Amid concerns that the Paris climate accord could have a detrimental effect on Royal Dutch Shell’s valuation, the company this week released a statement saying that they still expect to distribute all the inventories listed on their stock report regardless of any proposed production limit imposed by the pact.
CEO Ben van Beurden said in an interview with a prominent Dutch publication that the issues of standard reserves would not impact their revenues. The Paris accord has attempted to limit the amount of deposits that can be taken out of the ground due to rising carbon emissions.
“The basis of the company’s valuation is the next decade’s worth of reserve production and we don’t believe any climate outcomes are going to stop us from going ahead as planned,” said Van Beurden.
There are nearly 200 countries signed up for the Paris Climate Accord including the world’s first and second largest economies China and the U.S. plus the entire E.U. The aim of the agreement is to slowly wean the world off fossil fuels and try to limit any temperature increase to 2 degrees.
This has led to many of the world’s biggest energy companies investing billions into renewable and clean energy alternatives, and was highlighted by the acquisition of British Gas by Shell at the start of 2016.
Van Beurden also insisted that the oil market was exceptionably durable, especially after the collapse of oil prices from $120 to $30 per barrel. He said any revaluation after the climate deal would have limited consequences.
“There is no doubt that every fall in oil price costs a company like Shell billions of dollars, but they and other big players in the sector are slowly but surely transitioning to low-carbon energy alternatives,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a phone interview for Bloomberg. “I don’t think there will be any major changes in the firm’s dividend policies.”
The benchmark level for oil if companies can turn a profit is around $45-50 per barrel, and even a small increase in demand could send prices up. Next week an OPEC meeting could see a production freeze come in that could have that exact effect. Some analysts are confident that the output cap could go global if big non-OPEC countries like Russia get onboard with the plan.
Monday, November 28, 2016
Saturday, November 26, 2016
Retail sector investments are thin pickings
Is the worst of the retail dip over? Market expectations would certainly say so and shoppers are forecast to spend more than usual on their Christmas gifts this year after a particularly disappointing 2015.
However, big name retailers have still found profit growth as hard to come by as ever, which could leave investment bargains in the sector elusive.
Shares for the largest retail chains, including Macy’s and Best Buy, have soared on the expectation that a resurgent economy will loosen consumer purse strings and they will get a spectacular holiday quarter this year. Those share spikes have helped the S&P 500 to multiple record highs over the past fortnight.
The National Retail Federation has forecast a 4 percent expansion in holiday sales, helped by positive jobs data and significant wage increases. By comparison, 2015 holiday sales growth was a mere 2.9 percent.
Many analysts believe share prices already have the higher sales from the holiday season built in, with many of the stocks showing vast improvements in the past month. Best Buy in particular has seen a 25 percent gain this month alone. Kohls's shares are having their best drive in over 15 years.
“I don’t think the stock gains are going to necessarily put investors on guard and I doubt whether they will mean outperformance in the sector,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“The consumer sector shouldn’t get too far ahead of itself, the shopping centres were not as full as many would expect for Black Friday. In a word, underwhelming,” Poulson continued.
According to Thomson Reuters data, which studies a selection of 20 large retailers including street stores and some online giants like Amazon, the average total return was 13 percent in 2016, while shares have soared 50 percent.
Gains in the retail industry have been fuelled by the expectation that President-elect Donald J Trump will follow through on policies that would favour a pick-up in the U.S. economy such as tax breaks, decreased regulations in the banking and healthcare sectors and a surge in infrastructure spending.
The SPDR S&P Retail exchange traded fund has been a serious outperformer since the conclusion of the race for the White House with a 13 percent gain, outpacing many other industry-tracking funds.
All this means that it’s much more difficult for investors to pick up bargains on shares, with many experts recommending companies that will benefit from the upswing in the housing market, like Home Depot.
However, big name retailers have still found profit growth as hard to come by as ever, which could leave investment bargains in the sector elusive.
Shares for the largest retail chains, including Macy’s and Best Buy, have soared on the expectation that a resurgent economy will loosen consumer purse strings and they will get a spectacular holiday quarter this year. Those share spikes have helped the S&P 500 to multiple record highs over the past fortnight.
The National Retail Federation has forecast a 4 percent expansion in holiday sales, helped by positive jobs data and significant wage increases. By comparison, 2015 holiday sales growth was a mere 2.9 percent.
Many analysts believe share prices already have the higher sales from the holiday season built in, with many of the stocks showing vast improvements in the past month. Best Buy in particular has seen a 25 percent gain this month alone. Kohls's shares are having their best drive in over 15 years.
“I don’t think the stock gains are going to necessarily put investors on guard and I doubt whether they will mean outperformance in the sector,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“The consumer sector shouldn’t get too far ahead of itself, the shopping centres were not as full as many would expect for Black Friday. In a word, underwhelming,” Poulson continued.
According to Thomson Reuters data, which studies a selection of 20 large retailers including street stores and some online giants like Amazon, the average total return was 13 percent in 2016, while shares have soared 50 percent.
Gains in the retail industry have been fuelled by the expectation that President-elect Donald J Trump will follow through on policies that would favour a pick-up in the U.S. economy such as tax breaks, decreased regulations in the banking and healthcare sectors and a surge in infrastructure spending.
The SPDR S&P Retail exchange traded fund has been a serious outperformer since the conclusion of the race for the White House with a 13 percent gain, outpacing many other industry-tracking funds.
All this means that it’s much more difficult for investors to pick up bargains on shares, with many experts recommending companies that will benefit from the upswing in the housing market, like Home Depot.
Friday, November 25, 2016
Actelion confirm approach on buyout offer
Europe's biggest biotech firm and rare disease medication specialist Actelion has confirmed that it is in early discussions with U.S. healthcare firm Johnson & Johnson regarding a possible takeover of the company which could be worth upwards of $25 billion.
A spokeswoman for the company said there was no guarantee that any deal would go through and talks are at a “below executive” level at this time.
J&J have been on the ropes in the past year as its biggest selling product Remicade, a popular arthritis medication, faces stiff competition from a cheaper Pfizer alternative.
In response to the takeover news, Actelion stock jumped nearly 20 percent to a record high of 187.52 Swiss francs in early trading on Friday. Closing price was up 17 percent at 184.55, its best performance of the year by far.
Regulators have been getting tough on medication pricing certifications over the past few years, but those companies specializing in rare diseases have been largely exempt from scrutiny, making them a very attractive target in M&A.
Actelion's focus on lung disease puts them in that category and many analysts say that due to the industry’s appetite for businesses such as these, the final bid for the company’s shares could be as high as $250 per share.
Sales forecasts put the firm’s operating profits from their lung medication at around $5 billion in the next 4-years. Actelion's Opsumit and Uptravi medication relieve high blood pressure in the lung region which sometimes proves fatal, especially in young children.
“J&J are looking for some diversification and to boost their drug pipeline with a focus on Europe and the U.S.,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “We’ve just seen them purchase Abbott Laboratories' eye care business for around $4 billion and they’ve had their eye on Actelion for a while.”
One major sticking point in the deal could be Actelion’s founder and CEO Jean-Paul Clozel who has said on numerous occasions that he would like to see the company remain autonomous. Clozel holds a 4 percent stake and has previously called on shareholders to block attempts by activist investor groups to sell the firm, and since then the company’s shares have quadrupled in value.
J&J could face tough competition on the bid by Swiss rival Novartis AG, however a spokesman for the group said they have not entered the bidding process.
A spokeswoman for the company said there was no guarantee that any deal would go through and talks are at a “below executive” level at this time.
J&J have been on the ropes in the past year as its biggest selling product Remicade, a popular arthritis medication, faces stiff competition from a cheaper Pfizer alternative.
In response to the takeover news, Actelion stock jumped nearly 20 percent to a record high of 187.52 Swiss francs in early trading on Friday. Closing price was up 17 percent at 184.55, its best performance of the year by far.
Regulators have been getting tough on medication pricing certifications over the past few years, but those companies specializing in rare diseases have been largely exempt from scrutiny, making them a very attractive target in M&A.
Actelion's focus on lung disease puts them in that category and many analysts say that due to the industry’s appetite for businesses such as these, the final bid for the company’s shares could be as high as $250 per share.
Sales forecasts put the firm’s operating profits from their lung medication at around $5 billion in the next 4-years. Actelion's Opsumit and Uptravi medication relieve high blood pressure in the lung region which sometimes proves fatal, especially in young children.
“J&J are looking for some diversification and to boost their drug pipeline with a focus on Europe and the U.S.,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “We’ve just seen them purchase Abbott Laboratories' eye care business for around $4 billion and they’ve had their eye on Actelion for a while.”
One major sticking point in the deal could be Actelion’s founder and CEO Jean-Paul Clozel who has said on numerous occasions that he would like to see the company remain autonomous. Clozel holds a 4 percent stake and has previously called on shareholders to block attempts by activist investor groups to sell the firm, and since then the company’s shares have quadrupled in value.
J&J could face tough competition on the bid by Swiss rival Novartis AG, however a spokesman for the group said they have not entered the bidding process.
Monday, November 21, 2016
U.S. stocks plateau while Nasdaq reaches new peak
U.S. Federal Reserve officials sent out their clearest message yet that they would hike interest rates next month as the Dow and S&P 500 remained near their all time highs and the Nasdaq recorded its highest ever level at the end of the week.
Janet Yellen, Fed chair, mentioned last Wednesday that the central bank would change interest rates “in the not too distant future” and according to Thomson Reuters reports, traders are now pricing in an 80 percent chance of a hike before the year is out.
Some other Fed officials, like St. Louis Fed President James Bullard, have also said that the focus is now very much on the central bank’s course of action regarding rates in 2017, further enhancing the probability that they will hike rates next month.
Since republican candidate Donald Trump pulled off a surprise triumph in his bid to secure the White House, U.S. stocks have been on a whirlwind rally based on his pledges to boost fiscal spending, especially on infrastructure projects within America, and reduce corporate and private taxes.
Those factors are seen to be strong plus points for the U.S. economy, but the stellar U.S. stock performance levelled off slightly this week as investors waited for Trumps announcements in relation to his appointments to administrative posts.
“We’re advising clients to hold off at the moment and await some clarity on many of the President-elect’s policies,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in an email to investors yesterday.
“We need to be aware that this sudden spurt in growth, especially with financials, may just be a knee jerk high based on flimsy perceptions of what might happen under a Trump administration. Caution is required at this point in time.” Poulson added.
The Nasdaq hit a record high of 18,879.46 today and it closed yesterday just 3 points lower from that historic figure, while the Dow Jones Industrial average lost 23.98 points, or 0.12 percent. The S&P 500 hit a record peak this time last month and closed slightly down on that high at 2,193.80.
Janet Yellen, Fed chair, mentioned last Wednesday that the central bank would change interest rates “in the not too distant future” and according to Thomson Reuters reports, traders are now pricing in an 80 percent chance of a hike before the year is out.
Some other Fed officials, like St. Louis Fed President James Bullard, have also said that the focus is now very much on the central bank’s course of action regarding rates in 2017, further enhancing the probability that they will hike rates next month.
Since republican candidate Donald Trump pulled off a surprise triumph in his bid to secure the White House, U.S. stocks have been on a whirlwind rally based on his pledges to boost fiscal spending, especially on infrastructure projects within America, and reduce corporate and private taxes.
Those factors are seen to be strong plus points for the U.S. economy, but the stellar U.S. stock performance levelled off slightly this week as investors waited for Trumps announcements in relation to his appointments to administrative posts.
