|Bid||41.97 x 1300|
|Ask||41.98 x 1000|
|Day's Range||41.72 - 42.08|
|52 Week Range||36.74 - 48.67|
|Beta (3Y Monthly)||1.30|
|PE Ratio (TTM)||9.19|
|Forward Dividend & Yield||1.40 (3.41%)|
|1y Target Est||N/A|
(Bloomberg) -- Ashley Alder, chief executive officer of Hong Kong’s Securities and Futures Commission, will step down at the end of his contract in September 2020.The watchdog’s head announced his decision Monday in internal communications, according to people with knowledge of the matter, who asked not to be identified because they’re not authorized to speak publicly. The government will begin a global search for Alder’s replacement, the people said.Alder has spent eight years overseeing one of the world’s biggest stock markets, a financial hub which over that period has cemented itself as the global gateway to China. His tenure included the start of trading links with the mainland as well as the controversial introduction of dual-class shares. In recent years, his agency has focused on trying to root out bad behavior among the city’s small-cap companies.Under Alder, the SFC has “pursued a set of intensive policy and operational reforms to tackle market risks as well as setting itself as a tough, competent and effective market regulator,” the commission said in a statement. It was Alder’s decision to leave, it said.Also the chairman of the International Organization of Securities Commissions, Alder became known for his hard-line stance toward misbehaving firms, fining HSBC Holdings Plc a record HK$400 million ($51 million) over the sales of structured products linked to Lehman Brothers Holdings Inc. in Hong Kong.In 2013, the SFC changed its rules to make underwriters more explicitly accountable for the quality of initial public offerings in the city, and it warned firms that they could be held criminally liable for the accuracy of share-sale prospectuses. The regulator also asked banks to improve underwriting standards and ask tougher questions when examining the accounts of would-be applicants.Earlier this year a number of international banks including UBS Group AG and Morgan Stanley agreed to pay a combined HK$787 million to settle cases related to their IPO work. UBS was also banned from sponsoring IPOs in the city for 12 months.Notable SFC fines“Alder did a very good job not only in the local market but, owing to his role at IOSCO, to raise Hong Kong’s status and credibility in the international arena,” said Clement Chan, a non-executive SFC director and managing director of assurance at BDO Ltd.Alder started his career as a London-based lawyer in 1984, before moving to Hong Kong. In an earlier stint at the SFC he oversaw the agency’s corporate finance division from 2001 to 2004. Prior to taking his current role he was head of Asia at the U.K. law firm then called Herbert Smith LLP.During his time in charge of the SFC, Alder also revamped the commission’s internal team structure, including the establishment of ICE -- Intermediaries, Corporates, Enforcement -- a cross-divisional working group intended to tackle corporate misconduct and protect investors. That put him at odds with much of the industry, with brokers adorning an image of his face with devil’s horns for a mass rally three years ago.Hong Kong’s financial secretary will chair a selection panel with SFC chairman Tim Lui and other senior officials to identify a new CEO, a spokesman said.As economic ties between Hong Kong and mainland China increase, the commission’s next head will need to navigate political relations, and balance regulation with market innovation.\--With assistance from Daniel Taub.To contact the reporter on this story: Kiuyan Wong in Hong Kong at email@example.comTo contact the editors responsible for this story: Candice Zachariahs at firstname.lastname@example.org, Sam Mamudi, Benjamin RobertsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investing.com - Asian markets in morning trade on Monday after the U.S. and China agreed on a “phase one” trade deal over the weekend, although some analysts voiced skepticism about the accord.
The coming week’s docket of economic reports and earnings releases comes just following the Trump administration’s announcement of a partial trade deal with China late last week.
This will be a key week for Brexit because Boris Johnson will need to ask Brussels for an extension on the UK’s withdrawal from the EU under the terms of the Benn Act if parliament has not approved either a deal or no-deal exit by Saturday. The European Council meets in Brussels on Thursday and Friday, where any deal reached will need to be signed off. Mr Johnson’s team is believed to be drawing up plans to fudge the most controversial issue dogging negotiations with Brussels: whether Northern Ireland should be part of the EU customs union to avoid the need for a hard border with the Irish Republic.
Morgan Stanley (MS) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
The changes in Volcker Rule are expected to support banks' financials amid a challenging operating environment and lower interest rates.
(Bloomberg) -- Morgan Stanley’s infrastructure arm agreed to buy German wind farm operator PNE Wind AG for 300 million euros ($331 million), highlighting investor appetite for renewable energy.PNE Wind’s board accepted a bid of 4 euros a share from Morgan Stanley Infrastructure Partners, which intends to delist the stock, according to a statement Thursday that confirms an earlier Bloomberg News report.Demand for renewable energy is rising amid falling prices and an investor push to curb emissions and fight climate change. Honda Motor Co. agreed last month to buy 320 megawatts of electricity from wind and solar farms in Texas and Oklahoma, the biggest ever clean-power purchase by an automaker.The PNE deal still needs to meet a minimum acceptance threshold of 50% of the shares plus one to become final, and not all investors are in favor.“Based on the strong planning and development pipeline, the proposed offer fundamentally undervalues the company,” Enkraft Capital Managing Director Benedikt Kormaier said in an email. The investor earlier threatened an audit of the sale if PNE couldn’t show that a the company had run a standard auction.It’s “distressing to see the management and supervisory boards trying to enable MSIP to acquire a large stake in the company below market value and attempting to force shareholders out of the company by threatening to delist shares,” he said in the email.PNE rose as much as 5.8% in Frankfurt. The shares have gained 65% this year.To contact the reporters on this story: Eyk Henning in Frankfurt at email@example.com;Gillian Tan in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Kenneth Wong at email@example.com, John Lauerman, Marthe FourcadeFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Is Morgan Stanley (NYSE:MS) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting […]
The wirehouse is working on a digital tool that will help its financial advisors quickly assess the impact of news and other information on client portfolios.
