Asean countries are winners from Sino-US decoupling

https://www.economist.com/finance-and-economics/2022/11/06/who-wins-from-the-unravelling-of-sino-american-trade

And we are Asean’s financial centre and a global port to boot. Our PAP millionaire ministers are very lucky that S’poreans allow them to govern us. But are they grateful? I doubt it.

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Interesting chart on three commodities

Goldman Sachs is talking about a new commodities supercycle.

But looking at this chart, we may be looking at a copper supercycle. Remember the green economy need a lot of of dirty copper.

But given China’s property slowdown (meltdown?), I doubt iron ore is in a supercycle.

I’m an agnostic about a food supercycle.

Time for emerging markets?

They’ve been the dog with fleas on it.

Doesn’t seem like it. Not only because

But also because China, makes up 37.5% of the MSCI Emerging Markets index. And we know what is happening there

Grandpa Xi is shaking down the tech billionaires and calling for “common prosperity”. As these actions are what Robin Hood or the heroes in the “Water Margin” were doing, “robbing the rich to help the poor”,

A senior CCP official said that the push for “common prosperity” did not mean China would “rob the rich to help the poor”.

Xi is no Robin Hood but pork investors are suffering

Want 10% yield?

But the reason for the yield is the currency’s volatility

Asean currencies V US$

Indon rupiah stronger than S$. Btw, see how strong is Taiwanese dollar. Stronger than Renminbi. Grandpa Zi must be upset.

Why global recovery depends on effectiveness of Oxford/AstraZeneca Covid-19 vaccine

There are concerns about the effectiveness of the Oxford/AstraZeneca vaccine. South Africa has stopped using it while it is reassessing the situation. It says that the vaccine is not effective. The vaccine was offering “minimal protection” against mild and moderate disease in young people.

But the World Health Organization has just recommended the Oxford/AstraZeneca coronavirus vaccine for use worldwide by all adults, including the elderly.  It also recommended a gap of 8 to 12 weeks between doses.

But remember WHO screwed up by sucking up to China this time last year.

Whatever, many countries, especially poorer ones, have betted big time on the jab, because it will be sold at cost during the pandemic and is easy to store and transport. Some 500m doses have been ordered through the African Union and several hundred million doses more through Covax, a scheme designed to help poorer nations get vaccines.

Post Covid-19, economic prospects for India and the Philippines are the most bleak

Emerging markets will feel most the economic impact of the pandemic, particularly India and the Philippines. Btw, looks like Spain, France, UK and Italy are not developed countries but China is.

Modi and Indians will not be happy with China’s success.

Grab and Gojek can’t be both right/ Consumers get screwed

Grab and Gojek both claim to be negotiating from strength in their merger talks.

Grab and Gojek, who dominate ride-hailing and food delivery in south-east Asia, each told their staff that they are in a position of strength ahead of a potential merger. Grab is valued at US$10bn twice that of Gojek.

The two start-ups have been urged to combine forces by their investors, in particular SoftBank, after fierce and expensive rivalry for market share.

Grab operates in 8 countries, while Gojek operates in 5 but it’s the biggest player by far in Indonesia, the region’s largest and fastest growing market. They are the top two players in most markets. 

My money is on no deal. This is good for consumers: A merger creates a monopoly with more expensive services for customers.

Indonesia has a problem

Fed’s schemes to lend other central banks US$ were of little help to countries such as Turkey, South Africa, Lebanon or Indonesia. They are all shut out of the system.

A problem for Indonesia, which has to repay US$16.7bn this yr.

Pinoys: Asean tua kees

That was my first tot when I looked at the u/m chart on a ranking of financially stronger/ weaker emerging economies .”M’sia tak boleh” was my second tot.

The Asean ranking: PinoyLand (6th), Thailand (7th), Vietnam (12th), Indonesia (16th) and M’sia (25th).

Btw, S’pore’s not ranked because it’s not an emerging economy (except in accountability: S’pore: Bottom of developed world), but South Korea and Taiwan are still emerging economies, even if Korea is a member of of the OECD.

Emerging mkts to look at

Look elsewhere, not Asia.

Emerging Europe generally, including Bulgaria and Serbia, may benefit from European companies looking to bring supply chains closer to home.

And Mexico will benefit from US cos looking to bring supply chains closer to home.

Then there is Ukraine Its doing well, partly thanks to ambitious reforms and disciplined fiscal policy, even if its president was a comedian.

Egypt, which completed an IMF programme last year, is seen as a potential outperformer.

 

Chill wind from emerging mkts

Is winter coming?

If the US$ strengthens, developing countries will be in trouble because foreign currency debts (i.e. US$ bebts mainly) are falling due big time next year.

 

 

 

 

 

 

 

 

 

 

 

 

And many may not have the $. M’aia and Indon are OK. Lots of reserves.

 

 

 

 

 

 

 

 

 

 

 

 

FYI

Why HSBC is really Hongkong Bank

Yesterday, HSBC took out advertisements, in five Cantonese-language newspapers. The bank said it was deeply concerned about the recent events and “condemned violence of any kind”, saying the rule of law is vital to maintaining Hong Kong’s status as a financial centre. “That is why we fully support the ambition to resolve the present situation peacefully.”

Why is it so concerned?

These three charts show why HSBC is really Hongkong Bank (It once used this name), and the last two charts also show that it’s the people’s bank in HK. All of which explains the ads and what an HSBC spokesman said recently: “We respect that our employees have their own personal views on political and social matters. Our priorities are the safety of our employees and supporting our customers.”

A 34-year-old HSBC bank employee said the bank had not officially sanctioned the strike on Monday but some managers had told staff verbally they would not be penalised for not coming to work.

FT

Interesting, relevant, little known facts about HK’s general strike

 

Remember that HSBC includes the Hang Seng Bank which has a lot of branches serving the people: the takeover of Hang Seng Bank was the start of HSBC becoming a global bank: HSBC, Superman and another Cina superhero. I’m very surprised that BoC is a distant second in terms of deposits. I tot the gap was much narrower. And this was in 2018. I’m sure BoC lost a lot of deposits.

 

 

 

Wh

 

Chaos can be good for S$, PM, PAP

I kid u not.

HK$ rose against US$ despite the protests and riots that created economic uncertainty. Hmm maybe Mad Dog in power could be good for S$.

HoHoHo: StanChart CEO kanna lick ass/ Temasek acts

After further upsetting shareholders unhappy with his pay, by calling them”immature and unhelpful” (HoHoHo: StanChart CEO upset that investors angry about his salary), he issued a statement saying

I regret my inability to get my points across in the manner I intended and certainly meant no disrespect to our shareholders.

He explained that when talking to FT

about leadership I urged a conversation about the pressing questions of inequality, fairness of executive compensation and the role of corporations. The focus on a single component of pay, which in the case of Standard Chartered had no effect on total compensation, has crowded out this important debate.

Ha, Ha, Ha. Pull the other leg, it’s got bells on it.

The FT helps him out

He bristles at the suggestion that he is overpaid. Although he was Britain’s second-highest-paid bank CEO last year — his total package was almost £6m — he earns a fraction of what he did at JPMorgan. Critics counter that StanChart’s share price has fallen by about 20 per cent since he took over in 2015, versus double-digit gains for competitors HSBC and DBS.

(With friends like the FT who needs enemies?)

The very latest from the FT is that Temasek has told the directors of StanChart to sort the matter out in a way that wins support from the bank’s other large shareholders. FT reports the bank is considering asking its chief executive to take a pay cut.

What? He’ll resign given that he’s paid peanuts (albeit his performance amounts to monkeying around). But maybe that’s what Temasek wants?

Related post on the mess StanChart is in: HoHoHo: StanChart accused of more crimes

HoHoHo: StanChart accused of more crimes

The good news is that the accusation comes not from the US marshals that have been making life difficult for the go-to bank for Iran’s activities to by-pass US sanctions, but by whistleblowers in a civil law suit.

StanChart has been accused of handling U$56.8bn of dollars in allegedly illegal transactions with Iran-connected entities in a civil suit. They allege StanChart cleared far more transactions in violation of Iran sanctions between 2009 and 2014 than the US government used as the basis for fines paid by the bank in April (This prediction came true: HoHoHo: StanChart gets into more trouble).

The new claim filed on Thursday piles further legal woes on the emerging markets bank which has been hit with a series of penalties by US law enforcement and regulators in the past seven years for lax financial controls and for handling transactions for companies in Iran and other sanctioned countries.

FT

Quiet so. and CEO still KPKBing about his pay: HoHoHo: StanChart CEO upset that investors angry about his salary?

Weekend reading:

HohoHo: StanChart’s strategic plans are sounding like our restructuring plans

StanChart: Yet more problems for “rogue bank”

HoHoHo: Gd news for StanChart

HoHoHo: StanChart CEO upset that investors angry about his salary

The FT had a piece on Tuesday in which Bill Winters, the CEO of StanChart, criticised shareholders after almost 40% of them voted against the bank’s pay policy at its annual meeting in May: Temasek stood by him. They were upset about the pension contributions made to Mr Winters.

“Picking on individual pension arrangements . . . and suggesting that there is some big issue there is immature and unhelpful,” the CEO of StanChart KPKBed.

On Wednesday the FT quoted shareholders hitting back.

Five top-20 shareholders (not Temasek with 16% though) in the bank told the FT that they were unimpressed by Mr Winters’ decision to attack shareholders. One big asset manager described the chief executive as “tin eared”.

Another large shareholder said: “As an immature investor, I’m going to not make any rash comments, but look forward to the fallout coming.”

Whatever, underperforming CEO (HoHoHo: Time for StanChart’s CEO to go? and HO Ho Ho: What Temasek forgot when it bot into StanChart) it seems is behaving like millionaire PAP ministers when it comes to money:  StanChart mgt think they like PAP ministers isit? and HoHoHo: StanChart CEO learning from our ministers.

Sounds like what Secret Squirrel told me is true: Temasek has warned him his end is nigh if he can’t improve the bank’s performance soon. So he’s frustrated and angry and hits out unthinkingly.

This outburst can’t help his relations with Temasek as there are now many comments online on FT website pointing out Temasek’s failure to get rid of him.

To be fair to him, his pay is “peanuts”. He got a lot more as a JPMorgan senior executive.

 

StanChart: More unhappiness

Another influential shareholder advisory influencer, Institutional Shareholder Services, has recommended that investors vote against Standard Chartered’s pay policy at its annual meeting next month and described the bank’s method of calculating executive pension allowances as “disingenuous”.

ISS said that investors should cast their ballot against the emerging-markets bank in a binding vote on its pay policy on May 8 because of a change in how it calculates executive pension allowances.

Glass Lewis published a similar recommendation earlier.

Together,Glass Lewis and ISS usually influence over roughly a quarter of votes in any listco: a sizeable number. But Temasek is relaxed about the bank’s pay policy: StanChart mgt think they like PAP ministers isit?

HoHoHo: Rogue bank kanna fined again

(Updated on 10 April at 5am:  StanChart will pay US and UK authourities US$1.1bn to settle charges that it violated sanctions and ignored red flags about its customers: more than expected. It’s deferred prosecution deal with the US marshals extended until 2021. Ho Ho Ho.)

Standard Chartered is bracing itself for a bumper fine this week that could total hundreds of millions of pounds as it settles US charges over Iranian sanctions violations.

The London-headquartered but Asia-focused bank is expected to draw a line under a long-running investigation into sanctions busting by Wednesday when a six-year deferred prosecution agreement (DPA) with US authorities is set to expire.

DPAs allow firms to settle charges with state authorities without facing criminal prosecution. The companies must agree to specified conditions, which can include a fine and their conduct being monitored for a set period.

https://www.theguardian.com/business/2019/apr/07/standard-chartered-readies-for-huge-us-fine-over-iranian-activities

Related posts:

StanChart: Yet more problems for “rogue bank”

HO Ho Ho: What Temasek forgot when it bot into StanChart

HoHoHo: Time for StanChart’s CEO to go?

