TheChek News Flow

The rate at which UK property companies entered insolvency reached its highest point in six years in 2015 as rising property values prompted lenders to put “zombie” companies out of their misery and reclaim their assets.

Some 346 property companies went out of business in the second quarter of 2015, the most recent period for which figures are available — more than four times the equivalent figure in 2010, according to data compiled by the law firm EMW. In the year to April 2015, 1,307 property groups were wound down.

Saudi Arabia has executed 47 people for terrorism, including a leading Shia dissident cleric.

The execution on Saturday morning of Sheikh Nimr al-Nimr, a staunch opponent of the ruling Al Saudi family, has further stirred sectarian tensions in the Gulf and triggered threats from regional rival Iran.

The Iranian foreign ministry accused Saudi Arabia of supporting terrorist movements and extremists abroad while confronting domestic critics with oppression and execution. “The Saudi government will pay a high price for following these policies,” the Iranian foreign ministry said.

The executions took place in 12 locations across the kingdom on Saturday, a report on the official Saudi Press Agency said.

The statement said the accused, 45 Saudis, an Egyptian and a Chadian national, had been found guilt of carrying out and planning terrorist attacks on Saudis, foreigners, diplomats, security personnel and oil installations.

One activist said that 45 of those executed were al-Qaeda members and sympathisers, with the other two being Shia.

Many of the charges related to terrorist attacks that took place during the al-Qaeda insurgency that was put down a decade ago.

The charges laid out in the statement also seemed to refer to the claims previously made against Sheikh Nimr, namely “calling for the shooting of security forces by fire arms and throwing Molotov bombs.”

Shia activists have denied that Sheikh Nimr was involved in violent resistance, but many Saudis argue that his incitement against the government was tantamount to terrorism and often defend his death sentence.

The activist said the government probably executed Shia dissidents at the same time as al-Qaeda sympathisers to back its claim to be taking an even-handed approach in its crackdown down on terrorism. The Shia minority in the oil-rich eastern province has for years complained of discrimination.

The Saudi Press Agency report, citing the Koran, said: “The recompense of those who wage war against Allah and His Messenger and do mischief in the land is only that they shall be killed or crucified or their hands and their feet be cut off from opposite sides, or be exiled from the land.”

The mass execution is likely to revive international condemnation of the harsh judicial system of this western ally.

A further deterioration in bilateral relations between Saudi Arabia and Iran comes as proxy battles between the two rumble on through the Middle East.

Talks in Geneva last month to bring an end to the war in Yemen failed to find a resolution, condemning the country to further violence as a Saudi-led coalition tries to push back Iran-allied Houthi militias and reinstate the Riyadh-backed government of Abd Rabbu Mansour Hadi.

The Syrian civil war pits Iran-allied president, Bashar al-Assad, against rebels backed by Riyadh and other Gulf states.

The execution of Sheikh Nimr surprised observers who had assumed that the government would refrain from signing his death warrant for fear of stoking sectarian tensions in the eastern province and neighbouring Bahrain, where the Shia majority continue pro-democracy protests against the Sunni Al Khalifa royal family.

Shia Muslims marched through the eastern town of Qatif to protest Sheikh Nimr’s execution, according to reports. Demonstrations against the executions in a Shia village to the west of the capital Manama were also quelled by riot police on Saturday.

In Bahrain police fired tear gas at protesters. Demonstrators carrying pictures of the cleric, Nimr al-Nimr, faced security forces in a stand-off in the Shia Muslim village of Abu-Saiba, west of the capital Manama, Reuters reported.

It would appear the people of Switzerland have been listening to their military leaders. Having recently been warned by the Swiss army chief of growing social unrest, SwissInfo reports applications for gun permits in Switzerland increased by 20% between 2014 and 2015, according to a survey conducted in 12 cantons. But while the army proposes "arm yourselves," Swiss crime prevention officials warn against the false sense of security that guns bring.

Whereas in 2011 numerous people in Switzerland voluntarily gave up their firearms, today more and more people are purchasing guns.

Swiss army chief André Blattmann warned, "The threat of terror is rising, hybrid wars are being fought around the globe; the economic outlook is gloomy and the resulting migration flows of displaced persons and refugees have assumed unforeseen dimensions," adding that "Social unrest can not be ruled out."

He further recalled the situation around the two world wars in the last century and advised the people of Switzerland to arm themselves...

And, as SwissInfo reports, it appears they have...