(Bloomberg) -- Trade war-hardened emerging-market investors aren’t counting on any breakthrough in trade negotiations as talks between the U.S. and China are set to resume Thursday in Washington.BNP Paribas Asset Management has been reducing its exposure in junk-rated debt, while Union Investments Privatfonds GmbH is favoring investment-grade rated bonds over high-yield debt. And in case any breakdown in discussions triggers a flight to safety, Aviva Investors has been been buying the yen.“We expect another empty-handshake meeting,” said Bryan Carter, London-based head of emerging-market fixed-income at BNP Paribas Asset. Ultimately, no substantive agreement will be reached, he said.Emerging-market stocks rebounded 2.2% since an early September low, when China and the U.S. announced they would hold face-to-face negotiations once again. The rally has since petered out after President Donald Trump said he won’t seek an interim agreement and global growth showed further signs of deterioration as the year-long trade war dragged on. Impeachment proceedings have also spurred concern that it may hinder Trump’s hand in the negotiations.Below are comments from investors and analysts:Maddi Dessner, multi-asset strategist at JP Morgan Asset Management in New York, tells Bloomberg Television:Bar is much lower for U.S.-China trade talks this week than it has been in previous negotiations“Investors are much more conservatively positioned than they were even six months ago,” so there’s not as much of a negative riskTo have exposure to equities, investors can buy futures, stocks or upside calls, which allow them to gain upside in rallies and lose equity risk in their portfolio when market draws downBrendan McKenna, a currency strategist at Wells Fargo in New York:“Trade relations between the U.S. and China will probably get worse before they get better”No trade truce or breakthrough this week, and Trump will probably move forward with plans to increase and impose more tariffsEscalations will hurt EM currencies broadly, especially emerging Asia’s IDR, INR and PHP; High-beta currencies TRY, ZAR, MXN and BRL likely to also come under pressureExpect more downside in the renminbi and more risk-sensitive currencies such as the AUD, NZD, KRWJim Caron, global head of macro strategies at Morgan Stanley Investment Management in New York:Trade tensions put a damper on global growth, and expectations are for continued talks“I don’t think that anybody really expected there to be a grand bargain this week with China”Alejandro Cuadrado, a senior BBVA strategist in New York:Likes being “defensive (USD biased) with a preference for hedging through CLP” ahead of trade talks“Our expectations are low as we don’t see the incentives fully lined up”Prefers hedging through options in LatAm crosses given region’s sensitivity to global trade, lower levels and higher costsSergey Dergachev, senior portfolio manager at Union Investment in Frankfurt:Expectations for a breakthrough are “very low,” though it will be important to see how the meeting will end and the mood during the meetingFuture steps are also crucial, such as when the next round of talks will beDergachev said he’s positioned “mildly defensive,” and is focusing on the credit quality of his holdingsWerner Gey van Pittius, co-head of emerging-market fixed income at Investec Asset Management in London:The trade war will last longer than what the market is hoping because it’s not just about trade. There’s an element in the U.S. that is afraid of “the geopolitical rise of China” and that is much bigger than just trade right nowChina is preparing for the next decade and trying to reduce the impact of the trade war by opening up their markets, attracting capital, and moving away from U.S. influence by selling Treasuries and buying gold. Their time horizon is beyond the U.S. electionsHe is taking a long duration strategy in his bond portfolio as the trade war raises the risk of a recessionCarter at BNP Paribas Asset:Politics are driving the negotiations, and not economicsThe upcoming 2020 presidential election, and impeachment investigations in the House, are the dominant context for the trade meetingCarter said he plans to continue cutting exposure to junk-rated bonds even if there was a positive outcome from the meeting. That’s because the firm doesn’t expect any comprehensive agreement will be reached that would reverse the negative economic effects of the trade warMark Haefele, global chief investment officer at UBS Global Wealth Management in Zurich, tells Bloomberg Television:Base case is for tensions to neither worsen or improve much, with the U.S. to go ahead with the announced additional tariffsUBS Global is underweight equities globally at this time; the trade impact will be felt hardest in Europe and emerging markets, while the S&P will probably be range-boundStuart Ritson, emerging-market bond fund manager at Aviva Investors in Singapore:It is hard to be too optimistic on the outcome of trade talks given the narrow scope of the discussionsThe firm’s local-currency bond portfolio is “relatively defensive” at the moment, given the weak global growth backdrop. It is also positioned for further easing by EM policy makers and has increased exposure to the yen, given its anti-cyclical properties, and still attractive valuationsRobert Carnell, chief economist for Asia Pacific at ING Groep NV in Singapore, writes in a note:China may see it as advantageous to keep the trade war alive, but under control, pending political developments in the U.S.For the U.S., the benefits of fighting China on trade may now be outweighed by the short-term hit to the economy, in terms of popular support and potential votes for Trump at next year’s presidential electionStephen Innes, an Asia-Pacific market strategist at AxiTrader, writes in a report:In the absence of a significant catalyst, Asian currencies will continue to track the yuan, which remains the best global barometer for trade war riskHeadline risk will continue to influence trading flows in the Chinese currency(Updates with analyst comments throughout)\--With assistance from Sydney Maki, Aline Oyamada, Chester Yung, Netty Ismail and Carolina Wilson.To contact the reporter on this story: Lilian Karunungan in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Tomoko Yamazaki at email@example.com, Karl Lester M. YapFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- PayPal Holdings Inc.’s decision to pull out of the Libra Association may lead to more congressional hearings from critics seeking to press the payments company for more details on why it walked away, according to Cowen.A push for hearings may intensify further if Libra -- Facebook