FT : Mall owner Intu faces FTSE 100 relegation on retail woes

Mall owner Intu faces FTSE 100 relegation on retail woes
Retail property owners are being hit by pessimism over the fortunes of their tenants

Intu Properties, the shopping centre owner, faces relegation from the FTSE 100 index next week in the latest sign of investor pessimism over the retail sector.

The performance of the real estate investment trust’s share price places it on track to be relegated in the review to be announced on May 31, according to analysts at Numis Securities. Its stock would need to rise about 11 per cent to save it from falling out of the FTSE 100.

Shares in Intu, which owns shopping centres including Lakeside in Essex, are trading at a 32 per cent discount to the book price of its properties, which reflects investor pessimism about the retail sector, said Robert Duncan, analyst at Numis.

“The pace of change in retail is only going one way and it’s not getting any slower . . . I can see no reason at this time to invest in retail property,” he said.

Retailers have been under pressure this year from burgeoning inflation and low real wage growth, which has added to the impact of e-commerce on the profitability of stores. This in turn has led to worries about rents and occupancy of retail property.

Like several international retail property groups, Intu has drawn attention from short-sellers. It is subject to $468m of short positions, according to data from S3 Partners.

Membership of the FTSE 100 index is mainly based on market capitalisation, but entrants must also meet criteria in areas such as liquidity and free float. The annual review, to be unveiled on May 31 and implemented on June 16, sparks reactive trading by index trackers, estimated to make up 8 to 10 per cent of the market.

Intu may be replaced in the blue-chip index by G4S, the security group that has been implementing a turnround plan since it was ejected in 2015.

But another contender is Segro, the industrial property group that has benefited from the same e-commerce trend that has hurt companies like Intu. Segro provides warehouse space to host the types of online sellers that are taking market share from traditional high street retailers.

In a further reflection of this trend, Debenhams risks relegation from the FTSE 250 amid worries that department stores are being particularly hard hit by online competition.

Debenhams said last month it would shift towards services like cafés and beauty salons within its stores. But John Stevenson, analyst at Peel Hunt, said: “Debenhams needs a fairly radical overhaul in order to be relevant to consumers and to drive sales.”

Also in the FTSE 250 relegation zone are Restaurant Group, owner of Chiquito and Garfunkel’s, Scottish Investment Trust, Keller Group, a ground engineering company, and Allied Minds, which specialises in turning research inventions into start-ups. BH Macro, a vehicle of the hedge fund Brevan Howard, and the private equity group SVG Capital are also in danger of falling out of the FTSE 250.

Lining up to replace them are companies such as the corporate buyer Melrose Industries, the newly London-listed hedge fund Pershing Square Holdings, Sirius Minerals and the thread manufacturer Coats Group.

Also in line for promotion to the FTSE 250 are Stobart Group, an infrastructure and support services business, the IT services provider FDM Group, the Georgian bank TBC and the waste managers Renewi.

FT : Noble Group struggles to prove its turnround will work

Noble Group struggles to prove its turnround will work
Investors reacted badly to the commodities trader’s latest weak results

Over the past 18 months, Noble Group has tried to get itself out of a deep hole by raising almost $3bn through asset sales and bond and share issues.

But for what was once Asia’s largest commodities trader, this fundraising effort might not be enough.

Noble’s shares have dropped sharply after the company revealed this month that problems with contracts to buy and sell coal had left it nursing a $129m net loss in the first quarter of 2017. The prices of its bonds have meanwhile declined to levels that suggest traders see a high risk of default.

This is just the latest setback for Noble and its founder and largest shareholder Richard Elman, who warned at the results that the company may not be profitable until 2019.

Noble has been battered since 2015, as the then downturn in commodities markets coincided with questions about the company’s accounting. Its shares have plunged more than 90 per cent since analysts led by a little known research firm called Iceberg started highlighting how Noble’s profits on long-term contracts to source and supply commodities were not fully matched by cash flow, and this in turn focused attention on whether it could service its large debt load.


Noble founder Richard Elman © Bloomberg
More than two-thirds of the $3bn raised by Noble has been used to repay loans during 2016 and 2017. But the company still had $3.2bn of net debt at March 31.

Unless Noble can bring about a successful conclusion to its lengthy search for a major new shareholder, the company has its work cut out to convince investors and creditors that it has a future.

“It’s too soon to say the banks have given up on Noble but if things don’t improve in the next few months it will get a lot more difficult,” says Mervin Song, analyst at DBS.

“Any respite will be temporary if they can’t show a return to profitability, stronger cash flow, and most importantly an ability to service their loans.”

Noble had sought to draw a line under its troubles in May 2016, when it installed Jeff Frase and William Randall as co-chief executives.

They have persisted with a shrink-to-survive strategy that was pursued by previous chief executive Yusuf Alireza, meaning that Noble has over the past two years largely exited agricultural and metals trading.

But the strategy of doubling down on coal and oil trading does not appear to be working — the company recorded a cash outflow from operating activities of $323m in the first quarter.

A test of Noble’s relationships with its banks is now under way as it tries to renew a $2bn credit facility that helps finance its trading.



This loan involving several banks was due to be repaid this month, but Noble secured a 45-day extension to assist talks with the lenders.

Noble wants a key condition on the facility relaxed, by reducing the stipulation on the company’s minimum tangible net worth — an indication of what might be recovered in a liquidation — from $3bn to $2.5bn, according to people familiar with the negotiations.

