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Oppenheimer raised its price target on Tesla from $385 to $612. Oppenheimer Senior Research Analyst Colin Rusch joins Yahoo Finance’s Seana Smith on The Ticker to discuss.
Oppenheimer raised its price target on Tesla from $385 to $612. Oppenheimer Senior Research Analyst Colin Rusch joins Yahoo Finance’s Seana Smith on The Ticker to discuss.
(Bloomberg) -- For decades, it’s been an article of faith in Chinese credit markets: Companies controlled by the central government will get bailed out if they ever run into trouble.Now investors aren’t so sure.Mounting concern about the financial health of China Huarong Asset Management Co. -- a distressed-debt manager controlled by the country’s finance ministry -- has fueled a record tumble in the company’s dollar bonds that’s stoking fears of contagion.While China Huarong has said it has access to liquidity and is making payments on time, bond prices suggest investors are bracing for a potential restructuring that would be the country’s most consequential since the financial crisis that gave rise to China Huarong and other bad-debt managers in the late 1990s.Whether or not that comes to pass, the selloff underscores a historic shift in the world’s second-largest credit market. As Chinese President Xi Jinping dials back support for weaker borrowers to reduce moral hazard, state-owned enterprises have replaced their private counterparts as the country’s biggest source of defaults.SOEs reneged on a record 79.5 billion yuan ($12.1 billion) of local bonds in 2020, lifting their share of onshore payment failures to 57% from 8.5% a year earlier, according to Fitch Ratings. The figure jumped to 72% in the first quarter of 2021.The big question now confronting investors is how much pain China’s government is willing to tolerate as it tries to wean the bond market off implicit guarantees. None of the state-owned companies that have defaulted so far -- including Peking University Founder Group Corp., which is ultimately controlled by China’s education ministry -- were considered as systemically important as China Huarong.Chinese authorities have tried to strike a balance between instilling more market discipline and avoiding a sudden loss of confidence that might spiral into a crisis. But the tumult surrounding China Huarong, some of whose bonds are now trading below 80 cents on the dollar, highlights how quickly investor sentiment can deteriorate even at a time when the economy is strengthening.“China’s credit market is entering a new era as SOEs are emerging as the main source of stress,” said Shuncheng Zhang, an analyst at Fitch Ratings. Whatever the outcome for China Huarong, policy makers will likely allow more defaults in the state sector to reduce moral hazard and cultivate a more mature debt market, he added.The stakes are high as Beijing considers which companies to support. SOEs had the equivalent of $3 trillion in onshore bonds outstanding at the end of last year, or 91% of the total, data compiled by Fitch show. A small but growing portion of those bonds are now owned by international money managers as China steps up efforts to integrate its financial markets with the rest of the world.While the speed of China Huarong’s bond rout has jolted some investors, the company has long been a source of potential risk. Its former chairman, Lai Xiaomin, was executed earlier this year for bribery. Under his leadership, China Huarong expanded into areas including securities trading and trusts that were a significant departure from the company’s original mandate of helping banks dispose of bad debt.This month’s selloff was triggered by China Haurong’s failure to publish 2020 preliminary earnings by a March 31 deadline, which business publication Caixin reported was due to a significant financial restructuring.Losses in the bonds accelerated on Tuesday -- spreading to other Chinese issuers including property developers -- as traders circulated a separate Caixin report discussing scenarios for China Huarong that included bankruptcy. The company is still considered investment grade by Fitch, Moody’s Investors Service and S&P Global Ratings, though all three have said they will review their ratings for a potential downgrade.It’s not the first time Beijing has grappled with the risk of credit-market contagion. A surprise onshore default by a state-linked coal producer in November triggered a brief selloff as investors reassessed the creditworthiness of investment-grade Chinese debt. Further defaults, including by prominent chipmaker Tsinghua Unigroup Co., also caused short-term market ructions but never came close to precipitating a crisis.“The new thinking is that as long as it doesn’t cause systemic risk, there isn’t necessarily a need for a bailout,” said Ivan Chung, an analyst at Moody’s Investors Service. “More SOE defaults are expected to occur in the future but they will likely be concentrated in fiscally weaker regions and sectors with heavy legacy debt and labor burdens.”It’s unclear whether Chinese leaders have discussed the fate of China Huarong’s bondholders, but there are signs that authorities might be preparing to provide support to the company if needed.The finance ministry is considering transferring its controlling stake in China Huarong to a unit of the nation’s sovereign wealth fund that has more experience resolving debt risks, Bloomberg reported on Tuesday, citing a person familiar with the matter. The finance ministry aims to complete a transfer in the next few months, though any final decisions will require approval from China’s State Council, the person said.“The transfer, if realized, may offer more flexibility in financial support to Huarong,” said Bloomberg Intelligence analyst Dan Wang. “But it also indicates that Huarong’s debt risk may be much higher than the market had previously expected.”