Inc.’s effort to develop a digital currency -- were to lose other members, analyst Jaret Seiberg wrote. Not only has Facebook failed to win Washington’s “buy in,” it’s also lost support and the “messaging war,” he said. And Seiberg warned that other backers may join PayPal in retreating rather than “risk getting pulled into the policy fights over privacy and private currencies.”PayPal pared losses of as much as 2% as Facebook declined as much as much as 1.1%. Meanwhile other Libra backers -- Visa Inc. and Mastercard Inc. -- both fell more than 1.7% before paring some of the drop. Financials declined across the board, along with the broader market, as analysts fretted about banks’ prospects and trade tensions flared.On Monday, Morgan Stanley analyst James Faucette described PayPal’s decision as wise. “While we believe it made sense for PayPal, Visa, and Mastercard to initially participate in Libra to defend their flanks and maintain optionality, the amount of political attention Libra has received has made the opportunity less attractive,” Faucette wrote.Cowen’s Seiberg has consistently doubted Facebook’s ability to secure the necessary regulatory approvals as the social media company is “framing Libra as an independent entity that will control the transaction data of users.” Big partners exiting may mean it will be “harder to convince policymakers that Libra is independent of Facebook.” He expects Facebook will stay in the spotlight and will face mounting scrutiny as the 2020 election approaches.Separately, Height Capital Markets in a note said that “one withdrawal does not doom Libra, but if there is a cascade of departures the Libra project may collapse before it can launch.” The firm also saw regulators’ focus on financial stability as “overstated,” as Libra won’t be issuing any country’s currency or debt, but will convert a given currency into Libra currency, and Libra will be “backed by a basket of short term debt instruments issued by sovereign nations.”Earlier, Loop Capital analyst Alan Gould wrote that Libra “will likely take much longer than initially anticipated” and more government regulation and fines could be on the way.\--With assistance from Cristin Flanagan.To contact the reporter on this story: Felice Maranz in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Catherine Larkin at email@example.com, Will DaleyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- They were the “golden crumbs,” those bits of money that fall off as bonds get traded around the world.Those crumbs were enough to make bond traders the Masters of the Universe in Tom Wolfe’s 1987 novel “The Bonfire of the Vanities.” But those days are long gone.AllianceBernstein Holding LP has introduced a robot to execute corporate-bond trades directly with bots at dealer counterparties. The $587 billion asset manager used the system in August to complete three trades with similar digital assistants at Citigroup Inc., Morgan Stanley and Royal Bank of Canada.“We’ve taken a traditional human-to-human interaction and augmented it to allow a machine to meet another machine,” said Maryanne Richter, global head of credit electronic trading strategy at Morgan Stanley in New York.While computers have already transformed equities trading, the corporate bond market has been one of the last holdouts in finance’s digital revolution. Firms are slowly stepping up their use of artificial intelligence and crunching reams of data to get ahead as electronic bond trading becomes more prevalent.Automation is making inroads on trading desks, such as at UBS Group AG and HSBC Holdings Plc, where robots are making bond sales more efficient. More than 40% of capital market participants that took part in a Greenwich Associates survey earlier this year said that their firms are using AI for trading. Another 17% said they will introduce it within the next two years.Still, this is the first time that bots have traded with other bots in corporate bonds, according to AllianceBernstein.The robot is an extension of the asset manager’s virtual assistant, named Abbie, which pores through data and identifies for traders the best bonds to buy or sell. AllianceBernstein gathers about 4 million data points a day to work out the best ways to trade including bid and offer prices from dealers and electronic trading venues.“Right now they aren’t replacing traders, they’re really just helping us trade”Executing trades involves a number of manual steps. Currently it can take traders up to 20 minutes to negotiate the size, price and precise maturity of a trade with a counterparty on the other end of the phone or instant message. With bots that could become almost instantaneous.“Machines are helping us to make smarter decisions and be more efficient,” said James Switzer, global head of fixed-income trading at AllianceBerstein. “I guess we could look out 5 or 10 years and start anticipating what would happen, but right now they aren’t replacing traders, they’re really just helping us trade.”The robot is designed to save traders time and beat competitors, a meaningful edge in a secondary market starved of liquidity. It could also be developed using AI to remember the best counterparties for certain trades and target them first in future, a system known as smart order routing, according to Switzer.In the test cases, AllianceBernstein made three separate trades in investment-grade U.S. corporate bonds with each of the three banks and the firm expects to expand that to more dealers in the coming months. The bots agreed to the transactions on the signal of a human trader.“The master is telling the dog to fetch and bring the stick back,” said Switzer.In the future, AllianceBernstein expects the bot to spot the best prices within parameters previously set by a trader and execute automatically. That would mean it would no longer need a human to give the execute command, although to be sure, the firm will still have human checks and balances including compliance.Citi and Morgan Stanley both expect their trading algorithms to be able to directly handle requests to trade and execute without human command, depending on the nature of the transaction. A spokesman for RBC Capital Markets declined to comment on the trade with AllianceBernstein.“We’re automating parts of a very manual process,” said Kevin Foley, head of markets electronification at Citi in New York. “Phase two is fully-automated straight-through processing.”It’s surely a world Bonfire’s bond trader Sherman McCoy would have no place in as the crumbs disintegrate.“Just imagine that a bond is a slice of cake, and you didn’t bake the cake, but every time you hand somebody a slice of the cake a tiny little bit comes off, like a little crumb, and you can keep that,” Wolfe wrote in his novel.