Tuesday, August 4, 2015

Deutsche Bank asked to pay former employee US$3m in damages

AUG 4, 20159:59 PM

[NEW YORK] Wall Street's industry-funded watchdog on Monday asked Deutsche Bank to pay US$3 million in compensation damages to Jorge Usandivaras, the former head of its Latin American Strategic Transactions unit.

Mr Usandivaras had initially filed for US$4.5 million in compensatory damages, claiming the bank had breached his employment contract and acted in violation of US labour laws.

He also claimed that Deutsche Bank had acted in contravention to the Sarbanes-Oxley Act that protects whistleblowers.

The Financial Industry Regulatory Authority (FINRA) found Deutsche Bank liable to pay damages.

Mr Usandivaras joined Deutsche Bank in April 2012 as a managing director, having previously worked at Banco Itau.

Mr Usandivaras' LinkedIn profile shows he worked for about two years with the German bank.

REUTERS

Platinum reaches 6-year low on China demand concern; gold steady

AUG 4, 20158:46 PM

[LONDON] Platinum fell to a six-year low and palladium reached the lowest since 2012 on speculation supplies are ample amid slowing demand from China. Gold was little changed.

BMW AG said on Tuesday it cut production by 16,000 cars in China and slowing sales may lead it to revise profitability goals. The country accounts for at least 23 per cent of global demand for platinum and palladium, which are mainly used in catalytic converters that curb harmful car emissions, Johnson Matthey Plc estimates.

Commodities have slumped as China's economy expands at the slowest pace in 25 years, leading to gluts in everything from metals to crops. Platinum mine output is rebounding in top producer South Africa after a five-month strike last year. Faith in precious metals has soured as the Federal Reserve prepares to raise interest rates, cutting the allure of investments that don't give returns like other assets such as equities and bonds.

"What is missing right now is a significant element of demand from China," Jonathan Butler, a precious-metals strategist at Mitsubishi Corp in London, said by phone.

"If miners sell as much metal in the second half of the year as they did in the first, prices could be under more pressure." Platinum for October delivery lost 1.1 per cent to US$956.30 an ounce by 8:07 am on the New York Mercantile Exchange. It earlier fell as much as 2.2 per cent to the lowest since January 2009. Palladium futures were down 1.4 per cent at US$594.75 an ounce.

Gold futures were little changed at US$1,090.60 an ounce on the Comex in New York. They reached a five-year low on July 24.

Investors bought bullion through exchange-traded products for the first time since mid-July, increasing holdings by 0.2 metric ton to 1,523.6 tons, data compiled by Bloomberg show.

Silver was little changed at US$14.51 an ounce in New York.

BLOOMBERG

Coal prices near-decade lows as Chinese demand slumps

AUG 4, 20159:54 PM

[LONDON] Coal prices' downward trajectory shows no sign of reversing as a supply glut, combined with expectations that demand from top consumer China will shrink more, paint a bleak outlook for the fossil fuel which generates nearly half the world's electricity.

Global coal prices have fallen by around 10 per cent this year bringing pain to top producers including Indonesia, Australia and South Africa. They now stand at their lowest in nearly a decade, extending losses from a bearish trend since 2011, as incremental growth in supply has outstripped demand.

The falling prices could particularly benefit emerging economies relying on coal as a cheap form of power.

Political pressure is growing to curb greenhouse gas emissions from coal-fired power stations, however, before United Nations climate change talks in Paris at the end of the year.

"We fear that global coal prices have not yet reached their bottom. Maybe it'll be next year," said Erich Schmitz, managing director of Germany's coal importers association VDKi. "But for that to happen, capacity would have to be removed from the market," he said.

European API2 2015 coal futures closed near a nine-year low of US$55.50 a tonne on Monday.

The biggest problem coal has faced this year has been China, where coal imports between January and June were down 37.5 per cent from a year earlier.

China's drive to cut imports is both environmentally driven, while also being motivated by a desire to help domestic producers, as most have been losing money.

"China has invested on incremental coal production on the basis of the very high prices they were having in the domestic market a few years ago and that is coming on stream at the same time, so they're swamped in coal which has caused a collapse in domestic pricing," a mining industry source said. "The view for the second half of the year could be quite dire."

