Posts from Tuesday Feb 8 2011

Telenor assesses Indian presence

Telenor has threatened to reconsider its presence in India if the New Delhi revises the terms of its spectrum licence amid a political scandal over regulation of the Indian telecoms industry, reports the FT. Jon Fredrik Baksaas, Telenor chief executive, said the Norwegian mobile operator was committed to India “as long as the Indian government is committed to its side of the agreement” to make more spectrum available to the company.

Indonesian growth hits six-year high

Indonesia’s economy grew at its fastest pace in six years in the fourth quarter of 2010, beating economists’ forecasts and heightening concerns about overheating, the FT reports. The economy expanded 6.9 per cent in the three months ending in December compared to a year earlier, mirroring a spurt across much of Asia in the last quarter of 2010, with many countries defying expectations of a slowdown caused by stuttering western demand and tighter monetary policy. The region’s robust performance was led by China, which posted annual growth of 10.3 per cent, up from 9.2 per cent in 2009. Singapore, a regional bellwether, grew by 14.7 per cent on preliminary estimates, with neighbouring Malaysia likely to achieve about 7 per cent.

Pace of US equity buy-backs picks up

US companies have announced share buy-backs at the fastest pace since the fall of Lehman Brothers as companies search for ways to put their record cash holdings to work in a still nascent economic recovery, reports the FT. Buy-backs announced by 24 US groups were $27.3bn last week, topping $26.5bn the previous week and the most in any week since September 2008, according to figures compiled by TrimTabs Investment Research.

China in fresh interest rate rise

China has raised benchmark interest rates for the third time since October as Beijing intensifies its battle against stubbornly high inflation, reports the FT. The benchmark one-year lending rate will rise 25 basis points to 6.06 per cent, the People’s Bank of China said on Tuesday. The timing of the increase, which came on the final day of the week-long Chinese New Year holiday, appeared to be aimed at avoiding unsettling global and domestic markets. The previous increase was announced on Christmas day.

Four charged with insider trading

US prosecutors have charged four hedge fund employees with insider trading in a widening probe into illegal trading of information on Wall Street, the FT reports. Charges against two of the portfolio managers include obstruction of justice, federal prosecutors in Manhattan said on Tuesday. Among the four charged are Samir Barai, 39, who runs hedge fund Barai Capital and Donald Longueuil, 34, a former employee of SAC Capital Advisors. Mr Barai surrendered at 9am on Tuesday in New York, according to officials. Mr Longueuil was arrested at his Manhattan home. Also charged were Noah Freeman, 35, a former employee of SAC and Sonar Capital Management, and Jason Pflaum, 37, a former technology analyst at Barai. Mr Freeman and Mr Pflaum have both pleaded guilty and are cooperating with the FBI.

Further further reading

For the commute home,

– Research or insider trading? A guide, in chart form, by Downtown Josh Brown. Read more

Jeffrey Lacker’s inflation disconnect

Richmond Fed president Jeffrey Lacker’s speech on Tuesday morning inspired quite a bit of commentary because of his recommendation that the Fed consider stopping QE2 before its scheduled completion. (See Real Time Economics, Street Sweep, Reuters.)

We were more interested in his comments on inflation, which he used as a partial justification for his broader argument. Read more

Insider trading investigations, continued

The insider trading investigations continue — and move beyond expert networks. From the FT on Tuesday:

Federal prosecutors have charged three hedge fund portfolio managers and a hedge fund analyst with insider trading.

 Read more

BoI refuses to go quietly

Bank of Ireland won’t bow to the inevitable.

Monday after (stock) market hours statementRead more

Ireland’s secret liquidity is unbelievably cheap

This, from the Irish Independent, is very interesting:

IRISH banks are paying an interest rate of less than 3pc on the €51bn of ’emergency liquidity assistance’ (ELA) that has been sanctioned for them by the Central Bank of Ireland.

 Read more

The missing bits from Merrill’s Ireland note

Last week, Michael Lewis brought you his take on Ireland, a Vanity Fair epic on the nation’s real estate and banking bust. He also brought us the story of Philip Ingram, a zoology student and former Merrill Lynch banking analyst.

