36.29 +0.03 (0.08%)
After hours: 5:14PM EDT
|Bid||36.31 x 3200|
|Ask||36.32 x 2900|
|Day's Range||36.20 - 36.50|
|52 Week Range||35.62 - 45.40|
|Beta (3Y Monthly)||0.50|
|PE Ratio (TTM)||10.49|
|Forward Dividend & Yield||2.00 (5.53%)|
|1y Target Est||42.81|
U.S.-based Citigroup Inc and French bank BNP Paribas are caught up in the U.S. criminal case against the chief financial officer of China's Huawei Technologies, according to newly available documents. The banks were named in documents released on Tuesday after a hearing in British Columbia Supreme Court, where Huawei CFO Meng Wanzhou is fighting extradition to the United States on bank fraud charges. The two are among at least four financial institutions that had banking relationships with Huawei when Meng and others allegedly misled them about its business dealings in Iran despite U.S. sanctions.
(Bloomberg) -- HSBC Holdings Plc, the bank that shook up its senior leadership this month, is considering a bid for Asian operations being sold by Aviva Plc as it seeks ways to diversify its business in the region, people with knowledge of the matter said.London-based HSBC is in the early stages of weighing an offer for at least part of Aviva’s Asian business, the people said, asking not to be identified because the information is private. A deal would help HSBC bolster its insurance presence in Singapore and other parts of Southeast Asia, the people said.Aviva, the U.K. insurance conglomerate whose shares have dropped 27% in the last 12 months, confirmed in August it’s examining options for its Asian business as new Chief Executive Officer Maurice Tulloch’s turnaround takes shape. The company’s operations in the region could be valued at about $3 billion to $4 billion, with an official process slated to kick off later this year, Bloomberg News reported earlier.Other suitors are also considering bids for the Aviva assets, the people said. No final decisions have been made, and there’s no certainty the deliberations will result in a transaction, the people said. Representatives for HSBC and Aviva declined to comment.Aviva’s American depositary receipts rose 2.6% at 12:13 p.m. in New York over-the-counter trading. The company’s London-listed shares rose 0.1% to close at 358.50 pence on Wednesday. HSBC rose 0.2% to 598.30 pence in London.Earlier in August, HSBC abruptly ousted Chief Executive Officer John Flint after just 18 months. Chairman Mark Tucker was increasingly at odds with Flint over the CEO’s focus on expansion in China, people with knowledge of the matter said at the time. The head of HSBC’s China business resigned the same week, and the bank unveiled a new round of job cuts that could eliminate 4,000 roles.Hong Kong, where HSBC generates more than half of its pretax profit, has for weeks been roiled in protests that have left the business and financial elite increasingly concerned about the city’s growth prospects. The bank’s presence in the rival Asian hub of Singapore is smaller than some international competitors such as Standard Chartered Plc.Aviva has been capitalizing on the surging ranks of middle class consumers in Asia, many of whom are newcomers to life insurance policies. Singapore is the company’s largest market in Asia, with its life insurance unit there generating 1.3 billion pounds ($1.6 billion) in new business and 141 million pounds in adjusted operating profit last year, according to its latest annual report.(Updates with share prices in fifth paragraph.)\--With assistance from Jan-Henrik Förster, Will Hadfield and Ambereen Choudhury.To contact the reporters on this story: Dinesh Nair in London at firstname.lastname@example.org;Manuel Baigorri in Hong Kong at email@example.com;Stefania Spezzati in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Aaron Kirchfeld at email@example.com, ;Sree Vidya Bhaktavatsalam at firstname.lastname@example.org, Ben Scent, Amy ThomsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- It’s hard not to see HSBC Holdings Plc’s exclusion from China’s interest-rate reform as a snub.Hong Kong’s biggest bank wasn’t included in a list of 18 lenders that will participate in pricing for a new loan prime rate that the People’s Bank of China will start releasing Tuesday. The roster includes foreign lenders Standard Chartered Plc and Citigroup Inc., which have smaller China businesses than HSBC.It’s the latest sign that all may not be well in HSBC’s relations with Beijing, after a turbulent period that has seen the departures this month of Chief Executive Officer John Flint and the bank’s Greater China head, Helen Wong. HSBC shares fell 13% in Hong Kong this year through last Friday, compared with a decline of less than 1% in the benchmark Hang Seng Index.London-based HSBC, which is also Europe’s biggest bank, has made China a key plank of its growth strategy. The lender is the third-largest corporate bank in the country by market penetration, according to data provider Greenwich Associates LLC. That places it ahead even of China Construction Bank Corp. and Agricultural Bank of China Ltd., two of the nation’s big four state-owned lenders. Standard