China's energy consumption tripled in just two decades but growth slowed to just 0.7 per cent year on year in the first half of 2015. In terms of power generation, coal lost market share to increased oil, natural gas and renewables.

A sharp sell-off in Chinese stocks, posting their biggest monthly loss in July in nearly six years, also cast a shadow over the demand outlook for commodities, including coal.

"The big question ultimately is will any of the turmoil on China's equity markets filter through to the real economy?" said an analyst at an European utility. "I expect Chinese coal imports to continue to weaken in 2016 but not at the pace of this year."

Coal miners have been slow to cut production in response to lower prices, with weakening domestic currencies versus the dollar shielding producers to some extent in export markets including Australia.

Top thermal coal exporter Indonesia has curbed its production but analysts said that is not enough to change the market's fortunes.

"Indonesian exports have probably fallen faster than we previously imagined they would, but that's not enough to turn things around," said Stefan Ljubisavljevic, analyst at Macquarie Bank.

Indonesia's May exports were down by just under 20 per cent from a year earlier and year to date their exports are down around 9 per cent, Mr Ljubisavljevic added.

REUTERS

China dethroned as world's most liquid stock market after curbs

AUG 4, 20154:44 PM

[BEIJING] China has lost its title as the world's most liquid stock market as trading halts and regulatory efforts to curb bearish transactions drive away investors.

Daily turnover on mainland exchanges has averaged the equivalent of US$202 billion over the past 30 days, down from US$288 billion at the start of July. After exceeding turnover on US bourses for about a month through July 8, the value of shares traded in China is now US$72 billion lower than in America. Volume in Shanghai on Tuesday was 36 per cent below the 30-day average.

The unprecedented boom in Chinese stock trading during the first half of 2015 has fizzled as the Shanghai Composite Index sank 27 per cent from this year's high and mainland exchanges allowed hundreds of companies to halt their shares. The drop in volumes deepened this week as authorities curbed short sales, investigated algorithmic traders and warned investors against placing large sell orders.

"What happened recently will definitely leave a bad taste in investors' mouths," said Tang Yayun, a Shanghai-based analyst at Northeast Securities Co. "There has been too much regulatory intervention in this market and some institutional investors may be unwilling to enter the market for the long term."

While proponents of the intervention say it's necessary to restore confidence after an almost US$4 trillion selloff in mainland shares, critics have argued that China is backtracking on its pledge to give markets more sway in the world's second- largest economy. International investors have sold almost US$8 billion of Shanghai shares through the city's exchange link in the past four weeks.

Regulators are also probing "malicious" short selling and have examined the futures trading accounts of foreign investors. They've banned stake disposals by major shareholders, suspended initial public offerings and compelled state-run institutions to support the market with equity purchases. About 520 companies are still halted on mainland exchanges, versus more than 1,400 in early July.

In the latest curbs announced overnight, China's two main exchanges introduced measures that restrict short sellers' ability to sell and buy back shares in a single day, a practice the Shenzhen bourse said may "increase abnormal fluctuations in stock prices and affect market stability." Citic Securities Co, China's largest brokerage, and several of its peers said they suspended short selling after the revised rules.

In a short sale, traders sell borrowed stock, anticipating the price will drop so they can profit by buying back the shares at a lower price. China already bans investors from purchasing and then selling the same stock in a single day.

The decline in trading volumes is likely to continue, putting pressure on earnings at brokerages, according to Thomas Ho, an analyst at Daiwa Capital Markets Hong Kong Ltd. Even after the recent slump, 30-day average daily turnover on mainland bourses is double its level in March, according to data compiled by Bloomberg.

"We are entering a period of low volume in the next three to six months at least," Mr Ho said. That will have "implications on valuation for some brokerages, which are highly valued given a change in market conditions."

Citic Securities dropped 1 per cent in Hong Kong trading on Tuesday, while GF Securities Co retreated 1.9 per cent.

The surge in volumes was unsustainable and a level of 500 billion yuan (US$80.5 billion) to 600 billion yuan a day would make more sense for the Chinese market, according to Richard Xu, an analyst at Morgan Stanley.

"The market probably needs to rationalize in terms of the trading volume as well as leverage," Mr Xu said in an interview in Hong Kong. "We are seeing some positive developments in my perspective - the volume has finally started shrinking."

