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Jun 26, 2012
via Breakingviews

Evergrande red flags are real, even if fraud isn’t

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By John Foley

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

Short sellers launched a rocket at Evergrande, China’s second-largest property developer, last week. It hasn’t quite hit the mark. Citron Research, the maverick investment house that launched the allegations of bribery and dodgy accounting, may have shot itself in the foot by fudging some numbers, and leaping to unlikely conclusions. Yet the Hong Kong-listed Evergrande’s red flags are real, even if the supposed fraud isn’t.

Jun 12, 2012

Credit Suisse toxic bonus keeps giving

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

By John Foley

HONG KONG, June 12 (Reuters Breakingviews) – Credit Suisse’s
(CSGN.VX: Quote, Profile, Research) toxic bonus plan is the gift that keeps on giving.
Three years ago, around 2,000 employees were forced to take some
$5 billion of the riskiest assets from the Swiss group’s balance
sheet as their bonuses. Now, recipients are being offered the
chance to buy more. What once seemed like a punishment has
turned into something of a perk.

Jun 12, 2012

BREAKINGVIEWS:EXCLUSIVE-Credit Suisse toxic bonus keeps giving

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

By John Foley

HONG KONG, June 12 (Reuters Breakingviews) – Credit Suisse’s
(CSGN.VX: Quote, Profile, Research) toxic bonus plan is the gift that keeps on giving.
Three years ago, around 2,000 employees were forced to take some
$5 billion of the riskiest assets from the Swiss group’s balance
sheet as their bonuses. Now, recipients are being offered the
chance to buy more. What once seemed like a punishment has
turned into something of a perk.

May 31, 2012

Graff’s new luxury paradigm hits the rocks

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

By John Foley

HONG KONG, May 31 (Reuters Breakingviews) – Graff Diamonds
cannot be blamed for the falls in world markets which helped
undermine its hopes to float shares in Hong Kong. Nor is the
family-owned diamond merchant responsible for the poor post-IPO
performance of social network Facebook (FB.O: Quote, Profile, Research), which has left
many investors who normally buy new stocks nervously nursing
losses.
But given Graff’s peculiarities, and the risk aversion stalking
markets for well over a year, it’s hard not to feel that the
company and its advisers were being overly optimistic in chasing
a share offering that would have valued the firm at $4 billion
and raised $1 billion of new cash.
Investors homed in on Graff’s reliance on a handful of mega-rich
customers as a key investment risk. But that wasn’t the only
oddity. Another was the fact that Graff was listing in the first
place, given the ongoing weakness of markets. It didn’t need the
money, most of which was earmarked for the company’s founders
rather than growth. Expansion could have been funded from
Graff’s own cash flows or by raising debt. The IPO gave the
company a chance to restructure, but it can also do that in
private.
The final straw may simply have been too much cleverness.
Graff’s pitch relied on convincing investors that its clientele
is so high end as to make it unlike any other listed luxury
company. That meant buying into a new concept rather than simply
measuring Graff against obvious peers like Tiffany & Co (TIF.N: Quote, Profile, Research)
or LVMH (LVMH.PA: Quote, Profile, Research). In truth, Graff’s valuation of $4 billion
looks reasonable, which makes it likely the company will return
to the market later. But volatile times don’t suit new
paradigms.

May 30, 2012
via Breakingviews

Li Ka-shing opts for succession China-style

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By John Foley

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

Li Ka-shing is taking the Chinese approach to succession. After years of leaving investors guessing, Hong Kong’s richest man named his eldest son Victor as heir to his business empire. That should prevent a power scramble, and assures him a loyal follower who shares his values. The newcomer will even be surrounded by a coterie of long-time Li acolytes. It’s not dissimilar to the leadership transition happening in Beijing.

May 21, 2012
via Breakingviews

Graff Diamonds IPO gleams but doesn’t dazzle

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By John Foley

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

It’s hard to think of a company more plugged into the 0.1 percent than Graff Diamonds. The UK diamond merchant, which in 2011 sold rocks worth almost $100 million to a single customer, plans to list its shares in Hong Kong, in an offering that could raise $1 billion and value the whole at $4 billion. Strip out the hype over the ascent of the super-rich, and the valuation looks solid if not a steal.

May 18, 2012

Temasek makes unlikely corporate governance hero

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

By John Foley

HONG KONG, May 18 (Reuters Breakingviews) – Temasek is
taking a stand – sort of – on corporate governance. The
Singaporean state investment fund abstained last week from
backing the re-election of a group of board directors at
Standard Chartered (STAN.L: Quote, Profile, Research), according to people familiar with
the situation. The reason, StanChart suggests, is Temasek’s
preference for a more independent governance structure.

May 14, 2012
via Breakingviews

Property slowdown leaves China on shaky ground

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By John Foley

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

China’s property chickens are coming home to roost. Last week’s economic data shows that a year of falling prices is finally changing developers’ speculative behaviour.

May 9, 2012
via Breakingviews

Temasek’s triple personality bodes well for returns

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By John Foley

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

Temasek is turning into a financial chimera. Where that mythical beast was part lion, goat and serpent, the Singaporean fund combines aspects of a hedge fund, private equity house and investment bank. That combination sounds good for returns, though it might not sit well with Temasek’s political ties.

May 8, 2012
via Breakingviews

“Cabbage in formaldehyde” is toxic dish for China

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By John Foley

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

China’s food industry is accident-prone. Milk laced with melamine, fake eggs, glow-in-the-dark pork and cadmium-tainted rice have all made headlines. Now there is formaldehyde-laced cabbage, found in Shandong province. Thus treated, the vegetables will last for a week. The economic effect of food-scares can last far longer.