Keith Bliss of Cuttone and Company joins Yahoo Finance's Alexis Christoforous from the floor of the New York Stock Exchange to discuss what investors should be focusing on after the latest North Korean headline risk failed to spook the markets.
Keith Bliss of Cuttone and Company joins Yahoo Finance's Alexis Christoforous from the floor of the New York Stock Exchange to discuss what investors should be focusing on after the latest North Korean headline risk failed to spook the markets.
(Bloomberg) -- Credit Suisse Group AG unloaded about $2 billion of stocks tied to the Archegos Capital Management blowup in the second such block sale since the bank wrote down the bulk of its exposure in the first quarter.The stock offerings included Discovery Inc. and Iqiyi Inc., adding to some $2.3 billion worth of shares tied to the debacle that the bank sold last week, according to people familiar with the matter. The trades follow a torrent of similar transactions that had already erased about $194 billion in market value as banks from New York to Zurich and Tokyo unwound leveraged equity bets by Bill Hwang’s family office.Shares of Credit Suisse fell as the sale adds to evidence that the Archegos collapse could impact the bank beyond the first quarter, when it took a 4.4 billion franc ($4.8 billion) writedown, its worst trading hit in more than a decade. While the Swiss bank has substantially reduced its exposure, transactions since the end of March weren’t included in the first-quarter results, a person familiar with the matter has said.Credit Suisse fell as much as 2.2% in early Zurich trading and was 1.2% lower by 9:43 a.m. The stock has lost 15% this year, compared with double-digit gains for an index that includes its European peers.A spokesperson for Credit Suisse declined to comment on the sale and whether the bank plans more such transactions.Hwang’s private investment firm became the center of one of the biggest margin calls of all time late last month, and represented one of the most spectacular failures of risk-management and oversight in recent memory. The downfall of Archegos will result in $10 billion of losses to banks, according to analysts at JPMorgan Chase & Co. The debacle could attract regulatory scrutiny and potential fines for the banks involved, the analysts said this week.Read more: Archegos Ripples Through Banks’ Lucrative Hedge Fund BusinessTuesday’s block trades -- which sold at the lower end of ranges -- included 19 million Class A shares of Discovery sold at $38.40, said one of the people, asking not to be identified discussing a private matter. In addition, 22 million Class C shares of Discovery sold at $32.35 while a stake of 35 million Iqiyi shares went for $15.85.Credit Suisse’s latest sale comes weeks after several rivals dumped their shares to skirt losses. While the firm was one of several global investment banks to facilitate the leveraged bets of Archegos, it was slower than others to unwind the positions and had initially tried to reach some sort of standstill agreement, people familiar with the matter have said.The strategy failed as rivals rushed to cut their losses. Global banks including Goldman Sachs Group Inc. and Deutsche Bank AG have told investors that they shed their Archegos-linked positions with little financial impact.Credit Suisse is now planning a sweeping overhaul of its hedge fund business. It has already announced plans to cut its dividend, suspend share buybacks and scrap bonuses for top executives.(Updates with Credit Suisse shares from third 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.
(Bloomberg) -- Barclays Plc shares briefly dropped almost 10% in the opening minutes of Wednesday’s session, the most intraday in more than a year, in what traders said was likely due to an error known as a “fat finger.”The stock entered a volatility auction at about 8:06 a.m. in London after two trades totaling about 48,000 shares at a price of 168.40 pence, according to Bloomberg data. The shares quickly recovered after the five-minute pause and were down 0.3% to 186.32 pence at midday.Trades made in human error, or even by algorithms, are often referred to as “fat fingers,” a term stemming from the idea that a person’s over-sized digits might cause them to hit the wrong button on a computer keyboard. While generally not uncommon, fat fingers in high-profile stocks like Barclays -- one of the U.K.’s largest publicly traded companies -- are rare.What Are Fat Fingers and Why Don’t They Go Away?: QuickTakeWednesday’s apparent error briefly trimmed about 3.2 billion pounds ($4.4 billion) from the bank’s market capitalization.About two years ago, a fat finger was cited for an 83% drop in shares of investment firm Jardine Matheson Holdings Ltd. in Singapore, while in 2018, BNP Paribas Securities was blamed for erroneous orders that knocked almost 10% off the value of Taiwan-listed Formosa Petrochemical Corp.While erroneous trades are sometimes canceled, there were no cancelations for Barclays as of midday, Bloomberg data show. The day’s low, according to the data, matched that shown on the London Stock Exchange website.(Updates with background on fat finger trades and cancelled trades from third 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.
