|Bid||8.00 x 800|
|Ask||20.80 x 800|
|Day's range||20.60 - 20.80|
|52-week range||14.19 - 24.39|
|Beta (5Y monthly)||N/A|
|PE ratio (TTM)||1.65|
|Forward dividend & yield||N/A (N/A)|
|1y target est||N/A|
(Bloomberg Opinion) -- Big spending numbers are being thrown around in China, once again. This time, it’s trillions of yuan of fiscal stimulus on all things tech. The plans are bold and vague: China wants to bring technology into its mainstream infrastructure buildout and, in the process, heave the economy out of a gloom due only partly to the coronavirus.But will this move the needle for China to achieve some kind of technological dominance? Or increase jobs, or boost favored companies? Not as much as the numbers would suggest, and possibly very little. A country covered in 5G networks makes for a tech-savvy society; it's less clear that this money will boost industrial innovation or even productivity.Over the next few years, national-level plans include injecting more than 2.5 trillion yuan ($352 billion) into over 550,000 base stations, a key building block of 5G infrastructure, and 500 billion yuan into ultra-high-voltage power. Local governments have ideas, too. They want data centers and cloud computing projects, among other things. Jiangsu is looking for faster connectivity for smart medical care, smart transportation and, well, all things smart. Shanghai’s City Action Plan alone is supposed to total 270 billon yuan.By 2025, China will have invested an estimated $1.4 trillion. According to a work report released Friday in conjunction with the start of the National People’s Congress, the government plans to prioritize “new infrastructure and new urbanization initiatives” to boost consumption and growth. Goldman Sachs Group Inc. analysts have said that new infrastructure sectors could total 2 trillion yuan ($281 billion) this year, and twice that in 2021. Funding is being secured through special bonds and big banks. The Shanghai provincial administration, for instance, plans to get more than 40% of its needs from capital markets, and the rest from central government funds and special loans. Thousands of funds have been set up in various industries since 2018, and some goals were set forth in previous plans.Policymakers are aggressively driving the fiscal stimulus narrative through this new infrastructure lens. Building big things is a tried and true fallback in China, from the nation’s own road-and-rail networks to its most important soft-power foreign policy, the belt-and-road initiative to connect the globe in a physical network for trade. It’s less obvious that this will work for technology. The reality is that the central-government approved projects add up to only around 10% of infrastructure spending and 3% of total fixed asset investment. The plans lack the focus or evidence of expertise to show quite how China would achieve technological dominance. Thousands more charging stations for electric cars won’t change the fact that the country has been unable to produce a top-of-the-line electric vehicle, and demand for what’s on offer has tanked without subsidies. With their revenues barely growing, China’s telecom giants seem reluctant to allocate capital expenditures toward the bold 5G vision. China Mobile Ltd. Chairman Yang Jie said on a March earnings call that capex won’t be expanding much despite the company being at the outset of a three-year peak period for 5G investments. Analysts had expected it to grow by more than 20%, compared to the actual 8.4%.Laying this new foundation for the economy, which includes incorporating artificial intelligence into rail transit and utilities, requires time, not just pledged capital. It’s hard to see the returns any time soon, compared to investments on old infrastructure. These projects are less labor intensive, so there’s no corresponding whack at the post-virus jobless rate that would help demand. State-led firms that could boast big profits from sales of cement and machinery on the back of building projects, for instance, can’t reap money as visibly from being more connected.Spending the old way isn’t paying off like it used to, either. Sectors such as automobiles and materials, big beneficiaries of subsidies and state funding, have seen returns on invested capital fall. The massive push over the years gave China the Shanghai maglev and a vast network of trains and roads. But much debt remains and several of those projects still don’t make money. Add in balance-sheet pressures and spending constraints, and every yuan of credit becomes less effective. There’s also expertise to consider. Technological dominance may require research more than 5G poles. China’s problem with wide-scale innovation remains the same as it has been for years: It always comes from the top down. Beijing has determined and shaped who the players will be. Good examples are the 2006 innovative society plan and Made in China 2025, published in 2015, that intended to transform industries and manufacturing, and have had mixed results.China is unlikely to get the boost from tech spending that it needs to solve present-day problems, especially in the flux of the post-Covid-19 era. Ultimately, the country will just fall back on what it knows best: property, cars, roads and industrial parks. The economy is still run by construction, real estate and manufacturing. Investors should think again before bringing in anything but caution.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The coronavirus has disrupted the world in very large ways. While that battle has been waged, however, another event has almost been missed: the birth of a new kind of fiat currency, which could forever reshape the relationship between money, economic power and geopolitical clout. An official Chinese digital yuan, more than five years in the making, is now in pilot runs to slowly start replacing the physical legal tender. If the experiment succeeds, this new cash, valued the same as the familiar banknotes bearing Mao Zedong’s image, will become the world’s first sovereign token to reside exclusively in the ether.The trials are taking place just as the blame game around the coronavirus deepens mistrust between the U.S. and China. With President Donald Trump warning that Washington would respond if Beijing intervenes against protests and democratic movements in Hong Kong, chances of a detente from last year’s trade war are fading.Outside the People’s Republic, the big question is if the digital yuan is a challenger to the dollar. Within China, though, there’s a more mundane explanation for why Beijing wants to turn banknotes in circulation into virtual tokens. Chinese consumers have bypassed both computers and credit cards to embrace mobile payment apps, which have gone on to spawn large money-market funds investing in high-yielding wealth-management products. This has led to the accumulation of risks in opaque shadow banking. Bringing them out in the open requires a leg up for traditional lenders in payments, an area where financial technology has left them far behind. The digital yuan, which will be pushed out to consumers via banks, seeks to restore this missing balance; it will allow authorities to “regulate an overstretched debt market more effectively,” says DBS Group Holdings Ltd. economist Nathan Chow.Still, there’s also a power play. It isn’t a coincidence that China’s project picked up speed last year as Facebook Inc. announced Libra. The proposed stablecoin promised to hold its value against a basket of major official currencies rather than gyrating wildly like Bitcoin. When it looked like regulators in the U.S. and elsewhere would nix this synthetic global cryptocurrency, the Libra Association curbed the scope of its undertaking. But the idea of “a regulated global network for cost-effective retail payments,” as described by Singapore state investor Temasek Holdings Pte, a new member of Libra’s Geneva-based governing body, remains alive. For Beijing to shake the dollar’s hegemony, it has to pre-empt Silicon Valley from taking the pole position. Hence the hurry for China’s test runs. According to media reports, half the May transport subsidy for Suzhou municipal employees will be in the form of digital currency electronic payment, or DCEP, as it’s being called in the absence of a catchier moniker. The pilot plan in Xiong’an, a satellite city of Beijing, includes coffee shops, fast food, retailers, theaters and bookstores, Goldman Sachs Group Inc. has noted. The other trials are reserved for Chengdu and Shenzhen. Thanks to Alipay and WeChat Pay, 80% of Chinese smartphone users whip out their mobiles to make payments, more than anywhere in the world. To them, the DCEP wallets being provided by the big four state banks should seem much the same. But there are differences. In this new system, a low-value transaction can go through even if both parties are offline. Also, this is sovereign liability, safe if an intermediary goes bankrupt. The big four lenders — and later fintech firms — will distribute the tokens, but the funds won’t reside in bank accounts. This will be unlike existing payment apps that only move one institution’s IOUs to another. Beijing was going to launch the digital money even before the pandemic. However, adoption could be faster now because of people’s fear of catching an infection from handling cash. Also, it’s possible to trace in real time whether an anti-virus subsidy, given out in tokenized form, is reaching the target. Once it has, the tracking would be “turned off” to ensure corporate and household spending stays anonymous, Goldman says. Strictly speaking, though, the anonymity of cash will no longer exist. Authorities can look under the hood of pseudonymous transactions for unwanted activity, an outcome far removed from the vision that drove libertarians (and money launderers) to cryptocurrencies in the first place. With the outbreak giving legitimacy to intrusive physical contact tracing, the case for financial tracing gets even stronger. Exchange of digital yuan between customers and merchants will pop up on a centralized ledger, and go through far more swiftly than in Bitcoin-style setups that rely on widely distributed ledgers of asset ownership. Every nation projects power when others desire its money — something that costs the home country nothing to produce. But as with any digital network, the sovereign tokens that take off first could end up winning disproportionately. The digital yuan could find customers overseas, especially in places where China is making belt-and-road investments. For one thing, they wouldn’t have to pay banks fat fees for running the $124 trillion-a-year business-to-business international transfers market.By distributing digital currency through banks, China has given its big institutions a chance to match the payment technology of fintech rivals. But it’s possible that a central bank in another country would bypass intermediaries altogether, potentially making the state the monopoly supplier of money to retail customers. That, as I wrote in December, could upend banking. The digital yuan may have started modestly, but it might pave the way for changes that are both ambitious and long outlast the coronavirus. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Argentina will improve the terms of its offer to restructure $65 billion of overseas bonds after sinking into default when it failed to make an interest payment.Economy Minister Martin Guzman didn’t give any details on his plans in an interview at his office on Friday evening, but he said discussions with creditor groups continue. The latest proposals from bondholders have shrunk the gap between the parties’ positions, he added.The South American nation, burdened by inflation near 50% and a shrinking economy even before the pandemic hit, missed the final deadline for $500 million of interest payments on Friday. The government has said Argentina needs $40 billion in debt relief to set it back on the path to sustainable growth, and officials have been in talks with bondholders for two months.“Our intention is to amend the offer based on the negotiations so that it has a structure compatible with the restrictions we face, as well as bondholders’ preferences and objectives,” Guzman said. “The message we’ve received from bondholders is that they’re interested to continue talks.”Argentina extended the deadline for creditors to consider its debt restructuring offer until June 2. Key bondholders have committed not to sue for immediate repayment on the defaulted debt, allowing talks to continue on friendlier terms, Guzman added.Read More: Argentina’s Stumble to Default Caps Brutal Four-Year DeclineArgentina’s Exchange Bondholder Group said the government invited some of its members as well as representatives from other creditor committees to sign a non-disclosure agreement for further talks.‘Good News’Jorge Arguello, the nation’s ambassador to the U.S., said in a statement late Saturday that formal negotiations are ongoing.