Reuters blog archive

from Breakingviews:

WH Group flop shows pitfalls of crowded IPOs

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

WH Group’s flop shows the pitfalls of overcrowded initial public offerings. The Chinese pork producer hired a record 29 banks but still failed to sell its $1.3 billion listing to investors. That undermines the standard wisdom that more advisers mean less risk for issuers. For banks, it’s a reminder that they can share embarrassment as well as sought-after league table credit.

The practice of hiring lots of advisers for an IPO has often been seen as a risk-free option for both companies and banks. Issuers in Asia have tended to use mandates to thank relationship banks. Companies also expect that having more banks on their side will help to boost demand from investors. Advisers, meanwhile, get a smaller slice of the fee pool. But getting their name on a big-ticket deal boosts their league table standings, which can help to justify their headcount.

Hiring more banks doesn’t guarantee good performance, though. Some of Hong Kong’s worst recent large IPOs had the most advisers. China’s Huishan Dairy, which hired 20 banks for its $1.3 billion offering last year, has lagged the benchmark Hang Seng index by 30 percent since. Galaxy Securities had 21 banks helping to flog its $1.1 billion listing, yet has trailed the market by 9 percent. By the same token, large syndicates aren’t necessarily an obstacle to success. Cinda Asset Management, which had 18 advisers, has been one of the best performers – its $2.5 billion offering has beaten the index by 14 percent so far.

from Breakingviews:

WH Group’s pulled pork IPO is least bad outcome

By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

This little piggy isn’t going to the market after all. WH Group has scrapped its Hong Kong listing after investors turned their noses up at its valuation. The Chinese pork producer had already more than halved the size of the fundraising to as little as $1.3 billion. A delay which gives the company formerly known as Shuanghui more time to integrate its U.S. subsidiary Smithfield is probably the least bad outcome.

from Breakingviews:

China index: Economy is creeping and crawling

By Katrina Hamlin

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Our index touched 90.7, slightly up from 89.5 a month earlier. But domestic activity still looks sluggish. Rail freight volumes are lower; truck sales are slower; steel production is stalling; and growth in air travel is unusually modest. Dwindling exports offer little support.

from Stories I’d like to see:

Regrouping for Detroit, GM’s bankruptcy evasion and Chinese corporate records

1. Kevyn Orr and a Detroit rebound?

Last Friday, I happened onto a C-Span broadcast of a speech to a national group of bankruptcy lawyers given by Kevyn Orr -- the emergency manager who Michigan Governor Rick Snyder appointed to take over Detroit’s finances and guide the fallen city through bankruptcy. Since I couldn’t stand watching the Yankees get slaughtered by the Los Angeles Angels of Anaheim, I stopped on the Orr speech for a minute. I stayed 45.

I had never seen Orr speak or paid much attention to Detroit’s troubles and his efforts to dig the city out from under. But if his talk -- riveting, funny, emotional, self-effacing, forceful, fact-filled, wholly convincing and seemingly off the cuff -- is any indication, both Orr and Detroit 2014 are big national stories.

from The Great Debate:

A three-part plan for Obama’s pivot to Asia

President Obama embarked this week on an eight-day trip to Japan, South Korea, Malaysia and the Philippines. He has tried to reassure the leaders of those countries that his administration is committed to carrying out its signature foreign policy initiative: the rebalance towards the Asia-Pacific.

Obama entered office with the belief that the U.S. had over-invested in the Middle East, particularly in Iraq and Afghanistan. In an October 2011 essay-cum-policy statement, then-Secretary of State Hillary Clinton explained that with the wars in Iraq and Afghanistan winding down, the U.S. should “pivot” to the Asia-Pacific. In January 2012, the Department of Defense formalized her recommendation, announcing that the U.S. would “of necessity rebalance” towards the region.

from Breakingviews:

China’s offshore bond boom has further to run

By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

China’s offshore bond boom has further to run. Companies like Tencent and CNOOC are increasingly turning to international capital markets for financing. Tighter credit on the mainland is a factor - but so is international expansion. Though there are bound to be setbacks, overseas bond issuance should carry on growing.

from Anatole Kaletsky:

Abe’s disturbing lack of focus

President Barack Obama’s trip to Asia this week has focused mostly on Japan’s territorial disputes with China. On this issue, Obama seems to be repeating the same mistakes he made in Ukraine.

By creating false expectations of U.S. support for the Japanese position, the president is encouraging Japan to escalate its belligerent rhetoric. That, in turn, makes Chinese military action to seize the disputed islands more likely. Everyone knows that there is no chance of the United States going to war with China to defend Japan’s claim to four uninhabited lumps of rock.

from MuniLand:

China takes another step toward municipal borrowing

Last January, when I made my predictions for 2014, I wrote:

The biggest muniland story this year will be the development of the Chinese municipal bond market. It’s not often that you get to watch a government launch a bond market. And China’s will be massive. From the South China Morning Post:

The [Chinese] mainland’s quest to solve its $3 trillion-and-growing public debt problem by starting a domestic municipal bond market hinges on the one thing officials are most afraid of: transparency.

from Breakingviews:

China’s state firm shakeup gets it only half right

By John Foley 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Private shareholders could bring discipline to China’s 150,000 or so state owned enterprises. There’s no question the companies, which generate a return on assets about half that of private sector rivals, need the help. Recent shake-ups at CITIC Group and Sinopec have set the ball rolling. But for real efficiency, SOEs need to pay market rates for debt as well as equity.

from Breakingviews:

WH Group’s chopped IPO still looks unappetising

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

WH Group’s chopped initial public offering still looks unappetising. The Chinese pork producer is slashing the size of its Hong Kong fundraising to as little as $1.3 billion, down from a previous target of at least $3 billion. But WH Group’s reluctance to accept a lower price means the IPO remains a tough sell.