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A cornered tiger, Alibaba lashes out
Capital Markets
<p>Chinese internet giant Alibaba is on the offensive after a recent article warned that the firm could lose up to 50% of its value.</p> <p>The furor started with an article posted in Barron’s over the weekend. Journalist Jonathan Laing had wrote that the NASDAQ-listed firm was massively over-valued, and faces losing half of its value amid an "array of problems". </p> <p>This only adds to Alibaba's stress. As of Friday, Alibaba’s stock was trading at $64.68, having slipped below its $68 IPO price from it when it went public a year ago.</p> <p>Laing raised red flags regarding business practices, counterfeit goods, conflicts of interest, and corporate governance. Needless to say Alibaba was not happy and promptly published a point-by-point rebuttal on its website in the early hours of this morning, accusing the journalist of factual inaccuracies and using selective use of information.</p> <p>Alibaba’s stock has not been in great shape for a while. It peaked at around $119 a share in November last year and have been steadily declining ever since. No doubt the Barron’s article will have an impact on the company’s stock, how much may depend on how well Alibaba has argued its case. We will see when the US markets open today.<br /> Photo: Patrick Bouquet</p>
A bull on China
Asset Management
<p>While high-profile hedge fund managers such as Ray Dalio go full-on negative on the region, Nikko Asset Management Asia’s Peter Sartori says that China, as well as Asia’s emerging markets, will continue to beat its first world peers.</p> <p>According to the Straits Times, Sartori argues that there’s still a compelling case for a “long-term bull market” in the region, despite all its recent routs and regulatory missteps:<br /> “The pace of initiatives appears to be increasing in China, particularly in the state-owned enterprises and financial services space…While naysayers argue that the attempted shift from an investment-led economy to a consumption-led economy will result in a major dislocation in financial markets, we believe that the government has enough tools and capital at its disposal to make the transition successfully.”<br /> He also adds that the nation’s highly-scrutinized GDP doesn’t really mean anything to the equity market, saying:<br /> “Does GDP matter from the stock market point of view? No. There's no strong correlation between economic growth and stock market returns. In fact, it's the opposite. When Japan and Korea's economies were growing, their stock markets' returns were lacklustre. When growth slowed in those countries, their markets went through a long and sustained bull market. That's what's under way now in China.”<br /> While he does have a point, low growth in the new and open China seems to be uncharted territory for most, and the fact that Beijing’s been behaving like a riddle wrapped in a mystery within an enigma doesn’t help his argument either.</p> <p>That said, Sartori’s also betting on India in the medium term, asserting that all the nation’s recent troubles “provide scope for looser fiscal and monetary policies.”</p> <p>India bulls are sure to love that.<br /> Photo: groucho</p>
Video: The fabulous life of…Steve Cohen
Lifestyle, 4:01
<p>Steve Cohen is known for three things: SAC Capital, buying a dead shark for $8 million, and having a bit of a bother with the SEC.</p> <p>The latter two aside, SAC Capital’s impressive run of two decades of 30% returns – net of his hefty, nay, enormous 50% fee – has allowed Cohen to surround himself with more toys and art aside from the aforementioned rotting shark. Here are a few of them, plus the shark, via Business Insider:</p> <p>If I was worth $11 billion, I’d probably be doing the same too.<br /> Photo: jwilly</p>
Why China is like the movie Predator
Hedge Funds
<p>Investors are no doubt full of quirky analogies they can employ to describe their experiences of China, but perhaps the best comes from Russel Clark, the CIO of hedge fund Horseman Capital, who recently compared China to the 1987 sci-fi action movie Predator.</p> <p>ZeroHedge reports that Clark offered up this gem in his firm's monthly letter after the $2.5 billion fund was up a staggering 9.4% for August following China’s market rout. </p> <p>Clark recalls how the film features a special ops team ordered on a mission to a South American jungle, that are slowly hunted down by an alien creature. </p> <p>They try to trap the creature, but it defies anything they have seen before: it can turn itself invisible, has infrared vision, and uses a shoulder mounted laser rifle. Nearly all of them succumb to the Predator.  </p> <p>The explanation is long and can be read here. In short, for bears, the Chinese government is like the Predator: continually using special abilities that were previously unknown. Bearish investors meanwhile have been picked off relentlessly and effortlessly by the government and the central banks. </p> <p>But things have unraveled since. The stock market began to sell off and pressure  built on the currency, prompting the Chinese to devalue the renminbi. This had the unwanted effect of stoking fear in the investing public, increasing  both capital outflows and pressure on the exchange. Clark concluded his analogy:<br /> “In my experience, in the mind of the international investment community, small devaluations tend to encourage even more capital outflow, which in turns leads to even large devaluations. Or to borrow, a line from Predator, 'If it bleeds, we can kill it'.’’<br /> One wonders what other movie analogies work to describe the Chinese economy. <br /> Photo: Malte Sörensen</p>
Indonesia: A rising fintech powerhouse?
