FILE PHOTO: A Jet Airways passenger aircraft prepares to land at the airport in the western Indian city of Ahmedabad August 12, 2013. REUTERS/Amit Dave/File Photo
March 15, 2019
By Suvashree Choudhury
MUMBAI (Reuters) – A consortium of lenders led by the State Bank of India (SBI) should reach a final resolution plan to rescue embattled Jet Airways in the next one week, an SBI official said on Friday.
Grappling with a debt of more than $1 billion, Jet has delayed payments to banks, lessors, vendors and staff. Lessors have grounded more than three dozen planes, forcing hundreds of flights to be canceled.
All the lenders are working toward a resolution with the “desire that this airline keeps running”, the official said, declining to be named as the matter was sensitive.
Jet, in February, said its board had approved a rescue deal which will make its lenders its largest shareholders as they convert part of their debt into equity and fix a near 85 billion rupee ($1.2 billion) funding gap.
But the plan, which also includes an equity infusion, debt restructuring and the sale and lease back of aircraft, needs approvals from several stakeholders, including major shareholder Etihad Airways.
Newspaper reports https://bit.ly/2u7QYGE, citing sources, on Friday said Etihad was unlikely to agree to the proposed debt resolution plan because of a disagreement over certain terms of founder Naresh Goyal’s shareholding.
Separately, SBI announced the launch of cardless cash withdrawals from its automated teller machines using the bank’s mobile app YONO. This will help minimize debit card-related fraud and theft, the bank said.
(Reporting by Suvashree Choudhury, writing by Abhirup Roy, Editing by Himani Sarkar)
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., March 13, 2019. REUTERS/Brendan McDermid
March 15, 2019
By David Randall
NEW YORK (Reuters) – The S&P 400 Mid-Cap index has surged to its best start to a year since 1991, both rewarding fund managers and forcing them to work harder to seek out bargains in a group that is now the most expensive part of the U.S. market based on their historical averages.
The rally in mid-cap stocks – companies with a market valuation between $2 billion and $10 billion – has come during a broad rally in global stock markets as investors price in a resolution in the trade talks between the United States and China and fewer interest rate hikes by the Federal Reserve.
Mid-caps are up 14 percent for the year to date and sport an average price-to-earnings ratio of 16.9 times forward earnings, for their highest valuation premiums to small-cap stocks since 2017, according to Bank of America Merrill Lynch research.
Yet fund managers from Janus Henderson, Hotchkis & Wiley, and Fairpointe Capital are among those who are still finding values by concentrating on financial, energy and media stocks and eschewing the high-priced real estate investment trusts and utility companies that make up nearly a fifth of the benchmark index.
“The window for the big bargain bin was the fourth quarter and that was about it,” said Kevin Preloger, a portfolio manager of the $3.3 billion Janus Henderson Mid Cap Value fund. “We’re looking for companies that have good balance sheets and good cash flow, but the tough part is reasonable valuations.”
Preloger’s fund is finding them in financial companies such as M&T Bank Corp and Hartford Financial Services Group Inc that are increasing their stock buybacks at the same time they have been beating analysts’ earnings expectations. Shares of M&T, for instance, are up 20.8 percent since the start of the year and trade at a forward price-to-earnings ratio of 11.8.
“Financials are the cheapest sector in the space, and their earnings are also growing,” Preloger said.
Stanley Majcher, a portfolio manager of the $1.4 billion Hotchkis & Wiley Mid-Cap Value fund, is buying into overlooked financial and energy stocks because he considers them less risky than utility companies or REITs with higher valuations.
“Energy is very out of favor and there’s a perception that it’s a risky business because oil prices are likely to be low for a long period of time because of the market share war between OPEC and the U.S.,” he said. “But we see low volatility of demand and more discipline on the supply side.”
Among its largest holdings, Majcher’s fund has several energy companies, including Whiting Petroleum Corp, Kosmos Energy Ltd and Ophir Energy PLC, according to Morningstar data, with mixed results for the year to date. Shares of Whiting are up 12.4 percent year-to-date, while shares of Ophir are up nearly 53 percent over the same time.
Thyra Zerhusen, a portfolio manager of the $2.6 billion AMG Managers Fairpointe Mid Cap fund, said her fund is finding opportunities in media stocks such as broadcast company Tegna Inc, which was spun off of Gannett Co, magazine and local broadcasting company Meredith Corp, and New York Times Co, all of which should see a significant boost in revenues from the 2020 presidential and congressional elections, she said.
“With everybody running for president, the political advertising goes to these smaller market stations. Newspapers are almost non-existent now,” except for the New York Times, which continues to grow its digital subscriptions, she said.
She is also adding opportunistic positions in companies such as Westinghouse Air Brake Technologies Corp, which completed its merger with the transportation unit of General Electric Co on Feb. 25. Shares of the company are up 2.9 percent year-to-date, and remain 35 percent below where they were trading six months ago.
