Yahoo Finance Plus As more coronavirus cases are confirmed, gig economy workers are finding themselves facing risks as companies refuse to cover healthcare and sick days. Associate Professor at University of Buffalo Erin Hatton joins The Final Round to discuss the details.
A pension fund filed a lawsuit against Credit Suisse Group AG on Friday in a U.S. court, accusing the Swiss bank of misleading investors and mismanaging risk exposure to high-risk clients, including Greensill Capital and Archegos Capital Management. The pension fund, City of St. Clair Shores Police & Fire Retirement System, based in St. Clair Shores, Michigan, filed the class action lawsuit in federal court in Manhattan, alleging violations of federal securities laws.
(Bloomberg) -- The U.S. refrained from designating any trading partner as a currency manipulator in the Biden administration’s first foreign-exchange policy report, even as Switzerland, Taiwan and Vietnam met thresholds for the label.The Treasury Department said Friday that those three economies met criteria for the manipulator label, including a large trade surplus with the U.S. But it said there was “insufficient evidence” to conclude that the three trading partners showed the intent of “preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade” to apply the tag.A Treasury official told reporters that the decision not to designate any nation a manipulator should not be seen as a mixed message. In December, the last report done under President Donald Trump designated Switzerland and Vietnam as manipulators.The new assessments signal the Biden administration is taking a less confrontational approach to international currency policy after Trump labeling of China and other countries as manipulators proved ineffective and spurred concerns of politicization.The latest report assesses currency activities through 2020.Covid ImpactThe U.S. acknowledged that the unprecedented nature of the coronavirus pandemic’s impact on the global economy led to creative policy responses by governments and central banks. For that reason, the Treasury said it seeks a deeper understanding of Switzerland’s, Taiwan’s and Vietnam’s currency actions in order to determine if the interventions were done with the intent of gaining an unfair trade advantage, or to cope with the crisis.Ireland and Mexico were added to the Treasury’s watch list, which means they met two of the three criteria for designation. The Treasury kept China, Thailand, India, Japan, South Korea, Germany, Italy, Singapore and Malaysia on the monitoring list.The agency said China’s “failure” to be more transparent around activities at state-owned banks warrants close monitoring. Those banks can act in currency markets with official guidance due to close relationships with China’s central bank.“Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,” Treasury Secretary Janet Yellen said in a statement accompanying the report.The manipulator tag has no specific or immediate consequence, beyond any short-term market impacts. But the law requires the administration to engage with the trading partners to address the perceived exchange-rate imbalance. Penalties, including exclusion from U.S. government contracts, could be applied after a year unless the label were removed.Trump EraDuring the Trump era, the Treasury abruptly designated China a manipulator in mid-2019 outside its usual release schedule, only to lift the label five months later to win concessions in a trade deal. The developments raised concerns that the report was being increasingly politicized.That, combined with the December manipulator designations being defied by Switzerland and Vietnam who did not change their policies as a result, has called into question the credibility of Treasury’s foreign-exchange assessments.These concerns continue under Yellen.In 2019, her predecessor Steven Mnuchin used the older of the two active trade laws that inform Treasury’s currency assessments to label China a currency manipulator. Now, Yellen is using that same law to decide that no nation warrants the designation.“The inconsistent use of the same criteria by successive administrations certainly undercuts the notion of the Treasury currency report being a dispassionate and nonpolitical evaluation of other countries’ currency practices,” said Eswar Prasad, an economist at Cornell University who formerly worked in the International Monetary Fund’s China division.Still, he said that Yellen’s “less overtly political approach” may restore some credibility.Swiss officials have repeatedly denied that they are manipulating the franc, and have continued the nation’s purchases of foreign currencies as part of a long-running campaign to fight deflation through negative interest rates and currency intervention.The Treasury noted the impact of monetary policy objectives on the franc, and said it is is in talks to develop “specific actions” to address the causes of Switzerland’s external imbalances.Earlier this month, the International Monetary Fund gave the Swiss National Bank a green light for its purchases of foreign exchange, while also recommending that officials follow counterparts with a strategy review.TaiwanThe U.S. moved Taiwan from its watch list to the separate list of those meeting all three criteria for distortionary currency policies. As with Switzerland and Vietnam, Treasury officials said Taiwan met the criteria laid out in a 2015 law by a wide margin, but declined to name the country as a “manipulator” under a related 1988 act.Taiwan widely exceeded the thresholds for all three criteria, and the U.S. urged the nation to create a plan to address the causes of its currency undervaluation.Taiwan’s central bank has acknowledged intervening in foreign exchange markets to pare gains by Taiwan’s currency against the dollar. Daily efforts to stabilize the Taiwan dollar began in earnest in June 2020 until September. Since then, it appears that the bank has been managing the currency’s appreciation.The bank’s governor, Yang Chin-long, said in March he believed the U.S. might designate Taiwan a currency manipulator, but he didn’t expect serious negative impact for the local economy, given robust U.S. demand for semiconductors. Semiconductors, he said, were the main factor driving Taiwan’s trade surplus with the U.S.As for the dollar, the Treasury highlighted that even after its decline in 2020, it remained “nearly 5% above its 20-year average,” considering the real effective exchange rate -- which adjusts for inflation and is weighted against currencies of U.S. trading partners. (Updates with additional details from 18th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
U.S. technology and growth stocks have taken the market's reins in recent weeks, pausing a rotation into value shares as investors assess the trajectory of bond yields and upcoming earnings reports. Technology has been the top-performing S&P 500 sector in April, rising 8% versus a 5% rise for the benchmark index. Big tech-related growth stocks in other S&P 500 sectors such as Amazon Inc, Tesla Inc and Google-parent Alphabet Inc have also charged higher.
