Posts from Wednesday Jul 21 2010

AIG picks coordinators for AIA listing

AIG selected Goldman Sachs and Morgan Stanley to act as lead “global coordinators” in listing its Asian life insurance unit AIG, the WSJ says, citing people familiar with the matter. The insurer also enlisted Deutsche Bank, the WSJ reports, adding: “AIG’s management is especially keen to avoid hiccups after Prudential PLC’s $35.5 billion bid for AIA collapsed last month”.

Bernanke cautions on ‘uncertain’ US outlook

Ben Bernanke on Wednesday said the US recovery was advancing, even as the Fed chairman acknowledged an “unusually uncertain” economic outlook and promised that the central bank was prepared to take further steps to boost the economy if necessary, the FT reports. In terms of monetary policy, Mr Bernanke said the Fed was continuing “prudent planning” for an eventual tightening move that would raise interest rates and shrink its $2,300bn balance sheet.

Private equity in the Gulf: no recovery yet

Until the financial crisis, private equity was one of the Gulf’s trendiest industries. Is it back in fashion yet? A report published today by the Gulf Venture Capital Association (GVCA) hints that it might be, according to the FT’s beyondbrics blog. Still, beyondbrics says, deals remain rare: last year saw only 19 transactions, totalling $561m, compared to 55 transactions worth $2.7bn in 2008.

BlackRock suffers heavy fund outflows

BlackRock unveiled disappointing results on Wednesday as the world’s largest asset manager reported a second successive quarter of new business outflows and warned of more to come, the FT reports. BlackRock saw net outflows of $30.7bn in Q1 2010. Larry Fink, chief executive, said outflows from clients would continue for “at least another quarter”; he also said integration of Barclays Global Investors, bought by BlackRock for $13.5bn last year, was progressing as planned.

IMF urges ‘stress-test’ openness

Eurozone authorities should make their “stress tests” of banks more transparent and extend them across more institutions, according to the IMF’s annual assessment of the eurozone’s economic policies. The fund said that governments must commit to fiscal sustainability and boost growth through structural reforms as well as strengthening the banking system, the FT reports.

Morgan Stanley swings into profit

Morgan Stanley’s quarterly results swung to a profit as efforts to overhaul the bank showed progress despite brutal market conditions. While the bank’s revenue during the period reflected the turbulent markets that have hurt rivals such as Goldman Sachs and JPMorgan Chase, they also underline how Morgan Stanley struggled to find its way a year ago even as many of those peers were producing stunning trading results, the FT says.

Obama signs financial reform bill

The biggest reform to US financial regulation since the 1930s became law on Wednesday after President Barack Obama signed the Dodd-Frank Act at a ceremony in Washington. The signing starts an intense period of rule-making which is needed to put the law into practical effect, and means the US government immediately has a new “resolution authority” to unwind large, failing financial companies, the FT reports.

Taiwan looks to curb local bank fundraising

Taiwan’s banking regulator is considering curbs on private fundraising by local banks and insurers, the FT reports. Chang Kuo-ming, chief secretary of Taiwan’s Banking Bureau, said his office would meet industry associations to discuss possible new rules to limit private share placements. Any such restrictions could hurt the competitiveness of Taiwanese banks, and throw up an obstacle to further private equity investments in the country’s banks and insurers, according to the FT.

China rating agency hits west

The head of China’s largest credit rating agency has criticised his western counterparts and said that as the world’s largest creditor nation, China should have more say in the rating of governments and their debt, the FT reports. Guan Jianzhong, chairman of the privately-owned Dagong Global Credit Rating, told the FT that “western rating agencies are politicised and highly ideological” and “do not adhere to objective standards”. Dagong last week published its own sovereign credit ranking, which rated China higher than the US and other key economies.

Oil groups form $1bn spill response unit

Four of the world’s biggest oil companies will announce on Thursday that they are pooling $1bn to form a joint venture to develop a deepwater Gulf of Mexico oil spill response and containment system, the FT reports. ExxonMobil, Royal Dutch Shell, Chevron and ConocoPhillips will each initially invest 25 per cent in a new standalone company, according to sources involved in the plans. BP has not been included.

Further from El-Erian on Bernanke and sliding stock markets

With Fed chairman Ben Bernanke on Capitol Hill presenting his semi-annual monetary policy report to Congress, stock markets are under notable pressure.

Bernanke’s full written testimony is now availableRead more

BarCap vs HUD on Hamp

We do enjoy a good calling-out here on FT Alphaville, and on Wednesday, a pair of credit strategists at BarCap provided a neat example of the genre.

In a report headlined “Misleading Reporting of Mod Performance in the June HAMP Scorecard”, analysts Sandeep Bordia and Jasraj Vaidya deplored the reporting of the latest Hamp loan performance data by the US Department of Housing and Urban Development. Read more

A Chinese rating agency critique

The head of Dagong Global Credit, China’s largest rating agency, is not best pleased with his western rivals.

In an interview with the FT, the agency’s chairman Guan Jianzhong didn’t mince words about the likes of Moody’s, Fitch and S&P: Read more

Day 475 in the Celebrity Economist house

Day 475 in the Big Economist House.