Chartered and Citigroup don’t rank among the top five, according Gaurav Arora, head of Asia Pacific at Greenwich.It could be argued that HSBC’s focus on big corporate clients means it’s less attuned to the loan market for small and medium-size enterprises that are the focus of China’s changes to its interest-rate regime. That would be a stretch, though. Corporate banking is a scale game. And even though StanChart may have a greater preponderance of smaller clients, HSBC surely has many similar customers. Citigroup’s inclusion makes more sense: It’s the only U.S. bank in China with a consumer-lending business that spans credit cards to SME loans. The list also includes less influential domestic lenders such as Bank of Xian Co. Those searching for reasons why HSBC may have fallen into China’s bad books may point to Huawei Technologies Co. Liu Xiaoming, China’s ambassador to the U.K., summoned Flint to the embassy earlier this year to interrogate him over the bank’s role in the arrest and prosecution of Meng Wanzhou, the chief financial officer of Huawei, the Financial Times reported Monday. The then-CEO told him HSBC had no option but to turn over information that helped U.S. prosecutors build a case against Meng, the FT said. On Aug. 9, an HSBC spokeswoman denied that Wong’s departure as Greater China head was linked to any issue involving Huawei, pointing out that she announced her resignation before Flint’s departure. Still, the bank has faced criticism in China’s state-owned media over its role in the case. The way HSBC helped the U.S. Department of Justice acquire documents concerning Huawei was unethical, the Global Times reported previously, citing a source close to the matter. The bank was likely to be included in China’s first “unreliable entity” list of companies that have jeopardized the interests of Chinese firms, it said.The timing of China’s interest-rate snub won’t do anything to quell jitters, coming a day after Cathay Pacific Airways Ltd. CEO Rupert Hogg resigned amid criticism from Chinese regulators over its stance on employee participation in Hong Kong’s protests. Beijing is becoming more muscular in its attitude to the city’s unrest and foreign-owned businesses aren’t being spared. In an increasingly politicized environment, even a business that’s been around for 154 years will have to tread carefully. To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
When Liu Xiaoming, China’s ambassador to the UK, gave an address at HSBC’s Chinese new year party in February, he was full of praise for the bank. Speaking in the walnut-panelled United Nations Ballroom ...
British stocks on Thursday crumbled on concerns over the global economy in the wake of the U.S.-China trade war, even as data showed its own consumers have been resilient.
The bank's head of New England corporate banking, a newcomer to Boston, wants to make HSBC a bigger name in Boston executive suites and boardrooms.
John Flint, then-HSBC chief executive, declared in June of last year that it was time for the bank "to get back into growth mode".Under his predecessor Stuart Gulliver, the lender, once known in its advertising as the "world's local bank", had cut thousands of jobs, shrunk its global footprint from 87 countries to 67 and spent tens of millions of dollars to revamp its compliance following a scandal over its money-laundering controls that saw it pay US$1.9 billion in a settlement with US authorities.The outlook was generally positive at the time: central banks, including the Federal Reserve, had begun tightening after a decade of historically low interest rates. And Flint was betting HSBC could further expand its business in fast-growing Asian markets which account for about half of its revenue. HSBC's CEO makes surprise departure as bank seeks new growthFlint's unexpected exit shows the lower tolerance that HSBC's directors have for underperformance, particularly as the lender faces more challenging market conditions, according to analysts. The bank missed a key target for expense growth last year and a more positive first half opened the door for a smooth exit.Mark Tucker, the HSBC chairman, said last week the decision to replace Flint was about the bank's future and cited the "pace, ambition and decisiveness" of interim CEO Noel Quinn as "absolutely essential to capitalise on the opportunities ahead".The abrupt departure of Flint was a "surprise" to many in the company, executives say, but comes as the bank faces a much more difficult operating environment than it did when Flint, a career HSBC executive, took over as CEO in February 2018.The year-long US-China trade war cut into business sentiment globally as some companies were delaying future investments, sending some investors to the sidelines as recession fears grow. Sogo operator worried over outlook as protests, trade war hit salesHong Kong " HSBC's biggest market " has been hit by two months of protests, which is starting to hurt the economy, even though the bank said the effect on its business has been "limited" so far.Plus, central banks are becoming dovish as the outlook for the global economy has