Warren Buffett's famous economic measurement shows Orman might be onto something.
Bitcoin tumbled more than 4% on Friday after Turkey's central bank banned the use of cryptocurrencies and crypto assets for purchases citing possible "irreparable" damage and transaction risks. In legislation published in the Official Gazette, the central bank said cryptocurrencies and other such digital assets based on distributed ledger technology could not be used, directly or indirectly, to pay for goods and services. The decision could stall Turkey's crypto market, which has gained momentum in recent months as investors joined the global rally in bitcoin, seeking to hedge against lira depreciation and inflation that topped 16% last month.
Euro zone politicians, courts and policy hawks will pose a stiff challenge this year to the ECB's resolve to pin down the bloc's borrowing costs, precisely at a time when higher U.S. Treasury yields are tempting investors away from European markets. The European Central Bank has held sovereign debt yields low through bond purchases, and recently increased buying in its 1.85 trillion-euro ($2.22 trillion) emergency stimulus scheme, known as PEPP. And it is no longer battling alone to support the euro economy, as the pandemic induced governments to spend more and to create an 800 billion-euro Recovery Fund, seeded by joint European Union borrowing.
(Bloomberg) -- Wall Street often grumbles about the unhelpfulness of so-called reference prices for direct listings like Coinbase Global Inc. It turns out they might not be so inaccurate, after all.The night before Coinbase went public, New York Stock Exchange former president Thomas Farley echoed the complaints of traders about reference prices -- dollar figures assigned by stock exchanges to provide context around a direct listing’s price action.“When the press articles tomorrow say ‘Coinbase pops 40pct above reference price!!!’ remember that the reference price is 100pct useless and was set artificially low so that headlines would say exactly this,” he wrote on Twitter. “Very silly.”Farley, who is now chairman and CEO of blank-check company Far Peak Acquisition Corp., didn’t immediately respond to a request for further comment.Farley is onto something. Unlike an IPO price, no shares change hands at the reference price, which is based on recent performance on private markets that are far less liquid than public exchanges.Direct listings’ first-day pop from their reference price is almost identical to the average gain for initial public offerings.Six major companies have conducted direct listings in New York since Spotify Technologies SA became the first in 2018. All six stocks finished their debut sessions above their reference prices -- 34% higher on average, according to calculations by Bloomberg News. By comparison, new stocks rose by an average of 36% from their offering price during their debuts.While the average first-day move from a reference price is similar to the average first-day move from an IPO price, that only tells half the story. One in five of these IPOs fell from their offering price in their debuts, according to data compiled by Bloomberg, while a direct listing has never closed below its reference price in the same span.With more than 250 IPOs priced over the past year -- excluding SPACs and deals that raised below $50 million -- the traditional route of going public has provided plenty of data for an exercise like this.There have been far fewer direct listings, but another may be coming soon in Squarespace Inc. The web-hosting service is planning a direct listing for this year, Bloomberg has reported.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Debtors filing for personal bankruptcy often struggle to successfully include student debt for discharge, and Senator Elizabeth Warren (D-MA) thinks the current system is "fundamentally wrong."
Emerging market central banks delivered five net interest rate hikes in March, marking the end of an easing cycle which started in 2019 as central banks in the developing world grapple with rising inflation pressures. Across a group of 37 central banks in developing economies, policy makers in Ukraine, Georgia, Brazil, Turkey and Russia raised interest rates, many delivering bigger hikes than expected. This follows a total of two net interest rate cuts in February.
Incoming Petrobras CEO Joaquim Silva e Luna, an army veteran with no oil experience, has endorsed four career executives to head up key company divisions rather than bringing in more outsiders, people with knowledge of the matter said on Thursday. The board of directors of Petroleo Brasileiro SA, as Brazil's state-controlled company is formally known, meets on Friday to vote on the new division heads, the company said. Brazil's president, Jair Bolsonaro, announced the 71-year-old Luna would take the helm of Petrobras in a Facebook post in February.