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) -- If Deliveroo Holdings Plc’s listing was meant to hang an ‘Open For Business’ sign over the City of London, the opening day crash in the shares jarred somewhat with the message the U.K. had intended to send about post-Brexit Britain.Personally welcomed by Chancellor Rishi Sunak, the food delivery company’s initial public offering should have been a beacon to lure tech firms against competition from New York and Hong Kong, which have been winning the larger part of the business. Instead, concerns over the company’s governance and the treatment of its riders combined to produce one of the worst market debuts in City history.The ignominious flotation was a symbolic end to a quarter that saw London’s future as a financial center once again put in the spotlight. Since the U.K. left the European Union at the start of the year, London has faced a series of challenges to its pre-eminence, most notably the embarrassment of seeing Amsterdam — a city one tenth its size — take over as the No. 1 location for European share trading.London’s response has been a flurry of reviews into the fintech industry and listing rules, but the Square Mile’s hunt for a new identity remains a work-in-process. Early predictions of dramatic deregulation — the so-called Singapore-on-Thames option — have proved unfounded, perhaps no surprise given the City had an outsized role in writing many of the bloc’s financial rules. And for bankers in London, hopes for unhindered access to EU markets — via a process known as equivalence — have long gone, particularly as Brussels sees Brexit as a chance to deepen its own capital markets.100 Days of Brexit: a series on how Brexit changed Britain ‘Hostile’ EU’s Vaccine Spat With U.K. Boosts Support for Brexit Brexit Britain’s Biggest Test Might Be the Ability to Survive 100 Days of Brexit: Was It as Bad as ‘Project Fear’ Warned?The bloc is stepping up efforts to strong arm even more business from Britain. Banking giants including Goldman Sachs Group Inc. and JPMorgan Chase & Co. have already moved some staff and assets to the continent, and the risk is many more will follow unless the U.K. overcomes the hurdles to secure beneficial terms.JPMorgan’s Chief Executive Officer Jamie Dimon said last week that the EU “has had, and will continue to have, the upper hand.” Dimon, a long-time skeptic of Brexit, also warned he could shift bankers serving EU clients out of London.“It is clear that, over time, European politicians and regulators will make many understandable demands to move functions into European jurisdictions,” he said in his annual shareholder letter. “Paris, Frankfurt, Dublin and Amsterdam will grow in importance as more financial functions are performed there.”London’s global financial status, built on centuries of tradition and supercharged by the “Big Bang” of deregulation more than three decades ago, is unlikely to be undone by Brexit. The City got some good news on Monday when cybersecurity company Darktrace Plc announced plans for an IPO that could value the business at about $3 billion to $4 billion. Its CEO, Poppy Gustafsson, called it a “historic day for the U.K.’s thriving technology sector.”But the chipping away that’s taken place in just a matter of months has yet to be replaced by a compelling vision for London’s future, despite that multi-pronged series of reviews aimed at maintaining its position. Many of the proposed changes amount to fine tuning rather than a complete tearing up of the rulebook. Speaking to Bloomberg, executives of several major banks said they don’t expect authorities to ditch inherited rules, including the bonus cap on banker pay.What they expect is what some call a “tailoring” of London’s approach, hardly the swashbuckling reforms that some imagined.Instead, banks want to eliminate some of the annoyances that came with being part of the EU, such as time-consuming and expensive trade reporting requirements, and rules that make it more difficult to raise capital from smaller investors. The hope is the efficiency shown by the U.K. in its coronavirus vaccination policy — which is far outpacing the EU rollout — can be replicated when it comes to financial services.“It’s about speed and nimbleness, rather than sweeping changes,” said William Wright, founder and chief executive officer of New Financial, a London-based think tank.Evolution not revolution also means protecting existing strengths as much as possible. However, London’s relationship with the EU was barely mentioned in last year’s Brexit trade deal, and those talks highlighted resentments and political point scoring that could frustrate any future discussions. Of the 39 areas in which the EU could find Britain financially equivalent, it has granted only two, and both are time-limited.“I think there’s a lot of Europeans that want to have a bite of the golden goose,” said Fraser Thorne, chief executive officer of Edison Institutional Services Ltd, a London-based financial advisory firm.Read More: Listen to the Latest Stephanomics Podcast on 100 Days of Brexit How Brexit Is Changing the City of London, One Piece at a TimeOne minor positive for the City in 2021 was that the U.K. and the EU agreed a framework for talks late last month, and in a rare Brexit development, it was done on deadline. But realistically even that Memorandum of Understanding amounts to very little, and the sense is that no significant access to EU financial markets is on the cards anytime soon.Brussels has made no secret of its desire to become less reliant on U.K.-based financial services. Seen from outside Britain, Europe’s lack of a major global financial center within its own borders is a matter of political and strategic concern, and one that policy makers want to rectify.In the U.K., even some of the more mild-mannered British public servants are being more forthright about the need to protect London against an increasingly aggressive EU. At the Bank of England, Governor Andrew Bailey used a Parliament hearing to, unprompted, bluntly deliver a message: The U.K. would “resist very firmly” any EU attempt to force relocations.Any post-Brexit identity for the City will also be forged by the new business it attracts, as much as what remains in place.Sunak and his Treasury minister, John Glen, have spent the past few months trying to sell the benefits that London can offer outside a more rigid EU system.“If they get it right, London will remain an incredibly strong force,” said Alasdair Haynes, CEO at Aquis Exchange Plc. “But if they argue and there's a lot of bickering and we can't move swiftly and there's political interference then actually London is probably in the most precarious place it has ever been.”Officials are making a big play for the U.K. to build on its position as a hub for financial innovation, cultivating a growing ecosystem of fintech businesses spanning everything from consumer-facing businesses attempting to steal retail customers from the big lenders through to niche firms supplying specialized technology services to investment banks.Iana Vidal, head of government relations and policy at Innovate Finance, the lobby group for the U.K. fintech industry, says Britain could steal a march on the rest of Europe by moving faster to help mold the regulatory structure for the nascent sector.“We want to have a first-mover advantage,” she said. “You could potentially gain a head start over your competition in Europe.”That’s an opportunity acknowledged by Brexit critic Dimon, who said London “still has the opportunity to adapt and reinvent itself, particularly as the digital landscape continues to revolutionize financial services.”But in the short-term he’s pessimistic, warning that Brexit “cannot possibly be a positive” for the U.K. economy.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.