“We’re advising clients to hold off at the moment and await some clarity on many of the President-elect’s policies,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in an email to investors yesterday.
“We need to be aware that this sudden spurt in growth, especially with financials, may just be a knee jerk high based on flimsy perceptions of what might happen under a Trump administration. Caution is required at this point in time.” Poulson added.
The Nasdaq hit a record high of 18,879.46 today and it closed yesterday just 3 points lower from that historic figure, while the Dow Jones Industrial average lost 23.98 points, or 0.12 percent. The S&P 500 hit a record peak this time last month and closed slightly down on that high at 2,193.80.
Friday, November 18, 2016
Iranians considering new OPEC deal, nearer to agreement
According to sources close to the Organization of the Petroleum Exporting Countries (OPEC), the cartel is getting closer to finalizing an agreement that will put a freeze on crude production for the first time in eight years, and most members are prepared to grant concessions to the only country that is holding up the deal, Iran.
Tehran has been suffering from decreased capital inflow since Western sanctions started, but the restrictions were eased at the start of this year. However, the second largest Middle-East oil producer wants an exemption from the OPEC output cap in order for the country to continue its recovery.
Some of the larger crude producing nations in OPEC, including Saudi Arabia, feels Iran is already running at full capacity and that giving only them concessions would be unfair.
Gulf sources previously reported that OPEC asked Tehran to cap its production at 3.7 million barrels per day, but the Iranians put forward a figure of between 3.9 and 4.3 million bpd. At the sidelines of a gas forum in Doha last week, OPEC eventually offered an updated figure of 3.8 million bpd but have yet to receive a reply from the Iranian energy minister Bijan Zanganeh.
The Islamic republic is currently producing around 3.9 million bpd, so the latest OPEC offer would not give the country much room for growth while restrictions are in place.
Interested parties are hoping OPEC can come to some form of agreement soon, and all eyes will be on its next official meeting in Vienna at the end of the month.
Saudi Arabia's Khalid al-Falih said the gas forum meeting went as expected but declined to comment further.
“A fast conclusion to this saga would be beneficial to the OPEC nations because they would then be able to involve some of the bigger oil producing countries who are not part of the group, like Russia,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a phone interview for Reuters.
“The Kremlin has been very positive about supporting the output cap but their interest could dwindle if disagreements and infighting continue,” Poulson continued.
Alexander Novak, Russian Energy Minister, mentioned at last week’s meeting that many non-OPEC nations would be interested in taking pro-active measures to manage issues in the world’s oil market.
Tehran has been suffering from decreased capital inflow since Western sanctions started, but the restrictions were eased at the start of this year. However, the second largest Middle-East oil producer wants an exemption from the OPEC output cap in order for the country to continue its recovery.
Some of the larger crude producing nations in OPEC, including Saudi Arabia, feels Iran is already running at full capacity and that giving only them concessions would be unfair.
Gulf sources previously reported that OPEC asked Tehran to cap its production at 3.7 million barrels per day, but the Iranians put forward a figure of between 3.9 and 4.3 million bpd. At the sidelines of a gas forum in Doha last week, OPEC eventually offered an updated figure of 3.8 million bpd but have yet to receive a reply from the Iranian energy minister Bijan Zanganeh.
The Islamic republic is currently producing around 3.9 million bpd, so the latest OPEC offer would not give the country much room for growth while restrictions are in place.
Interested parties are hoping OPEC can come to some form of agreement soon, and all eyes will be on its next official meeting in Vienna at the end of the month.
Saudi Arabia's Khalid al-Falih said the gas forum meeting went as expected but declined to comment further.
“A fast conclusion to this saga would be beneficial to the OPEC nations because they would then be able to involve some of the bigger oil producing countries who are not part of the group, like Russia,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a phone interview for Reuters.
“The Kremlin has been very positive about supporting the output cap but their interest could dwindle if disagreements and infighting continue,” Poulson continued.
Alexander Novak, Russian Energy Minister, mentioned at last week’s meeting that many non-OPEC nations would be interested in taking pro-active measures to manage issues in the world’s oil market.
Monday, November 14, 2016
U.S. banking sector could continue to see gains under Trump
With the expectation that a Trump presidency would see lighter regulations in the banking sector and the prospect of a gentle rise in interest rates starting next month, many analysts believe the post election rally in the industry is just the start of a major upswing.
Optimism is hitting new heights as a prolonged dip in the sector may finally be coming to an end. Banks have been suffering under ultra-low rates and tougher rules after the world economic crisis of 2007-2009.
Following Trump’s shock victory, the S&P 500 bank subsector jumped 10.3 percent, posting its best figures in over seven years.
Shares for some of America’s biggest financial houses climbed over 10 percent, and investors say the increases are not even close to their ceiling yet.
“Bank shares have a long way to go before they can be considered expensive,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “If we see the expected hike from the Fed before the end of the year and if the Trump administration gives some indications as to how regulations are going to be altered then the current upswing in shares can most definitely go higher.”
One of the more notable regulations that Trump might change is the minimum asset threshold for so called “too big to fail” financial institutions. The level is currently set at $50 billion. If the government raised this to $300 billion, for example, it could offer a lot more flexibility to banks operating at that kind of level.
Mr. Trump is due to make announcements regarding his administration postings in the next month and the financial community will be eager to learn what kinds of personalities the President-elect will put in charge of The Treasury and the Department of Commerce.
Kevin Baker, Piper Jaffray chief analyst, said, “It’s going to be a very interesting few months as Trump takes over the reins of power. I don’t think anyone is certain how many of his pledges he will deliver on but certainly the expectation of his economic policies is having a positive effect on the markets at this moment in time.”
Trump has already made clear that he will not be forging ahead with a free trade agreement involving Pacific-rim nations.
Optimism is hitting new heights as a prolonged dip in the sector may finally be coming to an end. Banks have been suffering under ultra-low rates and tougher rules after the world economic crisis of 2007-2009.
Following Trump’s shock victory, the S&P 500 bank subsector jumped 10.3 percent, posting its best figures in over seven years.
Shares for some of America’s biggest financial houses climbed over 10 percent, and investors say the increases are not even close to their ceiling yet.
“Bank shares have a long way to go before they can be considered expensive,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “If we see the expected hike from the Fed before the end of the year and if the Trump administration gives some indications as to how regulations are going to be altered then the current upswing in shares can most definitely go higher.”
One of the more notable regulations that Trump might change is the minimum asset threshold for so called “too big to fail” financial institutions. The level is currently set at $50 billion. If the government raised this to $300 billion, for example, it could offer a lot more flexibility to banks operating at that kind of level.
Mr. Trump is due to make announcements regarding his administration postings in the next month and the financial community will be eager to learn what kinds of personalities the President-elect will put in charge of The Treasury and the Department of Commerce.
Kevin Baker, Piper Jaffray chief analyst, said, “It’s going to be a very interesting few months as Trump takes over the reins of power. I don’t think anyone is certain how many of his pledges he will deliver on but certainly the expectation of his economic policies is having a positive effect on the markets at this moment in time.”
Trump has already made clear that he will not be forging ahead with a free trade agreement involving Pacific-rim nations.
Friday, November 11, 2016
Fed will observe and adjust rates as needed - Fischer
Fed Vice Chair Stanley Fischer said late last week that he is encouraged by the state of the American economy and if conditions continue as they are, the Fed would bring in incremental interest rate hikes but the situation needs to be constantly monitored.
10-year Treasury yields have gained slightly since the surprise election of Republican Donald Trump, even though many analysts saw his win as a negative for the economy as a whole.
“We are looking very closely at the markets and will adjust policy as needed,” said Fischer in a central banking conference in Santiago, Chile. “At this moment in time we need to be flexible and manage policy almost on the fly. Whichever way the market turns we will be ready to adapt.”
“Overall we are encouraged by the U.S. economy and we should see interest rates increase in the near future,” he added.
The central bank’s second-in-command also mentioned that they were “getting closer” to their jobs and inflation targets which made the case for tightening monetary policy even stronger. Analysts in the economic circles tend to agree.
“At the moment we can’t see anything other than a gradual continued expansion for the American economy,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“If the Fed has the same view then it would be the right time to get interest rates up to normal levels slowly.”
President-elect Trump mentioned he was happy to continue fiscal stimulus and although Fischer didn’t mention what effect the incoming Republican would have for overall economic policy, he confirmed the Fed would be happy with steady stimulus for the economy as it enters a more solid growth phase.
“Should fiscal policy be expanded I don’t think anyone could argue that it wouldn’t help the economy and take some of the burden for growth. The Fed board certainly would see it as a useful addition to the current upswing,” Fischer said.
Should the Fed raise interest rates next month, as is widely expected, they are likely to keep the hike extremely gradual and the prospect of a unified Republican government could mean greater levels of cooperation between departments and less red tape in Washington, according to many experts.
The Fed is expected to make an announcement regarding policy after their monthly meeting in late December and the official minutes will be released shortly after.
10-year Treasury yields have gained slightly since the surprise election of Republican Donald Trump, even though many analysts saw his win as a negative for the economy as a whole.
“We are looking very closely at the markets and will adjust policy as needed,” said Fischer in a central banking conference in Santiago, Chile. “At this moment in time we need to be flexible and manage policy almost on the fly. Whichever way the market turns we will be ready to adapt.”
“Overall we are encouraged by the U.S. economy and we should see interest rates increase in the near future,” he added.
The central bank’s second-in-command also mentioned that they were “getting closer” to their jobs and inflation targets which made the case for tightening monetary policy even stronger. Analysts in the economic circles tend to agree.
“At the moment we can’t see anything other than a gradual continued expansion for the American economy,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“If the Fed has the same view then it would be the right time to get interest rates up to normal levels slowly.”
President-elect Trump mentioned he was happy to continue fiscal stimulus and although Fischer didn’t mention what effect the incoming Republican would have for overall economic policy, he confirmed the Fed would be happy with steady stimulus for the economy as it enters a more solid growth phase.
“Should fiscal policy be expanded I don’t think anyone could argue that it wouldn’t help the economy and take some of the burden for growth. The Fed board certainly would see it as a useful addition to the current upswing,” Fischer said.
Should the Fed raise interest rates next month, as is widely expected, they are likely to keep the hike extremely gradual and the prospect of a unified Republican government could mean greater levels of cooperation between departments and less red tape in Washington, according to many experts.
The Fed is expected to make an announcement regarding policy after their monthly meeting in late December and the official minutes will be released shortly after.
Wednesday, November 9, 2016
Neighbour currencies gain as markets back Clinton victory
The financial community continued to bet on a Clinton presidential victory in the next 12 hours. As it did, both the Canadian dollar and the Mexican peso rose with the greenback against the yen and Swiss franc.
Many research firms are projecting a Clinton victory in some of the traditional battleground states, and market sources have cited that data as a reason for the currency movements.
The Japanese yen has always been seen as a “safe haven” currency, and an unlikely Trump win would most probably see capital shift into that direction, along with the Swiss franc which also has some level of perceived security. Clinton is seen as a much more stable candidate for the markets, due to her relatively neutral stance on trade, foreign policy and immigration.
Conversely, Republican candidate Donald Trump has promised to re-negotiate the NAFTA with America’s neighbours and even erect a wall between the United States and Mexico which understandably has investors spooked.
“Only a few hours ago VoteCastr agency had Florida trending towards Mrs. Clinton, so this is why we are now seeing Clinton-orientated trading going on in the markets. You could say it’s betting on non-volatility,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“Of course, polls and research data has been wrong before. We only need to look back a few months at what happened with Brexit. A Clinton win in Florida would pretty much seal it for her though.” Poulson added.
