John's Feed
Dec 10, 2014
via Breakingviews

China on the horns of a volatility dilemma

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By John Foley

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

China’s gyrating stock markets are a reminder that movement matters. Volatility is increasing in the People’s Republic, and fighting it is a losing battle.

Dec 8, 2014

Breakingviews: Wanda property IPO trades price for location

By John Foley

BEIJING (Reuters Breakingviews) – A prime location is worth
making sacrifices for. That may be why Dalian Wanda Commercial
Property is accepting a modest valuation on its initial public
offering in Hong Kong. At a potential market capitalization of
$25 billion, equivalent to 8.7 times forecast earnings for 2015,
the price reflects well-founded worries about China’s real
estate market, and the company is raising a third less than it
originally planned. The advantages of having an offshore pied a
terre make it a reasonable compromise.

Wanda sells itself on having branded retail and office
“plazas” in 109 cities around the country. As China’s housing
market slumps, that appeals to investors in two ways. First, a
square metre of retail space sells for three times the
equivalent square metre of housing, and with gross margins twice
as high. Second, Wanda can help populate its malls with the
cinemas, hotels and karaoke halls owned by its parent company,
reducing the chance of them sitting vacant.

Dec 4, 2014
via Breakingviews

China stocks take turn on monetary merry-go-round

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By John Foley 

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

What’s in a Chinese share price? Text books say it should be a function of risk-free rates, equity risk premiums and expectations of company earnings. In reality, it’s money and hope. There’s no other explanation for the record trading volumes in the country’s markets on Dec. 3, and the astounding run-up in share prices that has preceded it.

Dec 2, 2014
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China’s invisible tycoon centre stage in Wanda IPO

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By John Foley

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

Wang Jianlin is China’s invisible tycoon. The founder of Dalian Wanda group will soon be the controlling shareholder of four listed companies spanning cinemas, real estate and hotels with shares that trade in China, Hong Kong and New York. Yet he is not on the board of any of them. What may look like good governance raises a different set of questions.

Dec 1, 2014
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China’s deposit guarantee is really the opposite

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By John Foley

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

Market purists get nervous about the idea of governments guaranteeing deposits in the event of a bank failure. They worry that savers will become too trusting, and that lenders will take greater risks. In China, where the central bank on Nov. 30 unveiled proposals for deposit insurance after 21 years of talk, the reverse is true. Savers already trust too much. The proposed reform is more like an anti-guarantee.

Nov 25, 2014
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China’s offshore empires go from help to headache

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By John Foley

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

When is a Chinese company not Chinese? When it’s a complex web of offshore vehicles rooted in anonymous tax havens. That description includes some of the People’s Republic’s most successful and innovative companies. It will make the country’s apparent new push on tax evasion hard to enforce.

Nov 24, 2014
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China monetary policy enters difficult adolescence

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By John Foley

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

China’s economy is in the throes of financial adolescence. One consequence is that, when faced with surprises like the cut in interest rates on Nov. 21, it doesn’t always do what it is told.

Nov 21, 2014
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Alibaba’s huge finance arm is a mystery to most

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By John Foley

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

Alibaba’s finance arm is one of the secrets of the Chinese e-commerce group’s success. Yet investors in the listed Alibaba Group don’t control a single share of the business, and can’t reliably estimate its worth. That puts them at a disadvantage to a select group of insiders with a seat on both sides of the table.

Nov 11, 2014
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China embraces troublesome cult of consumption

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By John Foley 

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

China has no more potent symbol of consumer power than “Singles’ Day”. Alibaba, the e-commerce giant that invented the shopping frenzy which takes place every Nov. 11, shifted $2 billion of goods on its websites in the first hour of trading. If consumers kept that up all year, retail sales in the People Republic would be five times bigger than they actually were in 2013. Fortunately, they don’t.

Nov 10, 2014
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Obama and Xi compete to put the “I” in “APEC”

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By John Foley 

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

There is no “I” in “APEC”. Yet the leaders of China and the United States are both using the Beijing round of the Asia-Pacific Economic Co-operation this week to push their own agendas. Using the global stage to play domestic political games leaves room for dangerous mistakes.