weakened, which could put pressure on the bottom lines of HSBC and other banks, analysts said."Global uncertainty has changed sentiment and further [interest rate] rises are unlikely, and we may see some of the improved net interest margin reverse in 2019," Paul McSheaffrey, head of banking and capital markets at KPMG China, said in a recent report.Another nail in the coffin for Flint may have been HSBC's share price."Whilst the abrupt CEO's exit without the appointment of a successor shows weaknesses in corporate governance, it also signals the board's intention to more aggressively target underperforming businesses and cost structure, which " if appropriately executed " would improve efficiency and profitability of the group," Alessandro Roccati, a Moody's Investor Services senior vice-president, said.S&P; Global Ratings said the ousting of Flint shows an "increased ruthlessness" on the part of HSBC's directors when it comes to middling performance.HSBC executives said that the abrupt departure of John Flint was a "surprise" to many in the company. Photo: Reuters alt=HSBC executives said that the abrupt departure of John Flint was a "surprise" to many in the company. Photo: ReutersHSBC expects to take six to 12 months to find a replacement and look at candidates both inside and outside the bank."I think we're looking again for somebody with ability to deal with scale, ability to deal with multiple geographies, ability to understand Asia, ability to understand banking, again, both tactically and strategically focused, someone who will continue to move with pace and think about the simplification, and somebody who has a great ambition for the group," said Tucker. HSBC's Greater China head Helen Wong quitsThe bank has been quietly reassuring officials in Beijing that it had an obligation under financial regulations in the US and a court-ordered monitorship at the time to comply with requests for information by authorities about its dealings with Huawei, according to people familiar with the effort.HSBC has declined to comment, saying it is not a party to the criminal case against Meng.HSBC has had to reassure Beijing over its involvement in the US investigation of Huawei Technologies, after its CFO Meng Wanzhou was arrested in Canada. Photo: Reuters alt=HSBC has had to reassure Beijing over its involvement in the US investigation of Huawei Technologies, after its CFO Meng Wanzhou was arrested in Canada. Photo: ReutersLast month, HSBC also was ordered by the Malaysian government to transfer more than 1 billion ringgit (US$238.5 million) from an account held by the state-owned China Petroleum Pipeline Engineering in a dispute over a pipeline project that was suspended last year. HSBC has declined to comment.There have been calls by some netizens in China to add HSBC to the unreliable list since word of the bank's cooperation in the Huawei case and the Malaysian seizure became public. On July 15, the day after the funds seizure in Malaysia, a blog operated by China's state-owned Beijing Daily newspaper started publishing calls to put HSBC on the unreliable list.The Chinese Ministry of Commerce, responsible for the list, has said it is still in the process of preparation and declined to comment on specifics.Staying on Beijing's good side is critical as mainland China becomes a larger component of the bank's business, particularly as the country's financial services industry opens further.In the past four years, HSBC has opened the first majority-owned joint venture securities company in China, debuted a sole-branded credit card and doubled the size of its workforce. In July, the bank said that it was creating a US$880 million technology fund to provide financing to early stage companies in the Greater Bay Area.Tucker, the HSBC chairman, said that the company remains committed to its strategy, which is heavily reliant on growth in mainland China and Hong Kong.Operating income, which is similar to revenue in the US, rose 5.9 per cent to US$7.54 billion in the bank's Asia business in the second quarter. HSBC to cut 2 per cent of its workforce as bank looks to reduce costsDespite the positive quarter, HSBC said last week that it would cut less than two per cent of its workforce. That was less dramatic than the 18,000 job cuts announced at Deutsche Bank in July, but represented an admission that the bank, which employs nearly 238,000 people worldwide, needed to reduce the pace of its expense growth to achieve its target for returns in 2020."We could see the revenue outlook softening. We knew to get to 11 per cent [return on tangible equity] we had to get there a different way," Ewen Stevenson, the HSBC CFO, said.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
It is inexcusable that the chair of HSBC (albeit with a fraction of the time), the outgoing CEO, the board and last but not least major influential institutional investors failed to pick the correct candidate. It is surprisingly unlike HSBC to act with such speed and therefore one presumes with a sense of urgency. Institutions do not wish to see another penny “invested” in the investment bank.