HoHoHo: StanChart’s CEO is worse than our paper generals

 

HoHoHo: StanChart CEO learning from our ministers

He also gets a free pass from Temasek.

FT reports that StanChart is facing an investor rebellion over its chief executive’s pay after the bank changed how it calculated his pension in a way that falls foul of UK corporate governance guidelines. This comes as executives at the UK’s largest listed banks are being subjected to rising pressure to reduce their pension payments so that they are in line with the majority of staff.

StanChart’s CEO will receive a pension allowance of £474,000, which is the highest of any chief executive of a large UK-listed bank.

But unlike UK investors, Temasek, StanChart’s biggest shareholder, a person close it said it did not share other investors’ concerns on pay at the bank.

Related post: HoHoHo: Time for StanChart’s CEO to go?

Comprehensive list of articles on what went wrong with this investment: HoHoHo: Temasek’s “rogue bank” kanna caught again

Shrinking commodity inventories

Is the CEO of Glencore, the miner and hard commodities trader, talking his book or does he really have a point that commodities are a cheong.

“If you look . . . around the world, we’re at record low levels for a lot of commodities,” he said in late February. “In copper we have 13 days’ supply sitting in inventories. You have zinc down at record levels of eight days’ supply and nickel at 34 days.”

Since then the prices of these have rallied but, then so has most markets.

HSBC: another view

Further to HSBC: Looking vulnerable, the view from an institutional broker, here’s another view from the Investors Chronicle, a respected retail investor magazine.

It says “Buy: HSBC”

HSBC’s progress is encouraging. That bodes well for the maintenance of its dividend, which was last cut in 2009.

showing the retail emphasis on sustainable dividend. (Think: Hyflux is warning of investing in high dividend yield stocks.)

It says HSBC’s Asia pivot makes it a natural victim of US-China trade rows. Chairman Mark Tucker blamed market weakness during the fourth quarter for lower-than-expected revenue for 2018: must have financed large share purchases on margin.

Combined with a 6 per cent rise in adjusted operating expenses as the lender seeks to expand across the northern China and Pearl Delta areas, this resulted in negative adjusted “jaws” – the difference between the rates of change in revenue and costs — of 1.2 per cent.

In its global banking and markets business, economic uncertainty and reduced primary issuance led to lower adjusted rates and credit revenue. But this was partially offset by stronger demand for securities services and global cash management liquidity.

Retail banking and wealth management were much stronger, posting an 8 per cent rise in net operating income. That business benefited from a 9 per cent rise in lending and improved deposit margins due to rising interest rates.

But mortgage lending grew in the UK and Hong Kong, although margins shrank.

Higher lending and adverse foreign exchange movements across business lines also resulted in an increase in adjusted risk-weighted assets, which reduced the common equity tier one ratio to 14 per cent from 14.5 per cent in the prior year. However, the return on tangible equity improved by 1.8 percentage points to 8.6 per cent, with management reiterating its target to grow that figure to over 11 per cent by 2020.

Expected credit losses were slightly higher than loan impairment charges in 2017: blame Brexit and trade rows. Credit quality in the UK will get worse.

Analysts at Shore Capital expect adjusted net tangible assets of 732 cents (US) a share at the December 2019 year-end, up from 701 cents at the same time in the previous year.

HSBC: Looking vulnerable

Because investors are likely to be disappointed: slower revenue growth, no share-buy back and dividend yield could go up (share price falls).

JPMorgan Cazenove, a leading UK broker, downgraded HSBC to “underweight” from “neutral” with a 620p target on the back of the bank’s full-year results on Tuesday. Among the broker’s concerns was a rise in funding costs as Hibor — a measure of lending costs between banks in Hong Kong — underperforms Libor, the equivalent UK rate.

Although we rate HSBC’s management highly and view the group on the right strategic path long term, we believe that revenue growth pressures (partly as a result of the changed outlook for US rate hikes, a widening Libor-Hibor gap and macro uncertainty) alongside cost investment needs could weigh on the [return on tangible equity] outlook for longer than we previously thought.”

With HSBC unlikely to deliver an 11% on tangible equity by 2020, its premium valuation of 1.2 times book value looked exposed, JPMorgan said. It added that while HSBC no longer had a capital surplus, but investors continued to expect a share buyback this year.

The dividend of 51 cents (US) should remain stable over the medium term but the yield of 6% (in line with other UK banks) might move higher (i.e. because share price falls) because of the the uncertainties faced,

HoHoHo: Temasek’s “rogue bank” kanna caught again

Standard Chartered pays $40m fine after forex rigging probe

US authorities claim UK traders tried to manipulate emerging markets currencies

FT Headline

More on its problems:

“Criminal” activities

StanChart: Yet more problems for “rogue bank”

HoHoHo: Ho’s rogue bank woes (Cont’d)

Ho Ho Ho: StanChart still in jail

Incompetent mgt

HohoHo: StanChart’s strategic plans are sounding like our restructuring plans

HoHoHo: StanChart’s CEO is worse than our paper generals

No home market

HO Ho Ho: What Temasek forgot when it bot into StanChart (Got share price chart since Temasek bot into it. Got very sick looking at it)

 

But the gd news is that FT reported recently that Temasek had very recently told the mgt that it was not happy. I wrote last October HoHoHo: Time for StanChart’s CEO to go?. Shumeone in Temasek reads me? Ho Ho Ho

Have a prosperous and Happy Chinese New Year. To ensure this vote wisely. And certainly not for Mad Dog, Lim Tean and Meng Seng . But do think of voting for good SDP teams if they are better than the PAPpies.

HO Ho Ho: What Temasek forgot when it bot into StanChart

There’s an FT report that Temasek is putting pressure on StanChart to shape up. It’s tired of being reminded that under the current CEO, the share price has fallen 40%. Worse, share price is roughly at half of Temasek’s entry point 13 years ago.

 

Temasek forgot when it bot into  StanChart that StanChart did not and still does not have have a major, thriving, prosperous market that it dominates.

Although it’s smaller than the supertanker of HSBC, it doesn’t have the engine of Hong Kong that HSBC does, so it’s taking every bit as long, if not longer, to reform. But we’re still very supportive.

(Hugh Young, head of Asia Pacific at Aberdeen Standard Investments, which holds a stake of about 5 per cent in the bank talking to the FT)

It also does not a client like the Lis.

The story of how two Chinese gentlemen made Hongkong Bank great is told in HSBC, Superman and another Cina superhero.

 

HoHoHo: Ho’s rogue bank woes (Cont’d)

GST sure to go up leh. Jialat for PAP govt and us.

Ex-Standard Chartered banker prepares to plead guilty in Iran case
Emerging markets lender under investigation for alleged sanctions breaches

FT headline

Goes on

Although no formal charges have been brought, an internal Standard Chartered investigation found at least one of the bankers under scrutiny was receiving secret kickback payments, one of the people said.

If the ex-employee does plead guilty, it would be one of the few instances of an individual banker being successfully prosecuted in the US over sanctions abuses.

Depending on what the former employee says in any plea deal, an admission of guilt could put Standard Chartered in a weaker position in its negotiations with regulators and enforcement officials, who are seeking to impose fines of as much as $1.5bn on the bank, the people said.

So why GST sure to go up?

The potential fine could complicate the bank’s plan to return capital to investors for the first time in a generation, details of which the bank would like announce alongside its strategy update and full-year results at the end of February, according to people briefed on the proposal.

Ho Ho Ho.

Fyi, over the last 10 years, Singapore’s net investment returns (NIR) contribution (NIRC) to the Budget has more than doubled from S$7 billion in FY2009 to an estimated S$15.9 billion in FY2018.

NIRC consists of 50 per cent of the Net Investment Returns (NIR) on the net assets invested by GIC, the Monetary Authority of Singapore and Temasek Holdings and 50 per cent of the Net Investment Income (NII) derived from past reserves from the remaining assets.

In other words, we spend 50 per cent of the estimated gains from investment, and put the remaining 50 per cent back into the reserves to preserve its growth for future use.

Associate Professor Randolph Tan is Director of the Centre for Applied Research at the Singapore University of Social Services, and a Nominated Member of Parliament.

Under PAP rule will S’pore become like UK or Venezuela?

——————————————————————————-

igNoble Hse omnishambles puts spotlight two int’l accounting firms

In the coming yr, investors, creditors and S’porean regulators of Noble will be singing

Fee-fi-fo-fum,
I smell the blood of an accountant from Ernst & Young or PricewaterhouseCoopers,
Be he alive, or be he dead
I’ll grind his bones to make my bread.

The back story

Noble Group is facing insolvency after authorities in Singapore said the crisis-hit commodity trader would not be able to list shares in a new entity, dealing a potentially fatal blow to its emergency debt restructuring.

Singapore’s white collar crime agency, its de facto central bank and the regulatory arm of the country’s stock exchange said they had “significant uncertainties about the financial position of ‘New Noble’”.

In a statement they said “New Noble’s” net asset value could be as much as 45 per cent lower than stated by the company when local standards stipulated by Singapore’s Accounting and Corporate Regulatory Authority were applied.

“It would be imprudent to allow the re-listing as investors will not be able to trade in New Noble’s shares on an informed basis. Monetary Authority of Singapore and Singapore Exchange will therefore not allow the re-listing of New Noble to proceed.”

FT a few weeks ago

The auditors were and are the Hong Kong arm of Ernst & Young

But they are not the only ones facing questions.

Noble Group’s Chief Executive Yusuf Alireza sought to draw a line under a long-running accounting dispute after a report by board-appointed auditor PricewaterhouseCoopers (PwC) found no wrongdoing in the company’s accounting practices.

https://www.reuters.com/article/us-noble-group-accounts/pwc-says-noble-groups-accounting-practices-comply-with-rules-idUSKCN0QF0Y420150810

 

HoHoHo: Gd news for StanChart

And for HSBC and JPMorgan Citibank. This trio are the biggest players in the trading financing biz and there’s plenty of biz to finance.

There was a US$1.5tn gap in financing needs for international trade transactions in 2017.according to Alisa DiCaprio, head of research at R3 and formerly an economist at the Asian Development Bank.

S’pore, Asean in trouble if Renminbi collapses below 7 to US$

Further to Trump’s US$ trumps Xi’s Renminbi

if the renminbi breaks thru  7 to the US$, this has

broader repercussions for other emerging market countries, already under pressure. This includes the likes of Indonesia, India and the Philippines. India’s rupee has slumped some 15 per cent to a record low versus the dollar this year. Other China-linked exporters such as Singapore, South Korea, Thailand and Malaysia would also see their currencies come under pressure. Then there’s the Australian dollar, seen as a more liquid proxy to play China and its economic outlook along with copper and other industrial metals — today the Aussie dropped to a new two-year low just above $0.70.

FT’s Market Forces

HoHoHo: Why oil price rises are not gd for PAP

Phew that was a quick sharp retracement after a very sharp spik: Tua kee traders take opposing views on price of oil. The PAP govt must be relieved oil is now trading around US$82 (minutes ago) than above US$86 (middle of last week).

A US$ oil price of closer to US$100 will not only make Tun M (M’sia exports oil) more willingly to cut off our water supply but will pose problems for an early GE in late 2019 esp with the promised rise in GST(See below for GST related posts) after GE: Akan datang: GE in late 2019

According to Citi’s Johanna Chua, Asian countries suffer the most when oil prices rise because, aside from Malaysia, most are net oil importers. Singapore runs a sizable 6.5% oil and gas deficit, followed closely by Pakistan, Thailand, Sri Lanka and Taiwan. Indonesia and Vietnam manage slightly smaller deficits of roughly 1%.

So many of these economies see the largest inflation swings when oil prices rise. Chua’s chart ranking the sensitivity regionally over the past six years. See where we stand.

The ** explained that the spike in inflation here is caused by some one-off stats adjustment of data base. So not really comparable to other countries. But try telling that to cybernuts like Oxygen or Phillip Ang.