“I understand there is still an important distance to cover but they clearly are on a positive course,” he wrote. “The good news is that all sides are at the table trying to find a solution.”Argentina has demanded a three-year moratorium on payments, sharp cuts to interest rates and a reduction in the principal owed. People familiar with the matter said earlier this week that there was a gap of about 20 cents on the dollar between what the government was offering and what creditors want.The government remains flexible on the specifics of the deal and could use sweeteners to make it more appealing to creditors, according to Guzman.“There’s flexibility on the combination of parameters,” he said. “While the counteroffers we received last week are closer than the first ones we received, they’re still far from what Argentina can sustain.”Bonds were little changed Friday, with most securities trading between 30 and 40 cents on the dollar, as investors had largely anticipated that Argentina wouldn’t make the overdue interest payments. The notes had rallied from record lows in recent weeks amid some optimism an accord can be reached in coming days and weeks.Investors are resigned to a certain amount of losses, and the government has tried to keep things friendly by avoiding rhetoric that demonized creditors, a hallmark of the country’s battles with hedge funds after its 2001 default.Argentina’s default at the turn of the century led to 15 years of costly court battles with creditors. It’s unlikely we’ll see a repeat of that, according to Alberto Ramos, the head of Latin American economics at Goldman Sachs Research.“Given all these signals that all these things seem to be progressing, I don’t think anyone will litigate immediately,” Ramos said. “There will be an understanding with bondholders and life goes on.”(Updates with statement from Argentina’s ambassador beginning in seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Brazil’s financial assets have fallen so far, so fast that you could think it’s time to buy. But the truth is few experts are ready call a bottom.Latin America’s largest economy no longer seems like a bargain for investors, as a bungled response to the pandemic turned the country into the world’s fastest-growing virus hotspot. On Friday, the country overtook Russia and is now second in number of cases in the world, trailing only the U.S.Two health ministers have exited amid clashes with President Jair Bolsonaro, whose government has been engulfed in a political crisis that has pried open the door to a potential impeachment. That has left an ambitious reform agenda, which included an overhaul of the tax system, all but dead. With no reforms in sight and more spending to fight the virus, fiscal concerns resurfaced.“There’s no clear catalyst” for a rebound yet, said Paulo Pereira Miguel, a partner at Julius Baer Family Office in Sao Paulo. “Anyway, an improvement in the external scenario, with a rebound in the third quarter, would certainly have a positive impact on the Brazilian real.”The real has fallen almost 30% this year, outpacing any other currency in the world, and stocks lost almost half of their value in dollar terms amid the slew of local woes. The yield curve steepened to reflect the fiscal deterioration risk, while sovereign dollar bonds were more resilient, backed up by the nation’s $340 billion international reserves.For the currency, the outlook is especially bearish as the central bank slashes interest rates to stimulate growth, which reduces its carry appeal. The real reached an unprecedented 5.97 per dollar earlier this month and Deutsche Bank AG says it could drop further to as much as 6.5 per dollar amid Brazil’s worst recession ever.“Being bearish on the Brazilian real is a consensus view,” said Alvise Marino, a strategist at Credit Suisse AG in New York who expects the currency to reach 6.20 per dollar. “There’s no way around that.”Stocks are also attracting negative bets. Sao Paulo-based Persevera Asset Management, which is run by former executives at HSBC Holdings Plc, is shorting Brazilian equities as it forecasts the Ibovespa index could drop 28% from current levels before rebounding.“The economic legacy of this crisis will be more destructive than what the market is currently pricing in,” said Guilherme Abbud, a founding partner and chief investment officer at the firm. He says the gross domestic product may shrink by as much as 10% this year.Many local funds have been favoring the U.S. stock market on a relative basis. Verde Asset Management, whose flagship fund is one of Brazil’s best-known hedge funds, said in a recent letter to clients that the country’s “mist of uncertainties“ have been hindering investment decisions.Infighting among federal and state officials, not to mention within Bolsonaro’s own cabinet, have left the nation without a comprehensive strategy to slow the spread of the virus. Markets are also on edge because of allegations by former Justice Minister Sergio Moro that Bolsonaro tried to interfere in the federal police. While talk of impeachment is just that for now, analysts fret that new evidence may come to light.“President Bolsonaro’s purge of government officials and the resignation of Sergio Moro, a top justice minister, elevated political risk to a level we are uncomfortable with,” Brendan McKenna, a currency strategist at Wells Fargo & Co. in New York, wrote in a note.Despite all the uncertainties, some still see potential drivers for stocks. Goldman Sachs recommended investors buy the benchmark Ibovespa index, calling equities “an ideal bounceback candidate” as they benefit from growing appetite for risky assets and a rebond in commodities. Morgan Stanley strategists led by Guilherme Paiva said the historically low rates should continue to push more money into equities.Concern is mounting, meantime, that stricter lockdowns may hurt an economy that’s already expected to contract 5.1% this year. While the U.S. and European nations take their first tentative steps to reopen, Schroders Plc says Brazil may be the last economy in the world to do so.On Friday, Brazil reported confirmed Covid-19 cases had reached 330,890, more than doubling over the past two weeks. The virus has killed over 21,000 people in the country.“The Brazilian economy has been hit hard by the Covid-19 crisis,” said Katrina Butt, a senior Latin America Economist at AllianceBernstein in New York. “The uncertainty of economic reopening globally is likely to increase demand for dollars against most currencies, especially emerging-market ones, in the near term.”(Adds new covid cases starting in deck headline)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Argentina is on the verge of officially being declared in default just four years after a wave of optimism lured billions of dollars in investment.The country’s ambassador to the U.S. said it wouldn’t make $500 million of overdue payments whose grace period expired today until it can reach a restructuring deal with creditors, likely marking Argentina’s ninth default on international debt in its 200-year history. Government officials had already said they didn’t have the money to pay and have been in talks with investors holding $65 billion of overseas obligations.Argentina has suffered a severe fall from grace among international investors, a disappointment after President Mauricio Macri came to power promising sweeping reforms to normalize an economy with a history of boom and bust cycles overseen by leftist governments. His efforts lured pledges for billions of dollars of direct investment to the country while supporting a torrent of bond sales, including $2.6 billion of securities that didn’t mature for 100 years.But Macri wasn’t able to accomplish what he promised, hampered by a combative congress and an inability to clamp down on inflation. The leftist Alberto Fernandez took over as president in December and began steps to restructure, eventually pushing for $40 billion of debt relief.“The more things change in Argentina, the more they stay the same,” said Jared Lou, a money manager at William Blair Investment. “The idea that large external debt is a solution to fiscal problems in Argentina historically hasn’t worked out well for anyone.”Argentina is demanding a three-year moratorium on payments, sharp cuts to interest rates and a reduction in the principal owed. After two months of negotiations and a deadline extension to May 22, the government and its biggest creditors couldn’t reach a deal. People familiar with the matter said there was a gap of about 20 cents on the dollar between what the government was offering and what creditors want.“Argentina will postpone this payment until an agreement is reached with creditors and new terms are agreed upon on the interest to be paid on said bonds,” Jorge Arguello, the ambassador, wrote in a newsletter sent by the embassy.Bonds were little changed Friday, with most securities between 30 and 40 cents on the dollar, as investors had largely anticipated that Argentina wouldn’t make the overdue interest payments. The Emerging Market Traders Association recommended that the country’s foreign law securities “trade flat” starting May 25 until further notice. The bonds had rallied from record lows in recent weeks on optimism creditors and the government could reach a deal.Nothing may change immediately after the default. While bondholders have the option now of going to court to sue for full repayment, they’re likely to keep seeking a settlement as long as the sides don’t reach an impasse. Lawsuits are expensive, and Argentina has a track record of fighting to the bitter end.But the missed payment does trigger cross-default clauses in its other bonds, and Argentina now has a two-month window to “cure” the situation before holders of those bonds will also get the chance to sue.There’s some optimism an accord can be reached in coming days and weeks. Investors are resigned to a certain amount of losses, and the government has tried to keep things friendly by avoiding rhetoric that demonized creditors, a hallmark of the country’s default battle with hedge funds earlier this century.Argentina said this week it would extend the deadline for creditors to consider its debt restructuring offer until June 2 as both sides need more time reach a deal. The government received two formal counteroffers from creditors last week.One of Argentina’s three major creditor groups said Friday it objected to the government’s decision to default in a statement, calling it “detrimental to the Argentine people.” Still, the bondholders added they would continue to participate in talks.“Given all these signals that all these things seem to be progressing, I don’t think anyone will litigate immediately,” said Alberto Ramos, the head of Latin American economics at Goldman Sachs Research. “There will be an understanding with bondholders and life goes on.”(Updates with statement from the Emerging Markets Trader Association in eighth paragraph, and with a creditor statement in the twelfth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Voodoo SAS’s backers have kicked off the sale of a stake in the French mobile game developer, people with knowledge of the matter said.Marketing materials with an overview of the business have been sent to potential buyers, the people said, asking not to be identified as the information is private. The sellers are seeking indicative bids by early June, according to the people. A deal could value Voodoo at more than 1.5 billion euros ($1.6 billion), one of the people said.The decision to push ahead with the sale comes at a time when the coronavirus pandemic is keeping more people indoors and on their phones. That is helping to shield the mobile gaming industry from the virus’s broader economic impact, which is slowing dealmaking in other sectors.Voodoo is majority owned by its co-founders Alexandre Yazdi and Laurent Ritter. In 2018, they sold a stake in the business to a Goldman Sachs Group Inc. private equity fund called West Street Capital Partners VII.The company’s shareholders have been gauging interest from potential investors including rival game developers Ubisoft Entertainment SA and Zynga Inc., Bloomberg News reported in April. The process is at an early stage, and there’s no certainty the deliberations will lead to a transaction, the people said.A representative for Goldman Sachs declined to comment. An official at Voodoo didn’t immediately respond to a request for comment.Voodoo, which was started in 2013, makes easy-to-play games including “Helix Jump,” “Roller Splat” and “Snake VS Block.” Many are free to download with optional in-game purchases. The company’s games have more than 300 million monthly active users and have generated in excess of 2 billion downloads, according to its website.