FT : European Central Bank scraps €500 note

The European Central Bank has decided to stop producing €500 notes, in a move it depicts as a crackdown on crime but which critics in German-speaking countries say is part of an onslaught on cash and savings.
Top eurozone officials argue that the €500 bill, the euro’s highest denomination note, is the banknote of choice for the darkest parts of the black economy, because it allows drug dealers and terrorists to carry large amounts of cash.

Although the bill accounts for just 2.3 per cent of banknotes in the single currency area, it represents almost 30 per cent of their value.
As well as ending production, the ECB said on Wednesday it had decided to stop issuing the €500 around the end of 2018, “taking into account concerns that this banknote could facilitate illicit activities”. It added that “in view of the international role of the euro and the widespread trust in its banknotes, the €500 will remain legal tender and . . . will always retain its value”.
But its decision to scrap the printing plates for the note, which has not been produced since 2014, is likely to anger public opinion in Germany, a country where banknotes are viewed as a symbol of personal freedom, and Austria.
Both countries are culturally attached to cash in ways that distinguish them from other eurozone members, and much of German public opinion is already at odds with the ECB over the central bank’s ultra-low interest rates.
Leading politicians in Berlin have claimed the ECB is expropriating German savings and fuelling the rise of rightwing nationalism.
Until now banknote makers in Austria and Germany have produced the €500 note, along with note manufacturers in Luxembourg.
By making it more difficult to keep very large sums in cash, the abolition of the note could push otherwise reluctant people to put their savings in banks, raising fears that negative interest rates could eat into the principal.
To date such rates, which are imposed on commercial banks’ accounts at the ECB itself, have not directly applied to ordinary savers in the eurozone.
While ECB president Mario Draghi, who has already come under considerable criticism in Germany, pushed for the decision to scrap the €500 bill, the move has come under fire from other members of the governing council.
Ewald Nowotny, the governor of the National Bank of Austria, has claimed that the central bank risks “running into a general debate about abolishing cash”.
“My personal view is that we shouldn’t aim for phasing out the €500 bill,” he said last week.
Jens Weidmann, Bundesbank president, has said it would be “fatal if citizens got the impression that they are dispossessed of cash”.
Despite the ECB’s strong insistence to the contrary, some critics have accused the bank of seeking to abolish banknotes altogether.
The bank is adamant that all of the other denominations of its banknotes, which range from €5 to €200, will continue to be produced.
German public opinion has also been rocked by Berlin’s plans to limit the size of cash payments, an intended anti-terrorist move in the wake of the attacks in Paris and Brussels.
Bild, Germany’s highest circulation newspaper, recently contained a letter for readers to send to finance minister Wolfgang Schäuble in protest at his plans to limit cash purchases to €5,000, saying cash meant “independence from banks, technology and fees”.

FT : The strange case of Ashazi: Wirecard in Bahrain, via Singapore


Ashazi Services, a Bahrain-based electronic payments company, moved from place to place in the Gulf Kingdom. For a time it was based in managed office space in one of the gleaming towers of Manama’s prestigious diplomatic area, but also small apartments far from the centre.
In early 2011, however, Ashazi’s address was the office of its lawyer, Kumail Al Alawi, found above a side alley tucked between an outpost of Kentucky Fried Chicken and a car rental office.
So what sort of company was it? The question matters because in 2011 the Bahrain start-up was responsible for €4m per year of licence fee revenues reported by Wirecard, the German listed payments company. Ashazi Services Co WLL is one of the dormant companies leading back to E-Credit Plus Singapore, the first business purchased in Wirecard’s long Asian acquisition spree.