China has imposed a sweeping restructuring on Jack Ma's Ant Group, the fintech conglomerate whose record $37 billion IPO was derailed by regulators in November, underscoring Beijing's determination to rein in its internet giants. The overhaul, in the works for several months, includes Ant turning itself into a financial holding firm, a move expected to curb its profitability and valuation by curtailing some of its freewheeling businesses. It comes two days after Ma's Alibaba Group Holding Ltd, of which Ant is an affiliate, was hit with a record $2.75 billion antitrust penalty as China tightens controls on the booming "platform economy".
(Bloomberg) -- U.S. regulators are throwing another wrench into Wall Street’s SPAC machine by cracking down on how accounting rules apply to a key element of blank-check companies.The Securities and Exchange Commission is setting forth new guidance that warrants, which are issued to early investors in the deals, might not be considered equity instruments and may instead be liabilities for accounting purposes. The move, reported earlier by Bloomberg News, threatens to disrupt filings for new special purpose acquisition companies until the issue is resolved.The accounting considerations mark the latest effort by the SEC to clamp down on the white-hot SPAC market. For months, the regulator has been raising red flags that investors aren’t being fully informed of potential risks associated with blank-check companies, which list on public stock exchanges to raise money for the purpose of buying other entities.The SEC began reaching out to accountants last week with the guidance on warrants, according to people familiar with the matter. A pipeline of hundreds of filings for new SPACs could be affected, said the people, who asked not to be identified because the conversations were private.“The SEC indicated that they will not declare any registration statements effective unless the warrant issue is addressed,” according to a client note sent by accounting firm Marcum that was reviewed by Bloomberg.In a SPAC, early investors buy units, which typically includes a share of common stock and a fraction of a warrant to purchase more stock at a later date. They’re considered a sweetener for backers and have thus far been considered equity instruments for accounting purposes. Sponsor teams -- the management of a SPAC -- are also typically given warrants as part of their reward to find a deal, on top of the founder shares.In a statement late Monday, SEC officials urged those involved in SPACs to pay attention to the accounting implications of their transactions. They said that a recent analysis of the market had shown a fact pattern in transactions in which “warrants should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings.”“The evaluation of the accounting for contracts in an entity’s own equity, such as warrants issued by a SPAC, requires careful consideration of the specific facts and circumstances for each entity and each contract,” the officials said in the statement.The SEC issued its guidance after a firm asked the agency how certain accounting rules applied to SPACs, according to another person familiar with the matter. It’s unclear how many companies will be impacted by the move and not all warrants will be affected. Still, regulators consider it likely to be a widespread issue. Firms will be expected to review their statements and correct any material errors, said the person.The shift would spell a massive nuisance for accountants and lawyers, who are hired to ensure blank-check companies are in compliance with the agency. SPACs that are already public and that have struck mergers with targets may have to restate their financial results, the people familiar with the matter said.More than 550 SPACs have filed to go public on U.S. exchanges in the year to date, seeking to raise a combined $162 billion, according to data compiled by Bloomberg. That exceeds the total for all of 2020, during which SPACs raised more than every prior year combined.In an April 8 statement, John Coates, the SEC’s top official for corporate filings, warned Wall Street against viewing SPACs as a way to avoid securities laws. Claims that promoters face less legal liability than a traditional public offering are “uncertain at best,” Coates, who was one of the officials issuing Monday’s statement on accounting, said at the time.The deluge has overwhelmed those responsible for reviewing filings at the SEC, triggered a surge in liability insurance rates for blank-check companies and fueled market anxieties that the bubble is about to burst.(Updates with SEC official’s previous comment in penultimate 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) -- China ordered 34 internet corporations Tuesday to rectify their anti-competitive practices within the next month, signaling that Beijing’s scrutiny of its most powerful firms hasn’t ended with the conclusion of a probe into Alibaba Group Holding Ltd.Shares in Tencent Holdings Ltd. and Meituan extended losses after the State Administration for Market Regulation issued a stern statement emphasizing it will continue to eradicate abuses of information and market dominance among other violations. Also summoned to an ad-hoc meeting with the watchdog on Tuesday were industry leaders including TikTok owner ByteDance Ltd., search giant Baidu Inc. and JD.com Inc.Regulators warned internet companies to “heed Alibaba’s example,” reaffirming their intent to abolish forced exclusivity among other practices. The meeting -- organized jointly with the cyberspace and tax regulators -- came days after Beijing wrapped up a four-month probe into Alibaba by slapping a record $2.8 billion fine on the e-commerce giant for abuse of market dominance.The penalty was less severe than many feared and lifted a cloud of uncertainty hanging over founder Jack Ma’s internet empire. It also came after the Chinese central bank ordered an overhaul of his Ant Group Co. fintech titan.Alibaba’s shares have gained 7% since the start of the week, but its fellow Chinese internet giants have gyrated while investors digest the rapid-fire announcements and concerns grow that Beijing’s scrutiny will extend beyond Alibaba. On Tuesday, Tencent gave up early gains to finish down slightly while Meituan, video service Kuaishou Technology and JD all slid more than 3% in Hong Kong.“The base line of policies cannot be crossed, the red line of laws cannot be touched,” the market watchdog said in the statement on Tuesday.The investigation into Alibaba was one of the opening salvos in a campaign seemingly designed to curb the power of China’s internet leaders, which kicked off after Ma infamously rebuked “pawn shop” lenders, regulators who don’t get the internet, and the “old men” of the global banking community. Those comments set in motion an unprecedented regulatory offensive, including scuttling Ant’s $35 billion initial public offering.The 34 firms summoned Tuesday must now undergo complete rectification after conducting internal checks and inspections over the next month, and make a pledge to society to obey rules and laws, the antitrust watchdog said in its statement. Regulators will organize follow-up inspections and companies that continue to engage in abuses like forced exclusivity -- a practice that “flagrantly trampled and destroyed” market order -- will be dealt with severely.The regulator also highlighted abuses like acquisitions that squeeze out smaller rivals and burning through cash to grab market share in community group buying, currently the hottest e-commerce arena in China. Firms also need to address issues like counterfeiting, data leaks and tax evasion, according to the statement.“This is positive because the SAMR is giving the platforms one month to review their practices, rather than dish out fines and penalties without warning,” Bloomberg Intelligence senior analyst Vey-Sern Ling said. “They are using Alibaba as an example to deter misbehavior from the rest of the industry players. If these companies toe the line, industry competition can become healthier. ”(Updates with share action from the 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) -- 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.