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Pandemic-induced market volatility and warnings from Wall Street that tax rates are bound to rise have more Americans preparing to move money from traditional individual retirement accounts into Roth IRAs.It’s an attempt at tax arbitrage. With traditional IRAs, a saver is required to begin making annual withdrawals and paying income taxes on them at age 72. If tax rates are likely to be higher then, the thinking goes, why not pay taxes on some of the money held in tax-deferred accounts now, at today’s presumably lower rate, and let it grow tax-free in a Roth?That option has become more appealing this year, as stock market declines have shrunk the value of accounts, along with the tax bill for converting assets. Fidelity Investments said Roth conversions surged 76% in the first quarter from a year ago.The strategy can also make more sense for those in lower tax brackets due to job losses or salary cuts. As well, the CARES Act allows those required to take annual distributions from traditional IRAs to skip it this year, which can provide wiggle room within their tax bracket for maneuvers like a partial Roth conversion.Daniel Lash at VLP Financial Advisors in Vienna, Virginia, did Roth conversions for about 10 clients in late March and early April, as equity markets were at their lows for the year.“We moved mostly small- and mid-cap U.S. stock funds, and since completing the conversions the funds have increased significantly, but now on a tax-free basis in the Roth,” he said.The S&P 500 has surged 31% since bottoming out on March 23.Some people assume they’ll be in a lower tax bracket when they retire. But a growing number of Wall Street luminaries predict that personal or corporate tax rates will probably rise as massive government stimulus programs swell federal budget deficits. They include BlackRock Inc. Chairman Larry Fink, Bridgewater Associates’ founder Ray Dalio and Goldman Sachs Group Inc. chief U.S. equity strategist David Kostin.In addition, the Republican tax cuts enacted in late 2017 are scheduled to expire after 2025, reverting to previous levels. Today’s top marginal tax rate of 37% looks modest next to top marginal rates during other turbulent periods of American history. In 1918, during the last pandemic, the top marginal tax rate was 77%. In 1932, near the height of the Great Depression, rates on top earners rose to 63% from 25%. The highest top marginal tax rate on record came in 1944, during World War II, at 94%.There was $11 trillion in traditional and Roth IRA accounts at the end of 2019, or more than a third of the U.S. retirement market, according to the Investment Company Institute. More than 36 million U.S. households own traditional IRAs funded with pretax money on which they’ll pay taxes on future withdrawals. About 25 million Americans have contributed after-tax money to Roth IRAs.“Backdoor Roths”While people with high incomes are precluded from opening Roth IRAs, conversions are a different story. The income caps where the ability to open a direct Roth IRA end -- $139,000 of modified adjusted gross income for individuals and $209,000 for married couples -- don’t apply to conversions, which are sometimes called “backdoor Roths.”Many planners are prepared but waiting to pounce if there’s another market pullback. Some are holding off until a client’s taxable income picture is more complete later in the year. That allows them to fine-tune the Roth conversion amounts to ensure clients stay in lower marginal brackets. But sometimes, even if a conversion makes long-term financial sense, clients may not act -- reducing a cash cushion to pay taxes is never pleasant, and during uncertain times cash can bring valuable peace of mind.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Billionaire Jack Ma’s Ant Group generated about $2 billion of profit in the December quarter, underpinned by its push to help Chinese lenders dole out money to the country’s under-banked consumers.The finance giant generated about $721 million in profit for Alibaba Group Holding Ltd. during the period, according to the e-commerce giant’s earnings filing. Based on Alibaba’s 33% equity share, that would roughly translate to $2 billion in profit for Ant. A representative for Ant declined to comment.Ant is now valued at about $150 billion, more than Goldman Sachs Group Inc. and Morgan Stanley combined. The company entered the banking arena as a disruptor, raising alarm bells for many of the nation’s 4,500 lenders. But about two years ago, it flipped the idea on its head, and began turning China’s lenders into clients by helping them provide loans and selling them cloud computing power.Ant’s sprawling network of more than 900 million active users means it can help China’s state-back lenders reach consumers in smaller cities that want credit. Outstanding consumer loans issued through Ant may swell to nearly 2 trillion yuan by 2021 according to Goldman Sachs analysts, more than triple the level two years ago, Bloomberg has reported.Ant has aspirations to go public, though it hasn’t decided on a timeline or listing destination.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Goldman Sachs Group Inc. and BlackRock Inc. predict Europe’s most indebted companies will shift their money raising toward bonds and reduce reliance on loans in the post pandemic world, echoing the last financial crisis.The move to bonds will largely reflect investor demand as fixed income funds have seen seven consecutive weeks of inflows since the credit-market crash earlier this year. At the same time, issuance of collateralized loan obligations -- bonds backed by leveraged debt -- has slowed to a trickle, hobbling a market that typically absorbs half of new loans to European companies.“Steadily we’re going to see an increase in issuance, and a number of companies that have relied more on the loan space will look to access high yield bonds,” said Michael Marsh, head of credit finance for Europe, the Middle East and Africa at Goldman Sachs. “The bond market is a little more robust right now, it’s less constrained than the loan market.”Recent deals suggest the trend has already started. Two borrowers that have made previous use of both markets -- BMC Software Inc. and Merlin Entertainments Ltd. -- raised bonds in preference to loans in recent weeks.It’s a change from the pre-Covid market when a healthy CLO market drove loan demand. Only eight new European CLOs have priced since the start of March, the same number often seen in a single month until recently.More DiversityAnother driver of the switch to bonds is the deteriorating credit quality of corporate borrowers following the economic shock of a global pandemic. S&P Global Ratings had cut the credit scores on 173 issuers in the EMEA region by May 20 since the start of the current crisis.A rising number of firms being stripped of their investment-grade status will contribute to the net supply of high-yield bonds outpacing loans this year, according to research by Barclays Plc. The bank now forecasts the volume of available bonds in 2020 will increase by between 40 billion euros and 45 billion euros, up from the 35 billion euros it originally predicted. Loan supply will rise by 20 billion euros, down from the previously expected 30 billion euros.Corporate borrowers that have suffered a downgrade on account of pressures on their business from the pandemic may find the bond market more receptive than loans because it’s bigger, with a more diverse investor base.“Lower-rated borrowers are more likely to choose bonds as the more diverse return profiles of bond investors makes it easier to find a price for the risk,” said James Turner, who heads European leveraged finance at BlackRock, overseeing bond, loan and CLO strategies.“European borrowers can alternate between loans and high-yield bonds, but during times of stress, issuers can lean more heavily on the high-yield market.”The shift may hand more power to investors. Loans have a flexibility that can play to the advantage of borrowers because they can be easily repaid or repriced if the issuer thinks it can get a better deal. But bonds’ usually have a non-call period written into their structure. This allows investors to lock in coupons for several years without the risk of getting repaid and offered new debt with worse terms as soon as conditions improve for the borrower.That’s a valuable feature in today’s market, so much so that some companies raising loans are adopting it. Apcoa Parking AG, for example, which can’t repay its new loan for one year.Some companies are still choosing loans. Insurance broker Financiere CEP SASU launched a 725 million-euro buyout loan this week and others are raising small liquidity facilities. And bonds may not suit those with urgent financing needs that have never yet tapped that market, since it can take first-timers around two months to prepare accounts and documentation.But for those that need large sums of money whether for acquisitions, refinancing or to boost liquidity, raising as much as possible from high-yield could be the best option.“Arrangers will be thinking about market capacity. If the company can raise dollars or euro high-yield bonds, that’s helpful as the European loan market has taken the longest to recover,” said Sarah Mackey, EMEA head of leveraged capital markets at UBS Group AG.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- India’s central bank cut interest rates in an unscheduled announcement on Friday and kept the door open for further easing to help an economy it expects will contract for the first time in more than four decades.Governor Shaktikanta Das reduced the benchmark repurchase rate by 40 basis points to 4%, the lowest since the measure was introduced in 2000, and pledged to take “whatever measures are necessary” to support the economy. The monetary policy committee, which met ahead of its scheduled meeting in early June, retained its “accommodative” stance, implying it could ease policy further.The rate cuts along with the central bank’s move to allow borrowers more time to repay loans are expected to provide relief to India’s stressed businesses and consumers, many of whom were left disappointed with the fiscal stimulus announced recently. Companies are struggling in the face of a collapse in demand, with millions of jobs already shed in an economy where consumption is the backbone of growth.“Going forward, we will continue to be vigilant and we will take whatever measures are necessary to meet the Covid-related challenges which are ahead of us,” Das said. “The RBI will continue to remain vigilant and in battle readiness to use all its instruments and even fashion new ones, as recent experience has demonstrated, to address dynamics of the unknown future.”The central bank now expects the economy to contract in the fiscal year through March 2021, Das said, after activity was brought to a virtual halt amid the coronavirus pandemic and measures taken to contain the outbreak. Goldman Sachs Group Inc. is predicting a 45% annualized decline in GDP in the quarter through June from the previous three months, which it said will result in the economy shrinking 5% for the full fiscal year.The yield on the most-traded 2029 bonds fell 11 basis points to 5.93% as of 1:23 p.m. in Mumbai, while that on the new 10-year notes dropped 3 basis points. The rupee weakened and stocks reversed gains to halt a three-day rally ahead of a long weekend.Read More: Bonds Rally in India After RBI Announces Emergency Rate Cut“The off-cycle move may have caught the markets off-guard, but it shouldn’t be a total surprise given recent dismal activity indicators,” said Prakash Sakpal, an economist at ING Groep NV in Singapore. “GDP is headed for a sharp contraction, as much as 5% year-on-year on my estimate, in the current quarter.”Das’s comment that the RBI could turn to new policy instruments signals his willingness to do more to bolster growth. The central bank has already pumped in more than $50 billion into the financial system and announced targeted liquidity operations to support some sectors of the economy.What Bloomberg’s Economists SayThe Reserve Bank of India’s surprise 40 basis point cut to its policy repo rate at an unscheduled meeting on Friday isn’t much in the context of the massive disruptions to economic activity as a result of the virus-induced lockdown. We doubt it will do much to spur a faster recovery in demand.Click here to read the full report.Abhishek Gupta, India economistCalls are also rising for the RBI to buy government bonds directly from the government to help finance a widening fiscal deficit and surging borrowing. The RBI has been prevented from monetizing the deficit since a law was passed in 2006 banning its participation in the primary market.Shilan Shah, a senior economist at Capital Economics Ltd. in Singapore, said there’s likely to be further interest rate cuts and liquidity steps, like long-term repo operations, and perhaps a reduction to the cash reserve ratio. Deficit financing was an option “as long as the boundaries of it are very strict and well-defined so that it doesn’t spook markets,” he said.The RBI has now lowered its benchmark rate by a cumulative 115 basis points so far this year after also cutting rates at an emergency policy meeting on March 27.Das also outlined the following measures on Friday:The reverse repurchase rate was cut to 3.35% from 3.75%The moratorium on bank loans was extended for another three monthsRules for withdrawal of funds by states were relaxedLimit on banks’ group exposure to companies raised to 30% from 25%Pre- and post-shipment credit rules for exporters easedForeign portfolio investors given an additional three months to meet investment needsOn inflation, the central bank expects the headline number to ease in the second half of the year and revert toward its medium-term target of around 4%. Core inflation, which strips out the volatile food and fuel prices, is likely to stay subdued, it said.With fiscal pressures mounting and a credit rating downgrade looming, the central bank may have to shoulder more of the stimulus burden. While Finance Minister Nirmala Sitharaman last week announced an economic package of about 21 trillion rupees ($277 billion), or 10% of GDP, the actual fiscal cost amounted to just about 1% of GDP.