The greenback hit a monthly high against the yen at 105.20 and levelled up just below that at 105.06, a 0.65 percent gain. The dollar also saw a quarter percent gain versus the Swiss franc to 0.9767.
The Mexican peso hit a monthly high versus the dollar, rising over 1 percent, and the Canadian dollar, affectionately referred to as the ‘loonie”, also climbed 0.3 percent against its neighbour’s currency.
According to the most prominent polls, Clinton has over a 90 percent chance of claiming the White House, leading to little, if any, hedging on a Trump win. If the Republican nominee were to pull off an unlikely victory come tomorrow morning, the markets will undoubtedly go through a substantial period of high volatility as investors scramble to exit.
As of the last set of data, Clinton is set to easily surpass the 270 Electoral College votes needed to claim victory.
Many research firms are projecting a Clinton victory in some of the traditional battleground states, and market sources have cited that data as a reason for the currency movements.
The Japanese yen has always been seen as a “safe haven” currency, and an unlikely Trump win would most probably see capital shift into that direction, along with the Swiss franc which also has some level of perceived security. Clinton is seen as a much more stable candidate for the markets, due to her relatively neutral stance on trade, foreign policy and immigration.
Conversely, Republican candidate Donald Trump has promised to re-negotiate the NAFTA with America’s neighbours and even erect a wall between the United States and Mexico which understandably has investors spooked.
“Only a few hours ago VoteCastr agency had Florida trending towards Mrs. Clinton, so this is why we are now seeing Clinton-orientated trading going on in the markets. You could say it’s betting on non-volatility,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“Of course, polls and research data has been wrong before. We only need to look back a few months at what happened with Brexit. A Clinton win in Florida would pretty much seal it for her though.” Poulson added.
The greenback hit a monthly high against the yen at 105.20 and levelled up just below that at 105.06, a 0.65 percent gain. The dollar also saw a quarter percent gain versus the Swiss franc to 0.9767.
The Mexican peso hit a monthly high versus the dollar, rising over 1 percent, and the Canadian dollar, affectionately referred to as the ‘loonie”, also climbed 0.3 percent against its neighbour’s currency.
According to the most prominent polls, Clinton has over a 90 percent chance of claiming the White House, leading to little, if any, hedging on a Trump win. If the Republican nominee were to pull off an unlikely victory come tomorrow morning, the markets will undoubtedly go through a substantial period of high volatility as investors scramble to exit.
As of the last set of data, Clinton is set to easily surpass the 270 Electoral College votes needed to claim victory.
Tuesday, November 8, 2016
Markets react violently as Clinton win becomes “less likely”
As Donald Trump widened his possible path to the White House with a victory in Ohio, the country’s stock index futures plummeted and global markets in general reacted violently to the possibility that Hillary Clinton could lose this race, defying the polls.
Traditional battleground states have remained close but so have states that were expected to be held easily by Clinton, leading many analysts to believe that her chances of winning the campaign overall are waning.
With many networks calling the crucial state of Florida and also North Carolina for Mr Trump, financial markets have been abuzz with a probable upset.
There was a 5 percent drop in the S&P futures ESc1 on news of those state results, and the Dow Industrials futures slumped over 690 points.
The financial community as a whole has seen Clinton as the safe bet for stability in the markets, while a Trump presidency is expected to have the opposite effect due to his radical stance on trade, national security and foreign policy.
“The fact is that a Hillary win is looking far less likely now and not many analysts hedged for this, so we are seeing an exodus,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “This is why we’ve seen over a million contracts changing hands on the S&P 500, and the index over 4 percent down. Similar results for other areas of the markets too. It’s still way too early to call but Trump certainly has a good chance now.”
Reflecting investor anxiety over a Trump victory, the CBOE Volatility index soared over 35 percent. The Mexican peso took a battering as it fell to a record low of 20 versus the greenback.
Ameriprise Financial chief analyst David Joy said, “You have to admit that not many polls and experts saw this situation occurring as we move towards the evening polls. It’s going to be a big shock to the system if Trump wins and you are seeing a lot of scrambling around not just on Wall Street but in Asian markets too. Asset prices are hitting very surprising levels. There’s still a long way to go today but preliminary results show that this is going to be very close.”
Traditional battleground states have remained close but so have states that were expected to be held easily by Clinton, leading many analysts to believe that her chances of winning the campaign overall are waning.
With many networks calling the crucial state of Florida and also North Carolina for Mr Trump, financial markets have been abuzz with a probable upset.
There was a 5 percent drop in the S&P futures ESc1 on news of those state results, and the Dow Industrials futures slumped over 690 points.
The financial community as a whole has seen Clinton as the safe bet for stability in the markets, while a Trump presidency is expected to have the opposite effect due to his radical stance on trade, national security and foreign policy.
“The fact is that a Hillary win is looking far less likely now and not many analysts hedged for this, so we are seeing an exodus,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “This is why we’ve seen over a million contracts changing hands on the S&P 500, and the index over 4 percent down. Similar results for other areas of the markets too. It’s still way too early to call but Trump certainly has a good chance now.”
Reflecting investor anxiety over a Trump victory, the CBOE Volatility index soared over 35 percent. The Mexican peso took a battering as it fell to a record low of 20 versus the greenback.
Ameriprise Financial chief analyst David Joy said, “You have to admit that not many polls and experts saw this situation occurring as we move towards the evening polls. It’s going to be a big shock to the system if Trump wins and you are seeing a lot of scrambling around not just on Wall Street but in Asian markets too. Asset prices are hitting very surprising levels. There’s still a long way to go today but preliminary results show that this is going to be very close.”
Monday, October 31, 2016
Close U.S. presidential race puts investors and markets on edge
The latest U.S. polls show Republican candidate Donald Trump catching up with his Democratic rival Hilary Clinton, and traders reacted to the news by dodging high-risk assets, selling South Korean stock and buying the safe-haven Japanese yen.
The latest sudden shift in the polls comes days after the FBI announced that they are re-investigating Hillary Clinton’s email server over suspicious communications the former secretary of state sent and received. Director James Comey had made a formal statement to Congress informing them of the probe.
To be fair to Mr. Trump, Clinton’s lead was already narrowing significantly even before the FBI’s recent actions, but the news coming at this very late stage has set investors on edge and caused them to moderate their bets on a Clinton victory and prepare their portfolios for further volatility in the markets.
“We don’t think this is going to put Trump in the White House, but you need to adjust your investments as conditions develop,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “Our basic approach, and advice for our clients, is to price for continued instability over the next week or two.”
The situation mirrors that of the UK Brexit vote earlier in the year, when the financial world was unsure how political events were going to affect the markets in the short-term.
Emerging Asian currencies went toe-to-toe with the greenback at the end of the week, but the dollar eventually steadied itself. The latest uncertainty came after a Washington Post poll showed that Trump was just a single point down on Clinton, a deficit usually treated as statistically insignificant.
“The markets largely priced out the chance of a Trump win and they will now need to revise their forecasts and take the possibility a little more seriously,” said National Australia Bank’s chief currency strategist Ray Attrill in a phone interview for the BBC. “This is not going to be the whitewash for the White House that the markets were previously expecting.”
“Even if Trump wins, I expect the markets to steady fairly quickly. There will of course be some short-term risk aversion in the global financial community but the greenback has historically been quick to recover from these kinds of politically motivated market movements,” Attrill added.
Americans go to the polls on November 8th to choose the 45th president of the United States.
The latest sudden shift in the polls comes days after the FBI announced that they are re-investigating Hillary Clinton’s email server over suspicious communications the former secretary of state sent and received. Director James Comey had made a formal statement to Congress informing them of the probe.
To be fair to Mr. Trump, Clinton’s lead was already narrowing significantly even before the FBI’s recent actions, but the news coming at this very late stage has set investors on edge and caused them to moderate their bets on a Clinton victory and prepare their portfolios for further volatility in the markets.
“We don’t think this is going to put Trump in the White House, but you need to adjust your investments as conditions develop,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “Our basic approach, and advice for our clients, is to price for continued instability over the next week or two.”
The situation mirrors that of the UK Brexit vote earlier in the year, when the financial world was unsure how political events were going to affect the markets in the short-term.
Emerging Asian currencies went toe-to-toe with the greenback at the end of the week, but the dollar eventually steadied itself. The latest uncertainty came after a Washington Post poll showed that Trump was just a single point down on Clinton, a deficit usually treated as statistically insignificant.
“The markets largely priced out the chance of a Trump win and they will now need to revise their forecasts and take the possibility a little more seriously,” said National Australia Bank’s chief currency strategist Ray Attrill in a phone interview for the BBC. “This is not going to be the whitewash for the White House that the markets were previously expecting.”
“Even if Trump wins, I expect the markets to steady fairly quickly. There will of course be some short-term risk aversion in the global financial community but the greenback has historically been quick to recover from these kinds of politically motivated market movements,” Attrill added.
Americans go to the polls on November 8th to choose the 45th president of the United States.
Thursday, October 27, 2016
New Japanese regulation could see Abe in third straight term
Following a decision by his political party to allow its presidents to serve three consecutive terms, Japanese Prime Minister Shinzo Abe will have the chance to remain the country’s leader up to and beyond 2020, which would also make him the longest serving ruling leader in the nation’s history.
Abe just about made it into his second term, with assurances he would revitalise the country’s flagging economy and beef up the nation’s military defences. The term will conclude this time next year.
The rule adjustment by his Liberal Democratic Party could give Abe the time he needs to complete a revision of a controversial post-war pacifist constitution which many conservative politicians see as a humiliating symbol of the nation’s defeat in 1945. Other observers take the opposite view that the constitution represents a beacon of true democracy.
At the moment the LDP allows its presidents two consecutive three-year terms but under the new rules a third term will be allowed, although the regulatory change must be ratified at a party convention in March.
Japan is used to a revolving door of leaders, and Abe will break the mould if elected for a third term which would take him past the Tokyo Olympics in 2020. Combined with his previous tenure in 2006-2007 it would make him the longest serving Japanese leader ever.
“Another term would allow Abe to really settle down and tackle the problem of the Japanese economy,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“It will be some task in the current environment. Many in the financial community are feeling pretty jaded with his ‘Abenomics’ as the strategy doesn’t seem to have been working. It may be the reason why the Bank of Japan has been trying to tweak their approach recently,” added Poulson.
Even though Abe has largely failed to deliver on his economic promises, his popularity at the polls has remained remarkably solid, with the latest figure at 65 percent, largely due to his tough stance on defence and in particular China, which recently overtook Japan as the world’s second largest economy.
Abe is so popular within his own party, and opposition is so weak, that many are concerned his governance will go largely unchecked if given a third term.
Abe will overtake early 20th century premier Taro Katsuraand if re-elected next year, assuming his party finalize the new rule in March.
Abe just about made it into his second term, with assurances he would revitalise the country’s flagging economy and beef up the nation’s military defences. The term will conclude this time next year.
The rule adjustment by his Liberal Democratic Party could give Abe the time he needs to complete a revision of a controversial post-war pacifist constitution which many conservative politicians see as a humiliating symbol of the nation’s defeat in 1945. Other observers take the opposite view that the constitution represents a beacon of true democracy.
At the moment the LDP allows its presidents two consecutive three-year terms but under the new rules a third term will be allowed, although the regulatory change must be ratified at a party convention in March.
