FT : Japan edges closer to lifting casino ban

Japan edges closer to lifting casino ban

A long-debated proposal to lift Japan’s ban on casino gambling could finally come to fruition this year after a multi-party group of lawmakers agreed to submit a legalisation bill to the current session of parliament. Iwaya Tsutomu, a member of the ruling Liberal Democratic party who is part of the pro-casino group, said Tokyo’s selection last month as host of the 2020 Olympic games had given fresh impetus to its push for legalisation. "There will be a major world event here, and we should make this a goal in our effort to turn Japan [into] a tourism power," he told reporters after a meeting of the group late on Wednesday. Japan allows betting on horse, boat and bicycle races, as well as lotteries and pachinko, a version of pinball in which winning players collect cash prizes, but other forms of gambling are banned. International gaming groups such as Wynn Resorts, MGM and Caesars see Japan as a potentially lucrative market. It is the world’s third-largest economy, and casinos in Tokyo and other cities could attract gamblers from China who have turned the former colony of Macau into the world’s biggest gaming market. Following the financial success of Macau, other Asian economies are increasingly coming round to the idea of legalised gambling. Since they opened in 2009, Singapore’s two casinos generated gaming revenues of $5.9bn in 2011, according to Citibank, just behind the $6.1bn earned by casinos in Las Vegas. Singapore estimates that casinos contribute 1.5-2 per cent of gross domestic product, with gambling also generating new revenues through taxes levied on gaming, amounting to 2.2 per cent of total government operating revenue. The lawmakers’ group said casinos should be allowed in smaller Japanese cities as well as the major centres of Tokyo and Osaka, which have been seen as the most likely locations for Japan’s first facilities. The liberalisation initiative dovetails with a broader deregulation programme being pursued by Shinzo Abe, prime minister. Casino legalisation could be implemented as part of a rollout of "strategic zones" for local deregulation that form part of the prime minister’s growth strategy. Though the lawmakers group is composed of members of four ruling and opposition parties, the proposed bill could still face opposition, both from moral campaigners and groups representing entrenched non-casino gambling industries.

FT : Foreign investors chase Spanish ‘bad loans’

Foreign investors chase Spanish ‘bad loans’

Foreign investors are scrambling to buy Spanish banks’ bad loans in the latest sign that the health of the eurozone economy is improving. Sareb, Spain’s so-called "bad bank," has attracted 30 offers for a €300m portfolio of non-performing residential mortgages, according to people with knowledge of the matter. The portfolio, dubbed Abacus, is the first bundle of loans Sareb is selling since being established earlier this year by the government to dispose of €50bn of toxic banking assets. Bidders include US private equity groups Lone Star, Apollo, Cerberus, Centerbridge and Fortress. Sareb, headed by Belén Romana García, expects to close a deal before the end of the year, the people said. Separately, a €650m portfolio of distressed consumer loans and credit card debt being sold by Banco Sabadell has received more than 40 offers from investment funds, which it had narrowed down to 30, people close to the process said. The disposals by Sareb and Sabadell are just a fraction of the €7bn to €10bn of underperforming loans being marketed in Spain. Sareb and Sabadell declined to comment. "There’s an awful lot of interest in Spain at the moment," said a loan portfolio adviser involved in some of the transactions. This pick up in loan sales comes as Bill Gates, the founder of Microsoft and one of the world’s richest men, made a €113.5m investment in Spanish construction group FCC on Tuesday. The move was described by Spain’s industrial minister José Manuel Soria as a sign of "greater confidence and credibility". Investor appetite for Spain is mounting because the economy is showing signs it has stabilised after two years of recession. Gross domestic product rose 0.1 per cent in the third quarter after nine consecutive quarters of decline. US private equity groups are beefing up their teams in anticipation of a much-awaited bank asset sell-off. With a combined $90bn of cash to be spent on distressed loans from lenders across Europe, they have had to wait longer than planned because banks could not afford to crystallise the implied losses if they sold their worst assets. The creation of Sareb is expected to boost disposals. "We are beginning to see private equity groups who did not have an office in Spain hiring Spanish people and opening offices in Spain," said Alejandro Ortiz, a partner at Linklaters in Spain. About €9bn of loans have been sold this year in Spain, the same amount for the whole of last year, and up from less than €1bn in 2010, according to PwC estimates.

