>>> Asian Update

Asian Market Update: China markets extend gains on more upbeat govt rhetoric; Australia PM pushes forward Budget to secure labor reform


***Economic Data***
- (NZ) NEW ZEALAND Q1 WESTPAC CONSUMER CONFIDENCE: 109.6 V 110.7 PRIOR
- (NZ) NEW ZEALAND FEB RETAIL CREDIT CARD SPENDING M/M: -0.4% v +1.9% PRIOR; Y/Y: 7.3% v 8.3% PRIOR
- (NZ) New Zealand Feb Net Migration: 6.1K v 6.1K prior
- (UK) UK MAR RIGHTMOVE HOUSE PRICES M/M: 1.3% V 2.9% PRIOR; Y/Y: 7.6% V 7.3% PRIOR

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 closed, S&P/ASX -0.5%, Kospi -0.3%, Shanghai Composite +1.9%, Hang Seng +0.3%, Jun S&P500 -0.2% at 2,034

***Commodities/Fixed Income***
- Apr gold flat at $1,253/oz, May crude oil -0.8% at $40.83/brl, May copper +0.2% at $2.29/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 11.9 tonnes to 819.0 tonnes; 4th straight increase; highest since Mar 2014
- SLV: iShares Silver Trust ETF daily holdings rise to 10,218 tonnes from 10,135 tonnes; highest since July 2015
- Saudi Aramco CEO: Expect oil prices to begin adjusting higher by 2016-end; Prices may not rise to 2013-14 levels - financial press
- (CN) PBOC SETS YUAN MID POINT AT 6.4824 V 6.4628 PRIOR
- (CN) PBOC to inject CNY130B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$500M in 2.75% 2035 Bonds; avg yield: 3.14%; bid-to-cover: 2.89x
- (NZ) Auckland said to aim for NZ$150M retail bond issue with as much as NZ$100M in oversubscription
- (BR) Brazil to offer up to 20K FX reverse swap contracts on Monday as rising speculation of impeachment proceedings against President Rousseff boost demand for BRL; First such auction since Mar 2013
- (US) Goldman Sachs: Weakness of USD will not last; The Fed was too dovish - financial press

***Market Focal Points/FX***
- Asian equity markets are mixed with most pronounced gains on the mainland. Investors are cheering more upbeat commentary from Commerce Minister Gao and Vice premier Zhang while shrugging off the warning from PBoC gov Zhou about rising debt levels. Shanghai Composite has hit a 2-month high above 3,000, even as oil and US equity futures point to a slightly lower open. Markets in Japan were closed for holiday. In FX, USD/JPY traded in a 40pip range above 111.20, AUD/USD in a 30pip range below $0.76, and NZD/USD in a 40pip range above 0.6750. With major macro risk events - ECB, BOJ, FOMC decisions - out of the way, traders will now look for hints on whether the dovish bias of the three will be justified.

- In China, Commerce Min Gao said March trade data are expected to show a significant recovery after soft Jan-Feb figures that "matched global trends". Vice Premier Zhang was also cautiously optimistic, stating that while there is downward pressure on the economy, it is largely stable with some improvement in the most recent data. On the flip side, PBoC Gov Zhou warned that corporate debt levels relative to GDP is becoming too high, while a state researcher Wang estimated 2016 GDP at the bottom of the target range of 6.5%, calling for a 3-year period of recovery after this year's bottom.

- Japan was closed, though the focus remained on the progress of the high-profile Hon Hai-Sharp deal. Over the weekend, one local press report indicated Hon Hai had reached a tentative agreement for a ¥300B credit line from Sharp's banks, though another report suggested that Hon Hai has already lowered its bidding price from initial plan of ¥489B due to potential risks of financial liabilities without disclosing the new amount. A notable Nikkei report commented on distortions in Japan's fixed income markets, with investors more concerned with BOJ appetite for considered bonds rather than their actual credit worthiness.

- Australia govt is in flux after PM Turnbull - despite recent commentary from govt officials to the contrary - pushed forward the Budget release by a week to May 3rd and also recalled Parliament for Apr 18th to consider legislation of key labor reform legislation including re-establishment of the Australian Building and Construction Commission and Registered Organisations Bill. While Australians were already expected to go to the polls later this year, if those bills do not pass, PM Turnbull said he would dissolve both houses of parliament and call an early election for July 2. On the corporate side, Virgin Australia was sharply higher after securing a A$425M credit facility from major shareholders.