Applications for gun permits in Switzerland increased by 20% between 2014 and 2015, according to a survey conducted in 12 cantons by Swiss public television, SRF.

The survey, published on Wednesday, showed that in the 12 (out of 26) cantons surveyed, the Swiss are increasingly interested in purchasing pistols, rifles and other firearms for private use.

The greatest increase – more than 70% – was measured in canton Vaud, with more than 4,200 applications in 2015, compared with 2,427 in 2014.

There is a general climate of uncertainty and an increased fear of intruders, said Pierre-Olivier Gaudard, head of crime prevention for canton Vaud.

But Martin Boess, director of Swiss crime prevention, warned against the false sense of security that guns bring.

“When there are more guns in circulation, there is a greater danger for society,” he said in an interview on the 10 vor 10 news programme. “That’s shown by experience in places like the United States. When there are more guns, there are more accidents with guns.”

In Switzerland, with more than 8 million inhabitants, there are about 2.5 million legal weapons, around half of which are used for Swiss military service.

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And while the Swiss go about their legal business of arming themselves, President Obama is preparing to unleash another weapon - the executive order - to enact gun-control legislation.

Facing stiff resistance to gun-control legislation in Congress, Mr. Obama has signaled that he plans to act on his own. The president has directed administration officials to explore any steps he could take on guns without lawmakers’ help, and he said in his weekly address that he would sit down with Ms. Lynch on Monday “to discuss our options.”

“I get too many letters from parents, and teachers, and kids to sit around and do nothing,” Mr. Obama said in the address, which was released Friday morning.

Gun-control advocates who are familiar with the White House’s plans say Mr. Obama could lay out multiple executive actions as soon as next week, and administration officials have confirmed that recommendations for the president are nearing completion.

White House spokesman Eric Schultz said Mr. Obama asked his team to “scrub existing legal authorities” and assess actions that could be taken administratively.

Free-dom indeed.

A chasm has opened between the private and public financing of fast-growing tech groups as more Silicon Valley companies shun initial public offerings, contributing to a sharp fall in global listings of all kinds.

Tech companies raised less than $10bn through IPOs in the US in 2015, according to Dealogic, compared with $41bn the year before, when the figure was boosted by the $25bn raised by Chinese ecommerce company Alibaba.

The dearth of IPOs has provoked consternation among venture capital investors in Silicon Valley, who have seen a hoped-for payday repeatedly deferred in recent years as companies such as Uber, Airbnb and Palantir have opted to stay private rather than follow earlier generations of successful start-ups to Wall Street.

“There’s some impatience around the fact that we need liquidity,” said Bill Maris, head of the venture capital arm at Alphabet, the holding company for Google. “Companies generally need to go public so there’s liquidity in the marketplace. I think we’ll move in that direction, because I don’t know how much further the pendulum can swing in the direction it’s already gone.”

With tech start-ups shunning Wall Street, the amount raised instead from venture capitalists in 2015 is expected to show its second-biggest year ever when official numbers are reported, topped only by the dotcom bubble year of 2000.

If the fourth quarter matches the year before, the amount of private investment would have exceeded $60bn, or more than six times as much as tech companies raised on Wall Street during the year — twice the differential that existed at the height of the dotcom boom.

The flood of money into so-called “unicorns”, or private start-ups valued at $1bn or more, made it unnecessary to seek a listing, said Lise Buyer, an IPO adviser in Silicon Valley. “In 2015, it was raining money on them, so why bother?”

Anthony Kontoleon, head of global syndicate in equity capital markets solutions at Credit Suisse, added: “Tech has been largely absent from the IPO market given the availability of private market alternatives.” He predicted that there would be “a make-up over the next 24 months as these companies continue to refine their business models and prepare for the public markets”.

Mr Maris said more IPOs were needed so funds such as his could report returns for their investors. He also echoed a view expressed by a growing number of VC investors in recent weeks that holding back from IPOs was shielding successful tech companies from the disciplines imposed by public markets on more mature companies and reducing the opportunities for their employees, many of whom held stock, to cash in.

The collapse in tech IPOs lay behind a broader decline in US IPOs, with companies tapping Wall Street for only $36bn during 2015, less than half the $96bn of the year before. Total global proceeds from new listings fell nearly 30 per cent from $264bn in 2014 to $194bn.

