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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 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>
Weekend Scan: Fed meets to set rates; Fedex reports quarterly earnings
Capital Markets
<p>The top news of the week won't come until Thursday afternoon, when the Federal Reserve will reveal its latest interest rate policy. Until then, market watchers will have the earnings of Fedex to chew on. The air freight company is considered a bellwether of the economy. The Estimize consensus for the fiscal first quarter: $2.46/share, up fro $2.10 a year earlier, on revenues  of $12.273 billion, up from $11.7 billion in 2014.</p> <p>Will they or won't they? The Federal Reserve Board meets  on Sep 16-17; Chair Janet Yellen will hold a news conference after the release of the FOMC policy statement at 2:00 p.m. ET. Markets are split on whether the Fed will hike interest rates 25 basis points, the first hike since 2008. The economy is expanding and job formation looks good. But the dollar is strong and China is faltering and various economic data in the U.S. continue to disappoint. What's a central bank to do? The move, if it comes, would pack a powerful psychological punch even though interest rates remain abnormally low.</p> <p>Germany initiates temporary border controls. The Interior Minister Thomas de Maiziere said migrants couldn't choose their places of refuge and began enforcing border controls with Austria after 13,000 migrants arrived on Saturday. Germany is expecting 800,000 migrants this year. BBC</p> <p> Flavia Pennetta wins women's grand slam. The Italian player snagged her first Grand Slam and announced her retirement. The No. 26 seed defeated Serena Williams in a stunning upset to advance to the finals. MarketWatch</p> <p>Died: Moses Malone, NBA Hall of Famer.  At the age of 60. Known as "Chairman of the Boards," Malone was a three-time MVP winner. Wall Street Journal (paywall)<br /> You won't believe this:<br /> The secret sex life of a feared al Qaeda operative. Anwar al-Awlaki, the American-born jihadist, preached strict Islam but the FBI caught him again and again patronizing prostitutes. After Osama bin Laden, he was one of the most feared al Qaeda leaders.  New York Post</p> <p>&nbsp;</p> <p>Photo: Brooking Institute</p>
Returns per asset class 2015 YTD [chart]
Capital Markets
<p>A chart by Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB) highlighting the returns per asset class 2015 YTD</p> <p>H/T Barry Ritholtz<br /> Returns Per Asset Class 2015 YTD</p> <p>This story originally appeared in ValueWalk.<br /> Photo: Allan Ajifo</p>
Barron's Weekend Roundup: Alibaba sinks; Apple shows new potential
Capital Markets
<p>A year ago this week, the Chinese Alibaba had the largest-ever IPO. In this week's cover story, Barron's looks at how the powerful company's stock went from peak to a downward slide. Alibaba's stock could continue to fall 50% further, Barron's writes.</p> <p>Alibaba may be falling, but Apple has good growth potential, writes Barron's. Last week Apple revealed new products, including a new iPhone and iPad Pro. As wireless phone companies switch up their plans for customers, Apple is looking to compete with annual upgrades and phone leasing options. Shares for Apple could jump 50%, Barron's writes.</p> <p>This coming week the Federal Reserve will make a decision about whether or not to raise interest rates. Growth stocks have been dominating in recent years, but rising rates could push value stocks up, writes Barron's.<br /> Photo: Világos Gergőhttps<br /> &nbsp;</p>
Weekend Scan: U.S. stocks post weekly gains; UoM consumer sentiment hits 12-month low
Capital Markets
<p>Happy Saturday everyone. While you were sleeping, U.S. stocks posted their best week in months with the S&amp;P 500 climbing 2.1% for the week, the Dow surging 2% - its best week since March – while the Nasdaq spiked 3% to notch is best showing since July. Oil however continued its downward trend largely thanks to price forecast cuts from Goldman Sachs and the EIA. WTI crude lost 3.1% this week, while Brent slipped 3%. Also ending the week on a bad note was gold, with December gold losing 1.6% for the week. This is the third consecutive weekly decline for the yellow metal, which lost 1.1% and 2.2% in the preceding two weeks respectively. Here’s what else you need to know:</p> <p>America remembers 9/11. Friday marks the 14th anniversary of the 9/11 attacks on the U.S., in which more than 3,000 people were killed when terrorists commandeered three commercial airliners and crashed them. President Obama marked the tragedy with a town hall meeting in Fort Mead, Md. Other ceremonies took place in Washington, D.C., New York, and Pennsylvania.