John's Feed
Jul 24, 2012

CNOOC’s state control is a paper tiger

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

By John Foley

BEIJING, July 24 (Reuters Breakingviews) – Opponents of
CNOOC’s (0883.HK: Quote, Profile, Research) $15 billion bid for Canadian oil producer
Nexen (NXY.TO: Quote, Profile, Research) will focus on the idea that the Chinese energy
major is a Trojan horse for the Communist Party. Similar fears
derailed CNOOC’s bid for U.S. producer Unocal in 2005. Such
arguments are unhelpful. State ownership is real, but state
control is a paper tiger.

Jul 13, 2012
via Breakingviews

Beware “blame China” earnings phenomenon

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By John Foley

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

Get ready for some corporate China-bashing this earnings season. Investors are already punishing companies like Burberry and Cummins for what they perceive to be disappointing growth from the Middle Kingdom. A slowdown in the world’s growth engine will see many more CEO fingers pointing east.
 
Trench-coat maker Burberry’s shares fell 7.4 percent on June 11 after it said annual Chinese same-store growth was somewhere near 15 percent in the past quarter, compared with twice that a year earlier. Never mind that this time last year Burberry had just bought out and glammed up its Chinese stores, making 2011 a tough act to follow. Investors saw a hole in the China story and ran through it.

Jul 6, 2012
via Breakingviews

China rate cut targets financial not economic ills

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By John Foley

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

China’s surprise interest rate cut looks like a response to financial rather than economic ills. Thursday evening’s reduction in the lending rate by 31 basis points and the deposit rate by 25 points won’t alone do much to change the economic picture even if data due next week show activity is markedly slowing down. What it will do is buy banks and lenders some time, and postpone the more imminent danger of a rise in bad loans.

Jul 5, 2012
via Breakingviews

China can’t reproduce its way out of trouble

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By John Foley

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

China has outgrown its one-child policy. Three prominent government scholars called this week for the government to scrap it before China’s population gets too old, too fast. Yet after 30 years, such an intrusive policy can’t be reversed overnight. China will need time to prepare for the 2.3-child world.

Jun 29, 2012
via Breakingviews

Juilliard improves tone of China’s urbanisation

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

The tone of China’s frantic urbanisation may be changing for the better. The Juilliard School, one of the best known U.S. music and fine arts colleges, has picked the city of Tianjin for a new institute. The host city is unlikely to be motivated only by a love of the performing arts, but it matters little so long as China’s urban jungle gets more liveable.

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.