Japan is used to a revolving door of leaders, and Abe will break the mould if elected for a third term which would take him past the Tokyo Olympics in 2020. Combined with his previous tenure in 2006-2007 it would make him the longest serving Japanese leader ever.
“Another term would allow Abe to really settle down and tackle the problem of the Japanese economy,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management.
“It will be some task in the current environment. Many in the financial community are feeling pretty jaded with his ‘Abenomics’ as the strategy doesn’t seem to have been working. It may be the reason why the Bank of Japan has been trying to tweak their approach recently,” added Poulson.
Even though Abe has largely failed to deliver on his economic promises, his popularity at the polls has remained remarkably solid, with the latest figure at 65 percent, largely due to his tough stance on defence and in particular China, which recently overtook Japan as the world’s second largest economy.
Abe is so popular within his own party, and opposition is so weak, that many are concerned his governance will go largely unchecked if given a third term.
Abe will overtake early 20th century premier Taro Katsuraand if re-elected next year, assuming his party finalize the new rule in March.
Friday, October 14, 2016
Wanda chairman still top of China’s wealth rankings
According to the annual Hurun rich list, Chinese property tycoon Wang Jianlin remains the nation’s wealthiest individual despite a 40 percent surge in wealth for his nearest rival, Alibaba founder Jack ma.
Dalian Wanda Group chairman Wang defended his top spot with a personal fortune of over $30 billion and fended off not only Ma, but also up and coming players like Baoneng's Yao Zhenhua and online gaming specialist Ding Lei of Netease.
The Hurun data on China’s wealthiest people is a good indicator of where money is being distributed in the communist country and highlights the growing financial power the nation’s billionaires are wielding, a trend that explains the recent surge in Chinese M&A activity across the world in the last few years.
Baoneng Group chairman Yao Zhenhua is the biggest mover and shaker on the rankings, with a meteoric 800 percent surge in his personal wealth to over $17 billion, taking him to third in the list. Yao has been fighting hard in a hostile takeover of the country’s biggest real estate developer, but trade is not where Yao made his fortune.
“We are seeing a new breed of wealth here in China,” says Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management who oversee a $7 billion fund in the region. “These individuals are coming from a financial market background as opposed to the more traditional routes to the top, like manufacturing or exporting.”
“The country as a whole has to become more flexible to alternative income flows as materially the economy is slowing down as new government reforms come in. It’s all about the capital markets and other financial investments not just in China but overseas also, as we’ve seen with recent Chinese M&A activity in Germany,” Poulsen added.
The real estate developer on Yao’s portfolio is China Vanke Co Ltd and his wealth has grown as his stake in the company has increased; now becoming the largest single shareholder through Baoneng, who were a relatively unknown financial conglomerate previously.
The Hurun rich list revealed there are now nearly six hundred billionaires in China, with the world’s second largest economy now leading the U.S. in billionaires. The next target for China’s mega rich is to make it onto the global top twenty rankings, where they don’t have a single representative.
Dalian Wanda Group chairman Wang defended his top spot with a personal fortune of over $30 billion and fended off not only Ma, but also up and coming players like Baoneng's Yao Zhenhua and online gaming specialist Ding Lei of Netease.
The Hurun data on China’s wealthiest people is a good indicator of where money is being distributed in the communist country and highlights the growing financial power the nation’s billionaires are wielding, a trend that explains the recent surge in Chinese M&A activity across the world in the last few years.
Baoneng Group chairman Yao Zhenhua is the biggest mover and shaker on the rankings, with a meteoric 800 percent surge in his personal wealth to over $17 billion, taking him to third in the list. Yao has been fighting hard in a hostile takeover of the country’s biggest real estate developer, but trade is not where Yao made his fortune.
“We are seeing a new breed of wealth here in China,” says Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management who oversee a $7 billion fund in the region. “These individuals are coming from a financial market background as opposed to the more traditional routes to the top, like manufacturing or exporting.”
“The country as a whole has to become more flexible to alternative income flows as materially the economy is slowing down as new government reforms come in. It’s all about the capital markets and other financial investments not just in China but overseas also, as we’ve seen with recent Chinese M&A activity in Germany,” Poulsen added.
The real estate developer on Yao’s portfolio is China Vanke Co Ltd and his wealth has grown as his stake in the company has increased; now becoming the largest single shareholder through Baoneng, who were a relatively unknown financial conglomerate previously.
The Hurun rich list revealed there are now nearly six hundred billionaires in China, with the world’s second largest economy now leading the U.S. in billionaires. The next target for China’s mega rich is to make it onto the global top twenty rankings, where they don’t have a single representative.
Thursday, October 13, 2016
South Korean shipping company looks for buyers
Hanjin Shipping Co Ltd is looking for bidders for its vast Asia to U.S. network less than 60 days after the firm applied for court receivership after racking up total debts thought to be in the region of $5 billion.
According to a statement by the company on Wednesday, Hanjin will receive letters of intent up to the end of October concerning the sale of its main business.
Global industry overcapacity, tough competition and relatively low freight rates have taken their toll on Hanjin over the past year and experts believe that they will not be the only shipping firm to be pulled into the murky depths of receivership.
According to shipping data provider Alphaliner, Hanjin dropped to 18th place in the container ship capacity global rankings as of the start of this month, and creditors started to make claims soon after that.
The statement went on to detail the assets Hanjin would put up for sale, which includes six of their container ships, a dozen overseas businesses, all operations involved in the Asia to U.S. shipping route and manpower systems. A spokesman for the company did not comment on potentially interested buyers or exact prices for the assets, saying it was confidential.
Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management said Hanjin’s bankruptcy “has started to affect West Coast ports in the U.S. and especially the Port of Long Beach” where container volumes plummeted 17 percent in the second week of October.
“When a company that contributes 10-15 percent of a ports total containerised volume goes bust, you are going to feel reverberations in the local community. Dockers are pretty nervous right now in Long Beach,” Poulson added.
One likely interested party would be Korean firm Hyundai Merchant Marine. The company’s CFO said the firm would need to carefully review Hanjin’s books before putting in any firm offers for the shipping line, but Hanjin was definitely on their radar.
According to a statement by the company on Wednesday, Hanjin will receive letters of intent up to the end of October concerning the sale of its main business.
Global industry overcapacity, tough competition and relatively low freight rates have taken their toll on Hanjin over the past year and experts believe that they will not be the only shipping firm to be pulled into the murky depths of receivership.
According to shipping data provider Alphaliner, Hanjin dropped to 18th place in the container ship capacity global rankings as of the start of this month, and creditors started to make claims soon after that.
The statement went on to detail the assets Hanjin would put up for sale, which includes six of their container ships, a dozen overseas businesses, all operations involved in the Asia to U.S. shipping route and manpower systems. A spokesman for the company did not comment on potentially interested buyers or exact prices for the assets, saying it was confidential.
Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management said Hanjin’s bankruptcy “has started to affect West Coast ports in the U.S. and especially the Port of Long Beach” where container volumes plummeted 17 percent in the second week of October.
“When a company that contributes 10-15 percent of a ports total containerised volume goes bust, you are going to feel reverberations in the local community. Dockers are pretty nervous right now in Long Beach,” Poulson added.
One likely interested party would be Korean firm Hyundai Merchant Marine. The company’s CFO said the firm would need to carefully review Hanjin’s books before putting in any firm offers for the shipping line, but Hanjin was definitely on their radar.
Wednesday, October 12, 2016
Hike expectations unchanged as U.S. stocks gain slightly
The general feeling around Wall Street this morning is that the U.S. Federal Reserve, and investors alike, are both waiting on domestic earnings reports before taking any meaningful action. That means expectations for a rate hike are largely unchanged.
Those conditions saw the Dow Jones industrial average and the S&P 500 index gain slightly in the morning session in New York.
According to the minutes of the Fed’s latest meeting in September, several voices on the board feel a hike will be “around the corner” if the domestic economy continued its upswing.
“There are downside risks to keeping rates low but the Fed obviously think it’s a greater risk to bump rates at a time when the economic strengthening is in the balance,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in an email to clients yesterday.
According to the CME FedWatch tool, traders are pricing in low odds of a rate hike in November as the U.S. presidential election is just days away from the next Fed meeting. Most traders feel a December hike will be the most likely outcome even if the odds were down slightly from the previous day.
“Investors are going to wait on earnings data in the absence of any solid news from the Fed. And the Fed is likely waiting on the same reports,” Poulsen added.
Thomson Reuters data is forecasting a Q3 fall of around 0.6 percent in the S&P 500 meaning a fourth successive quarter of negative earnings for the benchmark index.
The Nasdaq Composite fell 7.78 points, or 0.14 percent, to 5,239.06, the Dow Jones industrial average rose 15.56 points or 0.08 percent to 18,144.3 and the S&P 500 gained 2.46 points, or 0.12 percent, to 2,139.17.
Cisco Systems weighed heavily on the Nasdaq after stocks dropped amid reports of a massive profit decline for rivals Ericsson.
A more hawkish Fed was feared by investors in both the electronics and real estate sectors. All eyes will be on the next meeting in a month’s time, but odds are rates will be left unchanged yet again.
Those conditions saw the Dow Jones industrial average and the S&P 500 index gain slightly in the morning session in New York.
According to the minutes of the Fed’s latest meeting in September, several voices on the board feel a hike will be “around the corner” if the domestic economy continued its upswing.
“There are downside risks to keeping rates low but the Fed obviously think it’s a greater risk to bump rates at a time when the economic strengthening is in the balance,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in an email to clients yesterday.
According to the CME FedWatch tool, traders are pricing in low odds of a rate hike in November as the U.S. presidential election is just days away from the next Fed meeting. Most traders feel a December hike will be the most likely outcome even if the odds were down slightly from the previous day.
“Investors are going to wait on earnings data in the absence of any solid news from the Fed. And the Fed is likely waiting on the same reports,” Poulsen added.
Thomson Reuters data is forecasting a Q3 fall of around 0.6 percent in the S&P 500 meaning a fourth successive quarter of negative earnings for the benchmark index.
The Nasdaq Composite fell 7.78 points, or 0.14 percent, to 5,239.06, the Dow Jones industrial average rose 15.56 points or 0.08 percent to 18,144.3 and the S&P 500 gained 2.46 points, or 0.12 percent, to 2,139.17.
Cisco Systems weighed heavily on the Nasdaq after stocks dropped amid reports of a massive profit decline for rivals Ericsson.
A more hawkish Fed was feared by investors in both the electronics and real estate sectors. All eyes will be on the next meeting in a month’s time, but odds are rates will be left unchanged yet again.
Saturday, September 17, 2016
U.S. government wants $15bn from Deutsche to end securities probe
Deutsche Bank will need to cough up around $15 billion if they want a mortgage-backed securities investigation by the Department of Justice to end.
In response Deutsche said they “believe the figure cited is preposterous and are unlikely to settle potential civil claims in that region.”
The scandal has hit the German bank’s US operations hard and their shares fell over 6 percent in the morning session in New York. There could be worse to come as the negotiations and investigation could take the rest of the year.
A spokesman for the Department of Justice (DOJ) said the “scale of the investigation is being widened; it’s much bigger than first thought.”
Deutsche said in a statement this morning, “This is just the start of talks between us and the DOJ. Going on previous settlements by banks in a similar situation we believe the end figure will be much lower.”
The German banking giant is being blamed for playing a role in the global economic crisis of 2007-2009 when it sold residential mortgage-backed securities. Deutsche is not the only bank in the U.S. who has been probed.
