Monday, September 15, 2014

State-backed Royal Bank of Scotland (RBS.L) aims to raise up to $4 billion

Royal Bank of Scotland
Royal Bank of Scotland (Photo credit: Wikipedia)
State-backed Royal Bank of Scotland (RBS.L) aims to raise up to $4 billion from the share flotation of its U.S. bank Citizens Financial Group this month, it was announced on Monday, putting it on track to be the biggest U.S. bank share offering this year.
RBS, which is 81 percent owned by the UK government after being rescued in 2008, has come under pressure from UK regulators to improve its capital base and focus on its domestic business, and the bank had already made clear it planned to sell up to a quarter of Citizens this year through an initial public offer (IPO).
RBS said on Monday it would sell 140 million shares in Citizens at between $23 and $25 each in the New York IPO, and could sell a further 21 million shares in an over-allotment option granted to the underwriters of the offer. (1.usa.gov/1tlcS0t)
Up to 29 percent of the bank will be sold, valuing Citizens at the top end of the price range at $14 billion.
RBS did not set a date for the listing, but it is slated for on or around Sept. 23, a person familiar with the matter said.
RBS said the sale would "significantly improve" its capital position and is "an important milestone" for both RBS and Citizens.
Analysts said once RBS sells at least half of Citizens, probably in the first half of next year, its core capital adequacy ratio should be boosted by 2-3 percentage points, although the initial IPO is unlikely to have much impact.
RBS has previously said it expects to fully sell out of Citizens by the end of 2016.

LONG HISTORY, SERIES OF DEALS
Citizens provides retail and commercial banking services to about 5 million customers in the United States and ranks as the country's 13th biggest retail bank holding with about $130 billion in assets.
The 186-year-old bank, headquartered in Providence, Rhode Island, was bought by RBS in 1988 and expanded with 25 acquisitions, including the 2004 purchase of Charter One.
It has 18,000 staff and 1,200 branches in 11 states across the New England, Mid-Atlantic and Midwest regions at the end of June and made a net profit of $479 million in the six months to the end of June, on revenue of $2.6 billion.
Citizens is being valued at the upper end of the $9 billion to $15 billion range estimated by analysts with the IPO offer range pricing the business at near its net tangible book value of $13.1 billion at the end of June.
That represents a premium to RBS shares, which are trading at about 0.7 times book value. U.S. banks of a similar size, such as Fifth-Third (FITB.O) and BB&T Corp. (BBT.N), on average trade at near 1.2 times book value, according to Reuters data.

Citizens intends to list on the New York Stock Exchange under the trading symbol "CFG".

Sunday, September 14, 2014

Sweden's Electrolux AB (ELUXb.ST) said on Monday it would double U.S. sales

Sweden's Electrolux AB (ELUXb.ST) said on Monday it would double U.S. sales by paying $3.3 billion in cash for General Electric Co's (GE.N) appliances business in its biggest ever deal, giving it the scale to go head-to-head with larger rival Whirlpool (WHR.N).
GE's century-old household appliance business, which had $5.7 billion in 2013 revenue, could help the Swedish company expand beyond its core European market, where growth has trailed that in North America.
Electrolux, the world's second-largest appliance maker by sales, will see its annual sales in North America more than double to over $10 billion, similar in size to Whirlpool's sales there. It also gets to keep the iconic GE Appliance brands.
The GE unit sells refrigerators, stoves, air conditioners and water heaters under the GE Monogram, GE Cafe and Hotpoint brands.
"I think it's a historic event for Electrolux. I'm very excited about it. I think the fit - the strategic fit, the industrial logic - is compelling," Electrolux Chief Executive Keith McLoughlin told Reuters.
While the price tag is higher than the $2 billion to $2.5 billion figure that some people familiar with the business had estimated, analysts said the company was not overpaying. The deal includes GE's 48.4 percent stake in Mexican appliance maker Mabe.
Reuters reported on Sept. 4 that Electrolux was near a deal to buy the GE business for more than $2.5 billion and could announce the agreement as soon as this week.
Electrolux said the price was 7.0-7.3 times GE Appliance's estimated 2014 earnings before tax, interest, depreciation and amortization (EBITDA), based on an enterprise value, including debt, of $3.45 billion, according to ThomsonReuters data.
Including expected annual cost savings of around $300 million, the multiple paid for GE would be much lower at around five times EBITDA, Electrolux Chief Financial Officer Tomas Eliasson told a conference call.
"If they manage to realize the synergies, it's clearly a good multiple," said Kepler Cheuvreux analyst Johan Eliason, adding that the inclusion of the Mabe stake would strengthen Electrolux's position in Latin America on top of the clout it is gaining in North America.
"They're getting access to both North and South America in a very good way, and will become very strong in all of the Americas," Eliason said.

