him — one which had elements of racism. In all, Tijdane Thiam seems to be hugely upset at his treatment by the media. In response, FT Alphaville decided to make a few observations… Read more

Please do shut it, George

Here’s a intriguing argument for why the new British government shouldn’t talk itself up as taking action to stop the UK becoming the next Greece, as George Osborne, the incoming Chancellor, did on Monday morning.

Take it away, Stephen Lewis of Monument Securities, emphasis FT Alphaville’s: Read more

Testing Re-Remics

A Friday resecuritisation fail, via Bloomberg:

May 14 (Bloomberg) — Standard & Poor’s cut to junk the ratings on certain securities, backed by U.S. mortgage bonds, that it granted AAA grades when they were created last year by Credit Suisse Group, Jefferies Group Inc. and Royal Bank of Scotland Group Plc. Read more

GLG lurches down a potholed Memory Lane

Remember the heady days of GLG Partners’ US listing back in 2007 when the UK-based fund achieved a stock market valuation of $3.4bn?

Here’s a Lex note from the time; Read more

To: tidjane.thiam@prudential.co.uk

FT Alphaville has eight questions for Tijdane Thiam. A sample: ‘What valuations can reasonably be expected from the fire sales in India and China? You also state that the Pru will continue to seek value for shareholders. Does this mean Korea, Malaysia and Australia could also be on the block?’ Read more

Markets Live transcript 17 May 2010

Live markets commentary from FT.com 

China stocks slump 5.1 per cent

The Shanghai Composite Index was driven to its biggest loss since August on Monday, Bloomberg reports, as government curbs on property-buying weighed on stocks. The Shanghai bourse has been in a bear market for weeks over policy fears.

US muni default risk grows

A default by a large US municipality is more likely than a sovereign debt default this year or next, according to a survey of US restructuring experts to be released on Monday, the FT says. Ninety per cent of those surveyed believe that a US city will default in 2010 or 2011, after several years of budget deficits.

Democrats open to derivatives talks

Senators Chris Dodd and Blanche Lincoln have told the FT they are ready to negotiate on proposals to force banks to spin off their swaps desks, as banks lobby regulators and clients to help overturn the provisions contained within the Senate financial reform bill. Fears have grown that the new rules would limit legitimate hedging and market-making.

Robust dollar brings euro to four-year low

The euro slumped to a four-year low against a robust dollar as fiscal woes continued to drive global markets on Monday, according to the FT’s rolling global markets overview. Traders switched to “risk off” in Asia as the worries about the impact on global growth of eurozone austerity measures again batter confidence. However, European bourses shrugged off an initial wobble as a rebound in US equity futures calmed nerves.

Man agrees $1.6bn takeover of GLG

Hedge fund manager Man Group is to buy GLG Partners in a deal that values its rival at $1.6bn, it announced on Monday, the FT reports. The deal will create a global alternative investment manager with a combined $63bn of funds under management. FT Alphaville considers the deal’s structure and merits, as well as some history.

The EU’s very own AAA SPV

Part of the European Union’s bailout package involves setting up a special purpose vehicle (SPV) to make funds available to eurozone countries that need them. It has grabbed fewer headlines than the European Central Bank’s government bond-buying adventure, even though it’s actually the biggest component of the bailout package at up to €440bn over the course of three years. But how will it be viewed by the rating agencies? FT Alphaville has some analyst reaction. Read more

Pru unveils $20bn rights issue

Prudential launched its delayed $20bn rights issue on Monday and told investors the $35.5bn (£24bn) acquisition of AIA, the Asian businesses of AIG, would be more valuable than either group on their own, the FT reports. The issue means that UK regulators have given their tacit approval to the deal, the WSJ adds, but shareholders are still to be convinced.

‘Shut it, George’

Quoth George Osborne, the UK’s new Chancellor, in Monday’s FT:

We are finding all sorts of skeletons in various cupboards and all sorts of decisions taken at the last minute. By the end the previous government was totally irresponsible and has left this country with absolutely terrible public finance, worse as a proportion of our economy than Greece; the second worst in the entire European Union after Ireland and I’m afraid that is something we warned of and is something that people will see in coming weeks that is something that is absolutely true as the Office for Budget Responsibility produces a proper set of borrowing forecasts and a proper set of national accounts. Read more

Pru rights issue: the details

At long last, FT Alphaville writes. Prudential announced a much delayed $20bn rights issue on Monday to make the case for taking over AIG’s Asian arm, AIA – amid the steepest falls on Asian markets in six months, though. But what do analysts think? Read more

One giant leap for ManGLGed (Group) Part II

Shares in Man Group were the biggest faller in the FTSE 100 on Monday morning, as investors digested its transformational deal to grab GLG, FT Alphaville adds. No doubt. Man Group is paying a good 6.75 per cent of GLG’s AUM. If Man doesn’t make this work, prepare for a big goodwill write off. Read more