17 10 / 2011
Olympus shares drop in heavy, volatile trading
Olympus may take legal action against ousted Chief Executive
Michael Woodford, accusing him of disclosing confidential
information in media reports following his firing on Friday, a
senior executive told investors on Monday.
17 10 / 2011
Sonic Youth co-founders Moore, Gordon split up
The couple, “married in 1984, are announcing they have separated,” the statement said.”Plans beyond that (November) tour are uncertain. The couple has requested respect for their personal privacy and does not wish to issue further comment.”Sonic Youth’s tour has five dates, starting with a November 5 show in Buenos Aires, Argentina, and concluding on November 14 in Sao Paulo, Brazil.Gordon, 58, and Moore, 53, co-founded the quartet in 1980 in New York amid the so-called “no wave” movement.Moore and Lee Ranaldo were on guitars and Gordon played bass. Drummer Steve Shelley joined later.The pair first met when Gordon played in a band named CKM. “I guess it was love at first sight,” she said in the 2001 book “Our Band Could Be Your Life.”Moore and Gordon live in Northampton, Mass., with their daughter, Coco, 17, who is a singer with the local band Big Nils.Sonic Youth’s 16th record was “The Eternal” in 2009.
12 10 / 2011
Strong miners, banks hoist Britain’s FTSE higher
* Technical analysis suggests FTSE rally has further to run* FOMC meeting minutes eyed, due at 1800 GMTBy Tricia WrightLONDON, Oct 12 (Reuters) - Strong miners and banks boosted
Britain’s top shares on Wednesday, keeping the index on an
upward tilt, underpinned by progress in tackling the euro zone
sovereign debt crisis and recent upbeat U.S. data.The mood, already elevated by hopes European leaders will
unveil new measures to solve the crisis by the month’s end, was
further lifted when Slovakian lawmakers said they would approve
a plan to expand powers in the euro zone rescue fund.After some encouraging U.S. data, namely last week’s jobs
report and ISM manufacturing and non-manufacturing surveys, the
market awaited minutes of the last U.S. FOMC meeting, which
could be key to bolstering investor confidence.”As long as we continue towards a solution to the European
sovereign debt crisis, and as long as we continue to see an
improvement in terms of U.S. economic data, it should be enough
to encourage investors to take advantage of cheap valuations,”
said Henk Potts, markets strategist at Barclays Wealth.”The important thing is what we hear from the Fed later
today. The expectation is that they’ll suggest that growth is
likely to be better in the second half of the year than in the
first half, but the risk still remains skewed to the downside.”The FTSE 100 ended up 46.10 points, or 0.9 percent,
at 5,441.80, and has notched up gains of about 10 percent since
it struck lows a week ago.Phil Roberts, chief European technical strategist at
Barclays Capital, said there was likely more upside for the
index, which may reach the March and June lows over the course
of the next month, around the 5,600 mark.A convincing break above that level, however, would be “a
tough nut to crack”.The mining sector , which remains off 26 percent
this year despite a 20 percent rise since early last week,
gained in tandem with base metal prices as expectations rose of
potential restocking in China.Miners, led by ENRC and Antofagasta , which
enjoyed respective gains of 7.4 percent and 6.9 percent, bounced
back from a weaker start after disappointing results from U.S.
aluminium group Alcoa .ENRC grabbed the top spot on the blue chip leader board as
Deutsche Bank said it saw the firm’s recent deal to take up a
$650 million option to control Kazakh coal producer Shubarkol
Komir as a boost for the company.Silver and gold miner Fresnillo bucked the trend,
off 2 percent, after cutting full-year silver production
guidance after output fell in the third quarter, as it
reinforced safety conditions at all of its projects following
the deaths of 10 workers.Banks , beaten down this year on worries over
exposure to the euro zone crisis, rallied, with Barclays
the standout gainer in the sector, up 6.4 percent.Traders attributed Barclays’ outperformance in part to a
target price hike from Macquarie.Societe Generale said it remained very upbeat on UK domestic
banks, and reiterated “buy” recommendations on Royal Bank of
Scotland , Lloyds Banking Group and Barclays,
despite cutting target prices across the sector.Sticking with financials, Man Group dropped 6
percent, the top FTSE 100 faller, after the hedge fund firm said
its flagship AHL fund fell 5.5 percent last week.Meanwhile, engineers were boosted, with IMI and Weir
up 4.3 percent and 3.7 percent, as Berenberg Bank
started its coverage on both firms with a “buy” rating.Burberry was another good gainer, up 3.5 percent,
after the British luxury goods group issued a reassuring
first-half trading update, prompting CFD specialist H20 Markets
to upgrade its stance on the stock to “hold” from “sell”.Ex-dividend factors knocked 2.70 points off the FTSE 100,
with Capital Shopping Centres , Old Mutual ,
Smith & Nephew , Tesco , Wolseley , and WPP
Group all losing their payout attractions.