Credit Suisse has identified $2.3 billion worth of loans exposed to financial and litigation uncertainties in its Greensill-linked supply chain finance funds, it told investors on Tuesday. Switzerland's second-biggest bank has been reeling from its exposure to the collapse first of Greensill Capital and then Archegos Capital Management within a month. Its asset management unit was forced last month to shut $10 billion of supply chain finance funds that invested in bonds issued by Greensill after the UK firm lost credit insurance coverage shortly before filing for insolvency.
(Bloomberg) -- Europe’s top financial watchdog has asked some of the bloc’s largest banks for additional information on their exposure to hedge funds after the recent collapse of Archegos Capital Management.The checks by the European Central Bank on lenders such as Deutsche Bank AG and BNP Paribas SA are standard practice after such a disruptive event for the industry, according to people familiar with the matter. All banks supervised by the ECB that have a significant hedge fund business are likely to face these questions, they said, asking not to be identified discussing the private information.Representatives for the ECB, Deutsche Bank and BNP declined to comment.The collapse of Archegos, a secretive family office that had made highly leveraged bets on stocks, could cause as much as $10 billion of losses for banks, analysts at JPMorgan Chase & Co. estimate. Swiss lender Credit Suisse Group AG alone has put the expected hit at 4.4 billion Swiss francs ($4.7 billion) in the first quarter.Euro-region banks, by contrast, have come away largely unscathed. Deutsche Bank had several billion dollars of exposure to Archegos when it started unraveling but the German lender quickly sold its holdings, Bloomberg News has reported. It said it won’t incur a loss as a result of the firm’s collapse.Archegos put on its trades with the help of so-called prime brokerage units at a number of investment banks, effectively borrowing large amounts to amplify returns. When the investments declined and lenders asked for more collateral, the firm collapsed and banks raced to unwind the positions with prices plummeting.Prime brokerage units make money by lending cash and securities to hedge funds and executing their trades. The business is risky but lucrative, earning European banks Barclays Plc, BNP Paribas, Credit Suisse, Societe Generale SA and UBS Group AG a combined $4 billion in 2019, according to a report from JPMorgan.“There is a need to scrutinize the reasons why the banks enabled the fund to leverage up to such an extent,” ECB executive board member Isabel Schnabel said in an interview with Der Spiegel last week. “It is a warning signal that there are considerable systemic risks that need to be better regulated.”(Adds previous comments from ECB executive 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.
(Bloomberg) -- President Joe Biden told companies vying with each other for a sharply constrained global supply of semiconductors that he has bipartisan support for government funding to address a shortage that has idled automakers worldwide.During a White House meeting with more than a dozen chief executive officers on Monday, Biden read from a letter from 23 senators and 42 House members backing his proposal for $50 billion for semiconductor manufacturing and research.“Both sides of the aisle are strongly supportive of what we’re proposing and where I think we can really get things done for the American people,” Biden said. “Now let me quote from the letter. It says, ‘The Chinese Communist Party is aggressively -- plans to reorient and dominate the semiconductor supply chain,’ and it goes into how much money will be they’re pouring into being able to do that.”Chief executives including General Motors Co. CEO Mary Barra, Ford Motor Co. CEO James D. Farley, Jr., and Sundar Pichai, CEO of Alphabet and Google participated in the virtual summit.White House Press Secretary Jen Psaki said the meeting showed the administration is serious about addressing supply-chain constraints and softening the blow for affected companies and workers.National Economic Council director Brian Deese and National Security Adviser Jake Sullivan hosted the meeting, with Commerce Secretary Gina Raimondo also participating. Companies invited to join included Dell Technologies Inc., Intel Corp., Medtronic Plc, Northrop Grumman Corp., HP Inc., Cummins Inc., Micron Technology Inc., Taiwan Semiconductor Manufacturing Co., AT&T Inc. and Samsung Electronics Co., as well as GM, Ford and Alphabet Inc.Intel CEO Pat Gelsinger said in an interview after the meeting that the White House and Congress are working aggressively to support the semiconductor industry with more domestic manufacturing, research and development as well as efforts to build the workforce. Taiwan’s TSMC also voiced its support. The contract chipmaker, which plays a central role in manufacturing most of the world’s most advanced semiconductors, has secured government incentives to begin building a $12 billion Arizona plant this year.“TSMC is confident that our 5nm advanced fab plan in Phoenix Arizona -- one of the largest foreign direct investments in U.S. history -- will be successful in partnership with the U.S. government,” it said in a statement.The administration intended to highlight elements of the president’s proposed $2.25 trillion infrastructure-focused plan that they believe would improve supply-chain resilience, a White House official said. The agenda also included discussions about the auto industry’s transition to clean energy, job creation and ensuring U.S. economic competitiveness, the official added.Many of the lawmakers supporting additional funding for semiconductors want to see the measure in a standalone competitiveness bill aimed at China, not as part of Biden’s infrastructure package, as it is now. The China bill has some bipartisan support and could have a quicker path through Congress.Intel, Micron, GM, A&T on Roster for White House Chips MeetingBut exactly how to spend and allocate the semiconductor funding is a source of debate among automakers and other consumers of chips, as well as the semiconductor companies themselves.Carmakers are pushing for a portion of the money to be reserved for vehicle-grade chips, warning of a potential 1.3 million shortfall in car and light-duty truck production in the U.S. this year if their industry isn’t given priority.Yet makers of other electronic devices affected by the chip shortage, such as computers and mobile phones, have taken issue with the carmakers’ demands, worried their industries will suffer. The debate was also a factor in the White House meeting.