<p>When it comes to financial innovation in Asia, it’s China that has gobbled up most of the headlines of late, with tech giants like Alibaba and Tencent expanding aggressively into areas such as payments and banking. But perhaps we should be casting our gaze further south, to Indonesia?</p> <p>There are plenty of reasons to be bullish about Indonesian fintech. With around 255 million people, it is the region’s third most populous country after India and China, and has the fourth largest population globally. </p> <p>A large chunk of this population is also unbanked. According to Deliotte, the country has 110 million "bankable unbanked" citizens. Indonesians are crying out for fin-tech solutions and companies are coming into fill the breech. </p> <p>TechInAsia, recently put together a list of nine Indonesian startups that currently springing up across areas as such as payments, product comparison., lending, cloud technology, and data services. The sheer diversity of this nascent space indicate Indonesia might be one to watch.<br /> Photo: Bindalfrodo</p> <p>&nbsp;</p>
Hong Kong companies face tougher scrutiny
Capital Markets
<p>There was an encouraging nugget in an otherwise worrying report on Friday by leading Asia-based brokerage CLSA.</p> <p>First the bad news: a record 38% of Asian companies are destroying shareholder value, returning less than their cost of capital; the proportion burning cash is at a three-year high; and 20% of them are borrowing to pay dividends, according to the Financial Times (paywall).</p> <p>CLSA’s findings were part of a report screening 2,500 of the biggest companies in Asia-Pacific (ex-Japan) for “red flags” that could indicate problems with the quality of their earnings or balance sheets.</p> <p>Companies with several balance sheet-related red flags tend to underperform the broader market by 18%, notes CLSA, while those with poor-quality earnings do so by 7%.</p> <p>Hong Kong-listed companies look especially vulnerable. As many as 1,285 have filed profit warnings this year, which is the most in eight years.</p> <p>But, here’s the good news – although at first glance it might seem perverse.</p> <p>The number of companies that had their shares suspended for financial distress and accounting issues both doubled last year and are set to be even higher this year.</p> <p>For years investors have complained about poor governance and opaque accounting practices at the Hong Kong’s listed but tycoon dominated companies, and despaired at lax stock market supervision.</p> <p>Now, the territory’s regulators might actually be raising their game.<br /> Photo: Barbara Willi</p>
The rebirth of Google Wallet
<p>Rumors of the death of Google Wallet have been greatly exaggerated. While Google Wallet may have been supplanted by Android Pay, the internet giant’s latest NFC payment platform, the product will stick around as a P2P platform.</p> <p>The new pared down app will focus only on sending money, offering the same functionality seen in the old Google Wallet app and Gmail's "attach money" feature in a standalone format. The pivot will put Google Wallet up against the likes of Square Cash and Venmo. </p> <p>According to The Verge, all users will retain their original Google Wallet balances inside the new app. But only Android users can access Android Pay, meaning iPhone owners will be shut out from access to gift cards, loyalty programs, and promotional offers. </p> <p>The re-launch coincides with the unveiling of Google Wallet's mobile payments successor which will be the bludgeon with which Google hopes to thwack Apple’s aspiration of mobile payments dominance. The new platform began rolling out in the US last week  and works with all with all NFC-enabled Android devices running KitKat 4.4 and above on all US mobile carriers. American Express, Discover, MasterCard, Visa, Citi, and Wells Fargo are said to be all aboard. <br /> Photo: Prairie Kittin</p>