“We’re trying to add stocks where there may be a short-term problem hitting the share price but the long-term outlook looks okay,” she said.
(Reporting by David Randall; Editing by Jennifer Ablan and Leslie Adler)
FILE PHOTO: Raindrops cover the bonnet of a BMW car in London, Britain, February 23, 2017. REUTERS/Stefan Wermuth
March 15, 2019
By Costas Pitas
LONDON (Reuters) – German carmaker BMW is continuing to prepare for a “worst-case scenario” no-deal Brexit after lawmakers voted to seek a delay to Britain’s exit from the European Union.
BMW builds over 15 percent of Britain’s 1.5 million cars, making Minis at a factory in Oxford and Rolls-Royce models at a southern English site in Goodwood in addition to more than 375,000 engines at its central English Hams Hall facility.
The firm said earlier this month that it could move some production out of Britain if the country does not secure an orderly departure from the European Union, another warning from a once soaring sector that is now reporting dips in investment, sales and output.
British lawmakers voted overwhelmingly on Thursday to seek a delay to Brexit, which had been due on Mar. 29.
“As a responsible employer, we must therefore continue to prepare for the worst-case scenario, which is what a no-deal Brexit would represent,” said a BMW spokesman.
“In order to prepare for a postponement of Brexit, the BMW Group is currently examining various scenarios. Preparations cover all key areas of our business including manufacturing, sales … customs processes, IT and logistics.”
BMW’s Mini and Rolls-Royce brands, Jaguar Land Rover and Honda – together accounting for around 55 percent of UK car output – all plan to shut their factories in April from between a week to up to a month in case of any disruption from a no-deal Brexit.
A delay would ruin such contingency plans as shutdowns are generally organized months in advance so employee holidays can be scheduled and suppliers can adjust volumes, making them hard to move.
(Reporting by Costas Pitas; Editing by Andrew MacAskill and Giles Elgood)
FILE PHOTO: A woman looks at fruits and vegetables at a market stall in Madrid January 29, 2013. REUTERS/Juan Medina/File Photo
March 15, 2019
BRUSSELS (Reuters) – Euro zone inflation edged higher as expected in February, the European Union’s statistics office confirmed on Friday, mainly because of more expensive services, food, alcohol an tobacco.
Eurostat confirmed its earlier estimates that consumer prices in the 19 countries sharing the euro rose 0.3 percent month-on-month for a 1.5 percent year-on-year gain, accelerating from 1.4 percent year-on-year in January.
The European Central Bank wants to keep inflation below, but close to 2 percent over the medium term, but inflation has been well below that target since 2013.
Finnish central bank chief Olli Rehn said the bank needed to review its policy since it failed to boost inflation back to target despite years of extraordinary stimulus.
The ECB has kept record low interest rates and pumped 2.6 trillion euros into the banking system through bond purchases and several rounds of ultra-cheap funding for banks.
Eurostat said price rises of services contributed 0.61 points to the overall year-on-year result in February, while food alcohol and tobacco added another 0.44 points and more expensive energy 0.35 points.
Without the volatile energy and unprocessed food components, or what the ECB calls core inflation and looks at in monetary policy decisions, prices grew 0.3 percent on the month and 1.2 percent in annual terms, the same as in January.
(Reporting By Jan Strupczewski)
FILE PHOTO: People look at an electronic board showing stock information at a brokerage house in Shanghai, China July 6, 2018. REUTERS/Aly Song
March 15, 2019
SHANGHAI (Reuters) – A rally that has made China’s stock market the world’s best-performing this year has fed a rush of leveraged bets in the country’s stock options market, prompting regulators to warn investors of rising risks.
Growing interest in China’s equity option market came after a contract soared as much as 19,267 percent in a single session last month.
Data from the Shanghai Stock Exchange shows that the number of open contract positions in the ChinaAMC 50 ETF exceeded 3 million for the first time on record this week as investors hope to take advantage of the equity bull run to land huge profits.
An option gives investors the right to buy or sell the underlying asset at a set price on a specific date. The ChinaAMC 50 ETF tracks the SSE 50 index, dubbed China’s “nifty fifty index”, which has risen more than 20 percent this year.
Interest has been concentrated in a call option expiring March 27 that gives investors the right to buy the ETF at 3 yuan ($0.4467), in effect a bet that the ETF will jump at least an additional 9.5 percent this month from its closing price of 2.74 yuan on Friday.
If the ETF does not reach the option’s strike price of 3 yuan by the expiry date, the option will be rendered worthless.
Zhang Yi, an options analyst at Everbright Futures Co Ltd, said that a buoyant stock market has driven investor hopes of making a quick fortune.
“Some investors are jumping into the options market, without understanding the basics of this instrument, such as what the time value of an option is.”
