In a deal that could value the ride hailing start up DidiChuxing at around $30 billion, Taiwanese electronics giant Foxconn have announced they will invest over $100 million in the Chinese Uber look-a-like.
The investment will be carried out using one of Foxconn’s subsidiaries Foxteq Holdings Inc.
Didi now have a host of influential tech companies under their list of investors which includes Uber themselves. Other notable names include Apple Inc and Alibaba Group Ltd.
Hai Precision Industry Co Ltd, the trading name for Foxconn, announced the deal in a stock exchange filing, and they said the company would own a third of a percent of Didi, one of China’s highest valued tech ventures. The cash injection would give Didi a market capitalization of over $30 billion.
The two firms said they are “looking at a range of possibilities although plans are not finalized as yet.”
Uber have had a torrid time in China, going through three years of court battles which resulted in them being bought out by Didi. In return, Uber acquired a 20% stake in the Chinese firm.
“Uber were fighting a losing battle and I think they chose the smartest way out,” said Global Co-Head of the Investment Management Division of Shizuoka Capital Wealth Management, Michael Lane, commenting on the news.
“With their $8 billion valuation, Uber would have been hit very hard if they got tied up in further litigation. Now they are part of a $30 billion company and can leave the handling of the Chinese government regulations to the local firm.”
Foxconn have also been making moves in the electric auto industry, with a significant investment in Future Mobility, a firm that is looking to rival U.S. company Tesla Motors and recently took on several executives jumping ship from BMW’s electric car unit. Environmentally friendly car sales are booming right now in China with very favourable initiatives for both manufacturers and buyers.
Apple Inc has close ties with Foxconn, being the U.S. firm’s main assembler of its iPhones. Apple came in with a $1 billion investment in Didi and they are interested in getting into the auto-industry next year, with Silicon Valley abuzz with rumours of an iCar.
Monday, September 12, 2016
Friday, September 9, 2016
Google look to firm up cloud operations with Apigee deal
Google will be looking to strengthen their cloud business as it goes into final talks with software development firm Apigee Corp over a possible merger worth around $600 million.
Apigee assists companies communicate with their customers using innovative technology focused primarily on mobile devices and web based applications.
“It’s a brave new world when it comes to how businesses interact with their customer base,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview. “Home visits and even phone calls are dated, with API’s taking over more and more these days.”
The announcement regarding the possible deal was made late Thursday afternoon and a short statement included details on the ratios.
Alphabet Inc's Google would give Apigee shareholders $17.42 for each of their shares, representing around a 7 percent premium to the share’s Thursday close, and their stock was trading slightly up on the offer price the next morning.
Apigee have a host of big name clients including Vodafone, AT&T and the World Bank. The company’s IPO was a year ago in May, and shares have jumped half a dollar since then.
Dianne Greene, who is in charge of Google’s cloud unit, has been pushing to make the company a top player in fintech and other corporate computing services, and she was central in a deal only days ago with online cloud storage firm Box Inc which will be used to integrate Google Docs into the cloud.
Apigee assists companies communicate with their customers using innovative technology focused primarily on mobile devices and web based applications.
“It’s a brave new world when it comes to how businesses interact with their customer base,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview. “Home visits and even phone calls are dated, with API’s taking over more and more these days.”
The announcement regarding the possible deal was made late Thursday afternoon and a short statement included details on the ratios.
Alphabet Inc's Google would give Apigee shareholders $17.42 for each of their shares, representing around a 7 percent premium to the share’s Thursday close, and their stock was trading slightly up on the offer price the next morning.
Apigee have a host of big name clients including Vodafone, AT&T and the World Bank. The company’s IPO was a year ago in May, and shares have jumped half a dollar since then.
Dianne Greene, who is in charge of Google’s cloud unit, has been pushing to make the company a top player in fintech and other corporate computing services, and she was central in a deal only days ago with online cloud storage firm Box Inc which will be used to integrate Google Docs into the cloud.
Thursday, September 8, 2016
Bank of England say they will “give fintech space to grow”
The Chief Cashier of the Bank of England (BoE) Victoria Cleland has said publicly that the central bank will not stifle financial technology innovation as the central bank attempts to keep up with new developments in the field.
According to Cleland, the BoE will customize its new upcoming regulations in order to “give fintech space to grow” and that understanding technological innovation was a priority at the bank.
Most of the recent news surrounding fintech has been focused on digital currencies, like bitcoin, and a high security online ledger called blockchain, which can automate transactions and could be hugely beneficial in the financial industry in the future. The BoE has been looking at benefits, and also the risks of using such systems.
The comments from the senior BoE employee are seen by many observers as an attempted reassurance to fintech firms that their businesses are safe in London, which has been a hub of the industry.
“After the Brexit, policymakers are doing all they can to pander to certain industries they feel are important, and fintech is definitely one of those” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in an email to clients.
“Companies have been worried about having their client base limited and being cut off from the euro zone market after the UK leaves the financial bloc.”
Cleland said she understands the concerns and will work with companies to make it clear where the goalposts are. “Obviously with a technology that is moving at such a fast pace it’s very difficult to draw up regulations for it,” she said in a press meeting. “Seeing that this is a global industry, we really need to see some parity from regulators around the world.”
With the alternative financial industry growing by a massive 80 percent last year alone, all eyes have been on the BoE and the Financial Stability Board, which is headed by Mark Carney the BoE Governor, to see what kind of rules are going to be enforced.
According to Cleland, the BoE will customize its new upcoming regulations in order to “give fintech space to grow” and that understanding technological innovation was a priority at the bank.
Most of the recent news surrounding fintech has been focused on digital currencies, like bitcoin, and a high security online ledger called blockchain, which can automate transactions and could be hugely beneficial in the financial industry in the future. The BoE has been looking at benefits, and also the risks of using such systems.
The comments from the senior BoE employee are seen by many observers as an attempted reassurance to fintech firms that their businesses are safe in London, which has been a hub of the industry.
“After the Brexit, policymakers are doing all they can to pander to certain industries they feel are important, and fintech is definitely one of those” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in an email to clients.
“Companies have been worried about having their client base limited and being cut off from the euro zone market after the UK leaves the financial bloc.”
Cleland said she understands the concerns and will work with companies to make it clear where the goalposts are. “Obviously with a technology that is moving at such a fast pace it’s very difficult to draw up regulations for it,” she said in a press meeting. “Seeing that this is a global industry, we really need to see some parity from regulators around the world.”
With the alternative financial industry growing by a massive 80 percent last year alone, all eyes have been on the BoE and the Financial Stability Board, which is headed by Mark Carney the BoE Governor, to see what kind of rules are going to be enforced.
Wednesday, September 7, 2016
All eyes on Fed as traders hold back
As traders and investors gauge the outlook regarding future interest rate hikes, U.S. stocks flattened out on Tuesday although the Nasdaq somehow managed another record high close.
Grocers results were poor, with sprout farmers the hardest hit. There was a 14 percent drop for sprout shares to $19.69, Kroger shares were down 5 percent to $31.33 and Whole Foods shares dropped 6 percent to $29.09.
Investors have been focused on the Federal Reserve, trying to ascertain how close the central bank is to raising interest rates. Most expect the Fed to hold back on any major changes due to the disappointing jobs report last week together with other discouraging data.
The Fed has been coy on any firm change date, recently commenting on a decent economic expansion in the last quarter.
“After the past week’s moderate jobs report, most observers are getting the distinct impression rates will remain low for the foreseeable future,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management. “We are probably going to see the same story at the ECB [European Central Bank] where policymakers will be tempted to keep rates at rock bottom.”
The largest company in the world by market capitalization, Apple Inc, saw its shares jump 0.8 percent to $108.35 after they unveiled their brand new iPhone 7.