FT : Draghi’s blunt warning on bank stress tests

Draghi’s blunt warning on bank stress tests

Mario Draghi warned on Wednesday night that some European banks needed to fail a series of European Central Bank health checks to prove the credibility of its year-long review of the region’s biggest banks. The blunt comments by the ECB president raised pressure on EU leaders to earmark public money that could in extreme cases be used to recapitalise struggling lenders. The ECB’s assessment, which includes stress tests and balance sheet reviews, is designed to dispel doubts about banks’ financial health before the central bank takes over from national authorities as supervisor in a year’s time. "Banks do need to fail to show its [the assessment’s] credibility," Mr Draghi told Bloomberg Television. "There is no question about that." He went on to note that EU political leaders had made an "explicit commitment to have in place proper, adequate national backstops by the time the exercise is being carried out. We have a commitment at the highest level". While the ECB has said banks that are found wanting capital should first turn to shareholders for fresh funds, there is concern that the lack of agreed public backstops could unsettle financial markets if left unresolved for too long. Germany, however, this month hardened its stance against granting direct access to eurozone rescue funds for troubled banks. It insisted that losses be imposed on bondholders before any taxpayer money comes into play, making it harder to set in place a common safety net for lenders. The grand coalition government that will probably be formed in Berlin is not likely to give ground on the issue. The centre-left Social Democrats share Angela Merkel’s Christian Democratic Union’s opposition to "direct recaps" by the European Stability Mechanism. Bank share prices fell after the ECB unveiled its plans. Italian bank stocks fell by as much as 3 per cent in early trading, reflecting investor concern that the tests would show up unexpected holes in balance sheets. Most other leading banks in Spain, France and Germany saw share prices fall about 2 per cent. As part of the ECB’s assessment, the central bank will conduct an asset quality review of bank balance sheets, leading to a recommendation in a year’s time that may involve demanding some banks bolster their capital reserves. "We expect that this assessment will strengthen private sector confidence in the soundness of the euro area and in the quality of bank balance sheets," Mr Draghi, ECB said in a statement.

FT : UK’s Brevan Howard moves staff overseas

UK’s Brevan Howard moves staff overseas

Brevan Howard, the world’s third-largest hedge fund, has moved most of its operations out of the UK, shifting dozens of jobs to the Channel Islands, Switzerland, Asia and the US to escape EU regulation and grow internationally. Three years after opening a satellite office in Geneva, Brevan – which has $41bn under management – now only has a "handful" of traders left at its London office and has moved out many of its senior operational jobs, people familiar with the company told the Financial Times. The publicity-shy hedge fund, which specialises in placing bets on movements in interest rates and bonds, employs more than 450 people worldwide. Fewer than 200 are now in London. As recently as four years ago, almost all of its employees were based in the UK capital. Brevan’s decision to shift business offshore comes as the EU’s sweeping new Alternative Fund Manager Directive, a law aimed at regulating hedge funds, is launched in the UK. Most of London’s $300bn hedge fund industry has accommodated itself to the new rules – which have proved to be far less onerous than many fund managers feared they would be. The Financial Conduct Authority, the UK regulator, has also sought to moderate some provisions to appease London-based fund managers’ concerns. Brevan – founded by the billionaire trader Alan Howard – has nevertheless continued to blanch at Brussels’ interventionism and believes that EU politicians could seek to impose further curbs on hedge fund activities in the future. Mr Howard moved himself and a clutch of top traders to Geneva in 2010. Although speculation has recently mounted about whether he would return to the UK, Mr Howard has told traders at the company he will be in Switzerland until at least the end of 2014. The company has meanwhile shifted its centre of gravity out of London in a deliberate strategy to "internationalise" itself. By next year, as many as five dozen employees will be based on the Channel Island of Jersey. Although Brevan’s Jersey office has officially served as a headquarters for the company’s holding company since 2005, it previously housed only a couple of administrative jobs. In September Brevan co-founder James Vernon returned to the hedge fund – having retired in mid 2011 – to spearhead operations on the island. Mr Vernon will play "a key role in the ongoing development of the Jersey office", Brevan said at the time. Operations on the island now include almost all of the hedge fund’s asset allocation, risk management and compliance and HR functions – jobs that were all previously conducted in London. Brevan’s US presence has swollen too, with 60 employees now based in New York and Washington. As many as 60 per cent of Brevan’s investors are now US-based. The hedge fund is spotting more trading opportunities there, too, thanks to markets’ increasing focus on the policies of the US Federal Reserve and a potential end to quantitative easing. Brevan declined to comment.

