Blog Profile / Reuters Breakingviews Blog

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Archived Since:June 19, 2011

Blog Post Archive

China index: Economy springs back, for now

Breakingviews’ alternative gauge of activity recovered slightly in February to its highest level since last spring. Chinese New Year celebrations and a bump in exports gave the economy a temporary boost to offset falling steel production, rail freight volumes and truck sales.

Immelt’s SIFI escape route is tough to follow

The $280 bln GE is offloading most of its finance unit and should be able to ditch the systemic tag imposed by watchdogs. That will free CEO Jeff Immelt’s remaining empire from onerous rules. Big U.S. banks might fancy similar liberty, but they are more tightly hemmed in.

GE finally exorcises Jack Welch’s financial demons

It took a near-death experience and flat-lined shares, but Jeff Immelt is ditching banking and returning GE to its industrial roots. The timing works on many levels: asset values are high and lending businesses can be funded. Immelt also keeps a step ahead of prowling activists.

Review: China fails to live up to luxury hype

After a decade of red-hot growth, prospects have dimmed in luxury’s star market and given pause to high-end brands. With vigor returning to traditional hubs like the United States, a prediction that Chinese shoppers are establishing a Bling Dynasty looks premature at best.

Capital forsakes Asia’s reform-shy economies

Around $160 bln took flight from the region last year, and central banks are running out of surplus dollars to add to reserves. The exceptions seem to be India and Indonesia. Investors are perhaps more likely to stick around where market-friendly policies are in evidence.

Investment banks within reach of adequate returns

Banks’ wholesale units are destroying value. To lift returns they must cut costs, raise revenue and boost capital – while avoiding big fines. If firms can do that, a Breakingviews calculator suggests the biggest ones could exceed a combined 12 percent return on equity by 2017.

Guest view: What’s holding technology M&A back?

Though deal-making is near boom-time highs, most of it’s not about making bold bets on the future, says Andreessen Horowitz’s managing partner. Activism plays a role. But as newly public tech firms that are more resistant to external pressure mature, the dynamic will shift.

Grenada offers debt restructuring model for Greece

The Caribbean island is close to agreeing a deal with creditors after years of wrangling. The deal structure, including warrants and phased debt relief, is equitable, and provides incentives for reform. It looks like a decent model for Ukraine—or even Greece.

Hong Kong stock boomlet tests China’s capital dam

A trickle of Chinese money pouring into Hong Kong stocks via a new trading link has turned into a flood. The arrival of mutual funds is a factor, but a bigger one is speculation on the wall of money bursting to get out of the mainland. The dam is sturdy, but pressure is building.

Shell could win from bold $70 bln swoop on BG

The oil major is offering a fat 50 pct premium for its UK rival. But the share price was depressed and the synergies are attractive. The deal could prove a smart and opportunistic way to boost growth via deepwater assets and liquid natural gas – provided Shell keeps costs down.

Shell-BG highlights rise of the micro-boutiques

The $70 bln deal needed just three advisers: Merrill, Goldman, and minnow Robey Warshaw. Rivals like Zaoui & Co have also won major mandates. For big M&A shops, two worrying trends are intersecting: CEOs seem ready to hire fewer banks per deal and to use much smaller outfits.

Japan index: BOJ plays a risky waiting game

The Bank of Japan refused to heed growing calls to further ease its ultra-loose monetary policy. Inaction could be risky. Stock prices are the lone bright spot in a gloomy Breakingviews Abenomics Index reading for February. A return of deflation could hurt the BOJ’s credibility.

Why silencing short-sellers is futile

Asian companies and regulators are coming down hard on authors of negative research reports. Though it’s possible to track down even anonymous assailants, it’s tougher to prove the attacks were wrong or reckless. Executives have little choice but to face up to their critics.

Royal Dutch Shell and BG open mega-deal pipeline

The $200 bln energy giant is in advanced talks to buy its $46 bln gas rival. It could be an opportunistic move for Shell, whose vulnerable target has a new CEO. There could yet be other suitors for BG. Any deal is also bound to kick off other big transactions in the sector.

Rob Cox: Race to bottom of global subprime begins

A new Chinese-led financial world order is emerging to challenge the IMF and World Bank. Republican U.S. presidential hopefuls Rand Paul and Ted Cruz are in a way enabling the fledgling framework. The possible competition in the market for national aid money could be worrisome.

FedEx bets $5 bln on Europe’s potential with TNT

The U.S. shipper’s cash bid for its Dutch rival comes two years after Brussels killed a takeover by rival UPS. The price is 20 times the weakened target’s 2016 earnings. That sounds high. But a strong dollar, cheap debt and sizeable synergies could help deliver decent returns.

Iran deal moves oil closer to long bear market

A framework deal to curb Iran’s nuclear program is likely to bring the country’s oil exports way up. Like Saudi Arabia, Iran gains more from market share than it loses from low prices. Higher-cost producers will take time to adjust.

Tencent’s discount to Facebook harder to justify

The Chinese social media giant generated about the same revenue as its U.S. counterpart last year and was more profitable, despite having fewer users. Yet it trades at a lower multiple of earnings. As the two business models converge, the valuation gap needs a rethink.

Request for IBM activism likely falls on deaf ears

Some big shareholders are begging for a Big Blue shake-up. They have reason to be dissatisfied – 11 quarters of falling revenue have sent the shares into a slump. Snag is IBM has already exhausted the typical activist playbook of tapping the balance sheet, buybacks and disposals.

NY judge gives 1970s sitcom a Silicon Valley spin

A “Three’s Company” parody didn’t breach rights to the TV hit, despite similarities. Like rulings on Google Books and Aereo’s video streaming, the verdict reflects Big Apple legal thinking that ideas are for sharing. It’s a philosophy tech firms might want more courts to follow.

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