(Bloomberg Opinion) -- A 12,000-foot-high Alpine mountain range and 250 miles separate AMS AG’s base in the Austrian town of Premstaetten and Osram Licht AG’s Munich headquarters. The Austrian firm must overcome much bigger obstacles in its attempted takeover of the German lighting-maker. After months of toing and froing, AMS finally tabled a 3.7 billion-euro ($4.1 billion) approach for Osram late on Sunday. The deal would trump a 3.4 billion-euro bid from Bain Capital and Carlyle Group LP that Osram has already accepted. From that perspective, it looks very attractive to the German company’s investors. The approach offers a glimmer of hope: the Bain-Carlyle bid appears dead in the water after being rejected by Allianz Global Investors, Osram’s biggest shareholder, last week.The difficulty is on the AMS side. Chief Executive Officer Alexander Everke hasn’t yet done enough to warrant lifting the company’s debt ratios to levels well above most peers in exchange for returns in the near term that are likely to be below capital costs, based on planned synergies and analyst earnings forecasts. The company is confident returns will exceed costs in the second year after the deal completes. That will be contingent on hitting some ambitious savings targets. In Everke’s three years at the helm, AMS has generated significantly lower returns for shareholders than the Philadelphia Stock Exchange Semiconductor Index, despite major outlays on acquisitions and manufacturing capacity. Sure, AMS has improved its sensor offering and, after a bumpy few years, might finally be starting to demonstrate returns on that spending.But integrating Osram, with its 24,300 employees globally, is a significantly greater challenge than AMS’s biggest acquisition to date: The 2016 deal to buy Heptagon, with just 830 employees, for $570 million.To fund the takeover, AMS plans a 1.5 billion-euro equity increase, underwritten by UBS Group AG and HSBC Holdings Plc, which 50% of shareholders will need to approve at an extraordinary general meeting in the fourth quarter. In return, it will get a company whose core automotive market is shrinking.The offer is a gamble on carmakers adopting more and smarter sensor technology for the vehicles they are still able to sell. Osram’s strongest business has traditionally been car headlamps, but in recent years it has expanded into different parts of the optical spectrum, such as infra-red. AMS is optimistic that it can package those products with its sensors to work in autonomous cars (which might need laser-based environmental sensors) and for in-cabin sensing (to tell, for example, if the driver has fallen asleep).It seems a hell of a lot of upfront risk given that it’s unclear what kind of sensors autonomous cars will need when they hit the roads on a significant scale in perhaps a decade’s time. AMS was unwise to invest so heavily in smartphone sensors when it did. But the automotive sensor market is not the best way to diversify.\--With assistance from Chris Hughes.To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: Stephanie Baker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The new digital lending platform, powered by the leading end-to-end technology platform Amount, provides U.S. consumers with a simple way to apply for personal loans online
HSBC Holdings' Greater China Chief Executive Helen Wong is leaving, a bank spokeswoman said on Friday, the second senior departure this week after the ousting of group CEO John Flint. Wong has decided to leave to pursue an external opportunity, the spokeswoman said, adding that her role will be dropped and the Greater China region, which includes Hong Kong and Taiwan, would be run by the respective country heads. Greater China is HSBC's biggest profit driver, but the banking sector outlook in the region has been clouded by the tit-for-tat tariff war between China and the United States, as well as unrest in Hong Kong.
HSBC, the largest lender in Hong Kong, has lost its second senior management within a week.The bank's Greater China chief executive Helen Wong Pik-kuen has resigned and will start on leave from Saturday, according to an internal memo seen by the South China Morning Post.Wong, who joined HSBC in 1992, "has decided to leave HSBC to pursue an external opportunity", according to the memo sent by her boss, Peter Wong Tung-shun, deputy chairman and chief executive of Asia-Pacific, to all 47,000 staff in the Greater China region which she oversaw.Wong's departure comes after the lender's surprise announcement on Monday that its group chief executive John Flint has left after 18 months on the job.While Flint will be replaced on an interim basis by global commercial banking head Noel Quinn, there will be no replacement for Wong's position, and her responsibilities will be shared by the four heads of Hong Kong, Macau, Taiwan and mainland China, an HSBC spokeswoman said."Our four CEOs across Greater China are in a strong position to continue collaborating to deliver our Greater China growth strategy. Therefore, there will be no replacement," the spokeswoman added.They are Diana Cesar in Hong Kong, PH Lau in Macau, David Liao in mainland China and Adam Chen in Taiwan.The region under Wong was the largest at HSBC Group in terms of staffing, with 21,000 employees in Hong Kong and 26,000 on the mainland, which together represents 20 per cent of its 235,000 global staff, according to figures from the bank.It is also a challenging region as she needed to help customers in Hong Kong and China deal with the impact of the year-long US and China trade war.Financial Secretary Paul Chan Mo-po on Wednesday warned that Hong Kong might slide into recession in the third quarter because of the trade war and the increasingly violent protests in the city against the now-abandoned extradition that has now entered a third month. HSBC helps China's manufacturers expand their production lines in Southeast Asia to dodge trade war tariffsDespite the headwinds, HSBC's pre-tax profit from its Hong Kong operations still rose 11 per cent to US$3.15 billion in the second quarter, the bank said on Monday.The spokeswoman said Wong's decision to leave has "no connection with Huawei, no connection with former group chief executive John Flint leaving the bank, and no connection with the job cut plan mentioned on 5 August".HSBC on Monday announced a plan to cut less than 2 per cent of its workforce to reduce the rate of its cost growth in a more challenging market environment.Wong had worked briefly at other lenders before joining HSBC and worked in many of its departments.Peter Wong's memo noted her contribution in maintaining HSBC's presence as the largest foreign bank on the mainland. "During her tenure as chief executive of Greater China she was a strong supporter of RMB [yuan] internationalisation and sustainable finance as well as HSBC's presence in the Pearl River Delta."This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
HSBC said its Greater China head was resigning from the bank, in the second high-profile departure from the lender in a week following the ousting of chief executive John Flint. A spokesperson for HSBC said Helen Wong, who has been chief executive of Greater China for the bank since 2010, was leaving to pursue a job at another company. Ms Wong has worked for the lender for almost 30 years.