12 10 / 2011
Strong miners, banks hoist Britain’s FTSE higher
* Technical analysis suggests FTSE rally has further to run* FOMC meeting minutes eyed, due at 1800 GMTBy Tricia WrightLONDON, Oct 12 (Reuters) - Strong miners and banks boosted
Britain’s top shares on Wednesday, keeping the index on an
upward tilt, underpinned by progress in tackling the euro zone
sovereign debt crisis and recent upbeat U.S. data.The mood, already elevated by hopes European leaders will
unveil new measures to solve the crisis by the month’s end, was
further lifted when Slovakian lawmakers said they would approve
a plan to expand powers in the euro zone rescue fund.After some encouraging U.S. data, namely last week’s jobs
report and ISM manufacturing and non-manufacturing surveys, the
market awaited minutes of the last U.S. FOMC meeting, which
could be key to bolstering investor confidence.”As long as we continue towards a solution to the European
sovereign debt crisis, and as long as we continue to see an
improvement in terms of U.S. economic data, it should be enough
to encourage investors to take advantage of cheap valuations,”
said Henk Potts, markets strategist at Barclays Wealth.”The important thing is what we hear from the Fed later
today. The expectation is that they’ll suggest that growth is
likely to be better in the second half of the year than in the
first half, but the risk still remains skewed to the downside.”The FTSE 100 ended up 46.10 points, or 0.9 percent,
at 5,441.80, and has notched up gains of about 10 percent since
it struck lows a week ago.Phil Roberts, chief European technical strategist at
Barclays Capital, said there was likely more upside for the
index, which may reach the March and June lows over the course
of the next month, around the 5,600 mark.A convincing break above that level, however, would be “a
tough nut to crack”.The mining sector , which remains off 26 percent
this year despite a 20 percent rise since early last week,
gained in tandem with base metal prices as expectations rose of
potential restocking in China.Miners, led by ENRC and Antofagasta , which
enjoyed respective gains of 7.4 percent and 6.9 percent, bounced
back from a weaker start after disappointing results from U.S.
aluminium group Alcoa .ENRC grabbed the top spot on the blue chip leader board as
Deutsche Bank said it saw the firm’s recent deal to take up a
$650 million option to control Kazakh coal producer Shubarkol
Komir as a boost for the company.Silver and gold miner Fresnillo bucked the trend,
off 2 percent, after cutting full-year silver production
guidance after output fell in the third quarter, as it
reinforced safety conditions at all of its projects following
the deaths of 10 workers.Banks , beaten down this year on worries over
exposure to the euro zone crisis, rallied, with Barclays
the standout gainer in the sector, up 6.4 percent.Traders attributed Barclays’ outperformance in part to a
target price hike from Macquarie.Societe Generale said it remained very upbeat on UK domestic
banks, and reiterated “buy” recommendations on Royal Bank of
Scotland , Lloyds Banking Group and Barclays,
despite cutting target prices across the sector.Sticking with financials, Man Group dropped 6
percent, the top FTSE 100 faller, after the hedge fund firm said
its flagship AHL fund fell 5.5 percent last week.Meanwhile, engineers were boosted, with IMI and Weir
up 4.3 percent and 3.7 percent, as Berenberg Bank
started its coverage on both firms with a “buy” rating.Burberry was another good gainer, up 3.5 percent,
after the British luxury goods group issued a reassuring
first-half trading update, prompting CFD specialist H20 Markets
to upgrade its stance on the stock to “hold” from “sell”.Ex-dividend factors knocked 2.70 points off the FTSE 100,
with Capital Shopping Centres , Old Mutual ,
Smith & Nephew , Tesco , Wolseley , and WPP
Group all losing their payout attractions.