“With limited space for fiscal expansion, the central bank will have to do the heavy lifting,” said Manish Wadhawan, founder at Serenity Macro Partners.(Updates market reaction in sixth paragraph and adds comment from economist in 10th.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The Chinese government abandoned its decades-long practice of setting an annual target for economic growth amid the storm of uncertainty unleashed by the coronavirus pandemic, and said it would continue to increase stimulus.Speaking Friday morning at the National People’s Congress in Beijing, Premier Li Keqiang delivered an annual policy address that laid out a renewed focus on maintaining employment and investment. Against a backdrop of escalating tensions with the U.S., Li said Beijing remains committed to implementing the terms of the ‘phase one’ trade deal.With more than $500 billion in infrastructure bonds to be issued this year and more monetary easing on the horizon, China is trying to cement a fragile domestic recovery without indulging in the kind of debt blowouts seen in the U.S. and Europe. The world’s largest exporter is therefore still reliant on other countries reining in the pandemic and on a reboot of global trade.“We have not set a specific target for economic growth this year,” Li said, speaking in the Great Hall of the People. “This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment.”Shifting away from a hard target for output growth breaks with decades of Communist Party planning habits and is an admission of the deep rupture the pandemic has caused. Economists surveyed by Bloomberg expect China’s economy to expand just 1.8% this year, its worst performance since the 1970s.At the same time, Li gave a precise figure for the targeted budget deficit, widening it to more than 3.6% of gross domestic product. Including the issuance of special bonds, that brings a broader measure of the deficit to more than 8%, according to Bloomberg Economics.Analysts including Goldman Sachs Group Inc. economist Yu Song said the package was less aggressive than expected. Market sentiment was overshadowed by the announcement Friday that Beijing would impose national security legislation on Hong Kong, risking further confrontation with the U.S.The CSI 300 Index fell 2.3% on Friday, its worst reaction to the opening of the country’s annual National People’s Congress since the stock benchmark started in 2005.What Bloomberg’s Economists Say...“Setting a target in such an uncertain economic environment would have been risky. Abandoning the decades-long tradition relieves the government of the straitjacket the annual target placed on economic policy. The challenge now will be to effectively guide expectations in the absence of the GDP target.”Chang Shu and David Qu, Bloomberg EconomicsFor the full note click hereLi said the government is setting a target for urban job creation of more than 9 million jobs, lower than the 2019 target of around 11 million, and a target for the urban surveyed unemployment rate of around 6%, higher than 2019’s goal, according to the document.The government’s official measures don’t capture the full extent of unemployment caused by the pandemic, which has hit both manufacturing and services hard. With jobs and income growth vital for the unelected Communist Party’s political legitimacy, stabilizing employment has become Li’s first priority.“We will make every effort to stabilize and expand employment,” Li said. “We will strive to keep existing jobs secure, work actively to create new ones, and help unemployed people find work.”Reflecting recent controversy over the ‘phase one’ trade deal with the U.S. signed earlier this year, before the pandemic broke out, Li said China will work with the U.S. to implement the agreement.The wider budget deficit target implies a significantly larger shortfall than 2019’s target of 2.8%. Greater spending on efforts to restart the economy and control the spread of coronavirus will be funded by issuing 1 trillion yuan ($140 billion) in sovereign debt.To help finance infrastructure investment, local governments will issue 3.75 trillion yuan in local special bonds this year, up from 2019’s quota of 2.15 trillion. Economists had forecast issuance of as much as 4 trillion yuan.The government’s language on monetary policy was kept basically unchanged, with the stance remaining “prudent,” as well as “flexible” and “appropriate.” The English-language report said new monetary policy tools would be developed to “directly stimulate the real economy.”“It is crucial that we take steps to ensure enterprises can secure loans more easily and promote steady reduction of interest rates,” according to the report. Li added that money supply will be guided “significantly” higher this year and that reserve ratios and interest rates will continue to be cut.Key leaders sat in two rows behind Li’s podium, well spaced and without face masks. Officials behind were more closely packed and wearing masks, as were the hundreds listening in the hall. The Congress represents the centerpiece of China’s political calendar, though it has a rubber-stamp role. The meeting was delayed more than two months by the virus shutdowns.Li detailed measures including continued implementation of VAT cuts, and a further 500 billion yuan in tax and fee reductions. The target for consumer price inflation was set at 3.5%, higher than the usual ceiling and a reflection of continued high food-price gains.Analysts said that while more stimulus was announced, the government’s ambitions for growth remain limited given the dangers of another run up in debt. China borrowed heavily to stabilize the economy after the 2008 crisis, and is taking a markedly different tack this time. At the same time, rising unemployment may force the government’s hand.“I think the central government would like local governments to play a much more active role in relieving domestic unemployment and boosting domestic consumption,” Michael Pettis, a finance professor at Peking University, said Friday on Bloomberg Television. “The problem is, local governments are indebted up to their eyebrows. There’s really not much room for them significantly to increase debt.”(Updates markets in eighth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Tencent Holdings Ltd.-backed Missfresh is on the verge of closing $500 million of new financing to quicken expansion after the Covid-19 outbreak bolstered demand for fresh groceries, people familiar with the matter said.Beijing Missfresh Ecommerce Co., which counts Goldman Sachs Group Inc. and Tiger Global Management among its backers, recently wrapped up the second tranche of a funding round that will raise a total of about $300 million and another 1 billion to 1.5 billion yuan ($211 million) of Chinese currency funding, the people said, requesting not to be named because the matter is private. A third and final tranche will be completed soon but the financing has so far valued the grocery delivery startup at about $3 billion before investment, the people said.A company representative declined to comment.Missfresh -- one of a clutch of startups Tencent backed during China’s internet boom -- is competing in a cash-burning sector with deeper-pocketed corporations including Alibaba Group Holding Ltd. Consumers sheltering at home during the Covid-19 pandemic have reinvigorated the once-difficult online groceries arena, and Missfresh now needs ammunition to attack a Chinese online fresh foods sector that could reach $178 billion by 2025.The company, founded in 2014, has more than 1,500 mini-warehouses that promise deliveries as fast as within an hour, it said in a statement in July. Missfresh had nearly 25 million monthly active users as of May last year. It handled 10 billion yuan ($1.5 billion) of transactions in 2018 and had generated positive cash flow by the end of that year, the company said at the time.The funding will help tide Missfresh over during tough times in the venture capital market. VC funding plummeted at the start of 2020 with investors stranded at home and increasingly risk-averse. Excluding the latest effort, the Beijing-based startup has raised nearly $900 million via eight funding rounds from investors including Jeneration Group and Genesis Capital, the company has said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil posted its longest streak of gains in more than a year, buoyed by output cuts across the globe that have whittled away at a stubborn supply glut.Futures climbed 1.3% in New York. U.S. supply data showed crude inventories fell for a second week after climbing steadily since January and stockpiles at the storage hub at Cushing, Oklahoma declined by a record. OPEC and its allies are reducing output and IHS Markit Ltd. says U.S. oil producers are also curtailing about 1.75 million barrels a day of existing production by early June.“There is a lot of narrative out there that the rebalancing is going to come quicker and will be more aggressive than we thought,” said Bart Melek, head of commodity strategy at Toronto Dominion Bank.Oil’s rally this month into the $30-a-barrel range raises the possibility that shale producers may slowly start to turn on the taps again after futures plunged into negative territory in April, leading to layoffs across the energy industry, a slowdown in drilling and deep declines in the number of oil rigs in operation. Goldman Sachs Group Inc. said U.S. shale will emerge from the current slump as a lower growth and more cash generative industry, while consolidation will concentrate the number of players in the sector.While the large decline in stockpiles at Cushing, the delivery point for WTI futures, indicates the supply glut is starting to ease, a surprise increase in U.S. gasoline inventories last week reflects underlying demand weakness in the world’s largest economy. The economic outlook remains uncertain with another 2.44 million Americans filing for unemployment last week, Labor Department figures showed.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- In the aftermath of the new coronavirus, New Jersey’s finances have been a blur of uncertainty, save for Governor Phil Murphy’s commitment to make record payments to the state’s 800,000-member public pension system.Beyond that, Murphy is counting on an undisclosed amount of borrowing and cash from the federal government to make up for $10.1 billion in lost revenue. Any spending adjustments or tax increases will be disclosed Friday, the deadline for his treasurer to present revised spending plans to the legislature.“It’s not pretty,” Murphy said on Thursday of the updated budget, without being specific. “That’s the reason we have to borrow money, unfortunately. It’s also the reason we need direct federal cash assistance.”Murphy’s commitment to a $3.8 billion payment this fiscal year to the pension fund, the worst-funded among U.S. state governments, puts him on track to be the first New Jersey governor since the mid-1990s to make all promised contributions. It also has him depending partly on long-term borrowing to fill budget gaps in a state that has a constitutional ban on such maneuvers.The practice is frowned upon within public finance, and may pose a downgrade risk to a credit rating that’s second-worst, behind Illinois, among U.S. states.“He’s talking about creating a longer-term liability to take care of an operating budget, which is a cardinal sin within budgeting,” said Howard Cure, managing director for municipal bond research at Evercore Wealth Management, which holds New Jersey debt and has $8.3 billion of assets under management.Cutting CostsCalifornia, New York and Pennsylvania are slashing budgets, just as more than half of U.S. states -- including New Jersey -- did a decade ago, during the Great Recession. In New Jersey, a bipartisan group of lawmakers has approved a public-worker furlough plan with potentially hundreds of millions of dollars in savings.But Murphy has criticized the measure, saying “we don’t need to be raising the unemployment ranks” with more than 1 million people -- one in nine New Jerseyans -- newly out of work and collecting benefits.The state lost 757,700 jobs in April, said Robert Asaro-Angelo, the state labor commissioner, and the jobless rate reached 15.3%, higher than the 14.7% national figure. From March 20-May 16, the state has paid $3.4 billion in unemployment benefits.In the face of such numbers, Murphy named pensions as a priority. “We will make the quarterly -- we’ll make the pension payments,” he said on May 14.Union BackingThat commitment earns the governor praise from Communication Workers of America, the state’s largest public-employees union, whose endorsement and political-action committee contributions helped elect Murphy, a former Goldman Sachs Group Inc. director, in November 2017. The pension system had just 39.7% of assets needed to cover liabilities through June 2019, compared with 38.4% a year earlier, according to a state audit.