“There were many, many voices saying, ‘hey, we can’t just start carving things up for particular industries. We need a solution that works in the medium and long term and that are sensitive to some of the unique challenges of the immediate term,’” Gelsinger said in the interview. “I think we’re working pretty well through that process right now. Nobody will be entirely happy but we’re heading in a good direction.”The White House has not taken a public position on the issue but has indicated privately to semiconductor industry leaders that it would not support special treatment for one industry, according to people familiar with the matter.Matt Blunt, president of the American Automotive Policy Council, which lobbies for Ford, General Motors and Stellantis NV (formerly Fiat Chrysler Automobiles), expressed optimism that the Biden administration would at least consider his industry’s arguments.Congress Weighs Countering China on Chips, GOP Wary of Cost (1)He said the White House has not endorsed any specific plans for setting aside money for carmakers, but administration officials “understand why the proposal was made.”To avoid future chip shortages, Blunt’s group proposed that at least 25% of any federal support for the construction of semiconductor factories must go to U.S. facilities that commit to allocating at least 25% of their capacity to automotive-grade chips.John Neuffer, president and chief executive officer of the Semiconductor Industry Association, said the industry understands “the difficulty the auto sector is feeling right now, and chipmakers are working hard to ramp up production to meet demand in the short term.”For the long term, he said, the industry needs a boost in domestic production and innovation across the board “so all sectors of our economy have access to the chips they need, and that requires swiftly enacting federal investments in semiconductor manufacturing and research.”(Updates with TSMC’s comments from the seventh 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 Bank of England’s Chief Economist Andy Haldane will step down in June, removing the the Monetary Policy Committee’s most outspoken contrarian and inflation hawk.Haldane, 53, will leave after career spanning more than three decades at the central bank to become chief executive officer at the Royal Society for Arts, Manufactures and Commerce starting in September. He will remain in place through the bank’s rate decision on June 24. He’s departing as the U.K. emerges from its worst recession in three centuries, which pushed the central bank to unleash unprecedented stimulus including 150 billion pounds ($206 billion) of bond purchases this year. Haldane alone on the nine-member policy panel voiced concerns about inflation accelerating with a rapid bounce-back in growth as Prime Minister Boris Johnson winds back restrictions to contain the Covid-19.“The most interesting element to me is that he is probably the arch-hawk on the MPC, and his removal will certainly see a more dovish tone seep into meetings,” said Stuart Cole, chief macro strategist at Equiti Capital and a former BOE economist.Bank of England Governor Andrew Bailey will appoint a successor after the bank advertises the position. While the chief economist traditionally also sits on the MPC, it’s the Treasury’s decision to name members to that panel.In recent months, Haldane has warned about the risk of excessive pessimism about the economic outlook as the pandemic winds down, terming it “Chicken Licken” economics that could undermine the recovery.While many of his colleagues point out concerns about rising unemployment and signs of sluggishness in the economy, he said he expects a “rip-roaring recovery” and on inflation said a “tiger has been stirred” that may “prove difficult to tame.”Several economists said the improving outlook for the U.K. economy has already shifted debate on the MPC away from extra stimulus and toward whether the pace of bond purchases need to slow -- or even an eventual tightening in policy.“In 2022 the BOE is likely to set out an exit strategy from its ultra-easy policy stance before hiking the bank rate in 2023,” said Kallum Pickering, senior economist at Berenberg.Haldane joined the BOE in 1989 after gaining a masters in economics from Warwick University.He logged experience at the central bank in international finance, market infrastructure and financial stability during the financial crisis before clinching his current role under previous Governor Mark Carney in 2014. That year, “Time” magazine named him one of the world’s 100 most influential people.Haldane is known for his occasionally quirky speeches. He once used Dr. Seuss to bemoan the reading age needed to understand the central bank’s communications.His words sometimes raised eyebrows, notably when he compared pre-crisis economic projections to a famously inaccurate forecast by BBC weatherman Michael Fish before a 1987 storm that killed 18 people.In 2012, he drew the ire of his future boss with a speech -- titled “The Dog and the Frisbee” -- which called for simplicity in banking regulation. Carney, who was then the Bank of Canada governor and head of the global Financial Stability Board, said the speech was “uneven” and the conclusion “not supported by the proper understanding of the facts.”Haldane has also led the government’s Industrial Strategy Council until it was dissolved a few weeks ago and is the co-founder of charity Pro-Bono Economics.“If your business is trying to predict rates and quantitative easing, it will be a bit easier without Andy’s speeches somewhat clouding the issue,” said Tony Yates, a former BOE official who worked with Haldane. “If you’re trying to get up to speed on the latest things in monetary economics and finance, then it’s less good because there won’t be Andy picking up new things and explaining them.”