(Bloomberg) -- PT Dayamitra Telekomunikasi, the infrastructure services unit of state-owned PT Telkom Indonesia, has picked banks to arrange its potential initial public offering in what could be the country’s biggest first-time share sale, according to people with knowledge of the matter.Mitratel, as the company is known, has chosen HSBC Holdings Plc, JPMorgan Chase & Co. and Morgan Stanley to work on the planned Jakarta IPO, the people said. BRI Danareksa Sekuritas and Mandiri Sekuritas were also selected to help arrange the listing, the people said, asking not to be identified as the process is private.The company aims to raise about $1 billion from the first-time share sale as soon as this year, Bloomberg News reported on Tuesday. At $1 billion, the IPO would be the largest in the country to date since PT Indofood CBP Sukses Makmur’s $696 million offering in 2010, according to data compiled by Bloomberg.Mitratel could add more banks to the lineup at a later date, one of the people said. Deliberations are ongoing and details of the offering including size and timeline could change, the people said.Preparations for the Mitratel IPO are underway and the company will give more details in due course, Ririek Adriansyah, president director of Telkom Indonesia, said in response to a Bloomberg News query.Representatives for HSBC, JPMorgan and Morgan Stanley declined to comment.A representative for Mandiri Sekuritas couldn’t immediately comment. A representative for BRI Danareksa Sekuritas didn’t immediately respond to requests for comment.Mitratel manages more than 16,000 telecommunication towers throughout Indonesia, according to its website. It signed a deal in October with PT Telekomunikasi Selular, another Telkom Indonesia unit, to buy 6,050 towers.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The defense team for Huawei's chief financial officer, Meng Wanzhou, will ask a Canadian court to delay upcoming hearings in her U.S. extradition case, the court said on Friday. Meng's U.S. extradition hearings have lasted more than two years and she is scheduled to be back in the British Columbia Supreme Court on April 26. A source familiar with the matter told Reuters the application was a result of an agreement announced last week in a Hong Kong court between Huawei Technologies Co Ltd and HSBC regarding publication of internal documents relating to the fraud allegations against Meng.
(Bloomberg) -- Morgan Stanley surprised investors with a $911 million loss tied to the collapse of Archegos Capital Management, staining what was otherwise a record quarter for revenue and profit.“The current quarter includes a loss of $644 million related to a credit event for a single prime brokerage client, and $267 million of subsequent trading losses through the end of the quarter related to the same event,” Morgan Stanley said Friday in its first-quarter earnings statement.The hit was related to Archegos, Chief Executive Officer James Gorman said on a call with analysts. The CEO called the matter a “very complex event,” and said he was pleased with how the company handled it.The firm’s philosophy is to “cauterize bad stuff” and deal with it as quickly as possible, Gorman said. Archegos won’t change how Morgan Stanley views its prime-brokerage business, but it will be looking hard at certain types of family offices and the adequacy of their financial disclosures, he said.The Archegos hit leaves Morgan Stanley as the only major U.S. bank to be nursing losses from the flameout of Bill Hwang’s family office. The New York-based bank was one of the early backers of Archegos despite the legal taint tied to Hwang, who was previously accused of insider trading and in 2012 pleaded guilty to wire fraud on behalf of his predecessor hedge fund, Tiger Asia Management.“This amount is material and should have been disclosed earlier, especially given the degree of attention prior to earnings,” Mike Mayo, an analyst at Wells Fargo & Co., said in a note to clients. “We expect more from Morgan Stanley when it comes to governance, and are incrementally concerned about complacency based on the tone from today’s conference call.”Shares of the company fell 3.4% to $78.05 at 1:57 p.m. in New York, paring this year’s gain to 14%The Archegos collapse rattled investment banks across continents, with Credit Suisse emerging as the worst hit with almost $5 billion in losses from its exposure to the family office.In the wake of Archegos, Morgan Stanley’s equity traders gave up their No. 1 spot, falling behind Goldman Sachs Group Inc. and JPMorgan Chase & Co., which posted big trading wins earlier this week off a wild quarter for markets.Equities-trading revenue at Morgan Stanley nevertheless rose 17% to $2.88 billion, compared with the $2.6 billion average estimate of analysts surveyed by Bloomberg. Goldman Sachs and JPMorgan have been clawing away at Morgan Stanley’s lead in that business, but until now the firm has managed to stay ahead of the pack. Both rivals posted equities revenue in excess of $3 billion for the quarter.Gorman’s PayIn January, Gorman leaped past JPMorgan’s Jamie Dimon as the best-paid CEO of a major U.S. bank, after being awarded $33 million for the firm’s performance in 2020 while running a firm that’s a third the size of JPMorgan.One reprieve for Gorman’s firm was the timing of the fund’s blowup. In any other quarter, the losses would have stood out more starkly. Instead, the hit came at a time when the bank and all its major peers have smashed one record after another, helping dull the pain.“Such a shame we have to talk about the” Archegos hit, given the strong results throughout the rest of the firm, Glenn Schorr, an analyst at Evercore ISI, said in a report titled, “Other Than That, It Was a Great Quarter, Mrs. Lincoln.”Fixed-income trading revenue at Morgan Stanley rose 44% to $2.97 billion, compared with the $2.2 billion analysts were predicting before earnings season kicked off.Morgan Stanley’s investment bankers pulled in $2.61 billion in fees, compared to the $2 billion analyst estimate, as equity underwriting quadrupled. The quarter proved particularly lucrative with the continued explosion in blank-check companies, better known as SPACs, as well as public offerings from technology companies.Banks are also having to fend off fierce demand for their top talent, with venture-capital firm General Catalyst this month luring away Paul Kwan, Morgan Stanley’s head of West Coast technology investment banking.Wealth-management revenue totaled $5.96 billion, up from $5.68 billion in the previous quarter.The acquisition of E*Trade last year also proved timely, as average daily trading surged in the first quarter, well above its fourth-quarter record. The firm also announced the completion of the Eaton Vance takeover last month, adding another business likely to throw off consistent fee-based revenue.(Updates with analyst’s comment in sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The defense team for Huawei's chief financial officer, Meng Wanzhou, will ask a Canadian court to delay upcoming hearings in her U.S. extradition case, the court said on Friday. Meng's U.S. extradition hearings have lasted more than two years and she is scheduled to be back in the British Columbia Supreme Court on April 26. A source familiar with the matter told Reuters the application was a result of an agreement announced last week in a Hong Kong court between Huawei Technologies Co Ltd and HSBC regarding publication of internal documents relating to the fraud allegations against Meng.