Ingram, Lewis says, was one of the few analysts to really ‘get’ the looming financial crisis in Ireland. In early 2008 he conducted a survey of commercial property players, with the results published in a March 2008 note. According to Lewis, Merrill ended up retracting the report, allegedly at the behest of its Irish bank clients. A “toned down” version, one that was “purged” of insider quotes, was eventually published instead. Read more

China’s lunar rates rise

Everyone was expecting a China rate rise at some point. But today? Tuesday?

Officials at the People’s Bank of China just announced they’ll increase the one-year yuan lending rate to 6.06 per cent from 5.81 per cent, and the one-year yuan deposit rate to 3.00 per cent from 2.75 per cent — supposedly in response to inflationRead more

Subprime metals

Metals Markets Anomaly No.1 worth pondering, courtesy of Citigroup’s Metals and Mining team in a note published on Monday:

 Read more

In Pharaoh’s currency markets

Noted at pixel time — direct (and rather impressive) intervention by Egypt’s central bank in the Egyptian pound, just two days after banks reopened:

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Markets Live transcript 8 Feb 2011

Live markets commentary from 

On benchmarks creating bubbles

Here’s an interesting thought for a relatively quiet Tuesday: Does the investment industry’s tendency towards cap-weighted indices cause bubbles?

We arrive at it slightly tangentially via Steve Johnson’s FTfm story on investors considering a move towards fundamentally-weighted indices. These are weighted according to ‘fundamental’ factors (so for instance, GDP for sovereign bond indices) rather than capitalisation (or debt outstanding for sovereign bonds). Read more

The new strongmen of Asia’s looming currency wars

Some intriguing movements are afoot on the currency front in Asia, where the Taiwanese dollar, the Indonesian rupiah and the Korean won have lately been the region’s strongest performers.

It’s all part of a steady intensification of regional inflation jitters — and a looming cycle of back-to-back interest rate increases and possibly, more moves towards capital controlsRead more

A $55bn bid for Colgate?

Here’s something for Markets Live guest Jean-Marc Huet to consider over his mid-morning Marmite rice cracker – should Unilever launch a $55bn cash offer for Colgate Palmolive?

It’s a mega-deal that’s been rumoured in the past, and it might well be the only way the Anglo-Dutch consumer goods company can meet its target of doubling group sales to €80bn from €40bn. Read more

Risk rally shows signs of fatigue in Europe

European bourses have opened with marginal losses as investors take a breather from the risk asset rally that has driven stocks to their best levels in two-and-a-half years and a number of commodities to record highs, the FT says in its rolling global markets overview. The FTSE All-World index is up 0.2 per cent to its strongest point since July 2008, helped by gains in Asia, while the Reuters-Jefferies CRB resources benchmark sits just shy of a 27-month peak. The dollar is weaker and bond yields a touch firmer.

UBS recovery slows in fourth quarter

UBS, one of Europe’s hardest-hit banks in the financial crisis, reported a mixed fourth quarter as improvements in some businesses were balanced by continuing weakness in investment banking and disappointing new money flows in the powerhouse private bank, the FT says. Investment banking remained the focus of efforts to improve revenues and lower costs, as UBS revealed a 10 per cent cut in its politically sensitive 2010 bonus pool to SFr4.3bn ($4.5bn) from SFr4.8bn.

JPMorgan to accept gold as collateral

FT Alphaville reports that JPMorgan, one of two tri-party clearing banks in the US, will now accept physical gold as collateral to satisfy securities lending and repos with counterparties. JPM suggested the decision was due to client demand, with customers “holding gold on their balance sheets as an inflation hedge and … looking to make these assets work for them as collateral.” Meanwhile, CNBC reports that clearing house LCH.Clearnet is also considering a plan to accept gold bullion as collateral.