One banker involved in the talks said if the loan was renewed, his group would not be among the participating lenders under guidance from his risk department. Noble declined to comment.

Another key test for Noble and its ability to cope with its debt load will come next year when it must find $1.5bn to repay a $379m bond and a $1.14bn loan.

Analysts say the company, to refinance this debt, will probably have to raise funds through a bond issue, share sale or disposals.

They estimate Noble has about $700m in cash plus $400m of unused credit lines, although some of the company’s money is tied up with brokers in derivatives to hedge its trading.

All Noble’s fundraising options appear to face challenges. Issuing new debt could be difficult after Fitch and Moody’s cut Noble’s credit rating further into junk territory last week.

The sale of a stake in Noble to a strategic investor is a possibility, but bankers are doubtful that Sinochem, the Chinese state-controlled chemicals group long mooted as a white knight for the trader, will be interested now it is in merger talks with ChemChina.

Paul Brough, who this month replaced Mr Elman as Noble chairman, has embarked on a strategic review.

“Noble’s resilience has been tested before and will be tested again but given the people and businesses we have at our disposal I am confident that we will develop solutions that will appeal to our bankers, creditors and shareholders,” he said in a statement.

The company has previously strongly defended its financial reporting, and a review by accounting firm PwC in 2015 said it was in line with industry practice.

One asset Noble could sell to raise cash is its portfolio of contracts to source and supply commodities. The net fair value of these deals — or money Noble says it reasonably expects to receive from the contracts — stood at $2.83bn, including hedges, at March 31.

There has, however, been a long-running debate about the value of the contracts, started by Iceberg.

For Noble and Mr Elman, generating cash from these contracts might be the only way to prove the market wrong.

“The market has no confidence in the business model,” says one banker with exposure to a Noble loan maturing next year. “No matter what they say or do, the results don’t get better.”

FT : $350bn of deals as Trump arrives in Saudi Arabia

$350bn of deals as Trump arrives in Saudi Arabia
US president hopes to rekindle a strategic relationship grown frosty under Obama

President Donald Trump was met by King Salman in Riyadh on Saturday morning, with officials pledging deals of around $350bn as the two allies rekindle a relationship that had grown frosty under the Obama administration.

The agreements included a $110bn arms package that the White House said would help Saudi Arabia and the Gulf states face Iranian threats and contribute to counter terrorism operations, “reducing the burden on the US military,” a White House official said.

The value of the deals signal a revived partnership that promises Saudi investment into US infrastructure in return for US arms deals for the kingdom.

Saudi Arabia is also looking for US support as Riyadh tries to transform its oil-reliant economy after the sustained drop in crude prices triggered a budgetary crisis and rapid deceleration.

The kingdom hopes to cement this renewed commercial partnership with a common vision to check Iranian ambitions in the Arab world.

Mr Trump on Saturday began a number of political and economic meetings with the Saudi leadership. On Sunday he will give a speech on Islam when he meets 50 Muslim leaders.

The king, walking with the aid of a stick, accompanied Mr Trump up a red carpet at the royal terminal of Riyadh’s airport, with the president’s wife Melania following at the back of the small welcoming committee.

Mrs Trump, who like many foreign dignitaries did not cover her head or wear the black abaya robe, was nonetheless conservatively dressed in flowing dark trousers and blouse, accessorised with a gold belt.

TV footage of the president’s blonde daughter Ivanka caused an instant sensation online. The hashtag “#TrumpsDaughter” trended on twitter in the region, including one man asking the president for her hand in marriage. Others satirised Saudis’ infatuation with the mother-of-three.

As the president landed, dozens of chief executives from Saudi Arabia and the US were convening at a forum where they discussed Saudi financial flows into America, and how the US could help diversify the kingdom’s oil-reliant economy.

“The government is taking a back seat and putting the private sector as the locomotive to drive the economy,” said Khalid al-Falih, the Saudi energy minister. “There will be risks, but we will work with you to mitigate it.”

Saudi Aramco, the state oil company, signed more than $50bn worth of deals on Saturday, around $22bn of which were new memorandums of understanding, including:

● Investing $7bn with Rowan over 10 years to own and operate drilling rigs, creating 2,800 jobs in Saudi Arabia.

● Extending a joint venture with Nabors for oil well services, seeing $9bn of investment over 10 years, creating up to 5,000 jobs in the kingdom.

● A new joint venture with National Oilwell Varco in Saudi Arabia to manufacture driving rigs and equipment, seeing $6bn of investment over 10 years.

Aramco also said it would boost operations at its US refinery unit Motiva, with a planned $12bn investment with a likely additional $18bn by 2023. The deal aims to create 12,000 jobs by 2023.

Six firms — including Honeywell, McDermott and Weatherford — signed MOUs to expand Aramco’s use of locally produced goods and services, bringing $19bn of investment to the kingdom.

Aramco also signed a deal with GE to deliver $4bn worth of savings via digitisation of the oil firm’s operations. This was part of a GE package of valued at $15bn.

When deputy crown prince Mohammed bin Salman visited Washington earlier this year, the White House estimated that Saudi investment pledges could rise to around $200bn.