(Updates with reference to electronic trading in fifth paragraph. An earlier version of this story corrected assets under management for AllianceBernstein in third paragraph.)To contact the author of this story: Katie Linsell in London at firstname.lastname@example.orgTo contact the editor responsible for this story: Vivianne Rodrigues at email@example.com, James HertlingFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Earnings season unofficially kicks off next week, when the big money-center banks start reporting their results for the third quarter. Expectations are low, with analysts projecting U.S. companies to say profits fell 3% from a year earlier. What’s more important, though, is what companies say about the future, and in that regard, this earnings season could make or break the stock market.Although analysts have been trimming their 2019 forecasts all year – they took down their third-quarter estimates, for example, from a previous call for a 5.3% gain to the current expected drop – they have inexplicably kept their 2020 projections largely unchanged, calling for earnings growth of 10% next year. That’s even as a Duke University/CFO Global Business Outlook released last month showed that more than half of U.S. chief financial officers anticipate the economy will be in a recession within a year, with optimism at its weakest point since 2016. “The number of CFOs growing more pessimistic outnumbers those growing more optimistic by a five-to-one margin,” Duke finance professor John Graham, who authored the report, said in a video.So, do analysts really still believe earnings growth of 10% is achievable? We’ll soon know the answer to that question, because – as the folks at DataTrek research point out – now is the time when companies, investors and analysts start focusing on the year ahead. The unpredictability of the U.S.-China trade war has made it next to impossible for companies to effectively predict where earnings may be the next quarter, let alone in 2020. But as of now, it’s hard to say where earnings growth might come from.The Institute for Supply Management said last week that its index measuring activity in the manufacturing sector fell to its lowest level since 2009, below even the level that it fell to when earnings growth stalled between late 2014 and mid-2016. Perhaps more troubling, the ISM’s gauge of activity in the services sector, by far the largest part of the economy, tumbled to its lowest since 2016.For all the bad news on the domestic front, the international picture isn’t any better. This is important because members of the S&P 500 now generate as much of 40% of their revenue outside the U.S. When the OECD last month updated its global gross domestic product forecasts, it cut its 2019 estimate for U.S. growth by 0.3 percentage point to 2%, while slashing its estimate for the Group of 20 economies as a whole by 0.4 percentage point to 3.2%. Its 2.9% estimate for global growth this year would mark the world economy’s worst performance since the global financial crisis. Where things get interesting is when you compare the earnings outlook for the S&P 500 to those indexes tracking smaller companies that aren’t as exposed to the broader global slowdown as their larger, multinational peers. Morgan Stanley’s chief U.S. equity strategist, Michael Wilson, pointed out in a research note last week that analysts’ forecasts for earnings per share among members of the S&P MidCap 400 over the next 12 months have come down 3.7%, while EPS estimates for members of the Russell 2000 Index have been reduced by 6.3%. The implication is that it’s only a matter of time before the estimates for the S&P 500 members come down, too.There’s a danger for the stock market in all of this because it seems investors are buying in to analysts’ current optimistic 2020 forecasts. The S&P 500 is trading at 16 times next year’s expected earnings. That’s up from a little over 14 times back in January, when profits were still expected to advance in 2019. It’s also about to turn higher than the average during the 2014-2016 earnings recession.The lack of earnings growth means that the stock market is increasingly beholden to the Federal Reserve and continued interest-rate cuts to support lofty valuations. Earnings season “seems unlikely to provide the punch necessary to stimulate excitement about the outlook,” Bloomberg Intelligence equity strategists Gina Martin Adams and Michael Casper, wrote in an Oct. 3 research note. “Sadly, it may come down to policy makers to offer risk-tolerance a shot in the arm.” That sums it up about right.To contact the author of this story: Robert Burgess at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Masayoshi Son’s startups have had a rough few months, from a botched initial public offering by WeWork to a sharp decline in shares of Uber Technologies Inc. Now analysts are beginning to calculate that the damage for Son’s SoftBank Group Corp. will likely reach into the billions of dollars.Mitsubishi UFJ Morgan Stanley Securities Co. cut its profit estimate for SoftBank’s Vision Fund, its main investment vehicle, by 580 billion yen ($5.4 billion) to an operating loss of 367.6 billion yen for the September quarter, citing declines in the stock prices of Uber and Slack Technologies Inc. and the withdrawn WeWork IPO. Sanford C. Bernstein & Co. estimates that Vision Fund’s writedown alone could be as much as $5.93 billion, with another $1.24 billion drop for the portion of WeWork owned by SoftBank Group.Son is going through a particularly rocky stretch after repositioning SoftBank from a telecom operator into an investment conglomerate, with stakes in scores of startups around the world. He built a personal fortune of about $14 billion with strategic bets on companies such as China e-commerce giant Alibaba Group Holding Ltd. But the recent troubles have weighed on SoftBank’s shares, pushing them down about 30% from their peak earlier this year as investors grow skittish about startup valuations.“Profits in the [SoftBank Vision Fund] segment may still see considerable volatility ahead,” Mitsubishi UFJ analyst Hideaki Tanaka wrote.Uber’s share price drop was the main culprit for Vision Fund’s poor performance in the second quarter, Tanaka wrote. He also reduced SoftBank Group’s fiscal year operating profit to 1.01 trillion yen, from 1.59 trillion yen.SoftBank may book a $3.54 billion drop in the value of its Uber stake, a $750 million decline for Guardant Health Inc. and take a $350 million hit for Slack, according to Chris Lane, an analyst at Sanford C. Bernstein. Lane said the combined writedown for WeWork may be as much as $2.82 billion, assuming a slide in the company’s valuation to $15 billion from $24 billion, but remains uncertain. He said his estimates represent a worst-case scenario and may be offset by gains from other unlisted companies.In an interview with the Nikkei Business magazine, Son said he is unhappy with how far short his accomplishments to date have fallen of his goals.