Wirecard is a German-listed tech company worth €4.8bn, and a stock market rocket whose shares have risen eightfold in the last six years. It owns a bank and listed in Frankfurt through the 2005 reverse takeover of a defunct call centre operator. And, as outlined in our first post on the matter, the company presents a puzzle.
Since 2009 the company has struck a string of deals, often involving struggling companies, to buy customers for its payment services. Wirecard structured some of those deals in unusual ways, and has raised half a billion euros from investors to keep spending. The tactics prompt questions about what was bought, the nature of its growth and the value of €670m of intangible assets on the balance sheet.
Wirecard said:
In addition to a strong organic growth story in Europe, Wirecard started in 2009 a very successful expansion strategy into Asia. This expansion strategy is focusing on a “buy and build” strategy. By M&A Wirecard buys into local payment companies which are small in international terms but have local strengths, Wirecard contributes its international expertise and business is developed on a synergetic basis.
The Asian expansion began with Singapore-based E-Credit Plus PTE ltd. This post is a look at that deal, and some of the company’s customers.
Searching for Ashazi
We visited Mr Al Alawi at his new office by a highway, the neighbouring buildings under construction. A bookshelf was filled with thick ring binders named for different clients, but the slim black folder marked “Ashazi Services” the lawyer pulled down held only a handful of documents. Nasreen Sururi, Ashazi’s, owner and managing director, would be better placed to talk about the company, he suggested.
Ms Sururi started Ashazi in 2009 with minimal capital, according to the Bahrain Ministry of Industry and Commerce, which shows no record of annual financial statements filed since. In December 2011, discussing her nomination for an award at the Abu Dhabi Women In Leadership forum, she told Bahrain This Month her company had “operations in Bahrain, Kuwait and the United Kingdom, and endeavours to maintain a growing global network of partners worldwide”.
According to Companies House, Ashazi Services (UK) ltd was a dormant entity, since dissolved. It was owned by an Isle of Man company controlled by accountants based in the Channel Islands.
As for the global partners, in January 2012 Ashazi issued a press release announcing a strategic partnership agreement with hSenid Software International, a Sri Lankan company with offices around the world. “Under the terms of the agreement Ashazi will become the exclusive partner and agent for hSenid’s products in the Kingdom of Bahrain and will integrate its mobile payment products with hSenid’s mobile platform.” Another release in March elaborated on the collaboration.
However Dinesh Saparamadu, hSenid’s chief executive, had never heard of Ashazi before we asked, and said his company anyway did not have an exclusive partner and agent for Bahrain. “We haven’t done any work with this company and we don’t have any partnership with them.”
Ashazi’s website, now for sale, appears to have been short lived in fully functional state, according to the Internet Archive. An October 2010 snapshot of the website, the earliest available, appears to show a site under construction.
A valuable Wirecard customer
From August 2010 Wirecard began licensing software to Ashazi at a cost of €1m per quarter, according to accounts filed in Singapore by E-Credit Plus. A note to the accounts said the software was provided by Wirecard, passing through at no profit to the Singapore entity.
Did Ashazi pay those bills? At the end of the year E-Credit Plus reported licence fee receivables — sales recognised, but where cash is yet to be collected from customers — of S$3.5m (€2m).
The following year E-Credit Plus, renamed Wirecard Asia Pte ltd, reported licence fee income of S$7.2m ($4m), and licence fee receivables of S$6.1m (€3.6m). The high level of uncollected cash prompted the local audit firm to offer a qualified opinion on the accounts, issued June 15 2012.
For 2012 the auditor was changed to the local branch of Ernst & Young, and licence fee revenues were shifted to another subsidiary, E-Payment Singapore, also audited by E&Y. The 2012 accounts for E-Payment Singapore show revenues of $7.2m, licence fee income of S$6.4m, and trade receivables of $6.5m.
When we first reached Ms Sururi, we asked if she recalled the agreement with E-Credit.
“No, [pause] no”, she said. “I cannot recall anything. As you say, I cannot recall what I had for lunch. Literally I forget everything in my files.”
“I had a partner in the company and he used to agree all the contracts”, she said. “I was running the company more on the management and marketing side”. She asked to be sent details of the agreement by email.
Wirecard said:
Ashazi was a well-financed company backed by strong shareholder commitments that intended to build up a regional player in the middle-east. They struck a 3 years licensing agreement that was based on using Wirecard platform on a white label SaaS (Software as a Service) basis. Such a licensing agreement classically consists of a minimum transaction volume they pay for covering the minimum costs to run such a platform and a variable per transaction fee above that. The EUR 12mn were an aggregate projection based on their business plan. Of course in the financial statements only the annual amount was included that they had to pay. This was an aggregated amount of about two third (around EUR 8mn) of the initially forecasted amount. Ashazi fully honored their commitments and we have no open balance with this company.
Christopher Bauer, a German businessman with experience at payments companies, was also involved at Ashazi Services for 8 months in 2011. He said the company was “in the development stage, definitely” when he joined in January that year, with a small number of employees trying to win new clients. He said there was a licence bought for a payment gateway, “but it was before my time”. He said, “I was more on the PR and marketing side” and “most of the time it was her who did the work”.
Mr Bauer’s previous company, the Philippines based PayEasy Solutions International, had employed as chief operating officer James Bergman, former chief executive of the Aim-listed money transfer group Earthport. Mr Bergman said Ashazi “had more than two or three staff, it wasn’t just a one man band working out of a bedroom.” He said Ms Sururi was “a very intelligent lady. She was an impressive young female entrepreneur with a lot of drive.”
Ms Sururi said, via email:
I am a well-known and reputable businesswoman and entrepreneur in Bahrain, and I am looking back on a successful career of more than 10 years in the payments industry…
Ashazi was at all times managed and operated in full compliance with the laws and regulations of Bahrain. The UK branch was founded with the intention to obtain a payment institution license under the British Financial Conduct Authority (FCA) although eventually it did not become operational.
Ashazi has written proof of hSenid’s partnership with and I am surprised by your claim that a senior official of hSenid allegedly does not remember the cooperation between the two companies. In any event, I am not obliged to and will not provide you with confidential business information related to past commercial dealings with any of Ashazi’s business partners.
In relation to E-Credit, we would advise you to refer any questions related to E-Credit to representatives of E-Credit.
Ms Sururi’s Linked-In profile now describes her occupation as a TV presenter and actress since 2008. Bait Shazi Trading Co WLL, her new company registered in 2012, is an events business.
E-Credit Plus and a five-headed reseller
Wirecard purchased E-Credit Plus for €10.3m, plus future “earn-out” payments of €2.5m, on December 28, 2009.
What might be considered unusual is that ownership of the company changed hands three times in the two months before the sale, according to Singapore filings. In November BS Payment Singapore Pte Ltd sold to Kennedy Jayaprakas J M Aime, a Malaysian individual listed as a director of E-Credit. Ownership then passed to Credence Collection Singapore Pte Ltd, on to the Malaysian Commerce Connecting Pte Ltd, then finally to Wirecard.
The company said, “before the transaction there were changes in ownership which were in good order with respect to the purchase of the company. The background of the transactions is a matter solely concerning the former owners.”
In 2010 the audit opinion for E-Credit was qualified due to problems verifying the validity of “gateway fees” from a subsidiary, Infotop Singapore.
Infotop was one of five resellers listed in note 14 to the E-Credit accounts detailing “Gateway Fees”:
In 2010 the company has entered into ECP Relationship Management Partner Agreement with Ugrand Universal Limited, Infotop Singapore Pte Ltd, Credence Macau Ltd, Manboo UK Limited, and E-Credence UK Limited (Reseller).
E-Credit reported S$1.3m in gateway fees for 2010, compared to zero in 2009.
What might be considered odd is at the start of the year four of those so-called resellers for Wirecard were owned by Wirecard. A German filing lists them as subsidiaries.
The two UK entities, Manboo and E-Credence UK, were dormant, according to Companies House.
By the end of 2010 all four resellers were owned by the fifth, the Hong Kong registered Ugrand Universal.
In 2013 Deitmar Knoechelmann, a former director of Wirecard subsidiaries, became a 50 per cent owner of Ugrand, according to Hong Kong filings.
Wirecard said Ugrand is an external independent company and the four subsidiaries were not related parties. It said, “for HGB (German local GAAP) the legal ownership is relevant, while for IFRS the control is relevant, which was not taken over by Wirecard Group. The business background was that as part of the consolidation of the heterogeneous structure of E-credit we did not intend to take over these companies.”
Nature of the beast
Some might expect a software licensing deal to be highly profitable. After all, the purpose of buying customers is simply to push more transactions through Wirecard’s existing systems and infrastructure, and software is straightforward to replicate. However, founder and chief executive Markus Braun said Ashazi “was not a very profitable deal”. He said, “when the whole technology is on us, it produces a whole load of costs, proprietary development, local support.”
Perhaps such deals are a natural consequence of dealing with small payments companies. It is unusual to find individual customers listed in the accounts of companies bought by Wirecard, so Ashazi and Ugrand may be outliers, or they may be representative. The puzzle that is the nature of Wirecard’s long expansion remains.

