Apple said to market euro bonds adding to US$53b debt binge

Apple Inc is selling bonds in euros for the second time, extending a $53 billion debt binge since 2013, as it raises funds to buy back shares and locks in borrowing costs near record lows. 

PHOTO: REUTERS

SEP 10, 20156:12 PM

[LONDON] Apple Inc is selling bonds in euros for the second time, extending a $53 billion debt binge since 2013, as it raises funds to buy back shares and locks in borrowing costs near record lows.

The iPhone maker plans to sell debt maturing in 12 years at about 95 basis points more than benchmark rates, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified. That compares with a 45 basis-point premium when it sold 1.4 billion euros (US$1.6 billion) of similarly dated securities in November as part of its first non-dollar debt sale, data compiled by Bloomberg show.

Apple has sold bonds around the world to diversify funding as it works to return US$200 billion to investors by March 2017 and expands its global retail network. While the cost of funding has increased since Apple's debut euro sale, US companies can still raise capital in the single currency at a 2.07 percentage- point average discount to borrowing in dollars, according to Bank of America Merrill Lynch indexes. 

"It's slightly more expensive than last year's euro bond sale, but you're still paying less than 2 per cent for 12 years," said Geraud Charpin, a portfolio manager at BlueBay Asset Management in London. "It's pretty cheap money. What else do you want to ask for?"

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The Cupertino, California-based company is also selling securities maturing in 2024 that will pay about 70 basis points above benchmark rates, according to the person. It paid a 30 basis-point premium for eight-year debt in November, data compiled by Bloomberg show.

The company will use proceeds from the bond sales for general corporate purposes, as well as to pay shareholder dividends, boost working capital and fund capital expenditure, acquisitions and repayment of debt, according to the person.

Apple officials in Europe were unavailable for immediate comment on the sale when contacted by phone.

Similarly rated corporate debt in euros, with an average maturity of eight years, is quoted at about 49 basis points more than benchmark rates, according to a Bank of America Merrill Lynch index. For 13-year maturity debt, quotes are about 73 basis points above. When Apple held its first euro bond sale on Nov 4 premiums were 34 basis points for eight years and 53 basis points for 13 years.

Investment-grade corporate debt in euros yields an average 1.37 per cent, compared with the record low 0.85 per cent in March, according to Bank of America Merrill Lynch data.

Apple on Wednesday unveiled a wide-ranging lineup of new products, including updated iPhones, a revamped TV set-top box for playing games and watching videos, and a bigger iPad designed for business customers. 

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Google won't have easy ride back into China

Sundar Pichai, senior vice president of products for Google Inc., speaks during the Google I/O Annual Developers Conference in San Francisco, California, U.S., on Thursday, May 28, 2015. 

PHOTO: BLOOMBERG

SEP 10, 20152:17 PM

[SINGAPORE] Google CEO Sundar Pichai has made no secret that he wants to get back into China via Google Play, the app store for its Android mobile operating system.

But it's unlikely to be a smooth ride.

Google largely pulled its services out of China five years ago after refusing to continue self-censoring its search results. Since then, it has maintained a limited presence in the world's biggest Internet market, but most of its services, including Play, have been rendered borderline inaccessible.

"Google needs to be in China, period," says Andy Tian, CEO of Asia Innovations, a Chinese app developer and former Google executive. "Once in China, they can expand into other services. They need a beachhead, and the beachhead is Google Play." Google declined to comment on reports it plans to ramp up its Play store in China this year. Instead, it pointed to comments Pichai has made about exploring how to bring Google Play to China.

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But Mr Tian and others say Google has lost basically all ground in most of its major services, especially search and video streaming, to Chinese players such as Internet giants Baidu , Tencent, Alibaba and Qihoo 360 . All have built their own products and services to replace or even surpass Google's offerings.

In China and elsewhere in Asia, the centres of gravity in mobile have shifted away from app stores as the point of control to applications like messaging, which act as gateways for third parties to provide services.

Tencent's WeChat, a messaging app originally similar to WhatsApp, has become a digital Swiss army knife, allowing its 600 million monthly active users to play games, book cabs and make payments, among many other things.

But China is too big a market for Google to ignore. Apple complies with local laws and made US$13.2 billion last quarter in Greater China, which includes the mainland, Hong Kong and Taiwan, making it its second-biggest market.

Some in the industry doubt whether Google can use the Play store to help get its other services into China as domestic rivals are now well established and Google would have to comply with Chinese law. That would mean storing all data in China, and meeting information access and censorship requests, a thorny issue, particularly if the US government gets involved.