“The results still have a long way to go and that makes me embarrassed and impatient,” Son said. “I used to envy the scale of the markets in the U.S. and China, but now you see red-hot growth companies coming out of small markets like in Southeast Asia. There is just no excuse for entrepreneurs in Japan, myself included.”“It only just began and I feel there is tremendous potential there,” Son told Nikkei Business. The strategy is to invest in companies that share his vision of a world being reshaped by artificial intelligence, he said.SoftBank Gives ‘Very Public Lesson’ to Founders in WeWork OusterWeWork and Uber may be losing money now, but they will be substantially profitable in 10 years’ time, Son said in the interview. At a private retreat for portfolio companies late last month he had a different message: become profitable soon. At the gathering, held at the five-star Langham resort in Pasadena, California, Son also stressed the importance of good governance. Just days later, SoftBank led the ouster of WeWork’s controversial co-founder Adam Neumann.(Updates with Sanford C. Bernstein’s projections from second paragraph)To contact the reporters on this story: Pavel Alpeyev in Tokyo at firstname.lastname@example.org;Takahiko Hyuga in Tokyo at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Edwin ChanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Alex Ehrlich, co-head of the prime brokerage business at Morgan Stanley, plans to retire at the end of 2019, according to an internal memo seen by Reuters and confirmed by a spokesman. Ben Walker, who also co-heads the business, will become the sole chief of the unit, the Oct. 7 memo said. Ehrlich joined Morgan Stanley in 2009 after roles at UBS AG and Goldman Sachs in a career spanning 40 years.
(Bloomberg) -- Silicon Valley investors are touting direct listings to startups as a way to sidestep Wall Street banks and the IPO process. The biggest investment banks want to make sure they stay in the mix.Morgan Stanley is organizing an event about direct listings on Oct. 21 in San Francisco, according to people with knowledge of the program. It will take place at the West Coast outpost of the New York Stock Exchange, the people said, asking not to be identified because the information hasn’t been made public. Goldman Sachs Group Inc. held a session on direct listings during its Private Innovative Company Conference in Las Vegas Thursday.The gatherings follow a closed-door confab of venture capital firms, investors and entrepreneurs on Tuesday, in which organizers promoted the alternative to initial public offerings that wrests power away from banks and avoids a first-day price pop. In one of this year’s highest profile examples, shares of Beyond Meat Inc. surged 163% on their first day of trading after the company’s May IPO. While investors that took shares in the IPO made a big profit, the day-one price surge suggests it was priced below its actual value.Under a direct listing, a company makes its shares available for trading on a stock exchange without the formalities of a traditional IPO. That means no road show, no underwriter and no offering price, according to a blog post by John Tuttle, NYSE’s vice chairman and chief commercial officer.“There’s an understanding that capital raising can be decoupled from becoming a public company, and that’s sparking a lot of questions about how and when a company should go public,” NYSE President Stacey Cunningham said in an interview at an equity-market conference in Washington. “A direct listing is a new tool.”Representatives for Morgan Stanley and NYSE declined to comment on the Oct. 21 event.Speakers at the Goldman Sachs conference included Will Connolly, the bank’s head of technology equity capital markets, Spotify Technology SA Chief Financial Officer Barry McCarthy and Greg Rodgers, a partner at Latham & Watkins LLP.“It was a great event with an interesting blend of founder-led companies matched with some of the best venture-capital investors in the world,” said Jake Siewert, a bank spokesman who moderated the panel.Some investors and startups are concerned about first-day price surges that often capture headlines, Joe Mecane, head of execution services at Citadel Securities, said Wednesday in Washington.Even as this year featured several flops of high-profile IPOs, first-day pops have generated billions of dollars in gains for investors in U.S. offerings.Venture capitalists “feel like they’ve gotten shortchanged by the IPO process,” said Mecane, whose firm was the designated market maker on the direct listings of Slack Technologies Inc. and Spotify. The two companies’ chief financial officers will speak at Morgan Stanley conference in San Francisco, one of the people said.“We are bullish on direct listings,” Colin Stewart, Morgan Stanley’s global head of technology equity capital markets, said in an email. “On the back of Spotify and Slack, we believe every company that is considering going public should be having discussions in the boardroom about the direct listing option.”Morgan Stanley, this year’s top-ranked underwriter of IPOs globally, worked on those two deals, creating the new role of adviser to the designated market maker. Goldman was also hired as an adviser to both companies. The two banks earned significant fees on the transactions because fewer banks were splitting the fee pool than on a traditional IPO.“It’s interesting to see people trying different methods of listing,” Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission, said in an interview. “There haven’t really been so many at this point that we have a lot of data, but it’s a trend we’re all watching. I’m watching it for sure.”The interest in direct listings comes as the IPO outlook is slowing for the rest of the year. Companies interested in selling shares will probably wait for markets to stabilize in 2020, Mecane said.\--With assistance from Liana Baker and Sonali Basak.To contact the reporters on this story: Lananh Nguyen in New York at email@example.com;Crystal Tse in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, Steve Dickson, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Morgan Stanley has been lagging its big bank peers this year, and investors will be looking for evidence that the firm is starting to turn things around.