>>> Street Pre-Market Indications

ML
** Reminder: Sweden, Denmark, Finland, Norway, Switzerland,Austria closed
* BARCLAYS AFRICA GR - Barclays sells 103.6m shrs; Citi/JPM/UBS..............
* CENTRICA - 7% placing to fund £350mn of acquisitions & support bal sheet...
LUNDIN - We INITIATE coverage with Buy rating, PO SEK 40/ c$5.60............
MORRISON - Positive. Total sales -1.8% with LfL +0.7%, +0.2% v bbg cons...+3%
REPSOL - Big beat. 1Q Net EU572m v 261.2m. Upstream profitable the key....+3%
EDP - 4% beat driven by weather, with EBITDA €1,069m v bbg cons €1,024m...+2%
IMI - Solid. Oil & gas has been nowhere near as bad as feared.............+2%
BT - Beat, good fibre KPIs, 2yr guidance (16/17 inline, 17/18 ahead)....+1-2%
OLD MUT - Flows £1.8bn v BAML £1.5bn & FUM £107.1bn v BAML £104.8bn.....+1-2%
SAGE - Beat on rev with 6.2% org growth v 6.1% cons. H1 margin weaker...+1-2%
RSA - Solid. Slightly ahead of targets, low weather losses & FX tailwind+1-2%
DERWENT - Read well. 185.4k sq ft letting YTD, 6.1% ahead of Dec ERV......+1%
PFG - Made good start to the yr. Consumer credit all fine. Outlook ok too.+1%
FERROVIAL - Q1 EBITDA €194mn v bbg cons €189mn. Toll rds & airports solid.+1%
RANDGOLD - We UPGRADE to Buy, PO 7,100p. Shares look oversold v history...+1%
BEAZLEY - Positive. 1Q gross premiums written $583m v $546m yr earlier....+1%
A3M - Upgrading Spanish media ad growth from 6.5% to 8%. U/G EBIT by 7%.+0.5%
AMADEUS - Rev 1% ahead, EBITDA 4% ahead EPS 5% ahead. Detail looks mixed+0.5%
OILS - Solid recovery post -ve DOE data, +1.3% from EU close............+0.5%
VESTAS - Wins new order for 178mw in Kansas according to Reuters........+0.5%
APERAM - Q1 inline with EBITDA -14% YoY. No change to ests post results...u/c
BUNZL - 2x bolt-on acquisitions in Germany for rev €22m. Not material.....u/c
KINGSPAN - KSP has made a strong start to the year, with YTD sales up 25%.u/c
CYBG - Has taken a £45m PPI charge. NAB takes 90%, leaving CYBG with £44m.-1%
SMITH & NEPHEW - Sales only and report revs -2.5% v cons at group level...-2%
LANCASHIRE - PBT of $26.5m v cons $35.4m but towards bottom end of range-2-3%
ROLLS - Slightly disappointing. Q1 IMS lowers 1H outlook, keeps FY guide..-3%
ISAT - Lower group guidance by 4%. Weakness in Maritime reflect headwind-4-5%
MILLENIUM & COPTHOR - Hotel rev lower because of weak trading performance.-5%

