Reuters : China stocks surge on state firm merger hopes

--> FXI +1.5%...SHI +17.1%, PTR +5.0%, SNP +5.8%

(Reuters) - China stocks jumped to fresh seven-year highs on Monday, led by heavyweights such as China Petroleum & Chemical Corp and PetroChina Co Ltd on expectations that Beijing will accelerate mergers among state-owned enterprises (SOEs).

China will likely cut the number of its central government-owned conglomerates to 40 through massive mergers, as Beijing looks to overhaul the vast underperforming state sector, state media reported on Monday.

Currently, there are 112 SOEs controlled by the central government.

The consolidation hopes outweighed investor concerns over the accelerated pace of initial public offerings (IPOs) and data showing weak earnings for industrial firms amid a slowing economy.

Profits earned by Chinese industrial firms fell 0.4 percent in March from a year earlier, and were down 2.7 percent in the Jan-March quarter, official data showed on Monday.

"We don't see a slowdown in money inflows, so more liquidity will likely push stock indexes higher," wrote Sun Jianbo, strategist of Galaxy Securities Co. "Stepped-up IPO approvals won't change the market's upward trend."

The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.2 percent to 4,807.59 points while the Shanghai Composite Index ended up 3.0 percent at 4,527.40 points.

Oil giants China Petroleum & Chemical and PetroChina jumped by their 10 percent limit in Shanghai on merger expectations.

Bets on consolidation also pushed shares of China Shipbuilding, CSSC Holdings Ltd and Guangzhou Shipyard International Co Ltd up over 8 percent.

The CSI300 Real Estate Index rose over 2 percent, amid signs that authorities were exhorting banks to do more to support the cooling property market, one of the key risks to the economy.

Loans to Chinese property developers surged again in the first quarter despite the country's housing downturn, official data showed on Friday

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: SILC -5%, DB -4.4%, MRVL -4.2%, SOHU -3.8%, MNDO -2.3%, IBN -1.6%

M&A news: AMAT -6% (Applied Materials and Tokyo Electron (TOELY) agree to terminate business combination agreement; announces $3 bln share repurchase authorization), BP -1% (UK Government has indicated that it would not approve any acquisition of BP, according to FT)

Other news: CLDN -74.5% (reports negative results for CUPID2 trial of MYDICAR in advanced heart failure; investigational gene therapy fails to meet primary and secondary endpoints), AKRX -12.4% (announces it will restate various previously issued financial statements due to errors identified during the first quarter 2015 financial review process; affirms its 2015 EPS guidance),RMGN -10.6% (announces the appointment of Jana Bell as CFO), CO -5.8% (announces receipt of 'going private' proposal from Golden Meditech Holdings for $6.40/share in cash), ATRS -4.4% (regains U.S. marketing rights to OTREXUP for psoriasis indication and announces termination of leo pharma marketing agreement), CWST -1.1% (postponed the date of 2015 Annual Meeting of Stockholders, previously scheduled to be held on July 7, 2015, to a date to be determined), NOK -0.8% (reaffirms it currently has no plans to manufacture or sell consumer handsets)

Analyst comments: DDD -2.5% (downgraded to Underweight from Neutral at Piper Jaffray; downgraded to Sell from Neutral at UBS), SDRL -1.7% (downgraded to Sell from Neutral at Citigroup; downgraded to Underperform from Market Perform at Wells Fargo), EV -1.6% (downgraded to Sell from Neutral at Citigroup), SSYS -1.3% (downgraded to Hold from Buy at Canaccord Genuity),OHI -1% (downgraded to Underperform from Neutral at BofA/Merrill), PRGO -0.9% (downgraded to Neutral from Buy at UBS; downgraded to Neutral at B. Riley & Co), TWTR -0.6% (downgraded to Neutral from Buy at Sun Trust Rbsn Humphrey)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: INCR +6.8%, BPOP +4.3%, LH +2.8%, QSR +1%, INGN +0.9%, CYOU +0.6%