(Bloomberg) -- British industrialist Sanjeev Gupta’s companies seemed to be prospering until his main lender, Greensill Capital, imploded last month. But long before Greensill collapsed, several banks had cut off the commodity trading business of Gupta’s Liberty House Group.Four banks stopped working with Gupta’s commodity trading business, starting in 2016, after they became concerned about what they perceived to be problems in bills of lading – shipping receipts that give the holder the right to take possession of a cargo – or other paperwork provided by Liberty, according to interviews with 18 people directly involved in the trades, as well as internal communications seen by Bloomberg News. The banks include Sberbank PJSC, Macquarie Group Ltd., Commonwealth Bank of Australia and ICBC Standard Bank. Goldman Sachs Group Inc. also stopped working with Gupta’s companies around that time.In 2018, Sberbank sent a team to scour the brightly colored containers stacked in the port of Rotterdam, looking for the ones full of nickel that the bank had financed on behalf of Liberty. Yet each time investigators located one of the containers, they found it had already been emptied, according to two people involved in the matter. After checking about 10 of them, they gave up, the people said. Sberbank confronted Gupta at a meeting weeks later. He promised that his company would pay back the roughly $100 million it owed, the people said.“At some point certain discrepancies were spotted within documentation and logistical data, which made Sberbank discontinue all operations with the company,” the bank said in an emailed statement. “The issue was settled in pre-trial format. Thanks to the existing control systems, we incurred no financial losses through these operations and managed to unwind all transactions in the spring of 2019.”GFG Alliance, which is made up of the companies controlled by Gupta and his family, including Liberty, said in an emailed statement sent by a spokesman that it refutes any suggestion of wrongdoing.“An internal investigation was conducted in 2019 by Liberty Commodities Limited (LCL)’s external legal advisors following enquiries regarding alleged rumours of double pledging,” GFG Alliance said in the statement. “The investigation found no evidence to substantiate the rumours, nor was LCL ever subject to further complaints or proceedings.”Double pledging is the practice of improperly raising funds more than once using the same collateral. As several banks dropped Gupta’s commodity trading unit, GFG Alliance came to rely more on Greensill Capital for loans – ultimately racking up debts of nearly $5 billion to Lex Greensill’s trade finance company by March 2021, according to a presentation seen by Bloomberg News. Gupta’s commodity trading business alone has $1.04 billion of debt, of which $846 million is owed to Greensill, according to the presentation. “LCL has ongoing banking relationships with separate financial institutions,” GFG Alliance said in the statement. “Its reliance on Greensill was a natural consequence of the competitive nature of the trade finance market, which has been hugely challenging for all but the very largest commodities traders in recent years.”Now, with Greensill in insolvency and its German subsidiary under a criminal complaint after the regulator said it found irregularities in how the banking unit booked assets tied to GFG Alliance, Gupta is trying to find new financing. But it’s been tough. After Gupta searched for would-be financial backers for weeks, Credit Suisse Group AG – which became a major lender to Gupta’s companies by buying debt packaged by Greensill – moved last month to push Liberty Commodities Ltd. into insolvency. Gupta said in interviews on BBC Radio 4 and Sky News on April 1 that the action made no sense and that he’d litigate it if needed.Lending RisksTraders in the world of commodities have long relied on banks to help finance the flow of goods on their journey from origin to destination. From the banks’ point of view, this type of financing is generally considered low risk. Should the trader run into financial difficulties, the bank can seize its collateral – the cargo – and easily recoup its money. That holds true so long as the shipping paperwork used, such as a bill of lading, is accurate.ICBC Standard Bank stopped financing Liberty’s commodity trading unit by early 2016, after discovering it had presented the bank with what seemed to be duplicate bills of lading, according to two people with direct knowledge of the matter. Commonwealth Bank of Australia pulled the plug on lending to Gupta’s trading business the same year after the bank financed a cargo of metal for Liberty, only to be presented with what appeared to be the same bill of lading a short time later by another trader seeking a loan, according to three people directly involved.Then, in late 2016, Goldman Sachs, which had extended a credit line of about $20 million to Liberty to finance its nickel trade, stopped dealing with Gupta’s trading company after being warned of alleged paperwork problems by a contact in the warehousing industry, according to three people familiar with the matter.Spokespeople for Goldman Sachs, Commonwealth Bank of Australia and ICBC Standard Bank all declined to comment.