(Bloomberg) -- The full implications of Beijing’s rapid-fire moves against Jack Ma’s internet empire in recent days won’t be apparent for weeks, but one lesson is already clear: The glory days for China’s technology giants are over.The country’s government imprinted its authority indelibly on the country’s technology industry in the span of a few days. In landmark announcements, it slapped a record $2.8 billion fine on Alibaba Group Holding Ltd. for abusing its market dominance, then ordered an overhaul of Ant Group Co. On Tuesday, regulators summoned 34 of the country’s largest companies from Tencent Holdings Ltd. to TikTok owner ByteDance Ltd., warning them “the red line of laws cannot be touched.”The unspoken message to Ma and his cohorts was the decade of unfettered expansion that created challengers to Facebook Inc. and Google was at an end. Gone are the days when giants like Alibaba, Ant or Tencent could steamroll incumbents in adjacent businesses with their superior financial might and data hoards.“Between the rules for Ant and the $2.8 billion fine for Alibaba, the golden days are over for China’s big tech firms,” said Mark Tanner, founder of Shanghai-based China Skinny. “Even those who haven’t been targeted to the same extreme will be toning down their expansion strategies and adapting many elements of their business to the new bridled environment.”Tech companies are likely to move far more cautiously on acquisitions, over-compensate on getting signoffs from Beijing, and levy lower fees on the domestic internet traffic they dominate. Ant in particular will have to find ways to un-tether China’s largest payments service from its fast-growth consumer lending business and shrink its signature Yu’ebao money market fund -- once the world’s largest.Even companies that have been less scrutinized so far -- like Tencent or Meituan and Pinduoduo Inc. -- are likely to see growth opportunities curtailed.The watershed moment was years in the making. In the early part of the last decade, visionary entrepreneurs like Ma and Tencent co-founder Pony Ma (no relation) created multi-billion dollar empires by up-ending businesses from retail to communications, elevating the lives of hundreds of millions and serving as role models for an increasingly affluent younger generation. But the enormous opportunities coupled with years of hyper-growth also fostered a winner-takes-all land-grab mentality that unnerved the Communist Party.Regulators grew concerned as the likes of Alibaba and Tencent aggressively safeguarded and extended their moats, using data to squeeze out rivals or forcing merchants and content publishers into exclusive arrangements. Their growing influence over every aspect of Chinese life became more apparent as they became the conduits through which many of the country’s 1.3 billion bought and paid for things -- handing over vast amounts of data on spending behavior. Chief among them were Alibaba and Tencent, who became the industry’s kingmakers by investing billions of dollars into hundreds of startups.All that came to a head in 2020 when Ma -- on the verge of ushering in Ant’s record $35 billion IPO -- publicly denigrated out-of-touch regulators and the “old men” of the powerful banking industry.The unprecedented series of regulatory actions since encapsulates how Beijing is now intent on reining in its internet and fintech giants, a broad campaign that’s wiped roughly $200 billion off Alibaba’s valuation since October. The e-commerce giant’s speedy capitulation after a four-month probe underscores its vulnerability to further regulatory action.Chinese titans from Tencent to Meituan are next up in the cross-hairs because they’re the dominant players in their respective fields. Regulators may focus on delivery giant Meituan’s historical practice of forced exclusivity -- particularly as it expands into burgeoning areas like community e-commerce -- while investigating Tencent’s dominant gaming service and whether its messaging platform WeChat excludes competitors, Credit Suisse analysts Kenneth Fong and Ashley Xu wrote Tuesday.“The days of reckless expansion and wild growth are gone forever, and from now on the development of these firms is likely going to be put under strict government control. That’s going to be the case in the foreseeable future,” said Shen Meng, a director at Beijing-based boutique investment bank Chanson & Co. “Companies will have to face the reality that they need to streamline their non-core businesses and reduce their influence across industries. The cases of Alibaba and Ant will prompt peers to take the initiative to restructure, using them as the reference.”The revamp of Ant -- a sprawling financial titan once worth as much as $320 billion -- is a case in point. In its ruling, the People’s Bank of China said it wanted to “prevent the disorderly expansion of capital” and ensure that all of Ant’s financial business will be regulated under a single holding company.What Bloomberg Intelligence SaysAnt Group’s prospects could wane further after China halts improper linking of Alipay payments with Ant’s other products. New curbs on Yu’ebao also hurts its wealth business. Alipay’s 711 million active users are its potential fintech-product buyers. Ant’s valuation could now be near banks we cover (average 5x forward earnings) compared with over 30x at its IPO attempt.- Francis Chan, analystClick here for the research.Ma’s company will likely have to apply and register to get into any new areas of finance in future -- a potential ordeal given the infamously creaky wheels of Beijing bureaucracy. It faces restrictions in every key business -- from payments and wealth management to credit lending.The company’s most lucrative credit lending arm will be capped based on registered capital. It must fold its Huabei and Jiebei loan units -- which had 1.7 trillion yuan ($260 billion) of outstanding loans between them as of June -- into a new national company that will likely raise more capital to support its operations. And Ant must reduce its Yu’ebao money market wing, which encompasses a self-operated Tianhong Yu’ebao fund that held $183 billion of assets as of the end of 2020, making it one of the largest pools of wealth in the world.Alibaba appears to have got off lightly in comparison. While the $2.8 billion was triple the previous record set by Qualcomm Inc.’s 2015 penalty, it amounts to under 5% of the company’s annual revenue. Far more insidious however is the threat of future action and the dampening effect it will have on Alibaba.The fine came with a plethora of “rectifications” that Alibaba will have to put in place -- such as curtailing the practice of forcing merchants to choose between Alibaba or a competing platform. Executives also volunteered to open up Alibaba’s marketplaces more, lower costs for merchants while spending “billions of yuan” to help its clients handle e-commerce.Ant will likewise have to tame its market share grab in payments. Changes to that business, which is fending off Tencent’s WeChat Pay, were among the top priorities regulators outlined. Ant pledged to return the business “to its origin” by focusing on micro-payments and convenience for users.The most amorphous yet dire threat lies in the simple principle implicit in regulators’ pronouncements over the past few days: that Beijing will brook no monopolies that threaten its hold on power.The central bank warned in draft rules released previously that any non-bank payment company with half of the market for online transactions -- or two entities with a combined two-thirds share -- could be subject to antitrust probes. If a monopoly is confirmed, the State Council or cabinet has powers to levy a plethora of penalties, including breaking up the entity.That’s an entrepreneur’s ultimate nightmare.“Everyone is on the regulators’ radar, and it really depends on each one’s reaction next,” Chanson & Co.’s Shen said. “It’s better to take the initiative to self-rectify, rather than having to go through restructuring ordered by the regulators, which may not have your best interests in mind.”(Updates with a graphic of this week’s stock gyrations in fifth 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.