CS
Accor -1-2% French preliminary RevPAR for April weak, Paris -19.6%
Amadeus +1-2% Q1 EBITDA €448m vs cons 431m, adj prof €245m vs cons 235m
Aperam +1-2% Q1 inline, EBITDA $112m cons $113m, guidance for Q2 better
Beazley +1-2% No's better, expects combined ratio for H1 to be better
BT Group +1-2% Rev beat & Ebit beat. Look solid & low expectations
Bunzl M/P Made a small acquisition
Bureau Veri M/P Small acq. London-based TMC Marine, 2015 rev. of Eu8.5m
Derwent -1% Statement cautious on June referendum
EDP +1% 1Q Net Income EU263m; Est. EU262m
EI Towers +1-2% Q1 core revs 0.5% miss, EBITDA 5.5% beat, Confirms 2016
Esure M/P Motor gross written premiums up 17.1%, on track for 2016
IMI M/P Q1 LFL rev growth of -4% cons -5%
Inmarsat -2-3% FY16 Revs range guidance reduced
Kingspan -1-2% Easing in order placement, maintained guidance
Korian +1% Q1 revs 2% beat, confirms FY rev target
Lancashire -1-2% Q1 pretax $26.5m vs cons $31m, combined ratio better
M&C M/P PBT inline, hotel business has had worse than expected
Morrison +2-3% Q1 LFL sales ex fuel up 0.7% est up 0.2%
Miners UNCH Copper -0.45%, Brent +0.75%, Iron Ore -3.05%, China -0.13%
Oils M/P Oil rallied c.3% from lows, Fires at Canadian Oil Sands
Repsol +3% 1Q adj net EU572M est EU261.2M
Rolls Royce -2-3% Will break even in H1 vs cons +243m, H2 weighted
Sage Group +1% H1 rev beat down to FX. Confident on targets
S&N -2% Q1 rev miss 1.14bn vs 1.17bn
Shawbrook +0.5% IMS inline, 2020 targets look optimistic
Solvay -0.5% CS downgrade to NEUTRAL (Valuation)
Telefonica M/P Officials decided to block CK Hutchison purchase of 02, WSJ

MF
*ALLIANZ-To bid for 48% stake in NY Hudson Yards Tower,Ex Div......-4.5%
*ELIOR-In adv talks to buy Megabite,Ramachandra Caterers...........-0.5%
*BT-Sales £5.66b(5.67),FY EPS better,sets guidance for 2 years.....+2%
*TEF-EU Officials to decide to block Hutchison purchase of O2......-0.5%
*DB1-LSE moving forward on all-share merger with Deut Boerse.......+0.5%
*APERAM-Ebitda 112m(113),Sales 1.08b(1.09),Q2 Ebitda up vs Q1......U/C
*EDP-Net €263m vs est €262m,Ebitda €1.13b vs est €1.02b............+1%
*METRO-To add Bank Of America to advise on food ops split..........U/C
*AMADEUS-Ebitda 448.8m(431.2),Adj Pft 245.6m,Sign Expedia deal.....+1%
*REPSOL-Adj Net 572m(261.2),Ebitda 1.02b(1.078),Net Debt 11.97b....+2%
*RR-H1 expected to be clse to breakeven,cost savings on track......-2%
*GRIFOLS-Ebitda 282.5m(281.8),Rev 959m(958),Net 125.2m.............+1%

>>> Sohn Conférence 2016 - day 1

The 2016 Sohn Conference New York just concluded and featured top hedge fund managers sharing investment ideas in order to benefit the Sohn Conference Foundation which is dedicated to the treatment and cure of pediatric cancer and childhood diseases. Here's the takeaways:


Notes From Sohn Conference New York 2016


Larry Robbins (Glenview Capital): “Get a Grip.” Theme was stocks can be a bumpy ride for investors, and hedge funds have taken a lot of hits in the press, but if you expect them to not be short-term traders, then don’t judge them by their short-term records. He talked his book; claiming that fundamental investing is not dead. He is long: VCA (WOOF) – Veternarian hospital, multiple has compressed as earnings have grown and “There is no Obamacare for Veternarian hospitals.” Also pitched his longstanding holding of Thermo Fisher Scientific (TMO). Yes, it has FX issues, but it has EPS growth. Pitched Lab Corp (LH) as well: hit by fears of new technology, but Theranos story shows that it’s not that easy to come up with new technology. On CBS (CBS): the viewing model is changing, with over-the-top (OTT), but content still has value. Flextronics (FLEX): they got out of the low value business, but still grew revenue 3% and EPS 15% yet their P/E is only 8.5x. The stock fell in February 19% and nobody knows why. Abbvie (ABBV): has a pipeline, Humira has IP protection, and biosimilars will take time to develop. Brookdale Senior Living (BKD): earning less, but still, oversold. Talked about Anthem (ANTM): 1. Managed care is still a good business 2. Cigna (CI) merger could lead to 20% accretion 3. ANTM vs ESRX contract repricing spat could lead to more earnings 4. Market pricing says deal breaks, he doesn’t think it will.


