Posts from Monday Jul 5 2010

Renminbi bond deals begin to flourish

A Hong Kong-based toll road company will sell renminbi-denominated bonds to international investors this week in a little-noticed deal that marks an important change in China’s currency controls, the FT said. Hopewell Highway Infrastructure, controlled by Hong Kong tycoon Gordon Wu, is non-bank company to take advantage of new rules introduced by China and Hong Kong to promote the use of the renminbi in cross-border transactions.

Daiwa buys KBC capital markets unit

Daiwa Capital Markets, the investment banking unit of Daiwa Securities, is set to pay $1bn for KBC’s global convertible bond and Asian equity derivatives businesses, in an effort to globalise further, the FT reports. The Japanese group expects the combined businesses, which comprise an average 2 per cent of the Belgian bank’s net profits, to generate operating revenue of about Y15bn ($170m) a year.

China eyes shake-up of CIC bank holdings

China is considering stripping its $200bn sovereign wealth fund of the country’s banking stakes, in a move that could free it of some restrictions when it invests in the US, the FT reports, citing people familiar with the matter. China Investment Corporation would no longer be responsible for holding the state’s majority stakes in the country’s biggest banks, such as Bank of China.

Troubled Gulf Bank returns to ruder health

Several Gulf banks teetered during the financial crisis but few have suffered as much as Gulf Bank, one of Kuwait’s largest and most established lenders. But Michel Accad, a Citigroup veteran who was appointed chief executive last August, told the FT he is optimistic the bank will soon put a traumatic two years behind it.

Libya hints at taking stake in BP

Libya’s top oil official on Monday said that his country’s sovereign wealth fund should invest in BP to take advantage of the troubled company’s falling share price, the FT reported, citing Dow Jones. Shokri Ghanem, chairman of Libya’s national oil company, made the comments amid speculation that BP was seeking to raise capital from the oil-rich Middle East. Separately, BP said it was not planning to issue new shares.

Chinese pay disputes mirrored across region

Chinese labour unrest is being replicated in south-east Asia where factories that compete with China to supply low-cost goods face walkouts as employees demand better pay and benefits, the FT reported. The disputes match similar action in China, where growing worker dissatisfaction has led to industrial unrest and higher wages.

Fuel protests bring India to a halt

Transport and businesses across India were severely disrupted on Monday by a dawn-to-dusk strike called by opposition parties to protest against the government’s decision to raise fuel prices, the FT reported. The government has insisted that it will stand firm, saying India can no longer afford the huge cost of keeping domestic fuel prices below world market levels.

Greenpeace fires salvo over paper producer

Greenpeace has accused Walmart, Tesco, Carrefour and other international companies of buying products from Indonesia’s Asia Pulp & Paper, which it claims is destroying rainforests in violation of promises not to threaten endangered species. APP is the world’s fourth largest paper and pulp company, and is owned by Indonesia’s Sinar Mas conglomerate, the FT said.

Farewell for now, Bob

Bob Janjuah is moving on, FT Alphaville reports. The permabear has left RBS but here’s the good news for fans of the most pessimistic strategist in the Square Mile – he’s not going to the buy-side (we hear he could be on the way to RBC Capital Markets). Also leaving RBS are chief markets economist Kevin Gaynor and the excellent Alan Ruskin, international strategist. Read more

27 days later

The Baltic Dry Index, which measures the cost of shipping dry bulk goods, headed into its 27th day of losses on Monday.

This takes it into its longest continuous slump for five years, according to Bloomberg. Read more

G.R.I.M. markets

Forget douple dip. What we’re really facing for the next couple of years are G.R.I.M markets — Growth Really Is Mediocre (geddit). That’s the view of Graham Secker, Teun Draaisma’s successor at Morgan Stanley, who has weighed into the double-dip debate. FT Alphaville has more. Read more

Sad twist in the K1 case

Remember K1, the mysterious German fund of hedge funds that left banks including Barclays, BNP Paribas and JP Morgan nursing some nasty losses?

Its founder was Helmut Kiener, a psychologist and creator of the “K1 fund allocation system,” which generated, cough, extraordinarily consistent returnsRead more

Wall Street justice, Texas-style

Things we learned this weekend:

So you can add the Lone Star state to the growing of list of those out to claim damages from Wall Street. Read more

It’s a zero-sum game Mr. Hari

In case you missed it, the Independent’s Johann Hari has done a Matt Taibbi — yes he of Vampire Squid fame.

But this time the author doesn’t just accuse the bank of gross financial manipulation, he accuses the institution of single-handedly starving millions around the world 2006 onwards. Read more

The plain vanilla mortgage LIVES! It’s just called ‘qualified’

Did any one catch this bit in the latest (and last?) draft of theUS financial reform bill?