But rational readers should get the message. Voters really get hurt by oil price rises. And the promised GST price increase is not going to impress the 10 points of voters that voted for the PAP in last GE, bring the total votes for the PAP to 70%: a great result for the PM and the PAP after the failure of only 60% in 2011.

---

GST-related posts

GST rise: Anti-PAP activists should take note

How to ensure no GST rise

Countering PAP’s BS that taxes must go up

 

HoHoHo: Time for StanChart’s CEO to go?

Another one for the repair shop is UK-listed Standard Chartered. After damaging revelations about the bank breaching US-led sanctions against doing business with Iran, it had already paid a $667m fine to avoid criminal charges in 2012. This week another $1.5bn in fines from US authorities was highlighted after allegations that the bank continued to defy certain sanctions. Even without the added headache, Lex adjudged that chief executive Bill Winters has done a poor job of preserving shareholder value — never mind building some — since he joined just over three years ago. The shares are down 40 per cent.

Emphasis mine. FT’s Letter from Lex summarising it’s article that’s behind a pay wall.

Time for Temasek, the controlling shareholder, to talk to other top 10 shareholders about removing him? Pigs will fly first. The CEO that ran the bank into the ground was kicked out because another top 10 shareholder,Aberdeen Asset Mgt, as it then was, organised a campaign against him.

But then Temasek’s paper general CEOs would also have to go if they are judged by best practices ang moh private sector standards,

Related post: HoHoHo: StanChart’s CEO is worse than our paper generals

 

StanChart: Yet more problems for “rogue bank”

FT reported that US prosecutors have told StanChart that they are preparing to bring criminal charges against two of the bank’s former employees over alleged sanction breaches involving Iran-linked companies.

Related posts:

HoHoHo: StanChart gets into more trouble

Double confirm StanChart’s rogue bank & PAP apologist is a fool

HoHoHo: StanChart’s CEO is worse than our paper generals

S’poreans have few good things to say about our paper generals and scholars: think SPH’s CEO and ex-SMRT’s CEO.

Well StanChart’s CEO, a true blue ang moh life long banker, makes these guys look good.

When Bill Winters became the Messiah CEO of StanChart in June 2015, the bank’s shares were around £10. Now they are around £6. He was brought in because the previous CEO had run the bank into the ground. The bank overextended, trying to take advantage of other banks’ problems. Unlike them it had a great time during the financial crisis.

Well Winters failed. The shares have dropped about 37%, while Bloomberg’s global banking index has gained 47%.

Ho Ho Ho.

Related posts

Now pays a “peanuts” dividend: HoHoHo: StanChart refuses to resume dividend

This 2016 issue hasn’t been resolved: More on StanChart’s latest problem with the US

HoHoHo: Temasek’s dubious achievement

HoHoHo: StanChart gets into more trouble

StanChart is expecting a potential penalty of around US$1.5 billion from U.S. authorities for allowing customers to violate Iran sanctions.

https://www.bloomberg.com/news/articles/2018-10-01/stanchart-said-to-brace-for-new-iran-fine-of-about-1-5-billion

StanChart hasn’t been able to clean up its dirty linen despite a 2012 deferred prosecution agreement (DPA) in which it admitted secretly moving billions of dollars through the U.S. on behalf of Iranian clients, in violation of sanctions.

As part of the DPA, the bank agreed to have an outside, independent monitor to scrutinize its business practices and the U.S. agreed to eventually dismiss charges once the bank has complied. A failure to comply would typically allow prosecutors to reopen the case.

The DPA has been extended multiple times, including as recently as this summer, and will now run until the end of 2018. Authorities said the bank’s sanctions-compliance program “has not yet reached the standard required.”

Naturally the price came off when the mkts heard this. Ho Ho Ho

Related post: Double confirm StanChart’s rogue bank & PAP apologist is a fool

Our fragile neighbours

Think the woes in Turkey are irrelevant to us? Far away Muslim country.

Well look at this table https://fingfx.thomsonreuters.com/gfx/breakingviews/1/951/1238/index.html

If Turkey goes, M’sia (6th with Turkey as Number 1) and Indonesia (8th) are likely to get into trouble.

As could Thailand (15th), India (10th), China (12th) and S Korea (14th)

HoHoHo: StanChart disappoints, again

On Tuesday (London time), StanChart reported half-year operating income of US$7.6bn, 6% more than in the same period last year. The stock dropped 3.5% trading because operating income was below expectations. Blame higher IT spending: costs in general have outgrown revenues by a whole percentage point. Not good.

FT’s Lex

StanChart investors must be counting on costs soon falling, relative to revenues. The hope should be for a leaner and cleaner bank ready to grow at the bottom of the next cycle.

adding

Shares in HSBC, another London-listed bank with an Asian focus, have climbed 63 per cent in the past two years, compared to 13 per cent at StanChart.

 

 

Ho Ho Ho: StanChart still in jail

Standard Chartered (STAN.L) has agreed to a further extension of its U.S. deferred prosecution agreement (DPA) until the end of December this year, it said on Friday.

StanChart entered the DPA with the U.S. Department of Justice and New York County District Attorney’s Office in December 2012, accepting that it had broken laws by processing payments for sanctions targets in countries including Iran, Burma, Sudan and Libya.

The bank avoided prosecution in exchange for a cash settlement of $327 million and an agreement with the U.S. authorities to improve its sanctions compliance.

…

The DPA was extended for three years in 2014 and a further nine months in November 2017 as StanChart sought to strengthen its controls under the scrutiny of an independent monitor.

https://www.reuters.com/article/us-stanchart-deferred-prosecution-agreem/standard-chartered-agrees-extension-of-u-s-deferred-prosecution-agreements-idUSKBN1KH24B

 

M’sia: Time to buy?

M’sian mkt being ignored. One of least crowded emerging markets. Thailand and China look vulnerable because everyone’s there. Indonesia, Pinoy Land, Taiwan, Korea and India are in between. 

M’sian economy: a safe haven in emerging mkts storm

Tun should chill out on his fears for the M’sian economy. His fiance minister and Najib  are right about how gd the economy is: Either Tun or his Cina finance minister is wrong: OK, OK vis-a-vis other emerging mkts.

Remember the Taper Tantrum of 2013? Back then, the talk was of the Fragile Five (sometimes known as the BIITS): Brazil, India, Indonesia, Turkey and South Africa:  these large emerging markets had large current account deficits.

Well the tantrum is back with India, Indonesia, Turkey, Pakistan and the Philippines recently raising their official interest rates but despite Tun’s KPKBing M’sia is in great shape. True getting rid of GST is not a great idea but with oil in the US$70s , there’s room for compacency: Mahathirnomics/ Luck of the devil.

Juz tell that to the foreigners selling M’sian equities.

Noble is crap to be flushed away

I’ve been taking a keen interest in the once Noble House because I tot it might look interesting post restructuring even if it would have a very high debt burden after swapping debt for equity.

Well its warning of bigger losses (now confirmed*) put paid to my interest because the latest losses were coming from coal trading the business it was going to focus on post restructuring, and which was the basis of it being nubbed “Noble House”

I’ll let the FT do the talking:

One of Noble Group’s biggest shareholders has said senior management has yet to show it can turn round the commodity trader after it reported a $5bn annual loss, one of the largest ever in Singapore.

Goldilocks Investment, which took an 8.1 per cent stake in the crisis-hit company last year, said the fact the core business of coal trading continued to lose “millions every month” raised doubts about a rescue plan involving a massive debt-for-equity swap.

*https://www.reuters.com/article/us-noble-grp-results/noble-group-plunges-to-4-9-billion-loss-in-talks-to-wrap-up-debt-deal-idUSKCN1GC172

HoHoHo: More money for Budget

Soon, Temasek will be contributing a bit more to the Budget.

“StanChart restarts dividends as profit returns” is the FT’s headline on the turnaround in StanChart. It stopped paying dividends several years ago.

And there’s still plenty of room for it to improve

[D]espite stellar economic growth in Asia, which accounts for over two-thirds of underlying pre-tax profit, the group is still destroying economic value. Return on equity, at 1.7 percent or 3.5 percent excluding exceptional items, is still far below the group’s cost of equity, which is probably more like 10 percent. Costs are rising, even as the group clamps down on loan losses.

After years of retrenchment, Winters needs turbocharged revenue growth and restraint on costs to hit his modest medium-term target for an ROE of 8 percent. Suppose operating costs grow just 2 percent annually, with flat loan losses and restructuring charges and taxes at 30 percent. StanChart would need 7 percent annual revenue growth to fulfil its aim by 2020, according to a Breakingviews calculation. That is more than double last year’s rate and at the top of the bank’s projected 5 to 7 percent range.

https://www.breakingviews.com/considered-view/stanchart-shareholders-pay-winters-a-compliment/

If things work out at StanChart (and elsewhere), maybe GST increase can be delayed? Dream on, pigs will fly first.

Update at 7.30am Chris K responded:

News like this does not impact the NIR Temasek delivers the budget becos the contribution is based on expected real returns over the long run.

I responded:

So long as no transparency shows how flakely is NIR. It’s want the PAP administration says it is.

HO HO HO: How Shi**y is StanChart?

In 2016, when China as a country grew at close to 7 per cent, StanChart’s revenue across greater China and north Asia declined by 15 per cent. While Southeast Asia GDP grew by nearly 5 per cent, StanChart’s revenue there shrank by 5 per cent. And in Africa and the Middle-East, another fast-growing region, the bank’s revenue was down 4 per cent. StanChart’s full-year numbers for 2017 have yet to be published, but at the last count its ROE was running at about 5 per cent …

Today’s FT

Achtung if got money in Indon, M’sia and India

Nomura says Indonesia, Malaysia and India could be next to implement capital controls.

M’sia — Currency, MH370

M$

According to Anna Stupnytska, global economist at Fidelity Investment Management countries most sensitive to rising US interest rates are Turkey, South Africa, Malaysia and Mexico, because a large amount of their debt is held by foreign investors and their economies are relatively weak. Source: BBC report.

Searching in wrong area

Yellow dot seems to be where plane fell into the sea based on the debris found off Africa.

 

https://www.theguardian.com/environment/climate-consensus-97-per-cent/2016/dec/14/oceanographers-offer-clues-to-malaysian-airlines-crash

Fish disappointed by Peenoy president

They came to Manila Bay because of his promise to fatten them

Duterte’s landslide victory came after a campaign during which he vowed to kill 100,000 criminals in his first six months in office and told drug pushers and others: “I’ll dump all of you into Manila Bay, and fatten all the fish there.”

http://www.bbc.com/news/world-asia-38144237

Only less than 5,000 killed since his inauguration: peanuts.

Peenoy leader talks cock again

Mr Trump is also reported to have invited President Rodrigo Duterte of the Philippines to the White House next year during a “very engaging, animated” phone conversation, according to one of Mr Duterte’s aides.

But a statement issued by Trump’s transition team made no mention of an invitation.

BBC report

 

Another day, another ass for Duterte to kiss

The,Philippines, along with Chile, Mexico, Turkey, and Russia, have a large burden of US dollar debts, which are becoming more expensive in local currency.

And the US dollar keeps on going from strength to strength since The Donald was elected president.

So after kissing Xi’s ass so that Peenoys can catch fish in Peenoy waters, he now has to kiss Trump’s ass to make sure US MNCs continue investing in PeenoyLand.

And he wouldn’t dare curse Trump. He might find his home nuked.

Update at 7.30am:

Btw, he’s already reordering from the US, 26,000 assault rifles for his police force. He cancelled the order last week.

Why Duterte keeps cursing, dissing US

He’s frus because Pinoys more American than Americans while he personally hates America. Beecause he got buggered by an American Catholic priest?

Let me explain.

Filipinos hold a more favourable opinion of the US (92%) than even Americans themselves says the respected Pew Research Centre. And only 22 per cent of them trust China “very much” while  76% of Filipinos trusted the US “very much”, another poll says.

Bring on the hamburgers and Coke and forget the paos, siew mais and Chinese tea.