Many banks are accused of offering mortgages to unqualified borrowers, then selling the loan off as a solid investment, essentially passing on the risk.
But the fine the DOJ are proposing for Deutsche is by far the largest since the financial crisis. They penalised Citigroup $11 billion in 2014 for repackaging financial products related to mortgages. The eventual settlement was $8 million.
Some observers are wondering whether financial watchdogs are doing more harm than good at this stage.
“Some of these settlements are huge. Obviously there need to be penalties for what happened, but we want our economy to get back on our feet don’t we?” said ETX Capital chief analyst Neil Wilson in a TV interview on Friday.
Goldman Sachs settled for close to $5 billion early in 2016, while JP Morgan Chase got a $14 billion penalty for overstating the stability of mortgages being sold to their investor base.
“The timing of Deutsche’s fine is unfortunate to say the least,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “Revenues have been down nearly 25 percent this quarter and profits have suffered badly. There was also the Fed affair in the summer when Deutsche’s U.S. unit failed a stress test from the central bank.”
In response Deutsche said they “believe the figure cited is preposterous and are unlikely to settle potential civil claims in that region.”
The scandal has hit the German bank’s US operations hard and their shares fell over 6 percent in the morning session in New York. There could be worse to come as the negotiations and investigation could take the rest of the year.
A spokesman for the Department of Justice (DOJ) said the “scale of the investigation is being widened; it’s much bigger than first thought.”
Deutsche said in a statement this morning, “This is just the start of talks between us and the DOJ. Going on previous settlements by banks in a similar situation we believe the end figure will be much lower.”
The German banking giant is being blamed for playing a role in the global economic crisis of 2007-2009 when it sold residential mortgage-backed securities. Deutsche is not the only bank in the U.S. who has been probed.
Many banks are accused of offering mortgages to unqualified borrowers, then selling the loan off as a solid investment, essentially passing on the risk.
But the fine the DOJ are proposing for Deutsche is by far the largest since the financial crisis. They penalised Citigroup $11 billion in 2014 for repackaging financial products related to mortgages. The eventual settlement was $8 million.
Some observers are wondering whether financial watchdogs are doing more harm than good at this stage.
“Some of these settlements are huge. Obviously there need to be penalties for what happened, but we want our economy to get back on our feet don’t we?” said ETX Capital chief analyst Neil Wilson in a TV interview on Friday.
Goldman Sachs settled for close to $5 billion early in 2016, while JP Morgan Chase got a $14 billion penalty for overstating the stability of mortgages being sold to their investor base.
“The timing of Deutsche’s fine is unfortunate to say the least,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “Revenues have been down nearly 25 percent this quarter and profits have suffered badly. There was also the Fed affair in the summer when Deutsche’s U.S. unit failed a stress test from the central bank.”
Friday, September 16, 2016
German VC position in balance over trade agreement
The Vice Chancellor of Germany, Sigmar Gabriel, will be hoping that a trade deal between Canada and the E.U. will be pushed through in October, as his future as a politician and his ambitions to become Chancellor may hinge on it.
As part of his pledges in his role as economy minister, the VC and centre-left SPD party leader Gabriel has continuously backed the Comprehensive Economic Trade Agreement (CETA), even amid sceptical criticism of the deal from within his own party claiming the trade agreement would not benefit the European Union, only help large worldwide conglomerate gain access to the financial bloc, giving nothing in return.
Should Mr. Gabriel fail to convince the majority of his fellow SPD members of the merits of the deal at next week’s party convention, it could scupper his chances of running for Chancellor in the 2017 national elections. Another blowback could be the ignition of an internal power struggle in the SPD, which is a partner in Germany’s coalition government, the conservatives led by Angela Merkel being the senior partner.
“There is every chance that Gabriel could resign as the party leader if the CETA fails to win favour next week, most people observing German politics would say that would not be a good situation,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a note to clients.
“Emotions are running particularly high with the refugee issue and Merkel needs the full support of the SPD to counterbalance the CDU party’s position,” Poulson added.
If Gabriel were to convince the delegation to back CETA it would give him a much needed boost. He is currently a distant second to Merkel in the German political approval ratings even though the current Chancellor’s ratings took a nosedive with her decision to allow an influx of refugees into the country.
Gabeiel wants CETA as a counterbalance to China’s increasing influence on the world trade stage, and he was quick to condemn a competing trade proposal, the Transatlantic Trade and Investment Partnership (TTIP), which he said “had failed to meet the needs of the parties involved”.
CETA, conversely, would be a chance for developed nations to “make a move up the ladder of trade co-operation in the global market” if the deal is ratified by member states at the end of next month.
Gabriel made a trip to Ottowa last week in order to hammer out pre-agreement guarantees so as to appease any lingering doubters within the SPD.
As part of his pledges in his role as economy minister, the VC and centre-left SPD party leader Gabriel has continuously backed the Comprehensive Economic Trade Agreement (CETA), even amid sceptical criticism of the deal from within his own party claiming the trade agreement would not benefit the European Union, only help large worldwide conglomerate gain access to the financial bloc, giving nothing in return.
Should Mr. Gabriel fail to convince the majority of his fellow SPD members of the merits of the deal at next week’s party convention, it could scupper his chances of running for Chancellor in the 2017 national elections. Another blowback could be the ignition of an internal power struggle in the SPD, which is a partner in Germany’s coalition government, the conservatives led by Angela Merkel being the senior partner.
“There is every chance that Gabriel could resign as the party leader if the CETA fails to win favour next week, most people observing German politics would say that would not be a good situation,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a note to clients.
“Emotions are running particularly high with the refugee issue and Merkel needs the full support of the SPD to counterbalance the CDU party’s position,” Poulson added.
If Gabriel were to convince the delegation to back CETA it would give him a much needed boost. He is currently a distant second to Merkel in the German political approval ratings even though the current Chancellor’s ratings took a nosedive with her decision to allow an influx of refugees into the country.
Gabeiel wants CETA as a counterbalance to China’s increasing influence on the world trade stage, and he was quick to condemn a competing trade proposal, the Transatlantic Trade and Investment Partnership (TTIP), which he said “had failed to meet the needs of the parties involved”.
CETA, conversely, would be a chance for developed nations to “make a move up the ladder of trade co-operation in the global market” if the deal is ratified by member states at the end of next month.
Gabriel made a trip to Ottowa last week in order to hammer out pre-agreement guarantees so as to appease any lingering doubters within the SPD.
Thursday, September 15, 2016
British interest rates look set to continue fall
On the eve of one of the most influential economic events in the last 100 years, the financial meltdown of 2008, British interest rates stood at a very healthy 5 percent. In the turbulent weeks and months that followed, the Bank of England (BoE) aggressively chopped the rates down until by early 2009 they stood at 0.5 percent.
The broad assumption that ultra-low interest rates were just a temporary stop-gap to the financial situation of the time has proved completely untrue, and much to the dismay of even the most pessimistic of economists, this month, the BoE are considering a further cut, this time from the current rate of 0.25 to a miniscule 0.1 percent.
In the wake of the 2007-2009 economic troubles, the global financial system has never returned to full speed. Real incomes have declined, growth has remained stagnant and anti-establishment sentiment has never been higher, symbolized by the British vote to leave the EU and Donald Trump’s chequered attempts to win the U.S. presidential race.
As the UK’s central bank ponders the various implications that an exit from the euro zone financial bloc will bring, a possible further interest rate cut would not really be that surprising a move. The cut could even be as early as late December. The monetary policy committees (MPC) left the 0.25 percent level unchanged at the end of their last meeting, but the indicators are that they will continue with the easing strategy moving forward into next year.
“I don’t think the BoE are going to change their tact,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management on the company’s blog. “Economists in general are surprised that the UK economy has fared as well as it has post-Brexit, but most of us know that the test will be in the long run, and the financial authorities are going to do everything they can to spur spending.”
The MPC predicted that the UK economy would virtually come to a standstill after the British public voted to leave the European Union. That hasn’t happened, and when all the data is collected it may even show that growth is even better than last month’s projections.
The BoE will stay safe at their next meeting, according to many observers, but the rate cut will come sooner rather than later. The main purpose is to add further downward pressure on the sterling in order to stimulate foreign orders for British products and boost international trade in general.
The broad assumption that ultra-low interest rates were just a temporary stop-gap to the financial situation of the time has proved completely untrue, and much to the dismay of even the most pessimistic of economists, this month, the BoE are considering a further cut, this time from the current rate of 0.25 to a miniscule 0.1 percent.
In the wake of the 2007-2009 economic troubles, the global financial system has never returned to full speed. Real incomes have declined, growth has remained stagnant and anti-establishment sentiment has never been higher, symbolized by the British vote to leave the EU and Donald Trump’s chequered attempts to win the U.S. presidential race.
As the UK’s central bank ponders the various implications that an exit from the euro zone financial bloc will bring, a possible further interest rate cut would not really be that surprising a move. The cut could even be as early as late December. The monetary policy committees (MPC) left the 0.25 percent level unchanged at the end of their last meeting, but the indicators are that they will continue with the easing strategy moving forward into next year.
“I don’t think the BoE are going to change their tact,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management on the company’s blog. “Economists in general are surprised that the UK economy has fared as well as it has post-Brexit, but most of us know that the test will be in the long run, and the financial authorities are going to do everything they can to spur spending.”
The MPC predicted that the UK economy would virtually come to a standstill after the British public voted to leave the European Union. That hasn’t happened, and when all the data is collected it may even show that growth is even better than last month’s projections.
The BoE will stay safe at their next meeting, according to many observers, but the rate cut will come sooner rather than later. The main purpose is to add further downward pressure on the sterling in order to stimulate foreign orders for British products and boost international trade in general.
Juncker - Predecessors’ move to Goldman Sachs is “questionable”
José Manuel Barroso, the former European commission president, has raised a few eyebrows with his recent move to U.S. investment banking giant Goldman Sachs, and none more so than the man who replaced him, the current president Jean-Claude Juncker.
Juncker claims Goldman Sachs had a pivotal role in the financial meltdown of 2008 and remarked that Barroso’s move was “questionable”.
“José and I have been friends for many years and I have a very high degree of respect for the man. I have always thought of him as honest and reputable. He has made a decision to move to a company that played a leading role in the economic world crisis between 2007 and 2009, and personally I find the career choice questionable at best,” Juncker said in a TV interview.
The comments come in a week when Juncker has personally begun an investigation concerning whether or not Barroso violated EU regulations by taking the Goldman Sachs position. Barroso will be called for questioning in front of the commission and the main talking points will be his exact responsibilities at the bank.
“Barroso will be feeling the heat. Many of his former colleagues are up in arms at his appointment to Goldman Sachs,” said Head of Corporate trading at Nikko-Desjardins Asset Management, Stuart Poulson. “What’s baffling is why he has chosen an organization that was so implicit in the troubles of 2008. It’s a strange moral decision.”
Barroso has even been called on to give up his pension for bringing the European Union into disrepute by making the career move. The former prime minister of Portugal received a petition signed by over 140,000 people to that effect. In response, he has said publicly that he will carry out tasks at his new company “with total honesty and integrity to the best of my abilities.”
Barroso also wrote a letter to Juncker expressing his devotion to impartiality stating he has not been asked to lobby or advise the bank at any time concerning the British vote to leave the EU. Juncker hit back by saying Barroso would “be treated as a lobbyist by the EU rather than honoured as a former president.”
In response Barroso said “the decision by the president of the EC to make a special investigation out of this affair is inconsistent with what happened concerning other former members, I’m not sure why I’m being singled out.”