(Bloomberg Opinion) -- What’s the first thing that comes to mind when someone mentions “remittance”? Expatriates sending money home. Second? Lousy exchange rates.While exorbitant currency spreads and hefty bank charges are the norm for payments that cross national borders, the impression that they mostly affect individuals is wrong. Annual people-to-people transactions amount to $400 billion a year. People-to-business payments – like sending fees to schools overseas – come to another $1.5 trillion. Those are substantial figures, but they pale before the $124 trillion of business-to-business transfers, according to McKinsey & Co.A large multinational may be able to squeeze a saving from its corporate bank, but SMEs and individuals get routinely shortchanged. The challenge is acute in Asia, where money transfer costs are three-fifths higher than in Europe or the U.S. Capital controls and fragmented domestic banking industries breed inefficiency, which helps banks garner $85 billion in annual revenue – $38 billion more than what they make from cross-border transfers in North America. That hurts the competitiveness of smaller Asian firms.On their own, banks would have done nothing to alter the status quo. But a rising challenge from fintech means better rates are coming to Asia, and not a day too soon. The export-led region is deeply enmeshed in global supply chains. (The disruption caused by the China-U.S. trade war has demonstrated that amply.) Many of the small and midsize firms that move anywhere between $11 trillion and $15 trillion internationally are in Asia. To that add digital consumption, which is growing everywhere but exploding in the region. Finally, every small saving on Western Union transfers by Indian, Bangladeshi and Filipino overseas workers gives them more ability to consume other things.All this makes it crucial that clients in Asia – both individuals and small firms – get fair prices. But what’s fair? Zero, or a number very close to it, Harsh Sinha, the London-based chief technology officer at TransferWise Ltd., tells me. Currently, the global average for the payment industry ranges between $25 and $35. When the lender receiving customers’ funds needs a correspondent bank in another part of the world to complete the transaction, costs pile up. Something as innocuous as buying a cup of coffee with a Hong Kong credit card in Bangkok is punished for making unforeseen demands on local banking liquidity.TransferWise, an eight-year-old startup that’s now valued at $3.5 billion, came into being when its two Estonian-born co-founders, Taavet Hinrikus and Kristo Kaarmann, stumbled upon a solution: If one of them had pounds and needed kroons, the Estonian currency, and the other had the opposite need, they could be of mutual help. Since two flows can’t be perfectly matched, TransferWise uses algorithms to predict which country will need liquidity, when, and top up the bucket accordingly with its own funds. Customers get mid-market exchange rates – and not the vastly different “we buy at/we sell at” prices displayed by money-changers. TransferWise says it’s up to eight times cheaper than banks.Challenger banks reckon that fintech can help them shake the dominance of entrenched rivals. Sinha says TransferWise is open to bundling its money transfer service with another bank’s app, something it has done with Monzo in the U.K., and Bunq in the Netherlands. Now’s the time for such partnerships in Asia. As many as eight virtual banks will be arriving soon in Hong Kong. Singapore may license up to five. Taiwan has approved three. More are coming. Traditional banks must raise their game to keep customers from fleeing to the likes of TransferWise and Revolut Ltd., which are held up by researcher Oliver Wyman as examples of fintech specialists “capturing share from banks and driving down margins.” HSBC Holdings Plc, which together with a subsidiary has a lock on 30% of Hong Kong’s deposits, started offering a “first ever” 12-currency debit card to its top-end customers last month. That still doesn’t match the 40-currency card that TransferWise is bringing to Singapore, its Asia-Pacific headquarters, later this year, though it does take care of the paying-for-coffee problem in Bangkok.TransferWise is already profitable and confident that as volumes grow from 4 billion pounds ($4.9 billion) a month, its costs per transaction will go down. Still, it did raise some fees last year for U.S. customers after conceding its previous charges were unsustainable. But banks can’t be smug. The revolution that apps like WeChat Pay and Alipay ushered in for domestic payments in China has caught on. As local-currency payments in Asia become instantaneous, cashless and cheap, customers will demand similar features when they remit funds overseas.After all, it’s not like an intermediary needs to move a sackful of dollars anywhere. As Sinha says, it’s just data hopping from one computer to another. Why should it cost $25? To contact the author of this story: Andy Mukherjee at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
A swift turnaround at HSBC's investment bank - the Global Banking & Markets (GBM) business run by Samir Assaf - would reassure investors and could spare Chairman Mark Tucker the task of finding someone else to fill one of banking's toughest roles, investor and HSBC insider sources said. "HSBC's culture is not that easy to shift and it seems clear Mark [Tucker] is intent on that.