(Bloomberg) -- Britain’s financial markets watchdog is looking to upgrade its relationship with the U.S. and give U.K. firms permanent access to American securities and derivatives markets in the wake of Brexit.The Financial Conduct Authority is working closely with the Commodity Futures Trading Commission about a “permanent footing” for U.K. trading venues to operate in the U.S., Nausicaa Delfas, the FCA’s executive director of international, said at a conference on Tuesday.“If granted, this recognition will provide U.K. firms with the certainty they need to conduct their business in the U.S. with confidence,” Delfas said at the City & Financial Global virtual event.The FCA is also in discussions with the Securities and Exchange Commission over access to the U.S. for swap dealers, and the regulator is supporting the U.K. government’s negotiations with the U.S. on a wider trade agreement. These efforts build on agreements made before Brexit came into effect at the start of the year, which pledged to minimize disruption in transatlantic financial markets.“There is much still to be agreed, but we are supportive of an ambitious outcome on financial services that benefits both U.K. and U.S. industries whilst preserving our regulatory objectives and safeguards,” Delfas said.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) -- Cryptocurrency exchange Coinbase Global Inc. soared above a $112 billion valuation in its trading debut Wednesday, then slipped back below its opening price as Bitcoin fell from record highs and tech stocks fell across the board.The massive valuation, which dwarfs more traditional financial companies including Intercontinental Exchange Group Inc. and Nasdaq Inc. itself, is a landmark moment for the crypto industry and for Coinbase, which was started almost a decade ago when few people had even heard of Bitcoin, and many exchanges were run by amateurs from their garages and homes.Coinbase shares traded at $332.99 apiece on Nasdaq at 2:56 p.m., after earlier climbing as high as $429.54. Bitcoin, which along with Ethereum made up 56% of Coinbase’s 2020 trading revenue, dipped below $62,000 after earlier hitting a record price.The early rally isn’t just a mark of success for Coinbase, which was valued at just $8 billion in its most recent funding round in 2018. It’s also a win for Nasdaq, which hosted its first direct listing after beating out the New York Stock Exchange for Coinbase’s debut. Coinbase is the biggest company to take the direct listing route to market.Coinbase Chief Financial Officer Alesia Haas said in an interview Wednesday morning that one of the reasons that the company picked Nasdaq was because the bourse offered the ticker symbol “COIN,” which wasn’t part of the New York Stock Exchange’s pitch.“Ultimately that they had the ticker COIN, and that was a really great ticker for us to get,” Haas said.Nasdaq on Tuesday set a reference price of $250 a share for Coinbase’s direct listing, a number that’s a requirement for the stock to begin trading, but not a direct indicator of the company’s potential market capitalization. Every major direct listing has so far opened significantly above its reference price, with Roblox shares debuting at $64 each –- 42% higher than the number set by the exchange.Coinbase shares changed hands at a roughly $90 billion valuation in early March, Bloomberg News reported at the time, in what was one of the last chances for investors to trade its private stock before the company went public.Digital Currency Group founder Barry Silbert, who’s built an empire that spans the crypto world, tweeted Tuesday that his shares would definitely not be changing hands at the reference price, in an early sign that the stock was set for a pop at the open.Direct listings are an alternative to a traditional initial public offering that has only been deployed a handful of times. Until Wednesday, every company to pursue one -- including Slack Technologies Inc., Palantir Technologies Inc. and most recently Roblox Corp. -- listed on the New York Stock Exchange.As well as the ticker, Nasdaq’s ability to provide a private market for the shares, as well as services it offers such as investor relations work, were among its selling points to Coinbase, according to a person familiar with the matter.Appropriately for a company that in May said it was committing to a “remote-first” work culture and doesn’t list a headquarters on its filing, Coinbase’s pitch meetings with Nasdaq happened virtually, the person added.“We evaluated both NYSE and Nasdaq and ultimately felt that the Nasdaq platform was aligned with our value as a tech company,” Haas said.In a direct listing, a company’s shares begin trading without it issuing new shares to raise capital. That avoids diluting the shares and also, unlike a traditional IPO, often allows the company’s existing investors to put their shares on the market without waiting for lockup period -- typically six months -- to expire.Luring Coinbase was a win for Nasdaq, whose years-long fight for a larger share of mega listings gained traction in the past year. Half of the 10 largest U.S. IPOs, excluding blank-check companies, were on on Nasdaq, according to data compiled by Bloomberg. That included the third largest, Airbnb Inc.’s $3.8 billion IPO in December, which was the biggest listing on Nasdaq since Facebook Inc.’s $16 billion monolith in 2012.Crypto UpstartsPutting his trust in the stock exchange is Coinbase Chief Executive Officer Brian Armstrong, who started the company with Fred Ehrsam in 2012. Unlike most rivals, Coinbase’s founders always envisioned strict regulatory compliance as a cornerstone of the operation, which has helped the exchange to grow in the U.S., where many early Bitcoin traders and investors were located.Ehrsam left the company in 2017, and is now investing in crypto startups. Both Armstrong and Ehrsam own huge swaths of Coinbase.Coinbase last week said it expects to report a first-quarter profit of $730 million to $800 million, more than double what it earned in all of 2020.“They are going to build out a full financial services company,” said Barry Schuler, a co-founder of Coinbase investor DFJ Growth who until last year sat on the company’s board. “Like a crypto version of a Goldman Sachs or a Morgan Stanley.”Skeptics, RegulationThe company’s rapid growth hasn’t been without controversy, ranging from frequent outages during periods of heavy trading to new restrictions Armstrong placed on employee discussions of politics last fall. In March, Coinbase also settled with the Commodity Futures Trading Commission for $6.5 million, after the agency said the company reported inaccurate data about transactions and that a former employee engaged in improper trades.Then there are the crypto skeptics, as well as the regulators around the world who are stepping up oversight and casting doubt on Bitcoin’s usefulness as a currency.European Central Bank executive board member Isabel Schnabel, in an interview this month with Der Spiegel, called Bitcoin “a speculative asset without any recognizable fundamental value.”A publicly traded Coinbase was unimaginable several years back when Wall Street was full of crypto bears including JPMorgan Chase & Co.’s Jamie Dimon, who once called Bitcoin “a fraud.”Dimon later said he regretted saying that. His bank as well as Goldman Sachs Group Inc. advised on Coinbase’s direct listing.“I don’t think we sought Wall Street’s approval but we did seek to bring more transparency to crypto and to introduce crypto to more and more users,” Coinbase’s Hass said.Crypto Partners“Wall Street can become trader of crypto. They are going to be partners of us going forward,” she said.Coinbase’s early investors are celebrating.“I think Coinbase is this decade’s Microsoft, Netscape, Google or Facebook,” Garry Tan, founder and managing partner at Initialized Capital and an early-stage Coinbase investor, said in an interview with Bloomberg Television Tuesday.