The deal will be financed by a bridge facility, and the company plans a rights issue to raise about 25 percent of the price after the deal's expected closing next year, Electrolux said.

Saturday, September 13, 2014

sovereign wealth funds are muscling into stock markets

English: Sovereign wealth fund in the world Fr...
English: Sovereign wealth fund in the world Français : composition du fonds souverain norvégien au capital des sociétés françaises (Photo credit: Wikipedia)
With returns on government bonds at rock-bottom prices, sovereign wealth funds are muscling into stock markets and other higher-yielding assets like real estate at a rate that private investors warn could destabilize the world economy.
Since central banks cut interest rates to record lows in a bid to shore up flagging economic growth, world governments have had to look further afield to grow public pension money or central bank currency reserves. But the resulting tide of money is in danger of distorting markets, causing prices to reflect political priorities rather than financial reality, insiders say.
It's also threatening to inflate the very price bubbles that central bank teams globally are working so hard to prevent, experts suggest.
"There is quite clearly both an actual and a potential conflict of interest... There should be some sort of code of practice," said David Marsh, managing director at the Official Monetary and Financial Institutions Forum (OMFIF), which researches public financial institutions.
Sovereign investors manage assets worth $29.1 trillion - equivalent to 40 percent of the global economy - which are held by 157 central banks, 156 public pension funds and 87 sovereign wealth funds, according to OMFIF.
The money originates often from natural resource revenues after a commodities boom - as in the case of Norway, which runs the world's biggest sovereign fund thanks to its oil reserves. Alternatively sovereign wealth funds can reflect an accumulation of manufacturing export revenues, as is the case with China.
Sovereign investors already feature prominently on the shareholder registers of many of the world's largest companies. Some of these stakes, such as Qatar's near 5 percent in Barclays, are a legacy of funds participating in shoring up beleaguered banks during the 2008-2009 financial crisis.
Norway's $890 billion fund owns 1.3 percent of all global shares and aims to put more of its cash in assets other than bonds, such as equities, infrastructure and real estate, its chief told Reuters recently.
And China Investment Corporation (CIC), with $575 billion in assets, allocates around 32 percent of its global investments to public equities and a similar proportion to 'long term' investments including private equity, real estate and infrastructure, OMFIF says.
In the rush to cash in on bumper property prices and a resurgence in global stocks, little thought has been given to the consequence of such major inflows, say private investors.
"People don't spend enough time discussing what the supposed merits of these vehicles are .. What's concerning is that the pool of so-called savings is put in the hands of so few people to be allocated," said Michael Cirami, co-director and portfolio manager at Eaton Vance Investment Managers.
Yngve Slyngstad, chief executive of Norway's sovereign wealth fund conceded the potential for distortions created by state-backed funds' involvement in markets but stressed his fund addressed the issue with strict internal guidelines.
"It is not an issue that I take lightly," he told Reuters. "We have put in place some obvious things like a very high requirement of transparency, limits on ownership, being as clear as possible on how we deal with our ownership roles."
Nevertheless the presence - or otherwise - of a sovereign wealth investor is already causing changes to trading patterns.
When Qatar Holding cut a stake in London Stock Exchange by a third last July, analysts said demand for the shares on sale was boosted because some investors had previously shied away from the company on the basis that the presence of big institutional investors rendered it illiquid and potentially more volatile.
And further impact seems inevitable. If official institutions manage $29 trillion, even a relatively conservative allocation in portfolios to equities of 10 percent could represent as much as $2.9 trillion in funds. That would be enough to move global markets given that the market cap of the MSCI All Country Index amounts to $38 trillion.