Carson Block (Muddy Waters): Famed short seller says, “No such thing as alchemy in banking” and touts Bank of the Ozarks (OZRK) as a short because they’ve done a lot of aggressive construction loans and acquisitions. Best case stock re-rates due to unsustainable EPS growth rate, worst case, balance sheet pressure.


John Khoury (Long Pond Capital): Value oriented, private equity approach. Hyatt (H) long. Says 65% upside, and low leverage gives a floor to valuation. Admits Pritzker family controls company but says they make good capital allocation decisions. Low end, leisure hotels most vulnerable to AirBnB threat. Hyatt has more corporate, higher end, which is relatively insulated. Not making a bullish call on all hotel stocks. Saying Hyatt since 2010 IPO, EBITDA is up 66%, shares up only 14% while they have bought back 20% of shares outstanding. Uses SOTP to get $79 PT, 65% upside.


Chamath Palihapitiya (Social Capital): Silicon Valley investor. Says Amazon (AMZN) is a multi-trillion monopoly in plain sight. Walked through e-Commerce, Amazon Web Services (AWS), says this is just the beginning, that Jeff Bezos will make good investment decisions. Says AWS is not understood by the Street and could be worth a lot more. (Seems like the AWS bull case is already widely touted by AMZN bulls?) Lots of potential losers as AWS scales.


Jeff Smith (Starboard Value): Activists. In 12 years they have replaced 162 board members at 50 companies. Likes Depomed (DEPO) long, pain medication, like Oxycontin, less abuse potential. Not taking price increases. Horizon Pharma (HZNP) tried to buy them, they refused to deal. Starboard has nominated a new board- sounds like a proxy battle is brewing. Also like Westrock (WRK), merger of Mead WestVaco and Rock Tenn. Sounds like a commodity business, but he says it is not, and it’s still cheap, at 4.9x 2017E EBITDA. Has $71 PT, almost a double from here.


Richard Deitz (VR Capital): They do a lot of emerging markets stuff. He says long Greek banks and Greek treasury bonds. Went through the sordid history of bailouts, and says now things are better, the banks are finally strong, may need one more round of recapitalizations. 141% upside, 34% IRR over next 3 years.


Stanley Druckenmiller (Duquesne Family Office): In a sentence: we have low rates, high multiples on stocks, high leverage, sell stocks and everything, buy gold. Fed is out of control, encouraging borrowing, reckless behavior. China is out of control, just buy gold.


Jeff Gundlach (DoubleLine Capital): Comedy show, with art talk in the beginning. In other words, his usual type of presentation. Says short XLU (utilities) long REM (mortgage REITs.) REITS are priced at 0.88x p/book, with 11% dividend, Utilities are 1.9x p/book with 3% dividend, you earn 8% net and you can lever it up 100% and earn 15%, plus the two should converge. He mocked the “low volatility” equities and showed that even utilities have had 56% drawdowns in the past. His most incendiary statement was that Donald Trump would be President, and “he’s comfortable with debt.”


Zach Schreiber (PointState Capital): He is the man that pitched oil short 2 years ago, when it was $100 per barrel. Long USD, short the Saudi currency, he says. He made a compelling case for why Saudi is in an “unsustainable equilibria” with lavish unfunded entitlements, unsustainable debt, and not enough currency reserves to protect their peg. Other oil producers’ currencies are down 25- 45% vs the dollar- Mexico, Norway, Russia, for example, yet the Saudi currency is unchanged. Only costs 1.5% to put this trade on and very asymmetric pay off.


Sohn Investment Contest Winner (Columbia Business School student): DXCM, Dexcom short was the pitch. Insulin device maker which is facing impending competition and is unable to increase price as revenue per user declines. Says stock can drop in half.


Adam Fisher (Commonwealth Opportunity Capital): Real estate background, now a Macro guy. Says short Japanese rates, long European rates. Very compelling case for how long JGBs that yield only 30 bps have nowhere to go but up. Even a move to 40 bps yield wipes out 10 years of return. Says maximum return for bondholders is 9% return over 30 years - that is not a CAGR of 9%, that is a TOTAL of 9%! Huge convexity in the trade.


David Einhorn (Greenlight Capital): He pitched Caterpillar (CAT) short, says company is NOT at trough earnings yet and the mining sector will never recover to the heights of the China boom. No catalyst on the short, other than EPS growth expected to take longer than expected. Then he pitched General Motors (GM) as a long, admitting that US business would drop off almost 20% but the currently money losing segments in Europe and Mexico could make up for the shortfall. Long deck with lots of charts and cartoons as usual. GM pitch rested on low P/E of 5.6x to increase despite US EBITDA to decline.