In the defence sector, Lockheed Martin signed a $6bn deal to assemble 150 Blackhawk helicopters in the kingdom, supporting 450 jobs. Raytheon and General Dynamics also signed agreements to support the localisation of defence contracts.

The deals support Prince Mohammed’s plans for the world’s third-largest spender on arms to create a domestic industry led by the newly formed company Saudi Arabia Military Industries. The kingdom wants to source half of defence spending locally by 2030 from 2 per cent now.

Saudi Arabia’s sovereign Public Investment Fund pledged $20bn for a $40bn Blackstone US infrastructure fund, with $20bn to be raised from other parties. Blackstone said it expects, with debt financing, to invest $100bn in infrastructure projects, mainly in the US.

“This potential investment reflects our positive views around the ambitious infrastructure initiatives being undertaken in the US as announced by President Trump,” said Yasir Al Rumayyan, managing director of PIF.

PIF was also an anchor investor in SoftBank’s Vision Fund, which on Saturday finalised its first close at $93bn.

As well as PIF, the technology fund — which is targeting a final close at $100bn within six months — received investments from PIF Mubadala Investment Company of the United Arab Emirates, Apple Inc., Foxconn Technology Group, Qualcomm Incorporated and Sharp Corporation.

PIF is believed to have pledged $45bn for the fund, which is expected to invest significantly in the US.

Dow Chemical, whose chief executive Andrew Liveris co-chaired the Saudi-US CEO Forum on Saturday, agreed to invest more than $100m for a polymers manufacturing plant, while studying a proposed investment in silicones production.

Majed bin Abdullah Al Kassabi, the minister of commerce and investment, granted new licenses to 19 US companies that will start operations in Saudi Arabia, including names such as Citigroup and Whirlpool.

At the close of the Saturday morning forum, about 70 senior Saudi executives and US chief executives boarded buses outside the Four Seasons hotel, bound for lunch with King Salman and Mr Trump at the royal court.

The elite business delegation is set to hold postprandial talks with prince Mohammed, architect of the kingdom’s reform plans.

Around 30 US executives were approved to attend the lunch, including names such as Larry Fink of BlackRock, Michael Corbat of Citigroup, Roy Harvey of Alcoa, Adena Friedman of Nasdaq and financial adviser Michael Klein.

Amid tight security, royal guards took the executives’ phones, before they boarded the coaches.

FT Lex : Saudi/Blackstone/SoftBank: active threat Premium

Saudi/Blackstone/SoftBank: active threat Premium
A desire for a bigger say to match huge cheques would produce problems

In private equity, the rights of limited partners are usually defined by the adjective rather than the noun. Lawmakers complain that public investors such as Calpers are too quiescent, handing over vast sums and paying big fees for little oversight.

When the LP is the sovereign-wealth fund of Saudi Arabia, everything is bigger -- including the problems of a typically passive or more active role. The Saudi Public Investment Fund (PIF) announced on Saturday that it would invest $20bn in a new Blackstone infrastructure fund and closed a deal to invest $45bn in SoftBank’s new technology fund.

The Saudis have no desire to be the dumb money, in either sense. As people involved in both sets of negotiations attest, there was wrangling over the degree of influence on investing that the Saudis would have in the SoftBank fund (as the Wall Street Journal also reported). There also appears to be different ideas on this crucial question for the as-yet unsigned Blackstone deal.

Demanding more say in the infrastructure fund would be understandable for what is the single biggest commitment from an LP in Blackstone’s history. However, it would also be fraught with danger. A New York private equity firm encounters plenty of political strife investing in US schools, hospitals, bridges and roads. The Saudis becoming any more than a silent partner would raise the stakes much further, evoking the Dubai Ports World saga.

Technology is far less politically problematic. The PIF has gone as far as investing directly in Uber. Even under the Obama administration, whose relationship with Saudi Arabia was bad; even though the Saudis got a board seat in exchange for their $3.5bn investment; and even though the money came from a repressive regime that does not permit women to drive, there was little in the way of backlash.

Yet already there has been disagreement over the degree of decision-making in the SoftBank fund. The two sides have ultimately agreed that SoftBank will pick tech investments, but the PIF’s representatives can observe decisions and veto large commitments. 

That does not sound like a bright line. As part of its attempt to move from an oil-dominated economy, Saudi Arabia sees the tech sector as strategic. It is already going to be hard to deploy so much money in a five-year fund when asset prices are so elevated. The needs of an active partner, who wants more than just a financial return, are going to make life complicated.

FT : Saudi wealth fund to back $40bn Blackstone infrastructure vehicle

Saudi wealth fund to back $40bn Blackstone infrastructure vehicle
Venture predates Trump visit and will focus on upgrading ageing US support systems

The sovereign wealth fund of Saudi Arabia has unveiled plans to place $20bn with Blackstone, the alternative asset manager, becoming the anchor investor in a new $40bn infrastructure fund that will focus on mainly upgrading US assets.

The two sides announced the non-binding memorandum on Saturday, just hours after US president Donald Trump landed in Riyadh for his first foreign visit since inauguration.

However, both Saudi’s Public Investment Fund and Blackstone stated that the terms were not yet finalised and emphasised that the agreement was the culmination of talks that predated the US president’s election.

Stephen Schwarzman, chief executive of Blackstone, who also heads Mr Trump’s economic advisory group, has actively been courting the Saudis for sometime, said one person with knowledge of the deal, who added: “With the Saudis, the negotiation never ends.”