M&A news: IGTE +3.4% (to be acquired by Capgemini (CGEMY) for $48 per share), PWRD +3.3% (enters into definitive agreement for going private transaction),HSBC +2.9% (SundayTimes details news that HSBC (HSBC) may consider EUR 20 bln spinoff of Britain retail unit), CELG +1% (to acquire Quanticel Pharma for an upfront payment of $100 mln in cash plus contingent payments; sees deal neutral to adj. FY15 earnings)

Other news: SYMX +66.7% (Paulson & Co discloses 11.7% passive stake in 13G filing), CANF +23% (reports positive results from further analysis of Phase II/III Psoriasis trial; Data suggest CF101 as potential first-line systemic therapy for patients with moderate-severe psoriasis), NBG +5.7% (ongoing volatility on Greece default), LXU +4.1% (LSB Industries and Starboard Value reach agreement regarding corporate governance and board composition), CBLI +3.8% (announces the award of a 3-year, $1.2 mln Breast Cancer Research Program Award to Roswell Park from the Department of Defense Congressionally Directed Medical Research Program for research into the immunotherapy of metastatic breast cancer), ZIOP +3.1% ( Initiation of Phase 1b/2 Study of Ad-RTS-hIL-12 Gene Therapy), TSL +2.5% (signs strategic cooperation agreement to develop up to 300 MW of distributed generation solar power and related projects in Hefei, Anhui Province), AXTA +2.2% (signed agreement with Rheinmetall MAN Military Vehicles Australia to provide coating products for over 2,500 Australian military logistic vehicles), MACK +2.2% (Merrimack Pharma and Baxter BioScience announce completion of new drug application submission to U.S. FDA for MM-398 as a treatment for post-gemcitabine metastatic pancreatic cancer), GWPH +2.1% (announces that the USPTO has issued a Notice of Allowance for a patent application which covers the use of cannabidivarin for treating epilepsy; also TechCrunch discusses upcoming changes to marijuana industry), ACHN +2% (presents detailed clinical results on ACH-3102 and ACH-3422 at the International Liver Congress), NVO +1.9% (among EMA recommendations on extensions of therapeutic indication), ASML +1.9% (cont strength), CPRX +1.6% (slight rebound following last weeks decline), AAPL +1.6% (report earnings later today, positive view at Barrons), PHG +1.1% (set to report earnings tonight), RCL +1% (cont strength)

Analyst comments: TRUE +5% (upgraded to Buy from Neutral at Goldman), NBR +3.7% (upgraded to Buy from Neutral at Goldman), YPF +2.8% (upgraded to Overweight from Neutral at JP Morgan), PTEN +2.1% (upgraded to Buy from Neutral at Goldman), JD +2.1% (initiated with a Overweight at JP Morgan), NEM +1.5% (upgraded to Outperform from Neutral at Credit Suisse), DIS+1.1% (upgraded to Buy from Neutral at Guggenheim
)

FT : US banks push for delay in reporting corporate bond trades


US banks and asset managers are pushing for a delay in reporting big corporate bond trades as a way of avoiding a possible liquidity crisis, potentially setting up a battle with regulators keen to preserve transparency in the traditionally murky market.
US corporate bond transactions have to be reported within 15 minutes to the Financial Industry Regulatory Authority’s Trade Reporting and Compliance Engine, first introduced in 2002 to increase price transparency in the clubby world of debt trading.