Friday, September 12, 2014

world's major economies are falling further behind in carbon emissions

The world's major economies are falling further behind every year in terms of meeting the rate of carbon emission reductions needed to stop global temperatures from rising more than 2 degrees this century, a report published on Monday showed.
The sixth annual Low Carbon Economy Index report from professional services firm PwC looked at the progress of major developed and emerging economies toward reducing their carbon intensity, or emissions per unit of gross domestic product.
"The gap between what we are achieving and what we need to do is growing wider every year," PwC's Jonathan Grant said. He said governments were increasingly detached from reality in addressing the 2 degree goal.
"Current pledges really put us on track for 3 degrees. This is a long way from what governments are talking about."
Almost 200 countries agreed at United Nations climate talks to limit the rise in global temperatures to less than 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial times to limit heat waves, floods, storms and rising seas from climate change. Temperatures have already risen by about 0.85 degrees Celsius.
Carbon intensity will have to be cut by 6.2 percent a year to achieve that goal, the study said. That compares with an annual rate of 1.2 percent from 2012 to 2013.
Grant said that to achieve the 6.2 percent annual cut would ‎require changes of an even greater magnitude than those achieved by recent major shifts in energy production in some countries.
France's shift to nuclear power in the 1980s delivered a 4 percent cut, Britain's "dash for gas" in the 1990s resulted in a 3 percent cut and the United States shale gas boom in 2012 led to a 3.5 percent cut.

Thursday, September 11, 2014

Japan's economy shrank an annualised 7.1 percent in April-June

Japan's economy shrank an annualised 7.1 percent in April-June from the previous quarter, more than a preliminary estimate, underscoring concerns the hit from an April increase in the sales tax may have been bigger than expected.
The revised contraction was the biggest since January-March 2009, when the global financial crisis hit Japan's exports and factory output, keeping policymakers under pressure to expand fiscal and monetary stimulus should the economy fail to recover from the disruption of the April tax hike.
"Growth this year will be less than what policymakers are expecting. The BOJ will ease policy in April because inflation will be too low to meet its target," said Takuji Aida, chief economist at Societe Generale Securities.
The revision was largely due to a bigger than expected decrease in capital expenditure and a deeper decline in consumer spending, suggesting the economy could struggle to overcome the April sales tax increase.
GDP was revised down from a preliminary 6.8 percent drop, according to Cabinet Office data released on Monday, and was more than the median market forecast for a 7.0 percent decline in a Reuters poll of economists.
On a quarter-to-quarter basis, the economy shrank 1.8 percent in the second quarter, compared with a preliminary reading of a 1.7 percent contraction.
Separate data showed the current account swung back into surplus in July, reflecting higher earnings on overseas investments.
The surplus stood at 416.7 billion yen ($3.96 billion), compared with economists' forecast for 444.2 billion yen. That followed a shortfall of 399.1 billion yen in June, which marked the first deficit in five months.
Policymakers had predicted the economy would shrink in the April-June quarter as consumers withheld spending after a shopping spree ahead of the sales tax hike to 8 percent from 5 percent on April 1.
But a recent run of weak data, including a slump in household spending and tepid output growth in July, has cast doubt on the policymakers' forecast that the economy will rebound steadily in the current quarter to sustain a moderate recovery.
The pace of growth from July will be crucial to Prime Minister Shinzo Abe's decision, expected by year-end, on whether to proceed with a scheduled second increase in the sales tax to 10 percent in October next year.