(Bloomberg) -- The Philippines cut its benchmark interest rate by a quarter-percentage point Thursday, in line with most forecasts, resuming policy easing after economic growth and inflation slowed.Bangko Sentral ng Pilipinas reduced the overnight borrowing rate to 4.25%, it said in a statement. Twenty-three of the 26 economists surveyed by Bloomberg predicted the decision.“Weaker global economic prospects continue to temper the inflation outlook,” central bank Governor Benjamin Diokno told reporters after the decision. That environment “provides room for a further reduction in the policy rate as a preemptive move against the risks associated with the weakening global growth.”The central bank cut its inflation forecast for the year to 2.6% from 2.7% at its June meeting. It lowered next year’s inflation forecast to 2.9%, from 3% earlier.“We think the worst is likely behind the Philippine economy this year, but stronger external headwinds and downside risks to investment give scope for another 25 bps cut by year-end,” Bloomberg Economics’ Justin Jinemez wrote.Policy makers across the region are taking stronger steps to counter global economic risks after the Federal Reserve’s rate cut last week gave them room to pursue looser monetary policy. Central banks in India, New Zealand and Thailand cut rates on Wednesday, each taking more aggressive action than economists had predicted.Diokno said earlier this week he sees about 50 basis points of interest rate cuts for the rest of the year, with the timing likely to depend on economic data.Data on Thursday showed the Philippine economy grew 5.5% last quarter, the slowest pace in more than four years, and well below the median estimate of 5.9% in a Bloomberg survey of economists.What Bloomberg’s Economists SayWe think the worst is likely behind the Philippine economy this year, but strong external headwinds and downside risks to investment give scope for another 25 bps cut by year-end.Click here to read the full report\-- Justin Jimenez, Asean economistDiokno said a projected recovery in household spending, as well as accelerated implementation of government infrastructure plans, should keep growth from slowing further.The central bank cut interest rates by 25 basis points in May and paused in June. Inflation eased to a two-year low of 2.4% in July from 2.7% in June, and economists predict price pressures will remain benign, given lower food prices, easing oil costs and a high statistical base effect.Rate cuts aren’t the only tool in the central bank’s kit. Noelan Arbis, an economist at HSBC Holdings Plc in Hong Kong, predicted the central bank would lower the reserve requirement ratio for banks by 100 basis points by year-end -- freeing up cash for lending -- in addition to cutting the benchmark interest rate by another quarter-percentage point.Deputy Governor Francis Dakila told reporters lowering the ratio is a “live discussion of the board,” although members didn’t address it in today’s policy meeting. Officials said they are waiting to see how liquidity from prior reserve ratio cuts filter through to the rest of the economy.“It shows that the BSP is not over-reacting to the lower-than-expected GDP print this morning, which was largely driven by weak infrastructure investment as a result of fiscal spending delays,” Arbis said. “We think a 25 basis-point cut still enables the BSP to provide support for the economy.”(Updates with comment from central bank governor in third paragraph)\--With assistance from Clarissa Batino, Andreo Calonzo, Claire Jiao, Siegfrid Alegado and Lilian Karunungan.To contact the reporters on this story: Ditas Lopez in Manila at email@example.com;Cecilia Yap in Manila at firstname.lastname@example.orgTo contact the editors responsible for this story: Cecilia Yap at email@example.com, ;Nasreen Seria at firstname.lastname@example.org, Michael S. ArnoldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Michael Privitera joined the bank after high school and today works out of HSBC’s administrative office in Depew.