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) -- Zhejiang Geely Holding Group Co. is considering raising about $1 billion to help expand its iconic British sports and racing automotive business Lotus Cars into the electric vehicles market in China, according to people familiar with the matter.Geely is working with advisers to sound out potential investor interest in a funding round that could value Lotus’s EV operations at about $5 billion, the people said, asking not to be identified because the matter is private.Separately from the fundraising, the Chinese company is also weighing an initial public offering of Lotus Cars, or just the British carmaker’s EV business, as soon as next year, the people said. A listing could value the entire business, including its combustion-driven sports and racing cars, at more than $15 billion, the people said.Geely Automobile Holdings Ltd. shares rose as much as 7.6% on Wednesday in their biggest intraday gain since Jan. 26. The stock closed 5% higher, outperforming a 1.4% increase in the benchmark Hang Seng Index.Chinese billionaire Li Shufu’s Geely, which also controls Sweden-based Volvo Car AB, purchased a stake in Group Lotus in 2017. It owns 51% of the company, including both Lotus Cars and consultancy Lotus Engineering, while Malaysia’s Etika Automotive Bhd. owns the remainder, according to a press release. Under Geely, Lotus in 2019 launched its all-electric Evija hypercar, a 1,972-horsepower coupe that costs about $2 million.Considerations are ongoing and details including size and timing could change, the people said. A Geely representative declined to comment. Representatives for Lotus didn’t immediately comment when contacted by Bloomberg News.Geely is seeking to expand into electric vehicles amid a booming market in countries including China. Polestar, the electric carmaker controlled by Volvo Car and its owner Geely, is exploring options for going public as soon as this year, Bloomberg News has reported.Investor mania over EV-related stocks has pushed the share prices of players including Nio Inc. and Xpeng Inc. to stratospheric levels. That intense interest has also spawned a wave of EV upstarts raising billions and racing to list via special-purpose acquisition companies. More than $180 billion has been raised globally through SPAC IPOs in the past 12 months, Bloomberg-compiled data show.(Updates with Geely Automobile share price in fourth 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.
(Bloomberg) -- Hundreds of thousands of small Indian businesses are planning to protest against large foreign retailers like Amazon.com Inc. in an event Thursday that coincides with the U.S. e-commerce giant’s annual seller jamboree in the South Asian nation, a sign of escalating tensions in the retail market of 1.3 billion people.The summit is the latest protest by local traders, which have long accused global retailers Amazon and rival Walmart Inc.-owned Flipkart of masquerading as platforms and employing unfair practices that hit at the livelihoods of small online and offline sellers. The trader groups’ event is named Asmbhav, or “impossible” in Hindi, and takes place on the first day of Amazon’s annual seller extravaganza, called Smbhav, or “possible.”“Over half-a-million sellers and leading small trader groups are participating in the Asmbhav event which will focus on ruined livelihoods because of the bullying and partisanship by e-commerce marketplaces,” said Abhay Raj Mishra of the non-profit Public Response Against Helplessness and Action for Redressal (PRAHAR), one of the organizers of the event spearheaded by a collective of Indian sellers.India’s small traders, distributors and merchants have petitioned the country’s courts and antitrust regulator to curb the foreign retailing giants ahead of a potential revision of foreign investment rules. The government is expected to tighten regulations that already bar e-commerce platforms from owning or controlling companies that sell on their platform, forging exclusive deals with makers of products such as smartphones, and discounting goods sold on their platforms.Amazon’s seller event -- which made its debut last year with founder Jeff Bezos in attendance -- will span four days this year and be held virtually. Key business figures including former Pepsico Inc. Chief Executive Officer Indra Nooyi, telecom operator Bharti Airtel Ltd.’s Chairman Sunil Mittal, India’s chief economic adviser Krishnamurthy Subramanian and Infosys Ltd. co-founder and Chairman Nandan Nilekani will be among panel speakers. Participants will include small businesses, startups, developers and retailers.To counter Amazon’s Smbhav awards to select sellers, organizers of the protest event will hand out tongue-in-cheek “Asmbhav awards” to Bezos, country chief Amit Agarwal and its India business partner, Narayana Murthy, the billionaire co-founder of Infosys. The event is backed by trade groups like the All India Online Vendors Association and the All-India Mobile Retailers Association.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) -- As Bitcoin hits records and Coinbase Global Inc. goes public, ETF issuers are betting en masse that U.S. regulators will green-light a fund tracking the largest cryptocurrency at long last.No fewer than eight applications for a Bitcoin ETF have now been filed with the Securities and Exchange Commission since late December, after billionaire Michael Novogratz’s Galaxy Digital Holdings Ltd. joined the list on Monday.It is racing with the likes of Fidelity Investments for first-mover advantage as conviction grows that the SEC will relent after years of rejected applications. With the first North American Bitcoin ETF in Canada already at $1 billion in assets, industry-watchers are wagering the agency will follow its northern neighbor’s lead.“Anyone who wants to launch a Bitcoin ETF and has been waiting wants to make sure their hat is in the ring if/when the SEC approves,” Bloomberg Intelligence analyst James Seyffart said. “So if they’re not first, they’re at least on the radar.”Bitcoin rose for a seventh straight day on Wednesday morning, hitting the highest on record and trading at about $63,900 as of 6:12 a.m. in New York. The all-time high comes as Coinbase, the largest U.S. crypto exchange, prepares to list on the Nasdaq.Whether Gary Gensler, the nominee to be next SEC chairman, will prove more open-minded toward a Bitcoin ETF than his predecessor Jay Clayton remains unclear. The agency has rejected every crypto ETF application since the first was filed in 2013 amid concerns about manipulation and criminal activity.An SEC spokesperson declined to comment.This time around, there’s more attention on the potential benefits of a Bitcoin ETF as a way to reduce market distortions.The Grayscale Bitcoin Trust (ticker GBTC) is the largest crypto product. In its current structure as an investment trust, it lacks the share creation and redemption process that helps an ETF keeps its price in line with its holdings. That makes GBTC vulnerable to dislocations like its monster premium at the end of 2020 relative to the Bitcoin it held, or the record discount it swung to earlier this year.In a report on Friday, JPMorgan Chase & Co. touted the benefits of a listed ETF over the closed-end trust to reduce tracking errors. Grayscale Investments LLC, the firm behind GBTC, has said it is “100% committed” to converting GBTC into an ETF.That means the pipeline is even larger than the eight official applications.“There’s a huge amount of pressure on the SEC to do something,” said Nic Carter, a partner at crypto-focused venture firm Castle Island Ventures. “The trust has way outgrown its structure and the lack of an arbitrage mechanism is causing a fair amount of harm to holders.”Between events like the Reddit-fueled GameStop Corp. mania and the recent blowup of Bill Hwang’s Archegos Capital Management, the SEC may have bigger priorities. But the Bitcoin ETF clock is ticking.The regulator has now acknowledged applications from VanEck Associates Corp. and WisdomTree Investments, meaning it has a limited period of time in which to approve or reject their proposals, though it can also extend its deliberations.“They would have to either approve or deny both WisdomTree and VanEck in 2021,” Seyffart said. “Personally, I just can’t see the SEC denying both of them, unless something changes.”Other ETF watchers are similarly bullish on a turning of the regulatory tide.“At some point, if we’re not already there, the SEC runs out of reasons for not approving,” said Nate Geraci, president of advisory firm The ETF Store.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.
