news blog from Dorothea

Olympus shares drop in heavy, volatile trading

Mon, 17 Oct 2011 20:47:16 -0400

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.

Sonic Youth co-founders Moore, Gordon split up

Mon, 17 Oct 2011 14:55:20 -0400

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.

Strong miners, banks hoist Britain's FTSE higher

Wed, 12 Oct 2011 13:01:46 -0400

* 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.

Strong miners, banks hoist Britain's FTSE higher

Wed, 12 Oct 2011 13:01:44 -0400

DEALTALK-China's US companies mull restructuring as crackdown looms

Wed, 12 Oct 2011 04:36:45 -0400

* 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.”

Wall St gurus reach the limit, scale back on stocks

Wed, 12 Oct 2011 04:00:50 -0400

* 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.