Moody’s reports no defaults in January

For the first time since the onset of the credit crisis, Moody’s has recorded a month in which not a single company defaulted on its debt, reports the FT. The rating agency said on Monday that January was the first month since June 2007 when no default was recorded among the companies whose debt it rates. In comparison, eight companies defaulted in January 2010 and there were five defaults per month on average last year.

Investors back onshore hedge funds

A majority of hedge fund investors are eschewing traditional offshore funds in favour of tightly regulated onshore vehicles – a sign of the lasting impact of the Madoff scandal and 2008 liquidity crisis, says the FT. According to a comprehensive industry survey undertaken by Deutsche Bank, 55 per cent of hedge fund investors would now prefer to allocate money in onshore so-called Ucits funds compared with just 21.7 per cent in traditional offshore Cayman Island funds. The survey shows the extent to which “hedge fund lite” Ucits funds are coming to dominate inflows into the hedge fund industry.

Danaher to buy Beckman for $6.8bn

Danaher, the acquisitive US conglomerate, has launched its biggest takeover deal, agreeing to buy Beckman Coulter, a diagnostic equipment maker, for $6.8bn, as it seeks to expand in the life sciences testing market, the FT reports. NYT DealBook says investors seemed to agree with an assertion by Danaher’s CEO that the company was paying “a very fair price” for Beckman Coulter. Shares in Danaher rose more than 2 per cent after the deal was announced. Beckman jumped nearly 10 per cent.

Regulators propose deferral of bank bonuses

US bank executives will have to wait at least three years to receive half of their bonuses under regulatory proposals aimed at cracking down on excessive Wall Street pay, the FT says. The proposed reforms – outlined by the FDIC on Monday – are the first attempt by US regulators to change the pay structures on Wall Street since the financial crisis. However, they fall short of similar rules by European regulators, which will see top bankers receive as little as 20 per cent of their bonuses in cash. Reuters reports that the FDIC “will vote shortly” on whether to formally propose the rules.

Obama vows to cut barriers to business

President Barack Obama pledged to cut regulation, reform taxes and rebuild infrastructure in the latest sign of a rapprochement with corporate America, the FT reports. But in a speech to the US Chamber of Commerce on Monday the president tempered his overtures to business by telling executives to “hire more American workers” and avoid big bonuses. The president has stepped up his attempts to re-engage with large companies since he and fellow Democrats received a self-acknowledged “shellacking” in November’s midterm elections.

Graft probe seeks to appease Egyptian public

As the regime in Egypt seeks to enhance its credibility in the face of a popular uprising threatening its survival, it has turned against ministers and ruling party officials who were seen, until two weeks ago, as unshakeable pillars of the system, according to the FT. In what many see as a cynical move aimed at appeasing an angry public without making political concessions, the state prosecutor announced he is investigating for corruption four ministers and a former senior official of the ruling National Democratic party, most of whom have business backgrounds. NDTV has more on one of the men, Egyptian steel magnate Ahmed Ezz, or the man “Egypt loves to hate.”

SEC sets sights on mortgage disclosures

US securities regulators investigating the role of banks in the mortgage crisis are homing in on the question of whether investors were misled about the home loans used to back securities, the FT reports. Kenneth Lench, chief of the SEC’s structured products unit, said at a conference in Washington on Friday that issues of interest to the commission include whether investors were properly informed about underwriting and foreclosure practices and the quality of mortgages used to back securities.

US wants Brazilian support on renminbi

The US is attempting to enlist Brazil in a united front against China’s allegedly undervalued currency, as Latin America’s largest economy struggles with a flood of cheap Chinese goods and a surging Brazilian real, the FT says. US Treasury secretary Tim Geithner visited Brazil on Monday to lay the groundwork for the move ahead of a meeting of the Group of 20 nations this month and a planned visit by Barack Obama, US president, to Brazil, which is expected in March. The Guardian reports that Geithner said Brazil was bearing the burden of other countries’ undervalued currencies.

What lies in Greek RMBS

Greece has lots of problems.

Yet unlike Ireland or Spain, a collapsed housing market (even under austerity) isn’t one of them. But… Read more