“These are the pensions that hundreds of thousands of people depend on,” Hetty Rosenstein, the union’s state director, said in an interview. “We put them last for 25 years.”Senate President Stephen Sweeney, New Jersey’s highest-ranking state lawmaker, said in a May 20 interview that Murphy has no choice but to make the pension payments because ratings agencies will impose an “automatic downgrade if he doesn’t.” Amid the economic crunch, now is the time to make cost-saving changes to the pension system that Murphy has resisted, said Sweeney, his fellow Democrat.Downgrade FearAt the same time, Murphy’s plan for borrowing is “going to be an automatic downgrading, too,” Sweeney said. Plus, it’s backed by collections from taxes that have tanked in recent weeks.The governor is faced with “not good choices,” Sweeney said.Murphy had started to build a surplus -- the state’s first in more than a decade -- and committed to record pension payments when the virus struck. New Jersey trails only New York as the state hardest-hit by the virus, with 10,843 deaths and 151,472 cases through Thursday.Murphy on March 21 closed nonessential businesses and ordered social distancing -- a life-saving step, he says, that also sent tax revenue “falling off the cliff.” Days later, he froze $920 million in spending, including municipal aid and property-taxpayer relief, citing the virus’s “unpredictable and rapidly changing” economic effects.In April, Murphy’s administration proposed the New Jersey Covid-19 Emergency Bond Act to authorize $5 billion in general-obligation bonds, and to access unspecified amounts from short-term notes and the U.S. Federal Reserve’s new $500 billion Municipal Liquidity Facility.“Absent the borrowing permitted by the bond act, the state will experience a cash-flow low point in July and a very stressed liquidity position in late August due to the economic impact of the Covid-19 pandemic,” state Treasurer Elizabeth Muoio wrote in an April 17 bond disclosure statement.Filling HolesIn a May 13 statement, Muoio disclosed a projected $10.1 billion revenue shortfall. For 2020, revenues of $36.7 billion were expected to be $2.75 billion short, about 7% less than anticipated. For 2021, the state now expected $33.8 billion in revenues, for a $7.34 billion gap, or 18%.The next day at a Trenton press briefing, Murphy said the only alternative to borrowing was “enormous cutting of services and headcount from the very people we need at the point of attack right now, in the biggest health-care crisis in the history of our state and country.”The last time the state was in the grip of a national fiscal crisis was the Great Recession. Midway through fiscal 2009, then-Governor Jon Corzine, a Democrat and former Goldman Sachs senior partner, proposed $800 million in spending cuts; public-worker pay freezes; and reductions in pension payments and municipal and school aid.David Rousseau, Corzine’s treasurer, commended Murphy’s commitment to the pensions -- but said he personally “would have pushed for freezing the March and June pension payments to give more flexibility and liquidity.” And he would have considered cutting Murphy’s planned $4.6 billion payment for next year to fend off budget reductions and new debt, he said.Delaying or reducing the pension payment would alleviate the need for borrowing, which may be challenged by lawmakers. Murphy has also proposed issuing general obligation bonds, despite a constitutional requirement that voters must approve such borrowing unless there’s “an emergency caused by disaster or act of God.”The nonpartisan Office of Legislative Services has said that borrowing without voter approval to cover Covid-19 costs is permissible, but it can’t be used to supplement revenue.Murphy is relying too much on borrowing, said Regina Egea, who was former Republican Governor Chris Christie’s chief of staff and now heads the Garden State Initiative, an affiliate of the State Policy Network, a non-profit group that advocates for conservative economic practices.“We had spending problems that were not helpful for the New Jersey economy or the cost of living in the state,” Egea, referring to Murphy’s fiscal priorities, said in an interview. “More borrowing and avoiding that problem longer just makes everything worse.”Christie, who had promised to rely more on “pay-as-you-go” spending for the state’s Transportation Trust Fund highway-improvements account, instead borrowed $6.6 billion, 100 times more than the cash he put into it, from 2011 to 2016. The state’s lackluster economy, high debt and skipped or reduced pension payments all contributed to a record 11 credit downgrades by the three major ratings companies during Christie’s eight years in office.Murphy on April 21 saw his first downgrade, by Fitch Ratings, to A-, seventh-highest, with a negative outlook, matching the levels and outlooks assigned by S&P Global Ratings and Moody’s Investors Service. If revenue doesn’t match Murphy’s planned borrowing repayments, the governor has pledged to raise property and sales taxes.“It’s a tough environment to raise taxes,” said Cure, the Evercore managing director. Atop the nation’s highest property levies, New Jersey residents are subject to the $10,000 limit on the state and local taxes they can apply against federal taxes.Funding pensions is going to be hard for Murphy as the state potentially faces economic recession, Cure said.“Investors were skeptical about New Jersey fully funding the pensions during good times,” Cure said. “This obviously makes it much more difficult. He’s really just replacing potentially one liability with another.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Even a global pandemic hasn’t shaken optimism in one of the most volatile industries.As Covid-19 dominates headlines and sparks billion-dollar share moves, biotech analysts are still pitching massive returns in companies that have nothing to do with developing a drug or vaccine for the disease.Wall Street analysts expect 105 of the 209 members of the Nasdaq Biotechnology Index to double over the next 12 months, data compiled by Bloomberg show. With the index trading just off a record high, many of the Street’s biggest bulls favor companies in areas like women’s health and cancer.Macrogenics Inc., Cytokinetics Inc. and Akebia Therapeutics Inc. are among drugmakers that have doubled so far this year. But the boom-or-bust nature of drug development has burned investors in other stocks, even after analysts piled on praise. Sage Therapeutics Inc.’s failed depression drug study, AnaptysBio Inc.’s eczema flop and Genfit’s NASH woes in recent months have wiped out millions in market value.Here are some of Wall Street’s biggest biotech calls right now:TherapeuticsMD Inc.Cantor Fitzgerald’s Louise Chen has a $13 target on TherapeuticsMD, or more than 10 times where the stock has been trading lately. The women’s health company has struggled to balance spending with the need to promote products such as its Annovera birth-control ring. Seven of nine analysts that follow the stock recommend buying shares and their average target implies a 574% surge in the next year. At the same time, money managers like Deerfield Management Co. and Frontier Capital Management Co. have thrown in the towel on their bets this year. And JPMorgan this week cut its rating on TherapeuticsMD to a hold equivalent, citing Covid-19 disruptions.Evolus Inc.Chen also carries the price target with the second-highest implied return in the Nasdaq Biotech Index. Her call that Evolus will reach $35 in a year suggests a gain of 770%. She has maintained that target since June 2018 despite the stock’s 85% drop since then, data compiled by Bloomberg show. The “performance beauty company” has struggled to meet early expectations for sales of its wrinkle treatment -- and Botox rival -- Jeuveau, after the pandemic closed practices.Chen didn’t respond to requests for comment about her targets.Precigen Inc.JMP’s Jason Butler likes Precigen’s emerging cancer-therapy pipeline ahead of key data readouts later this year. JMP has served as a lead manager for each of the company’s last two share offerings. Precigen’s value has been cut in half over the past year. The stock has two buy ratings and two holds, according to data compiled by Bloomberg.Sage Therapeutics Inc.Goldman Sachs analyst Salveen Richter expects Sage to regain levels last seen before a December trial flop in major depressive disorder. Her price target on the stock is $190, more than double the Street average of $73 and about five times the current price. It is worth noting that Goldman has acted on each of the company’s offerings since going public in 2014 and Richter has recommended shares since picking up coverage four years ago. She is focused on new data for the depression drug that are expected later this year and in 2021.Atara Biotherapeutics Inc.The $70 target that Canaccord Genuity analyst John Newman has for Atara implies almost 400% upside and is nearly double the expectations for his nearest peer, Mizuho’s Salim Syed. The stock’s peak was $65.56, in mid-2015. Newman’s model focuses on the company’s lead program for post-transplant lymphoproliferative disease. Data for Atara’s earlier-stage multiple sclerosis drug will be posted Friday afternoon ahead of the European Academy of Neurology’s congress, which is virtual this year. Newman says promising results there could also spark a gain in the shares.Unity Biotechnology Inc.Syed’s call for Unity to be worth $33 -- compared to about $7 currently -- stands out on Wall Street. Syed has kept that same target since starting coverage in September 2018 despite the stock’s 61% slide. This long-term bet hasn’t helped Syed’s overall track record -- his calls have lost 16% of their value in the past two years compared to a 3.1% drop for peers, data compiled by Bloomberg show. Syed says the second half of the year is “catalyst-heavy” for Unity and he expects investor interest to pick up in the coming months.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- It’s going to take months for oil demand in the world’s third-biggest market to get back to pre-virus levels as India faces its deepest recession ever in the wake of its near two-month lockdown.Once the engine of global oil demand growth, India’s fuel consumption collapsed by as much as 70% at one stage last month as it embarked on one of the world’s most stringent nationwide quarantines. As the lockdown eases, it’s now running at about 40% below last year’s levels and could take until the end of 2020 to get close to full recovery, according to executives at the country’s state-owned fuel retailers.The stuttering rebound in India’s oil use stands in contrast to China’s, where demand is all but back at levels last seen before Beijing imposed a lockdown to fight the coronavirus outbreak. That’ll temper some optimism around a faster-than-expected tightening of the oil market that’s helped push prices back to $35 a barrel.“Demand is reaching 60% to 70% of normal, but it will take some time to get to pre-Covid sales,” said Mukesh Kumar Surana, chairman of Hindustan Petroleum Corp. “Over a period of two to three months, we should get back to 80% of normal sales. Beyond that, it will be slow.”The country consumed about 4.6 million barrels a day in May last year, which means demand probably stands at about 2.8 million barrels a day now, according to data compiled by Bloomberg, based on estimates by the executives. Gasoline demand is still about 47% below the same time last year, while diesel consumption is about 35% lower, they said. Jet fuel was still a massive 85% weaker, they said.Vehicles used to queue up outside Ajay Bansal’s gas station in Delhi’s bustling heart all day. But since Prime Minister Narendra Modi imposed the world’s most disruptive stay-at-home order on March 25, he says his customers more or less vanished.“Daily sales plummeted to 10% after the lockdown began,” said Bansal, who’s also the president of All India Petroleum Dealers Association. “Vehicles have now started trickling in since easing of some restrictions, but normalization will take a long time.”The lockdown of more than 1.3 billion people has taken a massive toll on India’s economy. Goldman Sachs is forecasting the deepest recession ever, with the economy shrinking by an annualized 45% in the second quarter before rebounding in the third quarter.India extended its nationwide lockdown until May 31 but has eased restrictions in certain sectors to boost economic activity. Inter-state travel will be allowed with permits, while public transport, along with malls, cinemas, schools, gymnasiums and tourist spots will remain closed.R. Ramachandran, director of refineries at India’s second biggest fuel retailer Bharat Petroleum Corp., sees fuel demand reaching about 80% to 85% of normal in the next three to four months. He’s reluctant to make predictions beyond that as the full extent of the lockdown’s economic impact is yet to be seen.