Reuters blog archive

from Breakingviews:

Malaysia throws airline investors a parachute

By Peter Thal Larsen

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

Malaysia has thrown shareholders in its troubled airline a parachute. The country’s state investment fund is offering 1.4 billion ringgit ($436 million) to take Malaysian Airline System private. The deal gives investors a price the company’s shares haven’t closed at since February, before the already-ailing carrier was struck by double disasters. Taxpayers and employees may be less fortunate.

Malaysia Airlines was in financial trouble even before Flight MH370 was lost over the Indian Ocean in March. The national carrier has racked up losses of more than 4 billion ringgit since 2010, while gross debt has trebled over the same period. The tragic shooting down of Flight MH17 over Ukraine in July only served to accelerate plans for what majority shareholder Khazanah describes as a “complete overhaul” of the business.

The sovereign wealth fund has promised to spell out its plans by the end of the month. However, it wants to remove Malaysia Airlines from the public markets before embarking on the restructuring. Hence its cash bid for the 30 percent of the business it does not already own. The deal needs approval from a majority of independent shareholders, but it’s hard to see them holding out. The offer is a 23 percent premium to the volume-weighted average over the past six months, and 29 percent above the company’s most recent book value.

from MacroScope:

Euro zone inflation to fall further?


Euro zone inflation is the big figure of the day. The consensus forecast is it for hold at a paltry 0.5 percent. Germany’s rate came in as predicted at 0.8 percent on Wednesday but Spain’s was well short at -0.3 percent. So there is clearly a risk that inflation for the currency bloc as a whole falls even further.

The Bundesbank has taken the unusual step of saying wage deals in Germany are too low and more hefty rises should be forthcoming, a sign of its concern about deflation. But the bar to printing money remains high and the European Central Bank certainly won’t act when it meets next week. It is still waiting to see what impact its June interest rate cuts and offer of more long-term cheap money to banks might have.

from Full Focus:

Crash of Flight MH17

Images from the crash site of Malaysia Airlines Boeing 777, downed by a missile over east Ukraine with 298 aboard.

from Breakingviews:

Malaysia Airlines plight points to riskier world

By Una Galani

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

Fatal air accidents almost never happen, fortunately for both passengers and investors in airlines. Yet Malaysia Airlines has been struck twice by tragedy in little over four months. The aviation industry may have its own set of challenges, but it is a reminder that even more robust businesses need to consider political risk carefully.

from Breakingviews:

Asia’s solid exterior hides internal weakness

By Andy Mukherjee 

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

Asian economies are becoming more resilient externally, but sputtering economic growth is weakening them from within.

from Jack Shafer:

The jumbo coverage of Malaysia flight MH370

When a big story breaks, my news digestion knows no satiety. Earthquake, assassination, invasion, bank run, political campaign, celebrity court case, sport scandal or a drunk stubs his toe on the Lower East Side -- I can handle anything the press swarm sends at me.

So unlike Fox News press reporter Howard Kurtz ("It’s too much with too few facts," he said last week of the saturation reporting by his former network, CNN, about Malaysia Airlines Flight MH370), I can handle any "over"-coverage the news machine chooses to throw my way. By handle, I usually mean avoid, but on a story like MH370, I desire the sort of coverage that could fill the Indian Ocean, which I did not know until last week had an average depth of 2.5 miles.

from Breakingviews:

Fed liquidity curbs will act as Asia’s detox plan

By Andy Mukherjee

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

The Federal Reserve is forcing Asia to kick its addiction to hot money. The prospect of higher U.S. interest rates had made the region’s dwindling trade surpluses look an increasingly dangerous habit. Though markets may be turbulent, pricier local money or cheaper currencies will improve the trade balance for most Asian countries.

from Global Investing:

Emerging markets funds shun Brazil, South Africa

Global emerging markets equity funds have cut average weightings to Brazil and South Africa for the fourth straight quarter, according to the latest allocations data from fund research firm Lipper.

You can see a full interactive graphic of the allocations data here or by clicking on the snapshot below.

from Breakingviews:

Malaysia poll offers only short-term relief

By Andy Mukherjee

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

Malaysia’s ruling coalition has narrowly survived a strong challenge to its 56-year-old rule. While the results of the country’s general election on May 5 came as a relief for investors, the poll showed a widening racial divide. That doesn’t portend well for the economy.

from Breakingviews:

Unsure voters could dim lure of Malaysian assets

By Andy Mukherjee

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

Malaysia’s upcoming general election looks set to be a close-run affair. The big risk for investors from the May 5 poll is that neither of the two competing coalitions - the ruling Barisan Nasional or the opposition Pakatan Rakyat - may be able to claim a decisive victory.