After a health scandal, Chipotle Mexican Grill shares began to see some improvement rising 6 percent to $438.44. The chain was given fresh momentum with a 10 percent stake buy in from Pershing Square Capital owned by William Ackman, who said he would restructure the company at the executive level.
Leading the way on the trading floor yesterday were Delta Air shares, after the company announced better-than-expected sales for the last quarter. They were also helped by rival Southwest revealing they would cut their growth in chartered flights to South America next year.
However, share trading was the lowest seen for 30 days yesterday at around $5.9 billion compared to the $6.7 billion daily average. The Dow Jones average slumped 12 points to 18,526.15 and the S&P 500 index lost 0.32 points to 2,186.16. The Nasdaq result of an 8 point gain was a record close yet again for the benchmark gauge, a surprise for such a slow day.
Grocers results were poor, with sprout farmers the hardest hit. There was a 14 percent drop for sprout shares to $19.69, Kroger shares were down 5 percent to $31.33 and Whole Foods shares dropped 6 percent to $29.09.
Investors have been focused on the Federal Reserve, trying to ascertain how close the central bank is to raising interest rates. Most expect the Fed to hold back on any major changes due to the disappointing jobs report last week together with other discouraging data.
The Fed has been coy on any firm change date, recently commenting on a decent economic expansion in the last quarter.
“After the past week’s moderate jobs report, most observers are getting the distinct impression rates will remain low for the foreseeable future,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management. “We are probably going to see the same story at the ECB [European Central Bank] where policymakers will be tempted to keep rates at rock bottom.”
The largest company in the world by market capitalization, Apple Inc, saw its shares jump 0.8 percent to $108.35 after they unveiled their brand new iPhone 7.
After a health scandal, Chipotle Mexican Grill shares began to see some improvement rising 6 percent to $438.44. The chain was given fresh momentum with a 10 percent stake buy in from Pershing Square Capital owned by William Ackman, who said he would restructure the company at the executive level.
Leading the way on the trading floor yesterday were Delta Air shares, after the company announced better-than-expected sales for the last quarter. They were also helped by rival Southwest revealing they would cut their growth in chartered flights to South America next year.
However, share trading was the lowest seen for 30 days yesterday at around $5.9 billion compared to the $6.7 billion daily average. The Dow Jones average slumped 12 points to 18,526.15 and the S&P 500 index lost 0.32 points to 2,186.16. The Nasdaq result of an 8 point gain was a record close yet again for the benchmark gauge, a surprise for such a slow day.
Wednesday, August 24, 2016
Italy looks to expand EU deficit allowances
Italy’s Industry Minister Carlo Calenda said on Friday that if the country can introduce a new corporate spending strategy they may be able to convince the European Commission (EC) to increase its budget deficit.
The comments came in an interview with la Repubblica daily, where the minister called for a rethink on flexibility rules that reward economic reforms with increased deficit margins only for 12 months.
Italy has previously expanded its 2016 deficit goal by over $10 billion using the EC’s clauses. But due to a major slowdown in this year’s economic growth, mainly because of terrible Q2 figures, the government’s deficit targets are seen to be a high level risk.
Although the nation’s treasury department have said it’s too early to forecast budget effects for next year, it is rumoured that Rome will be petitioning the EC for added budget expansion. This was confirmed by Minister Calenda, who said the country would “almost certainly seek extra flexibility in our budget margins”. The treasury declined to comment on the minister’s remarks.
“What the EC and the euro zone markets need to see is some kind of credible plan from Rome,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview. “It’s clear the fiscal authorities of Italy want to develop the scope of the EC’s clauses both in size and duration.”
It may not be easy to get the grants however, as the EC has said publicly in a meeting last month that Italy has already received “more flexibility than any other country in the region”.
The European markets have traditionally kept Italian public finances at arm’s length due to the country’s terminally stagnant economic expansion and enormous level of public debt that are nearly double the domestic output.
Calenda is insistent that demand stimuli are a lost cause in the current climate and tired tax break initiatives simply aren’t working. The government, he says, needs to focus on the supply side of the equation and wants the budget expansion to increase competition and corporate investment.
The comments came in an interview with la Repubblica daily, where the minister called for a rethink on flexibility rules that reward economic reforms with increased deficit margins only for 12 months.
Italy has previously expanded its 2016 deficit goal by over $10 billion using the EC’s clauses. But due to a major slowdown in this year’s economic growth, mainly because of terrible Q2 figures, the government’s deficit targets are seen to be a high level risk.
Although the nation’s treasury department have said it’s too early to forecast budget effects for next year, it is rumoured that Rome will be petitioning the EC for added budget expansion. This was confirmed by Minister Calenda, who said the country would “almost certainly seek extra flexibility in our budget margins”. The treasury declined to comment on the minister’s remarks.
“What the EC and the euro zone markets need to see is some kind of credible plan from Rome,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview. “It’s clear the fiscal authorities of Italy want to develop the scope of the EC’s clauses both in size and duration.”
It may not be easy to get the grants however, as the EC has said publicly in a meeting last month that Italy has already received “more flexibility than any other country in the region”.
The European markets have traditionally kept Italian public finances at arm’s length due to the country’s terminally stagnant economic expansion and enormous level of public debt that are nearly double the domestic output.
Calenda is insistent that demand stimuli are a lost cause in the current climate and tired tax break initiatives simply aren’t working. The government, he says, needs to focus on the supply side of the equation and wants the budget expansion to increase competition and corporate investment.
Monday, August 22, 2016
Local authorities may fund Chinese steel bailout
Online economic website Caixin has reported that embattled state owned Bohai Steel Group may be the beneficiary of a local government fund initiative which would allow the company to restructure its debt obligations, which total nearly $30 billion.
The company, which came about through the merger of four smaller firms in 2010, owes over a hundred creditors debt and have only just enough assets to cover it.
The plan is to set up a local asset management company in Tianjin, which can handle the debts. The new firm will also assist other indebted companies in the region.
“The debt restructuring is probably the biggest we’ve seen in China since the 2008 economic meltdown. It’s a big effort by the authorities to clear the heavy governmental slate,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management who is advising the Tianjin government on the plan.
Most of the creditors involved are Beijing-based banks and trust firms, the magazine reported.
China has been attempting to keep in check an increasing state sector debt level for many years.
The main strategy has been to encourage creditors to accept debt-for-equity swap deals through newly formed specialist debt management firms such as China Reform Holdings Co., which is spearheading the debt re-shuffling of many state-owned companies.
The government have accelerated the debt repayment plans for the steel sector in particular as the flagging real estate market causes a decline in the demand for basic construction materials.
The company, which came about through the merger of four smaller firms in 2010, owes over a hundred creditors debt and have only just enough assets to cover it.
The plan is to set up a local asset management company in Tianjin, which can handle the debts. The new firm will also assist other indebted companies in the region.
“The debt restructuring is probably the biggest we’ve seen in China since the 2008 economic meltdown. It’s a big effort by the authorities to clear the heavy governmental slate,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management who is advising the Tianjin government on the plan.
Most of the creditors involved are Beijing-based banks and trust firms, the magazine reported.
China has been attempting to keep in check an increasing state sector debt level for many years.
The main strategy has been to encourage creditors to accept debt-for-equity swap deals through newly formed specialist debt management firms such as China Reform Holdings Co., which is spearheading the debt re-shuffling of many state-owned companies.
The government have accelerated the debt repayment plans for the steel sector in particular as the flagging real estate market causes a decline in the demand for basic construction materials.
Friday, August 19, 2016
Governor of BOJ says rates can go even lower
Although a controversial negative rate policy has so far failed to encourage any real economic expansion or inflation, Bank of Japan (BOJ) Governor, Haruhiko Kuroda, has announced that the central bank could be willing to cut rates even further.