***Equities***
US equities / ADRs:
- VAL: Sherwin-Williams to acquire Valspar for $113/shr in cash; $11.3B deal

Notable movers by sector:
- Consumer discretionary: Uni-President China 220.HK +5.4% (FY15 result); China Yongda Automoviles Services Holdings 3669.HK +4.6% (FY15 result)
- Consumer staples: Aeon Stores Hong Kong Co L984.HK -1.1% (FY15 result)
- Financials: Sinotex Investment & Development 600061.CN +10.0%, China Merchants Securities Co 600999.CN +8.6%, Everbright Securities 601788.CN +10.0% (China said to resume certain margin funding)
- Industrials: Sinopec Engineering Group Co 2386.HK +3.9% (FY15 result); Jiangling Motors Corp 000550.CN +1.5% (FY15 result); China Cosco Holdings Co 601919.CN +2.4% (contract with Vale); Qingdao Port International 6198.HK +3.9% (FY15 result); Virgin Australia VAH.AU +9.1% (new loan facility)
- Technology: East Money Information Co 300059.CN +7.0% (FY15 result); Hon Hai Precision Industries 2317.TW +0.2% (Hon Hai said to lower offer for Sharp)
- Materials: Fuyao Glass Industry Group Co 600660.CN +0.8% (FY15 result); Asia Cement China Holdings Corp 743.HK -0.6% (FY15 result)
- Healthcare: Shanghai Pharmaceuticals Holding Co 601607.CN +0.9% (FY15 result)

>>> Carrefour nominates Diniz to its board; investor plans to raise stake in ret

Carrefour nominates Diniz to its board; investor plans to raise stake in retailer 

Carrefour [EPA: CA], the French retailer, has nominated Abilio Diniz to its board, Folha de S. Paulo reported Saturday, citing a statement by Peninsula Participacoes, the investment vehicle of the Diniz family.

Diniz also advised French regulators that he plans to raise his stake, by an amount that wasn’t disclosed, in Carrefour, according to Folha.

Diniz reached a stake of 5.1% in the retailer in April 2015, the Portuguese-language noted. Diniz, the former chairman of Cia. Brasileira de Distribuicao (Bovespa: PCAR4), one of Brazil’s largest retailers and known as Pao de Acucar, has put about BRL 7bn (USD 1.9bn at current exchange rates) into Carrefour, according to Folha. The newspaper did not break out how much of the total sum is invested in the parent company and its Brazilian subsidiary.

Diniz was nominated to board by Georges Plassat, chairman and CEO of Carrefour, and approved by board members, O Globo reported Saturday, citing Peninsula for the information. The nomination will be submitted to a shareholders’ meeting for approval on 17 May, O Globo reported. The Portuguese-language daily also said that Diniz holds 5.1% of the parent company.

Diniz also has a stake of 12% in the Brazilian unit of Carrefour, Folha reported.

The French company said in its earning statement for 2015 that the sale of an additional stake in Carrefour Brazil to Peninsula Participacoes was a factor in reducing the company’s indebtedness last year. Carrefour also confirmed in the statement that Peninsula’s stake in Carrefour Brazil now stands at 12%

Link to article in Folha

Folha de Sao Paulo, O Globo, Company website

>>> Amadeus stake could be sold by AirFrance-KLM; Servair sale could yield EUR 5

Amadeus stake could be sold by AirFrance-KLM; Servair sale could yield EUR 500m 

Listed airline Air France KLM intends to sell various assets, possibly including its stake in reservations system company Amadeus to reduce its debt burden, Dutch-language De Telegraaf reported. The previously reported intended sale of catering and logistics subsidiary Servair could yield up to EUR 500m, the item noted, without citing sources for this claim.

Last year, the company already sold part of its stake in Amadeus, the report noted. The company could again sell part of the stake it now holds in Amadeus, which along with a sale of landing slots at London's Heathrow airport, could yield some EUR 250m, the item noted. The paper did not cite any source for this valuation.