Others say focusing on Google Play may make things easier. Chris MacDonald, a business ethics expert at Ryerson University in Toronto who oversaw a case study about Google's operations in China while at Duke University, says Chinese regulators will see Play as less threatening than Search and Gmail, reducing the frequency of government-led probes. "It's highly unlikely the Chinese government is going to come asking, 'Did anyone download Tetris?'" he said. "If Google doesn't have any highly private information, it can't be asked for highly private information."

China will this year become the world's largest mobile gaming market by revenue, earning more than US$6 billion, says Peter Warman, CEO of Dutch mobile analytics company Newzoo, which analyses data from its Chinese partner TalkingData. Up to 90 per cent of money spent on mobile goes to games, he said.

Google Play is available in China, but reaches only 21 million of an estimated 800 million Chinese mobile users, Warman said. The primary app stores of Internet giants Qihoo, Tencent and Baidu account for two thirds of the market.

These players are unlikely to give away that advantage.

And handset manufacturers like Huawei and Xiaomi have their own app stores which not only bring in revenue but enable them to control how their devices look and feel, at least in China. "The fact of the matter is that Google is late to China. Maybe almost too late," says Shiv Putcha, who covers mobile in Asia for IDC, a consultancy.

Indeed, some question whether China needs a single Google-controlled app store.

Rohit Dadwal, Managing Director Asia Pacific at the Mobile Marketing Association (MMA), says his organisation has worked with mobile players and app stores on standards and guidelines that help brands measure the success of their ads, a key source of revenue. "It's not the Wild West," he said. "It's a diversified, fragmented market, but each niche provides value." For some local developers having a single market place would be a boon, since it would free them from the restrictions and quirks of app stores. Piracy and malware are problems too: a study by Tsinghua University, Microsoft Research and China's Ministry of Science and Technology found that only a quarter of apps on local app stores are safe.

But, says Mr Tian and others, it would make most sense for foreign developers trying to break into China's market. Of the revenue generated by the top-100 games in China, only a tenth goes to publishers outside China, says Newzoo's Warman. "If they could pull it off it would be good for the ecosystem, but it's going to be tough," said Adam Morley, Beijing-based product manager for Chinese social app Nice. "You have a lot of players with skin in the game in a position of power."

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Dell says to invest US$125b in China over five years

Computer maker Dell Inc will invest US$125 billion in China over the next five years, its CEO said on Thursday, as the firm continued to expand in the world's second-largest economy. 

PHOTO: REUTERS

SEP 10, 20151:53 PM

[TAIPEI] Computer maker Dell Inc will invest US$125 billion in China over the next five years, its CEO said on Thursday, as the firm continued to expand in the world's second-largest economy.

The world's third-largest maker of personal computers said the investment would contribute about US$175 billion to imports and exports, sustaining more than one million jobs in China. "The Internet is the new engine for China's future economic growth and has unlimited potential," Chief Executive Michael Dell wrote in a statement. "Dell will embrace the principle of 'In China, for China' and closely integrate Dell China strategies with national policies," Dell said, adding that the company would continue to expand its research and development team in China.

Dell announced in 2010 it planned to spend US$250 billion on procurement and other investments over the next 10 years in China, its second largest market outside the United States.

The company ranked third in global PC shipments in the second quarter after Lenovo Group Ltd and Hewlett-Packard Co, according to research firm International Data Corp.

Sing dollar stabilises, interest rates ease as markets remain volatile

By

Siow Li Senlisen@sph.com.sg@SiowLiSenBT

SEP 10, 20158:01 PM

THE Singapore dollar (SGD) has stabilised somewhat, recovering from the year's low reached on Tuesday, and with that short-term interest rates have also eased.

On Thursday, the SGD rallied to S$1.4155 against the US dollar (USD), off the Tuesday low of S$1.4297 in highly volatile trade along with other Asian currencies, as China worries continue to give markets the willies.

The three-month swap offer rate (SOR) also eased to 1.46209 per cent on Wednesday, off Tuesday's high of 1.56409 per cent. The SOR is used to price commercial loans.

Sentiment on Asian currencies is highly volatile as the market deals with China worries and upcoming US Federal Reserve interest-rate normalisation, said Eugene Leow, DBS Bank economist.

Chinese Premier Li Keqiang said on Thursday the country's economic transformation is fraught with difficulties but sought to reassure international investors.