12 10 / 2011
DEALTALK-China’s US companies mull restructuring as crackdown looms
* Companies preparing reorganisations for worst-case
scenario* Move seen as hint China wants more companies to list at
home* Telecoms and internet firms affected, shares declineBy Rachel Armstrong and Stephen AldredSINGAPORE/HONG KONG Oct 12 (Reuters) - A looming Chinese
government crackdown on a corporate structure used by almost
half of all U.S.-listed Chinese stocks coupled with growing
investor uncertainty has prompted companies to mull major
restructuring plans.New rules expected to apply to variable interest entities, a
structure used by several of China’s internet giants, are not
only forcing executives to consider various options, the rules
are rattling investors as well.Shares in China based, U.S. listed internet companies Sina
Corp and Baidu Inc have slumped around 26
percent and 12 percent since Reuters reported on Sept. 18 that
the China Securities Regulatory Commission (CSRC) had suggested
the government take action against VIEs.Any new rules from the Chinese authorities are not expected
to shut-down existing VIEs, but lawyers say that the ongoing
uncertainty is pushing several companies to investigate
contingency plans.”We’re hoping we will never have to use them, but we are
working on plans for unwinding existing VIE arrangements and
making new investments using alternative structures to prepare
for the worst case scenario,” said Marcia Ellis, a partner at
Ropes & Gray law firm in Hong Kong.VIEs, (Variable Interest Entities) get around official
restrictions on direct foreign investment into sectors deemed
important to China’s interests. Forty-two percent of China
companies listed in the U.S. use the VIE structure, according to
researchers at Peking University.They are particularly popular in the internet sector, where
foreign investors are barred from commercial activities, as VIEs
give investors the earnings flow and control of a
domestically-owned company through a series of service contracts
rather than equity ownership.But now a crackdown on VIEs is looming, after a raft of
accounting scandals involving overseas listed Chinese companies
erupted on North American stock exchanges.Alibaba Group’s acrimonious and public dispute with Yahoo
also put the structure in the spotlight when the
group’s chief executive Jack Ma allegedly transferred its
lucrative online payment platform Alipay to a separate VIE
without the approval of the group’s major shareholders.Mainland Chinese media reports say the CSRC is suggesting
that companies already using the structures will be exempt from
most of the new rules, but international lawyers say that
doesn’t mean China’s authorities will give them an easy ride.”Historically, even when the Chinese government makes
regulatory changes that grandfather existing companies, they
still make it very difficult for them to prosper in the future
unless they conform to the new regulatory environment,” said
Lester Ross, a partner at WilmerHale law firm in Beijing.Reuters reached Baidu, Sina and Alibaba, three of the most
well known companies that use the VIE structure if they had
looked at restructuring. Baidu and Sina both declined comment,
while Alibaba referred to a recent speech made by their chief
executive Jack Ma during a speech at Stanford University in the
U.S. in September.”The VIE is a great innovation,” but “we’ve got to make the
VIE really transparent,” he said, adding that he didn’t expect
the government to shut the entities down.Last week, the Public Company Accounting Oversight Board, a
U.S. accounting watchdog, warned auditors that companies may
assume they can consolidate the financial results of a VIE into
their own balance sheet “even though there might be significant
uncertainties regarding the economic substance of those
arrangements.”Online video company Tudou Holdings Limited showed
how VIE contracts can leave investors vulnerable when it was
looking to list on the Nasdaq late last year.The offering was delayed eight months after Tudou’s founder
Gary Wang, who had a 95 percent interest in Tudou’s VIE, was hit
with a lawsuit filed by his ex-wife. His former wife was
demanding a portion of his VIE holding and if she had been
successful, she could have, in theory, kept a significant part
of its earnings that would otherwise have gone to Tudou’s
shareholders.Wang eventually settled with his ex-wife, but the case
delayed Tudou’s IPO from December 2010 to August 2011.RESTRUCTURING OPTIONSThere is no one-size-fits-all alternative to a variable
interest entity structure, which is why the structure has been
so popular. Any restructuring would involve changing the nature
of the relationship between the foreign investors and the
Chinese owners of the onshore licensed operations.Some companies operating in sectors with no, or relatively
few restrictions on foreign ownership, could dismantle the VIE
and instead form an onshore joint venture.Other companies in sectors that have tougher laws on foreign
ownership would face a more complicated task, but lawyers are
advising that investors need to review their VIE contracts and
see if they can enact stronger corporate governance controls.”While there isn’t necessarily a ‘silver bullet’ solution
for every investment, hence the long-standing popularity of
VIEs, developing contingency plans for the next-best
alternatives is clearly preferable to getting caught completely
off-guard if the regulatory winds shift direction,” said Ropes &
Gray’s Ellis.In the long term it is expected that any changes to VIEs,
which would be likely to come from the Ministry of Commerce and
Ministry of Industry and Information Technology as well as the
CSRC, would be accompanied by an effort from the authorities to
coax overseas-listed Chinese companies back to the domestic
market.”I think what the CSRC wants to do is encourage these
valuable companies to list within China so that they have a
better control over them,” said Virginia Tam, a partner at White
& Case in Hong Kong.New rules will take time though, meaning investor
uncertainty is likely to linger.”The Chinese government isn’t in the business of issuing
press releases that would be helpful to private businesses,”
said Howard Wu, a Shanghai-based partner at Baker & McKenzie.”I think it’s unlikely you’re going to get some official
government pronouncement anytime soon. It is a very complicated
issue.”
