Asia Market Update: Asian markets search for direction amid mixed open and US holiday, Shanghai remains volatile; Next week’s Bank of Korea (BoK) policy meeting in focus
Australia/New Zealand
-ASX200 opened -0.1%, closed -0.1%; Financials Index -0.5%, Consumer Discretionary Index -0.4%, Resources Index -0.1%
-Qantas -1.4%
- Citi analysts speculate that the launch of Amazon’s site in Australia may come after Black Friday – US financial press
-Australia Gold miner Resolute Mining announces gold hedge agreement which extends out to May 2010.
- Australia sold A$500M in 2.00% Dec 2021 Bonds, avg yield 2.0281%, bid to cover 5.40x
-Australia awards A$4B naval patrol contract to Germany’s Luerssen
- New Zealand S&P NZX 50 closes +0.3%
- NEW ZEALAND OCT TRADE BALANCE (NZD): -871M V -760ME; Imports: 5.43B v 5.0Be
China/Hong Kong:
-Shanghai Composite opened -0.3% (following 2.3% decline prior session); Hang Seng opened +0.3%
-Shanghai CSI 300 Index remains volatile, after dropping 2.9% on Thursday.
-Hang Seng Information Technology Index -0.5% (Tencent -0.5%)
- Alipay said to have ordered removal of certain loan products with high interest rates – Chinese Press
- (CN) China news IPO review committee (set up in Oct) has reviewed 52 IPO applications, rejecting 16, suspending five and passing 31 – Xinhua
- (CN) Fitch Report: China banks face continued regulatory scrutiny in 2018, bank credit growth seen decelerating; affirms stable outlook on sector
- China 10-year bond yield -1bp
- (CN) China Development Bank said to be not planning to conduct usual 10-year bond offering on Tuesday – US financial press; Expected to still issue up to CNY13B in 1, 3, 5 and 7 year notes.
- (CN) PBoC OMO: Injects CNY50B v CNY270B injected in 7,14 and 63-day reverse repos prior; Net injection CNY20B v CNY100B injection prior
-(HK) Hong Kong Dollar (HKD) money market rates rise: 1-week HKD Hibor up over 35bps to 0.79964%, overnight up over 45bps to 0.69143%
- (HK) Chiyu Banking Corp, Bocom HK and Bank of East Asia have all raised Hong Kong Dollar (HKD) deposit rates ahead of year end – HK Press
- (CN) PBoC sets yuan reference rate at 6.5810 v 6.6021 prior
- Sinopec: Unipec unit Exec to import 6M tons of US crude in 2017, expects to double volume in 2018
Japan
- Nikkei 225 opened -0.6% (holiday during prior session); closed +0.1%
-Topix Iron & Steel Index -1%; Mitsubishi Materials has declined over 9% (confirm data falsification issue related to certain parts)
-Automakers trade generally lower, Toyota -1%; Steel makers also generally lower, JFE -1.6%
- Softbank +1%
-30-year JGB yields have risen over 2bps: BoJ cuts over 25-year JGB purchases to ¥90B v ¥100B prior in daily operations
- Japan Nov Prelim Nikkei Manufacturing PMI: 53.8 v 52.8 prior
- (JP) Japan Fin Min Aso: Supplemental budget to invest in infrastructure
Korea
-Kospi opened +0.1%
-Korean Won (KRW) trades flat ahead of next Thursday’s (Nov 30th) Bank of Korea (Bok) rate decision. The central bank is expected to raise rates by 25bps to 1.50%, according to one poll.
-Bank of Korea last raised rates in 2011
Other Asia
Malaysia:
-Oct CPI below ests, but still above central bank’s 2-3% target: Malaysia Oct CPI Y/Y: 3.7% v 4.1%e (10th straight month above target range)
-Ringgit (MYR) -0.3%
Taiwan
-Taiex opened -0.1%, closed flat
-AU Optronics +2.5%; The company expects to run plants at full capacity in Q1, says a local press report.
-Taiwan Dollar +0.1%
North America
-NYSE was closed on Thursday in observance of Thanksgiving holiday. The exchange to close early (at 13:00 GMT) on Friday.
-M&A: Broadcom said to seek to break up pending merger between Qualcomm and NXP Semiconductor – US Press; Broadcom's CEO Hock Tan may be willing to improve the $70/share (cash and stock, $130B) offer for Qualcomm, under the condition that Qualcomm abandon its planned merger with NXP, says the article.