Kuroda was quoted in an interview with Sankei newspaper saying that rates have not reached their basement levels yet.
“If we look at the action by the U.S. Federal Reserve and the ECB [European Central Bank] they have gone much lower than we have with their rates so we cannot rule out expansion of the policy,” he said.
There were more than a few raised eyebrows at the start of the year when the BOJ set a minus 0.1 rate for certain deposits in their vaults in the hope that the move would encourage banks and corporations to increase expenditure and spur inflation, but that has not materialized.
The bank will carry out a full assessment of its annual fiscal policies next month, and only then will they make a decision on whether to adjust their huge asset purchasing plan, which has seen them buy up over 90 trillion yens worth of bonds on a yearly basis.
“Despite all this easing of the monetary base we haven’t seen any solid results,” said Michael Lane - Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in an email to investors.
“It’s been going on now for about 3 years and Prime Minister Abe is starting to get called out on his failed policies. The aim is to get up to 2 percent on inflation but the level hasn’t budged, with the economy as stagnant as ever,” Lane added.
The financial world will know more when the BOJ release their annual report on the same day as their meeting next month.
Kuroda was quoted in an interview with Sankei newspaper saying that rates have not reached their basement levels yet.
“If we look at the action by the U.S. Federal Reserve and the ECB [European Central Bank] they have gone much lower than we have with their rates so we cannot rule out expansion of the policy,” he said.
There were more than a few raised eyebrows at the start of the year when the BOJ set a minus 0.1 rate for certain deposits in their vaults in the hope that the move would encourage banks and corporations to increase expenditure and spur inflation, but that has not materialized.
The bank will carry out a full assessment of its annual fiscal policies next month, and only then will they make a decision on whether to adjust their huge asset purchasing plan, which has seen them buy up over 90 trillion yens worth of bonds on a yearly basis.
“Despite all this easing of the monetary base we haven’t seen any solid results,” said Michael Lane - Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in an email to investors.
“It’s been going on now for about 3 years and Prime Minister Abe is starting to get called out on his failed policies. The aim is to get up to 2 percent on inflation but the level hasn’t budged, with the economy as stagnant as ever,” Lane added.
The financial world will know more when the BOJ release their annual report on the same day as their meeting next month.
Wednesday, August 17, 2016
EXOR favours foreign HQ for easier access
In order to give Italian investment firm EXOR better access to European acquisitions and fund raising, owners the Agnelli family have decided to move their base of operations to Holland.
The move comes hot on the heels of a similar base transfer by a firm that EXOR controls with a 30 percent stake, Fiat Chrysler Automobiles, who recently registered as a Dutch company and planted a new HQ in Amsterdam.
“Although moves like this might not please everyone, companies need to do anything they can to improve growth opportunities,” says Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management, who have a small stake in Chrysler U.S.
In 2014 Fiat completed the full acquisition of their subsidiary in the United States, Chrysler, to create the world’s seventh biggest auto producer. At that point they made the decision to move away from home, sparking some unrest within political circles.
After the move, Fiat registered under both the Milan and New York stock exchanges, and chose the UK as its tax domicile.
In a statement released on Thursday evening, EXOR explained the reasoning for their decision to follow Fiat’s example. “Fiat has been much more successful regarding their new investments and M&A activity after their transfer to the Netherlands. We feel EXOR can also greatly benefit from the advantages that can be gained.”
The move comes hot on the heels of a similar base transfer by a firm that EXOR controls with a 30 percent stake, Fiat Chrysler Automobiles, who recently registered as a Dutch company and planted a new HQ in Amsterdam.
“Although moves like this might not please everyone, companies need to do anything they can to improve growth opportunities,” says Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management, who have a small stake in Chrysler U.S.
In 2014 Fiat completed the full acquisition of their subsidiary in the United States, Chrysler, to create the world’s seventh biggest auto producer. At that point they made the decision to move away from home, sparking some unrest within political circles.
After the move, Fiat registered under both the Milan and New York stock exchanges, and chose the UK as its tax domicile.
In a statement released on Thursday evening, EXOR explained the reasoning for their decision to follow Fiat’s example. “Fiat has been much more successful regarding their new investments and M&A activity after their transfer to the Netherlands. We feel EXOR can also greatly benefit from the advantages that can be gained.”
Monday, August 15, 2016
New York now favourite property target amid Brexit
As sentiment turns negative towards London due to the surprising UK vote to leave the European Union, New York has become the number one location for investors to seek out commercial real estate.
Just before the Brexit referendum there was an indication that investors were starting to feel nervy on London, as fluctuating international property transactions pointed to fears the English capital might lose its appeal as a world economic centre if the British public decided to leave the E.U.
According to investment company Jones Lang LaSalle Inc., compared to the first half of 2015, there was nearly a 50 percent drop in cross-border property transactions. Foreign investors simply didn’t want to risk purchasing property that might be devalued due to a political event beyond their control.
Indeed, one of the UK’s largest foreign investors, Norway's sovereign wealth fund, said it needed to wipe 10 percent off its British portfolio due to the Brexit.
“There’s no escaping the fact that London has got the sharp end of the Brexit stick,” Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a note to clients. “The attraction of London has always been as a world economic hub with a wide base of financial service employment opportunities. Obviously there is concern that London’s profile will be eroded.”
Data from Mr. Lane’s firm, Shizuoka, shows New York nearly doubled London’s total for cross-border real estate investments between January and June this year at $10 billion. In the same period last year London raked in $12 billion compared to this year’s $6 billion.
The UK has traditionally been viewed as friendlier than the U.S. towards real estate investors due to beneficial property tax structures, so the trend towards America will weaken one of Britain’s strongest investment areas.
“Many of America’s ‘gateway cities’ like Boston, Chicago, L.A. and of course New York are going to see a surge in capital investment towards property,” says Cushman & Wakefield senior VP Ken McCarthy. “Investors are looking to redeploy their capital away from the UK and, in a broader sense, Europe. It’s not just the shock of the Brexit but negative interest rates are a factor too.”
A World Bank report is expected in the coming months which will present data on the effects of the UK exit from the European Union. It will be released on the same day as a central bankers meeting in the U.S.
Just before the Brexit referendum there was an indication that investors were starting to feel nervy on London, as fluctuating international property transactions pointed to fears the English capital might lose its appeal as a world economic centre if the British public decided to leave the E.U.
According to investment company Jones Lang LaSalle Inc., compared to the first half of 2015, there was nearly a 50 percent drop in cross-border property transactions. Foreign investors simply didn’t want to risk purchasing property that might be devalued due to a political event beyond their control.
Indeed, one of the UK’s largest foreign investors, Norway's sovereign wealth fund, said it needed to wipe 10 percent off its British portfolio due to the Brexit.
“There’s no escaping the fact that London has got the sharp end of the Brexit stick,” Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a note to clients. “The attraction of London has always been as a world economic hub with a wide base of financial service employment opportunities. Obviously there is concern that London’s profile will be eroded.”
Data from Mr. Lane’s firm, Shizuoka, shows New York nearly doubled London’s total for cross-border real estate investments between January and June this year at $10 billion. In the same period last year London raked in $12 billion compared to this year’s $6 billion.
The UK has traditionally been viewed as friendlier than the U.S. towards real estate investors due to beneficial property tax structures, so the trend towards America will weaken one of Britain’s strongest investment areas.
“Many of America’s ‘gateway cities’ like Boston, Chicago, L.A. and of course New York are going to see a surge in capital investment towards property,” says Cushman & Wakefield senior VP Ken McCarthy. “Investors are looking to redeploy their capital away from the UK and, in a broader sense, Europe. It’s not just the shock of the Brexit but negative interest rates are a factor too.”
A World Bank report is expected in the coming months which will present data on the effects of the UK exit from the European Union. It will be released on the same day as a central bankers meeting in the U.S.