Meanwhile, KLM's catering subsidiary Servair was already put up for sale in 2012, when analysts expected the airline could yield up to EUR 300m, the report noted. However, no deal materialised at that time.

In 2015, Servair recorded a turnover of some EUR 1bn. Its earnings were EUR 37m, the report noted. Whether a buyer would want to pay more than 10 times the company's earnings remains uncertain, the report added.

de Telegraaf

>>> What to look at this Week End - 19th & 20th of March 2016

Weekly Performance
Dow +2.26% S&P+1.35% Nasdasq +0.99% Russell +1.30% Brazil+2.37% Nikkei -1.26% Hang Seng +2.34% Shanghai +5.15% EuroStoxx +0.55% Dax +1.22% CAC -0.67% Ibex-0.43% MIB -1.98% FTSE +0.81% SMI -1.51%
YTD Performance
Dow +1.02% S&P+0.28% Nasdasq -4.23%% Russell -3.01% Brazil+17.22% Nikkei -12.13% Hang Seng -5.67%% Shanghai-16.50% EuroStoxx -6.36%% Dax -7.37% CAC -3.76% Ibex-5.17% MIB -13.11% FTSE -0.84% SMI -11.39%
This mid-March week was dominated by a string of monetary policy decisions, with the key focus falling squarely on the Federal Reserve. Risk on sentiment was rewarded when the Fed apparently blinked, delivering an even more dovish statement that expected. The Fed decision got some cover from poor retail sales revisions that erased what had been strong sales data in January. US Treasury rates were touching monthly highs heading into FOMC statement after February core inflation ran hotter than expected. The 2-year yield touched 1% for the first time since early Jan before a dovish FOMC statement and press conference sent short rates forcefully lower. The curve steepened pushing the 10-2 Treasury yield spread wider by roughly 5 basis points. For the week, the DJIA gained 1.8%, the S&P500 advanced 1.3%, and the Nasdaq added 1%.


Macro :
Bundesbank Wants Half of Gold Reserves Back by 2020, Funke Says
Ex-BP CEO Hayward Seeks Backers for Energy Fund: Sunday Times
Signs Are Flashing That Dollar Plunge Has Gone Too Far, Too Fast
FT : 86% of active equity funds underperform - http://on.ft.com/1pUp8cP

Keep an eye on :
- AIR FP : Airbus Group to Sell Defence Electronics to KKR for Eur 1.1b
- ALT GY : Altana does not perceive itself as takeover candidate; eyes acquisitions - Frankfurter Allgemeine Zeitung
- ARYN VX : Aryzta’s Killian Won’t Sell More Shares: Sunday Independent
- CS FP : Axa CEO Seen as Favorite to Become HSBC Chairman: Sunday Times
- BAYN GY : Monsanto Approaches Bayer Over $30b Purchase of Crop Unit: Rtrs http://reut.rs/1LwUC2G
- POP IM : Banco Popolare Is Now Willing to Meet ECB Requirement for Merger
- POP IM : Banco Popolare Doesn’t Rule Out Capital Hike for Merger
- DWNI GY : Deutsche Wohnen sees no attractive M&A options among listed rivals - Boersen-Zeitung
- EDF FP : EDF’s French nuclear plant faces years of further delay - FT
- ENI IM : Eni looks to close Versalis sale to SK Capital by end of year, according to ENI CEO, Pevious reports talk of 1.2bil recap for Versalis - Il Sole 24 Ore
- EVK GY : Evonik studies acquisitions of AkzoNobel's special chemicals division and Air Products' tech division - de Telegraaf
- HSBA LN : Axa CEO Seen as Favorite to Become HSBC Chairman: Sunday Times
- INW IM : Inwit bidders Cellnex Telecom and F2i could pay up to EUR 3bn for 100% - El Economista
- LSE LN : LSE Shareholders Said to Seek More Money in Exchange Takeover
- MC FP : TAG Heuer Wants to Sell 80,000 SmartWatches in 2016: NZZ
- NESN VX : Drought Impact on Colombian Coffee May Last Two Yrs, Group Says
- PC IM : Two Sovereign Funds in Talks W/ Camfin for Pirelli Stake: Sole
- RR/ LN : Rolls-Royce in Talks on U.K. Nuclear-Power Reactors: Telegraph
- RR/ LN : Rolls-Royce to Add 350 Jobs at Derby Engine Plant: FT
- SAF FP : Smiths in Talks to Buy Safran’s Morpho Detection Unit: S. Times
- SBRY LN : Sainsbury Has ‘Clear Vision’ for Combined Co., CEO Says: Call
- SCHA GY : Schaeffler CEO Seeks 12%-13% Operating Margin: Euro am Sonntag
- SN/ LN : Smiths in Talks to Buy Safran’s Morpho Detection Unit: S. Times
- HOT US : Paulson Says ‘Happy’ to See Increased Starwood Offer: Reuters
- HOT US : Starwood Signs Cuba Hotel Deal Ahead of Obama’s Visit: Reuters
- SUN SW : Ex-Lanxess CEO Heitmann Nominated for Sulzer Adminstrative Board
- UHR VX : Omega Is Not Shutting Door on Smartwatch Concept, CEO Tells SZ
- TIT IM : Telecom Italia CEO Patuano Expected to Leave Co., Corriere Says
- VALE US : Former Vale CEO Agnelli Dies in Sao Paulo Plane Crash: O Globo
- VOW3 GY : VW’s Weil Says He Has No Reason to Consider New Leadership: FAZ
- WTB LN : +3% on Friday on rumors of chinese interest - The Times
- WTB LN : Whitbread Faces Investor Call to Consider Breakup: S. Telegraph