SINGAPORE (Reuters) -Singapore's central bank kept monetary policy settings unchanged on Wednesday and said the accommodative stance was appropriate due to a benign inflation outlook and global economic uncertainties caused by the pandemic. The Monetary Authority of Singapore (MAS) was, however, more upbeat about official 2021 growth projections while data showed the economy unexpectedly growing in the first quarter from a year earlier. The central bank manages monetary policy through exchange rate settings, rather than interest rates, letting the local dollar rise or fall against the currencies of its main trading partners within an undisclosed band.
(Bloomberg) -- Investors are pouring money into bonds backed by U.S. offices, shrugging off concerns about whether workers will ever fill them up like they did before the pandemic.About a third of all of this year’s commercial mortgage backed securities tied to single properties -- nearly $4 billion in total -- have helped finance prime office towers in large city centers, according to data compiled by Bloomberg. That’s despite the fact that Covid-19 has eviscerated demand for office space, decimating rents and slashing valuations.There’s no consensus on when a vaccinated workforce might, if ever, flock back, but the industry forecast isn’t great. Office demand may fall 10% to 31%, Deutsche Bank AG analysts said Wednesday.The Durst Organization helped feed hungry investors on Tuesday by pricing $1.1 billion of CMBS to refinance office buildings at 1133 Sixth Avenue and 114 West 47th Street in midtown Manhattan, with strong demand narrowing risk premiums. Bonds backed by loans on marquee properties in Philadelphia, Dallas, Houston, Los Angeles and elsewhere in New York have also been sold this year.Investors’ robust appetite for office-tower debt may be less a vote of confidence for the return of the urban office sector and more a straightforward hunt for yield in a tight credit-market environment, money managers say.“A lot of crossover corporate-bond buyers are looking at these office CMBS transactions for that incremental yield,” said Jen Ripper, a CMBS investment specialist at Penn Mutual Asset Management in Horsham, Pennsylvania. “But in the near term, there’s a lot of uncertainty for the urban office market, and rents, as well as vacancy rates, are under pressure as leases roll off. There are just too many question marks on the safest way to bring people back.”These securitized bonds, known as single-asset single-borrower CMBS, can offer higher yields than other asset-backed debt and corporate paper, and they are often floating-rate securities, an alluring quality at a time when many foresee interest rates rising. SASB securities have built-in safeguards to protect investors in the senior notes in case cash flows suffer, and are underpinned by top-quality assets, making buyers more comfortable, especially for the AAA tranches, Ripper said.The AAA rated slice of Wednesday’s Durst transaction priced at 98 basis points over a swap-spread benchmark for 10-year paper. That compares to a spread of only about 78 basis points over swaps for an average single A rated corporate bond with a seven- to nine-year duration, according to Deutsche Bank.“So you can pick up two full rating categories and incremental basis points,” said Deutsche Bank analyst Edward Reardon.Sales of SASB deals and so-called commercial real estate collateralized loan obligations will likely keep outpacing issuance of what is typically the more popular type of CMBS, known as conduits, in the second quarter, according to analysts at Bank of America Corp. Conduit deals are backed by dozens of different loans from various property sectors, including retail, hotels and industrial real estate.Overall private-label CMBS issuance stands at $29.5 billion this year, 19% higher than at this point in 2020.“It appears that the gradual return of office workers will play out over several years, and no one knows if occupancy will then achieve anywhere near its previous levels,” said Christopher Sullivan, chief investment officer of the United Nations Federal Credit Union.U.S.Big banks started releasing quarterly reports on Wednesday. JPMorgan Chase & Co. released $5.2 billion from its credit reserves, boosting earnings. The company’s fixed-income, currency and commodity trading revenue was stronger than expected, up 15%, while Chief Executive Officer Jamie Dimon said loan demand remains “challenged.”Goldman Sachs Group Inc. reported FICC sales & trading revenue of $3.89 billion, up 31% from a year earlierUnited Airlines Holdings Inc. shifted the majority of its $9 billion junk-debt sale to leveraged loans, the latest company to seek more flexible financing in the floating-rate assetsThe leveraged-loan market saw several other adjustments, including:CoreLogic Inc. slashed its offering to $3.25 billion from $4 billion, though pricing firmed to the tight end of guidanceNutrisystem Inc. inserted several covenant changes, which widened pricing on its dealTencent is holding off marketing a planned dollar bond deal Wednesday, according to people familiar with the matter, as Asia credit markets have been roiled by the plunge in one of China’s biggest distressed-asset managersFor deal updates, click here for the New Issue MonitorFor more, click here for the Credit Daybook AmericasEuropeM&A is driving performance in Europe’s secondary market, with Globalworth Real Estate Investments Ltd.’s bonds jumping in the wake of a takeover bid from CPI Property Group and Aroundtown.The company’s 2025 and 2026 bonds are the best performers in the euro high-grade marketSlovakia is the latest European sovereign to offer new debt, marketing a 15-year euro-denominated issue; Spain, Austria and the U.K. tapped the market with long-dated issues in recent daysThe operator of Amsterdam’s Schiphol airport has hired banks for a potential dual-tranche euro bond offeringAsiaAsian dollar bonds sold off Wednesday as concerns spread about the financial health of China Huarong Asset Management Co., one of the country’s distressed debt managers.Debt offerings slowed amid the turbulence, with just Chinese brokerage Guotai Junan and South Korea’s Shinhan Bank marketing dollar bonds.In Japan, Toshiba Corp.’s debt risk surged after KKR & Co. and Brookfield Asset Management Inc. were said to explore offers for the Japanese conglomerate, increasing the possibility it will be taken private and reduce information disclosure for investors.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 just a quarter of the way through 2021 and stocks have already leaped past Wall Street’s year-end forecasts. They’ve jumped 10% and priced in so much optimism that it will take two more years for earnings to catch up.Is that enough for bulls? Nope. In a market that has plowed through records once every five days, the only things expanding faster than valuations are investor expectations. At Citigroup, an indicator that compares levels of panic to euphoria in the market has been pinned on elation all year, while a Bank of America model weighing optimism among sell-side analysts sits at a 10-year high.To be sure, animal spirits have calmed at the market’s loopiest edge, with penny-stock volume down and the meme craze receding. But robust appetite persists in its tamer -- and still speculative -- districts. And while fortunes would have been sacrificed repeatedly by anyone expecting this rally to overheat, the juxtaposition of stretched sentiment and a still-healing economy is a source of growing anxiety for professionals.