Tuesday, August 9, 2016
Japan leads global bond sell off
This summer’s bond rally is finally unravelling.
Japan has led the global sell off and yields are increasing across every continent. Bank of America Corp.’s G-7 Government Index bond average jumped over half a percentage point, which is its biggest climb in over a month.
While the UK was in the grip of its referendum vote on the E.U. this June, the general sentiment in the financial world was that world economic growth would slow enough to convince the Federal Reserve to leave interest rates unchanged.
It may well be the case that those same analysts are now wondering if yields dipped too far. Presidential candidate Donald Trump said that current interest rates are “at a false low”.
Bill Gross, a prominent financial manager and author, said that bets on the ultra-low yields are too risky. The company Gross founded, Pacific Investment Management Co., said the Japanese government bond rally is most likely at an end.
With the G-7 index now falling, many of the gains in early 2016 are now turning into costly losses. This year’s returns are now at a lowly 5 percent.
Bonds in Japan have declined the largest amount since 2013, according to data released by the Japan Bond Trading Co.
10-year yields gained to minus 0.096 percent from the low set in the summer and Gross said the rally “has most definitely fizzled out” due to the Fed reaching the end of the road with its fiscal stimulus plan.
Another telling indicator was the lack of action from the Bank of Japan, who opted to leave their negative interest rates unchanged, and did not expand the bond purchasing plan they already had in place since their last board meeting in July.
“It’s extremely difficult, even for central banks, to get a handle on the situation with bonds,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“Policy-makers simply don’t know what the right response is to the turbulent events of this year. Similarly market participants are not confident with the current state of play. Many have jumped on the gravy train and suddenly there has been a call for the end of the line,” Lane added.
The bond situation may not be settled for a while. With the fallout from Brexit still having a ripple effect and the upcoming presidential election in the U.S., not to mention the continued slide of crude prices, investors would be wise to stay passive in the market for the near future.
Japan has led the global sell off and yields are increasing across every continent. Bank of America Corp.’s G-7 Government Index bond average jumped over half a percentage point, which is its biggest climb in over a month.
While the UK was in the grip of its referendum vote on the E.U. this June, the general sentiment in the financial world was that world economic growth would slow enough to convince the Federal Reserve to leave interest rates unchanged.
It may well be the case that those same analysts are now wondering if yields dipped too far. Presidential candidate Donald Trump said that current interest rates are “at a false low”.
Bill Gross, a prominent financial manager and author, said that bets on the ultra-low yields are too risky. The company Gross founded, Pacific Investment Management Co., said the Japanese government bond rally is most likely at an end.
With the G-7 index now falling, many of the gains in early 2016 are now turning into costly losses. This year’s returns are now at a lowly 5 percent.
Bonds in Japan have declined the largest amount since 2013, according to data released by the Japan Bond Trading Co.
10-year yields gained to minus 0.096 percent from the low set in the summer and Gross said the rally “has most definitely fizzled out” due to the Fed reaching the end of the road with its fiscal stimulus plan.
Another telling indicator was the lack of action from the Bank of Japan, who opted to leave their negative interest rates unchanged, and did not expand the bond purchasing plan they already had in place since their last board meeting in July.
“It’s extremely difficult, even for central banks, to get a handle on the situation with bonds,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“Policy-makers simply don’t know what the right response is to the turbulent events of this year. Similarly market participants are not confident with the current state of play. Many have jumped on the gravy train and suddenly there has been a call for the end of the line,” Lane added.
The bond situation may not be settled for a while. With the fallout from Brexit still having a ripple effect and the upcoming presidential election in the U.S., not to mention the continued slide of crude prices, investors would be wise to stay passive in the market for the near future.
Monday, August 8, 2016
Weaker ruble and potential stimulus raise Russian stocks
As the trend of central banks around the world proposing massive stimulus to their economies continues, Russian stocks leaped to record highs as investors took advantage of a much weaker ruble, purchasing equities cheaper than any of their developing nation competitors.
As the ruble dipped 0.8 percent to 66.49 per dollar in Moscow’s late afternoon session, the Mices Index, dominated by the Russian currency, gained 0.3 percent as part of a six day advance and neared its record peak reached 3 months ago. The ruble has declined the third worst out of 25 basket peers, according to Bloomberg.
Weaker-than-projected U.S. data has encouraged many investors to back bets the Fed will leave interest rates unchanged, resulting in capital inflow to developing markets which promise higher returns. Therefore, cash has flowed in abundance towards Russian equities, and firms on the Micex are trading at 7 times their forecast 1 year earnings, compared to half that for the MSCI index.
“There’s a feeling to bet long on a lot of Russian risk at the moment,” said Michael Lane - Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management who handle $10 billion worth of capital in the region.
“As long as regulators do what the market expects, those bets will yield heavy returns. It’s a very good time to be involved with developing markets, especially the Russian stock market. We are seeing a prolonged correction on crude and the ruble so there’s plenty of opportunity there for those wagering on a big oil recovery,” he said.
Many prominent analysts are recommending an overweight stance on Russian stocks. David Aserkoff, JPMorgan Chase & Co. Head of Asian Investments said Russia’s equities are “significantly undervalued” and offer “a lucrative return ratio and the best long term dividends out of any developing market globally.”
The ruble dip followed in step with the decline in crude, Russia’s biggest export business. In the U.S., drilling firms increased output putting crude stockpiles at a record high. The market reacted with a 1.8 percent drop in Brent shares to $2.79 per barrel.
The ruble’s decline, however, has been at a very slow rate, a testament to the Russian currency’s resilience, and due in part to the Bank of Russia’s decision to freeze interest rates in their meeting last Monday. Trader attraction to ruble-heavy securities is understandable, as they will always gravitate to currencies offering basement rates.
Friday, August 5, 2016
Yen soars higher as currency swings are upside down
Many investors saw a good opportunity to trade in currency divergence this quarter. The divergence is definitely there, it’s just the opposite of what many analysts thought would happen.
Following the announcement in Tokyo of a spending plan that the majority of financial specialists considered weak, the yen soared to a monthly peak on Wednesday. There were also important announcements across the pacific as the Federal Reserve indicated they will tighten up monetary stimulus, and a report released on Q2 growth was more disappointing than forecast, causing the greenback to continue its slide.
The paths for the yen and greenback seem to be upside down, opposite to the predictions of prominent hedge funds and other specialists in the past 30 days. The past week’s events have destroyed trader’s strategies of staying underweight on bullish yen bets and putting money on dollar increases.
“It looks like the major stimulus that everyone was expecting in Japan just didn’t happen,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview.
“Helicopter money seems out of the question too and the Fed were far less hawkish than predicted, so where does that the leave the dollar-yen relationship? Probably, it will go even lower,” Lane added, and he is now forecasting the yen to increase further to 96 versus the greenback by December which would be a three year high.
The yen’s continued jump has thrown hedge fund strategies into disarray. Other experienced financial speculators have also lost out, many of whom dropped their net-bullish wagers on the yen by 50% in the last month. Meanwhile, the same investors were upping their net-bullish bets on the greenback to the most since the beginning of 2016.
The yen’s rise comes after the Japanese finance ministry made public a 5 trillion yen plan for extra spending in 2016, in their attempts to kick start the nations faltering economy whilst also trying to stay within the range of their fiscal health projections.
The funds added to the system are part of Shinzo Abe’s promised “28 trillion yen stimulus package” that he made public in a short statement to financial press last Monday. Many believe the announcement was designed to impress the public rather than help the economy.
The Bank of Japan last week expanded their exchange-traded funds program but decided to leave negative interest rates the same.