Taz why the US can continue to ignore Duterte and treat him as another talk cock sing song Peenoy macho man who should be made aware that even a US state can beat up a bank owned by PRC: NY state fines China’s AgBank US$215m over money laundering violations. Bank is paying fine.

And why China would be wise not to throw money his way, the way they did to Hugo Chavez. (Btw, they are regretting their decision to be generous to Venezuela).

Whatever when the hegemon is annoyed, Peeso collapses and US MNCs don’t invest.

 

Peeso collapses as Empire strikes back

Global funds have pulled more than $600 million from Philippine stocks since inflows this year peaked in August as Rodrigo Duterte cursed while talking about President Barack Obama and announced a “separation” from the U.S. during an official visit to China. Concerns that his outbursts may jeopardize investments in the nation’s more than $20 billion business outsourcing industry have forced his administration’s top officials to assure companies their interests will be protected as the leader builds new global alliances.

And

The last time the Philippine peso neared 50 to the dollar, the global financial system was melting down and the central bank raised interest rates to defend it. This time, it has been driven by the president cursing his trading partners and his finance chief accepting the declines.

Credit Suisse Group AG and Rabobank Groep predict the currency will weaken past 50 per dollar next year, a level last seen in November 2008. Pioneer Investment Management Ltd. doesn’t see the peso as a long-term, strategic investment. The currency fell to a seven-year low of 48.618 in October, and was Asia’s worst performer in the third quarter, when it fell 3 percent.

And

American companies account for more than 70 percent of the business-process outsourcing industry’s revenue, which is estimated at $22.9 billion this year, according to IT & Business Process Association of the Philippines. The industry is set to become a key foreign-exchange earner amid fluctuations in the amount of money remitted by overseas workers, which makes up about 10 percent of the country’s gross domestic product. Exports have fallen for 17 straight months.

While American companies will continue operating in the Philippines unless official sanctions are imposed, the peso may slide further should the president continue to surprise markets with his “unorthodox rhetoric,” according to Stuart Allsopp, head of country risk and financial markets strategy in Singapore at BMI Research, a unit of Fitch Group.

http://www.bloomberg.com/news/articles/2016-11-01/duterte-seen-talking-peso-beyond-50-level-reached-in-2008-crisis

Gold and EM Funds are cheong

The Oppenheimer gold fund (run by guy with Chinese name) invests in mainly small- and mid-cap gold mining stocks, to magnify the impact of changes in the gold price, which has risen 9.3 per cent over the summer. With rates staying low, the lack of yield on precious metals is less of a deterrent to investors, some of whom also see gold as a hedge against any inflation generated by loose monetary policy.

But Bank of America Merrill Lynch warns that fundamentals in emerging markets were so strong that, given extremely loose monetary policy in the developed world, a “bubble” is “highly possible” in EMs in 2017.

Why EMs are not a bubble, yet

Historically, the most dangerous time for emerging markets is when investors’ enthusiasm for the sector is highest and when it trades at a premium, in valuation terms, to the developed world. Neither caveat applies at the moment.

http://www.economist.com/news/finance-and-economics/21704809-emerging-markets-are-popular-investors-again-back-fashion

Why EMs are a “cheong”

The importance of the dollar for EMs: Fed dovishness (US inflation very weak) means currencies no longer weak against the US$. EMs can afford to lower interest rates, currencies to stimulate growth.

Rising oil and commodity prices support EMs

Investors are increasing their bets on EMs

The global hunt for yield targets EMs’ debt

Search for yield is getting exotic

From NYT Dealnook (Look at charts from FT below also) Investors Turn to Risky Regions for Rewards Yield-starved investors are so desperate for returns that they have been willing to take on the risk of investing in a country that recently underwent a failed coup and an attack on its main airport. Turkish stocks and bonds have been rising, in spite of the country’s debt being downgraded. It seems a 10-year bond offering a 9 percent reward is too tempting to turn down, even if the inflation rate is 8.7 percent and the currency is heading south.

Stocks and bonds in developing markets have been on a tear as investors scoop up discounted stocks and hunt for returns in a world of super-low interest rates. They are rooting around in places like Brazil and South Africa, while markets more broadly appeared to be in a lull.

The turbulence that followed Britain’s vote to leave the European Union has dissipated and left behind only an uneasy calm. But there are still events that could rouse investors, as Bloomberg reports. As one fund manager put it: “At some point, the jaws must snap.”

Duterte will be impeached

Leni Robredo, the Pinoy vice-president, is a member of the Manila elite that Duterte despises and which despises him as it did Estrada.

As the Economist put it a few weeks ago:

His anti-establishment campaign may also hamper him: having run against the political elite, he now must govern with them. In Mr Duterte many see echoes of Mr Estrada, another populist outsider elected on an anti-corruption platform. His presidency lasted just under 18 months: he was impeached for graft, and resigned after the army withdrew its support.

A similar future may lie in store for Mr Duterte.

The article goes on to say

During the campaign some speculated that Mr Aquino’s Liberal Party (LP) machine would throw its support behind Ms Poe once it became clear that Mr Roxas could never win. Instead party grandees are rumoured to prefer impeachment, particularly if the LP candidate, Leni Robredo, wins the vice-presidency, and would become president on Mr Duterte’s departure. As The Economistwent to press she had a narrow lead.

http://www.economist.com/news/briefing/21698684-new-strongman-president-may-prevent-philippines-becoming-economic-star-fist

So what will Duterte do when he’s impeached? Just call the impeachers names? Or call out the murder squads?

Whatever, PinoyLand is not a good place to invest in.

M$, rupiah: Here we go again

HoHoHo, StanChart Cracks Down on ‘Above the Law’ Bankers

The bank is cracking down after “recent transgressions” concerning employees’ outside business interests, close financial dealings with co-workers and excessive expenses, Bloomberg reports, citing a series of memos issued over the past two months.

• BLOOMBERG

NYT Dealbook

Markets: Frontier, Emerging

HSBC: Bad news, good news

HSBC Said to Hire 175 Compliance Employees HSBC is hiring 175 people for the financial crime compliance team at its British consumer bank, which will eventually be isolated from its trading business, Bloomberg reports, citing people familiar with the plan.

• BLOOMBERG

HSBC to Move 840 Technology Jobs Out of Britain to Save Costs The bank announced plans last year to shed as many as 50,000 jobs by the end of next year as it seeks to reduce its costs and reshape its business.

• NYT »

Here we go again

Fed Is Seriously Considering Raising Interest Rates in June, Meeting Minutes Say The central bank sent an unusually frank message to Wall Street, delivered in the official account of the Fed’s April meeting.

• NYT » | AFTERNOON REPORT: STOCKS SWOON ON SIGNAL OF FED RATE INCREASE

UBS bearish that StanChart has turned a corner

It’s Shares jump despite fall in profit

Standard Chartered shares surged 10% in London after the bank — which generates almost three quarters of its revenue from Asia — reported a surprise decline in loan impairments and capital increased more than some analysts estimated.

Pretax adjusted profit fell 64 per cent to US$539 million (S$729 million) for the first three months of 2016, from US$1.5 billion a year earlier, said the London-based bank in a statement yesterday. Losses on bad loans fell 1 per cent to US$471 million in the quarter, well short of the US$650 million of impairments estimated by Mr Chirantan Barua, an analyst at Sanford C Bernstein. 

But there are still huge problems.

Revenue dropped 24 per cent in the quarter to US$3.35 billion, as income from every business unit declined.

http://www.bloomberg.com/news/articles/2016-04-26/standard-chartered-profit-drops-64-as-revenue-misses-estimates

UBS expects the share price to fall to 430p within 12 months.

With many funds short or underweight at the start of the year, commodity prices regaining some poise, EM equities rallying and EM funds seeing a return to inflows, a rally is directionally easy to rationalise.

But the StanChart rally has happened against a ~60% fall in consensus profit forecasts for this year and 30% decline for next. Our estimates are unchanged and so is our view: we see great businesses within StanChart – predominantly Transaction Banking, Financial Markets and bits of Retail – but we think the headwinds of de-risking, deleveraging, and flat and low yield curves will combine with elevated loan losses to make life particularly difficult near term (we forecast a loss for this year), leaving the 8% ROE target for 2018 out of reach.

 

 

Monkey still on Temasek’s back

The real monkey bothering Ms Ho. HoHoHo

Standard Chartered Said to Plan Sale of $4.4 Billion in Asian Assets Standard Chartered is seeking to sell at least $4.4 billion of assets in Asia, Bloomberg reports, citing people with knowledge of the matter.

• BLOOMBERG NEWS

NYT Dealbook

Feeling sea-sick?

HoHoHo: StanChart gives more pain

In London, StanChart fell 7.8% after after Australian peer ANZ warned of a further deterioration in credit quality.

FT reports

“Whilst we believe to some extent ANZ’s issues are company specific, ongoing commodity price weakness is likely to translate into higher losses for the sector,” said Macquarie. Oil and metals producers account for about 6 per cent of StanChart’s lending book.

More bad news

Separately, Morgan Stanley advised clients to sell into StanChart’s 25 per cent rally from February lows.

Lower-for-longer interest rates, contracting Asian export volumes and pressure on Hong Kong mortgages as lenders compete for low-risk assets make StanChart’s long-term targets look “heroic”, Morgan Stanley said, adding: “We see revenue as the next challenge and without deeper cost cutting we struggle to see how the 8 per cent 2018 return-on-equity guidance can be met.”

What regions have outperformed

FT reports

Capital Economics notes the recent outperformance of EM equities in Latin America and in emerging Europe, the Middle East and Africa, and expects emerging Asia to join the party soon. Valuations there are not high, it notes, and many economies in the region have relatively bright growth prospects.

HoHo Ho: StanChart’s in a right mess

Shares in Standard Chartered plunged on Tuesday after the Asia-focused bank revealed a $1.5bn (£1.1bn) loss.

http://www.bbc.com/news/business-35639284

The bank will take a $4bn charge on writing down the value of its loans, driven by falling commodity prices and deterioration of Indian markets.

Shares in the bank tumbled by 4% to a record low of 418.7p.

CEO said: “It rips at our soul every time we look at these numbers and we don’t ever want to have to stand up and tell this story again.”

And that’s not all.

StanChart faces accusations over ‘dirty debt’.  It bought a $100 million “dirty debt” from a M’sian bank and used it to demand compensation from the Tanzanian government despite knowing that the loan had been part of an embezzlement scheme, according to claims in a legal row in Tanzania. The debt was originally owed to the M’sian bank by a M’sian company, Mechmar.

Update qt 7.00am: HoHoHo woild endorse this spin Sir John Peace, Standard Chartered’s outgoing chairman, said: “While our 2015 financial results were poor, they are set against a backdrop of continuing geo-political and economic headwinds and volatility across many of our markets as well as the effects of deliberate management actions.”

Don’t blame us. World’s in bad shape. We juz reflecting it.

HOHONOHO: StanChart’s expected results

StanChart which suffered the biggest share price falls this year, will announce its results on February 23. Analysts expect it to report an 85%  fall in earnings per share, FT reports.

Last yr it was the second worse performer on FT100, down 47%, I think.

One analyst says there is debate that its business model is fundamentally broken. Another says that its strategic review released in Nov shows that it’s a collection of biz, none of whch cover their cost of capital.

Whatever China and other emerging mkts are in trouble and StanChart is an emerging markets bank. Until these mkts recover, StanChart can only cut costs (Sack more staff from Little India Marina Bay? Move jobs from London and S’pore?) and be more efficient.

HoHoNoHo

Updated at 5.00am

HoHoHo: Relying on mgt incompetence at StanChart

Standard Chartered has to hope that a quarter of its top brass really aren’t very good at their jobs. That is the portion of the UK-listed emerging markets bank’s 4,000 most senior staff who will find themselves surplus to requirements, Reuters reported on Oct. 9. Although StanChart could gain from a big cull, it’s a risky move.

http://blogs.reuters.com/breakingviews/2015/10/09/stanchart-takes-bet-on-management-incompetence/

So should HoHoHo and us S’poreans.