FT : Renzi puts brakes on Italy taxi reform

Renzi puts brakes on Italy taxi reform

Matteo Renzi, the reformist prime minister who has vowed to drag Italy into the digital era, has put the brakes on a plan to liberalise the country’s car-hailing market amid pressure from taxi drivers.
Mr Renzi’s government had been planning to begin opening the taxi market as part of a broader competition law that targets other closed sectors, such as pharmacies and notaries. But ministers dropped the taxi measures last week after drivers threatened to strike.

The decision by Graziano Delrio, the transport minister, Maria Elena Boschi, the reforms minister, and Federica Gudi, the minister for economic development, triggered a strongly-worded rebuke from Uber, the US ride-hailing company. Its presence in Italy has so far been limited to about 2,000 vehicles in the high-end UberBlack category in just three cities: Rome, Milan, and Florence.
“We are deeply disappointed that the government has backed away from these reforms,” an Uber spokesman said. “Prime Minister Renzi needs to embrace the future — by supporting the innovation in transport that mobile phones have made possible — rather than cling to the past”.
Uber has often clashed with national governments — particularly in Europe — in its quest to take on rigid taxi licensing regimes and boost its business internationally.
But the criticism of Mr Renzi is particularly surprising given that he has cast himself as a champion of modernisation and technological innovation in Italy, who has succeeded in driving foreign investment into the eurozone’s third-largest economy, including in recent months from big US companies such as Apple, Cisco and General Electric.
In addition, the Italian prime minister had once seemed enthusiastic about allowing Uber to compete with taxis on Italian streets. “Uber is a marvellous service. We will deal with it next week,” Mr Renzi said in May 2014, shortly after his rise to power.
More than two years later, however, nothing changed — whereas in other areas, such as labour, banking and political reforms, Mr Renzi has aggressively challenged powerful opponents, such as the trade unions, and prevailed.
“This action by the government is really discouraging,” says Carlo Alberto Carnevale-Maffe’, a professor of strategic management at Milan’s Bocconi University. “The promises of liberalisation and competition are fading away,” he warned.
Italian officials say they are still committed to allowing companies like Uber to operate extensively in Italy, but have merely changed their approach in order to make it more politically palatable.
In fact, although specific liberalising provisions were ditched — including the elimination of an arcane and little enforced requirement for all non-taxi drivers to return to their garage after each service — the bill still calls for broader mobility reforms that could benefit Uber. Among them are respect for the principle of competition, the need for better service, the technological evolution in the sector, and a better matching of supply and demand. So, while Uber might have to wait a bit longer — probably more than six months from now — it is still on the agenda, one Italian official said.