“It is strange to see these sentiment measures elevated at the same time the economy is still recovering,” said George Mateyo, chief investment officer at Key Private Bank. “We’ve had a shot in the arm with respect to fiscal and monetary stimulus” and its impact on the economy “is likely to continue for a while longer, but at some point it’d fade.”Not that there aren’t a lot of reasons to stay optimistic, with many data points coming in stronger than expected, vaccine rollouts (mostly) continuing and earnings expected to buttress the bull case. Taking any single sentiment indicator at face value and relying on it as a sell signal could have meant missing out on one of the largest year-over-year rallies ever recorded.Sentiment readings “are hovering at extremely high levels and we could have been worried about them three months ago -- we could have been worried about them one month ago,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, told Bloomberg TV. “They are telling us that the gains are going to be harder to come by, that if we do get negative catalysts, we are vulnerable to the downside. But I think it’s hard to view any of this data as an automatic sell signal right now.”Doubters point to everything from potential Fed tapering and tax hikes to the potential for fatigue among retail investors. A look under the surface already shows a shift in leadership that’s tilting toward companies whose growth is seen as more resilient during an economic slowdown. The frenetic buying of cyclical shares like energy and banks has cooled during the past month. Vaulting back to the top of the leader board are defensive stocks like technology, real estate and utilities.Bank of America’s “sell side indicator,” which aggregates the average recommended equity allocation by strategists, has risen for a third month to a 10-year high. But the cyclical rebound, vaccines and stimulus are all largely priced in already, wrote strategists led by Savita Subramanian. Meanwhile, a record amount of equity funds is being absorbed: Inflows to stocks over the past five months, at $576 billion, exceed inflows from the prior 12 years, according to the bank.Citigroup’s panic/euphoria model, which tracks metrics from options trading to short sales and fund flows, has remained in “euphoric” territory for much of this year, “generating a 100% historical probability of down markets in the next 12 months at current levels,” according to the bank’s chief U.S. equity strategist Tobias Levkovich.Options traders are placing bets the calm won’t last. The middle part of the VIX curve shows many are expecting volatility to pick up, with the spread between the VIX -- the market’s fear gauge -- and futures on implied 30-day volatility four months from now near the highest level in about five years. One trader last week wagered that the fear gauge will rise toward 40, and won’t be lower than 25, in July. The trader appears to have bought a total of about 200,000 call contracts, an amount almost as big as the total daily volume of VIX calls, based on the 20-day average.“Sentiment -- it’s not usually enough on its own to tip a bull market over, but it does mean that if there is something that causes the broad market to flinch, it can sell off quicker and harder,” said Ross Mayfield, investment strategy analyst at Baird. “When sentiment is running this hot, you’re hitting a new all-time high every day, at some point there will be a correction. Paying up for protection, if you have short-term money, makes plenty of sense.”Going all-in on equities for fear of missing out -- while staying protected against any downturn -- is the preferred posture of hedge funds. Lured by an almost uninterrupted rally since November, the industry has boosted their net exposure to equities to multi-year highs. Meanwhile, they’ve stepped up hedging through macro products such as index futures and exchange-traded funds. Their short sales on ETFs, for instance, increased 11% this year through March 26, according to data from Goldman Sachs Group Inc.’s prime brokerage unit.The hedged-long approach has gained traction on Wall Street. On Friday, JPMorgan Chase & Co. strategists led by Nikolaos Panigirtzoglou recommended investors hold on to risky assets such as stocks but add hedges through options in credit and stocks. One looming risk for the market is a continuing retreat from retail investors, a steadfast driver behind the yearlong bull market, they said.“We don’t believe that the equity bull market is yet exhausted,” the strategists wrote in the note. But “there is clear evidence of elevated equity positioning by retail investors and thus a vulnerability for the equity market going forward,” they said.Gene Goldman, chief investment officer at Cetera Financial Group, says his firm is looking for ways to de-risk its portfolios. “People are seeing the recovery, they’re seeing good things happening today, which is great, but it’s a classic case of ‘buy the rumor, sell the news’ and what they should be doing is looking six-to-nine months from now,” he said. “There are many headwinds that are going to hit the market.”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 turns out it’s not just some of Extended Stay America Inc.’s top shareholders who oppose its proposed $6 billion takeover. Two of the company’s own directors are against it as well.Extended Stay disclosed in a regulatory filing late Tuesday that while the majority of the board approved the deal with Blackstone Group Inc. and Starwood Capital Group, Neil Brown and Simon Turner opposed it, saying the $19.50-a-share price was insufficient, and below similar transactions in recent years.They were also concerned about the timing of the deal in light of a recent rebound in hotel stocks, and the potential for further recovery with the U.S. stimulus plan and increasing Covid-19 vaccinations, the filing shows.Turner was of the belief a transaction below $20 a share was inappropriate, and also was concerned about changes to the termination fee that were made in order for the buyers to raise their bid to $19.50 a share from $19.25, according to the filing.Extended Stay has two boards, one for the C-Corp and one for the real estate investment trust. Both Brown and Turner sit on the REIT board, according to the company’s website.The concerns raised by the two directors are similar to those of five top investors who came out against the deal. Tarsadia Capital LLC, Hawk Ridge Capital Management, SouthernSun Asset Management LLC, Cooke & Bieler LP and River Road Asset Management LLC have all said they plan to vote against the transaction.