Will ang mohs or Indians get terminated? Not many Chinese to sack despite 50% of revenues related to China business. (Related post: StanChart is Little India)

More for HoHoHo to ponder when she returns to work

— StanChart’s shares have underperformed the European peer group by 30 percentage points this year. The bank’s 7.7 percent return on equity in 2014 was unacceptable, especially as it was earned on a relatively low 10.7 percent Basel III capital ratio.

— Some bearish analysts reckon Winters should completely cover the bank’s $8.7 billion of non-performing loans to better match Asian peers like DBS. That would cost $4 billion, more than StanChart’s expected $3.1 billion of forecast 2015 pre-tax profit.

HoHoHo: StanChart’s capital shortfall

FT reported earlier today:

Goldman Sachs analysts predicted on Thursday that StanChart would face an estimated capital shortfall of $4bn in the Bank of England’s stress tests, which measure how the lender would fare in an emerging markets crisis.
But Goldman estimated that StanChart could cover this shortfall by selling its stakes in several Asian lenders and exiting low-returning clients and businesses, such as its smaller retail branch networks.

Related post: Why Little India now includes Marina Bay

But let’s be fair: When emerging mkts and commodities (StanChart has high levels of lending to the crumbling commodities sector) were fashionable 9lucrative) it was the right bank to be invested in. FYI according to Nomura 50% of its revenue is related to China.

Given  the exposure to China by HoHo Ho and GIC, ttme for Ah Loong to call Xi and offer him advice on how to fix the Chinese economy? Can lend him Tharman who is lauded in int’l circles.

Noble House: Funny this

Noble House is HQed in HK, and listed in S’pore. But its new head of internal audit is based in Stamford, Connecticut in the US: huh? Given all the problems it is facing especially concerns about its accounting practices, I find it strange that the chief internal auditor is not based in its HQ, but a long way away.

The guy has good credentials as an internal audit manager but given that he’s based a lo9ng way from HQ, how is he going to manage his team? If he is employed more for his analytical skills rather than as as a hands-on mgr, why not appoint him as an adviser to the audit committee and the CEO.

Background

Noble has appointed a new head of internal audit. In an email Noble Group CEO Yusuf Alireza said Mr Frank Russo will take charge with effect from Monday (Oct 5).

Mr Russo will be based in Stamford, Connecticut in the US and he will report directly to Mr Alireza and the audit committee.

Mr Russo was previously at GE Capital, where he served as managing director and head of audit for the Energy, Aviation and Insurance businesses. Prior to GE, he spent over eight years at Deloitte and Touche as a senior advisor for Governance, Regulatory and Risk Strategy.

China really tua kee

Related post: http://www.bbc.com/news/business-34344926

 

Why M$ fall should worry

The ringgit lost 20% (ine of the worse performing currencies) of its value against the dollar this year despite Bank Negara spending 29% of its FX reserves to slow the fall. If it had spent less, rinngit would have fallen a lot more.

 

HoHoHo: Temasek & GIC China plays

Reason for Glencore (GIC) and StanChart (HoHoHo back at work at Temasek soon) on the chart

Glencore

Even small changes in demand from China’s vast economy can have a knock-on effect on prices.

As Glencore has found out to its cost.

http://www.bbc.com/news/business-34208070

StanChart

FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015. More https://atans1.wordpress.com/2015/09/10/hohoho-two-brokers-views-on-stanchart/

NYT Dealbook last Tuesday.

MORE SIGNS OF A SHARPER SLOWDOWN IN CHINA Once the world’s workshop, China’s exports are facing their most protracted declines since the global financial crisis, Neil Gough writes in The New York Times. China’s trade slump deepened in August – an indication of a sharper industrial slowdown at home and weaker demand from overseas. Exports fell 5.5 percent in August and 1.4 percent in dollar terms in the first eight months of the year.

The country’s manufacturing sector is losing competitiveness as labor costs rise and the renminbi remains relatively strong despite its devaluation, making Chinese goods more expensive for foreign buyers.

Imports are falling even more steeply. They fell for the 10th month in a row in August, recording a drop of 14 percent by value. Economists blame the rout in commodity prices, but imports have fallen in volume too. The falling imports of industrial raw materials point to weakening domestic demand, driven by a slump in manufacturing and new housing construction.

The weak trade data weighed on markets, with Japan’s main index, the Nikkei 225, closing 2.4 percent lower. In Shanghai, stocks initially fell when the trade figures were released, but heavy buying in the afternoon set off a rally. Shares closed 2.9 percent higher – a pattern seen often in recent weeks, as China’s government appears to continue its efforts to support the slumping stock markets.

China’s leadership made the surprise decision last month to devalue the currency by about 3 percent, the renminbi’s sharpest drop in two decades. But the central bank has since intervened in the markets on a massive scale, fighting pressure to weaken the currency further by selling dollars and buying renminbi.

As a result, China is burning through foreign exchange reserves at the fastest pace yet. Reserves fell by nearly $100 billion in August alone, though they are still huge at $3.56 trillion.

Still, analysts say that the recent devaluation was most likely too modest to give China’s exports much of a boost, and that the exchange rate is still stronger than China’s slowing economic growth would otherwise support.

HoHoHo: Two brokers’ views on StanChart

From today’s FT (apologies for lifting)

With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.

A FTSE 100 rebound helped lift Standard Chartered away from its six-year low on Wednesday.

With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.

“The faster you drive into a crisis, the more you will get hit,” Bernstein said. “The speed at which the bank is hitting turbulence is dramatically different between the last crisis and this one.”

Bernstein added that, while StanChart does not need to raise cash, new chief executive Bill Winters may want to top up capital buffers by $3bn-$4bn “to give it significant leverage when the cycle turns next year”.

StanChart rose 3.2 per cent to 744p as the wider market extended its rally into a third day.

Monday’s FT (Again apologies for lifting. Promise no more after this)

shares hit a six-year low on Monday as worries grew over the depth of restructuring required under new chief executive Bill Winters.

The Asia-focused lender slid 1.7 per cent to 701.4p on reports it may cut a quarter of senior banking roles as part of a new business plan expected within the next few months.

Funding a deep restructuring would put further pressure on StanChart’s cash flow and capital ratios, which already include $49bn of commodities exposure and a further $43bn of risky Chinese and Indian debt, said analysts.

StanChart might need to raise as much as $5bn to cover bad loans, in addition to between $3bn and $4bn to boost its capital buffer to peer levels, forecast Morgan Stanley.

While the broker did not assume StanChart will need to launch a cash call, it put a one-in-five chance on China causing an Asian slowdown economic equivalent to the 1997 crisis, under which it said the shares would be worth 410p.

 

 

Sotong investors/ Some are moving on

INVESTORS SEEK SIGNAL IN THE NOISE Asian markets continued to soar on Friday, on the back of a global rebound on Thursday. The fear was palpable just days ago, but by the end of Thursday, the gloom had dissipated, DealBook’s Peter Eavis reports. The Standard & Poor’s 500-stock index had climbed 6 percent from the low of Tuesday’s closeby the end of Thursday.

The positive trend continued during Asian trading on Friday. Stocks in Shanghai closed up 4.82 percent after another late-day surge, while the Nikkei 225 finished the day up about 3 percent.

Bystanders were left struggling to comprehend the gyrations. Even Wall Street pundits are seeing mixed messages.

At Tuesday’s low, a bear market – when stocks decline 20 percent or more – did not seem out of the question. But after Thursday’s performance, it seemed plausible that the six-year bull market that started in 2009 might resume.

There was, in fact, a string of positive economic data released this week. Spain’s economy is now growing at a rate of over 3 percent, while revised gross domestic product numbers showed that the United States economy grew at a 3.7 percent rate.

There are still plenty of problems that could drag down global growth. China’s leaders have intervened to shore up the stock market, promote bank lending and loosen monetary policy, but these moves could well stifle the role of market forces.

The pressure on emerging markets is unlikely to go away. Companies that have borrowed in dollars may find it harder to pay back debt as their currencies lose value against the dollar. The resulting slow growth in developing countries might squeeze demand for goods and services from the United States and Europe, dampening growth there too.

If this happened, central banks like the Federal Reserve could step in to stimulate economies. But their intervention can create uncertainty over the long term as investors wonder whether stock and bond prices are rising because of central bank stimulus and worry about what will happen once that support is pulled away. Analysts see problems in the underlying economy that they say central bank stimulus, or quantitative easing, cannot fix.

When nobody knows when the stimulus will end, markets move unpredictably, as investors find different ways to interpret pronouncements from central bankers.

The one reassurance is that in recent history, short-lived stock market corrections that have not turned into bear markets typically have not stopped businesses from investing and people from spending.

 

James B. Stewart: Top Money Managers Take Their Losses, and Move On Fund investors are looking for opportunities in global stock markets, where share prices have been battered in recent days.

• NYT »

HoHoHo: StanChart has another problem

StanChart is expected to call for a rights issue by yr end. But mkt turmoil will make this difficult and expensive.

FT reports

“StanChart has been one of the hardest hit by the market turmoil. Shares in the bank, which is listed in London but specialises in Asia, the Middle East and Africa, have fallen a quarter this month and are down two-thirds in the past two years.

‘One investment banker said worries about slowing Asian growth and falling commodity prices risked creating “a perfect storm” for StanChart that would make it “much tougher to sell new shares” to investors.”

Note that FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10% of HSBC’s came from China proper.

And that “from trading at more than double its tangible book value, its market value is now a third less than its assets, a discount even to big victims of the financial crisis, such as Royal Bank of Scotland.”

HoHoHo

HoHoHo, StanChart got wrong CEO?

But first, shumething from the respected Terry Xu of TOC http://www.theonlinecitizen.com/2015/07/leaked-cables-on-the-failed-leadership-transition-of-temasek-holdings/

Standard Chartered Shakes Up Management Structure The British bank will be organized around three business lines, and top managers will report directly to the new chief executive, William T. Winters.

• NYT »

Did the recruiters at Standard Chartered and Credit Suisse get their dossiers mixed up?

Bill Winters is beginning his tenure as the new boss of the London-based emerging market lender at around the same time that Tidjane Thiam takes charge of the Swiss bank. Both are capable financial executives, but their experiences seem uncannily to better suit the other’s job. That they’ve wound up where they did, rather than where their resumes would suggest they should have, may say more about where the institutions they lead are headed.

Winters, who on July 19 reshaped StanChart’s management structure so that the heads of its major business units now report to him directly rather than to deputy Mike Rees, made his career leading JPMorgan’s investment bank in London … This would appear to eminently qualify him to run Credit Suisse. Its investment bank – stronger in the United States than elsewhere – competes directly with JPMorgan. And its private bank needs to more aggressively poach the very rich folks that Renshaw Bay, the firm he founded, calls customers.

Instead, $48 billion Credit Suisse got an insurance executive, French-educated Ivorian Thiam. True, he showed an affinity for deals as chief executive of Prudential, the UK insurer: an aborted attempt to snatch American International Group’s Asian operations was particularly bold. Private banking arguably should be run more like insurance than investment banking or trading.

Similar thinking prevailed when Barclays named a retail banker to the helm three years ago. But the British lender let Antony Jenkins go on July 8 partly because it needs someone capable of making an investment bank hum.

Though Credit Suisse may not be pre-eminent in Asia, Thiam’s experience there could help rectify that. Of course, that’s the region where $39 billion StanChart is strongest. And Africa, where Thiam was born, is one of StanChart’s prime growth areas. By contrast, Winters’ orientation has been to developed markets – places his bank shows zero interest in pursuing.

http://blogs.reuters.com/breakingviews/2015/07/20/shouldnt-credit-suisse-and-stanchart-swap-ceos/

HSBC’s 1979 gift keeps paying for itself

Li ka-shing accounted for 70% of HSBC’s global M&A advisory work in 2015 according to the FT.