(Bloomberg Opinion) -- The European Central Bank will doubtless cut its overnight deposit rate even deeper than the current -0.4% at its next meeting in September. That doesn’t mean it’s the right way to try to breathe life into the euro zone economy. It might just make things worse.By the time the ECB’s governing council gets around to making the cut official, it’s highly likely that the benchmark yield on 10-year German bonds will already be deeper in negative territory than the central bank’s deposit rate. HSBC analysts reckon 10-year bunds will end 2019 at a mind-boggling -0.8%. You now have to pay to hold any kind of German debt from the shortest maturities right out to three decades. As my colleague Mark Gilbert wrote this week, the bond market has gone through the looking glass.Given the expectation of the ECB cut, it’s no surprise that traders are pricing in more stimulus. But we’re entering dangerous territory here, not least because the plunge in yields is also dragging down long and ultra-long maturity bonds. There’s something seriously wrong in the euro area when lending money to Austria for 100 years produces an annual return of about 75 basis points.That longer duration bonds are behaving like this isn’t just a concern for yield-starved bond investors, it also represents a potentially critical problem for the real economy. That’s because it removes the incentive for the finance industry to take risk: If lending overnight yields only slightly less – or sometimes even more – than lending for longer-term investment, then why bother extending credit? German debt already yields more for three-month paper than it does three-year bonds, a phenomenon known as an inverted yield curve. Such inversions usually indicate a recession is headed our way, but they can actually cause recessions too if they’re prolonged. They create a disincentive to invest if the so-called “time value of money” (the higher cost that debt issuers usually pay for borrowing longer) stays reversed for a protracted period.The recent plunge in yields in the 10-year to 30-year range is the really scary bit of this phenomenon and is the last domino to fall. The longest maturity debt is falling in yield faster than shorter-dated bonds. The traditional yield curve, where interest rates rise as durations get longer, is imploding.This creates big problems for Europe’s finance firms. The fundamental nature of banking is to borrow short and lend long. Having overnight borrowing rates that are higher than 10-year bond yields turns everything upside down, resulting in collapsing net interest margins and profitability.It creates even bigger problems for the continent’s savings industry. Pension funds and insurers in need of long-term assets to match their liabilities have been forced into a hunt for any positive yield. With the ultra-long yields plunging too, where can they turn now?One can sympathize with the ECB chief Mario Draghi, who has recognized the limitations of monetary policy in fixing the euro zone’s ills and has pleaded with the bloc’s political leaders to use fiscal policy to help (a plea that Berlin appears ready to ignore). It’s hard to think about raising rates when everyone else is cutting, from Jay Powell at the U.S. Federal Reserve to Adrian Orr at New Zealand’s Reserve Bank. Draghi and his successor Christine Lagarde probably won’t want to make the euro stronger when Europe’s manufacturers are already struggling.But permanent easing isn’t working, with the bulk of the money being printed ending up parked back at the ECB. Until Europe’s policymakers work out a way to bring this to an end, expect the bond madness to worsen.To contact the author of this story: Marcus Ashworth at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
HSBC’s efforts to build a strong franchise in the US — long a priority of the London-based, Asia-focused bank — have again come up short of its own expectations. While the bank abandoned its 2020 US profit goal this week, that was “in no way an abandonment of the strategy”, Patrick Burke told the Financial Times. “We don’t see anybody in the market who has our model,” Mr Burke said.
(Bloomberg Opinion) -- U.S. President Donald Trump seems to think he holds the stronger hand in any currency war with China. Don’t bet on it.The yuan is “under siege,” thousands of companies are abandoning the country and “massive amounts” of money are pouring from China into the U.S., the president wrote in separate Twitter posts over the past two days. The suggestion is that Beijing’s hands are tied by the risk of capital flight.China’s last attempt to stem capital outflows was disastrous. Between 2015 and 2016, Beijing spent about $800 billion, or 20% of its foreign-exchange reserves, to stabilize the currency. Back then, banks, financial conglomerates and wealthy individuals raced to pull money out of the country, buying up luxury hotels, insurance products and any other overseas assets they could lay their hands on.There are good reasons to believe this time is different, though. Beijing is still mindful of capital flight, but it’s less worried than in the past.In 2015, a main channel for capital to exit China was currency arbitrage. The offshore yuan traded at much weaker levels than the onshore currency because of the absence of daily trading restrictions. Banks and state-owned enterprises with offshore accounts could earn easy money simply by selling the yuan in mainland China and buying the currency more cheaply in Hong Kong. The downside for Beijing was the resulting slide in the foreign reserves.Nowadays, China doesn’t care as much if you short the yuan – in fact, that’s a key driver of this week’s decision to let the currency weaken past 7 to the dollar. Beijing has already taught the shorts a painful lesson. It’s amassed many tools to manage the offshore currency, the latest being issuing higher-yielding yuan notes in Hong Kong. U.S. hedge fund manager Kyle Bass exited a long-held short bet earlier this year. That’s testimony to how difficult it is to profit from this