“No financial institution has been left out of pocket as a result of lending money to LCL,” GFG Alliance said in the statement, referring to Liberty Commodities Ltd. “On the contrary, they have received substantial commercial returns.”By 2016, Liberty had already become one of the world’s largest traders of nickel, according to an interview with Gupta in Metal Bulletin. Still, Liberty’s containers of nickel would sometimes take an unusually long time to travel between Europe and Asia – instead of the normal sailing time of about one month, the voyage would take several months, stopping off at ports along the way for weeks at a time, six people said.Metals trader Red Kite Capital Management, which also cut ties with Liberty, did so because it had become “uncomfortable” with some of the trades, said Michael Farmer, the company’s founder who is also a member of the U.K’s House of Lords. “It was difficult to work out the commercial sense of some of the shipments, which resulted in our decision to err on the side of caution and discontinue such trades,” said Farmer, who is one of the world’s best-known metal traders. “We had no proof of any misdoings.”Savior of SteelGupta was born in Punjab, India, the son of a bicycle manufacturer. He moved to the U.K. as a teenager to attend boarding school and set up Liberty House, his commodities trading business, in 1992 while he was still an undergraduate student at Trinity College, Cambridge. He first hit the headlines in Britain in 2013 when he bought a troubled steel mill in Newport, South Wales, and restarted production at a time when many other steel plants were being closed down. He went on to buy a string of other struggling steelworks, earning him the nickname “the savior of steel.”Gupta’s GFG Alliance isn’t a consolidated group, but a loose conglomerate of more than 200 different entities. The common thread running through both sides of his business, according to six former employees, was a chronic shortage of cash and intense pressure to find new ways to generate financing.On the industrial side of the business, that meant buying one asset after another in rapid succession, including unloved aluminum and steel plants in Yorkshire, England, northern France and South Australia, then borrowing against the business’s own inventory, equipment and customer invoices, often from Greensill.On the trading side of the business, that often meant nickel. Used as an alloying element in the production of stainless steel, nickel is among metals deliverable on the London Metal Exchange, which means that its price can easily be hedged and that banks are usually willing to lend against it; and nickel is expensive, meaning a relatively small amount of space in a ship can hold a valuable cache of metal.The commodity trading business grew rapidly. Revenue rose to $8.41 billion in the 15 months to March 2019, from $1.67 billion in 2012, according to the accounts of Liberty Commodities Group Pte, a Singapore holding company for the trading operations.Delayed DeliveryMacquarie became concerned about the paperwork underpinning some of Liberty’s trades some four years ago, according to four people with direct knowledge of the events as well as written communications seen by Bloomberg News.In one instance, the bank realized that nickel that it was supposed to have received in Antwerp, according to the shipping documentation, wasn’t at the port, according to two people. Liberty eventually delivered the nickel to Macquarie, but at a different port and about two weeks later than was listed in the paperwork.It wasn’t the only time Macquarie’s team had discovered discrepancies in Liberty’s paperwork, the people said.At a meeting in Macquarie’s London offices, executives from the bank grilled Gupta and his top lieutenants about the inner workings of the commodity trading business, three of the people said. Macquarie remained unsatisfied with the explanations, and by mid-2017, the bank had made the decision to stop all financing for Liberty, the people said.A spokesman for Macquarie declined to comment on the matter.After that banking relationship ended in acrimony, Gupta’s companies turned to Sberbank. When that link, too, soured, they became even more reliant on Greensill.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Zimbabwe is considering penalizing domestic banks, telecommunications operators and other businesses over what the government describes as profiteering off the hard currency it makes available at auctions.Lenders could face fines and suspensions, while companies that charge a premium for foreign exchange may be banned from participating in the auctions, central bank Governor John Mangudya said in a phone interview from the capital, Harare.“All the malpractices will be targeted,” he said. “There’s no need to chase foreign currency as if it will run out.”President Emmerson Mnangagwa on Monday threatened unspecified actions against “sharks in the financial sector,” according to the state-owned Herald newspaper, which said unidentified entities are profiteering at the public’s expense. The president’s comments were made during a wide-ranging interview he gave to state-owned television that will be aired on April 17 on the eve of Independence Day celebrations, the paper said.Exchange ClosedMnangagwa has previously issued warnings to private companies he blames for undermining his efforts to turn around an economy plagued by annual inflation of 241% and foreign-currency shortages.Last year, his government closed the Zimbabwe Stock Exchange for five weeks and singled out the largest mobile operator, Econet Wireless Zimbabwe Ltd., for undermining the nation’s currency through its mobile-money service. Econet denied the allegations.The impending action is an attempt to prevent manipulation of the foreign-currency auction system, according to the Herald. The system has provided over $800 million to companies since its introduction in June, though high demand for U.S. dollars by importers means that there is only a limited supply.Monetary authorities met with the Bankers Association of Zimbabwe on April 12 to discuss “due diligence and know-your-customer requirements” in order to ensure economic stability, Mangudya said.Ralph Watungwa, president of the Banker’s Association of Zimbabwe, didn’t immediately answer two calls to his mobile phone seeking comment.Zimbabwe reintroduced its own currency in 2019 after a 10-year hiatus and has been battling bouts of high inflation and shortages of everything from foreign currency to food. The local unit, which was pegged at parity to the U.S. dollar as recently as February 2019, has plunged to 84 per U.S. dollar.The gap between the official exchange rate and parallel market has widened by 36%, with a U.S. dollar selling for 115 Zimbabwean dollars on the streets of Harare.