Following the announcement in Tokyo of a spending plan that the majority of financial specialists considered weak, the yen soared to a monthly peak on Wednesday. There were also important announcements across the pacific as the Federal Reserve indicated they will tighten up monetary stimulus, and a report released on Q2 growth was more disappointing than forecast, causing the greenback to continue its slide.
The paths for the yen and greenback seem to be upside down, opposite to the predictions of prominent hedge funds and other specialists in the past 30 days. The past week’s events have destroyed trader’s strategies of staying underweight on bullish yen bets and putting money on dollar increases.
“It looks like the major stimulus that everyone was expecting in Japan just didn’t happen,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview.
“Helicopter money seems out of the question too and the Fed were far less hawkish than predicted, so where does that the leave the dollar-yen relationship? Probably, it will go even lower,” Lane added, and he is now forecasting the yen to increase further to 96 versus the greenback by December which would be a three year high.
The yen’s continued jump has thrown hedge fund strategies into disarray. Other experienced financial speculators have also lost out, many of whom dropped their net-bullish wagers on the yen by 50% in the last month. Meanwhile, the same investors were upping their net-bullish bets on the greenback to the most since the beginning of 2016.
The yen’s rise comes after the Japanese finance ministry made public a 5 trillion yen plan for extra spending in 2016, in their attempts to kick start the nations faltering economy whilst also trying to stay within the range of their fiscal health projections.
The funds added to the system are part of Shinzo Abe’s promised “28 trillion yen stimulus package” that he made public in a short statement to financial press last Monday. Many believe the announcement was designed to impress the public rather than help the economy.
The Bank of Japan last week expanded their exchange-traded funds program but decided to leave negative interest rates the same.
Thursday, August 4, 2016
Bitcoin shares plunge amid exchange theft
In a security breach reminiscent of the Mt. Gox 2014 case, hackers have stolen nearly $70 million worth of bitcoin from Hong Kong-based exchange Bitifinex, sending shares for the digital currency plunging.
Bitifinex is one of the largest exchanges for bitcoin in the world and it halted trading after the theft was discovered. Shares dipped 6 percent versus the greenback as of 3pm on Wednesday in the Tokyo afternoon session, with its two day slump at 14 percent.
Bitifinex said in a brief statement, which acknowledged that bitcoins were stolen from its users, that they were “thoroughly investigating the breach and will release more details as and when they become clear.”
“In the coming week we will look carefully at the situation and attempt to address the issue of user losses,” said the exchange on their blog. “We beg for patience in the bitcoin community as we investigate the breach.”
Bitfinex confirmed that hackers stole nearly 120,000 bitcoin, equivalent to around $70 million at the current exchange rate. “Although we stopped trading on all our digital currencies, the only one to suffer losses was bitcoin,” they added.
“It’s a huge breach,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview yesterday.
“We’ve seen in the past with similar events that bitcoin is fairly resilient however. This can be devastating in the short term and we all remember Mt. Gox filing for bankruptcy after a similar theft caused a 25 percent drop in bitcoin prices. But fairly quickly it bounced back,” Lane added.
The result of the current incident has been almost $2 billion being wiped from the currency’s market capitalization, according to data from CoinDesk, a news site specializing in bitcoin and digital currencies.
The latest theft comes only a year after Bitfinex announced it was hiring Palo Alto-based BitGo to handle its upgraded security. BitGo has an intricate multi-layer security protocol used to safely store deposits online.
After the new security partnership was made public, Bitifinex said, “It’s very difficult for attackers to get through as two separate organizations need to be compromised in order to gain access.”
Other exchanges, for example OKCoin, choose to store most of its funds offline. Only time will tell if Bitifinex decide to go down that route in the future. Judging by the magnitude of the latest attack, it may be something they are likely to consider.
Bitifinex is one of the largest exchanges for bitcoin in the world and it halted trading after the theft was discovered. Shares dipped 6 percent versus the greenback as of 3pm on Wednesday in the Tokyo afternoon session, with its two day slump at 14 percent.
Bitifinex said in a brief statement, which acknowledged that bitcoins were stolen from its users, that they were “thoroughly investigating the breach and will release more details as and when they become clear.”
“In the coming week we will look carefully at the situation and attempt to address the issue of user losses,” said the exchange on their blog. “We beg for patience in the bitcoin community as we investigate the breach.”
Bitfinex confirmed that hackers stole nearly 120,000 bitcoin, equivalent to around $70 million at the current exchange rate. “Although we stopped trading on all our digital currencies, the only one to suffer losses was bitcoin,” they added.
“It’s a huge breach,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview yesterday.
“We’ve seen in the past with similar events that bitcoin is fairly resilient however. This can be devastating in the short term and we all remember Mt. Gox filing for bankruptcy after a similar theft caused a 25 percent drop in bitcoin prices. But fairly quickly it bounced back,” Lane added.
The result of the current incident has been almost $2 billion being wiped from the currency’s market capitalization, according to data from CoinDesk, a news site specializing in bitcoin and digital currencies.
The latest theft comes only a year after Bitfinex announced it was hiring Palo Alto-based BitGo to handle its upgraded security. BitGo has an intricate multi-layer security protocol used to safely store deposits online.
After the new security partnership was made public, Bitifinex said, “It’s very difficult for attackers to get through as two separate organizations need to be compromised in order to gain access.”
Other exchanges, for example OKCoin, choose to store most of its funds offline. Only time will tell if Bitifinex decide to go down that route in the future. Judging by the magnitude of the latest attack, it may be something they are likely to consider.
Wednesday, August 3, 2016
S&P 500 rallies past Wall St. targets
Traditionally, even stocks that have soared to record new heights can be forecast to go even higher by the professionals on Wall Street. That trend might not fit reality now however.
The S&P 500 was forced down to 2,147.61 on Tuesday, representing over a 1 percent slump in response to U.S. shares dipping to a new monthly low.
Fifteen national brokerages were surveyed on their forecasts regarding a year-end target for the S&P 500, with the average being 2,146 at the start of this month. With yesterday’s 0.5 percent drop, that’s 10 points below the closing mark on Tuesday. It’s the first time in two years that the index has finished above analyst forecasts.
“If you view the market as a fundamentalist, then the reaction we’ve seen in the last couple of days actually makes sense,” says Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“There is no factor that we can see driving the market in an upward direction even though sentiment has swung to be positive in general. There is some divergence among prominent analysts in the financial sector with firms like Goldman Sachs staying relatively bearish on equities and sitting on their cash.”
Market analysts on Wall Street are usually a dependable source of enthusiasm and their annual predictions never fall below market prices for prolonged periods. The members of the survey set the index over two years ago at 2,141 and it has fluctuated around that mark steadily.
However, that solid bullish sentiment has declined this year with the bump in equities, and some analysts have reduced their projections which resulted in a fall of the surveyed average.
A champion of the bearish stance most recently has been Goldman Sachs Group Inc. who set a low target for both the S&P 500 and Europe’s Stoxx 600 gauge, saying they would both dip about 15 percent in the next quarter.
In a report by the firm’s equity strategists they said, “We are staying pretty neutral as we look towards next quarter and remain underweight on stocks and overweight on cash. As we see it, due to equities staying on the expensive side and growth in earnings levelling out, equities could well be at their ceiling for their recent rally.
David Kostin, the company’s U.S. equity chief strategist said the main stock indices may fall sharply as we get close to the holiday season.
The S&P 500 was forced down to 2,147.61 on Tuesday, representing over a 1 percent slump in response to U.S. shares dipping to a new monthly low.
Fifteen national brokerages were surveyed on their forecasts regarding a year-end target for the S&P 500, with the average being 2,146 at the start of this month. With yesterday’s 0.5 percent drop, that’s 10 points below the closing mark on Tuesday. It’s the first time in two years that the index has finished above analyst forecasts.