“Only time will tell and we will need to wait,” he said.The oil market is frantically trying to gauge if the world’s major demand centers are replicating the recovery in Chinese consumption, which has helped power a remarkable rebound in crude prices after the catastrophic drop below zero last month. Brent futures are back above $35 a barrel and physical differentials surging as the world’s biggest producers stick to their historic pledge to curtail supplies.While it’s a slow process in India, there are some signs of recovery. Sales of diesel, mainly used in transport and industries and accounting for 40% of India’s total oil demand, jumped 75% in the first half of May compared with the same period in April. The executives are also expecting gasoline consumption to accelerate quickly as people returning to work choose their own cars or taxis over public transport.Gasoline use could return to pre-Covid level in two to three months, according to M. Venkatesh, managing director at Mangalore Refinery and Petrochemicals Ltd. “People would prefer to use private vehicles rather than public transport.” He expects it will take until August or September for diesel demand to reach about 80% to 90% of its pre-Covid level.Trucking, which accounts for the majority of diesel consumption in India, is still facing logistical and financial constraints. About 70% of the transport sector remains frozen, according to All India Motors Transport Congress, the largest body of transporters in India representing almost 10 million truckers.“It is highly unlikely that the economy will return to normal any sooner than 8-10 months,” said Naveen Kumar Gupta, secretary general of the congress. “Poor demand will result in poor production and industrial output, which will further impede utilization of truck fleet. There is extreme financial pressure on the small operators who are highly fragmented and unorganized. If urgent relief measures are not taken, the day is not far away when the transport sector will not be able to function.”Commercial vehicles -- which include trucks, small cargo vehicles and buses -- account for 80% of India’s diesel consumption, according to Senthil Kumaran, oil markets consultant at Facts Global Energy. Long-distance travel is being severely impacted by remaining border closures between states and districts, so diesel demand will remain under pressure throughout the second half of 2020, he said.Restrictions on air travel and a reluctance among the public to fly are also weighing on jet fuel demand. About 45% of aircraft traffic occurs to and from five major international airports, all of which are located in the so-called red zone areas that are still under more severe restrictions. While Kumaran expects India to “slowly open up the borders for international flights from July onwards,” jet fuel demand is unlikely to get a major boost as passengers will continue to shy away from air travel, he said.In a move that could lift jet fuel sales, India said on Wednesday that it will allow airlines to restart domestic flights from May 25. However, the decision caught most of the country’s airlines off guard as the short notice makes it harder for them to prepare for operations. Only a limited number of flights will be permitted initially, and fares must adhere to lower and upper limits set by authorities as long as the pandemic persists, India’s civil aviation ministry said in an order posted on its website on Thursday.The International Energy Agency forecasts that the nation’s fuel demand will return to year-ago levels by the fourth quarter. The Paris-based body sees it declining 8% on an annual basis in 2020 with diesel and gasoline consumption likely to drop about 12% and jet fuel about 18%, according to its monthly oil market report released last week.“Indian oil products demand will remain weak over the next few months,” said Sandra Octavia, analyst at Energy Aspects. “Road transport is expected to remain lower year-on-year until at least the fourth quarter. Jet will be the laggard, unlikely to return to pre-virus levels until 2021 at the earliest.”(Updates with India limited flight resumption order in 19th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- In early March, before the coronavirus pandemic triggered a global economic lockdown, SoftBank Group Corp. founder Masayoshi Son paid tribute to Rajeev Misra, the man who runs his $100 billion technology investment fund. Wearing a $70 Uniqlo down jacket, the Japanese billionaire put his arm around Misra’s shoulders at a town hall meeting in San Carlos, California. He said he would never forget the help Misra provided when he was at Deutsche Bank AG more than a decade earlier and spoke of the trust and respect they had developed since, according to a summary shared internally. “We are family,” Son said. But behind the smiles and talk of kinship, another story is unfolding, one about the perplexing relationship at the top of SoftBank. The Vision Fund this week reported a loss for the latest fiscal year of $17.7 billion as it wrote down the value of portfolio companies including WeWork and Uber Technologies Inc. That triggered the biggest loss in SoftBank’s 39-year history. Its shares have been hammered as investors fret that the virus will batter the company’s holdings even more, and Son has said he will sell $42 billion in assets.Misra is at the heart of the problem in ways that go beyond how the fund’s companies are performing, people familiar with the matter say. He has come under fire for alleged efforts to tarnish internal rivals, including a previously undisclosed clash with SoftBank Chief Operating Officer Marcelo Claure. The company has acknowledged that it’s conducting an internal review. At the same time, Elliott Management Corp., the activist investment fund that built up an almost $3 billion stake in the company, has asked SoftBank to name three independent directors and create a new board committee to improve the Vision Fund’s investment process, according to correspondence reviewed by Bloomberg News.“Misra and Masa go back a long way, but gratitude should only last so long,” said Justin Tang, head of Asian research at United First Partners in Singapore. “If Misra is not the problem, he’s at least a big part of it.”The corporate intrigue involving Claure began in 2018, when the Bolivian entrepreneur was under consideration to join the Vision Fund’s board and investment committee, according to six people with first-hand knowledge of the matter and a review of emails and documents. The fund — run by Misra as an affiliate of the Japanese company — hired a Swiss firm called Heptagone to conduct a background check on Claure’s possible ties to money laundering and drug cartels, said the people, who asked for anonymity because they feared retaliation. The report cleared him, but its focus opened a rift between the two men that kept Claure off the fund’s board and solidified Misra’s control, the people said.A Vision Fund spokesman said one of the fund’s limited partners, not Misra, requested the background check and Misra wasn’t involved in determining its focus. SoftBank has been told the same thing and doesn’t have evidence otherwise, people familiar with the matter say. But current and former executives across the SoftBank empire remain convinced that Misra played a role since the report was commissioned by his team and follows a pattern of similar accusations about undermining internal rivals. In March, days after the Wall Street Journal reported that Misra had allegedly orchestrated a campaign to sabotage two former SoftBank executives beginning in 2015, Son ducked questions about the story from investors at a meeting at the Lotte New York Palace hotel, according to two people who were present. One of them, a SoftBank shareholder, told Bloomberg News afterward that the company needs a Vision Fund leader more focused on tight operations than turf battles. Son has remained steadfast in his support. “Rajeev has been instrumental in the company’s growth and success,” Son said in a statement to Bloomberg. “He’s also been a very trusted senior executive and friend, and will continue to have my full support and confidence.” The Vision Fund spokesman denied that Misra was involved in any campaigns to undermine company executives. “The claims underpinning this story are untrue, and have been fully denied,” he said.But some SoftBank insiders are wondering how Misra has managed to survive. It may be, they said, that Son needs his financial expertise to navigate the next few months of asset sales, share buybacks and loan repayments as the coronavirus weakens portfolio companies, hurting SoftBank’s ability to borrow. Misra helped Son finance difficult deals before joining the company in 2014 and played a crucial role in raising capital for the Vision Fund. He has also established his own power base at the fund’s London headquarters, surrounded by a coterie of former Deutsche Bank colleagues.Still, there are long-term risks for Son in tolerating what many see as a divisive culture and chaotic infighting that have plagued the Vision Fund since its inception. “Misra personifies what Vision Fund is about — a bunch of dealmakers obsessed with leverage who have no business running a venture capital fund,” said Amir Anvarzadeh, a market strategist at Asymmetric Advisors in Singapore, who has been covering the company since it went public in 1994. “But it would be naïve to put all of their problems at Misra’s feet. Son has the ultimate word.” Son and Misra share a bond as outsiders who left their native lands to study abroad and ended up finding wealth and prestige. Son, 62, went to the University of California, Berkeley and launched businesses in the U.S. before founding SoftBank in Japan in 1981. Misra, 58 and born in India, earned degrees from the University of Pennsylvania and the Massachusetts Institute of Technology before embarking on a career in banking at Merrill Lynch.But while Son never worked for anyone else, Misra always operated within large organizations, navigating their power structures. He moved to Deutsche Bank in 1997, where he eventually became global head of credit trading, turning it into one of the biggest traders of credit-default swaps — instruments at the heart of the 2008 financial crisis. One of his traders, Greg Lippmann, featured in Michael Lewis’s The Big Short, bet on a crash in the U.S. housing market, even as Deutsche Bank was a leading player in creating and selling mortgage-backed securities to investors. With slicked-back hair and a thicket of woven bracelets around his wrist, Misra speaks with an intimacy that suggests he’s confiding in a listener as he races from one subject to the next with a burning urgency. He wears his eccentricities proudly: He often padded around the office in stockinged feet, incessantly smoking, vaping or chewing nicotine gum.Misra joined SoftBank after stints at UBS Group AG and Fortress Investment Group. He started as head of strategic finance, reporting directly to Son, but his connections to the boss preceded his appointment. In 2006, Deutsche Bank helped SoftBank finance the acquisition of the Japanese wireless operations of Vodafone Group Plc, one of the most consequential deals of Son’s career. The $15 billion purchase was the largest leveraged buyout ever in Asia at the time and faced skepticism because Vodafone had struggled against the country’s top wireless players. Son succeeded in turning the business into a viable competitor, in part by persuading Steve Jobs to give him exclusive rights to the iPhone in Japan, and completing SoftBank’s transformation from software distributor to telecom conglomerate.Misra proved his worth at SoftBank as well. Son had acquired the troubled No. 3 wireless operator in the U.S., Sprint Corp., but the turnaround had proven far more difficult than the one at Vodafone. Misra put together a novel loan package secured by Sprint’s wireless licenses that helped it avoid bankruptcy.From the start, Misra clashed with Nikesh Arora, a hotshot former Google executive Son recruited in 2014 to oversee SoftBank’s startup investing, according to people with direct knowledge of their relationship. Arora would openly question Misra’s judgment, even on financial issues, leaving him fuming, the people said.In early 2015, Misra set out to undermine Arora and one of his allies at SoftBank, Alok Sama, the Wall Street Journal reported in February. The newspaper said Misra worked through intermediaries to plant negative stories about the executives, concocted a shareholder campaign against them and attempted unsuccessfully to lure Arora into a sexual tryst. “These are old allegations which contain a series of falsehoods that have been consistently denied,” a spokesman for Misra told Bloomberg News, adding that Misra thinks highly of Arora and that the two men worked together productively on many deals. “Mr. Misra did not orchestrate a campaign against his former colleagues.” A spokesman