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from Breakingviews:

Noble China joint venture still faces market test

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By Una Galani

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

Noble Group’s joint venture with China still faces a test from market forces. The Singapore trader is selling 51 percent of its agricultural business to a consortium led by state-backed COFCO for around $1.5 billion. China’s desire to control its food supply should guarantee volumes for the joint venture. But it’s less clear that will translate into healthy margins.

The precise size of the COFCO’s investment depends on how the unit, which processes everything from grains to coffee, performs over the next nine months. The final price will be equivalent of 1.15 times its book value in 2014. The headline price implies a valuation of $2.94 billion for the business, which accounted for 16 percent of Noble’s revenue last year.

The structure allows Noble to reduce its exposure to an underperforming business while sharing in any recovery. The prospect of a deal had already fuelled a 25 percent rally in Noble’s shares in the past month, lifting its market value to around $6.5 billion. The proceeds could be reinvested in Noble’s better-performing energy and resources businesses. And because Noble will no longer have to include the venture’s $2.5 billion of net debt on its balance sheet, its headline borrowings will roughly halve, according to Eikon.

The joint venture is another step by COFCO towards building a global trading platform for agricultural commodities. China wants to reduce its reliance on the so-called Big Four “ABCD” traders – Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus. Last month, COFCO led the purchase of 51 percent of Dutch grain trader Nidera for $1.3 billion. But with few large independent targets left, scaling up to match its rivals in size and pricing power may be a challenge.

from Breakingviews:

OCBC’s Chinese ambition comes with hefty price tag

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By Peter Thal Larsen

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

Oversea-Chinese Banking Corp is paying a hefty price to expand in the People’s Republic. The Singaporean group is realising a long-held ambition by splashing out almost $5 billion for Hong Kong’s Wing Hang bank. But the deal looks expensive at a time when growth on the mainland is slowing and the U.S. Federal Reserve’s tapering is threatening to push up deposit costs.

from MacroScope:

Erdogan unfettered

Investors have spent months looking askance at Turkey’s corruption scandal and Prime Minister Tayyip Erdogan’s response to it – purging the police and judiciary of people he believes are acolytes of his enemy, U.S.-based cleric Fethullah Gulen. But it appears to have made little difference to his electorate.

Erdogan declared victory after Sunday’s local elections and told his enemies they would now pay the price. His AK Party was well ahead overall but the opposition Republican People's Party (CHP) appeared close to seizing the capital Ankara. 

from MacroScope:

ECB uncertainty

For European markets, Germany’s March inflation figure is likely to dominate today. It is forecast to hold at just 1.0 percent. The European Central Bank insists there is no threat of deflation in the currency area although the euro zone number has been in its “danger zone” below 1 percent for five months now.

Having appeared to set a rather high bar to policy action at its last meeting, this week the tone changed. Most notable was Bundesbank chief Jens Weidmann, normally a hardliner, who said printing money was not out of the question although he would prefer negative deposit rates as the means to tackle an overly strong euro.

from Breakingviews:

China index: growth cannot cloud judgment on smog

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By Katrina Hamlin

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

Smog in China is losing its silver lining. Bad emissions were once associated with economic growth, since they meant power plants and factories were active. Citizens broadly accepted the trade-off. But the relationship may be changing. Breakingviews’ latest Tea Leaf Index reading shows growth prospects are the worst since July 2009 – even though the sub-index for pollution is at its second highest average level monthly in six years.

from Breakingviews:

CITIC’s $41 bln mega-merger needs fancy footwork

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By Una Galani

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

CITIC’s $41 billion mega-merger will need some fancy footwork. The Chinese state-owned conglomerate wants to reverse most of its assets, which include stakes in banks, brokerages and resources, into Hong-Kong listed subsidiary CITIC Pacific. There’s something in it for both sides, but the deal will require creativity to ensure it looks good financially for both the Chinese state, and CITIC Pacific’s minority shareholders.

from The Great Debate:

Putin’s new ‘values pact’

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Now that Russia President Vladimir Putin has swallowed Crimea, the question becomes: What if the peninsula doesn’t satisfy his appetite for new Russian territory? What if the only thing that will satiate his hunger for power is the goulash known as eastern Ukraine? Or does he then move on to Moldova, and then on and on?

Indeed, while the world watched the protests in Kiev and the Sochi Olympics last month, the Moldovan territory of Gagauzia quietly held a referendum about whether or not to join Russia if the rest of the country opts for stronger ties to the European Union. Its citizens, just like those in Crimea, have argued that they would be economically better off on Putin’s planet, rather than as meager satellites in the Western solar system.

from MacroScope:

IMF verdict on Ukraine due

G7 leaders didn’t move the dial far last night, telling Russia it faced more damaging sanctions if it took any further action to destabilize Ukraine.
They will also shun Russia’s G8 summit in June and meet ”à sept” in Brussels, marking the first time since Moscow joined the group in 1998 that it will have been shut out of the annual summit.

There were some other interesting pointers. For one, the G7 agreed their energy ministers would work together to reduce dependence on Russian oil and gas. Could this lead to the United States exporting shale gas to Europe? A committee of U.S. lawmakers will hear testimony on Tuesday from those who favour loosening restrictions on gas exports.

from MacroScope:

G7 test of mettle

Another crunch week in the East-West standoff over Ukraine kicks off today with Barack Obama in the Netherlands for a meeting of more than 50 world leaders at a nuclear security summit in the Netherlands. There, he and his fellow G7 leaders will hold separate talks on Ukraine.

Obama upped the ante on Vladimir Putin last week with sanctions that hit some of his most powerful allies and strayed firmly into Russia’s banking and corporate world. The EU acted more cautiously but is looking at how financial and trade measures would work, getting ready in case Putin escalates the crisis further.

from Breakingviews:

Valuing Tencent’s chat app remains an act of faith

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

Putting a value on WeChat remains an act of faith. Internet giant Tencent has shed some light on its popular messaging and social media service. But sparse details on costs and regulatory risks make future growth and earnings potential hard to pin down. Valuations are still largely based on hope.

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