Juncker claims Goldman Sachs had a pivotal role in the financial meltdown of 2008 and remarked that Barroso’s move was “questionable”.
“José and I have been friends for many years and I have a very high degree of respect for the man. I have always thought of him as honest and reputable. He has made a decision to move to a company that played a leading role in the economic world crisis between 2007 and 2009, and personally I find the career choice questionable at best,” Juncker said in a TV interview.
The comments come in a week when Juncker has personally begun an investigation concerning whether or not Barroso violated EU regulations by taking the Goldman Sachs position. Barroso will be called for questioning in front of the commission and the main talking points will be his exact responsibilities at the bank.
“Barroso will be feeling the heat. Many of his former colleagues are up in arms at his appointment to Goldman Sachs,” said Head of Corporate trading at Nikko-Desjardins Asset Management, Stuart Poulson. “What’s baffling is why he has chosen an organization that was so implicit in the troubles of 2008. It’s a strange moral decision.”
Barroso has even been called on to give up his pension for bringing the European Union into disrepute by making the career move. The former prime minister of Portugal received a petition signed by over 140,000 people to that effect. In response, he has said publicly that he will carry out tasks at his new company “with total honesty and integrity to the best of my abilities.”
Barroso also wrote a letter to Juncker expressing his devotion to impartiality stating he has not been asked to lobby or advise the bank at any time concerning the British vote to leave the EU. Juncker hit back by saying Barroso would “be treated as a lobbyist by the EU rather than honoured as a former president.”
In response Barroso said “the decision by the president of the EC to make a special investigation out of this affair is inconsistent with what happened concerning other former members, I’m not sure why I’m being singled out.”
Wednesday, September 14, 2016
Record breaking cash takeover as seed companies make deal
A record breaking cash transaction will be completed later this week that will create the world’s largest pesticide and seed retail entity. German chemicals titan Bayer announced that a deal has been finalized with U.S. firm Monsanto for a huge $67 billion.
Monsanto, who are famous for their GM seeds for crops, said their shares hold a value of $129 in relation to the offer.
Bayer specialises in healthcare products but has been through a major diversification process recently, especially into the agricultural sector.
Genetically modified seeds are used widely in the United States, but stern environmentalist opposition has so far scuttled plans to introduce them into Europe. Bayer hopes to change that situation. They say if the world wants to feed its growing population then GM foods are vital.
“This is going to bring substantial benefits not only to Bayer shareholders and staff, but to the population of Europe at large,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a phone interview.
The takeover comes amid a torrent of M&A action in the agricultural industry as declining crop prices force farmers to count their pennies, decreasing profits for the big companies in the sector. In order to save operational costs, the industry has been consolidating.
Other major firms in the sector, including Syngenta, DuPont and Dow Chemical, have all announced mergers in the past year.
Regulatory watchdogs will be scrutinizing those deals and also the Bayer-Monsanto tie-up, as there will be concerns over anti-competition with the current offer threatening to create an entity that would control 25% of the world’s supply of pesticides and seeds.
Farmers have been vocal in their opposition to the merger, citing that the move will probably lead to spiralling seed prices and less choice of seeds in general.
Monsanto has been described as the 'Frankenstein crop producer’ by some in the media and many observers are worried European farmers will be at a strong disadvantage if the deal goes through.
Bayer has paid a massive premium for Monsanto, nearly a 50 percent upward revision from the previous share price before talks began. Should the deal fall through, the fleeing party would have to pay a $3 billion fine.
In response to the news, Monsanto shares gained 1.7 percent and Bayer shares were up nearly 4 percent in New York’s morning session on Friday.
Monsanto, who are famous for their GM seeds for crops, said their shares hold a value of $129 in relation to the offer.
Bayer specialises in healthcare products but has been through a major diversification process recently, especially into the agricultural sector.
Genetically modified seeds are used widely in the United States, but stern environmentalist opposition has so far scuttled plans to introduce them into Europe. Bayer hopes to change that situation. They say if the world wants to feed its growing population then GM foods are vital.
“This is going to bring substantial benefits not only to Bayer shareholders and staff, but to the population of Europe at large,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a phone interview.
The takeover comes amid a torrent of M&A action in the agricultural industry as declining crop prices force farmers to count their pennies, decreasing profits for the big companies in the sector. In order to save operational costs, the industry has been consolidating.
Other major firms in the sector, including Syngenta, DuPont and Dow Chemical, have all announced mergers in the past year.
Regulatory watchdogs will be scrutinizing those deals and also the Bayer-Monsanto tie-up, as there will be concerns over anti-competition with the current offer threatening to create an entity that would control 25% of the world’s supply of pesticides and seeds.
Farmers have been vocal in their opposition to the merger, citing that the move will probably lead to spiralling seed prices and less choice of seeds in general.
Monsanto has been described as the 'Frankenstein crop producer’ by some in the media and many observers are worried European farmers will be at a strong disadvantage if the deal goes through.
Bayer has paid a massive premium for Monsanto, nearly a 50 percent upward revision from the previous share price before talks began. Should the deal fall through, the fleeing party would have to pay a $3 billion fine.
In response to the news, Monsanto shares gained 1.7 percent and Bayer shares were up nearly 4 percent in New York’s morning session on Friday.
Thursday, September 8, 2016
United States employment figures continue solid trend
Although latest reports suggest that the rate of job growth is declining, last week saw a surprise drop in the number of Americans claiming unemployment benefits, revealing a durable labor market.
The encouraging figures may not be enough to convince the Federal Reserve to hike rates at its upcoming policy meeting towards the end of this month. Gloomy services and factory industry activity and the downturn in job growth last month are more likely to be factors the Fed will sit up and take notice of.
“We haven’t seen a labor market this rosy for over forty years,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “The Fed is at a very important crossroads here, with rates far from normal levels, so should the economy turn nasty they don’t really have any recourse.”
There was a 3,000 decrease in primary unemployment claims for the week ending September 4th according to data from the Department of Labor, representing the lowest levels for over two months.
The financial markets in the U.S. were unmoved by the jobs report, with the greenback hitting a fortnightly low versus the euro amid a neutral stance by the European Central Bank regarding expansion of the bank’s asset buying scheme.
As concerns continue over chronically low inflation levels, the Fed has kept its benchmark interest rate steady. The last change was in December 2015, and that was the first adjustment in ten years.
Although hiring was still sluggish, data from the government revealed July job vacancies were at a record high, suggesting a probable skills deficiency, or over-skilled, in the potential workforce. The labor market, however, can still be seen as healthy.
Fed Chair Janet Yellen had previously announced that one hundred thousand new jobs would need to be created to keep up with growth, and the economy outperformed that figure by 50,000.
RDQ Economics analyst John Ryding attempted to pinpoint persisting issues, “Although the labor market seems tight on the surface, the underlying problem is trying to find people who are willing to work for the kind of wages that are being offered. There are plenty of vacancies but salary and skills are lacking on either side of the equation.”
The downturn in employment growth is to be expected as the recovery from the 2008 financial crisis shows its age, with significant cooling in the financial industry and also in the manufacturing sector.
The encouraging figures may not be enough to convince the Federal Reserve to hike rates at its upcoming policy meeting towards the end of this month. Gloomy services and factory industry activity and the downturn in job growth last month are more likely to be factors the Fed will sit up and take notice of.
“We haven’t seen a labor market this rosy for over forty years,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “The Fed is at a very important crossroads here, with rates far from normal levels, so should the economy turn nasty they don’t really have any recourse.”
There was a 3,000 decrease in primary unemployment claims for the week ending September 4th according to data from the Department of Labor, representing the lowest levels for over two months.
The financial markets in the U.S. were unmoved by the jobs report, with the greenback hitting a fortnightly low versus the euro amid a neutral stance by the European Central Bank regarding expansion of the bank’s asset buying scheme.
As concerns continue over chronically low inflation levels, the Fed has kept its benchmark interest rate steady. The last change was in December 2015, and that was the first adjustment in ten years.
Although hiring was still sluggish, data from the government revealed July job vacancies were at a record high, suggesting a probable skills deficiency, or over-skilled, in the potential workforce. The labor market, however, can still be seen as healthy.
Fed Chair Janet Yellen had previously announced that one hundred thousand new jobs would need to be created to keep up with growth, and the economy outperformed that figure by 50,000.
RDQ Economics analyst John Ryding attempted to pinpoint persisting issues, “Although the labor market seems tight on the surface, the underlying problem is trying to find people who are willing to work for the kind of wages that are being offered. There are plenty of vacancies but salary and skills are lacking on either side of the equation.”
The downturn in employment growth is to be expected as the recovery from the 2008 financial crisis shows its age, with significant cooling in the financial industry and also in the manufacturing sector.
Wednesday, September 7, 2016
Recall episode prompts air bag firm to court bids
The Japanese air bag manufacturer Takata Corp is fighting to stay afloat after the car industry’s largest ever recall, and it has prompted the firm to take primary bids from a list of investors ready to come to the rescue.
According to several anonymous sources close to the company, Lazard Ltd will be receiving rescue plans from a host of potential investors on Takata’s behalf which include, but are not limited to, Brain Capital, chemical maker Daicel Corp, electronic giants Joyson and KKR & Co.
At least 15 deaths have so far been reported linked to the company’s disastrous mistake of putting a volatile chemical inside the propellant used in their air bag system. The chemical was exploding inside the car and sending a deadly spray of shrapnel around the front compartment.
Takata are desperately seeking financial clout as they face billions of dollars in liabilities in upcoming court cases.
None of the companies involved in the potential buyout commented after email and phone call enquiries, and the sources preferred to remain un-named due to the sensitive nature of the affair.
The sources say Takata will attempt to narrow the amount of bids down to two by the end of September by setting up a steering committee to eliminate suitors. Over thirty organizations and business showed interest in the bailout arrangement after Takata announced they required a financial backer.
The winner of the bidding war will be responsible for keeping in check growing costs at the company and funding the restructuring of the business. Takata shares have plummeted well over 80 percent in the last two years.
“It’s been a torrid episode,” said Stuart Poulson, Head of corporate trading at Nikko-Desjardins Asset Management in a TV interview. “But it does represent a major opportunity to get some new blood, and cash, into the company and turn it around. Of course, the shares being at rock bottom prices won’t hurt potential investors either.”
Takata is one of the few dominant air bag makers in the world and many Japanese auto-manufacturers depend on the company to organize and refit the continuing recalls and to keep air bag prices down by providing on-going competition in the industry. As such, they have just about managed to stay in the red while their liabilities are pending.
According to several anonymous sources close to the company, Lazard Ltd will be receiving rescue plans from a host of potential investors on Takata’s behalf which include, but are not limited to, Brain Capital, chemical maker Daicel Corp, electronic giants Joyson and KKR & Co.
At least 15 deaths have so far been reported linked to the company’s disastrous mistake of putting a volatile chemical inside the propellant used in their air bag system. The chemical was exploding inside the car and sending a deadly spray of shrapnel around the front compartment.
Takata are desperately seeking financial clout as they face billions of dollars in liabilities in upcoming court cases.
None of the companies involved in the potential buyout commented after email and phone call enquiries, and the sources preferred to remain un-named due to the sensitive nature of the affair.
The sources say Takata will attempt to narrow the amount of bids down to two by the end of September by setting up a steering committee to eliminate suitors. Over thirty organizations and business showed interest in the bailout arrangement after Takata announced they required a financial backer.