Jim Chanos (Kynikos Associates): Got a dig in on Tesla (TSLA), which he had said he was short earlier that day on TV. He said Elon Musk had not enough production, not enough batteries, and now not enough executives, but he pulls production forward 2 years. “What a showman,” he said. His pitch was a complicated one, talking about weakness in South Africa, and Nigeria, which led to a short of MTN group, a wireless carrier which is also struggling with subscriber growth and declining average revenue per user (ARPU). At $20B EV, this is a big company that he says is not cheap.

>>> What to look at today - 5th of May 2016

Dow-0.56% S&P-0.59% Nasdaq-0.77% Russell-0.79%
US MArket Closed Lower, as oil prices fueled retreat & disappointing ADP jobs data continued to sway sentiment in favor of the bears. Worries about the Q2 slowdown were further reflected in Atlanta Fed GDP estimate that was revised by a decimal to 1.7%, while US Treasuries were bid higher. industrial (-1.3%), health care (-1.0%), and financials (-0.8%) spaces contributed to selling pressure. The cash market found little relief despite an above-consensus reading of the ISM Non-Manufacturing Index for April (55.7; consensus 54.5). The commodity-sensitive energy (-1.3%) space traded in-line with industrials (-1.3%) and behind materials (-1.0%), health care (-1.0%), and financials (-0.8%). Conversely, countercyclical utilities (+1.1%), consumer staples (+0.3%), and telecom services (+0.2%) finished with the only gains. WTI crude ended its day higher by 0.3% ($43.78/bbl), but well off its opening level ($44.84/bbl). Volume were in line with average with more than 992mils shares. US After Hours Earnings Movers : LGCY +22.4%,EPE +15.4%, ZNGA +13.9%, WTW +13.3%, ARRS +9.4%, QRVO +7.3%, SZYM +5.9%, KHC+5.1%, MTW +4.3%, WBMD +3.8%, TASR +3.7%, AUY +2.8%, TSLA +2.2%, RRTS -17.3%, TCAP -14%, FIT -12.6%, SQNM -11.1%, KTOS -6.9%, EXEL -6.5%, CTL -4.7%, HRTG -4.2%, PAA -4.1%, SGY -3.8%, GDDY -3.4%, TRIP -3.8%, LITE -2.6%, WMB -2.5%, FOXA -1.4%...SYNC+118%on AT&T Contract, GM+1.2% on +ve Greenlights Einhorn comments at Sohn conf., CAT-1.2% alos on Greenlights comments. Asian equity markets are trading lower again as risk-off flows in US hours. Asian equity markets are trading lower again as risk-off flows in US hours China Caixin Services PMI also saw a downtick for April, tracking the similarly disappointing Manufacturing survey out earlier this week.

Nikkei Closed Hang Seng-0.36% Shanghai -0.03%

Eur$ 1.1485 CNH 6.5117 CNY 6.5020 JPY 107.01 GBP 1.4522 CHF 0.9580 RUB$66.0721 WTI$44.74 +2.19%

S&P+0.32% EuroStoxx +0.62% Dax +0.59% SMI closed

Macro :
- SOHN CONF WRAP: Druckenmiller Likes Gold, Schreiber Shorts Riyal
- China Needs More Fiscal Stimulus, Ex-PBOC Adviser Says: MNI
- Atlante Fund Seeks Investors for Pop. Vicenza Stake: Sole

Keep an eye on :
- ADS GY : Adidas, Under Armour Seek to End Patent Fight Over Fitness Gear
- AMS SM : Amadeus 1Q Adj. Profit EU245.6M vs EU209.9M Year Earlier
- APAM NA : Aperam 1Q Ebitda Below Estimates, 2Q Seen Slightly Higher Q/q
- BAYN GY : Bayer’s Stivarga Improves Survival in Unresectable Liver Cancer
- BT/A LN : BT to Announce Multibillion Pound Broadband Plan: Telegraph
- BT/A LN : BT 4Q Sales Match Ests., Adj. Ebitda Climbs 14%
- BVI FP : Bureau Veritas Buys Consultant TMC Marine, Doesn’t Give Terms
- CNA LN : Centrica to Sell Shares to Fund Acquisitions, Cut Debt
- LNG US : Cheniere Terminal to Receive Creole Spirit Tanker May 7: Pilots
- COFA FP : Coface 1Q Net Drops 45%, Co. Remains Cautious on 2016 Outlook
- DIS US : Disney Said to Seek to Buy Up to 1/3rd of BAM Tech: Re/code
- EDP PL : EDP-Energias de Portugal 1Q Net Income EU263m; Est. EU262m
- EIT IM : EI Towers Continues to Look at Small, Medium M&A Opportunities
- ELIOR FP : Elior Said in Talks to Buy Megabite, Ramachandra Caterers: TOI
- FER SM : Ferrovial 1Q Net Rises 32% From Year Earlier to EU157M
- KHC US : Kraft Heinz 1Q Adj. EPS, Rev. Beat Ests.; Up 5% Post-Mkt
- KORI FP : Korian 1Q Rev. Rises to EU730m, Co. Confirms FY Rev. Target
- LSE LN : LSE Says ICE Didn’t Approach Company With Takeover Proposal, LSE Moving Forward on All-Shr Merger With Deutsche Boerse
- TL5 SM : Mediaset Espana 1Q Net Rises to EU50.1 Million
- MRW LN : Morrison 1Q LFL Sales Ex-Fuel Beat Ests.
- MS US : Morgan Stanley Had Trading Losses on 8 Days in 1Q
- OHL SM : OHL Says Qatar Railways Serves Notice to End Metro Contract
- RBS LN : RBS CEO Doesn’t Know If U.S. Vote Affects Mortgage Probe Timing
- REP SM : Repsol 1Q Adj. Net EU572m; Est. EU261.2m
- RLYP US : Relypsa 1Q Rev. Beats Est.; Veltassa Misses
- RR/ LN : Rolls-Royce Says 1H Expected to Be Close to Breakeven
- SHP LN : Baxter Boosts Size of Baxalta Exchange Offer
- SN/ LN : Smith & Nephew 1Q Rev. Misses Est., Still Sees Good FY16 Growth
- GLE FP : SocGen Has Upside on Costs, Kept as Best French Bank at Barclays
- HOT US : Qatar Said in Talks to Buy St. Regis NYC, San Francisco Hotels
- TIT IM : Telecom Italia’s Mario Di Loreto, Head of Human Resources, Quits
- TEF SM : EU Officials Said to Decide to Block Hutchison-02 Deal: WSJ
- TSLA US : Tesla Motors 1Q Loss 57c/Shr Versus Est. Loss 60c/shr
- TSLA US : Tesla Aims to Make 1m Vehicles in 2020, Elon Musk Says