Signs in recent weeks that private investors have grown more wary could force more tech companies to consider IPOs next year, several VC experts said. VC investment “has definitely fallen pretty materially”, said Anand Sanwal, chief executive of CB Insights. Operational difficulties at some highly valued start-ups, including Dropbox, Evernote and Jawbone, have contributed to the change in mood, he added.

Stock market volatility, a factor behind the postponement of share sales by the grocer Albertsons and retailer Neiman Marcus in 2015, could also contribute to a shift in the balance between supply and demand in the IPO market. Analysts predict that companies will have to offer discounts to their publicly traded peers to get deals done, a trend that was already apparent in the final months of 2015.

“IPO buyers are back in the driver seat,” said Matthew Kennedy, an analyst at Renaissance Capital, which specialises in IPO research and investment.

Brevan Howard’s $20bn flagship fund is down for a second year in a row in a further blemish to the trading record of one of the largest hedge funds in Europe.

While Brevan Howard’s 0.8 per cent loss for 2015 is small compared with some of its rivals, it inflicts a symbolic wound to a hedge fund that until 2014 had proudly defended its history of having never lost money in a calendar year for its clients.

The loss comes as some of the world’s highest profile hedge fund managers have suffered brutal losses over the past 12 months and several large funds have chosen to close down altogether.

The net asset value of the BH Macro listed fund, a feeder to Brevan Howard’s flagship Master Fund, fell from $21.06 at the end of November to $20.45 up to the week of December 18, taking the fund’s loss to about 0.8 per cent for 2015.

Alan Howard, who co-founded the hedge fund with a group of Credit Suisse proprietary traders in 2003, had already issued an apology to his investors for a “disappointing” investment performance in 2013, and pledged to deliver “a more satisfactory outcome for 2014”.

However, the Brevan Howard Master Fund went on to lose 0.8 per cent that year.

Although the Master Fund, which is run by Mr Howard and a team of traders, returned 12 per cent in 2011, it generated just under 4 per cent in 2012 and 2.7 per cent in 2013 after fees, before falling to a loss in 2014.

The ongoing struggles of Brevan Howard to make money trading in financial markets comes as its biggest European rival BlueCrest decided to return all outside money to its investors to focus solely on trading the fortunes of its founders.

Brevan Howard and BlueCrest’s strong performance during the biggest bouts of market volatility in the global financial crisis won both hedge funds many new investors, with its total assets under management at each swelling to more than $50bn.

Many of these new investors were public pension funds looking for a way to hedge the rest of their portfolios against large sell-offs, as well as making returns that were not correlated to the wider bond and equity markets.

Following several years of mediocre performance, a number of high-profile clients have pulled out of both Brevan Howard and BlueCrest.

In 2014, the influential London Pension Fund Authority redeemed its entire investment from Brevan Howard while BlueCrest saw several consultants to public pension funds in the US and UK recommend their clients to redeem their investments.

Investors made withdrawals for the sixth consecutive week from mutual funds and exchange traded funds buying high-grade US corporate debt, shifting instead to cash after a challenging year for credit.

Funds investing in investment grade corporate bonds counted $1.7bn of outflows in the week to December 30, lifting withdrawals in the fourth quarter to more than $11bn, according to Lipper.

Investors instead piled into money market accounts — effectively sitting in cash — as they counted down the final days of 2015. Money market funds recorded $17bn of fresh capital in the latest week, following two weeks of outflows.

Treasury funds drew in $246m of inflows while junk bond mutual funds and ETFs staunched three weeks of multibillion-dollar outflows, counting $114m of new money. Overall, taxable bond funds were hit by $1.8bn in outflows.

The figures underscore investor resistance to adding risk at year-end after turbulence in both the investment grade and high-yield asset classes.

US corporate credit ratings have deteriorated this year as companies have levered up to fund a record wave of mergers and acquisitions, and finance share buybacks and dividends.

Investors have suffered losses of nearly 1 per cent on US credit as well as a 2.6 per cent decline on high-yield debt — bonds rated triple B minus or lower by one of the major rating agencies — according to Barclays Indices.

A number of fund closures earlier this month also rattled investor nerves, with portfolio managers warning that a dearth of liquidity had made it challenging to trade in and out of bonds.

Investors have attributed much of the recent weakness to volatility in commodities. Crude oil has tumbled by more than a third this year, extending a 48 per cent decline in 2014, while copper has fallen by a quarter.