(Updates with context and comment from the first 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 window for Europe to sell its longest dated debt may be closing faster than countries expect.Demand for Britain’s longest-dated gilt fell to the lowest level since July 2018 at auction on Tuesday, with bids for the bond maturing in 2071 coming in at more than two times the 1 billion pounds ($1.38 billion) on offer. Austria and Spain both saw orderbooks fall for sales of 50-year and 15-year debt respectively.It’s a sign that the region’s bond markets are being hit by a double whammy of heavy supply and fears of a reflationary resurgence, which threatens to erode returns for investors. Nordea Bank Abp warned that the window to sell long-dated tenors is now closing as the economy recovers against a backdrop of an accelerating vaccine rollout. That could put pressure on the European Central Bank to dial back its bond purchase programs.“The odds are stacked against longer-dated supply being taken down well,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “There is no likely outcome where long end rates are able to sustain a bid.”Around 15% of debt sales in the region during the first quarter had maturities of 25 years or more -- an all-time high, according Nordea -- as countries took advantage of the ECB’s bond-buying program to borrow at near record-low rates. But now, government bond yields have rebounded from all-time lows as investors begin to price an end to the pandemic.“It may become trickier later this year, as the economic recovery materializes and an environment of higher yields may start to look less remote,” Nordea’s chief strategist Jan von Gerich said, adding that the worst of the selling pressure in bonds appears to be over for now.Spain saw orderbooks drop by around 20 billion euros for a six billion euro debt sale, while in Austria, demand for its 50-year sale fell by around one billion euros, even with only 2 billion euros on offer. Its four-year sale did better, garnering above 26.6 billion euros of bids, around six times more than the amount being sold.One overwhelming force keeping a lid on yields is the ECB’s repeated pledge to keep monetary policy accommodative as the region shakes off economic pain from the pandemic. Data scheduled for Friday is expected to show euro-area consumer price inflation jumped to 1.3% last month, the highest in more than a year. Yet that would still be below the central bank’s goal of a reading close to, but below 2%. “I don’t sense a shift in attitude towards duration based on the better economic outlook, not yet at least,” said Antoine Bouvet, senior rates strategist at ING Groep NV. “The lower-for-longer narrative is still widely shared in Europe.”Austrian securities that come due in 2062 yield around 0.66%, up from around 0.10% in December. Fifty-year gilts currently yield around 1.12%, having climbed from less than 0.3% last year. That’s well below a market gauge of expected price rises over the next decade, which hit 3.83% this month, the highest level in more than a decade.(Updates with prices throughout, adds Mizuho comment 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) -- 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) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.Indonesia’s central bank says the rupiah is “very undervalued” following a two-month slide. Investment banks and money managers are predicting further losses.Goldman Sachs Group Inc. says climbing U.S. yields and a potentially firmer dollar will keep hurting Indonesian assets in the near term, while PineBridge Investments Asia Ltd. says the rupiah will keep sliding due to the global risk-off trade and as overseas funds take home dividends. Loomis Sayles Investment Asia Pte. is bearish due to the Covid-19 situation.The rupiah has dropped 3.8% this year, the worst performer in emerging Asia after the Thai baht, as surging U.S. Treasury yields led to an outflow of funds from emerging-market assets. The currency fell as low as 14,635 per dollar on Tuesday, the weakest level since November.“The rupiah is among the most vulnerable among high-yield emerging-market currencies under risk-off sentiment,” said Arthur Lau, head of Asia ex-Japan fixed income at PineBridge in Hong Kong. “In the coming months, we expect the weakness of the rupiah to remain due to seasonal dividend and coupon repatriation in April-May and higher seasonal imports in the second quarter.”Indonesia’s currency is seen as a bellwether of risk in emerging Asia due to the relatively high foreign ownership of local assets and its generally open economy. The rupiah’s prolonged slide suggests there is a deeper shift away from developing nations than just a pullback from last year’s liquidity-fueled surge.Emerging-market stocks, bonds and currencies have all declined over the past three months with the biggest foreign-exchange losses in Brazil, Argentina and Turkey.“One of the most frequently asked investor questions in recent weeks has been whether it is time to buy the dip in Indonesia local markets?” Goldman Sachs analysts led by Zach Pandl in New York wrote in a research note this month. “The answer is ‘not yet’, in our view.”Goldman says its analysis indicates Indonesian bonds are not yet in cheap territory, and strong U.S. data suggests there’s the potential for even higher Treasury yields, which would be a further negative for the Asian nation’s assets.Bank Indonesia sees the rupiah rebounding due to the country’s low inflation and improving economic growth. Meanwhile, policy makers will seek to stabilize the currency in line with its fundamentals, Deputy Governor Dody Budi Waluyo said last week.Amundi Singapore Ltd. is also positive over a longer horizon.“Over the medium term, Indonesia will benefit from structural tailwinds, such as further finalization and implementation of the omnibus law, and from the relatively quicker economic recovery post-Covid,” said Joevin Teo, head of investment in Singapore. “This should continue to bolster investor interest and inflows in both the bond and currency markets.”Back among the bears, Loomis Sayles believes there’s little reason to be positive about the rupiah at present, especially with the country struggling to bring the coronavirus under control.“The fundamental reason for being bullish rupiah right now isn’t there,” said Thu Ha Chow, a portfolio manager at the firm in Singapore. In addition to the risk of a rising dollar and U.S. yields, “there’s no massive turnaround story in terms of what’s going on with the Covid situation,” she said.(Updates rupiah return in third paragraph, adds EM asset performance in sixth)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) -- KKR & Co. expects to raise more than $100 billion by 2022, building on last year’s record and an abundance of growth opportunities.