The winner of the bidding war will be responsible for keeping in check growing costs at the company and funding the restructuring of the business. Takata shares have plummeted well over 80 percent in the last two years.
“It’s been a torrid episode,” said Stuart Poulson, Head of corporate trading at Nikko-Desjardins Asset Management in a TV interview. “But it does represent a major opportunity to get some new blood, and cash, into the company and turn it around. Of course, the shares being at rock bottom prices won’t hurt potential investors either.”
Takata is one of the few dominant air bag makers in the world and many Japanese auto-manufacturers depend on the company to organize and refit the continuing recalls and to keep air bag prices down by providing on-going competition in the industry. As such, they have just about managed to stay in the red while their liabilities are pending.
Tuesday, September 6, 2016
Warburg eager to pick up mutual fund stake
According to sources close to the matter, French banking giant Societe Generale are in final discussions with Warburg Pincus to offload their 49 percent stake in a mutual fund joint venture with Baosteel Group, a Chinese iron and steel company based in Shanghai.
China first allowed foreign firms to enter their mutual funds business in 2002 and SocGen, France’s second largest banking entity was first into the market. The company they formed with Baosteel in 2003 was named Fortune SG Fund Management.
In the intervening 13 years a plethora of foreign firms including Aviva, Value partners and Bank of New York Mellon Corp, who entered into similar ventures, have sold off their stakes citing an overly competitive marketplace. SocGen have finally given up hope, and Warburg Pincus, a U.S. private equity firm, are looking to take over the reins.
None of the firms involved commented on the news.
Fortune SG was in the top twenty mutual fund ventures by assets, with an estimated $20 billion in assets under their control as of the end of July, according to China’s Asset Management Association.
The sources who broke the news did not mention the value of the proposed deal, but in similar arrangements in the past, fund managers would typically pick up between 3 and 4 percent of their assets.
Warburg is playing the long game. They are betting that over the next 20-year period China’s mutual fund sector, which is worth over a trillion dollars, will deliver high returns. They are already very familiar with Baosteel, being investors in their gas subsidiary for the past two years.
“It’s well known that Warburg have been raising a kitty in the region of around two billion dollars,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a phone interview. “In the past they have put massive bets on the country’s financial industry, like with the 2014 investment in China Huarong, so they are continuing with that strategy.”
That $800 million China Huarong investment, which preceded the company’s IPO in Hong Kong, was not the first foray into foreign markets for Warburg. The previous year they built a mutual arrangement with London-based Santander Asset Management which manages over $100 billion across the euro zone and South America.
Under the country’s stringent regulations, 49% is the maximum stake allowed for foreign companies in China.
China first allowed foreign firms to enter their mutual funds business in 2002 and SocGen, France’s second largest banking entity was first into the market. The company they formed with Baosteel in 2003 was named Fortune SG Fund Management.
In the intervening 13 years a plethora of foreign firms including Aviva, Value partners and Bank of New York Mellon Corp, who entered into similar ventures, have sold off their stakes citing an overly competitive marketplace. SocGen have finally given up hope, and Warburg Pincus, a U.S. private equity firm, are looking to take over the reins.
None of the firms involved commented on the news.
Fortune SG was in the top twenty mutual fund ventures by assets, with an estimated $20 billion in assets under their control as of the end of July, according to China’s Asset Management Association.
The sources who broke the news did not mention the value of the proposed deal, but in similar arrangements in the past, fund managers would typically pick up between 3 and 4 percent of their assets.
Warburg is playing the long game. They are betting that over the next 20-year period China’s mutual fund sector, which is worth over a trillion dollars, will deliver high returns. They are already very familiar with Baosteel, being investors in their gas subsidiary for the past two years.
“It’s well known that Warburg have been raising a kitty in the region of around two billion dollars,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in a phone interview. “In the past they have put massive bets on the country’s financial industry, like with the 2014 investment in China Huarong, so they are continuing with that strategy.”
That $800 million China Huarong investment, which preceded the company’s IPO in Hong Kong, was not the first foray into foreign markets for Warburg. The previous year they built a mutual arrangement with London-based Santander Asset Management which manages over $100 billion across the euro zone and South America.
Under the country’s stringent regulations, 49% is the maximum stake allowed for foreign companies in China.
Thursday, July 14, 2016
Danish energy firm in highest floatation of the year
Danish wind farm specialists Dong Energy completed a 10 billion pound IPO last week and began trading on the Nasdaq Copenhagen stock exchange today. The floatation is thought to be the largest that will happen in 2016.
Shares were selling higher than predicted, closing at DKK240 (£25.80) a share. The sale ended three days early as strong interest in the state-run energy firm spurred sales.
Nearly 40,000 new investors have been brought on as the Danish government; together with a consortium headed by Goldman Sachs sold an 18 percent stake in the business. Most of the new investors are private Danish interests with a small number of retail entities also buying in.
“We are delighted by the investor interest,” said Claus Hjort Frederiksen, Danish finance minister.
“I’m certain this will enable Dong Energy to push on as the sectors leading producer of green energy,” he added.
The floatation’s main aim was to raise capital for a monumental offshore wind farm project 80 miles off the UK coastline, near Grimsby. Insiders say the facility will include nearly 180 skyscraper sized giant turbines and will cover an area a sixth the size of Yorkshire.
Dong is also a very active player in the oil and gas industry around the North Sea with shares in the West of Shetland gas basin as well as multiple other locations and they will be hoping to invest additional funds to expand that side of the business in the near future.
Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management remarked on the IPO in an email to clients on Thursday, “Judging from the quick sale of shares and their better-than-expected price Dong Energy must be very happy. This will allow them to drive forward with their upcoming plans with renewed confidence.”
Meanwhile the listed oil firm BowLeven, a relatively low output producer, sold off a small portion of the company to private equity firm Crown Ocean Capital.
BowLeven are mainly focused on the African region and lack of new discoveries and declining oil prices have prompted the search for investment. Nearly 7 percent was sold off at 20.80p per share.
Shares were selling higher than predicted, closing at DKK240 (£25.80) a share. The sale ended three days early as strong interest in the state-run energy firm spurred sales.
Nearly 40,000 new investors have been brought on as the Danish government; together with a consortium headed by Goldman Sachs sold an 18 percent stake in the business. Most of the new investors are private Danish interests with a small number of retail entities also buying in.
“We are delighted by the investor interest,” said Claus Hjort Frederiksen, Danish finance minister.
“I’m certain this will enable Dong Energy to push on as the sectors leading producer of green energy,” he added.
The floatation’s main aim was to raise capital for a monumental offshore wind farm project 80 miles off the UK coastline, near Grimsby. Insiders say the facility will include nearly 180 skyscraper sized giant turbines and will cover an area a sixth the size of Yorkshire.
Dong is also a very active player in the oil and gas industry around the North Sea with shares in the West of Shetland gas basin as well as multiple other locations and they will be hoping to invest additional funds to expand that side of the business in the near future.
Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management remarked on the IPO in an email to clients on Thursday, “Judging from the quick sale of shares and their better-than-expected price Dong Energy must be very happy. This will allow them to drive forward with their upcoming plans with renewed confidence.”
Meanwhile the listed oil firm BowLeven, a relatively low output producer, sold off a small portion of the company to private equity firm Crown Ocean Capital.
BowLeven are mainly focused on the African region and lack of new discoveries and declining oil prices have prompted the search for investment. Nearly 7 percent was sold off at 20.80p per share.
Euro steel can’t compete with Chinese negative profit sales
The European Steel Association has said in a statement that Europe’s steel manufacturers will be “blown away” if the E.U. recognizes China as a fully-fledged market economy.
With China’s ability to sell steel for negative profit due to their vast excess, it is claimed they would flood the market and make competition impossible. The ESA feels China’s products will have much easier access to the euro zone market.
The issue has given the “leave” camp further ammunition with the British EU membership vote looming. Their opponents on the “remain” side say that China will never be granted special international trading status as they don’t meet the criteria, and there was a much better chance of the situation staying this way if Britain remains in the financial bloc.
Following the TataSteel sale in March, thousands of jobs are at risk in Wales, especially at their Port Talbot facility where as much as four thousand staff could be laid off.
Due to China’s authorities meddling in the market and deflating prices in order to give their production companies the ability to sell cheap steel, the E.U commission has so far not recognized the country as a market economy. This gives them the chance to impose higher taxes on imports coming into the continent.
This may change, however, as the commission have voiced plans to consider the nation as a market economy, and thus is would face significantly lower tariffs.
Karl Tachelet, spokesman for the ESA said, “It’s clear if new regulations come in we will simply be blown away by a Chinese storm. It is highly doubtful we would survive.”
Other observers admit the figures don’t look good for Europe’s steel producers. Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management commented in an email to investors on Thursday, “Let’s have a look at Chinese stockpiles at the moment; we are looking at about 450 million tonnes. What is Europe’s total steel demand, about 150 million tonnes? That is not great news for the ESA.”
Poulsen was quick to add, “This may just be a lot of hot air. I highly doubt that the euro zone officials will allow China to be seen as a bona fide market economy. I’m not the only one who believes China have failed to meet the criteria and have little hope of doing so by the end of 2016.”
With China’s ability to sell steel for negative profit due to their vast excess, it is claimed they would flood the market and make competition impossible. The ESA feels China’s products will have much easier access to the euro zone market.
The issue has given the “leave” camp further ammunition with the British EU membership vote looming. Their opponents on the “remain” side say that China will never be granted special international trading status as they don’t meet the criteria, and there was a much better chance of the situation staying this way if Britain remains in the financial bloc.
Following the TataSteel sale in March, thousands of jobs are at risk in Wales, especially at their Port Talbot facility where as much as four thousand staff could be laid off.
Due to China’s authorities meddling in the market and deflating prices in order to give their production companies the ability to sell cheap steel, the E.U commission has so far not recognized the country as a market economy. This gives them the chance to impose higher taxes on imports coming into the continent.
This may change, however, as the commission have voiced plans to consider the nation as a market economy, and thus is would face significantly lower tariffs.
Karl Tachelet, spokesman for the ESA said, “It’s clear if new regulations come in we will simply be blown away by a Chinese storm. It is highly doubtful we would survive.”
Other observers admit the figures don’t look good for Europe’s steel producers. Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management commented in an email to investors on Thursday, “Let’s have a look at Chinese stockpiles at the moment; we are looking at about 450 million tonnes. What is Europe’s total steel demand, about 150 million tonnes? That is not great news for the ESA.”
Poulsen was quick to add, “This may just be a lot of hot air. I highly doubt that the euro zone officials will allow China to be seen as a bona fide market economy. I’m not the only one who believes China have failed to meet the criteria and have little hope of doing so by the end of 2016.”
Australians want more trade with China, not US, data shows
A far reaching new opinion poll has shown that most Australians would prefer long term trading ties with China over the US. The survey, conducted by the University of Sydney, covered several Asia-Pacific nations and found that Australians were the least enthusiastic towards a large US presence with regard to trade in the region.
Significantly more Australians (75%) see China and the U.S. as “trading competitors” than even the Chinese that were surveyed (45%), though the data also revealed a surprising absence of political knowledge in Australian citizens, 44% of whom didn’t know that the US and Japan are trading allies in the form of the Trans-Pacific Partnership. This ignorance was identical in the Chinese poll.
Regionally the survey of 3,850 citizens in each of the five nations reflected that China would be the most dominant trading nation in Asia by 2027, with 70% of Australians saying that situation was already apparent. In comparison only 57% of Chinese thought their own nation was on top of the pile.