Big investment banks have long chafed against the rule, arguing that Trace in fact makes it trickier to trade corporate bonds — especially big blocks of debt — as rivals quickly know when a large transaction takes place, and can rush to take advantage of such deals.
Banks are now being joined by some bigger asset managers, which say that even a small delay in reporting would improve the sharp downturn in bond market liquidity — a phenomenon that is causing alarm across Wall Street and among regulators.
“We are very supportive of a delay in reporting on large blocks,” said Richard Prager, head of trading at BlackRock, the world’s biggest money manager. “It’s the simplest and most elegant way of solving some of the liquidity challenge, with very little effort.”
Any delay in reporting bond trade prices to Trace would go against the post-financial crisis trend towards greater transparency and stricter regulation, and the fact that the subject is even being broached underscores just how worried the bond industry is about tough trading conditions.
“The common view is that transparency is always a good thing, but even a one-day delay would be immensely helpful,” the head of US corporate bond trading at one big bank said.
Lee Olesky, the chief executive of electronic bond trading platform Tradeweb, agrees that a slight delay in Trace reporting would help ease big transactions in illiquid markets. “We’re huge fans of price transparency, but if something doesn’t trade frequently, delayed reporting for larger-size trades could positively influence liquidity,” he said.
In a report on the investment banking industry released last month, Morgan Stanley and Oliver Wyman also aired the idea of delaying Trace reporting as a way of improving trading conditions.

“Immediate post-trade transparency requirements discourage large order transactions, as buyers that are uncertain of ultimate size become concerned about being run over,” the report said. A delay in reporting big bond trades “may give brokers the incentive to take reasonable risk to facilitate client flow”.
Mr Prager said the financial industry was still in discussions on how best to present its case for a delay, but Finra was likely to resist given the impact it would have on transparency in one of the already more opaque corners of markets.
A spokesman for the body said: “Finra is always willing to participate in a dialogue with market participants regarding the effect of transparency on market liquidity. We welcome industry feedback and take these discussions very seriously.”

Telegraph : If its Astra bid was crazy, is Pfizer plotting something even more b

If its Astra bid was crazy, is Pfizer plotting something even more bonkers?

GlaxoSmithKline's vulnerability could make it a ripe takeover target for Pfizer

A year ago tomorrow, American pharmaceuticals giant Pfizer stunned corporate Britain with an audacious blockbuster bid for AstraZeneca. Its opportunistic approach was seen as controversial for many reasons, though not necessarily correctly on every count.


The initial shock came from the sheer size of AstraZeneca, which was, and still is, among the 10 largest companies on the London stock exchange, and with 50,000 staff globally, one of the country’s biggest employers.

Scale alone made most people understandably assume that AstraZeneca was virtually bid-proof.

Pfizer proved it wasn’t, announcing a £55 a share, unsolicited offer valuing the company at £69bn. If the Americans’ approach had been successful, it would have been the largest ever foreign takeover of a British company.


However, it proved not to be, with Pfizer, a corporate acquisition machine that had undertaken a series of mammoth deals over the previous decade and a half, getting its tactics badly wrong from the outset.

First, the Americans moved aggressively, launching a public bid without the knowledge of AstraZeneca’s board. Having been knocked back with an earlier approach at the start of the year, they decided to go straight to shareholders.

The move backfired, as did Pfizer’s failure to sound out the Government beforehand, an oversight that seemed extremely naive. In a situation that quickly became politically charged, Pfizer needed to be seen as a benign force, not hostile and reckless.

The Americans also completely failed to play down concerns based around potential job losses, and fears that their bid was largely driven by the huge tax savings Pfizer would reap from shifting its domicile to the UK through a so-called tax inversion scheme.

This totally played into the hands of AstraZeneca and its French chief executive, Pascal Soriot, who was allowed to get away with silly, emotive comments about how a takeover would be a huge distraction and cost lives.

Two months later, Pfizer’s attempt fell apart after four offers, and the company, best known for Viagra, was sent limping back to its New York headquarters.

As one senior banker who advised on the deal recently said to me: “The more I think about it, the more I think they were totally crazy.”
It’s an assessment that most in the City seem to share. So how crazy would it be, then, if just one year later, Pfizer were to return to these shores with fresh takeover ambitions, only this time for an even bigger British company?

I’m speaking about GlaxoSmithKline, a company much more important to Britain than AstraZeneca and therefore likely to evoke even greater protectionism against an unwanted predator, particularly Pfizer.

Glaxo is not only much bigger than AstraZeneca – both globally with 115,000 employees around the world, and in the UK, where it has 13,000 staff compared to Astra’s 7,000 – but its roots are far more “British” than its smaller rival, which had strong historical ties to Sweden and a large workforce there.