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- They’re back. Or rather, they never went away.In a market where stock indexes hit record highs almost every other day, a new report from JPMorgan Chase & Co. finds that do-it-yourself investors are jumping back in. Strategists including Peng Cheng studied recent equity and option transactions from retail investors and concluded these prominent players in the yearlong bull market are once again ratcheting up their wagers.Net buying of stocks from this group averaged $565 million a day last week, ranking in the 92nd percentile of the one-year range. Meanwhile call buying has picked up from recent lows that had prompted speculation the retail army might be in retreat.The data is the latest testament to the resilient appetite among a group of investors whose influence has grown in the stock market during the pandemic age. In an E*Trade Financial survey released earlier this week, more individual investors believe the market is “fully or somewhat” in a bubble, and yet they don’t want to miss it.“Retail flows and confidence, especially these days, are heavily momentum driven,” said Dan Suzuki, Richard Bernstein Advisors LLC’s deputy chief investment officer. “And momentum has been picking up again.”Equity gains are gathering steam amid better-than-expected economic data and corporate earnings. The S&P 500 is poised for its fourth straight weekly advance, while the Nasdaq 100 on Thursday crossed the 14,000 milestone for the first time in history.Read: Day Traders Know a Bubble When They See One, and They Want InDay traders flocked to technology shares, with the Invesco QQQ Trust (ticker QQQ), an ETF tracking the Nasdaq 100, attracting $70 million last week, JPMorgan’s data show. The ProShares UltraPro QQQ ETF (TQQQ), one that pays investors three times the return of the tech-heavy benchmark, lured $160 million. Apple Inc., Nvidia Corp., Boeing Co. and United Airlines Holdings Inc. were among their most-favored stocks.“Retail activity appears to be picking up again,” JPMorgan’s Cheng wrote in the note. “AAPL, NVDA and UAL are likely benefiting from a renewed interest in growth names and continued reopening theme,” he said, referring to the companies’ tickers.Arthur Hogan, chief market strategist at National Securities Corp., said in a phone call that investor sentiment is being fueled by a combination of strong market performance, perceptions that the economic outlook is brighter and the sheer availability of cash. He added that these things are “colliding right now to get retail investors more involved in this marketplace.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- It’s been 11 weeks since Lai Xiaomin, the man once known as the God of Wealth, was executed on a cold Friday morning in the Chinese city of Tianjin.But his shadow still hangs over one of the most dramatic corruption stories ever to come out of China – a tale that has now set nerves on edge around the financial world.At its center is China Huarong Asset Management Co., the state financial company that Lai lorded over until getting ensnared in a sweeping crackdown on corruption by China’s leader, Xi Jinping.From Hong Kong to London to New York, questions burn. Will the Chinese government stand behind $23.2 billion that Lai borrowed on overseas markets -- or will international bond investors have to swallow losses? Are key state-owned enterprises like Huarong still too big to fail, as global finance has long assumed – or will these companies be allowed to stumble, just like anyone else?The answers will have huge implications for China and markets across Asia. Should Huarong fail to pay back its debts in full, the development would cast doubt over a core tenet of Chinese investment: the assumed government backing for important state-owned enterprises, or SOEs.“A default at a central state-owned company like Huarong is unprecedented,” said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group. Should one occur, he said, it would mark “a watershed moment” for Chinese and Asian credit markets.Not since the Asian financial crisis of the late 1990s has the issue weighed so heavily. Huarong bonds -- among the most widely held SOE debt worldwide -- recently fell to a record low of about 52 cents on the dollar. That’s not the pennies on a dollar normally associated with deeply troubled companies elsewhere, but it’s practically unheard of for an SOE.Fears of a near-term default eased on Thursday after the company was said to have prepared funds for full repayment of a S$600 million ($450 million) offshore bond due April 27. Huarong plans to pay on the due date, according to a person familiar with the matter, who asked not to be named discussing private information.That’s a drop in the ocean and won’t remove investor concerns. All told, Huarong owes bondholders at home and abroad the equivalent of $42 billion. Some $17.1 billion of that falls due by the end of 2022, according to Bloomberg-compiled data.Bad BankIt wasn’t supposed to be this way. Huarong was created in the aftermath of the ‘90s Asian collapse to avert another crisis, not cause one. The idea was to contain a swelling wave of bad loans threatening Chinese banks. Huarong was to serve as a “bad bank,” a safe repository for the billions in souring loans made to state companies.Along with three other bad banks, Huarong swapped delinquent debts for stakes in hundreds of big SOEs and, in the process, helped turn around chronic money-losers like the giant China Petroleum & Chemical Corp.After Lai took over in 2012, Huarong reached for more, pushing into investment banking, trusts, real estate and positioning itself as a key player in China’s $54 trillion financial industry.Before long, global banks came knocking. In 2013, for instance, Shane Zhang, co-head of Asia-Pacific investment banking at Morgan Stanley, met with Lai. Zhang said his company was “very optimistic” about the future of Huarong, according to a statement posted on Huarong’s website at the time.Before Huarong went public in Hong Kong in 2015, it sold a $2.4 billion stake to a group of investors including Warburg Pincus, Goldman Sachs Group Inc., and Malaysia’s sovereign wealth fund. BlackRock Inc. and Vanguard Group acquired lots of stock too, according to data compiled by