>>> US After Hours

After Hours Summary: MMSI +14.5%, STMP +8.3%, CAKE +6.2%, FFIV +3.7%, SYMC -13.5%, FIO -12.2%, AKAM -6.9% following earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to earnings: MMSI +14.5%, MKSI +10.9%, STMP +8.3%, FTNT +7.7%, EQIX +6.3%, CAKE +6.2%, CTXS +5.7%, TSCO +5.3%, CSGP +4.7%, FFIV +3.7%, AEM +3.3%, TEX +2.7%, LRCX +2.3%, FNF +1.6%, FBHS +0.7%, MORN +0.6%, ETH +0.6%, CMS +0.5%, WLL +0.4%, EFX +0.2%, SLG +0.2%, HFWA +0.1%, RE +0.1%, CLW +0.1%, NOW +0.1%

Companies trading higher in after hours in reaction to news: MKSI +10.9% (announced Gerald G. Colella to succeed Leo Berlinghieri as CEO, effective January 1, 2014; co also reported earnings), EQIX +6.6% (appointed Ihab Tarazi as Chief Technology Officer), CTXS +5.6% (Board authorized $500 mln increase to share repurchase program; co also reported earnings), ARIA +1.3% (Camber Capital disclosed 5.4% passive stake in 13G filing), QTWW +0.9% (Seamans Capital disclosed 5.9% passive stake in 13G filing)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: SYMC -13.5%, FIO -12.2%, TQNT -10.4%, INFN -7.8%, VAR -7.4%, AKAM -6.9%, DAVE -6.2%, KFN -6.2%, QTM -6%, SKX -5.7%, EGHT -5.2%, ANGI -4.9%, ETFC -3.4%, TER -3.3%, CMO -3.2%, TRIP -3.2%, CVA -2.1%, LSI -2%, TAL -1.6%, SWFT -0.8%, PLCM -0.8%, IXYS -0.5%, BDN -0.4%, RJF -0.4%, QDEL -0.2%, AIZ -0.2%, CLGX -0.2%, MLNX -0.1%, PDFS -0.1%, SBRA -0.1%

Companies trading lower in after hours in reaction to news: NVDQ -6.0% (announced public offering of common shares, size not disclosed), ADK -4.2% (announced Brogdon Family cancellation of planned tender offer for majority interest), ZINC -1.0% (announced public offering of 5 mln shares of common stock)

>>> KKR Financial 3Q EPS Below Est., Raises Div.

KKR Financial 3Q EPS Below Est., Raises Div. KKR Financial 3Q EPS 16c, est. 38c. * 3Q rev. $128.7m vs $146.0m est. (1 est.); says yields compressed, CLOs amortized * Loan and securities interest income $93.5m vs $120.8my/y * Oil & Gas rev. $32.4m vs $21.5m y/y * Boosts div. to 22c from 21c * Call 5pm 877-303-4382.