(Bloomberg Markets) -- Ben Rosen has had several careers—technology analyst, early venture capitalist, entrepreneur—any one of which would have made him notable. A New Orleans native educated at the California Institute of Technology, Stanford, and Columbia Business School, Rosen introduced Steve Jobs to Morgan Stanley and financed Compaq Computer, Lotus Software, and Electronic Arts. With his older brother, Harold, Rosen co-founded in 1992 a hybrid car engine car company that employed J.B. Straubel—long before Straubel helped start Tesla Inc. In an interview at his home in Kent, Conn., Rosen, 86, looks back over his pathbreaking career and describes what excites him today. Here are some highlights.MARTY SCHENKER: You were there at the crossroads of some historic developments.BEN ROSEN: The timing was fortunate. I just happened to cross paths with some people who were really important in our lives. Steve Jobs and Bill Gates when they were 22 years old. And then Gordon Moore. He was my teaching assistant—when I was a freshman at Caltech, he was a first-year graduate student. So I’ve known him since 1950, and we stayed in touch. Later, Compaq was Intel’s No. 1 customer. The inventor of the spreadsheet, Dan Bricklin, and his associate Bob Frankston, I knew. They showed it to me in the beginning. And Mitch Kapor, who took it to the next step. Bob Noyce and Jack Kilby, who invented the integrated circuit. Kilby got the Nobel. Bob didn’t get it—only because he was dead.MS: And Morgan Stanley’s position as an underwriter of technology company initial public offerings [IPOs] started with your introductions.BR: First was the Apple IPO [in 1980]. They’d done one [technology IPO] many years ago, decades earlier. I don’t even remember the name of it. They apparently lost their shirts on it. They were embarrassed. It violated their rules, which was to be the banker for the No. 1 or No. 2 major companies in the major industries. They took a chance on this company. It was a disaster, so they decided no more technology.MS: But then you introduced Steve Jobs?BR: To Bob Baldwin. And it was funny to watch them. This was at a small trade show at the Hilton a few blocks from Morgan Stanley. And Steve knew nothing about the financial world, and Bob [who led Morgan Stanley from 1973 to 1983] knew less about technology. And the two of them were each trying to sell themselves. Neither heard the other or understood what they were saying. But anyway, they [Morgan Stanley] became a big technology underwriter. I had just left Morgan Stanley, and I was a one-year consultant before I moved out altogether.MS: You could have been an early investor in Apple?BR: Mike Markkula, who is the original investor in Intel—he bought a third of the company in 1976, I believe, for $91,000—one might call it really good venture investing. I knew him when I was an analyst. I used to see him at Intel. And he met Steve at a home-brew computer club in 1975. We were good friends, and he offered me $1 million of Apple stock at the time. I thought that somehow this was a conflict, even though Apple was a private company. I was an analyst. I was never on the banking side.MS: So do you follow technology now? What interests you?BR: Well, there are a lot of things that interest me. But to what extent? I’m an optimist. I got the optimism from my brother. He was the inventor of the geostationary communications satellite. He would always see the glass half full.With something like climate change, I don’t minimize the issues, but I think that the solutions are being minimized. And the way to do something is to fund science.The only investment I’ve made in 20 years, I just made [in Energy Vault SA]. There’s a longtime friend who runs an incubator in Pasadena, a Caltech graduate named Bill Gross. He’s actually the inventor of something called paid search, and he had a company called GoTo.com that started before Google, and they created the system that allowed one to get paid for search online.He has a new invention now with another person, attempting to solve the single problem that is most impeding renewable energy, and that is storage.Nature does it by having a lake at a high altitude, and you can release the water when you need the energy to generate electricity, and when you have excess electricity you pump it up again. But all of the natural storage areas are taken. So Bill came up with the idea to emulate nature, but instead of using water to use concrete. So the [Energy Vault] system takes 35-ton concrete blocks, lots of them, in a solar field or a wind farm, and when they’re generating energy that’s not needed, they have a six-arm crane very high up that pulls these up. And when they need energy, the cranes let these things down and they generate electricity. I’m not interested in apps—they’re useful and all—but I like things that are grand, and this is grand.MS: When you started in venture capital in technology, it was a relatively new field.BR: This is ’81. You could count on your hand how many venture firms there were. So what we were [Sevin Rosen Funds, founded with L.J. Sevin] was a startup only, just green fields. We didn’t do, with very few exceptions, any secondary investments.MS: What always fascinates me is the difference between the person and the idea. How do you weigh those in your investments? Is it the idea or is it the person that’s more important?BR: You mean in making the decision? The answer is yes.MS: [Laughs] So it’s both.BR: In some cases it’s one. For instance, in Compaq. At our initial meeting with the three entrepreneurs in Houston, they presented us with a hard drive for the then-just-introduced IBM PC. They were all at the hard-drive division at TI [Texas Instruments]. This is what they knew, and this is what they wanted to do. And we didn’t think that was enough, for us anyway, to build a company with. We encouraged them to go back and come up with another idea because we liked them.Then they had a sketch of a portable PC. That sold us, and we invested in them because it was something that nobody was really doing at the time. The other thing we did was subtler but more important, and that was to make the first fully compatible PC with IBM. We knew IBM would get the business market, and we had to make something that a buyer and a customer wouldn’t get fired for [having].Some people—Trip Hawkins at Electronic Arts—he was at Apple before. We liked the guy, and he said he was going to become a game studio.One of the big risks is falling in love with a product. Because products usually have a lifetime, and if you don’t have an organization that comes up with the next product and the next and the next, then it will be a short-lived investment.MS: There are people who are raising questions about [Apple