"This is going to be a painful and treacherous process," Mr Li said in a speech to a World Economic Forum meeting in the north-eastern city of Dalian.

"So ups and downs in economic performance are hardly avoidable," he added, calling that "natural" during a time of change, reported Reuters.

"China is not a source of risk for the world economy but a source of strength for global growth," Mr Li said, stressing that it accounted for about 30 per cent of world economic expansion in the first half of this year.

"The pullback in SOR can be attributed to a slight strengthening of the SGD," said Mr Leow.

Further downside to the SOR can be achieved in the short term if USD/SGD consolidates further, he said. But for the longer term, SOR rates will likely still take direction from where USD rates head towards, he added.

The markets also cannot decide when the Fed will begin hiking interest rates. Some think it could be next week at a scheduled meting, others say global uncertainties will push the event to December.

Commerzbank technical analyst Axel Rudolp said the SGD is expected to stabilise around the S$1.4170 region but if "it breaches S$1.4297, the next high is S$1.45 . . . perhaps by the end of the year . . . (in the) short term it should stabilise, though".

Year-to-date, the SGD has fallen some 7 per cent against the greenback, making it the fifth worst Asian currency performer.

The worst is the Malaysian ringgit, down 23 per cent, followed by the Indonesian rupiah, 16.4 per cent, Thai baht, 9.9 per cent and Korean won at 8.4 per cent.

      

China's yuan jumps offshore in suspected intervention

China's yuan shot higher in offshore markets on Thursday on suspected intervention by Chinese state banks, putting the offshore rate on track for its biggest daily gain on record. 

PHOTO: REUTERS

SEP 10, 20156:35 PM

[HONG KONG] China's yuan shot higher in offshore markets on Thursday on suspected intervention by Chinese state banks, putting the offshore rate on track for its biggest daily gain on record.

The intervention caught the market wrong-footed and was seen by traders as another bold gesture by Chinese authorities to shake out speculators and dampen expectations for further depreciation in the yuan following its devaluation in August.

The offshore yuan spot rate strengthened more than 1 per cent to 6.39 per dollar from 6.4698 earlier in the day as the suspected intervention prompted those betting on yuan depreciation to cover their positions. Offshore traded volumes spiked as much as 10 times their monthly average, Thomson Reuters data showed.

The jump took the offshore yuan rate to its strongest level since early August when the central bank surprised markets by devaluing the currency nearly two per cent. "The big picture is that policy makers are doing everything they can do to dampen expectations that the yuan will depreciate much," said Mark Williams, an economist at Capital Economics in London. "There's been rumours before of state entities acting on behalf of the central bank offshore. It shows that policymakers are unwilling to relax control of key variables that now include the offshore currency." The PBOC did not respond to calls requesting comment.

As a result of the intervention, the long-standing spread between the onshore and offshore rates narrowed sharply, while dollar currency forwards dropped.

The wide gap had implied that offshore markets were pricing in further depreciation in the currency, an expectation China has been trying to suppress.

While the central bank can guide the currency onshore by setting a daily reference rate, the offshore market is not bound by that marker.

The cost of keeping the yuan firm against the dollar even as neighbouring currencies have depreciated has been expensive for Beijing, leading to a record drop in the country's foreign exchange reserves in August of close to US$100 billion.

This was a major reason behind the devaluation in August, analysts have said.

The offshore yuan discount to the onshore yuan spot market narrowed to 0.47 per cent after the suspected intervention, from 1.56 per cent on Wednesday. "In the very extreme moment of the buying, we saw a rare reverse market quote in the Chinese currency which is an indicator that the buyers wanted to push up the value of the yuan at any cost," said the head of local currency trading at a US bank in Hong Kong.

A "reverse market quote" refers to when the bid price is higher than the offer price, which traders said pointed to intervention. "There are some Chinese banks steadily buying large amounts of yuan," said a trader at an Asia commercial bank in Hong Kong. "But even if it is intervention by the central bank, I don't think it will change the expectation on the depreciation of yuan." Onshore traders in the past have said the central bank often instructs major state-owned banks to intervene onshore, buying or selling yuan to control the market exchange rate. Traders said a sharp depreciation in the yuan in early 2014 was engineered by the central bank to shake out speculators.

Traders said they believe the central bank intervened strongly in the onshore market in the run-up to the devaluation in August, causing intraday price volatility to evaporate. But since the devaluation, strong depreciation pressure has been in evidence in forwards markets and the offshore spot market.

REUTERS