HSBC sold him its stake in Hutchison Whampoa at a very special “For you only” price in 1979. This gave him face and showed that HSBC was aligning itself with the Chinese tycoons not the ang moh houses like Jardines. The then Oz CEO of Hutch said he could have gotten a better price for the stake. He was told by HSBC to mind his own business because he was an employee. HSBC had hired him to turn round Hutch which he.

Long term greed.

Shareholders need to find a new Sandberg and Purvis combination, with John Bond assisting. We know the damage (think sub-prime and Safra) that Bond can do when not supervised by adults. But I’m to harsh. During his tenure, HSBC had a one-for-one bonus and the ex-bonus share price almost reached the cum price. And there was a deeply discounted share issue to pay for the losses in the US.

But at the very least we need a  home-grown John Cryan*. Off with Gulliver’s head.

Gulliver sucks, like Anshu Jain and has to go. Capital markets investment bankers are not usually rational, cold and deep thinkers

As Lex rightly pointed out a few weeks ago, Hongkong Bank is trying to cut fat and grow muscle. Us sporty fatties know that this is real hard work and often fails. Taz why we are still fatties. Gulliver failed to trim fat and is lousy at PR (When Blatter said he couldn’t be expected to know everything at FIFA, I tot of Gulliver’s remarks on managing HSBC.). And now he wants to cut fat and grow muscle?

Failed in cutting costs and now wants to do something even hardEer? Pigs are likely to fly first. Or i’ll lose some serious fat and put some muscle.

He’d likely cut muscle and grow fat. Maybe expansion into the industrial heartland that is the Pearl Delta estuary isn’t the greatest idea? “Poll shows 25% of foreign businesses plan China job cuts,” is the top FT headline on my PC screen.

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*And if there’s no-one homegrown do what the Germans did, go find someone and put the chap in charge of the board’s audit committee. Great hands-on experience and sreep learning curve.

I always believe that in most cases there is always someone inhouse in a company with a strong corporate culture who can do the CEO’s job: the problem is finding the guy and the board having the balls to appoint the “unknown”.

Yellow peril horde avoided

These charts from FT tell in charts what the NYT Dealbook describes in words below:

 

 

CHINA MOVES CLOSER TO INCLUSION IN MSCI INDEX Though MSCI decided on Tuesday that it would hold off on adding Chinese domestic shares to its emerging market index, China is moving closer to joining the global benchmark, Neil Gough writes in DealBook. In its decision, the index company cited concerns over China’s cumbersome investment quotas, restrictions on money flows, and questions over the legal status of foreign shareholders. But MSCI said that in the coming months it would work with China’s main securities regulator to address the company’s concerns and that it may make a special decision to include Chinese stocks, also known as A-shares, in its benchmarks before the next scheduled annual review, which takes place a year from now. “It is clear from MSCI’s announcement today that it is only a matter of time before A-shares are added to global indexes,” Louis Lu, a portfolio manager at CSOP Asset Management, which invests in mainland shares, said in an email.

“The decision – and the waiting period – reflects the changing face of China’s financial system,” Mr. Gough writes. Over the last two years, the country has embarked on a series of overhauls to the financial system, but foreigners remain wary because they continue to face challenges in gaining access to the Chinese markets. Mr. Lu said that the delay by MSCI is likely to motivate the Chinese government to “accelerate the opening of its capital markets and provide greater accessibility to international investors in the near term to increase the chance of inclusion as soon as possible.” If China can assuage MSCI’s concerns, analysts estimate that the country is likely to see several billion dollars of new investment pour in initially, with that figure rising to more than $200 billion over time.

Think Indonesia is still the next big thing?

Rothschild Exits Investment in Indonesian Coal The British financier Nathaniel Rothschild’s five-year foray into Indonesia’s coal sector has come to an end after his investment vehicle, NRH Holdings, agreed to sell its 17.2 percent stake in Asia Resource Minerals, the London-listed company formerly known as Bumi, for 23.2 million pounds, or $35.3 million.

NYT Dealbook

It would be “the first and last time” he would get involved in Indonesia. He described the Asian country as “ungovernable”.

As the FT reported, he ended his quest to regain control of the miner, which he founded along with Indonesia’s Bakrie family in 2010, when the company was known as Bumi. He is estimated to have lost about £80m through the investment.

Instead he has agreed to sell his shares to an investor group backed by another Indonesian family, the Widjajas. Their £135m bid is now being backed by Asia Resource’s board. The company was once worth £3bn.

Widjajas 1 Jewish boy 0

Bakries 0 Jewish boy 0

Even M’sian successful tycoons have serious problems navigating Indonesian corporate jungles: think AirAsia.

 

HSBC: Desperately seeking home-grown John Cryan

As a long suffering Hongkong Bank shareholder (But to be fair, I was there when John Bond called a bonus issue and the share price post bonus issue almost reached the pre bonus share price and I was there when the bank called for a massive deeply discounted during the crisis rights issue), who is the inhouse John Cryan*?

John Cryan the incoming UBS boss is rational, cold, deep thinker and no show-off – (NYT Dealbook).

Hongkong Bank needs a rational, cold, deep thinker who is not accident-prone.

Gulliver sucks, like Anshu Jain and has to go. Capital markets investment bankers are not usually rational, cold and deep thinkers

As Lex rightly points out, Hongkong Bank is trying to cut fat and grow muscle. Us sporty fatties know that this is real hard work and often fails. Taz why we are still fatties. Gulliver failed to trim fat and is lousy at PR (When Blatter said he couldn’t be expected to know everything at FIFA, I tot of Gulliver’s remarks on managing HSBC.). And now he wants to cut fat and grow muscle?

Failed in cutting costs and now wants to do something EVEN hardER? Pigs are likely to fly first.

He’d likely cut muscle and grow fat. Maybe expansion into the industrial heartland that is the Pearl Delta estuary isn’t the greatest idea? “Poll shows 25% of foreign businesses plan China job cuts,” is the top FT headline on my PC screen.

—-

*And if there’s no-one homegrown do what the Germans did, go find someone and put the chap in charge of the board’s audit committee. Great hands-on experience and sreep learning curve.

I always believe that in most cases there is always someone inhouse in a company with a strong corporate culture who can do the CEO’s job: the problem is finding the guy and the board having the balls to appoint the “unknown”.

HSBC should return to its roots

No not as a narco-bank for the modern day equvalent of the Jardines, Mathesons and Sassons who were the drug barons of the early 19th century smuggling opium into China

https://atans1.wordpress.com/2012/07/29/hsbc-doing-gods-work/#comments

https://atans1.wordpress.com/2012/12/23/hsbc-great-customer-shareholder-service/

It should remember that the HS stands for Hongkong and Shanghai and that it was once known as Hongkong Bank (when it was kicked out of China) https://atans1.wordpress.com/2013/04/02/hsbc-london-greater-china-bank/#comments

HSBC should focus on its jewel in the East

Here’s a good idea that (almost certainly) will not be announced by HSBC at its big strategy day on Tuesday: split the bank in two, and let only the Asian business base itself in Hong Kong.

UBS analyst John-Paul Crutchley is the author of the inspired demerger idea, which starts by arguing that “taking the accumulated baggage of the last three decades home may not be the best course of action”.

Baggage may seem a harsh description of the non-Asian parts of HSBC, including its UK retail banking operation, but Crutchley reckons the Hong Kong Asia-Pacific bank accounts for 80% of HSBC’s market valuation while deploying less than half the equity. It is the jewel. Indeed, the analyst reckons HSBC’s share price could be twice the current 619p if the group had decided in the 1980s to stick with its Asian franchise and not pursue all the deals and acquisitions elsewhere.

That observation illustrates the fact that HSBC management’s head-scratching over where to base the bank is something of a sideshow. Dodging the full impact of the UK bank levy by redomiciling the whole shebang to Hong Kong might save $1bn a year. But, even if one assumes such a saving is worth $12bn in today’s money, that’s only the equivalent of 44p on the share price. The bigger question is: what’s the best way to manage this vast sprawling group?

A demerger is not a cure-all but it would deliver a few advantages. The Hong Kong end could concentrate on combating increased competition from Chinese banks. Rump HSBC could be more vigorous in allocating capital to the parts of the business generating better returns. And, since regulators are piling heavier capital and compliance costs on very big global banks, both bits might benefit from being part of smaller organisations.

It’s an idea HSBC is highly unlikely to adopt. But a dose of bold thinking is arguably exactly what it needs to awaken a slumbering share price. Flogging the Brazilian and Turkish operations – Tuesday’s likely highlights – probably won’t be enough to excite shareholders.

From Guardian

StanChart has Middle Eastern personnel problems

Standard Chartered Said to See Exodus in Mideast Operations The high-profile departures at Standard Chartered include the global head of Islamic banking, the chief executive for the United Arab Emirates and the chief executive for Bahrain, Bloomberg News reports, citing people with knowledge of the matter.

• BLOOMBERG NEWS

(From over a week ago)

Ho, Ho, Ho, StanChart should do this too

Up to 20,000 people (8% of current work force) could be sacked at HSBC as the chief executive attempts to pacify investors by reducing costs to improve profits (see below): Us shareholders getting shirty.

Temasek, Aberdeen and other major shareholders should tell StanChart to cut its headcount. Although an ang moh bank, many of its senior and middle managers are “countrymen”, especially here in S’pore (Brits and Hongkies don’t love FTs that much). Ask presedential candidate Tan Jee Say and PAP FT MP Ms Foo: They had Indian FTs ahead, behind and beside them. Rumour has it that Indian FTs sacked both for non-performance, replacing them with less experienced and qualified “countrymen”.

The chief executive of HSBC, Stuart Gulliver, is expected to signal next week that thousands of jobs are to be cut when he outlines his latest strategy for the global banking business, according to reports.

After he took the helm in 2011, Gulliver outlined the need for 25,000 job cuts from a global workforce that then stood at 296,000. The annual report for 2014 puts the current number of employees at 266,000, or 257,600 full-time equivalents.

Another 10,000-20,000 cuts are reported to be on the cards as Gulliver attempts to pacify investors by reducing costs in an effort to bolster profitability. He is also expected to use the strategy day on 9 June to provide an update on plans to further retrench internationally, including from Brazil and Turkey.

http://www.theguardian.com/business/2015/jun/01/hsbc-boss-stuart-gulliver-expected-announce-thousands-job-cuts

StanChart: Ho, Ho, Ho on a wing and a prayer

Last yr when Temasek gave a media presentation on its results, the question on StanChart elicited a BS reply but which when viewed today tells a lot about Temasek’s strategy in dealing with dogs with fleas: “Everything will be alright in the long term”. Err remember Keynes said in the long run, we are all dead.

QUESTION: Could you give us some comments on how do you see StanChart performing in your portfolio because over the last few years, especially in the last year and a half and looking at the outlook as well, they seem to be finding it quite challenging and there was a profit warning as well. What is your plan for StanChart? Do you think that… is that something that you would like to exit in the long term or you would treat StanChart as another Olam where you could actually try to take over?

RS: So look, it’s obviously not fair for us to comment on individual companies but all I would say is that yes, a lot of our stocks go through volatility. Standard Chartered is an emerging markets bank and like all emerging markets banks, the stock over the last year has been quite volatile. We, however, see ourselves as long term investors, short term volatility doesn’t concern us. We look at our investments over a longer term and use our value test to decide whether what we do with those stocks and we remain as an active investor always engaged with the companies.

Brit hedgies bearish on Asia/ Khong kanna wait longer?

From yesterday’s Lombard column in FT

Bearish hedgies have confined themselves to shorting shares in Asia-focused fund managers …

Crispin Odey is chief among Mayfair’s prophets of doom. The pioneering hedge fund manager expects collapsing eastern markets to tip the world back into recession. He has accordingly sold 6.4 per cent of Ashmore and 1.5 per cent of Aberdeen in expectation of their shares dropping. About 16 per cent and 8.6 per cent of these fund managers’ free floats have been sold short, according to Markit.