Inc. CEO] Tim Cook and what’s next after the iPhone.BR: Why don’t you come up with another half-a-trillion-dollar product? What’s wrong with you? [Laughs]MS: In terms of people, I’m also curious about your involvement in politics. You held the first fundraiser for Barack Obama, or among the first.BR: Not the first. I don’t know who the others were, but yeah, we’d seen Barack Obama on television. This is before he declared in Springfield in February ’07.We saw Mayor Pete [Buttigieg] on Charlie Rose a couple of years ago. He was just a mayor. And then we started hearing about him late last year. And so I wrote, “To the mayor of South Bend, South Bend, Indiana: I would like to invite you to a fundraiser.”With both of them it was hard inviting people. The first time, because Hillary was inevitable. We had a different problem with Pete because we sent the invitations in February, and he was really not known. And then 10 days before our meeting was the [Buttigieg] CNN town meeting, and that was really a spike. So we got 85 people to come to our apartment [in Manhattan].MS: Is there anything, looking back on your career, that you would love to have done differently?BR: Well, let’s see. I made a huge investment in a company my brother and I started, to make a hybrid electric power train for hybrid cars. Rosen Motors. It was one of those things that was an artistic success and a commercial failure. The technology was incredible. Some of it lives today in other companies, but not the promise that we had for it.Other things, well, if I got another chance, I’d go to a liberal arts school because I’m more interested now in the cultural world. I went to Stanford after Caltech, and I saw the difference, because it had a student body that was interested in everything.MS: So if someone in business school was interested in an entrepreneurial career, what would you advise him or her to do?BR: I’d advise them to go to work in a company that’s doing something that would provide requisite experience—organizationally, maybe technically—in what the real world is like. Even though I went to business school, I don’t think it’s as helpful as getting industrial experience. And when I see now who’s in venture capital firms, they’re replete with people who’ve been in the industry. The other thing you learn by going into the real world is the network you develop. The network I got, even though it wasn’t industrial, but just by starting a conference and by starting a newsletter, I knew everybody in the part of the technology world I was interested in. And it was invaluable.MS: You want to change philanthropy now?BR: We live near Lincoln Center, and when we go to the ballet, we go to David Koch hall, and when we go to the Philharmonic, we go to the David Geffen hall. But if a person could go to a ballet at the Balanchine hall or a concert at the Leonard Bernstein hall, it would have such a different impact. There are 60 buildings at Caltech that have names, but there’s no Richard Feynman physics building, there’s no Linus Pauling chemistry building. The largest single contribution that we’ve made has been to start a biotechnology center at Caltech, and it’s a big deal there. And the woman who runs it, Frances Arnold, won the Nobel this past year. So the Donna and Benjamin M. Rosen Bioengineering Center is going to be the Frances Arnold Bioengineering Center.Schenker is Bloomberg’s chief content officer in New York.To contact the author of this story: Marty Schenker in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Christine Harper at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- “Flygskam” (or flight shame) has made some people too embarrassed to fly because of the damage to the planet. Might fashion be the next business to suffer as consumers put on their environmental hair shirts?Bernard Arnault, chairman of luxury behemoth LVMH Moet Hennessy Louis Vuitton SE, has criticized the 16-year-old climate activist Greta Thunberg as being “demoralizing for young people.” She’s probably a bit of a downer for him too.Arnault’s business depends on shoppers, especially young ones, buying lots of unnecessary stuff, from Christian Dior saddlebags to expensive lipsticks from the pop star Rihanna’s Fenty range. Fretting about an impending environmental catastrophe, and worrying that your purchases are contributing to it, is hardly conducive to a spot of retail therapy.The clothing and footwear industries (of which luxury is only a part) contribute about 8% of global C02 emissions, according to Quantis, an environmental consultancy. The Ellen MacArthur foundation, a non-profit organization, estimates that the textiles business generated more greenhouse gas emissions in 2015 than all international flights and shipping combined. There’s plenty here to infuriate Thunberg.Reliable data on the luxury industry’s environmental performance isn’t easy to come by, but one group (made up of Global Fashion Agenda, an industry forum, the Sustainable Apparel Coalition and the Boston Consulting Group) has had a go at creating at a scorecard. This “Pulse Score” is based on elements such as the ecological smartness of product design, raw material use and manufacturing processes. Getting 100 would be perfection on sustainability; nobody comes close to that.Overall, fashion had a pretty underwhelming score of 42 out of 100, although the big luxury companies scored a slightly more respectable 54. While this isn’t exactly cause to celebrate, it does show that the financial clout of LVMH — and its big peers such as Gucci-owning Kering SA and Switzerland’s Compagnie Financiere Richemont SA (home to Cartier) — might be an advantage when it comes to trying to mitigate their impact on the planet and its resources.Yet one can’t ignore the scale of that industry impact. The luxury goods makers have enjoyed more than three years of blockbuster growth, driven largely by Chinese shoppers, meaning they’re gobbling up more natural resources than ever. And as the chart below shows, the natural materials favored by the fashionable elite have the worst effect on the environment (silk is a particular disaster). None of this is helped by the wasteful practices of many shoppers, who move on quickly to the next hot design, or indeed some of the companies. Britain’s Burberry Group Plc came under justified fire last year for its now abandoned practice of destroying unsold stock to prevent it being sold off cheaply.Kering, founded by Arnault’s great rival Francois Pinault, does at least try to be transparent about the damage it does. It publishes an environmental profit and loss account, which put the cost of its impact on the planet in 2018 at about 500 million euros ($549 million). It estimates that about three-quarters of this came from raw