10:19 am Read more

Wall St reform – the video

Courtesy of Whitehouse.gov

 Read more

The story of the gold curve, so far

Peculiarities have been emerging in the world’s most consistent and established contango market: the gold market, FT Alphaville says. Among them, a clear deviation in the shape of the gold forward curve, in part linked to what seems on the surface a totally seized up and dysfunctional gold leasing market. Lease rates as they stand now are negative — something that’s almost unprecedented in recent history Read more

Ocado (IPO) tombstone

El-Erian: What to expect from Bernanke’s report to congress

Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, discusses the options facing the Federal Reserve as chairman Bernanke prepares to address Congress.

________ Read more

Rating agencies, Dodd-Frank and the ABS market

On Monday, FT Alphaville reported on one significant consequence of the Dodd-Frank Act: rating agencies have had to ask their clients not to cite their opinions in prospectuses and registration statements. And one market is already feeling the effects of the uncertainty: analysts are worried that the uncertainty surrounding the change might kill the public market for ABS, CMBS and non-agency MBS. FT Alphaville has more. Read more

From stress-test inferno to capital purgatorio

Europe’s bank stress tests are coming to an end on Friday. Now what about the recapitalisation risk afterwards?

Having sprung more leaks than the RMS Titanic, the tests seem to suggest that almost every bank has passed. We’ve even received the leaked list of questions to banks from regulators, via ReutersRead more

Sovereign/Securitisation/Stop

As goes the sovereign rating . . .

London, 13 July 2010 — Moody’s Investors Service has today downgraded Portugal’s government bond ratings to A1 from Aa2. Read more

Refilling the punchbowl

Here’s a post-crisis financial milestone to ponder on Wednesday, courtesy of some fresh data on banking activity from the Bank for International Settlements.

As the BIS comments (emphasis ours): Read more

Markets Live transcript 21 Jul 2010

Live markets commentary from FT.com 

Apple results lift investor confidence

Market rally? There’s an app for that! Sparkling profits and an unusually upbeat forecast from tech-maverick Apple appeared to restore investors’ faith in the US second-quarter earnings season, reports the FT. The FTSE All-World equity index was up 0.5 per cent, the dollar was a touch weaker and commodities were higher. US stock futures were up 0.2 per cent, though US Treasury yields were slightly softer as the saturnine core bond sector remains wary.

Avastin rebuff could lose Roche $1bn

Swiss pharmaceutical firm Roche could lose out on $1bn in annual revenue if US regulators follow a panel recommendation to revoke approval for its blockbuster Avastin drug for use in breast cancer, reports Bloomberg. Advisers to the Food and Drug Administration voted 12-1 on Tuesday to rescind Avastin’s clearance in breast cancer after finding the drug didn’t work better than other medicines alone when paired with chemotherapies. Shares in Roche fell five per cent in early European trade on the news.

Reckitt finally makes its move for SSL

That’s a relief.

After what feels like a decade of speculation, Reckitt Benckiser has finally got round to bidding for Durex condom maker and Scholl footcare group SSL International. Read more

‘VIP’ loans extended to Fannie Mae executives

Countrywide Financial made 153 “VIP” loans to Fannie Mae executives, in an effort to win goodwill from the giant mortgage finance company, according to a letter released on Tuesday by a US congressman. The FT reports that an additional 20 VIP loans were also made to Freddie Mac employees, the other large government-sponsored buyer of home loans, according to the details released by Darrell Issa, a California Republican. According to the Associated Press, the Fannie employee mortgages spiked in 1998, when Countrywide was negotiating volume discounts on the subprime mortgages.

SNB takes SFr14bn foreign exchange hit

The Swiss National Bank on Wednesday revealed the cost of its massive foreign exchange interventions to restrain the value of the franc, with losses of more than SFr14bn ($13.3bn, €10.4bn) in the first half of this year, reports the FT. In recent months, the SNB has raised its foreign exchange holdings by SFr132bn by selling francs for other currencies, mainly euros, in a fruitless bid to hold back the value of one of the world’s traditional safe haven assets. For more see FT Alphaville.

Please don’t use our credit ratings, say agencies

The Wall Street Journal reports that the country’s three main ratings agencies have declined to be used in documentation backing new bond sales due to uncertainties linked with the potential impact of the Dodd-Frank financial reform law. The move is reportedly already causing havoc in bond markets, parts of which are shutting down in response. The Journal adds the new law would make ratings firms liable for the quality of their ratings decisions. Consequently, some are holding back until they get a better understanding of their legal exposure. See FT Alphaville for more.

Reckitt snaps up SSL for £2.5bn

Reckitt Benckiser has agreed to buy SSL International in a £2.54bn ($3.87bn) deal that would give it ownership of the Durex condom brand, as well as the Scholl footcare and sandal business, reports the FT. The recommended cash offer, announced on Wednesday morning, values SSL at £11.63 a share, while SSL shareholders will also retain their entitlement to a proposed final dividend of 8p a share if the deal goes through. FT Alphaville notes shares were trading 33 per cent higher on Wednesday as expectations that a possible counterbid could emerge from either US drug company Merck or consumer goods firm Schering Plough, also of the US.