SocGen are at it again, and this time they appear to be mid-thrust:
Disappointingly, there’s no introspective mention of value destruction to be seen, but we do get price defense as the main justification for M&A activity: Read more
(Spending some time as FTAV’s Bombay wallah. Noticeably sweatier but not much else has changed.)
David studied economics, politics and journalism before joining the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.
In between his degree and masters he wandered into the real world of business where he learnt how to manipulate a spreadsheet and organise meetings where nothing gets decided.
He has spent time in France, learning French, and India, learning how to cross roads, and enjoys nothing less than writing about himself in the third person.
His hobbies include reaching things on top shelves, running long distances at slow speeds, growing beards and trying to live up to a rash claim he made as a twelve-year old that “he had read all of the books”.
If you wish to know more about David please do pick up the phone and call him for a chat in the first person. Be warned though: he tends to talk at pace and in an Irish accent.
When is reform of a Chinese state-owned enterprise not reform at all?
When it’s not going to create value.
Arguably, for example — when it’s really a reverse merger that allows a parent to tap international capital markets and bail out a struggling subsidiary that lost heavy in Australian iron ore mines. Arguably, we said.
Or — an oil major selling a third of its enormous marketing segment to state-backed pension funds, in order to access private capital and boost its already dominant position. Again, arguably. Read more
Markets: Asian markets were under pressure in the face of fresh tension in Ukraine and after the S&P 500 dropped to a two-month low on Friday. However, action was muted as investors waited for key Asian data later in the week, including China GDP figures on Wednesday. The US earnings season also ramps up, with about 10 per cent of S&P 500 companies set to report this week. (FT’s Global Markets Overview) Read more
Markets: Japanese stocks were on pace for their worst week of declines since 2011, leading a broader Asia-Pacific sell-off. A 6 per cent drop in US biotech shares spooked markets, sending the S&P 500 down by 2.1 per cent in its worst session since early February. The tech-heavy Nasdaq Composite tumbled 3.1 per cent for its worst day since November 2011. The negative tone spread across Asia, with Japanese stocks under added pressure following the release of minutes from the Bank of Japan’s March 10-11 meeting, which depicted a central bank that sees little reason to unleash further stimulus. (FT’s Global Markets Overview) Read more
Markets: Japanese stocks suffered as hopes for monetary stimulus faded, but the rest of Asia-Pacific was upbeat after Wall Street staged a rally. Japan’s losses were driven by comments from central bank governor Haruhiko Kuroda. On Tuesday he acknowledged that last week’s increase in the national sales tax was likely to push the economy into a decline this quarter, but said he foresees the economy rebounding by summer. In other words, no need for further stimulus. (FT’s Global Markets Overview) Read more
If you’re short the rupee* the past few months have been uncomfortable.
Not only have (somewhat dodgy) Indian polling data pointed consistently to a stable BJP government being formed after elections which started this week, but India has also managed to get its macro house into some sort of order.
From Goldman, for example: Read more
Unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation…
– Mario Draghi, April ECB press conference
Don’t try saying that with a mouthful of peas.
More seriously, spot the caveats. A few members of the ECB governing council have since added to the noise around ECB QE — Nowotny, Mersch, Constancio, Coeure and Weidmann — but we feel better no informed than when the presser ended on Thursday. Read more
Markets: Wall Street’s third consecutive day of tech-led sell-offs weighed on Asia-Pacific markets, with Japanese bourses bearing the brunt of the fall. Just ahead of earnings season in the US, the S&P 500 shed 1.1 per cent to 1,845 on Monday, leaving it 2.7 per cent down from an intraday record high of 1,897 struck in early trade on Friday. The average has now lost all of its 2014 gains. Tech stocks led the sell-off as valuation concerns grew. The tech-heavy Nasdaq suffered more than other US indices, falling 1.2 per cent to 4,079.8 on Monday. (FT’s Global Markets Overview) Read more
This week in circularity, from China:
Chinese property companies are buying stakes in banks and raising fears that the country’s already stretched developers are trying to cosy up to their lenders.
Ten Chinese property companies have invested Rmb18.4bn ($3bn) in banks, according to the Financial News, an official newspaper published under the aegis of China’s central bank.