Under the arrangement, the PIF will become a passive investor in the new vehicle, while Blackstone will seek to raise at least $20bn from other potential investors.

“Overall, through the equity in this vehicle and additional debt financing, Blackstone expects to invest in more than $100 billion of infrastructure projects, principally in the United States,” the two groups said in a joint statement.

The investment with Blackstone marks the second major backing of a foreign money manager in less than year by the PIF, which is undergoing a dramatic transformation under the leadership of the powerful deputy crown prince Mohammed bin Salman.

Also this weekend, the PIF finalised its plans to commit $45bn to a new $90bn technology investment fund to be managed by SoftBank, the Japanese tech-to-telecom conglomerate led by its billionaire Masayoshi Son.

Yasir Al Rumayyan, the PIF’s managing director, said: “This potential investment reflects our positive views around the ambitious infrastructure initiatives being undertaken in the United States as announced by President Trump, and the strategic opportunity for the Public Investment Fund to achieve long-term returns given historical investment shortfalls.

Hamilton James, Blackstone president, said: “There is broad agreement that the US urgently needs to invest in its rapidly ageing infrastructure. This will create well-paying American jobs and will lay the foundation for stronger long-term economic growth.”

The announcement is one on several deals being unveiled, with dozens of US business leaders in Saudi Arabia at the same time as President Trump.

PIF was advised by M. Klein and Company, an advisory firm founded by former Citigroup dealmaker Michael Klein.

>>> Weekly Update

Weekly Market Update: Markets Acknowledge Embroiled Trump Administration Before Quickly Moving On

In most cases stock indices opened the week at or near recent all-time highs. A continuing run of decelerating US economic data and the steady beat of headlines coming out of Washington DC were largely offset by a move higher in oil prices. Crude was finding support in solidifying market expectations that OPEC would extend supply cuts through next spring when they meet next week. Volatility remained remarkably low, and stocks remained bid globally, helped in part by a speech from China’s President Xi that illustrated the importance his government intends to put on finding new drivers for growth in the wake of softer April economic data.

By mid-week the tone dramatically shifted. Headwinds from Washington freshened on a report former FBI Dir Comey had drafted a memo chronicling a meeting with President Trump where he was asked to drop the investigation into former National Sec Adviser Flynn. Within 24 hours, former FBI Dir Mueller was appointed special counsel to oversee the Russia investigation, while the President repeatedly denied the reports, calling the whole thing a ‘witch hunt.’ Markets finally buckled as investors became increasingly concerned the political fallout could ultimately be fatal for the Republican’s pro-growth agenda. The flight from risk assets sent the VIX +27%, ultimately filling the gap made into the French election. Gold prices rose along with global Treasury bonds, sending yields lower. The US 10-year yield fell just short of the April low of 2.18%. The Dollar index gave back all the post-US election/Trump reflation gains.

The move into safe have assets was short lived. Equity markets rebounded Thursday in the wake of better US economic readings and technically driven momentum buying after the significant reversal. Markets largely shrugged off the latest political crisis in Brazil, which brought a spat of elevated volatility to Brazilian assets and word the Trump administration was pushing ahead with the NAFTA renegotiation. Oil prices pressed higher on speculation OPEC was contemplating a scenario of deepening supply cuts, not just extending. WTI crude finished the week above the $50 mark, while the Dollar Index closed near $97 for the first time since before the Nov election. Dollar bulls were dismayed by notably.dovish commentary from the Fed's Bullard. The US 10-year yield rebounded back towards 2.25%, but the curve remained compressed. For the week the Dow, S&P and NASDAQ nearly did a round trip, all falling ~0.5%.

As earnings news this week slowed to a trickle, a few big names reported strong results. Home Depot bucked the trend of poor retailer reports by notching a solid beat on top and bottom line, as the home improvement giant remains buoyed by a stronger housing market and a boost in big-ticket transactions. Semis were up modestly in Friday trading after Applied Materials issued strong results and guidance as its chipmaker customers ramp up to bring more advanced production equipment online. Deere rebounded by beating expectations across the board and raising its outlook, with notable strength from international farm equipment sales and home construction equipment.

SUN 5/14
(CN) CHINA APR INDUSTRIAL PRODUCTION Y/Y: 6.5% V 7.0%E; YTD Y/Y 6.7% V 6.9%E
(CN) CHINA APR RETAIL SALES Y/Y: 10.7% V 10.8%E; YTD Y/Y: 10.2% V 10.2%E
(CN) CHINA APR FIXED ASSETS EX RURAL YTD Y/Y: 8.9% V 9.1%E
(SA) Saudi Oil Min Al-Falih: Russia and Saudi Arabia in favor of extending OPEC deal for 9-months to March 2018; decision to be made May 25th - financial press

MON 5/15
(US) MAY EMPIRE MANUFACTURING: -1.0 V +7.3E
(US) MAY NAHB HOUSING MARKET INDEX: 70 V 68E (second-highest reading since financial downturn)
(US) MAR TOTAL NET TIC FLOWS: -$0.7B V $13.2B PRIOR; LONG-TERM TIC FLOWS: $59.8B V $53.1B PRIOR
27.HK CEO Lui: Encouraged by recent improvements in VIP; will need a few mouths to see if recovery is sustainable