“If you view the market as a fundamentalist, then the reaction we’ve seen in the last couple of days actually makes sense,” says Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“There is no factor that we can see driving the market in an upward direction even though sentiment has swung to be positive in general. There is some divergence among prominent analysts in the financial sector with firms like Goldman Sachs staying relatively bearish on equities and sitting on their cash.”
Market analysts on Wall Street are usually a dependable source of enthusiasm and their annual predictions never fall below market prices for prolonged periods. The members of the survey set the index over two years ago at 2,141 and it has fluctuated around that mark steadily.
However, that solid bullish sentiment has declined this year with the bump in equities, and some analysts have reduced their projections which resulted in a fall of the surveyed average.
A champion of the bearish stance most recently has been Goldman Sachs Group Inc. who set a low target for both the S&P 500 and Europe’s Stoxx 600 gauge, saying they would both dip about 15 percent in the next quarter.
In a report by the firm’s equity strategists they said, “We are staying pretty neutral as we look towards next quarter and remain underweight on stocks and overweight on cash. As we see it, due to equities staying on the expensive side and growth in earnings levelling out, equities could well be at their ceiling for their recent rally.
David Kostin, the company’s U.S. equity chief strategist said the main stock indices may fall sharply as we get close to the holiday season.
Saturday, July 30, 2016
Euro zone stocks battered by weak crude and bank industries
Commerzbank was the biggest faller in a slew of disheartening banking results in the euro zone this week, while weak crude prices also buffeted the financial bloc.
The German lender reported a steep decline in its Q2 capital and the STOXX 600 index dropped nearly 0.5 percent to 339.6 in this morning’s early session. Overall, the index has declined 8 percent this year even though it reached a 4 week high in the last session.
After the announcement of Commerzbank figures went public, shares dropped 5 percent. Reasoning for the decline was put down to Italian sovereign debt exposure and pension liabilities.
Experts in the field say that while the company still has an exceptional purchase rating, and the current valuation for its stock is on the low side.
“Profitability remains a slight issue,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“Overall though, Commerzbank has done extremely well to shuffle around its business to adapt to the challenges of recent years and we will see the bank return to its previous high levels before too long,” he added.
Friday saw the release of key European bank stress tests and investors were understandably cautious, reflected by a 2 percent drop in the bank index making the banking sector the worst performing industry not just of the quarter but of the whole year.
Super-low interest rates have not helped the situation in Europe and some of the top banks have seen their capital stretched to critically low levels. Lenders such as Deutsch Bank and UniCredit are down 6 percent.
Meanwhile, in the oil sector, BP failed to keep up with second-quarter targets and dropped nearly 3 percent due to falling oil prices affecting their operating margins. The British oil major announced they would reorganize its investment budget for the coming year in response to the decline.
Another Q2 faller was Mediaset, an Italian broadcaster, who were in line for a merger with a French media company who later pulled out of the deal. Their stock dipped 13 percent.
According to data from Goldman Sachs, there have been pleasant surprises included in the start of the earnings season, with basic resources and industrial goods doing well. The worst performers were real estate, banking and household goods, the report said.
By the end of next week over 50 percent of the companies on the STOXX 600 will have reported their earnings.
The German lender reported a steep decline in its Q2 capital and the STOXX 600 index dropped nearly 0.5 percent to 339.6 in this morning’s early session. Overall, the index has declined 8 percent this year even though it reached a 4 week high in the last session.
After the announcement of Commerzbank figures went public, shares dropped 5 percent. Reasoning for the decline was put down to Italian sovereign debt exposure and pension liabilities.
Experts in the field say that while the company still has an exceptional purchase rating, and the current valuation for its stock is on the low side.
“Profitability remains a slight issue,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“Overall though, Commerzbank has done extremely well to shuffle around its business to adapt to the challenges of recent years and we will see the bank return to its previous high levels before too long,” he added.
Friday saw the release of key European bank stress tests and investors were understandably cautious, reflected by a 2 percent drop in the bank index making the banking sector the worst performing industry not just of the quarter but of the whole year.
Super-low interest rates have not helped the situation in Europe and some of the top banks have seen their capital stretched to critically low levels. Lenders such as Deutsch Bank and UniCredit are down 6 percent.
Meanwhile, in the oil sector, BP failed to keep up with second-quarter targets and dropped nearly 3 percent due to falling oil prices affecting their operating margins. The British oil major announced they would reorganize its investment budget for the coming year in response to the decline.
Another Q2 faller was Mediaset, an Italian broadcaster, who were in line for a merger with a French media company who later pulled out of the deal. Their stock dipped 13 percent.
According to data from Goldman Sachs, there have been pleasant surprises included in the start of the earnings season, with basic resources and industrial goods doing well. The worst performers were real estate, banking and household goods, the report said.
By the end of next week over 50 percent of the companies on the STOXX 600 will have reported their earnings.
Friday, July 29, 2016
Dow Chemical reports increased revenues as tie-up draws near
One of the United States best performing companies, Dow Chemical, comfortably beat Wall Street targets in the second quarter as it seeks to finalize a merger with its closest competitor, Dupont.
The reason for the company’s stellar figures is increased demand for its primary product, plastics.
According to a report by the company released Tuesday, operating earnings jumped to 90 cents a share, outperforming Wall Street forecasts by 5 cents.
Dow’s chairman and CEO Andrew Liveris said in a prepared statement, “This quarter our company has yet again delivered significant growth and expansion of operating profits. Considering the current climate in both the geopolitical and market spheres, it’s extraordinary that we could hit fifteen quarters of growth consecutively.”
Although Dow have comfortably and consistently outpaced their rivals, sales for the Michigan based company have dropped to $11 billion, a decline of 6 percent compared to the same quarter in 2015. Crude prices and the impact from the offload of Dow’s chlorine unit can be blamed for the dip.
The statement also mentioned that due to increased demand throughout all of its global demographic strongholds, volume grew 3 percent.
The company has worked hard to reduce costs this year, with the statement claiming that upwards of $80 million has been saved this quarter alone, bringing the semi-annual savings to $190 million. The company looks good to beat the $290 million savings target for the year end.
Earnings will also get a boost from the recent acquisition of Corning Corporation’s silicon unit, which could add over a billion dollars to the company’s profits per year.
The plastics and materials industry will get a shake up when Dow and DuPont complete the proposed merger, which was green lit by major shareholders in a meeting last week.
The agreement is valued at over $140 billion and the process is said to involve a future split into three separate entities, two of which will concentrate on science and agriculture, and will be headquartered in Delaware.
The third entity, a plastics and materials focused concern, will be based in Dow’s spiritual home of Michigan.
Dow produces a broad range of materials from paint to plastics including many products used in the automobile sector. The company employs over 60,000 staff, many in Michigan. However, there could be downsizing on the horizon.
“Everyone involved in the deal knows that there will be significant job cuts coming,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management. “DuPont already made thousands of employees redundant, and Dow announced last week that certain sacrifices will need to be made involving the workforce.”
The reason for the company’s stellar figures is increased demand for its primary product, plastics.
According to a report by the company released Tuesday, operating earnings jumped to 90 cents a share, outperforming Wall Street forecasts by 5 cents.
Dow’s chairman and CEO Andrew Liveris said in a prepared statement, “This quarter our company has yet again delivered significant growth and expansion of operating profits. Considering the current climate in both the geopolitical and market spheres, it’s extraordinary that we could hit fifteen quarters of growth consecutively.”
Although Dow have comfortably and consistently outpaced their rivals, sales for the Michigan based company have dropped to $11 billion, a decline of 6 percent compared to the same quarter in 2015. Crude prices and the impact from the offload of Dow’s chlorine unit can be blamed for the dip.
The statement also mentioned that due to increased demand throughout all of its global demographic strongholds, volume grew 3 percent.