Bloomberg. The stock has collapsed 67% since its listing.Lai had no trouble financing his grand ambitions. A big reason: Everyone thought Beijing would always stand behind a key company like Huarong. It easily borrowed money in the offshore market at rates as low as 2.1%. It borrowed still more in the domestic interbank market. Along the way Lai transformed Huarong into a powerful shadow lender, extending credit to companies that banks turned away.The truth was darker. Lai, a former senior official at the nation’s banking regulator, doled out loans with little oversight from his board or risk management committee.One Huarong credit officer said Lai personally called the shots on most of the offshore corporate loans underwritten by her division.Money also flowed to projects disguised as parts of China’s push to build railroads, ports and more around the world – the so-called Belt and Road Initiative, according to an executive at a state bank. Huarong didn’t immediately reply to questions on its lending practices.Given Lai’s fate, both people spoke on the condition of anonymity.Huarong snapped up more than half of the 510 billion yuan in distressed debts disposed of by Chinese banks in 2016. At its peak, Lai’s sprawling empire had almost 200 units at home and abroad. He boasted in 2017 that Huarong, having reached the Hong Kong stock exchange, would soon go public in mainland China, too.The IPO never happened. Lai was arrested in 2018 and subsequently confessed to a range of economic crimes in a state TV show. He spoke of trunk-loads of cash being spirited into a Beijing apartment he’d dubbed “the supermarket.” Authorities said they discovered 200 million yuan there. Expensive real estate, luxury watches, art, gold – the list of Lai’s treasure ran on.This past January, Lai was found guilty by the Secondary Intermediate People’s Court in Tianjin of accepting of $277 million in bribes between 2008 and 2018. He was put to death three weeks later – a rare use of capital punishment for economic crimes. Some took the execution as a message from China’s leader, Xi Jinping: my crackdown on corruption will roll on.At Huarong, the bottom has fallen out. Net income plummeted 95% from 2017 to 2019, to 1.4 billion yuan, and then sank 92% during the first half of 2020. Assets have shriveled by 165 billion yuan.The company on April 1 announced that it would delay its 2020 results, saying its auditor needed more time. The influential Caixin magazine this week openly speculated about Huarong’s fate, including the possibility of bankruptcy. Its credit outlook was put on review for a potential downgrade by all three top rating firms.According to people familiar with the matter, Huarong has proposed a sweeping restructuring. The plan would involve offloading its money-losing, non-core businesses. Huarong is still trying to get a handle on what those businesses might be worth. The proposal, which the government would have to approve, helps explain why the company delayed its 2020 results, the people said.Company executives have been meeting with peers at state banks to assuage their concerns over the past two weeks, a Huarong official said.The Chinese finance ministry has raised another possibility: transferring its stake in Huarong to a unit of the nation’s sovereign wealth fund that could then sort out the assorted debt problems. Regulators have held several meetings to discuss the company’s plight, according to people familiar with the matter.In an emailed response to questions from Bloomberg, Huarong said it has “adequate liquidity” and plans to announce the expected date of its 2020 earnings release after consulting with auditors. China’s banking and insurance regulator didn’t immediately respond to a request seeking comment on Huarong’s situation.News the company aims to repay a note due this month helped its bonds rebound from record lows on Thursday. It’s not just about cost of funding though, said Thu Ha Chow, a portfolio manager at Loomis Sayles Investments Asia in Singapore. For Huarong to access the market it will need “a clear and definitive commitment,” from China’s finance ministry toward the offshore debt or clarity on a restructuring, she said.One thing is sure: Huarong is part of a much bigger problem in China. State-owned enterprises are shouldering the equivalent of $4.1 trillion in debt, and a growing number of them are struggling to keep current with creditors. In all, SOEs reneged on a record 79.5 billion yuan of local bonds in 2020, lifting their share of onshore payment failures to 57% from just 8.5% a year earlier, according to Fitch Ratings. The figure jumped to 72% in the first quarter of 2021.The shockwaves from Huarong and these broader debt problems have only begun to reverberate through Chinese finance. Dismantling all or part of Lai’s old empire would show Beijing is willing to accept short-term pain to instill financial discipline among state-owned enterprises.The irony is that Huarong was supposed to fix China’s big debt problem, not cause a new one.“Allowing a state-owned financial institution that undertook the task of resolving troubles of China’s financial system to fail is the worst way to handle risks,” said Feng Jianlin, a Beijing-based chief analyst at research institute FOST. “The authorities must consider the massive risk spillover effects.”(Updates with Loomis Sayles comment in final section)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Grab Holdings, Southeast Asia's ride-hailing to delivery giant, is considering a secondary listing in its home market of Singapore after completing a Nasdaq listing via a $40 billion SPAC merger, three sources familiar with the matter said. Listing on Singapore Exchange would enable Grab to have an investor base close to where its regional business is based, the people said, potentially offering its customers, drivers and merchant partners easier access to trade its shares. Grab, a household name across Southeast Asia, is in the early stages of considering a secondary listing in the city-state, said the sources, who declined to be identified as they were not authorised to speak about the matter.