>>> Europe : Brokers Upgrades & Downgrades - 5th of May 2016

>>> Up
*BHP BILLITON RAISED TO EQUAL WEIGHT VS UNDERWEIGHT AT BARCLAYS
*DIRECT LINE RAISED TO BUY VS HOLD AT CANACCORD
*ENCANA RAISED TO MARKET PERFORM AT FIRSTENERGY CAPITAL
*ENI ADDED TO CITI FOCUS LIST EUROPE, TOTAL REMOVED
*LUMENTUM HOLDINGS RAISED TO OVERWEIGHT AT JPMORGAN
*NEXT RAISED TO NEUTRAL AT CREDIT SUISSE
*ROYAL DUTCH SHELL CUT TO NEUTRAL VS BUY AT CITI
*STAGECOACH RAISED TO BUY VS NEUTRAL AT UBS
*SUBSEA 7 RAISED TO BUY AT JEFFERIES
*USINAS SIDERURGICAS RAISED TO BUY FROM SELL AT CITI

>>> Down
*AMBEV CUT TO NEUTRAL AT JPMORGAN
*FIRST QUANTUM MINERALS CUT TO EQUAL WEIGHT AT BARCLAYS
*LEGRAND CUT TO HOLD AT KEPLER CHEUVREUX
*LUNDIN PETROLEUM CUT TO MARKET PERFORM VS OUTPERFORM AT BMO
*PAPA MURPHY’S CUT TO NEUTRAL AT ROBERT BAIRD
*PORR CUT TO HOLD VS BUY AT BERENBERG
*SOLVAY CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE

>>> PT Change


>>> Initiation
*MCCARTHY & STONE RATED NEW EQUAL WEIGHT AT BARCLAYS, PT 279P

>>> Call
>> Stock
*ENI ADDED TO CITI FOCUS LIST EUROPE, TOTAL REMOVED

>>> Asian Update

Asian Market Update: China, Hong Kong PMIs slow further; Australia exports recover as trade deficit narrows


***Economic Data***
- (CN) CHINA APR CAIXIN PMI SERVICES: 51.8 V 52.2 PRIOR
- (HK) HONG KONG APR COMPOSITE PMI: 45.3 V 45.5 PRIOR; 14th straight contraction; 8-month low
- (AU) AUSTRALIA MAR TRADE BALANCE (A$): -2.2B V -2.9BE; 23rd straight month of deficit ; smallest deficit in a year
- (AU) AUSTRALIA MAR RETAIL SALES M/M: 0.4% (4-month high) V 0.3%E; Q1 CORE Q/Q: 0.5% V 0.7%E
- (AU) AUSTRALIA MAR HIA NEW HOME SALES M/M: +8.9% V -5.3% PRIOR; 6-year high
- (SG) SINGAPORE APR PMI: 49.4 V 52.0 PRIOR (lowest level since Nov 2012)
- (PH) PHILIPPINES APR CPI M/M: 0.2% V 0.3%E; Y/Y: 1.1% V 1.2%E
- (TW) TAIWAN APR CPI Y/Y: 1.9% V 1.6%E; WPI Y/Y: -4.2% V -4.2%E

***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 closed, S&P/ASX -0.1%, Kospi closed, Shanghai Composite -0.3%, Hang Seng -0.5%, Jun S&P500 +0.6% at 2,053

***Commodities/Fixed Income***
- June gold flat at $1,283/oz, June crude oil +1.5% at $44.72/brl, Jul copper flat at $2.18/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 0.6 tonnes to 825.5 tonnes; highest since Dec 2013
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5128 V 6.4943 PRIOR; weakest Yuan setting since Mar 28th
- (CN) PBOC to inject CNY130B in 7-day reverse repos