</p> <p>U.S. consumer sentiment falls to new low. The University of Michigan’s preliminary consumer sentiment index came in at 85.7 early this month – its lowest level in a year – and down from a 91.9 showing from the month before. Market volatility seems to be the one to blame here, as sentiment towards home and vehicle purchases only suffered mild declines. Reuters</p> <p>Jack Lew wants Beijing to quit fiddling with the yuan. U.S. Treasury Secretary Jack Lew recently had a quick chat with China’s Vice Premier Wang Yang over the phone and after the usual pleasantries, Jack kindly asked China to “refrain from competitive devaluation and to move in an orderly way towards a more market determined exchange rate system, specifically signaling an intent to allow market pressures to drive the RMB up as well as down, and to increase the transparency of its exchange rate policies.” U.S. Treasury Department</p> <p>Greece snap elections may delay aid. After handing the stage to China the past few months, Greece is back the headlines once again as Standard &amp; Poor’s warns that the nation’s snap elections could delay the next tranche of ESM funds. They did however, reaffirm their CCC+ rating and stable outlook for the region, so it wasn’t all bad. Financial Times (paywall)</p> <p>18 fintech companies raised $210 million this past week. FundBox, CommonBond, Orchard Platform, and Chain all raised more than $30 million. Year to date fintech companies have raised $12.4 billion. Finovate</p> <p>Rick Perry drops out of presidential race. Former Texas governor Perry is the first of the Republicans to drop out of their party’s very crowded presidential race. Perry, who also ran in 2012, has struggled all summer against more dominant candidates.Politico </p> <p>Crane kills 65 people at Mecca. A crane collapsed on the Grand Mosque in the Muslim holy city of Mecca, killing at least 65 people and injuring more than 150 more. Mecca is preparing for the annual Hajj pilgrimage when hundreds of thousands visit the Saudi city. The site has been undergoing construction to accommodate more worshipers. </p>
NexChange People Moves: JPMorgan and Northern Trust boost Asia teams; Deutsche builds in Mexico
Capital Markets
<p>JPMorgan hires head of EM Asia FX. JPMorgan Chase has named Jonathan Cavenagh as head of the EM Asia FX strategy, based in Singapore. Cavenagh most recently worked as chief Asian strategist for Westpac Bank. Reuters</p> <p>Northern Trust names global capital markets appointments. Sunil Daswani has been promoted to the newly created role of head of international securities across EMEA and APAC, after working at Northern Trust since 2002. Dane Fannin and Mark Snowdon will report to Daswani in the new positions of head of securities lending.</p> <p>Deutsche private bank adds a managing director for Mexico. Pascal Landrove will serve in the new position of managing director for the bank in Mexico, based in Geneva. Landrove previously served as a managing director and relationship manager for Lombard Odier. On Wall Street</p> <p>&nbsp;<br /> Photo: ©iStock.com/ooyoo<br /> &nbsp;</p>
Daily Scan: Americans remember 9/11; stocks rise before rate decision
Capital Markets
<p>Updated throughout the day</p> <p>September 11</p> <p>Good evening,</p> <p>Friday marks the 14th anniversary of the 9/11 attacks on the U.S., in which more than 3,000 people were killed when terrorists commandeered three commercial airliners and crashed them. President Obama marked the tragedy with a town hall meeting in Fort Mead, Md. Other ceremonies took place in Washington, D.C., New York, and Pennsylvania. Years after the event, the death toll continues to mount as survivors succumb to injuries related to the attack.</p> <p>Stocks rose Friday, after starting the morning with small losses. The Dow ended up 0.63%, making a weekly gain of more than 2% for the first time since March. The S&amp;P 500 gained 0.45%, and the Nasdaq rose 0.5%. Oil fell, ending below $45/barrel.