Europe
-(DE) Germany Green Party said to call for Chancellor Merkel to enter coalition with the SPD Party – German Press
-(EU) ECB’s Coeure (France): ECB deposit rate will stay at -0.4% for a long time; EU recovery is robust and homogeneous across countries and sectors - speaking in Paris; Internal demand driven Euro-area upturn is satisfying
-(FR) ECB’s Villeroy (France): Support European supervisors initiative on NPLs; Bank of France is monitoring France corp debt levels - speaking at London School of Economics
- (IE) Ireland Ruling Fine Gael Party: Stands behind Deputy PM, does not want election (**Note: Ireland's government was on the verge of collapse after the opposition Fianna Fail party whose votes PM Varadkar depends on to pass laws said it would seek to remove deputy PM Fitzgerald, according to a financial press report)
(UK) Ireland Foreign Min Coveney: there has not been enough progress yet on the Ireland border issue during Brexit negotiations
(UK) DMO to sell £400M of 4% 2060 Gilt in tender on Nov 28th
-Lanxess: To establish high-performance plastics plant in Changzhou, China – German Press
***Levels as of 01:00ET***
- Hang Seng +0.4%; Shanghai Composite -0.3%; Kospi +0.1%
- Equity Futures: S&P500 +0.1%; Nasdaq100 flat, Dax +0.1%; FTSE100 +0.2%
- EUR 1.1837-1.1859; JPY 111.19-111.50 ; AUD 0.7616-0.7632 ;NZD 0.6875-0.6894
- Dec Gold flat at $1,291/oz; Jan Crude Oil +0.7% at $58.41/brl; Dec Copper +0.2% at $3.153lb
Canali seeks majority investor, Goldman Sachs advises - sources
23 NOV 2017
Canali, an Italy-based luxury menswear brand, has mandated Goldman Sachs to find it an external investor, four sources briefed on the situation said.
The sale process is ongoing, and is for a majority stake in the company, the first and second sources briefed said, adding that the brand needs to be refreshed and relaunched.
The vendors are looking for a double-digit valuation, the first source added, noting that these high price expectations could make it difficult to realise a deal. Canali generated EUR 200m revenues in 2016, with c EUR 20m EBITDA, the same source said.
Canali did not return requests for comment, and Goldman Sachs declined to comment.
The menswear industry is not at its most brilliant, the second source briefed added. In October, Canali closed its plant in Carate Brianza, firing 134 people, as reported by the Italian press.
The second source briefed noted that despite a slump in the menswear market, high levels of available liquidity have helped with deals for other companies in the same niche, for example Boglioli, which private equity firm PHI Industrial Acquisitions bought in May this year for an unspecified amount, as reported by Mergermarket.
In 2015, Boglioli posted EUR 35.6m revenues, 20% of which was generated in the US, but also had negative EBITDA and EUR 15m debt.
Canali was founded by brothers Giovanni and Giacomo Canali in 1934. They opened a manufacturing workshop in Brianza, Northern Italy, an area known for fashion. Initially, the company specialised in producing raincoats, and over the years moved into tailoring. So far, it is still a family business.
Fingerprint Cards confirms receiving takeover proposal
23 NOV 2017
Fingerprint Cards [STO: FING-B] notes this morning's media and market speculation regarding the preparation of a possible takeover bid for the company's shares. In accordance with the company's policy, Fingerprints does not comment on rumors or speculation or other facts circulated in the media unless the company is obligated to do so. The stock exchange has however, in accordance with its rules, required the company to comment on the information.
The company has received a letter regarding the preparation of a possible takeover bid for the company's shares. Since the overall assessment is that the probability for the offer plans being realized is low, the company does not consider that the information constitutes insider information. The company has therefore not had an obligation to independently comment on the information.
The company will hereafter not comment on rumors or speculation or other facts circulated in the media unless there is an obligation for the company to do so.
Sabre Insurance sets IPO price range between 220p and 240p per share
23 NOV 2017
Following its announcement on 13 November 2017 of its intention to proceed with an initial public offering (the "Offer" or the "IPO"), Sabre Insurance Group plc ("Sabre" or "the Company") today announces the price range for the IPO and its intention to publish, later today, a prospectus in connection with the Offer (the "Prospectus").
The price range for the Offer has been set at 220 pence to 240 pence per ordinary share, representing a market capitalisation of between GBP 550m and GBP 600m on Admission. Following the completion of the IPO, the issued ordinary share capital of the Company is expected to comprise 250m ordinary shares ("Ordinary Shares") and it is anticipated that the Company will have a free float of between 33% and 50% of its issued share capital (prior to any exercise of the over-allotment option referred to below).