TUES 5/16
VOD.UK Reports FY16/17 Adj EBIT €3.97B v €3.70B y/y, adj EBITDA €14.1B v €14.2B y/y, Rev €47.6B v €49.8B y/y
*(UK) APR CPI M/M: 0.5% V 0.4%E; Y/Y: 2.7% V 2.6%E; CPI CORE Y/Y: 2.4% V 2.3%E
*(EU) EURO ZONE Q1 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; Y/Y: 1.7% V 1.7%E
*(DE) GERMANY MAY ZEW CURRENT SITUATION SURVEY: 83.9 V 82.0E; EXPECTATION SURVEY: 20.6 V 22.0E
HD Reports Q1 $ 1.67 v $1.62e, R$23.9B v $23.7Be
(US) APR HOUSING STARTS: 1.17M V 1.26ME; BUILDING PERMITS: 1.23M V 1.27ME
TATA.IN Reports Q4 (INR) Group loss 7.2B v profit 9.88Be, Rev 354.6B v 316.2Be
(US) APR INDUSTRIAL PRODUCTION M/M: 1.0% V 0.4%E; CAPACITY UTILIZATION: 76.7% V 76.3%E (largest total industrial production gain since Feb 2014)
(US) Atlanta Fed raises Q2 GDP to 4.1% from 3.6% on 5/12
(US) Weekly API Oil Inventories: Crude: +0.9M v -5.8M prior; first build in 3 weeks
(US) President Trump reportedly asked former FBI Director Comey to shut down investigation into National Sec Adviser Flynn, according to memo Comey wrote following a meeting with Trump - NY Times
(US) US House Chair of Oversight Committee Chaffetz (R): Has subpoena pen ready for Comey memo, oversight committee is going to get the memo

WEDS 5/17
(HK) Macau Gaming Regulator: No plans to set up online gaming; no plan to adj gaming tax
(UK) MAR AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.4% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y/Y: 2.1% V 2.1%E
*(UK) APR JOBLESS CLAIMS CHANGE: +19.4K V +33.5K PRIOR; CLAIMANT COUNT RATE: 2.3% V 2.2% PRIOR
(UK) MAR ILO UNEMPLOYMENT RATE 3M/3M: 4.6% V 4.7%E (lowest since 1975)
700.HK Reports Q1 (CNY) Net 14.5B v 13.0Be; Rev 49.6B v 46.4Be
(EU) EURO ZONE APR CPI M/M: 0.4% V 0.4%E; Y/Y (FINAL READING): 1.9% V 1.9%E; CPI CORE Y/Y(FINAL READING): 1.2% V 1.2%E
(DE) GERMANY SELLS €812M VS. €1.0B INDICATED IN 2.5% JULY 2044 BUNDS; AVG YIELD: 1.24% V 0.87% PRIOR; BID-TO-COVER: 2.3X V 1.2X PRIOR
*(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
TGT Reports Q1 $1.21 v $0.89e, R$16.0B v $15.6Be
F Confirms plan to cut 10% of Salaried workforce in North America and Asia as part of cost reduction program
(IR) Trump administration confirms will renew Iran sanctions waiver, as expected, related to nuclear agreement - press
(IE) Ireland PM Kenny confirms plan to resign; effective Thursday, May 18th; successor to be appointed June 2nd - Irish press
(US) Association of American Railroads weekly rail traffic report for week ending May 13th: 527.0K carloads and intermodal units, +5.7% y/y (18th straight week of gains)
CSCO Reports Q3 $0.60 v $0.58e, R$11.9B v $11.9Be; to cut 1.1K jobs (about 1.5% of total)
(US) Justice Dept names former FBI Director Mueller as special counsel to take over Russia probe - press
*(JP) JAPAN Q1 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; ANNUALIZED GDP: 2.2% V 1.7%E; 5th consecutive quarter of growth for the first time in 11 years
(CN) China developers expect their offshore dollar bond issuance to dramatically slow in the near term in an effort for govt to cool the sector - financial press
(HK) DICJ director Martins Chan: Macau gaming licenses will be not be renewed but open for bidding again when they expire; no plans for online gaming platforms
*(AU) AUSTRALIA APR EMPLOYMENT CHANGE: +37.4K (2nd straight increase; best 2-month rise since late 2015) V +5.0KE; UNEMPLOYMENT RATE: 5.7% (3-month low) V 5.9%E
*(CN) CHINA APR PROPERTY PRICES M/M: RISE IN 58 OUT OF 70 CITIES VS 62 PRIOR; Y/Y: RISE IN 69 OUT OF 70 CITIES V 68 PRIOR
(US) Democratic strategists said to begin poll-testing public opinions of impeaching Pres Trump - US press