The company has worked hard to reduce costs this year, with the statement claiming that upwards of $80 million has been saved this quarter alone, bringing the semi-annual savings to $190 million. The company looks good to beat the $290 million savings target for the year end.
Earnings will also get a boost from the recent acquisition of Corning Corporation’s silicon unit, which could add over a billion dollars to the company’s profits per year.
The plastics and materials industry will get a shake up when Dow and DuPont complete the proposed merger, which was green lit by major shareholders in a meeting last week.
The agreement is valued at over $140 billion and the process is said to involve a future split into three separate entities, two of which will concentrate on science and agriculture, and will be headquartered in Delaware.
The third entity, a plastics and materials focused concern, will be based in Dow’s spiritual home of Michigan.
Dow produces a broad range of materials from paint to plastics including many products used in the automobile sector. The company employs over 60,000 staff, many in Michigan. However, there could be downsizing on the horizon.
“Everyone involved in the deal knows that there will be significant job cuts coming,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management. “DuPont already made thousands of employees redundant, and Dow announced last week that certain sacrifices will need to be made involving the workforce.”
Thursday, July 28, 2016
This month’s biotech rally shows investor confidence
July saw a welcome comeback for the biotech industry as stocks increased, indicating a return of investor confidence in the sector.
As of the 28th of the month, with tomorrow still offering another full day of trading, there was a 12 percent jump in the Biotechnology index (NBI) with the gauge looking good for the largest monthly increase since 2013.
The current climate in the pharmaceutical sector has been unfavorable due to negative views on drug prices from many of the world’s leading governments. The NBI is still 20 percent below forecasts this year and over 25 percent below last year’s record breaking high.
Many analysts say shrewd investors are taking the chance to snap up the stocks. Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management said, “We seem to be on the precipice of a sentiment change. We are advising our investors to climb aboard the biotech train now while prices are low. The outlook has been bearish for some time, but indicators are right for investment in the industry.”
The downturn in the sector in the first 6 months of the year drove shares to record lows, with many of the largest US biotech firms trading at their cheapest levels in five years. Even today, they are still only 13 times earnings for their price-to-earnings ratios. The normal ratio for the last 5 years has been 17.
“Biotech stocks simply plummeted,” says RBC Capital pharma specialist Michael Yee. “The temptation is now there for investors to improve their portfolio for the industry, especially when many of the big companies were trading with pretty much no pipeline value in the first quarter.”
With the increased activity, stocks are now rising sharply. Biogen shares have gained 20 percent this month, with the firm’s end of month report indicating they will up its forecasts for the coming quarter. Alexion Pharmaceuticals, who produce specialist drugs, jumped 14 percent.
Prominent brokers are now marking the healthcare sector as a field investors should be looking to “overweight” and traders need not worry about volatile markets ahead of the US presidential elections, as those perceived fluctuations have been accounted for already.
Healthcare has pushed up the S&P 500 ladder with a 5 percent gain. Biotech has led the surge, however, the industry is still considered to be underperforming if the whole of 2016 is taken into account.
As of the 28th of the month, with tomorrow still offering another full day of trading, there was a 12 percent jump in the Biotechnology index (NBI) with the gauge looking good for the largest monthly increase since 2013.
The current climate in the pharmaceutical sector has been unfavorable due to negative views on drug prices from many of the world’s leading governments. The NBI is still 20 percent below forecasts this year and over 25 percent below last year’s record breaking high.
Many analysts say shrewd investors are taking the chance to snap up the stocks. Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management said, “We seem to be on the precipice of a sentiment change. We are advising our investors to climb aboard the biotech train now while prices are low. The outlook has been bearish for some time, but indicators are right for investment in the industry.”
The downturn in the sector in the first 6 months of the year drove shares to record lows, with many of the largest US biotech firms trading at their cheapest levels in five years. Even today, they are still only 13 times earnings for their price-to-earnings ratios. The normal ratio for the last 5 years has been 17.
“Biotech stocks simply plummeted,” says RBC Capital pharma specialist Michael Yee. “The temptation is now there for investors to improve their portfolio for the industry, especially when many of the big companies were trading with pretty much no pipeline value in the first quarter.”
With the increased activity, stocks are now rising sharply. Biogen shares have gained 20 percent this month, with the firm’s end of month report indicating they will up its forecasts for the coming quarter. Alexion Pharmaceuticals, who produce specialist drugs, jumped 14 percent.
Prominent brokers are now marking the healthcare sector as a field investors should be looking to “overweight” and traders need not worry about volatile markets ahead of the US presidential elections, as those perceived fluctuations have been accounted for already.
Healthcare has pushed up the S&P 500 ladder with a 5 percent gain. Biotech has led the surge, however, the industry is still considered to be underperforming if the whole of 2016 is taken into account.
$10 billion business software takeover imminent
U.S. software firm NetSuite Inc announced on Wednesday they are being taken over by business software maker Oracle Corp in a deal thought to be worth around $10 billion.
The deal is seen by many as an effort by Oracle to get a foot in the door of one of tech’s fasting growing fields, cloud computing.
Markets buzzed on news of the buyout, with NetSuite shares jumping a huge 19 percent to $108.08 after the noon session. Oracle shares remained at $40.95.
“Some might say it’s an expensive purchase for Oracle, with the current share price just under what they are offering,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview.
“We see this as a shrewd buy. The software and business services sectors have been overlapping for a while now and companies, which cover both bases are outperforming estimates, sometimes by 10 to 15 times the sales. Nearly 10 percent of Oracle’s revenue comes from cloud-software sales currently,” Lane added.
Both NetSuite and Oracle supply companies with business software applications that help them automate front and backend tasks across a wide range of sectors.
Given the decline in profits for the traditional software licensing business model Oracle, along with most of its rivals such as Microsoft, has tried to concentrate more on its ability to deliver applications to end users via cloud systems. This delivery method is being favored by most clients these days, especially small businesses who can’t afford their own hardware and tech workers.
Oracle has been very active with M&A in the sector, having already taken over cloud based firms Opower and Textura. The recent addition of NetSuite will add further clout to the company’s cloud expertise and will certainly increase earnings at the end of the first fiscal year of the buyout. NetSuit have reported profits that have exceeded forecasts for the past seven quarters.
Although the current deal is said to be overseen by a committee of independent executives, Larry Ellison, Oracle Executive Chairman, and his close family own about 50 percent of NetSuite shares, according to the company’s own released data.
NetSuite were the first firm to offer business apps over the internet in 1998, and have been pioneers in the cloud computing sector ever since. Their CEO, Zach Nelson, worked for Oracle for two years, heading up their marketing department.
The deal is seen by many as an effort by Oracle to get a foot in the door of one of tech’s fasting growing fields, cloud computing.
Markets buzzed on news of the buyout, with NetSuite shares jumping a huge 19 percent to $108.08 after the noon session. Oracle shares remained at $40.95.
“Some might say it’s an expensive purchase for Oracle, with the current share price just under what they are offering,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview.
“We see this as a shrewd buy. The software and business services sectors have been overlapping for a while now and companies, which cover both bases are outperforming estimates, sometimes by 10 to 15 times the sales. Nearly 10 percent of Oracle’s revenue comes from cloud-software sales currently,” Lane added.
Both NetSuite and Oracle supply companies with business software applications that help them automate front and backend tasks across a wide range of sectors.
Given the decline in profits for the traditional software licensing business model Oracle, along with most of its rivals such as Microsoft, has tried to concentrate more on its ability to deliver applications to end users via cloud systems. This delivery method is being favored by most clients these days, especially small businesses who can’t afford their own hardware and tech workers.
Oracle has been very active with M&A in the sector, having already taken over cloud based firms Opower and Textura. The recent addition of NetSuite will add further clout to the company’s cloud expertise and will certainly increase earnings at the end of the first fiscal year of the buyout. NetSuit have reported profits that have exceeded forecasts for the past seven quarters.