‘Obviously Inadequate’“We are dismayed that the board would approve such an obviously inadequate price and shocked that the board did so over the objection of two of its own members,” Tarsadia said in an emailed statement.Collectively, the investors own roughly 13% of Extended Stay’s outstanding common stock, according to data compiled by Bloomberg.Representatives for the other opposing investors weren’t immediately available for comment. A representative for Blackstone and Starwood declined to comment.Extended Stay defended its decision to sell, arguing the deal would provide immediate, certain and compelling value for shareholders.“The company ran a thorough, rigorous and thoughtful process, which included a careful consideration of the alternatives available,” a spokesperson said in an email Tuesday. “I would note that the company has thoughtful and independent board members, and paid careful attention to the points raised by the two dissenting directors. However, after detailed discussions, the boards ultimately concluded that the immediate cash certainty at a premium to the valuation over multiple time periods was in the best interest of shareholders.”‘Lose-Lose-Lose’Michael Bellisario, an analyst with Robert W. Baird & Co., said in a note to clients it was “intriguing” that two board members oppose the transaction, and that shareholders seeking a sweetener are likely to focus on this. But he said a voted-down deal would be a “lose-lose-lose” for investors because the company would likely trade back to $16 a share.Extended Stay shares have traded above the offer price since March 22. They were up 0.4% to $19.80 at 12:36 p.m. in New York Tuesday, giving the company a market value of $3.5 billion.Blackstone and Starwood agreed last month to acquire Extended Stay in a 50-50 joint venture in what would be the biggest deal in the hotel industry since Covid-19 decimated the travel business. The filing Tuesday shows that talks between the parties were on and off since 2017, and that at least two other undisclosed potential buyers had expressed interest over the years.Investor Tarsadia had also discussed numerous investment ideas with Extended Stay beginning in August 2020, including various transactions the company could pursue, the documents show.(Updates share price in paragraph 13, adds additional details in final 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. stock indexes rose on Wednesday after upbeat earnings reports from Goldman Sachs and JPMorgan boosted investor expectations of a strong rebound for corporate America amid swift COVID-19 vaccinations. Goldman Sachs Group Inc rose 3.3% after it reported a massive jump in first-quarter profit, capitalizing on record levels of global dealmaking activity. JPMorgan Chase & Co's shares fell 1.1% even as the largest U.S. bank's earnings jumped almost 400% in the first quarter, as it released more than $5 billion in reserves it had set aside to cover coronavirus-driven loan defaults.
(Bloomberg) -- Bond traders searching for an opportunity to challenge central banks are starting to look Down Under, where a likely showdown over yield-curve control is set to test the power of policy makers to contain the next wave of reflation bets.The global trading day for bonds begins in earnest in Sydney each morning, giving developments in Australia’s $600 billion sovereign debt market an out-sized impact on sentiment. It was the scene of a dramatic “flash crash” last year when the yield program was announced, illustrating the potential for turmoil.While the Reserve Bank of Australia has largely tamed markets since then, as the economy’s recovery strengthens, wagers against the RBA’s ability to keep yields lower look poised to rise.“If inflation expectations do start to un-anchor, then I think the RBA will be one of the first central banks to be tested by bond traders,” said Shaun Roache, an economist at S&P Global Ratings in Singapore. “The RBA is a canary in the coal mine for central banks as it is ahead in its labor market recovery.”The RBA brought short-sellers quickly to heel when the global bond rout emboldened them to test its grip on yield control in February. After weeks of aggressive positioning by traders, the bank nudged up the cost of speculating on rising rates and the yield on benchmark three-year bonds fell neatly back into line with its 0.1% target.But keeping the market at bay next time may prove more difficult, as vaccination campaigns gather pace in major economies and the U.S. recovery nears an “inflection point,” emboldening traders. Pressure is already apparent in Australia’s three-year swap rate, which is increasing the costs of managing interest-rate risks for corporate borrowers.Read More: BOJ Seeks Only Tweaks to Stay Aligned with Fed, ECBIf yield control fails in Australia, it may fade away as a potential option for other monetary authorities in need of more policy ammunition. Especially because yield control’s record in Japan -- the only other country to officially employ it -- is patchy.Pinning the rate of one key bond maturity has helped the Bank of Japan reduce borrowing costs in general and also allowed it to slow the pace of bond purchases. But it has come at a cost. The nation’s debt market is lambasted as dysfunctional and an economic recovery strong enough to revive inflation looks as far away as ever.Widening GapBeneath the surface, problems are building Down Under too. While the RBA has its thumb on one specific bond line, there is a large gulf between the yield on this security and those maturing slightly later. There’s also a widening gap to rates on the suite of derivatives linked to three-year yields that flow through into borrowing costs for companies and consumers.The three-year swap rate surged through February and March, rising to four times the RBA’s target for three-year bonds amid pressure from higher U.S. yields and a rebounding economy at home.Australia’s bond futures tell a similar story. The yield implied by three-year futures doubled in the two weeks to Feb. 26 and remains elevated, even after retreating from its high point.