THURS 5/18
BRBY.UK Reports FY16 Adj Pretax £462.4M v £457.1Me, Op Profit £458.7M v £417.8M y/y, Rev £2.77B v £2.77Be
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES REVERSE REPO RATE UNCHANGED AT 4.75% (as expected)
(UK) APR RETAIL SALES (EX-AUTO/FUEL) M/M: 2.0% V 1.0%E; Y/Y: 4.5% V 2.6%E
(BR) Brazil govt allies said to seek resignation of President Temer - financial press
(US) Commerce Sec Ross: Do not see any reason for policy delay; calls special investigations a sideshow - CNBC
(EU) ECB ACCOUNT OF MONETARY POLICY MEETING (APR MINUTES): Broad agreement that monetary policy stance was appropriate; risk outlook has improved
(US) MAY PHILADELPHIA FED BUSINESS OUTLOOK: 38.8 V 18.5E
(US) APR LEADING INDEX: 0.3% V 0.4%E
(MX) US Trade Rep Lighthizer: confirms began 90-day consultation period to renegotiate NAFTA
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 25BPS TO 6.75%; NOT EXPECTED
(BR) Brazil President Temer: I have nothing to hide; I will not resign; will prove innocence before Brazil's Supreme Court - comments in Brasilia
AMAT Reports Q2 $0.79 v $0.76e, R$3.55 v $3.54Be
CRM Reports Q1 $0.28 v $0.26e, R$2.39B v $2.35Be
*(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 2.50%; NOT EXPECTED

FRIDAY 5/19
(UK) MAY CBI INDUSTRIAL TRENDS TOTAL ORDERS: 9 V 4E
DE Reports Q2 $2.49 v $1.70e, Net Equipment Rev $7.26B* v $7.24Be
(CN) China reportedly will lift at 2-year suspension of foreign funds raising money in China to invest overseas as early as June - financial press
(US) New York Fed Nowcast: raises Q2 GDP forecast to 2.3% from 1.9% from 5/12
(US) GOP healthcare bill CBO score scheduled for release on Weds afternoon (5/24) - press

Barron's : Vodafone Looks Beyond Red Ink to Better Times

Vodafone Looks Beyond Red Ink to Better Times
The big mobile provider took a bath in India. But its shareholder-friendly policies and ample cash flow have already helped the stock

British mobile phone operator Vodafone could finally be dialing up its performance after suffering for years from sharp competition and regulatory pressure.

That may not be obvious immediately from the headline figures in its full-year earnings report last week. Vodafone made a whopping loss of 6.1 billion euros ($6.79 billion)—19% wider than the previous year—after being hit by a huge write-down in its troubled Indian business.

Despite that red ink, its shares jumped 4% on the day the figures were released, helped largely by its upbeat earnings outlook and a 2% dividend increase. CEO Vittorio Colao said on the earnings call that Vodafone’s (ticker: VOD.UK) adjusted organic earnings should rise by 4% to 8% this year, to between €14 billion and €14.5 billion.

More encouraging was his free cash-flow forecast. Having more than tripled free cash flow last year to €4.1 billion, Colao expected it to rise to around €5 billion this year, spurring hopes the company will continue to deliver on its progressive dividend policy.

Vodafone has a reputation for looking after its investors. After making $130 billion from the sale of its Verizon Wireless stake in 2014, it handed shareholders $84 billion, confounding expectations that it would launch a massive acquisition spree. A strong dividend has helped cement shareholders’ loyalty, effectively paying them to sit out the difficult years.

At 5.73%, its current dividend yield is well above its major European rivals. French operator Orange (ORA.France) is a distant second at 4.28%, while Germany’s Deutsche Telekom (DTE.Germany) trails at 3.45%, just ahead of Spain’s Telefonica with 3.34% (TEF.Spain).

Still, it isn’t all about the shareholders. The company resisted big M&A but it has plowed money into improving its services, aiming to attract clients with its product quality. Its focus has been on spreading its high-speed mobile networks in Europe and the emerging telecom markets of India and Africa. Its biggest acquisitions have been of European cable operators, intended to help it offer users the four-in-one “quad play” package of mobile, fixed-line, cable, and internet.

Last year it combined its Dutch business with that of Liberty Global (LBTYB) to create a joint venture with combined annual revenue of around €3.5 billion, reigniting speculation that the two companies could one day forge deeper ties.

Those investments have also allowed Vodafone to offer more generous plans to its European mobile customers—steadying its average revenue per user last year—while tapping strong data growth in emerging markets.

“We continue to be Europe’s fastest-growing broadband provider, seizing the opportunities created by convergence and winning revenue market share,” Colao said.

Goldman Sachs analyst Andrew Lee has Vodafone at Buy and raised his price target to 280 pence from 270 pence following the results, giving it upside of around 27% from the current level. He says the results were in-line but guidance was better than expected, suggesting that with capital expenditures falling its free cash flow “should cover the dividend in fiscal 2018 for the first time in years.”

Price competition from upstart players has been a bugbear for incumbent telecoms companies worldwide. It has been a particular problem for Vodafone in India and became critical with the arrival of mobile operator Reliance Jio Infocomm, bankrolled by India’s richest man, Mukesh Ambani, which gained a foothold by offering free services. The company now charges ultralow rates.

That had a big impact on Vodafone’s finances, forcing it to write down its Indian business by €5 billion last November.

UNDETERRED, AND STILL DETERMINED to tap India’s enormous growth potential, Vodafone announced plans in March to merge its Indian business with local player Idea Cellular (532822.India) to create a joint venture valued at nearly $24 billion that will vault over Bharti Airtel (532454.India) as the country’s biggest operator.

Apart from generating synergies with an estimated net present value of $10 billion, the India deal relieves some of the debt burden on Vodafone’s balance sheet. It also gave rise to a partial reversal of the Indian impairment, reducing it to €3.7 billion, net of tax.