David Tepper is “not as bullish” on the short term
Hedge Funds
<p>David Tepper, arguably one of the most successful (and volatile) hedge fund managers currently in action, recently told CNBC that he’s “not as bullish” as he could be – a terrible sign for the markets since he thinks being a bear is the work of Satan.</p> <p>In an interview with CNBC’s “Squawk Box,” the always-optimistic Tepper said that he has “problems with earnings growth [and] problems with multiples,” alluding to the high expectations currently embedded in the market, and added that you should “really make sure that you have some cash” if you invest in it because he sees a 10% to 20% correction on the horizon.</p> <p>As for Appaloosa, it’s on defense mode right now: “we have some longs and shorts and we're hedged in, but we don't have a huge equity book right now.”</p> <p>He also has issues with China, saying that they “just keep making policy mistake, after policy mistake, after policy mistake over there,” adding that while he knows there’s a learning curve in becoming a market-based economy, doing it in real time is “kind of bad when they're a $10 trillion or $11 trillion economy and they influence more than a third of the world's economy.”</p> <p>He’s bullish on the long term though, stating further that if the market fell 20% or more, he’d be a buyer.<br /> Photo: Sam valadi</p>
The DOJ’s unprecedented failure to prosecute big finance
Capital Markets
<p>“Justice is the end of government. It is the end of civil society.”</p> <p>- Federalist No. 51<br /> Executive Summary<br /> President Obama channeled the rhetoric of the Occupy Movements, blaming the worldwide financial collapse on “the reckless speculations of the bankers." Large financial institutions, banks, investment houses, and Hedge Funds are alleged to have knowingly committed fraud. Attorney General Eric Holder explained the challenge facing the newly minted Financial Fraud Task Force in 2009.</p> <p>We face unprecedented challenges in responding to the financial crisis that has gripped our economy for the past year. Mortgage, securities, and corporate fraud schemes have eroded the public's confidence in the nation's financial markets and have led to a growing sentiment that Wall Street does not play by the same rules as Main Street Unscrupulous executives, Ponzi scheme operators, and common criminals alike have targeted the pocket books and retirement accounts of middle class Americans, and in many cases, devastated entire families' futures. We will not allow these actions to go unpunished...This task Force's mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening.</p> <p>Despite Attorney General Eric Holder’s heated rhetoric promising to hold Wall Street accountable, an investigation into the Department of Justice's handling of the 2008 financial crisis found that:</p> <p> The Department of Justice has not filed a single criminal charge against any top executive of an elite financial institution.<br /> Attorney General Holder, Associate Attorney General Thomas Perrelli, Associate Attorney General Tony West, and Deputy Associate Attorney General Karol Mason all came to the DOJ from prestigious white-collar defense firms, where they represented the very financial institutions the DOJ is supposed to investigate.<br /> Top DOJ officials played prominent roles in his 2008 campaign. Holder co-chaired the campaign with Tony West, the DOJ’s third highest official.<br /> No other modern administration has staffed the DOJ with big money fundraisers. Holder bundled $50,000 for Obama’s 2008 campaign, while Perrelli, West, and Mason all bundled $500,000 for the campaign. West also helped raise an estimated $65 million in California.<br /> Washington's “Revolving Door" is at work in the DOJ. Top Iustice officials came from and returned to law practices where they defend the financial institutions the Do] is tasked with prosecuting.