***Market Focal Points/FX***
- Asian equity markets are trading lower again as risk-off flows in US hours driven by disappointing ADP jobs data continued to sway sentiment in favor of the bears. Worries about the Q2 slowdown were further reflected in Atlanta Fed GDP estimate that was revised by a decimal to 1.7%, while US Treasuries were bid higher. China Caixin Services PMI also saw a downtick for April, tracking the similarly disappointing Manufacturing survey out earlier this week. Australia March retail and trade data topped expectations however, putting any further possibility of easing by the RBA into question. In FX majors, AUD/USD rose some 40pips above $0.7490 on release of those figures, NZD/USD was up nearly 30pips around $0.69, and USD/JPY was rangebound at 106.90-107.20. Yuan fix was set much weaker once again as China prepares to release its own trade figures over the weekend.

- China April Caixin Services PMI slowed to 51.8 V 52.2 prior, as Composite PMI retreated to 50.8 v 51.3 prior. Caixin said that despite the softer activity, there was a rise in new orders. Even more notably, service firms raised their staff numbers after last month's decline to address rising backlog. Input costs also continued to rise, though rate of change in inflation was only marginal. Markit economist said that despite the mixed results, govts need to "keep implementing moderate stimulus to prevent a hard landing of the economy." On that note, former PBoC advisor Yu Yongding echoed those remarks, calling for govt to implement more fiscal stimulus to avoid a hard landing. Elsewhere, Hong Kong PMI hit an 8-month low amid further job shedding, falls in purchasing activity and decline stocks of inputs.

- Latest set of retail and trade data out of Australia may justify RBA standing pat, even as expectations of further easing have ramped up since the surprise rate cut this week. Terms of trade were in deficit for the 23rd straight month, but that deficit was smallest in a year. Exports rose 4% after last month's 1% drop, as shipments to China hit a 4-month high. Exports of iron ore were also at a 5-month high, while gold shipments spiked up to a 5-year high. March retail sales hit a 4-month high, driven by strength in Clothing/footwear/accessories category. Rio Tinto held its annual shareholder meeting, affirming plans to reduce operating costs by $2B over next 2 years and forecasting FY16 dividend of no less than $1.10/shr. Rio Tinto CEO said he was encouraged by strength of Australian economy, as mining volumes are still increasing.

***Equities***
US equities / ADRs:
- SYNC: AT&T agrees to new deal with Synacor to manage web portal, Unwinding long-time alliance with Yahoo; +134% afterhours
- KHC: Reports Q1 $0.73 v $0.61e, R$6.57B v $6.54Be; +5.6% afterhours
- KND: Reports Q1 $0.35 v $0.21e, R$1.84B v $1.84Be; +3.4% afterhours
- CF Reports Q1 $0.40 v $0.51e, R$1.0B v $815Me; +2.8% afterhours
- TSLA: Reports Q1 -$0.57 v -$0.54e, R$1.60B v $1.59Be; Move forward target to achieve 500K unit production by 2 years to 2018; +2.7% afterhours
- CB: Reports Q1 $2.26 v $2.19e, net premiums written $5.48B v $3,59BB y/y; +1.9% afterhours
- WFM: Reports Q2 $0.44 v $0.41e, R$3.70B v $3.74Be; +1.2% afterhours
- RIG: Reports Q1 $0.69 v $0.26e, R$1.34B v $1.10Be; +0.9% afterhours
- TSO: Reports Q1 $1.19 adj v $1.04e, R$5.10B v $3.59Be; +0.3% afterhours
- ALL: Reports Q1 $0.84 v $0.75e, R$8.87B v $8.04Be; +0.1% afterhours
- FOXA: Reports Q3 $0.47 v $0.46e, R$7.23B v $7.18Be; -0.7% afterhours
- OME: Completes Previously Announced Strategic Review; Adds $40M to buyback plan (9.4% of market cap); -1.4% afterhours
- PRU: Reports Q1 $2.18 v $2.38e, R$11.3B v $11.8B y/y; -2.1% afterhours
- MET: Reports Q1 $1.20 v $1.39e, R$16.6B v $17.1Be; -2.1% afterhours
- CTL: Reports Q1 $0.71 v $0.68e, Op Rev $4.4B v $4.43Be; -4.7% afterhours
- FIT: Reports Q1 $0.10 v $0.04e, R$505.4M v $444Me; Guides Q2 $0.08-0.11 v $0.27e, -12.9% afterhours

Notable movers by sector:
- Consumer discretionary: SA SA International Holdings 178.HK +1.7% (profit warning); Super Retail Group SUL.AU +7.2% (guidance)
- Financials: China Vanke Co 2202.HK -1.8% (Apr result); National Australia Bank NAB.AU +2.7% (H1 result); Scentre Group SCG.AU -0.1% (Q1 result)
- Materials: Glencore Xstrata 805.HK -7.5% (Q1 result); OceanaGold Corp OGC.AU -2.5% (guidance); Rio Tinto RIO.AU -0.4% (reaffirms capex guidance, to cut additional op costs - AGM)