Morgan Stanley analyst Emmet B. Kelly has Vodafone at Overweight with a 260 pence price target, offering potential upside of over 18%. He says the India deal offers a number of important benefits aside from the promised synergies that includes the removal of around €8 billion worth of debt from Vodafone’s balance sheet. “Which is considerably more than our prior value for Vodafone India [at €4.6 billion],” he notes.

Vodafone shares closed at 220 pence on Friday, down by 4% over the past year but up 11% in the last three months, comfortably outperforming the Stoxx Europe 600 which has added a little over 5% over the same period.

Recode.net: Spotify has hired an M&A specialist to help it buy other companies

Spotify has hired an M&A specialist to help it buy other companies
WPP veteran Sheila Spence joins next week

Spotify has hired an executive tasked with helping it buy other companies. The music streaming service is bringing on Sheila Spence, a longtime M&A specialist at ad giant WPP, as its vice president of corporate development.

Spence, who will report to Spotify CFO Barry McCarthy, is a well-known figure in the digital media business, and has spent the last 10 years run corp dev at WPP.

A Spotify rep says Spence will start May 30; I’ve asked her for comment.

Spotify is preparing to go public via an unconventional public listing later this year or early next year, at a reported valuation of $13 billion. If it does, its stock will give it a new currency for Spence to play as she looks at acquisition targets.

Up until now Spotify has made relatively modest purchases, and has usually focused on bringing on engineering teams. Yesterday, for instance, the company said it had picked up Niland, a Paris-based A.I. startup. Spotify’s biggest acquisition to date appears to be The Echo Nest, a music data startup, for about $60 million.

(Vox.com) Donald Trump has committed the exact offense that forced Richard Nixon

Donald Trump has committed the exact offense that forced Richard Nixon to resign

We don’t actually know if Richard Nixon ordered the break-in to the Democratic National Committee headquarters in the Watergate complex on June 17, 1972.

That, to me, is still the most remarkable feature of the Watergate crisis. A president was forced out of office for the first time in American history by a scandal centering on a single crime, and we still don’t know if he actually ordered it.

In his memoirs, Nixon denies it, though he smugly adds, "I could not muster much moral outrage over a political bugging." Jeb Magruder, a dirty tricks operative for Nixon, revealed three decades later that he had overheard Nixon and his reelection chair John Mitchell planning the burglary. But as historian David Greenberg notes, “Mr. Magruder had [previously] discussed that same meeting without noting Nixon's participation.” Dirty tricks operatives aren’t the most reliable of sources.

We don’t even know why it happened — if the burglars were looking for evidence that the DNC was receiving money from the North Vietnamese or Cuban governments (as conspirator Howard Hunt insisted), or information embarrassing to White House counsel John Dean (as G. Gordon Liddy, who planned the break-in with Hunt, claimed), or, as another popular theory has it, trying to find out how much DNC chair Larry O'Brien knew about Nixon’s financial dealings with billionaire tycoon Howard Hughes.

But what we do know, the “smoking gun” that eventually forced Nixon out of office, was that Nixon ordered his chief of staff to get the CIA to force the FBI to abandon its investigation into the break-in.

That was enough.

Some Republicans had stood by Nixon through his firing of the independent counsel investigating the matter, through multiple aides and Cabinet officials resigning, through the White House’s effort to resist subpoenas for documents and tapes. But when the “smoking gun” White House tape was released on August 5, 1974, Nixon’s remaining support from Republicans evaporated. Two days later, Senate Minority Leader Hugh Scott (R-PA), House Minority Leader John Jacob Rhodes (R-AZ), and former presidential candidate Sen. Barry Goldwater (R-AZ) went to the White House and informed the president that he had no support left in Congress.

They were shocked and horrified that Nixon had personally participated in the cover-up; before then there was still a sliver of a chance that the president himself wasn’t part of the conspiracy. They told Nixon that, now that his role in the cover-up was known, the votes were there to impeach him and remove him from office. The day after that, the president announced his resignation.

Similarly, there’s a lot we don’t know about Trump and his campaign’s ties to Russia. We know that the FBI and other agencies have been looking into any contact Trump's campaign advisers Paul Manafort, Carter Page, and Roger Stone might have had with the Russian government during the election. We know that intelligence agencies suspect those three might have worked the Russian officials to coordinate the release of hacked emails. We know that disgraced former National Security Adviser Michael Flynn, White House senior adviser and Trump son-in-law Jared Kushner, and Attorney General Jeff Sessions all lied about or failed to disclose communications with Russian Ambassador Sergey Kislyak.

We don’t know how all these pieces fit together. We don’t know exactly what Donald Trump Sr.’s direct involvement is, or how aware he was of his advisers’ efforts, or the nature of his business relationship with Russia. That’s provoked a lot of very valuable investigative journalism, as well as a lot of outright conspiracy theorizing.

But focusing too granularly on the details of Trump’s personal involvement risks setting the bar too low for him. It risks suggesting that unless we find undeniable proof of collusion between Trump and the Russian government, he’s in the clear.

The fact of the matter is that without any more information than we already have, we already know Trump’s conduct is at least as outrageous as what Nixon acknowledged in the smoking gun tape.

In Nixon’s case, what crossed the line, moving top leaders from his own party to go to the White House and tell Nixon that his presidency was over, was Nixon’s attempt to hamper the FBI’s investigation into Watergate.