</p> <p>Here's what else you need to know:</p> <p>Rick Perry drops out of presidential race. Former Texas governor Perry is the first of the Republicans to drop out of their party's very crowded presidential race. Perry, who also ran in 2012, has struggled all summer against more dominant candidates. Politico </p> <p>Crane kills 65 people at Mecca. A crane collapsed on the Grand Mosque in the Muslim holy city of Mecca, killing at least 65 people and injuring more than 150 more. Mecca is preparing for the annual Hajj pilgrimage when hundreds of thousands visit the Saudi city. The site has been undergoing construction to accommodate more worshipers. BBC</p> <p>Serena shut down. Serena Williams was denied another Grand Slam title by Italian Roberta Vinci. Vinci, ranked 43rd, wasn't even seeded at the U.S. Open. Had Williams won, she would have been the first person since Steffi Graf in 1988 to win all Grand Slam titles in one year. CNN</p> <p>D.C.'s Union Station closed after shooting. A station security guard shot a man that stabbed his girlfriend. Both are alive. The incident was unrelated to September 11. Quartz</p> <p>18 fintech companies raised $210 million this past week. FundBox, CommonBond, Orchard Platform, and Chain all raised more than $30 million. Year to date fintech companies have raised $12.4 billion. Finovate</p> <p>CNN debate lineup announced. Of the now 15 Republican presidential candidates, the following will participate in the California debate scheduled for next week: Donald Trump, Ben Carson, Jeb Bush, Ted Cruz, Scott Walker, Marco Rubio, Carly Fiorina, Mike Huckabee, Rand Paul, and John Kasich. The other five candidates are invited to participate in a debate earlier in the evening. CNN</p> <p>Cuba to release 3,522 prisoners. The Council of State for the island nation announced that it will release the prisoners ahead of Pope Francis' visit to the country next week. This is the third time Cuba has release prisoners before a papal visit. The released prisoners will be a mix of women, those younger than 20, the ill, and those with sentences ending next year. </p>
People Moves: HSBC hires new trading execs; Soc Gen names new Asia-Pac DCM boss
Capital Markets
<p>Soc Gen appoints new head of Asia-Pacific DCM. Laurent Morel, a 21-year Soc Gen man, has been appointed by the firm’s corporate &amp; investment banking arm as its new head of debt capital markets for Asia-Pacific. He replaces Yves Jacob, who moved to Paris to take on his new role as the firm’s Senior Banker in charge of the global relationship with International Financial Institutions – Morel’s previous role. Morel joined Soc Gen back in 1994 after a brief stint at Air France UK. He has served the French bank in various roles since then, including head of global DCM corporate origination and global head of ECM. He will be based in Hong Kong and will report to Patrick Menard, Global Head of Capital Markets, and to Sadia Ricke, Head of Global Finance in Asia Pacific. Societe General Corporate &amp; Investment Banking</p> <p>HSBC hires new Asia-ex Japan S&amp;T execs. Andrew Maynard, CSLA’s former head of global trading and execution services, has joined HSBC as its new head of sales trading and execution services for the firm’s Asia ex-Japan equities business. Prior to joining CSLA, Maynard spent 16 years at Bank of America Merrill Lynch where he ran the bank’s regional execution services platform. Joining him in Hong Kong are Deutsche Bank’s former Asia-Pac director of Institutional Program sales and trading, Christopher White, and former Barclays director Jonathan Green. Judy Low meanwhile will be heading HSBC’s Asean sales and trading business from Singapore after spending 9 years at Deutsche Bank. Finance Asia</p> <p>Citi names new Asia Pacific head of public sector banking. David Ratliff, one of Citigroup’s senior execs in Hong Kong, was recently named as the firm’s Asia Pacific head of public sector banking. In the newly created role, Ratliff will take charge of the bank's Asian corporate and investment banking coverage as well as its markets and securities services coverage of public sector clients. He was previously the firm’s Asia-Pac head of investor sales and relationship management for and Asia-Pac equities head for Citigroup Global Markets. Reuters</p> <p>For Asset Management moves, click here.<br /> Photo: Wendy</p>