</p> <p>DOJ - Historical Narrative<br /> The Obama Administration's relationship with Big Finance is not just Washington as usual. In 2008, Obama's largest private source of campaign funding came from Goldman Sachs Group Inc (NYSE:GS) executives. Candidate Obama outraised McCain on Wall Street - around $16 million to $9 million. Although Obama told Wall Street executives, "My administration is the only thing between you and the pitchforks," it appears as though the President may be shielding Big Finance from anything like a severe accounting.</p> <p>While the Justice Department is at present dominated from the top with corporate attorneys, whose links to the very financial institutions they are charged with investigating create conflicts of interest, Presidents George H.W. Bush, Bill Clinton, and George W. Bush hired experienced prosecutors and attorneys to prosecute the financial titans who caused the Savings &amp; Loan, Enron, and WorldCom crises.<br /> Financial fraud pro</p>
Daily Scan: Shenzhen tanks 6.7%; Europe edges up
Capital Markets
<p>Updated throughout the day</p> <p>September 14</p> <p>Good evening everyone. Despite a small pop at the open, Chinese shares ended the session deep in the green today largely thanks to yesterday’s mixed data as well as the upcoming Fed decision. As always, China managed to drag down the rest of Asia again, though Hong Kong proved surprisingly resilient to its neighbor’s clutch:</p> <p> Hang Seng Index: +0.27%<br /> Hang Seng China Enterprises Index: +0.11%<br /> SHCOMP: -2.67%<br /> SZCOMP: -6.65%<br /> Nikkei 225: -1.63%<br /> TOPIX: -1.20%<br /> Straits Times Index: -0.32%</p> <p>European markets meanwhile are doing much better with the FTSE 100 climbing 0.58%, the DAX jumping 0.26%, and CAC edging up 0.21%. Here’s what else you need to know:</p> <p>Malaysia pumps $4.6b into stock market. The Malaysian government is spending 20 billion ringgit ($4.6 billion) on boosting shares and is cutting taxes for manufacturers. The ringgit lost 20% of its value against the dollar this year and a 9% fall in its stock market. BBC</p> <p>Japan industrial production falls short of estimates. The land of the rising sun’s industrial output fell -0.8% last month, worse than the preceding month’s -0.6% reading and missing estimates of a -0.6% fall. Investing</p> <p>Aussie PM challenged for leadership. Australian PM Tony Abbot has been challenged for his job by senior minister Malcolm Turnbull, who says the country needs a "new style of leadership". BBC</p> <p>UK’s second biggest party picks left-wing leader. Jeremy Corbyn has become the leader of the UK’s Labour Party. Initially a rank outsider, the socialist bagged 60% of the vote on a wave of grassroots support. Runner-up Andy Burnham, has been named shadow Home Secretary. Independent</p> <p>Egypt forces kill Mexico tourists. Egyptian security forces killed at least 12 people after mistakenly opening fire on a caravan of tourist vehicles in the country’s Western Desert late Sunday night.10 others were injured. New York  Times</p> <p>Japan’s Mount Aso erupts. A volcano on Japan's southern-most main island of Kyushu has erupted, sending up huge plumes of grey ash and smoke. Mount Aso is one of the most active peaks in Japan but is also a popular hiking spot. ABC</p> <p>China factory output and fixed-asset investment data misses estimates. China’s been punching in some disappointing data lately and here’s the latest. The nation’s industrial production grew 6.1% from the year before in August, slightly better than July’s 6% climb but well below forecasts for a 6.6% rise. Fixed-asset investment meanwhile jumped 10.9% year-on-year in January to August, lower than January to July’s 11.2% climb and slower than what analysts had expected. Retail sales came in strong though, surging 10.8% from the year before and besting the 10.5% growth posted in July. Wall Street Journal</p> <p>Germany </p>