trade. As for debt-fueled conglomerates that used overseas acquisitions to move money out, they’ve all paid a price. The former chairmen of Anbang Insurance Group Co. and bad-debt manager China Huarong Asset Management Co. are in jail, and HNA Group Co. has had its wings clipped. In any case, Chinese companies wanting to buy overseas firms are often no longer welcome, with regulators such as the Committee on Foreign Investment in the U.S. having adopted a tougher stance.Sure, wealthy individuals in China still want to take money out, for portfolio diversification if nothing else. But bear in mind where we are in the credit cycle versus four years ago. Where can return-conscious Chinese place their money? Some 40% of global bonds are now yielding less than 1%. China’s 10-year bond, meanwhile, still offers a decent 3%, because the People’s Bank of China has conspicuously declined to join the world’s race to zero rates. On Thursday, China set its yuan fixing weaker than 7 for the first time since 2008. While the headlines may suggest that the government is weaponizing the currency, the reality is that Beijing has been very gentle. One of the factors that goes into the yuan fix is a “counter-cyclical adjustment,” which in effect means the People’s Bank of China has been propping up the currency. Since early May, the PBOC intentionally guided the yuan stronger against market forces. Had it not, the yuan fix would be around 7.30 today, HSBC Holdings Plc estimates.China still wants a trade deal and is extending an olive branch. Trump would be wise to realize that before patience runs out in Beijing. To contact the author of this story: Shuli Ren at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Don’t blame street protests for the luxury bust in Hong Kong. They hurt, but there are bigger issues at play that have been building for a while.Hong Kong is on alert for signs that demonstrations against the way China’s special territory is being run are damaging the economy. So far, the impact has been small. The confrontations between black-shirted protesters and riot police may have shut down subway lines and defaced public buildings, but private property hasn’t been targeted. Shop windows displaying the likes of Prada handbags and Gucci loafers remain unsmashed even if tear gas outside deters passersby. Contrast that with a class-warfare struggle like, say, the Yellow Vests in Paris. But Hong Kong is undoubtedly feeling luxury pain. The dominant buyers are mainland Chinese who account for 30% of such purchases worldwide. While turned off by what some of them see as unpatriotic disorder, they were already curbing sprees in Hong Kong well before mass marches against an extradition bill kicked off the unrest. Chinese visitor arrivals have been gradually declining since January, tourism data show. The trade war and its impact on currency have eroded purchasing power. Hong Kong’s peg to the U.S. dollar means that the yuan’s slump this week to an 11-year low will further put off Chinese shoppers. That will eventually ripple through to other luxury destinations. Recent events will take a toll. The Hong Kong Retail Management Association has predicted double-digit declines in sales for July and August from the same period in 2018. June retail sales fell 6.7% from a year earlier, provisional government data show, dragged down by a whopping 17.1% plunge in jewelry, watches, clocks and "valuable gifts."That’s bad news for a city that built a reputation on luxury shopping and makes up between 5% and 10% of global purchases, according to analysis from Bernstein Research. But the former British colony has been losing its luster for bling for a while now.Chinese luxury shoppers still opt for Hong Kong as their No. 1 destination, followed by France, Japan, the U.S. and China, HSBC Holdings Plc said in an April research report. But as Chinese grow wealthier and better-traveled, short shopping trips across the border have a been-there, done-that feel.Blase but bargain-eyed tourists are quick to tie up a shopping trip with a sightseeing one. Buying that LVMH SA handbag in Paris is less of a big deal than it used to be. Violent protests scared tourists away from Paris for a while, giving Hong Kong a cushion, but they returned to the French capital in the spring, Bernstein Research found.Then there’s the online challenge. A lot more luxury buying happens at home as brands cater to China’s digitally savvy shoppers. HSBC reckons that there will be 50-50 split between overseas and domestic shopping within two years, from 75-25 a few years ago. Chinese buyers still face a price gap. Louis Vuitton’s Speedy bag 25 (with strap) sells for 1,020 euros ($1,143) in France, HK$11,800 ($1,505) in Hong Kong and 10,900 yuan ($1,552) in China. Beijing, however, has been cutting value-added and import taxes to encourage consumers to spend more at home. The overall gap with prices in France has narrowed from more than 50%. Luxury brands are picking ambassadors like pop idols Kris Wu and or Lu Han to fight back. They’re also watching prices. French luxury goods group Kering SA cut prices on its Italian Gucci brand by 3% in China after the latest round of value-added taxes came into effect in April but still boasts strong sales there. In contrast, less trendy Italian fashion house Prada SpA posted a 5.1% drop in greater China first-half sales. When times are tough and the economy is slowing, Chinese consumers, like those elsewhere, become picky. One area that’s stayed resilient is high-end fashion with a sporty twist, due to its popularity with millennials. They like Balenciaga SA's Triple S sneakers and the gym clothes co-launched by Louis Vuitton and New York-based skate brand Supreme.At some point as the trade war intensifies, Chinese appetite will further diminish. Other markets won’t be spared. Hong Kong is proving a trip-wire for brands coping with some of the world’s highest rents. But the clouds of tear-gas shouldn’t obscure longer bad times coming for bling. To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.