Most City figures will dismiss the idea of Pfizer swooping on Glaxo as bonkers, but there are a number of reasons why it should not be dismissed out of hand.

First, Pfizer is still desperate to do a big deal. The company has tens of billions of pounds sitting dormant in overseas subsidiaries, cash that it cannot repatriate to America without being hit by a colossal tax bill.

In addition, it needs access to a bigger pipeline of new medicines. Patents on many of its top-selling drugs are expiring, including Viagra — leaving the products open to competition from generic rivals.

Second, Glaxo, despite its market cap, looks vulnerable to a bid. Although, at £75bn, it is safely out of the reach of most in the pharma industry, it is less than half the size of Pfizer, Roche and Novarti. Although a stretch, such beasts could still conceivably swallow Glaxo.

One consequence of Pfizer’s bid for Astra, and a string of other bumper takeovers both before and since, is that suddenly almost any deal looks plausible.
Glaxo is weak for other reasons. A big bribery scandal in China in 2013 was a serious blow to long-standing chief executive Sir Andrew Witty, who until then was seen as one of the foremost bosses in the FTSE 100. He has since suffered a further dent to his reputation from a profits warning last summer, credit downgrades, and signs that some of the company’s top drugs were coming under serious pricing pressures. The market appears concerned – in the past 12 months, Glaxo’s share price has slipped 7pc.

Pfizer made itself public enemy number one last year. Coming back for Glaxo would be staggeringly brave. And if Britain’s largest pharmaceuticals manufacturer received an approach from another suitor, it would surely still be quickly repelled with a wave of misplaced hysterical nationalism and possibly even government intervention.

Right now, that might seem fanciful.However, there were plenty of top City sources last year who were similarly dismissive of suggestions AstraZeneca could become a target. Since then, cement-makers LaFarge and Holcim have agreed a €40bn merger, Heinz has bought Kraft for $55bn and Shell has launched a £47bn bid for BG.

The reality is that boardrooms all over the world, left nerve-racked by the financial crisis, have finally regained their animal spirits, and mega-deals are well and truly back on the agenda.

Scourges still to score

This week should see one of the most fierce and acrimonious dust-ups the City has seen in a long time brought to an end when shareholders of Alliance Trust vote on a series of proposals from Elliott, the American hedge fund.

The battle is too close to call, but if Elliott wins it will be a big moment for activist investors of its ilk who were hailed as the scourge of boardrooms of sleepy, underperforming UK companies but have scored few victories here.

Campaigns – including those waged by Sandell against First Group, Sherbourne on Electra, and Cevian’s at RSA – have so far failed to lead to any notable shake-up. A real result is long overdue if these self-styled corporate crusaders are to live up to their billing.

(Betaville) Marlow cooks up another massive drugs deal

Marlow cooks up another massive drugs deal

Ben Marlow's comment column in today's The Daily Telegraph caught my eye this morning. Not only is it a well written piece of prose but it also contains a story I myself had been chasing for the last month or so.

Ben's comment column - click on the link http://www.telegraph.co.uk/finance/11564744/If-its-Astra-bid-was-crazy-is-Pfizer-plotting-something-even-more-bonkers.html - appears to suggest US pharmaceutical giant Pfizer is plotting a multi-billion bid for GlaxoSmithKline.

Now, I had been hearing similar rumours over the last few weeks about GlaxoSmithKline but have little to back up the speculation, so decided against publishing anything.

Whilst the gossip I had picked up suggested a corporate from the US was studying GlaxoSmithKline, I had also heard that there was interest in the FTSE 100 giant from the European continent.

Clearly, Ben reckons there is something in it, so has written an incisive column on the prospects of a takeover bid for GlaxoSmithKline from Pfizer.

Given Marlow's got form in breaking massive drug deals - last year whilst working at The Sunday Times he got the scoop of 2014 with his exclusive story about Pfizer weighing a £65 billion takeover bid for AstraZeneca - I wouldn't dismiss his column as just standard market "speculation"...