For Uber, however, replacing specific previsions with the promise of a broad reform in the future has been taken as an excuse for delay. “The [competition law] was a good opportunity to modernise the regulatory framework around mobility, for the benefit of everyone in Italy; it’s a missed opportunity,” Uber said.
There may never be a good time to take on the taxi industry in Italy — a lesson Romano Prodi, the former centre-left prime minister, learnt in 2006 when he abandoned a plan to liberalise licences after wildcat strikes by drivers sowed chaos.
Critics say Mr Renzi was initially wary of stoking taxi driver anger for fear that it might tarnish Milan’s 2015 Expo, and this year’s Jubilee Year of Mercy in Rome, called by Pope Francis. Looking ahead, taxi driver protests are the last thing Mr Renzi’s own ruling Democratic party’s leaders want ahead of tough municipal elections to be held in June in the country’s largest cities, including Rome, Milan and Naples.

FT : EDF’s French nuclear plant faces years of further delay

EDF’s French nuclear plant faces years of further delay

EDF’s new nuclear power station in France faces years of further delays if tests confirm that the steel used in its reactor is flawed, the country’s atomic watchdog has warned.
It is one of the clearest signals to date of the scale of the setback faced by the French utility. The flagship plant at Flamanville in Normandy has already been subject to years of delays and cost overruns, which have made it difficult for EDF to fund the identically designed £18bn reactor at Hinkley Point in the UK — a key element in Britain’s energy strategy.

Initially, Flamanville was expected to cost €3.3bn and start operations in 2012 — it is now planned to start in 2018 at a cost of €10.5bn.
But Julien Collet, the deputy director of France’s Nuclear Safety Authority, has said that it could be delayed further by several years, depending on the results of tests started last year and due to end this summer on the steel being used in the reactor core.
If the steel fails the tests, regulators could order EDF to rip out and replace the top and bottom of the reactor vessel. Mr Collet told the Financial Times: “It takes a lot of time to build new components like this — we’re talking years.”
The difficulties EDF is having with the steel at Flamanville have been caused by problems with the process of cooling and cutting a 450-tonne ingot of steel, which created an area the size of a dinner plate that was slightly more brittle than it should have been.
Areva, the French nuclear company in whose reactor business EDF is due to take a controlling stake, is working with regulators to test an identical piece to determine if it could lead to weakness in the reactor vessel.
The problem was discovered in late 2014 but EDF opted to push ahead with construction, potentially making it much more difficult to replace the faulty steel if needed.
Company insiders say they are confident it will pass the test. This week EDF will announce the completion of its primary coolant circuit — the first of three milestones before the project is finished.
Mr Collet warned that failing the steel tests would be problematic for the project. EDF did not comment.
The concerns over the steel used in the Flamanville plant are only the latest in a string of misfortunes at that project and another in Finland, both of which use Areva’s European Pressurised Reactor, or EPR, model.
These delays have caused difficulties for EDF’s contentious new project at Hinkley Point in Somerset, which was originally planned for 2017 but is now set to be built by 2025.
The plant is integral to the UK’s future energy supplies, and will provide 7 per cent of the country’s electricity once operational. It is part of a broader plan to build 16 gigawatts of nuclear capacity by 2030.

But having agreed to fund 66.5 per cent of the project last year, EDF has delayed giving it final approval, with some at the top of the company arguing more investors should be brought in first.
Finding outside investment has been difficult because of the problems being experienced with other EPRs in France and Finland, according to senior people within the company.
Earlier this month Thomas Piquemal quit as EDF’s chief financial officer, arguing the project could threaten the company’s entire future.
EDF was thrown a lifeline last week, however, when Emmanuel Macron, the French economy minister said his government would recapitalise the company if necessary.
But executives will come under scrutiny on Wednesday when they are grilled in Westminster about Hinkley Point by MPs on the cross-party energy select committee.

FT : Crispin Odey loses 20% for second time in a year

Crispin Odey loses 20% for second time in a year

To lose a fifth your client’s money in one month may be regarded as misfortune. To do it twice in 12 months could start to look like carelessness. Crispin Odey, the outspoken London hedge fund manager, made a 22 per cent loss in his €1bn Odey European fund in the first two weeks of March as a number of big bets went against him.
The loss follows Mr Odey, a stock picking specialist, having lost 19 per cent last April speculating on the value of the Australian dollar. That blow resulted in Odey European losing 12.8 per cent for clients in 2015 and being one of the worst-performing large hedge funds in the world that year.

