The Baltic Dry’s losing streak – now into its 28th day – is becoming old hat. But have you heard the one about the lumber futures?
As Bloomberg reported, lumber fell limit-down on the CME on Tuesday, “on declining construction in the U.S. and Canada and speculation that wood processors will not curb production, adding to already ample supplies”. Read more
Chinese investors bought up a net Y541bn ($6.2bn) in Japanese government bonds in the first four months of the year, amid ongoing global concerns about Europe’s debt woes, the FT said. Analysts said the scale of the buying – which was more than double the full-year record total of Y253.8bn set in 2005 – was notable when compared to the rate of increase in China’s foreign exchange reserves in the first quarter.
Samsung Electronics, the world’s second-largest handset maker by sales, is looking to the GalaxyS, its latest Android-based smartphone, to regain market share in the fast-growing smartphone market, the FT reported. The South Korean company — expected to announce its second-quarter earnings guidance on Wednesday – hopes the GalaxyS can become an iPhone killer. Meanwhile, rival handset-maker HTC said its Q2 unaudited net profit rose 33 per cent.
India has sought public comments on allowing foreign direct investments in multi-brand retail, the Wall Street Journal reported. Local regulations ban foreign multi-brand retailers from selling directly to Indian consumers, but allow up to a 51 per cent foreign ownership in single-brand retailers, the WSJ said. Foreign companies are allowed to open only wholesale outlets and provide back-end support to local operators, the newspaper added.
GTL Infrastructure, the Indian mobile tower group, has sought to reassure telecoms operators it remains independent in spite of announcing a proposed $11bn merger last week with the cell mast unit of Reliance Communications, the FT reported. Manoj Tirodkar, chairman of GTL, said the planned deal with Reliance Infratel would not prevent him looking for transactions with rival operators.
Many investment banks and companies in the Gulf will have to rip up their pre-crisis business model and shift away from the proprietary investments that tripped up scores of high-profile institutions, the FT said, citing senior regional bankers and analysts. The financial crisis has highlighted severe shortcomings in risk management, over-exposure to real estate and a reliance on paper gains on proprietary investments rather than recurring fee-based revenue.
The Dickensian debtors laws of the United Arab Emirates – stipulating jail sentences for defaulters – have long been a matter of controversy in the country, but seems to have won unexpected backing by HSBC, one of the largest international lenders in the region, the FT’s beyondbrics blog reported. HSBC Middle East’s UAE head told Arabian Business magazine the harsh laws were an effective deterrent to potential defaulters.
Australia’s central bank held interest rates steady on Tuesday in spite of strong new trade figures and worries about rising wage pressures. The country recorded a A$1.65bn trade surplus for May, its third-highest ever, according to data released earlier on Tuesday. Exports rose 6 per cent in value from a year before, helped in part by a rise in iron ore prices since an industry shift away from annual supply contracts, the FT reported.
Global investment banking earnings are expected to drop sharply in Q2 after brutally tough market conditions saw trading commissions dry up and the market for takeovers and IPOs freeze, the FT reported. Analysts are predicting that many European banks will see a drop of 50 per cent year on year in sales, trading and advisory revenues from April to June. In the US, the boom in trading commissions that powered earnings in the past year also appears to have ground to a halt.
Kohlberg Kravis Roberts has unsealed some of the private equity industry’s most guarded secrets, divulging that its co-founders each hold $800m stakes in the buy-out firm and were paid more than $22m last year, the FT reports. Henry Kravis and George Roberts, co-chief executives of the firm they started in 1976, each own 87m shares, or about 13 per cent, of KKR. The disclosures came as the company inches towards an NYSE share listing.
Agricultural Bank of China is set to raise up to $22.1bn in the world’s largest initial public offering, underscoring investors’ faith in the prospects for the Chinese economy, the FT says. The success of the deal highlights that investors believe in the growth outlook for Chinese banks, even as their peers in the west are hobbled by bad loans in the wake of the financial crisis.
As FT Alphaville readers may be aware, we have long bestowed the title of world’s most bearish man to RBS’ Bob ‘The Bear’ Janjuah. But as Janjuah is about to embark on gardening leave, we must in the interim bestow the title on another. Step forward, Robert ‘Dow sub-1000′ Prechter. Read more
How’s this for fantasy deal-making . . .