12 10 / 2011
Wall St gurus reach the limit, scale back on stocks
* Biggest shift for Morgan Stanley Smith Barney since 2009By Jessica ToonkelOct 11 (Reuters) - Clients of some big Wall Street firms
have probably missed out on sharp increases in stocks over the
last few days. Firms that were cautiously optimistic or bullish
through the summer selloff have turned bearish just as the
market seems to be clawing back.Between Sept. 18 and Oct. 6, several Wall Street firms who
mostly stood pat through months of market volatility finally
decided enough is enough.Morgan Stanley Smith Barney, Wells Fargo Advisors and UBS
have scaled back their portfolios’ exposure to equities in the
past three-and-a-half weeks, shifting away from more
unpredictable stocks and into the safety of fixed income and
cash.Meanwhile, the S&P 500 Index had its biggest rally in
nearly six weeks on Monday.But that hasn’t swayed investment officers at the firms.
They don’t believe governments in Europe and the U.S. are doing
enough to address the crushing debt threatening their financial
systems.Investment managers said they believe the ongoing
uncertainty and wild market swings caused by the expanding euro
zone debt crisis and a U.S. debt downgrade are here to stay.
What’s more, the volatility suggests to some investment gurus
that another recession is increasingly likely.European leaders have been meeting for months to address
the debt crisis plaguing the continent. What little progress
there has been is not happening fast enough, said Jeff
Applegate, chief investment officer at Morgan Stanley Smith
Barney, the brokerage arm of Morgan Stanley .European Central Bank president Jean-Claude Trichet warned
on Tuesday that the crisis had “reached a systemic dimension.”At the same time, in the U.S. the government has been
unable to get much accomplished, Applegate said. For example,
it’s been weeks since President Obama submitted his fiscal
stimulus package, and there hasn’t been any action in
Congress.”You have seen a lot of change since August,” Applegate
said. “And the policy responses have not been been swift enough
or large enough.”On Oct. 6, MSSB shifted the allocation of its portfolios
from overweight on global equities, commodities and REITs to
underweight and from underweight on global cash to overweight.
The firm also shifted its allocation on global bonds from
underweight to overweight.”This is a big shift for us, the biggest we have made since
April 2009,” Applegate said. At that time MSSB shifted to
overweight equities as the markets rebounded after the
financial crisis.One major factor in MSSB’s decision to cut back on risk was
a Sept. 21 report by the Economic Cycle Research Institute
predicting a recession. ECRI has successfully predicted the
last four U.S. recessions.On Oct. 1, Wells Fargo Advisors, the brokerage arm of Wells
Fargo & Co. went from neutral to underweight on its
equity exposure in its cyclical asset allocation portfolios.Wells, which reevaluates its portfolios on a quarterly
basis, first reduced its equity exposure slightly in April, but
cut exposure even further this month due to fears about the
European debt crisis, said Stuart Freeman, chief equity
strategist at Wells Fargo Advisors.The firm in April shifted its moderate growth & income
portfolio to 58 percent in equities from 63 percent. This
month, the fund decreased its share of equities again, to 45
percent.Wells Fargo Advisors now predicts a 35 percent chance for a
U.S. recession, up from a 20 percent chance four months ago,
Freeman said. The chances of a recession in Europe, according
to the firm: 40 percent, up from 25 percent a few months ago.Similarly, UBS shifted its portfolios from neutral
to underweight equities on Sept. 18.”We felt that the fundamental issues affecting the markets
had not been resolved,” said Mike Ryan, head of research for
wealth management at UBS. Ryan doesn’t think the United States
is necessarily headed for a recession.”We think you will see choppy, sluggish growth,” he said.Of course, not every firm is scaling back on equities.
Equity strategists at Bank of America Merrill Lynch —
whose well-known logo is a bull — are maintaining their
overweight position on equities, albeit a “moderate” overweight
position, said Kate Moore, global equity strategist at Bank of
America Merrill Lynch.She said that too many investors have held too small a
position in equities since the market crash of 2008 and missed
the rally. She believes Europe is closer to coming up with a
solution for its problems.”We are seeing a willingness of policy makers in Europe to
put things together,” she said.Bank of America Merrill Lynch’s economists forecast U.S.
GDP growth of 2.5 percent for the third quarter, she said.”That’s a far cry from the two quarters of negative GDP
growth that define a recession,” Moore said.