Apart from regulatory curbs, volumes are also declining as leveraged traders reduce their positions and new investors enter the market at a slower pace. Margin debt in China has dropped about 41 per cent from its June high, while the weekly number of new investors has shrunk by 76 per cent from its May peak.

China's economic slowdown has also weighed on sentiment, according to Ken Chen, an analyst at KGI Securities in Shanghai. A private factory gauge released on Monday fell to a two-year low in July, while an official index on Saturday slipped to a five-month low.

"Investors are still in a panic after the stock rout and they are not willing to pile into the market to buy at this stage," said Wei Wei, an analyst at Huaxi Securities Co in Shanghai. "It will take some time for the market to recover."

BLOOMBERG

Chinese firms said to approach Fortescue on infrastructure stake

AUG 4, 20156:55 PM

[SYDNEY] Hebei Iron & Steel Group Co and Tewoo Group Co have approached Fortescue Metals Group Ltd about acquiring a stake in the iron ore producer's infrastructure assets, people with knowledge of the matter said.

The state-owned Chinese firms are separately talking to Fortescue about investing in the infrastructure serving its operations in Western Australia's Pilbara region, the people said. They may also consider buying stakes in some of Fortescue's mines, two of the people said, asking not to be identified as the information is private.

Fortescue, controlled by billionaire Andrew Forrest, said in March it would consider selling minority stakes in mines, railroads and ports. Iron ore prices have tumbled to the lowest since at least 2009 as the largest suppliers, including Rio Tinto Group, expanded production just as economic growth slowed in China.

Australia's third-largest iron ore producer, which has US$7.2 billion in net debt, abandoned a previous plan to sell a stake in its infrastructure assets in 2013 after saying the offers it got didn't meet its objectives for value and terms. In March it sold US$2.3 billion of bonds after halting an earlier, larger offering amid the rout in commodity prices.

Largest Steelmaker Talks with the Chinese firms are at an early stage and may not result in a deal, the people said. Luke Forrestal, a spokesman for Fortescue, declined to comment. Representatives for Hebei Iron & Steel and Tewoo declined to comment.

Fortescue, which has a market value of US$4.1 billion, has held talks with Baosteel Group Corp and Japanese firms about selling a stake in some of its mines, people familiar with the matter said in June.

Hebei Iron & Steel, China's largest steelmaker by production capacity, produced 47.1 million metric tons of steel and booked sales of 280.6 billion yuan (S$62.2 billion) last year, according its website.

State-owned Tewoo, based in the northern Chinese port city of Tianjin, runs businesses including commodities trading, logistics, financial services and real estate. It had 114.8 billion yuan of total assets at the end of 2013, its website shows.

BLOOMBERG

Alibaba hires former Goldman banker Evans as president

AUG 4, 20158:41 PM

[BEIJING] Alibaba Group Holding Ltd has hired former Goldman Sachs Group Inc partner Michael Evans to oversee the e-commerce company's international expansion, a top priority as the firm looks beyond China to sustain its heady growth rates.

Mr Evans, who spent two decades at the investment bank in positions including vice chairman and head of Asia, has occupied a board seat at Alibaba since mid-2014, before the company held a record-setting public listing in New York.

Alibaba, by far the largest e-commerce player in China, said hiring Mr Evans signalled its intention to ramp up cross-border commerce in earnest after it spent years focusing on securing its domestic market position.

Top executives have long touted the idea that connecting increasingly wealthy Chinese consumers with, say, South American meat producers or European toy makers would generate billions in additional revenue for the firm.

Mr Evans, who once headed Goldman's equity underwriting arm, has no direct experience in e-commerce but is trusted by Alibaba's management, having known founder Jack Ma and vice chairman Joseph Tsai for years.

He will continue as a management director and lead Alibaba'growth strategy outside of China, reporting directly to Chief Executive Daniel Zhang, the company said. His position is newly created.

Mr Zhang said in a statement that globalisation is Alibaba Group's most important strategy for the coming decades.

He added that Mr Evans has been "a close advisor to Alibaba Group for many years, and we greatly value his deep knowledge of our business, his experience as a proven business builder and leader globally, and his more than 20 years of experience in China."

REUTERS

Tuesday, August 4, 2015