Although the current deal is said to be overseen by a committee of independent executives, Larry Ellison, Oracle Executive Chairman, and his close family own about 50 percent of NetSuite shares, according to the company’s own released data.
NetSuite were the first firm to offer business apps over the internet in 1998, and have been pioneers in the cloud computing sector ever since. Their CEO, Zach Nelson, worked for Oracle for two years, heading up their marketing department.
Wednesday, July 27, 2016
BOK says nation’s growth outperforming Bloomberg forecast
Supported by the continued boom in the construction industry and moderate increases in private consumption, the South Korean economy grew at an increased rate this quarter.
The Bank of Korea (BOK) released its Q2 data on Monday and it revealed the GDP swelled by 0.8 percent compared to 0.4 percent at the start of the year. This quarter’s performance has surpassed Bloomberg’s forecasts by 0.3 percent.
The report also showed the economy expanded 3.3 percent compared to the previous fiscal year, with private consumption up 1 percent and construction investment up nearly 3 percent.
Consumption figures were boosted by the surprise extension of temporary tax discounts brought in by the government to spur auto purchases. The on-going construction frenzy has thrived under ultra-low interest rates.
However, the BOK felt the need to slim down its GDP forecast by a small amount to 2.6 percent in response to upcoming reshuffling of management at several key indebted firms, market volatility regarding the Brexit vote and the newly formed anti-corruption law.
Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management commented on the news, “The central bank need some time to observe how their stimulus packages are filtering through the economy. This encouraging data will buy them that time. There are likely to be a few heavy factors that might drag on the economy in the near future, but at the moment we can call this an upswing.”
Director for BOK, Kim Young Tai, said several new product releases in the automotive and phone industries combined with the tax break extension gave private spending a much needed boost. He said that “the first 6 months of this year have fallen in line with central bank forecasts.”
The government and central bank announced they have set aside nearly $10 billion designed to act as a safety net should corporate restructuring and a dip in employment negatively affect the economy. The authorities are particularly wary regarding the shipbuilding industry which slumped last year.
The new anti-corruption measures, which will go live this October, might also inhibit economic growth. Yoo Il Ho, South Korean Finance Minister, said the new legislation may hurt some larger businesses and have some negative aftershocks on the wider financial landscape.
The law aims to put an end to gifts that certain citizens holding prominent positions can take. Included are journalists, teachers and politicians.
The Bank of Korea (BOK) released its Q2 data on Monday and it revealed the GDP swelled by 0.8 percent compared to 0.4 percent at the start of the year. This quarter’s performance has surpassed Bloomberg’s forecasts by 0.3 percent.
The report also showed the economy expanded 3.3 percent compared to the previous fiscal year, with private consumption up 1 percent and construction investment up nearly 3 percent.
Consumption figures were boosted by the surprise extension of temporary tax discounts brought in by the government to spur auto purchases. The on-going construction frenzy has thrived under ultra-low interest rates.
However, the BOK felt the need to slim down its GDP forecast by a small amount to 2.6 percent in response to upcoming reshuffling of management at several key indebted firms, market volatility regarding the Brexit vote and the newly formed anti-corruption law.
Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management commented on the news, “The central bank need some time to observe how their stimulus packages are filtering through the economy. This encouraging data will buy them that time. There are likely to be a few heavy factors that might drag on the economy in the near future, but at the moment we can call this an upswing.”
Director for BOK, Kim Young Tai, said several new product releases in the automotive and phone industries combined with the tax break extension gave private spending a much needed boost. He said that “the first 6 months of this year have fallen in line with central bank forecasts.”
The government and central bank announced they have set aside nearly $10 billion designed to act as a safety net should corporate restructuring and a dip in employment negatively affect the economy. The authorities are particularly wary regarding the shipbuilding industry which slumped last year.
The new anti-corruption measures, which will go live this October, might also inhibit economic growth. Yoo Il Ho, South Korean Finance Minister, said the new legislation may hurt some larger businesses and have some negative aftershocks on the wider financial landscape.
The law aims to put an end to gifts that certain citizens holding prominent positions can take. Included are journalists, teachers and politicians.
Friday, July 15, 2016
IMF says China needs “serious reforms” on debt
David Lipton, one of the International Monetary Fund’s highest ranked officials, has warned China that it needs to initiate “serious reforms” in order to address the country’s corporate debt if it wants a smooth transition from a manufacturing to a consumer based economy.
“If this problem is not tackled immediately China will be taking some extremely hazardous detours as it develops,” he said in a Chinese economic forum in Shenzhen on Sunday.
No country in the Group of 20 has amassed debt at a faster rate than China over the last quarter of a century, and this is just the last in a string of stern reprimands the IMF have given to the world’s second largest economy.
Lipton noted that China has “not come far enough” with its efforts to limit the amount of corporate debt it is taking on, with the country accumulating approximately $1.4 trillion in overly exposed loans.
A report by the IMF recently criticized China’s plan of using debt-to-equity swaps to even out the leverage ratios of the nation’s biggest companies, saying the strategy could easily blow up in their face, allowing ‘shell companies’ up to their neck in debt to keep operating, thus creating a dangerous conflict of interest for bank executives.
With estimated total debt at 230 percent of gross domestic product, Lipton described China as being “debt laden, by any country’s standards.”
Other economists agree. Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management wrote on his blog, “I think many people are realising that China has a very obvious weakness in its economy now, and it is being fuelled by extremely fast credit growth both last year and in the first quarter of 2016. The other issue is the huge rates of investment which seems to have no end.”
Lane added that “fast action” will be needed on a governmental level, and both banks and multinational companies need to get their balance sheets in order.
As part of a yearly review of China’s economy, Lipton and other IMF officials will take part in a summit with China’s top finance chiefs.
Although Lipton said the situation was urgent, he was quick to add that China is not in financial crisis.
“According to the Macquarie Capital Ltd report released earlier this month there is a major concern regarding corporate debt, however, the situation is recoverable. There is no current crisis, but work is needed sooner rather than later,” Lipton said.
“If this problem is not tackled immediately China will be taking some extremely hazardous detours as it develops,” he said in a Chinese economic forum in Shenzhen on Sunday.
No country in the Group of 20 has amassed debt at a faster rate than China over the last quarter of a century, and this is just the last in a string of stern reprimands the IMF have given to the world’s second largest economy.
Lipton noted that China has “not come far enough” with its efforts to limit the amount of corporate debt it is taking on, with the country accumulating approximately $1.4 trillion in overly exposed loans.
A report by the IMF recently criticized China’s plan of using debt-to-equity swaps to even out the leverage ratios of the nation’s biggest companies, saying the strategy could easily blow up in their face, allowing ‘shell companies’ up to their neck in debt to keep operating, thus creating a dangerous conflict of interest for bank executives.
With estimated total debt at 230 percent of gross domestic product, Lipton described China as being “debt laden, by any country’s standards.”
Other economists agree. Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management wrote on his blog, “I think many people are realising that China has a very obvious weakness in its economy now, and it is being fuelled by extremely fast credit growth both last year and in the first quarter of 2016. The other issue is the huge rates of investment which seems to have no end.”
Lane added that “fast action” will be needed on a governmental level, and both banks and multinational companies need to get their balance sheets in order.
As part of a yearly review of China’s economy, Lipton and other IMF officials will take part in a summit with China’s top finance chiefs.
Although Lipton said the situation was urgent, he was quick to add that China is not in financial crisis.
“According to the Macquarie Capital Ltd report released earlier this month there is a major concern regarding corporate debt, however, the situation is recoverable. There is no current crisis, but work is needed sooner rather than later,” Lipton said.
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