materials processing and production. Still, while it’s honest of them to publish these data, the harm is still being done.LVMH has kept a lower profile, though it does perform well on one measure. Morgan Stanley analysts say that the more a luxury company does its own manufacturing, the better it performs on environmental, social and governance targets. That’s because some of the worst industry practices happen in the supply chain away from the direct control — and responsibility — of the parent. The LVMH brands rank well on this measure, according to the Morgan Stanley research. Three of its brands (Loro Piana, Louis Vuitton and Christian Dior) do most of their own manufacturing.As Arnault’s attack on Thunberg highlighted, there’s a reason why these companies are trying to mend their ways: younger shoppers, including Chinese ones, are demanding it. In 2018 all of the industry’s growth came from the under-40s, according to consultants at Bain & Company. Those consumers are more likely to be loyal to brands with a conscience. Yet no matter how much attention the industry pays to the planet, this business is still about getting people to spend money on stuff they could live without. If the rich can be shamed into giving up their far-flung holidays, what does the future hold for Gucci’s diamond belt?\--With assistance from Elaine He and Lara Williams.To contact the author of this story: Andrea Felsted at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Polish banks suffered a setback in a ruling by the European Union’s top court on unfair terms in foreign-currency loans while avoiding a worst-case scenario.Mortgage holders, who have struggled with spiraling repayments on their mostly Swiss franc loans, celebrated in Warsaw, hailing the verdict as a breakthrough. An index of Polish bank stocks dropped just 1.1% as some analysts said the ruling wasn’t a full victory for borrowers. The zloty strengthened in volatile trade.The ruling opens a path for the conversion of mortgages into zloty at the rate which prevailed on the day the loan agreements were signed.However, the verdict reveals “skepticism” toward allowing converted loans to continue to be based on Swiss franc money market rates. If Polish courts were to allow that, it would boost bank losses further. Polish courts will now decide if the loans are maintained at their initial value -- counted in zloty -- or annulled, with approval from the borrower. It’s not clear, however, how disputes regarding already paid installments will be settled.“The decision creates uncertainty about the overall amount and timing of potential bank losses,” said Georgi Deyanov, an economist at Morgan Stanley. Nevertheless, it “represents less of an immediate risk about the banking system as a whole.”Unfair terms in such loan contracts “cannot be replaced by general provisions of Polish civil law,” the EU Court of Justice said in its ruling on Thursday. If, once those unfair terms are removed, and the nature of the contract risks changing, “EU law does not preclude the annulment of those contracts.”Financial EngineeringAt the heart of the issue is what seemed like a clever bit of financial engineering that many Polish home buyers enjoyed before the 2008 financial crisis. Assuming that the zloty would indefinitely maintain its value-increasing run, mortgage holders took out foreign-currency denominated loans, with the Swiss franc proving particularly popular.But when markets turned in the wake of the global banking meltdown, the equation no longer worked as the zloty began its long descent. To date, the currency lost about half of its value against its Swiss counterpart over the past 11 years. Poland now faces the burden of $31 billion in non-zloty loans that have left many homeowners struggling to reduce their debt or have pushed them underwater with mortgages exceeding their property values.Valuations of Polish banks and the zloty currency declined in past months due to concern that lenders will need to boost provisions, eroding profit. Regulators have repeatedly played down concerns, while the government on Thursday said that it has tools to help banks deal with the impact of the ruling, if needed.“The ruling is seen as a favorable outcome for mortgage holders, hence Polish banks shares are lower,” said Christopher Shiells, an analyst at Informa Global Markets. “However, this will be decided on a case by case basis and could take a very long time to sort out, and in previous cases of these types the banks end up winning most of the time.”Swiss TemptationPoland’s central bank Governor Adam Glapinski said this week that the country’s lenders are “very stable and well secured.” The industry’s average Tier 1 capital ratio, at 16.9%, is slightly above the European average.Lenders exposed to foreign-currency mortgages have also been required by the regulator to accumulate additional capital buffers. The country’s banking lobby said it’s too early to revise its view over potential losses to the industry -- which it earlier estimated at up to 60 billion zloty, or four years of profit.Thousands of Polish borrowers tempted by low interest Swiss franc mortgages more than a decade ago have sued for refunds after the depreciation of the zloty made their monthly repayments soar. They argued abusive terms in their contracts enabled the bank to set rates unilaterally in violation of the law.Should they annul the disputed contracts, Polish courts would then be required to find a method to settle financial claims by both sides, including monthly installments to banks in remaining years. Poland’s Supreme Court said in August that such settlements should refer to the initial value of loan measured in zloty rather than to its current value.That’s music to the ears of disgruntled borrowers.“This verdict is a breakthrough,” Barbara Husiew, a director at the ‘Stop Banking Lawlessness’ group said in Warsaw as her colleagues popped champagne bottles in celebration. “The chances of borrowers winning lawsuits have significantly increased and it would be tough to imagine that anyone with a franc mortgage wouldn’t take advantage of this.”The case is: Kamil Dziubak, Justyna Dziubak v. Raiffeisen Bank Polska SA.(Updates with market reaction and comments from second paragraph.)\--With assistance from Dorota Bartyzel, Konrad Krasuski, Adrian Krajewski, Maciej Onoszko, Piotr Bujnicki and Marek Strzelecki.To contact the reporters on this story: Stephanie Bodoni in Luxembourg at firstname.lastname@example.org;Maciej Martewicz in Warsaw at email@example.comTo contact the editors responsible for this story: Anthony Aarons at firstname.lastname@example.org, ;Wojciech Moskwa at email@example.com, Peter Chapman, Andras GergelyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.