Mr Odey’s second large monthly loss in less than a year has been driven by several large macro bets, driven by a deeply bearish view on the Chinese economy and emerging markets, that have turned against him. Odey European is now down by 25.5 per cent so far for 2016.
According to recent fund documentation the Odey European fund has put 25 per cent of its total exposure into betting that the value of the Japanese 10-year government bond will fall. Over March the yield on 10-year Japanese government debt — which moves inversely to their price — dropped to the lowest level on record, meaning Mr Odey’s trade is likely to have suffered large losses.
A further fifth of the fund’s exposure has been put into Australian government bonds, another trade likely to have caused losses over this month as the Australian 10-year yield rose, meaning the value of the bonds dropped.
The losses suffered by Mr Odey’s European fund have been heightened by a number of his largest bets against specific companies share prices turning sour since the start of the year.
According to data from UK regulatory data Odey Asset Management has sold short 6 per cent of the emerging market-focused fund manager Ashmore, whose shares have surged 25 per cent in March. Shares in the miner Anglo American, another large Odey short, have more than doubled since the middle of January.
A more successful trade for Mr Odey has been betting almost a third of the value of the fund on gold rising, with spot gold having gained 18 per cent so far this year.
In a note to investors Mr Odey wrote how “It is getting interesting”, going on to predict a recession in China. “What China needs given the overinvestment in non-productive assets estimated at $1.7tn a year for several years, is a deep recession, the writing off of several trillion dollars of debt and the refinancing of the banking system. You cannot do all that without interest rates at almost zero and a weak exchange rate.”

(BFW) Carmignac Gestion European Equity Head Resigns: FT


FT : Equity chief steps down at Carmignac

The head of European equities at Carmignac Gestion, whose personal investments were the subject of an internal probe, has resigned from the €52bn French asset manager.
Muhammed Yesilhark, who joined Carmignac in London in January 2014, resigned from Carmignac “for personal reasons”, according to the firm. His last day was on Friday. Mr Yesilhark declined to comment.

Mr Yesilhark was among a team of four that joined Carmignac in January 2014 following the closure of SAC Capital Advisors hedge fund in London, part of Carmignac’s expansion plans in the UK.
Personal investments made by Mr Yesilhark and his colleague Malte Heininger were the subject of an investigation at Carmignac last year.
When Mr Yesilhark bought a position in oil and gas company Sequa Petroleum in September 2014, the move was questioned internally. At the time, the oil and gas company’s only asset was part-ownership in a Kazakh exploration licence. It had made a loss of €4.2m in 2013 and the stock, listed on the lightly regulated Euronext Marché Libre in Paris, was thinly traded. Sequa is a start-up company backed by German entrepreneur Lars Windhorst and his investment firm, Sapinda.
Within weeks of buying Sequa, Carmignac reversed the trade and sold the stake back to Mr Windhorst. It later emerged that on the same date Carmignac acquired the position in Sequa, Mr Yesilhark and Mr Heininger had invested with their personal accounts in a separate deal promoted by Sapinda and its related brokerage, Anoa Capital.
The deal — a pre-IPO convertible bond called Cloud Hotel Investments, a German real estate fund — had a clear upside: the fund managers were able to buy at a discount and sell once it listed. Mr Windhorst said last year that the investment was a “good deal”, but the pair did not receive preferential treatment.
At the time, Carmignac said it “deals with every situation in a way that is fully compliant with applicable regulations and rules of ethics”.
Mr Yesilhark ran two funds at Carmignac, both of which have lost money over the past year. Carmignac Grande Europe, a long-only European equities fund, lost 12.93 per cent in the past 12 months. Meanwhile, Carmignac Euro-Patrimoine, a European hedge fund, dropped 10.72 per cent in the same period and is in the fourth quartile of performers, according to Morningstar
Carmignac is looking for a replacement for Mr Yesilhark, whose portfolio management responsibilities have been assumed by colleagues Mr Heininger and Huseyin Yasar, another portfolio manager.