The speculation has prompted a warning from the Shanghai Stock Exchange.
In a statement on March 8, the exchange noted large volumes, open positions, and price fluctuations on option contracts, and warned investors of the risk that the time value of the option would rapidly diminish ahead of its expiry.
The price of the 3 yuan call option expiring March 27 plunged more than 22 percent on Friday to 0.0052 yuan.
Despite the recent frenzy, Zhang said the words of caution from regulators and stringent risk-management rules in place mean that that there is little risk of a dangerous option bubble.
“China’s option market is still small, and has huge potential to grow, as there’s huge demand for this tool for risk-management,” he said.
(For a graphic on ‘Option frenzy’ click https://tmsnrt.rs/2O4LB4g)
(Reporting by Andrew Galbraith and Samuel Shen; Editing by Kim Coghill)
FILE PHOTO: Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. Picture taken December 7, 2018. REUTERS/Stringer
March 15, 2019
By Dmitry Zhdannikov
LONDON (Reuters) – The oil market will flip into a modest deficit from the second quarter of this year, with OPEC possessing a hefty supply cushion to prevent any price rally in case of possible supply disruptions, the International Energy Agency said on Friday.
The IEA, which coordinates the energy policies of industrialized nations, kept its 2019 oil demand growth forecast unchanged at 1.4 percent, or 1.4 million barrels per day.
Solid non-OPEC oil output growth led by the United States should ensure demand is met, the IEA said.
The IEA said the market could show a modest surplus in the first quarter of 2019 before flipping into a deficit in the second quarter by about 0.5 million bpd.
“At the same time, (OPEC) production cuts have increased the spare capacity cushion. This is especially important now as economic sentiment is becoming more pessimistic and the global economy could be entering a vulnerable period,” the IEA added.
The agency said it was particularly concerned about a possible further decline in production in Venezuela, where output has stabilized at 1.2 million bpd in recent months.
It said the degradation of Venezuelan power system, vital for oil output, was such that it could not be sure if the fixes were durable.
(Reporting by Dmitry Zhdannikov; Editing by Dale Hudson)
A man stands in front of an “integrity wall” at a consumer goods expo which opens a day ahead of World Consumer Rights Day, in Dalian, Liaoning province, China March 14, 2019. REUTERS/Stringer
March 15, 2019
By Brenda Goh and Pei Li
BEIJING/SHANGHAI (Reuters) – China is gearing up to skewer companies it accuses of treating consumers badly in a yearly event that has previously named and shamed firms from Apple to Nike Inc.
The state-run China Central Television (CCTV) will on Friday evening broadcast its annual consumer rights show, similar to CBS network’s “60 Minutes” in the United States, that tends to be a mix of undercover reports and song-and-dance routine.
Known as “315”, in reference to global consumer rights day on March 15, the show is usually greeted with trepidation by local and foreign brands, that have, in recent years, set up public relation teams in advance or handed out freebies around the day to take the edge off any possible criticism.
“This is the one day of the year that all eyes are focused on the consumer issue,” said James Feldkamp, Shanghai-based CEO of consumer research and testing firm MingJian.
“Some people may say it is losing its bite then suddenly it will have a big scandal that will have a big impact.”
This year, the show will grab more attention as it comes at a time when Beijing is locked in a trade war with the United States and has heavily criticized Canada over its decision to detain the CFO of Huawei Technologies on U.S. request.
Beijing has also continued to be critical of how companies, mainly international brands, refer to Taiwan in their marketing material or product package. Beijing considers the self-ruled, democratic island a wayward province.
Names of companies that will be targeted in CCTV’s consumer rights show are not disclosed ahead of the broadcast.
In fact, to maintain secrecy, people on the show have to sign a non-disclosure agreement, while producers are kept in a hotel and not allowed to go home a couple of months ahead of the screening, according to a former “315” executive.
It is unclear whether the show has had an impact on company sales, but it has drawn apologies from Volkswagen, whose engine defects in the Touareg SUV it criticized last year, as well as from Apple, whose China after-sales service it scrutinized in 2013.
CCTV did not respond to Reuters’ requests for comment.
Thanks to the fast-expanding middle class in the world’s second-largest economy, its consumers have become a powerful spending force with the ability to make or break brands.
Companies are willing to do anything to avoid being named, the former “315” executive said, on condition of anonymity as he was not allowed to speak about the show to media.
The show, first broadcast in 1991, has its own limitations on what can be exposed, the executive added.
Normally food-safety issues that could trigger public fear, giant state-owned enterprise or Chinese medicine firms are off limits, the person told Reuters.
“We are all staying on alert,” said a public relations officer at a major Chinese consumer tech brand.
(Reporting by Brenda Goh and Pei Li, additional Reporting by Josh Horwitz; Editing by Himani Sarkar)