“Lack of liquidity, a central bank that’s digging its heels in -- all that, for us, means there’s going to be more volatility in Aussie rates,” said Kellie Wood, a fixed-income portfolio manager at Schroders Plc’s Australian unit. “The RBA has succeeded in terms of round one. But we are starting to see cracks,” said Wood, who expects the market to challenge the 0.1% target again.Stephen Miller, an investment consultant at GSFM, an arm of Canada’s CI Financial Corp., agrees that higher yields may arrive in Australia sooner than the RBA thinks. “It will be powerless if the U.S. curve shifts upwards and other rates markets follow,” said Miller.Read More: Debate Over Next Move in Bonds Has Never Been FiercerNot everyone is prepared to bet against the RBA.For Fidelity International’s Anthony Doyle, taking on the RBA may be a recipe for steep losses if past lessons from the European Central Bank and U.S. Federal Reserve are anything to go by.Nine years ago, then ECB President Mario Draghi vowed to do “whatever it takes” to save the euro, leading to quantitative easing and bond purchases that are still in place. The Fed said more than a year ago that it would buy unlimited amounts of Treasuries to keep borrowing costs at rock-bottom levels, and it’s still holding firm.Holding the Cards“I don’t think it’s ever wise to fight anyone that has a printing press,” said Doyle, a cross-asset investment specialist at Fidelity in Sydney. “The RBA as a house holds all the cards. If they want yields lower, they’ll get it.”This caution is shared by JPMorgan Asset Management’s Kerry Craig.For now, the central bank “definitely has enough dry powder,” said Craig, a strategist in Melbourne. But he is concerned that with monetary policy and markets around the world moving in sync, “you can only fight so much if U.S. rates or global rates go higher -- it’s going to drag Australian ones up.”Yet Governor Philip Lowe isn’t doing everything he could to damp doubts over the RBA’s resolve. His reluctance to make an early switch in the yield target to bonds maturing in November 2024, from ones due in April 2024, is fueling debate about how soon the policy could be wound back.Lowe said at the conclusion of the latest board meeting on April 6 that a decision would be made later this year, without being more specific. He also indicated that the RBA expected to maintain “highly supportive monetary conditions” until at least 2024, even though the number of Australians with a job has returned to pre-pandemic levels.“We don’t think they’ll extend yield-curve control” beyond the current April 2024 bond, said Wood, who warned of potential taper tantrums.Lowe’s February win against short sellers, and a slide in yields at home and abroad over recent weeks, has given the RBA space to breathe. But it’s likely only a matter of time before bond traders come back for round two.“Everybody’s watching how this is going to unfold,” said S&P’s Roache. “The RBA may not want this role, but it is taking quite a starring role I think among global central banks.”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.
Before sitting back and letting the IRS do the work, experts say some people should at least consider filing an amended return.
Fed Chairman Jerome Powell said that he has not yet met with President Joe Biden, illustrating the administration’s caution in approaching matters at the independent central bank.
Popular crypto asset, dogecoin, which was engineered as a joke back in 2013, is surging along with a number of crypto assets ahead of the Coinbase IPO.
Coinbase opening at $381 is just the beginning of a climb to $600, according to one analyst.
(Bloomberg) -- The European Investment Bank plans to harness the power of blockchain to sell bonds, potentially boosting use of the digital-ledger technology as a tool for the region’s debt market.The European Union’s investment arm hired Goldman Sachs Group Inc., Banco Santander SA and Societe Generale AG to explore a so-called digital bond in euros, which would be registered and settled using blockchain, according to information from a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.Investor meetings for the inaugural sale will start April 15 and continue for some weeks, the person said.The EIB has often been at the forefront of innovation in Europe’s debt capital markets, being among the first to issue green and sustainability bonds, as well as debt benchmarked against a new euro short-term rate called ESTR. The move comes after European Central Bank President Christine Lagarde said the institution she leads could launch a digital currency around the middle of this decade.A spokesperson for the EIB declined to comment further when contacted by Bloomberg News.Not MainstreamA number of issuers globally including the World Bank, China Construction Bank Corp., JPMorgan Chase & Co. and National Bank of Canada have been experimenting with blockchain-based issuance in the past few years, but its use in debt markets is still far from mainstream.The technology used for verifying and recording transactions that’s at the heart of cryptocurrencies has faced hurdles to wider adoption, and the pandemic has caused delays in some projects.Blockchain has a longer history in loans and Germany’s Schuldschein debt market. Automaker Daimler AG was the first to sell a 100 million euros ($119 million) of Schuldschein using blockchain in 2017. Telefonica SA’s German unit also used blockchain in early January to raise a 200 million-euro loan.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) -- China should build more pig farms in Xinjiang as its cotton industry is under threat from declining soil fertility, according to a government researcher, commenting after some international companies avoided fiber produced in the region over allegations of forced labor.Hog farming could become a pillar industry in the region and supply 10% of the nation’s output, up from 1% now, wrote Mei Xinyu, a think-tank researcher at the commerce ministry. Xinjiang already grows more than 80% of the country’s cotton, and some of those pig farms would replace fields sown to the fiber that have been degraded.The suggestion comes after the U.S. banned imports of textile products containing cotton from Xinjiang in protest over alleged ill-treatment of its ethnic Uighur Muslim minority, and several western countries slapped sanctions on China over the same issue.Cotton is the most profitable crop in the region, and rotation to other crops is not in the interests of growers and hard to achieve on a large scale, Mei said on the WeChat account of Beijing News, a government-run newspaper. The only feasible option is to build more hog farms, he said, and they can use local grain to feed the pigs or import supplies from neighboring countries.Xinjiang Production and Construction Corps, a military-affiliated entity, and other groups have already started building several large-scale pig farms, which will increase output significantly in the next two years. In the meantime, animal waste from the farms could be used to boost soil fertility, which has been exhausted by extensive use of chemical fertilizer, said Mei.“The most desirable way to solve this problem is to raise pigs and grow cotton simultaneously, and return a large amount of manure from pig farms to the fields after treatment to enhance soil fertility and increase profits,” Mei said.China should expand hog farms in areas like Xinjiang and Heilongjiang, which are less population-intensive than the inland provinces like Sichuan, Hunan and Henan which dominate the country’s pork production, Mei said. Outbreaks of African swine fever that started in 2018 slashed hog herds by as much as half and sent meat imports spiraling to a record.(Updates with details from the report throughout)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.