Wednesday, September 10, 2014

It has been four years since Apple Inc introduced a completely new gadget

English: The logo for Apple Computer, now Appl...
English: The logo for Apple Computer, now Apple Inc.. The design of the logo started in 1977 designed by Rob Janoff with the rainbow color theme used until 1999 when Apple stopped using the rainbow color theme and used a few different color themes for the same design. (Photo credit: Wikipedia)
It has been four years since Apple Inc introduced a completely new gadget and the pressure is on for the world's largest tech company to wow at its "special event" in Cupertino, California, on Tuesday.
Apple has fed the high expectations, with promises by executives that the company's best product pipeline in 25 years is being readied inside its secretive facilities. That's a high bar for a company whose hits include the modern, graphic-based personal computer, the smartphone, the iPod and the tablet PC.
Those now ubiquitous gadgets were created under the innovative and famously meticulous eye of Apple co-founder Steve Jobs, who died in 2011. When Chief Executive Officer Tim Cook takes the stage on Tuesday, technology aficionados, investors and rivals will be watching closely to see whether Jobs' handpicked successor inherited the magic touch or whether Apple's winning streak is coming to an end.
"We think Apple’s pipeline is finally going to satisfy those who have wondered if the company has any new products. The stock price has been rallying as investors are beginning to believe that Tim Cook all along was telling the truth that there is an incredible pipeline of products," said Michael Yoshikami, CEO of Destination Wealth Management.
In the last five years, the period beginning July 1 has been the most fruitful for holders of Apple shares, with an average price gain of about 22.5 percent, compared with 11 percent gains seen in the first half of the last five years.
Below are some of the key products and features to look out for at Apple's big event on Tuesday:
iWatch?: Rumors of an Apple smartwatch go back several years, but Tuesday may finally be showtime. The watch, which will reportedly have a flexible screen and come in two sizes, will track its wearer's health and fitness, double as an electronic wallet and of course, display messages.
The watch is not likely to go on sale until sometime in 2015 and Apple may not even reveal its price on Tuesday. But with rivals such as Google Inc and Samsung Electronics Co already entering the smartwatch market, tech-watchers are anxious for Apple to show its cards.
"The market has been waiting for Apple’s product as the real category-defining product," said FBN Securities analyst Shebly Seyfari.
iPhone 6: Smartphones are Apple's bread-and-butter, representing more than half of its revenue, and the company is expected to introduce a pair of new models with bigger screens, a sleeker design and wireless payment capabilities. The iPhone 6 will be available with 5.5-inch or 4.7-inch screens, a step up from the current models' 4-inch screens. There is also speculation that some phones will boast extra-tough screens made from scratch-resistant sapphire material.
Mobile Wallet: Apple has reportedly struck deals with major credit card providers Visa Inc, MasterCard Inc and American Express Co. The partnerships, as well as a special communication chip within the new iPhone and smartwatch, would allow consumers to use their gadgets at stores to buy everything from coffee to blue jeans - changing the shopping experience and extending Apple's reach from the Web to real-world commerce.

Tuesday, September 09, 2014

preparations for a rise in U.S. rates

Faced once again with the prospect of rate rises in the United States, investors in Asia are no longer selling and running as in the past, choosing instead to stay in markets like India and South Korea, that are relatively sheltered from global forces.
The two bouts of market turmoil in May 2013 and January this year demonstrated the perils of selling out of markets prematurely and indiscriminately.
This time, investors have already begun preparations for a rise in U.S. rates by mid-2015 at the earliest, albeit with a degree of caution about the different moving parts to the policy story.
For one, central banks in Europe and Japan could soon be injecting stimulus, which would compensate the world for the cash the Federal Reserve is withdrawing.
And secondly, it is entirely plausible that U.S. growth disappoints, thereby keeping yields down but pushing stock markets sharply lower.
Standard responses to a spike in U.S. rates, such as avoiding Indonesia, India and other countries which rely on external funding, may no longer be appropriate, given how rapidly Asia has changed in the past year.
The region's current account deficits are smaller, bond yields are high and currencies already quite weak. Governments perceived to be more reform-oriented have taken over in India and Indonesia, and Asia's rallying stock markets are backed by robust growth in company earnings.
"You should be in countries where idiosyncratic forces are more dominant drivers than the global forces," said Jahangir Aziz, head of Asian research at JPMorgan. "They allow you to hedge against global changes."

As of now, both Asian equity and bond markets are still riding a six-year long rally spurred by the heavy quantitative easing policies of the Fed and other developed economies.