“We have many more strategies coming to market now than we did at the beginning of 2020,” Scott Nuttall, KKR’s co-president, said Tuesday at the New York-based firm’s virtual investor day. “Our fundraising pipeline is very large.”KKR took in a record $44 billion last year as investors sought higher-yielding assets. The firm, which oversees $252 billion, has been among the most active dealmakers during the Covid-19 pandemic, investing through the downturn to avoid mistakes it made in the aftermath of the 2008 financial crisis.The firm expects to reach its goal by raising $40 billion to $50 billion in private equity, $15 billion to $20 billion in infrastructure, $10 billion to $15 billion in real estate and $20 billion to $25 billion in credit.KKR is either already in the market with or planning to raise capital for more than 20 strategies this year and next, including its flagship Americas and Europe private equity funds as well as its global impact and opportunistic real estate funds, according to the presentation.Earlier this month, KKR said it brought in $15 billion for its biggest buyout fund in Asia, the largest private equity pool in the region. The firm is also seeking about $12 billion for its fourth global infrastructure fund, Bloomberg has reported.KKR shares gained 28% this year through April 12 compared to an increase of 21% for Carlyle Group Inc. and 19% for Blackstone Group Inc. Apollo Global Management Inc. fell 2.9% in that period.“We’re continuing to see robust demand from LPs of really all types across products,” Nuttall said at the event. “It’s been really hard for investors to find return in the public markets, both equities and credit, especially those that are focused on looking for yield. And so we’re finding more and more investors shifting a larger percentage of their investment portfolio to alternatives.”Nuttall said the firm is seeing investor interest in anything that’s yield-based, and that there’s a significant amount of interest in Asia.The firm also touted its focus on technology, with Co-President Joe Bae saying the sector has been the single largest destination of capital across its large-scale private equity businesses in the last three years. Digital has also been a major component of the firm’s real asset platforms, Bae said.(Updates with additional comments starting in the eighth 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.
HSBC and Huawei Technologies' Chief Financial Officer Meng Wanzhou have reached an agreement in a dispute about the publication of documents relating to U.S. fraud allegations against her, their lawyers told a Hong Kong court. The legal dispute reached the Hong Kong court last month after a British judge in February blocked the release of internal HSBC documents relating to the fraud allegations against Meng.
(Bloomberg) -- Abu Dhabi sovereign wealth fund Mubadala Investment Co. said it’s “close” to an initial public offering of Emirates Global Aluminium PJSC as it studies other major deals including a role in a consortium investing in Saudi Aramco’s oil pipelines.“We’ve been thinking about this for a couple of years and waiting for the right time for that business to be IPO’d,” Chief Executive Officer Khaldoon Al Mubarak said on Monday when asked about EGA, the Middle East’s biggest producer of aluminum. “We’re very close now.”Coming off its busiest year ever, the $232 billion fund has shown little sign of slowing down in 2021, striking deals ranging from purchasing a Brazilian refinery to investing in convertible bonds of messaging app Telegram.EGA, which is equally owned by Mubadala and Investment Corp. of Dubai, has smelters in Abu Dhabi and Dubai and a bauxite mine in Guinea. Its revenue in 2020 was $5.1 billion and it made earnings before interest, tax, depreciation and amortization of $1.1 billion.The company had planned an IPO in 2018 or 2019 but it was pulled after then-U.S. President Donald Trump imposed tariffs on aluminum imports from the United Arab Emirates. His successor Joe Biden said in February that he would keep the U.S. restrictions in place, reversing Trump’s last-minute move to grant the UAE relief from the duties.“We will decide, obviously, when the appropriate market conditions are there, but the company is certainly in a very strong position and I think is well placed for an IPO,” Al Mubarak said during a virtual conference.EIG TalksMubadala is meanwhile considering other deals. It hasn’t yet decided whether to join a group led by EIG Global Energy Partners LLC that agreed on a $12.4 billion deal with Aramco.The wealth fund has teams studying the opportunity and looking at possible returns on investing in neighboring Saudi Arabia, according to Al Mubarak. It’s previously said that it was in talks with EIG.According to an announcement last Friday, the investors will buy 49% of Aramco Oil Pipelines Co., a recently-formed entity with rights to 25 years of tariff payments for crude shipped through the Saudi Arabian firm’s network. Aramco will own the rest of the shares and retain full ownership of the pipelines themselves.Read more: Mubadala Discusses GlobalFoundries IPO at $20 Billion Value Mubadala has also made no decision about a share sale of its wholly-owned chipmaker GlobalFoundries, according to Al Mubarak. Earlier this month, Bloomberg reported that the wealth fund had started preparations for a U.S. IPO that could value the business at about $20 billion.“GlobalFoundries is a strong, well-run business,” Al Mubarak said. “We have not taken a view or a decision yet.”India PushAfter an initial pause after the pandemic first hit, the wealth fund doubled down and invested more in 2020 than in any previous year, the CEO said.India emerged as one key destination for Mubadala’s money, with its investments there in 2020 eclipsing the combined total of the preceding 19 years, Al Mubarak said.The wealth fund invested $1.2 billion in Reliance Industries Ltd.’s digital upstart Jio Platforms Ltd. in 2020, a deal that gave Mubadala a 1.85% stake in the venture.“Clearly, we were underweight in terms of India” and “over the last many years we didn’t invest as much as we should,” the CEO said. “That’s changing, and as far as we’re concerned in Mubadala, we’re certainly giving it a very particular focus.”(Updates with details on EGA 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.