,,, Aberdeen, for example, is a skilled Asian fund manager in the view of pundit Mark Dampier of Hargreaves Lansdown. Short sellers probably just think Martin Gilbert’s group specialises in a product so dangerous that it would be transported in lead-lined vessels if it were a physical commodity.

Shares in asset managers offer geared exposure to the markets in which they specialise. Their overheads stay the same, at least temporarily, even as their assets balloon or deflate in response to fluctuating stock prices and fund flows. Bears are presumably shorting Asian stock index futures too, though less visibly.

If the bears are right, Khong and Blackstone may have to wait to receive their rewards from Sentosa

https://atans1.wordpress.com/2015/01/27/sentosa-cove-god-tells-khong-to-wait-5-yrs-2/

and

“Blackstone seems to look for distressed assets and deep value,” said Vikrant Pandey, an analyst with UOB Kay-Hian Pte in Singapore. “In the U.S. it lapped up mass market apartments for their rental yields and deep value. In Singapore the luxury segment is offering deep value compared to mass market.”

http://www.bloomberg.com/news/articles/2015-03-31/blackstone-singapore-property-bet-seen-winning-as-elections-loom

EMERGING MARKETS LOSE THEIR LUSTER

Ang mohs lose interest in emerging markets i.e. Asean. We’ll suffer the consequences given that our listcos often seen as safe proxies for investments in these places.

Once seen as a necessity in portfolios, investments in emerging markets have lately become less appealing because of messy politics and staggering economies, DealBook’s Landon Thomas Jr. writes. The dollar’s upward climb and the growing acceptance that the Federal Reserve will soon increase interest rates are also causing concern. Now, emerging-market currencies are suffering the consequences. The Turkish lira and the Brazilian real have touched multiyear lows against the dollar and the Russian ruble remains volatile. The Mexican peso and the Indian rupee are also under pressure.

In Brazil, allegations of kickbacks and bribes at Petrobras, the country’s energy giant, threaten to derail the economy, Mr. Thomas writes. In Russia, a war with Ukraine and President Vladimir V. Putin’s erratic ways ‒ along with a collapse in the price of oil ‒ have rattled investors. In Turkey, the country’s president has added to existing currency jitters by suggesting that the head of the Turkish central bank is beholden to foreign speculators because he has not lowered interest rates fast enough. And analysts say there are deeper vulnerabilities in these and other emerging markets that will become more acute as the dollar continues to race ahead.

But while currencies have been volatile, capital flows out of emerging markets have not yet approached the levels of a year ago. According to the Institute of International Finance, the trade group for global banks, global flows into emerging markets nearly halved last month, to $12 billion from $23 billion, with money flowing out of Brazil, Ukraine and Thailand and into Indonesia and India. Since the beginning of the year, investors in the world’s largest emerging-markets investment vehicle, the $38 billion Oppenheimer developing markets fund, have withdrawn just $400 million ‒ an amount by no means indicative of investor panic.

StanChart: New CEO (“inspired choice”*) lacks Asian experience

But this lack of Asian experience shows that the directors think that the main priorities for the bank are to shore up capital (rights issue coming) and mending ties with US regulators. He has great credentials for these tasks. Temasek seems to agree. it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”

(*Btw, “inspired choice” is FT’s description)

Still the lack of Asian experience could become a major issue because there is expected to be an exodus of experienced managers. He may find replacements but changes will be disruptive if not problematic.

STANDARD CHARTERED OVERHAULS LEADERSHIP The British bank Standard Chartered responded on Thursday to shareholders’ calls for change, announcing a sweeping management overhaul including the departure of its chief executive, its chairman, the head of Asian markets and several directors, Jenny Anderson and Chad Bray write in DealBook. In a move that surprised many, it named William T. Winters, the 53-year-old former head of JPMorgan Chase’s investment bank ‒ who was once seen as a candidate to succeed Jamie Dimon ‒ to take the helm.

Mr. Winters, who will join the bank on May 1 and become chief executive in June, will succeed Peter Sands, one of the longest-serving chief executives in British finance. He will receive a base salary of 1.15 million pounds, or about $1.8 million, as well as a pension and other benefits. As the bank’s leader, Mr. Winters will not have it easy. The bank has been hurt in recent years by regulatory fines and investigations and by its focus on emerging markets. It has slashed thousands of jobs, closed its stock trading and underwriting unit and is looking to cut $400 million in costs. Impairments for bad loans, including in the mining sector, have soared.

But Mr. Winters, an American, appears up to the task. In a call with reporters, John W. Peace, the chairman, said that Mr. Winters had “great respect among regulators, clients and the market” and a solid understanding of the global regulatory environment. Temasek Holdings, which owns almost 18 percent of Standard Chartered, declined to comment on whether it had pressed for management changes. But it said that it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”

NYT’s Dealbook

Related article: http://blogs.reuters.com/breakingviews/2015/02/26/stanchart-board-clearout-is-only-the-first-step/

 

Short S$ long Rupee, US$/ Strong Asean currencies

Morgan Stanley is recommending going long on the US dollar against the Singapore dollar, the Thai baht and the South Korean won and a long position in the rupee against the Singapore

Of course MS’s assumption is that US raises rates. Didn’t happen lasy yr when that was conventional wisdom.

But India looks pretty good: As Rivals Falter, India’s Economy Is Surging Ahead Long considered a laggard, India is seeing a lift in its stock market as multinational companies look to expand operations there or start new ones, The New York Times reports.

• NEW YORK TIMES

And according to Credit Suisse, India is a major bet for global EM managers these days. Funds on average hold over 15% of their portfolios in Indian companies, double the benchmark weighting. Gd for them: in USD terms, India’s up 41%

The Indian rupee, the Philippine peso, Thai baht and Taiwanese dollar have strengthened against the US dollar, making repayment of dollar debt easier in these places.

Btw, still long Ascendas India Trust.

HSBC, Superman and another Cina superhero

(Or “HSBC and the right Chinese tycoons”)

HSBC is traditionally Li’s go-to bank for financing deals with its dominant local presence and a dedicated team to cover Li’s companies earned US$136 million in fees.Goldman Sachs has emerged as Li’s favored bank, pulling in an estimated $220 million in fees from Li’s two main companies Hutchison Whampoa and Cheung Kong Holdings since 2000.

http://www.reuters.com/article/2015/01/25/us-likashing-fees-idUSKBN0KY0YR20150125

Do remember that HSBC’s fees are on top of the interest it gets on its loans to these cos.

HSBC sold him Wharf once upon a time (the ang moh MD of wharf was angry as he said he could have arranged a better price) and both never looked back.

Which reminds me of the man who laid the foundation that made HSBC a global bank. Lee Quo-wei, the former chairman of Hong Kong’s Hang Seng Bank Ltd died on 12th August 2013, age 95

After joining Hang Seng Bank in 1946, Mr Lee was among those who transformed Hang Seng into the second-largest Hong Kong-based lender from a money-changing shop founded 13 years earlier. He helped Hang Seng end a bank run in 1965 with a capital injection from Hongkong & Shanghai Banking Corp, now HSBC. Four years later he was part of the team that created the Hang Seng Index.

Mr Lee was appointed executive chairman of Hang Seng Bank in 1983, according to a statement from current chairman Raymond Ch’ien. He retired in 1998, becoming honorary chairman and later honorary senior adviser.

If Hongkong Bank did not buy Hang Seng (at a good price from Hongkong Bank’s perspective, Mr Lee used to say to HSBC’s ang moh executives), HSBC, would not have become so entrenched into the HK economy. Look at StanChart and taz the best HSBC would have become.

As a shareholder of HSBC, I thank him.

Btw, It may be hard to imagine but once upon a time Bangkok Bank, OCBC were the rising banks while StanChart and HSBC were seen as the relics (albeit still powerful and rich) of colonialism.

2015: FT thinks PinoyLand safe haven

An Indian FT loves PinoyLand. Why doesn’t he relocate to Manila instead of living here? Maybe no goons with guns here, no traffic jams?

Where can investors hide if emerging markets get into trouble? 

…

In Asia, the country that comes closest to a sanctuary is the Philippines. Growth is rapid, and government finances are in much better shape than before. In a 2015 beauty pageant, the Philippines might lose out to some larger economies which could reap a reform-led bounty. Still, India and Indonesia are risky bets, while South Korea is flirting with deflation.

http://blogs.reuters.com/breakingviews/2014/12/30/where-to-hide-in-an-emerging-market-rout/

But he has a point: https://atans1.wordpress.com/2015/01/03/three-asean-mkts-in-top-10-performing-mkts-of-2014/

More on why emerging markets can get into trouble in 2015

Emerging markets follow the biblical rule of seven lean years followed by seven rich ones, according to Harvard University economist Jeffrey Frankel. Every fifteen years, a crisis erupts.

By that measure, a rout is almost due. Developing economies have seen six years of brisk credit growth, fuelled by cheap global money. Private and public debt has ballooned. Since the end of 2007, the surge has been 90 percent of GDP in China, 30 percent in Brazil, and 40 percent in the Czech Republic.

These types of excesses typically stop abruptly. Seven years of frenzied petrodollar recycling in Latin America ended with a debt debacle in 1982. A seven-year boom preceded the 1997 Asian crisis. The trigger for the next rout could be an uncontrolled rise in U.S. bond yields, leading to an exodus of capital from developing nations.

 

The big picture: Two things to worry about in 2015

TEST FOR POST-CRISIS BANKING SYSTEM The market turmoil this week will test Washington’s efforts over the last five years to bolster the financial system, Peter Eavis reports in DealBook. Investors are stampeding out of risky markets, dumping junk bonds issued by American energy companies that have borrowed heavily to exploit the shale oil boom. A steep slide in the price of oil could now cause some of the companies to default, analysts say. But the most dangerous pain is occurring abroad, particularly in Russia, which is dealing with a currency crisis.

“Such difficulties echo the crisis that buffeted markets in the developing world in 1998, when Russia actually defaulted on debt denominated in rubles,” Mr. Eavis writes. Back then, contagion made its way onto Wall Street through an enormous hedge fund called Long-Term Capital Management that nearly collapsed after making bets way beyond its means. “The parallels with 1998 have led investors and regulators to ask if any similarly dangerous weak points exist today. And if they do, the question is whether the big banks are sturdy enough to bear the shocks,” Mr. Eavis writes.

For the moment, many specialists say the system is sufficiently girded. For one, the big banks today rely less on borrowed money to finance their trading and lending. And the Wall Street banks are not lending as much money to hedge funds and other investors to make highly speculative bets. Still, the big banks continue to rely on billions of dollars in short-term loans that could dry up in a panic. And some investors are concerned about geopolitical risks undermining economic confidence. The plunging oil price, for instance, could create even harder economic times for countries like Russia and Iran. But low oil prices might also constrain governments that have stoked instability.

 

BOND INVESTORS SKITTISH OVER EMERGING MARKETS The biggest energy companies in some of the biggest emerging markets ‒ Petrobras in Brazil, Pemex in Mexico, Gazprom in Russia ‒ sold billions of dollars of bonds to investors eager to capitalize on the high interest rates. But as the price of oil tumbles and local currencies plunge in value, those bonds are looking shaky, Landon Thomas Jr. writes in DealBook. Concerns are now mounting that their troubles will unleash a new wave of market contagion as big funds unload their stocks, bonds and other investments in these countries, Mr. Thomas writes.

The steep slide in the Russian ruble ‒ and the collapse of the country’s bond and stock markets ‒ has already rattled investors, driving a sell-off in Mexico and Brazil. Like Russia, these countries also relied on cheap money to bankroll their energy investments and fund their growth. Economists have also warned of broader economic ripples if big, state-run companies like Petrobras and Gazprom are cut off from the bond market and lack alternative financing options. The bond yields of all three companies, which move in the opposite direction of their underlying price, have surged in recent days.