(Bloomberg) -- The Pritzkers built an empire spanning hotels to manufacturing before agreeing two decades ago to split up their fortune among 11 descendants.Karen Pritzker, one of the heirs, has parlayed that wealth into venture capital, backing firms such as Snap Inc. and Spotify Technology. Now she’s joined the wave of investors turning to blank-check firms.The Pritzker Vlock Family Office is the anchor investor for Thimble Point Acquisition Corp., a special purpose acquisition company that raised almost $300 million in an initial public offering in February. Executives from the family office, named after Pritzker and her late husband Michael Vlock, are leading the venture, which will focus on software and technology.“It allows us to be able to take companies public and kind of complete the full life cycle,” said Elon Boms, 40, Thimble Point’s chief executive officer and managing director of the family office, which committed $50 million to the SPAC ahead of its IPO.Growing ForceThe SPAC boom has attracted financiers, former politicians, athletes and celebrities willing to use their fame to attract retail and institutional investment. About 600 blank-check companies have raised more than $182 billion since the beginning of 2020, according to data compiled by Bloomberg.But family offices — the discrete, sometimes secretive firms that manage the affairs of the ultra-rich — have been one of the biggest driving forces.While large family offices have long been investors in private equity and real estate, the recent flurry of SPAC bets show how they’re becoming a growing force in public markets. This comes at a time when some critics are pushing for more regulation of the investment firms following the implosion of Bill Hwang’s Archegos Capital Management, which has inflicted billions of dollars of losses from banks.Family offices are largely exempt from registering with the U.S. Securities and Exchange Commission, but SPACs have to file with the regulator, providing insight into how billionaires are managing their money.Family offices and firms linked to them have launched — or sponsored — at least a dozen SPACs that have raised about $4.5 billion in the past year with a further $1 billion in pending offerings, according to data compiled by Bloomberg.Och, SternlichtFormer hedge-fund manager Dan Och has been particularly active through his Willoughby Capital. The New York-based firm has invested in a blank-check company targeting China’s consumer industry and also holds a stake in Thimble Point, according to a person familiar with the deal. A SPAC he’s sponsored, Ajax I, is merging with U.K.-based used-car platform Cazoo in a deal valued at about $7 billion.Barry Sternlicht’s family office is affiliated with the creation of six SPACs. Meanwhile, a blank-check firm set up by a co-founder of Michael Dell’s family office raised almost $600 million in its IPO last month, while Tom Barrack’s Falcon Peak is sponsoring Falcon Acquisition, a blank-check company that’s filed for a $250 million public offering.Most SPACs have been created in the U.S., but the trend has gone global. Black Spade Capital, the Hong Kong-based family office of casino mogul Lawrence Ho, has got in on the action. London-based billionaire Mohamed Mansour’s Man Capital invested in Grab Holdings Inc., Southeast Asia’s most valuable startup, before it announced a $40 billion tie-up on Tuesday.Rich families are even joining forces. NNS Group the family office of Egypt’s Nassef Sawiris, teamed with an investment firm for the Frere and Desmarais clans to launch Avanti Acquisition Corp., which is targeting European businesses after raising $600 million through its U.S. offering.‘Very Active’“Sophisticated family offices have been very active,” said Luigi Pigorini, head of Europe, Middle East and Africa at Citi Global Wealth. “They have incredible connections, knowledge and investment capabilities — all of these are important characteristics.”The SPAC mania is showing signs of wear and tear with clogged deal pipelines, heightened regulatory scrutiny and concerns over the quality of the deals that have been done.Real estate titan Sternlicht joked that a member of his domestic staff — his “very talented house manager” — probably could pull off a SPAC. He told CNBC last month that “if you can walk, you can do a SPAC,” and pointed out that many of the people behind blank-check firms are failed money managers or executives.“Three days due diligence means you check the letterhead and find out if the company exists,” Sternlicht told CNBC. “It’s a little out of control. No, it’s a lot out of control.”But Sternlicht is convinced he’s got the secret sauce. His Jaws Spitfire Acquisition Corp. is merging with Velo3D, a maker of 3-D metal printers, valuing the company at $1.6 billion. Jaws Acquisition Corp., another SPAC he’s backed, is merging with health-care provider Cano in a deal valued at $4.4 billion.Bolster ReturnsEven if SPACs flounder, it won’t necessarily hurt the family offices that have already launched blank-check companies.SPAC sponsors typically buy shares in firms they create at a fraction of the standard $10 price offered to IPO investors. They usually own about 20% of the blank-check firm’s equity after it goes public and can bolster their returns further through debt or equity financing and stock options.The family office of payments-processing entrepreneur Ed Freedman, for example, is linked to the sponsor of Stable Road Acquisition Corp., which agreed in October to merge with space-transportation company Momentus. The blank-check firm, which has until next month to complete the deal, is seeking shareholder approval to extend the deadline.If they fully vest, a group of shares the sponsor acquired for about $5 million will be worth more than nine times that amount — an 800% gain — even if the company’s stock price remains at $10, according to data compiled by Bloomberg. Freedman’s family office has also loaned the SPAC $300,000 and agreed to invest an additional $3 million at a price of $10 per share, filings show. Stable Road closed Thursday at $10.56 a share.A Stable Road spokesperson declined to comment.SPACs typically have as long as two years to find a company to acquire. If they fail to do so, they have to return cash plus interest to investors, while the sponsor forfeits their original investment.Thimble Point’s Boms said he began considering a SPAC about a year ago after trying to take companies public through reverse mergers. He said he’s had more than 100 meetings with prospective acquisitions since the company’s IPO. Of the roughly 600 SPACs that have listed since the start of last year, less than a third have announced deals and about 30 have completed them, according data compiled by Bloomberg.“We have a very, very solid hit list,” Boms said. “We are talking to people right now.”(Updates with details of Tom Barrack family office in 11th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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