From page 189 of Title IXRead more

Markets Live transcript 5 Jul 2010

Live markets commentary from 

Monday morning fat finger

Fun and games in Kazakh mining group ENRC on Monday morning.

 Read more

The Art of AgBank IPO

News reaches us that China’s closely-watched Agricultural Bank IPO has so far experienced lacklustre public demand from investors — while the institutional portion had been 10 times oversubscribed. Which prompted FT Alphaville to ponder: is now the time for some Chinese Sun Tzu-style strategy? Read more

Losing ECB liquidity = two small rate hikes, says Citi

The European Central Bank’s 12-month LTRO expired with a whimper, last week.

Lower-than-expected roll-over demand for the central bank’s new, albeit shorter-maturity, facilities meant European banks weren’t doing as badly as feared — or, at least some of them weren’t. But the reduction in ECB liquidity could mean something else for money markets; higher rates. Read more

Won’t somebody think of the eurozone bonds?

Credit Agricole has.

And as the French bank notes, eurozone banks have been rather big buyers of eurozone government debt in recent years — currently owning 26 per cent of Europe’s sovereign bonds. Read more

Further reading

Elsewhere on Monday,

– “What really did Ambac and MBIA in is a haze of fraud…” Read more

Pink picks

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

Clive Crook: The long and the short of fiscal policy
The US recovery is faltering, says the FT columnist. Last Friday’s jobs report, though not discomfiting the markets, contained more bad news than good, and followed a slew of other disappointing indicators. What Congress can do in current circumstances is limited, but Washington’s politicians are making sure to avoid doing even that. A limping recovery and a squabbling, impotent government are no formula for restoring confidence. Read more

Snap news

Breaking pre-market news on Monday,

– Lloyds sells HBOS integrated finance division to Coller Capital – statementRead more

Data void could add to tension this week

Markets are set for a nervy few days as a week light on statistical releases will give traders plenty of time to chew on their fears of a double-dip recession, the FT says. Worsening data on the US economy, including weak non-farm payrolls, last week gave markets the jitters and sent risky assets plunging. The US Treasury yield curve, for instance, was at its flattest since May 2009, while investors sought safe haven refuge in currencies like the swiss franc. Chinese equities’ also experienced their biggest weekly drop for 16 months on growth fears. That gave the eurozone a few days respite from the bears’ focus, but Jean-Claude Trichet, ECB president, will nevertheless be in the spotlight at this month’s rate-setting meeting on Thursday. The Bank of England’s rate-setting meeting will also attract attention.

IMF offers Ukraine $15bn stability grant

Ukraine received a big boost from the IMF when the organisation agreed to grant the country $14.9bn to stabilise its recession-battered economy, the FT says. But final approval of the aid package hinges onthe government’s willingness to press ahead with unpopular economic reforms, some of which have to be adopted before the IMF board meets this month. Separately, the FT reports that the IMF has written off $10.8bn of the Democratic Republic of Congo’s debt, after a record seven years of negotiations.

Overnight markets: Up ex-USA

Asian markets
Nikkei 225 up +34.30 (+0.37%) at 9,238
Topix up +5.16 (+0.62%) at 836.14
Hang Seng down -42.32 (-0.21%) at 19,863

US markets
S&P 500 down -4.79 (-0.47%) at 1,023
DJIA down -46.05 (-0.47%) at 9,686
Nasdaq down -9.57 (-0.46%) at 2,092 Read more

Weekend catch-up

In case you missed these weekend headlines,

From the FT, Read more

Hedge fund lending reportedly draws scrutiny

Firms that borrow from hedge funds often see a rise in bets against their shares before the loans are announced, the Wall Street Journal reports, citing a new academic paper. In contrast, companies that borrow from banks see little change in short-selling of their shares. The authors say hedge funds, like banks, qualify as ‘quasi-insiders’ but are not subject to the same regulation and oversight.

Private equity to invest up to £5bn

Private equity firms are looking to invest billions of pounds in the UK within the next year, in an attempt to reduce their cash piles, according to a study. The survey conducted in the second quarter by Grant Thornton,  shows that about 50 per cent of the more than 100 private equity executives polled expect to invest from £11m to £50m in UK companies in the next 12 months, the FT reports. And while markets remain volatile, the combined sum of their investments is still likely to exceed £5bn.

Osborne orders capital spending purge

Plans for new schools and hospitals are to be slashed under a review of all capital spending planned by UK chancellor George Osborne, which is expected to direct scarce resources to projects that can show the most economic benefits, such as transport schemes. Under Mr Osborne’s “zero-based” approach, the Treasury is starting with a blank sheet of paper, meaning every project, including some already in the pipeline, will face scrutiny, the FT says.