The debt issued by Petrobras, Pemex and Gazprom can be found in the portfolios of bond investors worldwide, including BlackRock, Pimco and Franklin Templeton. Now investors are realizing just how risky these bonds are. Pimco’s Emerging Market Corporate Bond Fund, for instance, has seen its performance sag and investors withdraw their cash. The fund’s assets now stand at $496 million, compared with $1.5 billion in late 2013, suggesting it can’t weather too much more.

Dealbook

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Double confirm StanChart’s rogue bank & PAP apologist is a fool

Remember a “PAP is always right” man KPKBing when StanChart was charged that the reulator was a “rogue regulator”. StanChart then made the dean of LKY School look dumb, really dumb, by pleading guilty.

Double confirm that StanChart is a rogue bank and the PAP apologist is a fool because now: The management of Standard Chartered is facing renewed pressure after being placed under fresh scrutiny by US regulators.

Two years after being fined more than £400m for breaching US sanctions towards Iran, the bank revealed that a two-year deferred prosecution agreement (DPA) that was imposed at the time was being extended for three years.

The US authorities are now investigating whether Standard Chartered breached its sanctions rules beyond 2007, the period when the previous offences for which the bank was penalised took place.

http://www.theguardian.com/business/2014/dec/10/standard-chartered-management-us-regulators-investigation-sanctions

Looks like Santa didn’t bring Ho a nice Christmas present, giving her a turd instead. Juz look at share price chart from FT. [Chart added at 11.30 am]

Big StanChart shareholder still likes stock

The second biggest shareholder in Standard Chartered (after Temasek with around 27%) is standing by the embattled Asia-focused bank, continuing to buy the stock and insisting that nothing is “fundamentally wrong” with the company.

Martin Gilbert, chief executive of Aberdeen Asset Management PLC, said that funds run by his company have been “buyers of the stock in a fairly modest way,” despite a series of profit warnings that have sent Standard Chartered’s share price down 33% this year.

“We do not think there is anything fundamentally wrong with the bank,” said Mr. Gilbert, during a call to discuss Aberdeen’s results. He said that revenue growth had slowed but added that he would prefer the bank’s existing management team, headed by chief executive Peter Sands, to “sort it out” rather than looking for a replacement: “They have to really get on with it, I would say, and have a look at the costs.”

Aberdeen owns 7% of the bank, according to Factset, and, as of Oct. 31 2014, that had not changed since last year. Some Aberdeen funds have “topped up” their positions this month however, according to an Aberdeen spokesman.

The value of Standard Chartered shares held by the emerging markets-focused fund manager slid from a peak of $5.1 billion in February last year to $2.6 billion in October, according to Factset data. Part of that was due to an 8% reduction in the size of Aberdeen’s stake at the end of last year, but most was due to the bank’s falling share price.

http://blogs.wsj.com/moneybeat/2014/12/01/aberdeen-asset-management-stands-by-embattled-standard-chartered/

Temasek is one of the shareholders pressing for a change of mgt, other reports claim.

 

StanChart directors to push for chief’s succession plan

Above is FT’s headline for today.

Ho, Aberdeen, Blackrock and L&G baring their fangs? TRE ranters and other anti-PAP paper activists, pls note that Temasek has been pushing for a succession plan for some time.

But they can rejoice ’cause  sharesclosed at £9.39 on Friday – down from £18 less than two years ago.

They will be celebrating.

Related:

https://atans1.wordpress.com/2014/10/29/lousy-set-of-results-from-stanchart/

https://atans1.wordpress.com/2014/10/31/stanchart-gives-ho-more-problems/

 

Lousy set of results from StanChart

Standard Chartered has announced a 16% fall in operating profit because of a restructuring of its South Korean business and an increase in bad loans.

The Asia-focused lender said pre-tax profits fell to $1.5bn (£930m) in the July-to-September quarter compared to the same period a year ago.

Standard Chartered also warned full-year earnings would fall because of weak trading activity.

http://www.bbc.com/news/business-29797961

FT reports that some of the major shareholders have been pressing for the CEO to be sacked if things don’t improve soon. It also reports that Temasek  is “pressing for a clear plan of succession”.

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Problems at Temasek’s StanChart & DBS/ OCBC ovepaid for HK bank?

Standard Chartered has said first-half operating profits will be 20% lower than a year earlier, blaming a slump in income from its financial markets business.

The warning comes only three months after the Asia-focused lender reported its first fall in annual profits for a decade.

The UK bank had been expected to show a modest bounce-back this year.

But it said tougher regulations and low market volatility had hurt revenues.

…

Standard Chartered said its interest rate and foreign exchange trading had been particularly hit.

Chirantan Barua, an analyst at Bernsteinm said: “Cyclical headwinds are yet to arrive in full force in the bank’s two key markets – Hong Kong and Singapore. Not that Korea or India is out of the woods either.

“Pack that in with a challenging and uncertain capital regime that won’t be resolved until the end of the year and you have a great deal of uncertainty around the stock.”

http://www.bbc.com/news/business-28031504

StanChart shows the peril of investing in a stock listed overseas overseas that operates internationally. When profits were gd, sterling was weak against all major currencies. When sterling is strong, profits no gd. Note the value of sterling is irrelevant to the underlying profits or losses of  most of bank’s international operations.

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ON AN afternoon in early summer a prospective customer walked into the gleaming new branch established in Shanghai’s free-trade zone by DBS, a Singaporean bank that, like many of its international rivals, has long touted China’s great promise for its business. The lobby was empty, save for a guard playing a video game. A log showed that the branch was attracting just two or three visitors a day. DBS remains optimistic about China and says that most of its free-trade-zone transactions are routed through other locations. But the torpid atmosphere at the branch points to foreign banks’ struggle to crack open the Chinese market.

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To be fair to DBS its New Citizen CEO is not like the FT CEO of OCBC who may have blundered.

OCBC is offering to buy Wing Hang Bank’s shares for 125 Hong Kong dollars (US$16.12) each, in a big bet on China’s sustained economic growth. OCBC hopes the deal will springboard its growth into mainland China through the Hong Kong bank’s cross-border operations, and give it a foothold in Macau.

OCBC and Wing Hang Bank, one of Hong Kong’s last remaining family-owned lenders, began discussions on a possible deal late last year, and in January entered exclusive talks (after ANZ and UOB balked at the family’s asking price), which were extended twice as they argued over price.

The most recent comparable transaction (and bargaining benchmark for the family), the 2013 sale of Chong Hing Bank, went for 2.35 times book value including the value of a special dividend related to Chong Hing’s real estate. Accounting for the increase Wing Hang ascribes to the value of its property, the OCBC offer is closer to 2 times book value, a discount, compared to the Chong Hing deal, considering Wing Hang’s return on equity averaged 11.3% for the past three years, versus 7.8% for Chong Hing, according to Capital IQ.

Still OCBC shareholders were not that happy and its share price suffered.

What is unknown is the value of Wing Hang’s Hong Kong real estate, on some of the busiest shopping streets in the world. These could be worth even more than the bank says. A government index of Hong Kong retail properties has risen 400% over the past decade. Yet the company’s revaluation over the acquisition cost of the property is less than 100%.

If enough of Wing Hang’s minority shareholders refuse the price on offer, however, OCBC might prefer to raise it or offer* or bear the cost of maintaining the Wing Hang listing, and the cost of failing to fully integrate the bank.

Update at 6’00am: Here’s someone who thinks OCBC got sold a dog.

Wing Hang gives it greater opportunity to finance trade between China and other parts of Asia such as Malaysia and Indonesia, where it already has a foothold. Wing Hang’s strong funding base – loans were just 73 percent of deposits at the end of last year – is another advantage, as is its ability to capitalise on the yuan’s growing international popularity. About 17 percent of Wing Hang’s deposits are currently in the Chinese currency.

Nevertheless, the purchase brings risks to OCBC investors. China’s economic slowdown is creating credit wobbles, while Hong Kong’s property boom is bound to have led to some lending excesses. Meanwhile, rising interest rates in the United States could reverse the cheap deposits that have flowed into both Hong Kong and Singapore in recent years. Shareholders, who will probably be asked to help finance the purchase, may pay a high short-term price for OCBC’s long-term China ambition.

 http://blogs.reuters.com/breakingviews/2014/04/01/ocbcs-chinese-ambition-comes-with-hefty-price-tag/

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*OCBC has said the bid, a 50% premium to the then stock price, is generous.

BT: Comparing apples to oranges again?

(Or “Anti-PAP bloggers share LKY’s Hardest Truth)

Schroders plc and Baring Asset Management Ltd are avoiding Singapore stocks, the cheapest in South-east Asia, as slower economic growth in the region and cuts to Federal Reserve stimulus drive capital outflows.

The fund managers expect property to lead declines in Singapore amid a real-estate slump and the prospect of higher interest rates. The Straits Times Index was the worst-performing developed market in 2013, dropping 9.5 per cent since Fed chairman Ben Bernanke said in May that bond purchases may be reduced on signs of sustainable US recovery.

Surprised constructive nation-building (but mathematically challenged) BT reported things this way.

In US$ terms, among the bigger Asean stock mkts, only the M’sian stk mkt was better than us. Taz not saying much as only M’sia index ended in positive territory (juz) juz before hols

M’sia:          +3.2%

S’pore:          -6.0

Thailand:     -8.5

Indonesia:   -23.0

Got subversives in BT meh?

In the minnow Asean mkts Vietnam  was +24%, while Manila was +3.4% according to the MSCI indices.

Next yr is not going to be a gd yr for Asean countries, so the fact that Schroders and Barings are “avoiding” S’pore is no big deal for anti-PAP bloggers to brag about. Don’t know about you, but I get the sense that some of them hate the PAP so much that they end up cheering and being cheerful when S’pore tanks, for whatever reason. Looks like they agree with one LKY that S’pore and the PAP are one. They may hate him but they accept his premise?

Asean round-up returns next yr, god willing.

StanChart losing its shine

Standard Chartered had a bad start to the hols. Last Monday, its shares fell sharply on the possibility that it might call for a rights issue in the wake of weakish results. They’ve since recovered but there was another sharp fall on Fridaty, albeit from a much recovered position.

It has also been forced to strip its finance boss of his responsibilities to oversee the lender’s risk division following pressure from the Bank of England.

Richard Meddings, who has been group finance director of Standard Chartered since November 2006, had to hand over governance responsibility of risk to Peter Sands after the Prudential Regulation Authority said it was concerned with Meddings holding two conflicting roles, according to news reports.

In particular, the PRA, the Bank of England’s financial watchdog, was concerned with the potential conflict between Meddings’ finance responsibility and his duty to oversee risk operations.

All this against the background that it is no longer  an ang moh favourite because emerging markets are no longer in fashion. Their economies are slowing while the Western economies are recovering. And the wall of money is returning to the West.

BTW, those readers of TRE who bitch that Temasek lost money on StanChart and say that I didn’t know this fact are daft: all they needed to do is to google up StanChart’s 10 yr price. But if anyone wants to see the numbers: here’s why.

 

Time to buy emerging mkts?

Not yet according to JPMorgan

http://www.businesstimes.com.sg/premium/wealth/others/there-cyclical-case-emerging-markets-equities-20130706

Burma: Think small, think basic

“What Myanmar needs now are more 7-11s, not more Walmarts,” said Lex Rieffel, a senior fellow at the Brookings Institution. He was quoted by FT.

Garments, footwear, frozen seafood and other food products were among Burma’s main exports to the west until sanctions 10 to 15 years ago. Expect foreigners (think Chinese) to invest in these labour intensive businesses for a start.

 

A Chinese bizlady told the BBC: “In my factory in China, the salary of workers has been increasing steadily over the last few years,” she told me during her recent visit to Bangladesh to look for opportunities here.”It has reached around $400 to $500 (£250 – £315) a month per worker. If I continue to produce there, our business will disappear.”In Bangladesh the average monthly salary for garments workers is only around $70 to $100. If I produce here, price is much more competitive.”

She can now scout out Burma, next door.

Finally for this week, Myanmar launched its first debit cards on Friday, giving customers the chance to use plastic for shopping, dining and travel for the first time in the latest leap forward for its cash-dominated economy.