>>> US Closed Dow-0,35% S&P-0,44% Nasdaq -0,57%

Closing Market Summary: Momentum Names Lead Stocks Lower

The major averages posted losses across the board as the Nasdaq (-0.7%) led to the downside. Stocks slumped at the open as cautious-sounding headlines from China combinedwith continued weakness among momentum names conspired to keep equities in thered throughout the session. Reports out of the Middle Kingdom suggested the largest Chinese banks saw their debt write-offs triple during the first half of the year. Separate headlines indicated the People's Bank of China ma tighten monetary policy due to excessive inflation. The liquidity crunch has made its presence known through the overnight Shanghai Interbank Offered Rate (SHIBOR), which jumped 73 basis points to 3.78%.

In addition to the news from China, stocks had to endure continued weakness among momentum names. Shortly after yesterday's close, activist investor Carl Icahn said he halved his stake in Netflix (NFLX 330.24, +7.72) after booking a 457% gain over the course of 14 months. Netflix outperformed today, but other momentum darlings like LinkedIn (LNKD 240.76, -4.19), Tesla (TSLA 164.50, -7.04), and Yelp (YELP 66.04, -3.37) posted losses as some participants may have taken a cue from Mr. Icahn, cashing in on some of this year's top performers.

Chipmakers were also victimized by heavy selling as the PHLX Semiconductor Index tumbled 3.4% after Altera (ALTR 32.30, -5.02) reported disappointing earnings and Broadcom (BRCM 26.36, -0.78) issued cautious guidance.

Even though select tech names displayed significant losses, the broader sector ended in-line with the S&P. Meanwhile, most other cyclical groups underperformed and the industrial sector (unch) was the only cyclical group that ended ahead of the broader market. Industrials outperformed, building on the relative strength of Boeing (BA 129.02, +6.54), Norfolk Southern (NSC 86.06, +5.46), and Northrop Grumman (NOC 105.56, +4.10) after the three reported better-than-expected earnings. However, the sector could not turn positive due to the underperformance of Caterpillar (CAT 83.76, -5.41), which lost 6.1% after missing on earnings, revenue, and issuing cautious guidance. Although equity indices spent the entire session in negative territory, only the energy sector (-1.4%) posted a loss exceeding 1.0% as crude oil slid 1.4% to $96.95 per barrel. Countercyclical sectors outperformed with consumer staples ending in the lead with a modest gain of 0.1%. Treasuries registered modest gains as the 10-yr yield slipped 2.5 basis points to 2.49%. Trading volume was a bit below average as less than 710 million shares changed hands on the floor of the New York Stock Exchange. On the economic front, the weekly MBA Mortgage Index slipped 0.6% to follow last week's uptick of 0.3%. Separately, the August Housing Price Index from the FHFA increased 0.3%, which followed an increase of 0.8% observed during the prior month.

Lastly, export prices, excluding agriculture, ticked up 0.3% in September after an unchanged prior reading. Excluding oil, import prices rose 0.1%,which followed last month's decline of 0.2%. Tomorrow, weekly initial claims and the August trade deficit will all be reported at 8:30 ET.

FNAC 3Q Rev. EU844m, Down 5.9% Y/y

+------------------------------------------------------------------------------+

ONE 10/23 15:40 FNAC: Improved revenue trends and stable gross margin in the third quarter of 2013 BN 10/23 15:42 *FNAC WILL CONTINUE TO IMPLEMENT COST SAVING PLAN BN 10/23 15:42 *FNAC SEES DIFFICULT MARKETS THROUGH TO END OF YEAR BN 10/23 15:41 *FNAC 3Q REV. EU844 MLN, DOWN 5.9% BN 10/23 15:40 *FNAC 3Q REV. EU844 MLN

+------------------------------------------------------------------------------+

FNAC 3Q Rev. EU844m, Down 5.9% Y/y 2013-10-23 15:49:09.206 GMT

By Jim Silver Oct. 23 (Bloomberg) -- Sees difficult market to end-yr, will continue to implement cost-saving plan. Link to Statement:{NSN MV4OVI3PWT1C <GO>} Link to Company News:{FNAC FP <Equity> CN <GO>}

For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story: Jim Silver at +1-212-617-7342 or jsilver@bloomberg.net