A couple of nations were more sceptical of that prospect, especially the Japanese, 77% of whom said China are behind the US in the number two spot.
Japanese also saw China’s role in the region as negative, with 60% espousing that view. Only 8% of Australians felt the same way, and many thought the US was more negative.
As far as a positive US role in Asia, only Japan and South Korea backed the number one world economy.
Australians were divided most on whether the nation should solidify trading ties with the US, with a 5% negative-positive score, while the rest of the countries had overwhelming majorities for working on US relations with South Korea (44%), China (49%), Indonesia (39%) and Japan (30%) leading the way.
Given the historical tensions between Japan and China, it was not surprising that Japanese surveyed were divided on whether to bolster trading ties with China with only a 7% majority in favour, compared to 54% in South Korea, 45% in Indonesia and 32% in Australia.
Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management attempted to summarize the data.
“Australians for the most part still think that the US is a declining trading power in the Asia-Pacific region,” Poulsen said in a phone interview. “Most Aussies seem pretty benevolent towards the China v US rivalry.”
He also remarked that the survey would “solidify many Americans fears that Australian support for a trading partnership with the US was waning,” and that “Australians are by no means expected to take political sides with Japan over China.”
Significantly more Australians (75%) see China and the U.S. as “trading competitors” than even the Chinese that were surveyed (45%), though the data also revealed a surprising absence of political knowledge in Australian citizens, 44% of whom didn’t know that the US and Japan are trading allies in the form of the Trans-Pacific Partnership. This ignorance was identical in the Chinese poll.
Regionally the survey of 3,850 citizens in each of the five nations reflected that China would be the most dominant trading nation in Asia by 2027, with 70% of Australians saying that situation was already apparent. In comparison only 57% of Chinese thought their own nation was on top of the pile.
A couple of nations were more sceptical of that prospect, especially the Japanese, 77% of whom said China are behind the US in the number two spot.
Japanese also saw China’s role in the region as negative, with 60% espousing that view. Only 8% of Australians felt the same way, and many thought the US was more negative.
As far as a positive US role in Asia, only Japan and South Korea backed the number one world economy.
Australians were divided most on whether the nation should solidify trading ties with the US, with a 5% negative-positive score, while the rest of the countries had overwhelming majorities for working on US relations with South Korea (44%), China (49%), Indonesia (39%) and Japan (30%) leading the way.
Given the historical tensions between Japan and China, it was not surprising that Japanese surveyed were divided on whether to bolster trading ties with China with only a 7% majority in favour, compared to 54% in South Korea, 45% in Indonesia and 32% in Australia.
Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management attempted to summarize the data.
“Australians for the most part still think that the US is a declining trading power in the Asia-Pacific region,” Poulsen said in a phone interview. “Most Aussies seem pretty benevolent towards the China v US rivalry.”
He also remarked that the survey would “solidify many Americans fears that Australian support for a trading partnership with the US was waning,” and that “Australians are by no means expected to take political sides with Japan over China.”
Sunday, June 26, 2016
High Street Chain to Sell after ‘running out of cash’
Officials overseeing the wind up of department store chain BHS may be interested in breaking up the business and selling it off part by part.
It was reported by the BBC they had received “several offers” from potential buyers including Edinburgh Woollen Mill, Sports Direct and Ikea. Interested parties were to put in solid offers before 4pm last Tuesday.
The demise of the retail chain will be the biggest high street collapse since the failure of Woolworths eight years ago, providing the government with another problem as it attempts to save thousands of jobs in the steel sector.
There is a long way to go however, with the company cascading into debts of over a billion pounds according to the administrator Duff & Phelps. They say the chain will continue to do business as the negotiations continue.
Another entity that has shown interest in purchasing parts of the embattled company is Yousuf Bhailok, a British businessman and the former general secretary of the Muslim Council Britain. The Preston based multimillionaire is understood to want to save at least three quarters of BHS’s 160 stores as part of a plan to buy the retail chain as a going concern. Although the company are in administration there is still some chance following Bhailok’s offer that the 10,000 staff can be kept on.
“BHS have basically been running out of cash in the last 2 years and this is the end result” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management on his blog Tuesday. “The first slip up that brought the situation about was down to Retail Acquisitions who famously bought the concern from Sir Philip Green for one pound, and proceeded to botch a hundred million pound funding strategy needed for development,” he added.
Failure to revaluate business rates is thought to have lost BHS over 14 million pounds in 2015.
Another factor facilitating the retail chains demise was a gigantic pension deficit. Sir Philip Green previously held talks with the Pension Regulator regarding a cash boost into the BHS pension plan. He is thought to have offered £80 in total equity in order to secure a loan against BHS’s assets but the deal fell through.
It was reported by the BBC they had received “several offers” from potential buyers including Edinburgh Woollen Mill, Sports Direct and Ikea. Interested parties were to put in solid offers before 4pm last Tuesday.
The demise of the retail chain will be the biggest high street collapse since the failure of Woolworths eight years ago, providing the government with another problem as it attempts to save thousands of jobs in the steel sector.
There is a long way to go however, with the company cascading into debts of over a billion pounds according to the administrator Duff & Phelps. They say the chain will continue to do business as the negotiations continue.
Another entity that has shown interest in purchasing parts of the embattled company is Yousuf Bhailok, a British businessman and the former general secretary of the Muslim Council Britain. The Preston based multimillionaire is understood to want to save at least three quarters of BHS’s 160 stores as part of a plan to buy the retail chain as a going concern. Although the company are in administration there is still some chance following Bhailok’s offer that the 10,000 staff can be kept on.
“BHS have basically been running out of cash in the last 2 years and this is the end result” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management on his blog Tuesday. “The first slip up that brought the situation about was down to Retail Acquisitions who famously bought the concern from Sir Philip Green for one pound, and proceeded to botch a hundred million pound funding strategy needed for development,” he added.
Failure to revaluate business rates is thought to have lost BHS over 14 million pounds in 2015.
Another factor facilitating the retail chains demise was a gigantic pension deficit. Sir Philip Green previously held talks with the Pension Regulator regarding a cash boost into the BHS pension plan. He is thought to have offered £80 in total equity in order to secure a loan against BHS’s assets but the deal fell through.
Tuesday, June 21, 2016
Crypto-Currency Could Change Cash Forever
It is "most probable" that the financial industry will embrace the innovations surrounding Bitcoin,” Head of Corporate trading at Nikko-Desjardins Asset Management, Stuart Poulson said.
"I'm pretty sure that the block-chain will change a lot of money related practice and trade," said Poulson on Tuesday from the Consensus 2016 event in Manhattan.
With respect to the crypto-currency's future, Poulsen said the government "will in any case implement laws," but that the sureness of Bitcoin's downfall is "not the definite position to take."
Block-chain innovation has been the subject of media and speculator interest as a potential fix for everything from hospital records to global ID. However many at the block-chain centred gathering told CNBC that there was an aura of over-confidence.
"We don't think the block-chain can do the greater part of what has been promised," Ripple Chief Chris Larsen said. "Yet, we're entering the web of quality — and that is especially under hyped.”
"While some speculators spent the block-chain centred meeting pitching how a safe, unchangeable worldwide ledger (a block-chain) could supplant the current worldwide money related framework, others believed it could play a more ironic role.
Some observers are of the opinion that the innovation behind Bitcoin could change cash forever, by helping fiat money be more productive. Rather than a trust-less system of financially incentivized database maintainers (called "miners" in Bitcoin circles), a variation of block-chain innovation would be utilized by the national banks that crypto-rebels advocate against.
Bitcoin determines its worth by some extent due to shortage. It's hard-wired into the code that there will only ever be a certain number of the crypto currency. National banks will need to have the capacity to make additional computerized resources as required.
Larsen added that central banks' digi-currencies, which he portrayed as a reasonable solution, are "just going to improve the government’s capacity to see what you're doing."
"I'm pretty sure that the block-chain will change a lot of money related practice and trade," said Poulson on Tuesday from the Consensus 2016 event in Manhattan.
With respect to the crypto-currency's future, Poulsen said the government "will in any case implement laws," but that the sureness of Bitcoin's downfall is "not the definite position to take."
Block-chain innovation has been the subject of media and speculator interest as a potential fix for everything from hospital records to global ID. However many at the block-chain centred gathering told CNBC that there was an aura of over-confidence.
"We don't think the block-chain can do the greater part of what has been promised," Ripple Chief Chris Larsen said. "Yet, we're entering the web of quality — and that is especially under hyped.”
"While some speculators spent the block-chain centred meeting pitching how a safe, unchangeable worldwide ledger (a block-chain) could supplant the current worldwide money related framework, others believed it could play a more ironic role.
Some observers are of the opinion that the innovation behind Bitcoin could change cash forever, by helping fiat money be more productive. Rather than a trust-less system of financially incentivized database maintainers (called "miners" in Bitcoin circles), a variation of block-chain innovation would be utilized by the national banks that crypto-rebels advocate against.
Bitcoin determines its worth by some extent due to shortage. It's hard-wired into the code that there will only ever be a certain number of the crypto currency. National banks will need to have the capacity to make additional computerized resources as required.
Larsen added that central banks' digi-currencies, which he portrayed as a reasonable solution, are "just going to improve the government’s capacity to see what you're doing."
Agrochemical-Pharma tie-up looms large
With a
new bid on the table, and amid a recent move by many in the industry to
consolidate, Germany’s Bayer are attempting a takeover of the American
agrochemical titan Monsanto which could result in the biggest supplier of seeds
and chemicals in the world.
Following
the mergers recently involving competitors including DuPont, Dow Chemical and
Swiss company Syngenta, the German chemical and drug producer is looking to
make significant strides into the GM crop arena, Monsanto being noted
specialists in the field.
The
transaction is far from being closed however, with regulators sure to have
their say first.
Monsanto
revealed in a statement released to the press, “Neither the terms of the deal
nor the assurances of any merger happening has been fully decided as yet.” The statement
added that the board of directors will also need to green light the deal for
talks to progress.
Stuart Poulson, Head of Corporate trading
at Nikko-Desjardins Asset Management commented on the news in his blog, “There
is a strong possibility the deal will go though. Both companies are playing
catch up with other big competitors in the field consolidating their holdings
recently. The only stumbling block could be the regulators.”
After
rumours recently that Monsanto had been courted by both Bayer and another German
chemicals giant BASF, Bayer confirmed they have been involved with talks saying
it had “sat down with members of the Monsanto board informally to discuss a
proposed combination of the companies.”
Following
the announcement, Bayer share prices took a 6 percent hit, which may spark a
backlash from their shareholders.
Bayer is
currently the second biggest supplier of crop chemicals after Syngenta, who
were recently acquired by ChemChina, pending regulatory approval. Monsanto also
attempted to buyout the Swiss firm last year but were rejected.
A ground
breaking merger took place in December 2015 when Dow Chemical, an American
chemical multinational head quartered in Michigan, and DuPont came together
forming a new $140 billion entity.
Tie-up concerns
In an
already embattled agricultural industry where major commodities are
underperforming, farmers have been losing income and big suppliers like Bayer
have also felt the squeeze on their annual profits.
As a
result, multinational agrichemical firms have higher amounts of seeds and
chemicals in stock meaning large scale price cuts and an increased need for
efficiency.
It’s
thought regulators will be looking at the proposed merger very carefully as
concerns have been raised the tie-up could have a dramatic effect on competition
in America. Farmers are also worried that such deals could lead to price
increases, fewer choices and too much power for any new entity that holds all
the cards.
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