And we now know that before Trump fired FBI Director James Comey, he asked Comey to stop investigating former National Security Adviser Flynn. This is exactly the same kind of FBI investigation interference that forced Nixon out of the White House and shocked his Republican allies out of defending him.

As of this writing, Trump’s Republican allies in Congress are standing by him and not demanding a independent prosecutor, let alone impeachment.

But this is not a “where there’s smoke there’s fire” situation. We don’t need to know much more to know that the president has committed conduct that was once thought sufficient to warrant removal from office.

The Comey firing isn’t smoke. It’s fire.

FT : Japan eyes prize in regulating bitcoin

Japan eyes prize in regulating bitcoin
Efforts to regulate the crypto currency by the Japanese may sharpen its appeal

As speculative fever takes hold, cybercriminals taint the brand with ransom demands and prices whipsaw between record highs and cliff-edge stumbles, governments, investors and financial institutions are legitimately asking whether the world is ready for bitcoin.

A thornier question — soon to be answered in Japan — is whether bitcoin is ready for “Mrs Watanabe”, the notional holder of the nation’s household purse-strings.

Since April 1 this year, as the global market value of bitcoins and other cryptocurrencies has surpassed $50bn, a growing number of online exchanges, funds and remittance companies has been scrambling to make formal registrations with the Japan Financial Services Agency. The process is expensive, demanding, laced with invisible tripwires and not all applicants, by any means, will be successful.

The prize, though, could be spectacular. Japanese retail investors — a group that does include a lot of Mrs Watanabe housewives but is actually dominated by her day-trading children and their leveraged online accounts — are voracious. FX margin trading in Japan, the “Mrs Watanabe” favourite with volumes at about $10tn per quarter, is the largest in the world. A minute fraction of that channelled towards the bitcoin market, say the most excitable proponents, could be transformational.

Propelling the rush to register is new legislation that (perhaps counter-intuitively for a country whose financial services industry still routinely uses fax machines), puts Japan comfortably at the head of the global pack on crypto currency trading regulation. Some US states have their own regulation for local bitcoin exchanges, but so far, no central government has taken the plunge and attempted to regulate an asset that was invented to defy regulation. It is easy to see why the FSA is keen to move: Japan, by volume, is one of the largest centres of bitcoin trading on any given day and has been helped by China clamping down. The Japanese government — unexpectedly clear-headed on the issue — sees as much potential opportunity as threat in that.

Hence the stampede to register exchanges and other businesses with the FSA. The prospect of a market where the government has demystified an otherwise enigmatic asset and Mrs Watanabe has been soothed by seeing the stamp of a regulator known for its conservatism, is simply too lucrative a bet to pass up.

By October 1, any bitcoin or “alternative coin” exchange or money transfer business that wants to operate in Japan must come under the regulatory supervision of the FSA and be submitted to annual audits. Much of the regulation (some of it in the familiar language of anti-money laundering measures and “know-your-customer” protocols) represents an attempt by Japan to purge some of the anarchy from bitcoin’s image. Other parts are designed to ensure separation between the stashes of customers’ bitcoins from those belonging to the exchanges themselves — a measure that might have avoided some of the chaos that followed the 2014 collapse of what was at the time the world’s biggest bitcoin exchange, the Japan-based Mt Gox.

In a final regulatory flourish that gently mocks the first two-thirds of the phrase “digital crypto currency”, new customers will not be able to trade until they have received a hard-copy acknowledgment letter, delivered by registered post to their home address.

But for all the regulatory freight, this is a strangely light-footed moment for Japan and the FSA. To reach this point, a series of surprisingly un-Japanese breaches of natural conservatism have been necessary — not least, the formal recognition of bitcoins as a legal payment system.

There are several reasons for the leap. The first arises from the Mt Gox catastrophe, the high global visibility of what remains one of the biggest digital heists in history, an international cast of furious investors and the FSA’s fierce discomfort that all this happened on its turf. This is an assertion of control by Japan, but one driven by the desire to legitimise something that it knows, from long experience, that Mrs Watanabe may very well be interested in.

Just as important, though, is the extent to which fintech — a loosely-mapped Aladdin’s cave of blockchain technology, crypto currency trading, artificial intelligence data analysis and other envisaged innovation — lies at the heart of government plans to turbo-charge Japan’s comatose financial services industry. Everyone loves and talks up the idea of Japanese banks (only recently armed with the legal ability to do so) splurging investment towards bleeding-edge fintech; nobody, confides the president of one of Japan’s three megabanks, is going to invest a single yen until there is a regulatory framework in place.

The way regulation has been handled in Japan, say companies currently applying for the licence, is both curse and blessing. On the one hand, there are elements of the regulation that are heavy handed and could ultimately threaten a crypo-currency that has thrived on anonymity. Apart from bitcoin, for example, there are more than 800 alternative currencies on the market, but the FSA is effectively approving only one of them, ethereum.

“When you are talking about start-ups, which of course a lot of the bitcoin-related businesses are, you never really think of regulation as a good thing,” says Mike Kayamori, chief executive of the crypto currency exchange Quoine, who argues that Japan has a long history of using regulation to squash innovation and “undesirable” areas of industry as it famously did with consumer loan companies in the late 2000s. “But in this case, it just might be different. The retail investor — Mrs Watanabe — doesn’t want the wild, wild west, she wants something regulated and trustworthy.”