for the Wall Street Journal said the paper stands by its reporting.Arora was cleared of wrongdoing by SoftBank, but he left in 2016 and is now chief executive officer of Palo Alto Networks Inc. Sama, who had been in charge of SoftBank’s investments and inked many of its early startup deals, seemed a logical candidate to play a leading role at the Vision Fund. But some of the limited partners expressed reservations about him, people familiar with the matter said. Arora didn’t respond to requests for comment, and an attorney for Sama declined to comment.Meanwhile, Misra solidified his ties to Son. He spent time in Tokyo in early 2017 as Son worked on the acquisition of Fortress. He also used his former Deutsche Bank connections to help close a deal for Saudi Arabia’s Public Investment Fund to become the Vision Fund’s cornerstone investor, chipping in $45 billion, almost half of the capital. That May, Misra was named head of the Vision Fund. The clash with Claure began after Sama was sidelined, according to SoftBank executives familiar with the matter. Son hit it off with Claure in 2013, when SoftBank took a majority stake in Brightstar, a Miami-based mobile phone distributor he founded that became one of Latin America’s fastest-growing startups. The 6-foot-6 executive quickly demonstrated how SoftBank could save millions on its purchases, winning respect from his new boss. A year later, Son tapped him to replace Sprint’s CEO. Claure made enough progress fixing the wireless operator that Son rewarded him with a seat on SoftBank’s board in 2017 and named him chief operating officer the following year. Then, Son gave Claure a new challenge: building teams in government affairs, legal services and operations to support the company’s expanding portfolio. Part of the mission was to assemble and lead a task force that would help startups fine-tune their strategies to improve execution and speed their path to profitability. The mandate would place him at the center of the action as SoftBank transformed itself into a technology investment conglomerate. It also apparently put Claure on a collision course with Misra.The first hint that this might not be a typical corporate rivalry came months before the Heptagone investigation, according to a person close to Claure. In the summer of 2018, Stephen Bye, a former Sprint executive, reached out to Claure with unsettling news. Bye, Sprint’s chief technology officer until 2015, was approached by a private investigator trying to dig up dirt on his former boss, the person said. Bye declined to talk to the investigator and immediately called Claure. Claure, 49, was used to people poking into his past because he was often approached about joining corporate boards. But he had also heard speculation about Misra’s role in the campaigns against Arora and Sama, and he expressed concern that he was next, the person said. The Vision Fund spokesman said neither Misra nor anyone else from the fund was involved in the approach to Claure’s former employee. Bye declined to comment.In October 2018, after the murder of Washington Post columnist Jamal Khashoggi at the hands of Saudi agents, Son and Misra traveled to Riyadh to meet with officials of the sovereign wealth fund, their biggest investor. They made the trip during the Saudi fund’s annual investment conference, even as other global executives canceled their travel plans. While the two men didn’t attend the conference, Son met with the head of the Public Investment Fund, Yasir Al-Rumayyan, and laid out the new role he envisioned for Claure. He would join the Vision Fund board and its investment committee, and manage the group of operations specialists when it was embedded within the fund, according to a proposal reviewed by Bloomberg News. The changes, if implemented, would give Claure broad authority at the fund.Later that year the Vision Fund commissioned the Heptagone report. What made it different from routine due diligence, according to the people directly involved, was that the sleuths were asked to answer three specific questions: Was Claure or any company under his control ever involved in money laundering, tax evasion or fraud? Was he ever in a relationship with individuals charged with or convicted of money laundering, drug trafficking or other crimes? Had he been convicted of a crime in the U.S. or elsewhere? Claure’s company, Brightstar, generated enormous amounts of cash selling used phones in Latin America in the 1990s, exactly the kind of business that could be used for money laundering, Heptagone’s report said. But the report found no evidence Brightstar or Claure were involved in such activities, people who saw it said.Heptagone went on to say that Claure had a long-standing friendship with Carlos Becerra, a San Diego businessman whose name had appeared in U.S. Drug Enforcement Agency reports for possible involvement in cocaine distribution and money laundering. After Becerra sold a unit of his company to Brightstar, in 2007, the two men remained friendly. A photo on Becerra’s Instagram account from June 2015 showed him posing on a boat dock with Claure. Becerra, who hadn’t been charged with a drug-related crime, told Bloomberg News that his relationship with Claure was cordial, not close. He denied any involvement in money laundering or drug dealing and said he has held a California liquor license since 2001, which requires a background check and isn’t available to anyone with a criminal record. The closest Claure came to a crime, the Heptagone report found, was his involvement in a Miami bar fight in the 1990s in which no one was hurt and he wasn’t charged. Heptagone co-founder and managing partner Alexis Pfefferlé said he couldn’t confirm or deny his firm’s involvement in any report but added that Heptagone “has always been able to fully complete its assignments.”The Vision Fund spokesman said the fund often runs background checks on employees, so it wasn’t abnormal to conduct one on Claure, given his potential involvement in operations. The only thing atypical, he said, was that it came at the request of a limited partner. While the Heptagone report cleared Claure, its underlying premise appeared to be that a Latin American entrepreneur must have built his business through unsavory means, according to the people who reviewed the document. Claure was furious. He went to Son, outraged at what he saw as an attempt to damage his reputation, the people said. SoftBank took over the due diligence from the Vision Fund and gave the job to Kroll, a more established security firm, the people said. Kroll, which declined to comment, found no problems in Claure’s past. But suspicious that Misra was behind the campaign, Claure told Son he wanted no formal part of the Vision Fund, the people said. Son ultimately decided to keep the two out of each other’s way. In February 2019, about 40 employees Claure had hired were shifted over to work for Misra. Claure, who had moved his wife and four youngest daughters to Tokyo less than two months earlier, headed back to Miami. He has since helped close Sprint’s merger with T-Mobile US Inc. and is leading the effort to turn around WeWork. He also oversees a Latin American investment fund for SoftBank and co-owns a Major League Soccer team, Inter Miami, with former British star David Beckham. SoftBank denied that Claure and Misra clashed over the operations group and said both men agreed that folding it into the Vision Fund was in the best interests of the business. “While we have had our occasional differences,” Claure said in a statement, “I have a close and collaborative relationship with Rajeev, including my involvement with many of the Vision Fund’s largest portfolio companies.” The relationships Misra forged at Deutsche Bank continue to underpin his power and influence. Colin Fan, a former co-head of the investment bank, moved to SoftBank in 2017, joining more than half a dozen former bankers and traders from the German lender. But arguably the most important connection forged at Deutsche Bank is Misra’s relationship with London-based merchant bank Centricus, founded by three former Misra colleagues: Michele Faissola, Dalinc Ariburnu and Nizar Al-Bassam. The firm, originally called FAB Partners for the principals’ last names, began working with SoftBank in 2016, when Misra asked it to help find financing for the Vision Fund. Centricus advised on the creation and structure of the fund, suggested employees and helped cement the investment by the Saudi sovereign wealth fund — a deal hashed out in October of that year when Mohammed bin Salman, then the country’s deputy crown prince, met with Son in Tokyo.For its work, Centricus negotiated a payment of more than $100 million, people familiar with the arrangement said. And the fees kept coming. Centricus advised SoftBank on its $3.3 billion deal for Fortress and teamed up with Son on a failed bid to start a 24-team soccer tournament with FIFA. The firm also was brought in to help raise capital for a second Vision Fund, Bloomberg reported in mid-2019.Some SoftBank and Vision Fund executives have questioned the amount paid to Centricus, the people with knowledge of the arrangement said. Although fees for helping companies raise capital are often about 1%, making the sum paid to Centricus a good deal for SoftBank, executives critical of Misra’s leadership were piqued that the recipients were former Deutsche Bank colleagues, the people said. Centricus and SoftBank both declined to comment about fees or any other aspect of their relationship.Faissola left the firm after his connections with the Qatari government created tension with the Saudis. But Centricus hired another former Deutsche Bank colleague of Misra’s as a consultant: London-based hedge fund manager Bertrand Des Pallieres, a senior trader at the bank from 2005 to 2007 who reported directly to Misra. Des Pallieres was under consideration for a job at the Vision Fund in 2018, the people said, but that all changed after the Wall Street Journal reported that Misra had recruited Italian businessman Alessandro Benedetti to undermine Arora and Sama. Benedetti, who denied through a spokesman that he had anything to do with those efforts, was a business associate of Des Pallieres. A year later, Des Pallieres became a Centricus consultant.SoftBank’s relationship with Centricus began fraying last year, according to people familiar with the matter. Misra argued that SoftBank had no further need for the firm, as Son had developed ties of his own with MBS, the people said. And Misra had his own relationship with Al-Rumayyan, the Saudi sovereign wealth fund head. In October 2019, Misra and Son attended a party for Al-Rumayyan and MBS on a yacht in the Red Sea, people with knowledge of the event said, confirming a Wall Street Journal account.By then, SoftBank had hired Goldman Sachs Group Inc. and Cantor Fitzgerald LP to help search for new investors. Some SoftBank executives were surprised by Cantor’s involvement, as the New York-based bank had little experience sourcing investments for initiatives like the Vision Fund. But Cantor’s president since 2017 has been former Deutsche Bank co-CEO Anshu Jain, a onetime boss and childhood friend of Misra’s.The Saudis have held off committing capital to a second Vision Fund, and Son this week said he had to stop raising money because of difficulties with WeWork and other investments. SoftBank stepped in to save WeWork last year after its failed initial public offering and put Claure in charge of turning the business around. But the coronavirus pandemic has exacerbated the challenges of drawing people to co-working spaces.