Monday, September 08, 2014

Are investors interested in Alibaba

When Chinese e-commerce giant Alibaba Group Holding revealed plans earlier this year to go public on a U.S. stock exchange, financial advisers like Bob Mecca in Hoffman Estate, Illinois braced themselves for a wave of frantic calls from retail investors wanting to get in on the action.
Alibaba, which sells more than Amazon.com Inc and EBay Inc combined, could raise over $21 billion in its IPO. It is often described as technology's hottest initial public offering since Facebook Inc’s 2012 debut, although initial pricing announced on Friday was less than many predicted.
Retail investors generally get only 10-20 percent of shares in big IPOs, and several advisers told Reuters they had expected a scramble from clients. But the phone has not been ringing off the hook.
“People are on Facebook, they know it, but no one has ever heard of Alibaba," said Mecca, who has $175 million in assets under management.
The number of client inquiries about the Alibaba IPO is around a quarter of what it was for Facebook at this stage of the process and about half of what it was for Twitter Inc, said Steve Quirk, senior vice president of the group serving active traders at discount broker TD Ameritrade Holding Corp.
Robert Christie, a spokesman for Alibaba, declined to comment, citing the company’s pre-IPO quiet period.
Alibaba’s decision to price its shares between $60 and $66 per American Depository Share is an indication that the company may not be too concerned about having a big U.S. retail investor base, since retail investors prefer stocks that cost much less per share. Alibaba could have raised the same amount of money by selling more shares at a lower price.
One consequence of retail investors sitting out the debut could be a muted first day of trade, rather than the "pop" many expect from a tech IPO.
“Because it is such a large deal and you aren’t going to see a lot of retail investor interest, I do not think it’s going to have a lot of momentum when it gets out of the gate,” said Tom Taulli, an independent IPO expert.
Longer term, tepid U.S. retail interest could be a drawback for Alibaba. Individuals tend to hold stocks longer, providing stability to the share price, and they help diversify the shareholder base. Having too much concentration among a small number of institutional investors, for example, could make the company vulnerable to attacks by activists, IPO experts said.

"I think a strong retail base is much better for Alibaba," said Josef Schuster, founder of Chicago-based IPOX Schuster LLC, which helps create index funds for IPOs.

Sunday, September 07, 2014

new quantum information processors

Google is teaming up with the University of California Santa Barbara to "design and build new quantum information processors."
The Quantum Artificial Intelligence team at Google is partnering with UCSB physicist John Martinis and his team on the effort, which will be "based on superconducting electronics."
Martinis and his team "have made great strides" in that area, Google director of engineering Hartmut Neven wrote in a blog post. Martinis was recently awarded the London Prize for his pioneering advances in the field.
Martinis told The Wall Street Journal that he will now be a joint employee of Google and UCSB, while a few members of his team will also join the search giant.
"With an integrated hardware group the Quantum AI team will now be able to implement and test new designs for quantum optimization and inference processors based on recent theoretical insights as well as our learnings from the D-Wave quantum annealing architecture," Neven said.
Google's Quantum Artificial Intelligence Lab, which launched in May 2013, is a collaboration between Google, the NASA Ames Research Center and the Universities Space Research Association (USRA). "We're studying the application of quantum optimization to difficult problems in Artificial Intelligence," according to the group's Google+ page.
Google will continue its collaboration with D-Wave scientists and experiments on NASA's "Vesuvius" machine. The lab houses a 512-qubit D-Wave Two from D-Wave Systems, a Vancouver-based company that first made headlines when it sold Lockheed Martin the world's first commercial quantum computer back in 2011.
Ultimately, the lab wants to accelerate computation on a massive scale, allowing researchers to better examine patterns in everything from weather systems to the stock market.
In July, Google co-founder Sergey Brin said Google hopes to one day develop "fully reasoning" artificial intelligence. But despite its acquisition of robot, satellite, and AI firms, the real-life Skynet is still a few years off. Computer scientists have been promising AI "for decades," and have not yet delivered, so it would be "foolish" for Google to put a hard date on when Google Now might become self aware, Brin said during a joint fireside chat with Google CEO Larry Page hosted by Khosla Ventures.

Raw food pet diet becomes trendy even as vets question safety

Raw food pet diet becomes trendy even as vets question safety