Analysts with all three leading US rating agencies — Standard & Poor’s, Moody’s and Fitch — expect defaults to increase in 2016, as credit conditions tighten and energy and materials groups struggle with the drop in commodity prices.

“That is one of the other features nipping at the heels of smaller companies,” said Jack Ablin, chief investment officer of BMO Private Bank. “Here we are in the sixth or seventh year of this bull market and all of a sudden it is getting harder to finance yourself.”

Investors have recently pushed back on new deals, requiring companies tapping the junk bond market to tighten investor protections or offer steep discounts.

Investment grade bond yields, which move inversely to price, have climbed 56 basis points over the past 12 months, according to Barclays.

For speculative groups, yields have climbed even faster. Yields on junk bonds have jumped more than 200 basis points since the end of 2014, rising to 8.74 per cent, according to Barclays.

Airbus has won the first new customer in two years for its A380 superjumbo, giving the aircraft programme a new lease of life.

ANA Holdings of Japan has agreed to buy three of the world’s largest passenger jets, which retail at a list price of $428m each, although this is rarely the price paid. Just a year ago, Harald Wilhelm, Airbus finance director, suggested that the A380 programme — which cost more than $10bn and took a decade to develop — could be scrapped without new orders.

The deal rewards the European aerospace group after it backed ANA’s plan to turn round the bankrupt domestic rival, Skymark Airlines, last August.

Airbus would not comment. ANA insisted that no decision had yet been made. However, two people familiar with the situation confirmed that agreement had been reached to buy three superjumbos and the details were being finalised before a formal signature later this month. The story was first reported by Nikkei.

Airbus is also understood to be in discussions for the sale of up to 30 A380s with other potential customers. It is under pressure from the superjumbo’s biggest user, Emirates Airline, to relaunch the aircraft with a more fuel-efficient engine. However, the group is keen to secure more orders for the existing programme before deciding to invest more in an aircraft that is unlikely ever to recoup its development costs in full.

The news comes as Airbus is set to widen its lead in net orders over US rival Boeing for the third consecutive year. By the end of December Airbus had 1022 firm orders against 743 for its US rival.

Official figures, net of cancellations, will not be published for several days, but the trend is clear. Though Boeing is expected to lead on aircraft deliveries, the re-engined Airbus A320neo short-haul aircraft is strongly outselling the rival 737 Max single aisle. Europe’s aerospace champion now claims about 60 per cent of the booming market for short-haul jets, which accounts for about three-quarters of all aircraft sales by volume.

The widening gap in orders is putting pressure on Boeing to fight back, possibly by accelerating plans for a new midsize passenger jet, to fill the gap between its 737 short-haul workhorse — including its more fuel efficient Max version — and its long-range 787 Dreamliner.

“Boeing does not have a lot of choice,” said Nick Cunningham of broker Agency Partners. “Narrow bodies are 50 per cent of the total market in dollar terms and the A320neo has been outselling Boeing’s 737 Max by two to one over the past two years. That cannot be acceptable to Boeing.”

Boeing insists no decision is imminent. “There is no change to our development profile for the balance of the decade,” a Boeing spokesman told the Financial Times. But the language it uses when discussing the possible launch of such an aircraft has noticeably changed over the course of 2015.

After ruling out any new “moonshots” in 2014, Boeing top management is now talking about the potential for a “middle of the market” aircraft to enter service in 2022. To meet that target, Mr Cunningham said, Boeing would have to make a launch decision during 2016.

The launch of a new aircraft is a huge financial commitment for Boeing — and potentially for Airbus which might feel driven to respond. It also could have a depressing effect on orders for existing jets, which is likely to intensify the nervousness that investors are feeling as growth begins to slow after a six-year boom.

Boeing and Airbus are expected to report combined net orders of about 1765 for 2015, a sharp drop on 2014’s 2,888. But those figures still leave the companies with 10 years of production in their backlogs. Given forecasts for continued strong growth in passenger traffic and the need to replace ageing jets as well as expand capacity, many industry observers are reluctant to call the turn of the cycle just yet.

Robert Stallard, aerospace analyst at RBC Capital, said there was a question mark over the quality of the backlog. Airlines could begin to defer their commitments — one of the first signs that the good times could be coming to an end. “Emerging market carriers have been a particular focus, given the double whammy of economic issues and foreign exchange impacts,” he said. “So far there’s been nothing meaningful — but we are ‘on watch’ for this. Many investors share our view that aero cycles don’t last for ever.”