We think Barclays is evaluating a break-up of the bank Political considerations and commercial imperative would see investment/corporate banking and Barclays Wealth spun off into a NewCo, leaving the remaining Barclays business as a pure play on retail banking. Valuing the two businesses using peer group multiples, which are currently at depressed levels, suggests this could provide upside for shareholders of between 27% and 39%. Read more
The Webvan Ocado IPO document is now available — all 284 pages of it.
Most of the key facts and figures have already been made public but there are some interesting tidbits in the Additional Information section, which starts on page 220. Read more
BNP Paribas analyst Ken Wattret has compiled a handy primer on the European Financial Stability Facility (EFSF), an appendage of the so-called European Stabilisation Mechanism.
The full note runs to seven pages and is available in the usual place. Read more
Here is an arresting graphic (click to enlarge):
A couple of interesting factoids come our way via Blackrock’s iShares’ just-launched weekly European ETF update.
Including the fact that last week saw a 40 per cent increase in the exchange turnover of so-called Non-Delta 1 ETF products. Read more
Last week, as FT Alphaville has highlighted, the ECB prominently failed to sterilise all of its €55bn worth of bond purchases in its one-week fixed-term deposit auction.
Moreover, as we wrote at the time, what Europe’s central bank did manage to auction (€31.86bn) also came at a much-higher rate (0.54 per cent) than what it offered at the start of its Securities Markets Programme (SMP). Read more
Here’s a note from Gary Jenkins, head of fixed income at Evolution Securities, on Tuesday regarding what could be a very inauspicious signal for the stock market emanating from this year’s World Cup.
As Jenkins points out: Read more
Live markets commentary from FT.com
Kenneth Rogoff, the Harvard University professor and former chief economist of the International Monetary Fund told Bloomberg news on Tuesday he believes China’s property market is beginning a “collapse” that will hit the nation’s banking system. He added the country was inevitably going to have bumps considering the speed it was growing. Although he also said that while recoveries across the global economy were “very slow,” the danger of a return to recession was not “elevated.”
Risky assets were back in demand on Tuesday as investors returned to the market following recent sharp falls, helped by soothing comments from the Australian central bank about the Asian economy. The FT reports that the FTSE All-World equity index was up 0.9 per cent, metals prices were rallying and the dollar was softer on a less fearful mood.
UK online food retailer Ocado confirmed on Tuesday that it would press ahead with an equity valuation in the £800m-£1.1bn range for its forthcoming initial public offering, the FT reports. This would see shares in Ocado – which sells Waitrose food online – priced at between 200p and 275p. Ocado said it would issue up to 257.7m shares, including up to 102.5m new shares, raising £200m. Investors and management would also sell up to 155.2m shares, including 10m options or warrants, that may be exercised before listing. For more see FT Alphaville.
Just out from the Swiss National Bank — some rather interesting FX reserve figures, reports FT Alphaville. The SNB’s currency reserves dropped to CHF225.8bn ($213.6bn) in June — a decline of CHF6.3bn from May. Considering that in that month the central bank’s reserves jumped by an astounding CHF78.8bn — or CHF138.5bn in the first five months of 2010 — it seems like quite a step change in policy. Read more
What is Ocado’s secret sauce?
Several big, established and profitable companies (Merlin and New Look for example) have been forced to abandon IPOs over the past year in markets a lot less volatile than now, yet this later day Webvan is pushing ahead with its flotation. Read more
The saga of Sigma Finance — God’s gift to structured finance writers, with its shadow banking connotations, Gordian Knot connection and ‘event’ associations — is lurching to its end.
On Monday, liquidators of the erstwhile $27bn SIV issued their final statement. Read more
With stress test results due in less than two-and-a-half weeks’ time, Europe’s investment banks have been busy churning out their own versions. One of the best we’ve seen landed in our inbox on Monday, says FT Alphaville. And in it, everyone passes — but mostly because the point of the exercise is to demonstrate how useless these stress tests could turn out to be. Read more
Elsewhere on Tuesday,
- Watch the state of the states. Read more
Comment, analysis and other offerings from Tuesday’s FT,
Gideon Rachman: South Africa’s trial by World Cup
There are still five days to go before the last ball is kicked at the World Cup, but the sense of relief in South Africa is already palpable, writes the FT columnist. Over the past month, the country has put itself on trial by hosting the world’s biggest sporting event. Read more
Breaking pre-market news on Tuesday,
- Ocado aiming for equity valuation of £800m-£1.1bn via IPO on the London Stock Exchange — statement. Read more