Roth accounts serve a special tax purpose — they’re funded with after-tax dollars and thus, are distributed tax-free (compared with a traditional account, where the money is contributed and grows tax-free but is taxed at withdrawal). Roth conversions are similar — investors move the money from their traditional accounts into Roth accounts and pay the tax upfront.
(Bloomberg) -- Jack Ma’s Ant Group Co. will drastically revamp its business, bowing to demands from Chinese authorities that want to rein in the country’s fast-growing Internet giants.Ant will now effectively be supervised more like a bank, a move with far-reaching implications for its growth and ability to press ahead with a landmark initial public offering that the government abruptly delayed late last year.The overhaul outlined by regulators and the company on Monday will see Ant transform itself into a financial holding company, with authorities directing the firm to open its payments app to competitors, increase oversight of how that business fuels it crucial consumer lending operations, and ramp up data protections. It will also need to cut the outstanding value of its money-market fund Yu’ebao.The directives come as China’s regulators pledge to curb the “reckless” push of technology firms into finance and crack down on monopolies online. The twin pillars of Ma’s empire -- Ant and e-commerce giant Alibaba Group Holding Ltd. -- have been at the center of the increased scrutiny, sending a message to the country’s largest corporations and their leaders to fall in line with Beijing’s priorities.Several government agencies, including the People’s Bank of China, and regulators overseeing the banking and securities sectors met with Ant to dictate the changes. The company will plan its growth “within the national strategic context,” and make sure that it shoulders more social responsibility, Ant said in its statement.Regulators have also slapped a record $2.8 billion fine on Alibaba this month after an anti-trust probe found the e-commerce company abused its market dominance.“The darkest hour for Alibaba has passed, but I wouldn’t say so for Ant Group,” said Dong Ximiao, chief researcher at Zhongguancun Internet Finance Institute. “The latest announcement clarified the framework for Ant’s restructuring, but the tone is still harsh and some of the requirements are tougher than expected. I don’t think the overhang is removed for Ant investors at this stage.”While the revamp leaves Ant’s main businesses intact, regulators are making it harder for the firm to exploit synergies that allowed it to direct traffic from its payments service Alipay -- which has a billion users -- to other financial services including wealth management, consumer lending and even on-demand neighborhood services and delivery.Authorities now require Ant to cut off any improper linking of payments with other financial products including its Jiebei and Huabei lending services. Ant said it will fold those units into its consumer finance arm, apply for a license for personal credit reporting, and improve consumer data protection.Ant could add more credit borrowing options on Alipay instead of setting Huabei as the default or preferred option, Thomas Chong, a Hong Kong-based analyst with Jefferies Financial Group Inc., wrote in a report, adding that synergies between Huabei and Yu’ebao could be affected.“Ant’s growth prospects just became a lot more challenging, given it will be much more difficult to capitalize on its scale,” said Mark Tanner, founder of Shanghai-based consultant China Skinny. “These growth challenges, in addition to the wider concerns about the tech sector regulators, makes their IPO value and attractiveness a shadow of what it was.”Ant Chairman Eric Jing promised staff last month that the company would eventually go public. Bloomberg Intelligence analyst Francis Chan has estimated the firm’s valuation may drop about 60% from the $280 billion it was pegged at last year given the rule changes being contemplated in areas including payments.Payments FocusChanges to the payments business were among the top priorities regulators outlined, with Ant pledging to return the business “to its origin” by focusing on micro-payments and convenience for users.Earlier this year, China proposed measures to curb market concentration in online payments, which Ant and rival Tencent Holdings Ltd. have transformed with their ubiquitous mobile apps that are used by a combined 1 billion people.The central bank said in draft rules that any non-bank payment company with half of the market in online transactions or two entities with a combined two-thirds share could be subject to antitrust probes.If a monopoly is confirmed, the central bank can suggest that cabinet impose restrictive measures including breaking up the entity by its business type.Mobile payments are only part of what contribute to online transactions, but they have become the most important platform in China, fueling growth in other services.Investors are also awaiting final rules aimed at curbing online consumer lending, which were unveiled late last year.Given all the changes still down the track, an Ant IPO remains “far, far away,” said Zhongguancun Internet Finance Institute’s Dong.“The PBOC statement emphasizes risks and correction, while Ant Group’s statement sounds positive to investors,” Shujin Chen, the Hong Kong-based head of financial research at Jefferies, wrote in a report. “Ant will be the first financial holding company in China, a milestone in fintech regulation. Ant sees a clearer roadmap to restructure, although some details remain unclear.”(Updates with Ant comment in fifth paragraph, analyst comment in tenth)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.
State mortgage programs offer thousands of dollars in student loan relief.
ZURICH (Reuters) -Proxy adviser Glass Lewis urged Credit Suisse shareholders to oppose board member Andreas Gottschling's re-election, on grounds that as risk committee chairman he should be held accountable for problems tied to Greensill and Archegos. Switzerland's second-biggest bank has been reeling from the collapses of Greensill Capital and Archegos Capital Management, with a 4.4 billion Swiss franc ($4.75 billion) charge hitting its balance sheet after Archegos failed to meet margin commitments.