The Offer will comprise an offer of new Ordinary Shares to be issued by the Company which is expected to raise net primary proceeds of up to approximately GBP 206m.
Those proceeds will be used by the Company to purchase the preference shares issued by Barbados Topco Limited ("Topco"), the current parent company of the Sabre group. The Offer will also comprise an offer of existing Ordinary Shares to be sold by certain shareholders of Topco. An over-allotment option of up to 10.0% of the Offer size will be made available by the Company's major shareholder, private equity funds advised by BC Partners LLP.
Those proceeds will be used by the Company to purchase the preference shares issued by Barbados Topco Limited ("Topco"), the current parent company of the Sabre group. The Offer will also comprise an offer of existing Ordinary Shares to be sold by certain shareholders of Topco. An over-allotment option of up to 10.0% of the Offer size will be made available by the Company's major shareholder, private equity funds advised by BC Partners LLP.
Institutional Offer
The Offer will comprise an offer of Ordinary Shares to certain institutional investors in the United Kingdom and elsewhere outside the United States in reliance on Regulation S of the US Securities Act of 1933, as amended (the "Securities Act") and to qualified institutional buyers (as defined in Rule 144A under the Securities Act) in the United States in reliance on an exemption from the registration requirements of the Securities Act.
Intermediaries Offer
Retail investors can apply through certain stockbrokers and share dealing providers who are participating in the Offer as Intermediaries, who will apply for Ordinary Shares on behalf of their clients. Retail investors can find further information about the Intermediaries Offer, including the Prospectus once published, and a list of the firms acting as Intermediaries for the Intermediaries Offer at www.corporate.sabre.co.uk (subject to applicable securities laws).
The minimum individual application size in the Intermediaries Offer will be GBP 1,000.
The Intermediaries Offer is expected to open following publication of the Prospectus. Individuals must apply in the Intermediaries Offer through participating Intermediaries. The latest time and date for the receipt of applications by Intermediaries is 4.00pm on 4 December 2017.
The final offer price is expected to be announced on or around 6 December 2017, with conditional dealings in the Ordinary Shares expected to commence on the London Stock Exchange on the same day.
Centrica: battle scarred
Threats to the dividend are overstated and say more about the US than the UKTo be Centrica chief executive requires bulletproof armour. Whether UK energy prices travel up or down, one can expect sniping from local media and even the government about excessive tariffs. Yet the thumping 15 per cent drop in the utility’s share price on Thursday owed far more to events in the US than at home.
This week’s shelling came after Centrica cut its earnings per share forecast for the year to December to 12.5 pence. That falls short of analysts’ expectations by about the same amount as the markdown in its shares, and means more downward revisions to come. Mathematically, Centrica’s shares will not become any cheaper than they already are, at about 10 times forward earnings. That itself is not far off decade lows.
The noise was mostly about its loss of 823,000 customers in just four months. In fact, many appear to have been low-margin accounts that Centrica says it can afford to lose. CEO Iain Conn believes the group’s UK residential profits will actually match last year’s, a better result than many expected. UK Home accounted for more than half of operating profit last year.
Mr Conn will admit he deserves no medals for Centrica’s North America performance. Its US industrial customer division is suffering from excessive competition in northeastern power markets, and had a one-off loss accounting adjustment relating to a revenue recognition issue. US B2B was the group’s second-largest profit contributor last year, when it earned £220m in pre-tax profits. It should have bettered that this year. Instead, the unit will produce just £80m.
The result is that per share earnings will only just cover the dividend. But what matters is cash flow. Here, the news is better. Sufficient cash exists, after capital spending, to pay investors. The dividend looks safe from the onslaught, for this year at least.
Mr Conn, CEO for nearly three years, would have liked to sound the cavalry charge by now. Instead, the share price retreats with each passing month, down 25 per cent already this year. That produces a yield of over 7 per cent yield, reflecting concerns about the sustainability of the payout.
To stabilise the share price and restore faith in the dividend, Mr Conn needs to get his US flank under control. If UK Home is truly in better shape than thought, Centrica should rise out of the trenches in the months ahead.
Report: Trump Revealed Israeli Commando and Mossad Operation in Syria to Russians
Trump allegedly disclosed an undercover Israeli mission to penetrate an Islamic State cell developing bombs that could go through airports undetected
When U.S. President Donald Trump revealed Israeli intelligence to senior Russian officials in March, he disclosed details of a covert Israeli mission to penetrate an Islamic State cell deep in Syria, claimed Vanity Fair's Howard Blum on Wednesday.