Markets: Asian markets retreated, reflecting a view among investors that the Bank of Japan would not immediately increase its monetary stimulus while the US Federal Reserve was unlikely to be steered off its course of reducing asset purchases. Markets in China were closed for a public holiday. (FT’s Global Markets Overview) Read more
Markets: Asian markets were in a near-frozen state ahead of the US jobs report due to be released later on Friday, which influences the Federal Reserve’s thinking on monetary policy. A retreat from risk was apparent among some Asia tech stocks, however, which followed their US counterparts lower. Wall Street paused for breath after two successive record closing highs for the S&P 500. (FT’s Global Markets Overview) Read more
Markets: With Beijing once again taking action to prop up growth, Asia-Pacific stock markets were on an upward path after global equities hit post-crisis highs. US stocks jumped after the ADP monthly jobs survey bolstered expectations for Friday’s key non-farm payrolls report while late on Wednesday, Beijing introduced what is being dubbed a mini-stimulus package to build new railways and give tax breaks for small businesses – treading a fine line by reducing economic reliance on credit-fuelled infrastructure and real estate investment while maintaining rapid growth rates and high employment. (FT’s Global Markets Overview) Read more
Maybe, says SocGen’s hedge fund watching team. Apparently hedge funds are about to turn buyers of volatility for the first time in three years…
Markets: Asian stocks joined a global rally following gains on Wall Street, where stocks notched record highs to begin the first quarter. The Japanese yen weakened 0.2 per cent to Y103.8 against the US dollar, its fifth straight fall, reinforcing investors’ preference for risky assets over havens. (FT’s Global Markets Overview) Read more
Your anti-corruption, anti-vice driven growth in Chinese government deposits from BofAML:
@Prasanna: Dead right. My bad and thanks for spot.Comment on: The Lok Sabha of dreams
Garima, it's a special report from a little while back -- India: elections, markets and the tyranny of economic reality. More in the usual place for those interested. http://discussions.ft.com/longroom/tables/emerging-markets/indian-elections?posted=trueComment on: The Lok Sabha of dreams
Cheers BBB, and of course Dreze needs to be taken in a Sen context too. Fwiw, Indian Express is my op-ed read of choice.Comment on: Further reading
DrHans: I don't quite follow you...Comment on: The good, the bad and the ugly of India's election: cut out and keep edition
@Every bubble: With apols for the delay, http://discussions.ft.com/longroom/tables/emerging-markets/china-transfer-market-and-its-fai-and-gfcf-gap?posted=trueComment on: Both a lender and a borrower be, China property edition
@Gordon: point was to illustrate the stalled reforms post-2008. Convergence lost. To steal a little bit more from Huang:
"More than a decade ago China launched a policy to reform SOEs by cutting back on direct subsidies and closing or privatising the poor performers under the slogan of “grasp the big, release the small”. The total number of SOEs fell from 260,000 in 1998 to about 145,000 in 2003. The creation of the State-Owned Assets Supervision and Administration Commission (Sasac) in 2003, with the mandate to represent state interests in the SOEs, slowed down exits, with the steep decline in the numbers of SOEs coming to a halt with about 115,000 by 2008.
But the SOE reform initiative had already made its mark by the time the global financial crisis hit. Returns on assets of industrial SOEs rose from 1 per cent in 1998 to more than 6 per cent by 2008, nearly closing the gap with private companies. But with the flood of financial support from the 2008 stimulus program, which was largely targeted at the state sector, incentives for more efficient SOE performance were seriously weakened.
The result has been a decline in returns on assets to about 4 per cent, while returns for private companies have continued to rise to roughly 11 per cent. This gap between the returns of private and public companies explains a significant part of the recent decline in China’s economic growth."Comment on: SOE you think you can reform
Will also leave this here, from MS:
"USD/CNH is above 6.20, the point we’ve written about as potentially creating non-linear follow-through. As a result, we use this note to update our “how to trade it” analysis.
In terms of the ordering of trades we identify the following:
First layer: buy USD/CNH spot target 6.38; buy 12mth vol target 4.2, then 6.5.
Second layer (CNH): CNH forward points – 12mth points should move to around 1300 from 625 now.
Second layer (non-CNH): sell TWD and SGD and also buy vol in same. Consider financial stocks.
Third layer: within China sell property developers in the credit space and transport related equities. Consider collateral implications for copper.
Fourth layer: sell EUR/USD if USD/CNY trades at the top of the band as PBOC band defense will lead to reserve re-balancing. "Comment on: Cu in hell
Speaking of which, from Nomura:
"Average residential property prices dropped by 3.8% y-o-y in the first two months of 2014, based on the value and volume of nationwide property transaction data released by the National Bureau of Statistics on 13 March. This is the first time the average price has dropped on a year-on-year basis since February 2012.
We believe this fall in property prices is not well recognized in the market. Price indexes such as the 70 city price data still show property price rising year-on-year, which may be misleading as tier 3 and 4 cities account for 67% of housing under construction in China, and most of them are not covered in the 70 city property price survey.
We believe China’s property market may have passed a critical turning point and will go into a downward cycle as the oversupply problem worsens."Comment on: Cu in hell
@iTrade, yes please.Comment on: Defaulting in China is like... well, I dunno, but it must be embarrassing
Ha. I may use that the next time I'm in a late night discussion with a BJP fan over here...
Catch this one btw? http://caravanmagazine.in/reportage/emperor-uncrowned Best backgrounder I've read.Comment on: Further reading