Israel's counterterrorism unit, working along with members of the Mossad, obtained information that a Syrian Islamic State cell had developed bombs that could be placed in laptops and then go through airport security undetected. Trump allegedly gave this information to the Russian officials.
According to the report, this discovery prompted the Trump administration as well as the British authorities to ban laptops and other electronics on airplanes until airports could comply with more strict security guidelines.
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Trump reportedly passed the intelligence to the Russians without first notifying and discussing the decision with Israeli principals. According to Vanity Fair, this violation of U.S.-Israeli trust implicated the larger Middle East, as Israel assumed Russia would pass this intelligence information to their allies: the Iranians.
In January, it was reported that Israeli intelligence officials were concerned that the exposure of classified information to their American counterparts in the Trump administration could lead to it being leaked to Russia and onward to Iran. The intelligence concerns, which had been discussed in closed forums, were based on suspicions of ties between Trump, or his associates, and the government of Vladimir Putin in Moscow.
According to the January report, American officials under President Barack Obama implied that Israel should “be careful” when transferring intelligence information to the White House and the National Security Council following Trump's inauguration on January 20.
While Trump's disclosure of intelligence was non-conventional, the president of the United States has the legal right to disclose intelligence at his discretion and Trump's actions were in no way illegal.
The source of the intelligence has been suspect to doubt however, as an Al Jazeera report claimed a Jordanian - and not Israeli - agent was the source of the intelligence information leaked by Trump to the Russians.
The report, which cites a number of Jordanian sources, contradicts claims that it was an Israeli spy within ISIS who had originally gained the information in question.
"When it comes to ISIL, unlike Jordan, Israel relies on its electronic surveillance collection and its intelligence sharing-arrangement with its Arab partners," one source told Al Jazeera.
$7.4bn into equities, $4.8bn into bonds, $0.2bn into gold
Bond flows: 3rd highest week of TIPS fund inflows ever (Chart 1), $9.8bn in HY outflows over the past 4 weeks but EM debt still seeing inflows
Equity flows: Japan the flows favorite with $9.2bn equity inflows in the past 4 weeks vs. just $0.8bn into Europe and $4.8bn in outflows from US; biggest healthcare outflows since Jan’17
BofAML Bull & Bear Indicator: ticks up slightly to 6.8 on long-only positioning & credit inflows; ends 3 weeks of decline after recent peak of 7.6 on Oct 26th
Asset Class
Equities: inflows 22 of past 24 weeks ($7.4bn; $13.0bn into ETFs, $5.7bn mutual funds outflows)
Bonds: inflows 46 of past 48 weeks ($4.8bn)
Precious metals: small week of inflows ($0.2bn)
Fixed Income Flows (Chart 26)
48 straight weeks of IG bond fund inflows ($4.3bn)
4th week of HY bond fund outflows ($2.0bn)
Inflows 41 of past 43 weeks EM debt ($0.9bn)
Small muni funds inflows ($0.4bn)
Small outflows to govt/Tsy funds ($0.01bn)
Largest inflows into TIPS since Nov’16 ($1.2bn)
Modest bank loan fund outflows ($0.5bn)
Equity Flows (Table 2)
US: small inflows ($1.0bn)
Japan: strong inflows ($2.6bn)
Europe: small outflows ($0.4bn)
EM: inflows for 34 of past 36 weeks ($1.5bn)
By style: moderate US large caps inflows ($1.9bn), small US growth outflows ($0.8bn), strong US value fund outflows ($2.2bn)
By sector: inflows to financials ($0.6bn), tech ($0.6bn), consumer ($0.2bn), real estate ($0.1bn) utilities ($0.1bn), materials ($0.1bn); outflows energy ($0.4bn), health care ($0.6bn)
Telecom Italia BoD to discuss spin-off and possible listing of telephone network at 5 December meeting - report (translated)
The board of directors of Telecom Italia (TIM) [BIT:TIT] will meet on 5 December to discuss the spin-off and possible listing of its telephone network, Italian language daily La Stampa reported. The unsourced report said that the dossier was only an exploratory analysis at present.
The report said that the board will also examine just spinning off but not listing the network so as to retain full control. The report said that a further option would be to make the network autonomous from TIM on the lines of OpenReach, which operates the telephone network of British Telecom [LON: BT.A].
The item added that as yet no national telecom group has listed its network. However, the report said that by doing so TIM would both release value and reduce its debt.
TIM has a market cap of EUR 13.91bn.