“Vision Fund’s results are not something to be proud of,” Son said at somber press conference in Tokyo on Monday, with reporters and analysts calling in remotely because of the pandemic. “If the results are bad, you can’t raise money from investors.”Elliott, the fund run by billionaire Paul Singer, has pressed for changes, and Misra has been involved in those talks, according to people with knowledge of the discussions. He has met frequently with Singer’s son Gordon, the people said. But two people familiar with Elliott’s operations say the firm has asked SoftBank to get to the bottom of Misra’s alleged involvement in campaigns against his colleagues and has expressed dismay at the infighting among top managers and how much of that spills into the press. A spokeswoman for Elliott denies that the company is pushing for an investigation, and a SoftBank spokesman said Son hasn’t received such a request.SoftBank’s board probed who was behind the campaigns against Arora and Sama but didn’t uncover any definitive evidence, people with knowledge of the matter said. While the company has said it’s looking into the most recent Wall Street Journal allegations, several senior executives have downplayed their significance. Ron Fisher, a SoftBank director, called the February story “another example of people anonymously spreading misinformation and innuendo about our executives,” according to an email to Vision Fund managing partners.SoftBank's board has lost several of its most independent voices in recent years, the kind of directors who could question his decisions. Shigenobu Nagamori, the outspoken founder of motor maker Nidec Corp., stepped down in 2017. Fast Retailing Co. CEO Tadashi Yanai, who had been on the board since 2001 and was a rare voice of dissent, left at the end of 2019. On the same day SoftBank announced its record losses this week, Alibaba co-founder Jack Ma announced he would leave the board too, after 13 years. Two new independent directors were nominated — Cadence Design Systems Inc. CEO Lip-Bu Tan and Waseda University professor Yuko Kawamoto.Misra’s fate is ultimately intertwined with the Vision Fund, which Son once declared would be the foundation of a new SoftBank but now risks becoming one of his worst missteps. The fund declared quarter after quarter of profit after its inception in 2017, as it marked up the value of startups and booked paper profits. But since the WeWork fiasco, it has lost all of that money and more. The structure of the fund — Misra’s invention — will create another squeeze. About $40 billion of the money raised from outside investors is in the form of preferred shares that pay about 7% a year. The idea is that SoftBank would see extra profits if the Vision Fund hit it big, but it also means losses are amplified. Venture capital funds typically don’t have such liabilities to avoid the risks of such a volatile business. Misra has been on something of a publicity tour recently to defend his reputation, although he declined to comment for this story. In an interview with CNBC published in March, he said that the Vision Fund’s mistakes are surfacing early and its portfolio will be redeemed in 18 to 24 months. “I’m so, so positive I’ll prove people wrong,” he said. He also vowed he wouldn’t leave the fund. “I owe it to my stakeholders, my LPs, my employees to be here for the journey,” he said. The Vision Fund spokesman denied Misra said the portfolio would recover that quickly. In the end, what SoftBank decides to do about Misra, if anything, depends on Son. His business is under intense pressure, putting even his deepest loyalties to the test. “At a company like SoftBank, where the founder runs the business, that person has to take responsibility for the ethics and the standards for behavior within the company,” said Parissa Haghirian, a professor of international management at Sophia University in Tokyo who specializes in Japanese corporate culture. “If you are not clear about this, then everybody sets their own rules.” For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- When Prime Minister Narendra Modi recently announced a stimulus package for India, he said it was worth Rs. 20 trillion — $265 billion, equivalent to about 10% of the country’s GDP. This seemed to fit in with the amounts being spent by some rich OECD economies to deal with the fallout from the Covid-19 pandemic. Equity markets exulted.In Modi’s India, though, it’s usually wise to wait for the details. Now that they’re out, the markets — and many economists — are disappointed. Actual spending is a fraction of what Modi promised, they argue — perhaps as little as 1% of GDP. Once equity traders added up the package’s components, the markets duly sank back into gloom.In fact, Modi and his advisers have gotten it right, and governments around the world could learn from their caution. While India’s fast-growing economy faces an unprecedented slowdown thanks to the pandemic — shrinking as much as 45% annualized in the second quarter of 2020, according to Goldman Sachs — spending on everything in sight isn’t the best solution.India’s policymakers found the correct prescription because they began with the proper diagnosis. A bigger stimulus would have been the right way to address a crisis in aggregate demand. But that’s not India’s problem: Until we figure out the best way to reopen, the country needs less economic activity not more. The real issue is the lockdown imposed to slow the spread of the new coronavirus.Instead of wasting money it doesn’t have, the government has tried to address the problem we do have. Government spending works if no other event, policy or signal can address the coordination problems that underlie a collapse in aggregate demand. In this case, we know there is such a signal: an end to the current emergency. In the interim, what the government needs to do is figure out how to preserve those things that would allow the economy to respond to that signal — lives, businesses and contracts.Yes, that can cost money and governments are the spenders of last resort. But even more important than the government’s ability to pay is its ability to absorb risk and provide liquidity. India’s rescue package is structured around precisely these strengths. It includes the promise, for example, of roughly $40 billion in collateral-free loans to small businesses that would be completely guaranteed by the government.We can quibble over the details — it’s a mistake to limit such loans to existing borrowers, for instance, when lots of smaller businesses may want to borrow for the first time — but you can see the government’s rationale. People who believe their business will recover can take on a loan for payments that they have to make; banks will be happy to cover them, since they’re being underwritten by the government. Instead of the government figuring out who to pay to reopen the economy, banks and businesses will make the decision. While we’ll have to see how it works in practice – any delays in the rollout and the whole thing will fall apart — the idea is sound.Thanks to this focus on liquidity support and risk underwriting instead of across-the-board spending, India’s debt might remain under control instead of exploding. Most importantly, Modi’s government has not been foolish enough to reverse decades of painful institutional reform and demand the central bank start monetizing its debt. That would have spelled the death knell for India as a mature economy — and sent borrowing rates for everyone through the roof. If some economists are furious, that’s because economists, like generals, are always battling the last crisis. India’s government learned from it instead, according to Finance Minister Nirmala Sitharaman: After the 2008 financial crisis, the government “just opened the floodgates and kept it open for a long time. At the end of the day, you had [the 2013] taper tantrum, double-digit inflation and food inflation hitting the roof.”Caution is wise. Unlike many of their global peers, India’s policymakers seem to recognize that, faced with an unprecedented emergency, their primary responsibility is to keep things stable until it is clear how best to intervene. It’s not to dissolve one institutional constraint after another on the pretext of fighting this crisis.Modi’s economic record has been far from exceptional, so how has his government proven so astute at this moment? Perhaps it’s because the prime minister himself is something of a fiscal hawk. Or perhaps fears that India might be downgraded concentrated minds in New Delhi. Had ratings agencies downgraded India, there would have been no chance of borrowing enough to provide stimulus when it might actually be needed — whether six, 12 or 18 months from now.And, yes, more spending will probably be required. If this emergency lasts long enough, India’s poor will need direct cash transfers, for example. Let’s hope that income support, when it comes, is as cautiously designed. For now, look to Modi’s India as a global example, not a disappointment.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mihir Sharma is a Bloomberg Opinion columnist. He was a columnist for the Indian Express and the Business Standard, and he is the author of “Restart: The Last Chance for the Indian Economy.”For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- It turns out the corporate bond market still needs traders.The algorithms that dealers use to buy and sell bonds with their customers failed in March at the height of extreme volatility from the coronavirus pandemic, according to investors and price data. The nimble analysis of flesh-and-blood traders was suddenly needed to price bonds, edging out machines that normally can trade large portions of the market without any human input.The bond market has been one of the last corners of finance to move into the digital age, slowly modernizing from the rise of electronic trading to new venues that will remove much of the interpersonal communication from the process of selling company debt. Yet even as digital platforms set record volumes in the first quarter, market watchers said the bots failed a test when Treasuries and credit spreads were so disorderly.“Good old-fashioned blocking and tackling is still very much a part of the business,”said Chris Coccoluto, head of investment-grade bond trading at Manulife Investment Management. “It was almost nice to see in a way you had to rely on your relationships.”The virus-related disruptions were profound. At the height of the volatility, Treasuries rallied to record low yields and corporate bond spreads gapped out to levels last seen in 2009. The securities are linked as the vast majority of investment-grade bonds trade at a premium to Treasuries, adding an extra layer of complexity when neither market was fully functional.While humans were able to spot the new patterns quickly, the bots couldn’t adapt because algorithms are built on historical data, said Chris White, founder of advisory firm ViableMkts LLC.“This is a reminder to a lot of people who may have been vilifying human interaction in the bond-buying process,” said White, a former fixed-income executive at Goldman Sachs Group Inc. “When things get really volatile, people become extremely valuable to the process.”Cutting RiskFor decades, banks have stepped back when prices are unpredictable and buying too much from a customer could trigger multimillion-dollar losses in just days. At the end of March, dealers cut risk-taking mainly by shutting off algorithms that were spitting out incorrect prices left and right.With Wall Street pulling back, asset managers stepped up to fill the void, according to MarketAxess Holdings Inc. data. Voice trades -- in which counterparties agree to a price over the phone, but process and hedge digitally -- rose to a record, according to Tradeweb Markets Inc.Roughly 70% of the investment-grade corporate bond market still trades with some element of human interaction, especially larger transactions over $2 million. The record credit trading volumes handled on MarketAxess, Tradeweb and Trumid Financial LLC show how traders took advantage of platforms to execute smaller, simpler transactions electronically, which in turn allowed them to focus their attention on more difficult deals that require complex analysis, said Chris Bruner, head of U.S. credit at Tradeweb.“Taking out any of the steps of manual work flow was really important in March so people could focus on risk,” Bruner said. “They were less worried about exact price, and more worried about moving an entire risk profile.”Bloomberg LP, the parent company of Bloomberg News, competes with Tradeweb, MarketAxess and Trumid in providing fixed-income trading services.Market turmoil also led to record volumes in portfolio trading, a relatively new practice that can price and sell a bundle of hundreds of bonds in minutes. Barely a concept three years ago, it is now a fast-growing part of the market. New data-analysis tools that allow prices to be fully automated are part of the reason that traders have seen their ranks greatly thinned in recent years.The events of this year may end up making bots better. JPMorgan Chase & Co. found that algorithms can in fact learn from humans in tempestuous markets. An algorithm it trained to recommend trades based on human market commentary significantly outperformed those based on only market observable features in March, strategists led by Joshua Younger said in a report dated April 23.The pace of tech innovation and disruption won’t be slowed by the events of March -- in fact, it will continue to gain speed, said James Switzer, global head of fixed-income trading at AllianceBernstein Holding LP. In March and April, his firm boosted by 500% its usage of MarketAxess’s all-to-all protocol, which allows for anonymous trading and can match investors with each other, as well as banks, on the other side of a transaction.“That’s what’s going to come out of this, a desire by the buy side to embrace all-to-all trading because we can’t always depend on dealer balance sheets,” Switzer said. “If we have to find the other side of the trade in an anonymous all-to-all fashion, we’ll do it.”Electronic powerhouses like AllianceBernstein and BlackRock Inc. have forged ahead to embrace technology. While both value having traders with market experience, they’ve also expanded recruiting criteria to include coding skills.Others like Mike Nappi, head of investment-grade credit trading at Eaton Vance, still like the old school way of getting the job done.“We don’t have a fully automated trading desk for a reason -- I want our traders to have a sense of what’s going on in the market,” Nappi said. “We’ll never live long enough to see who the winner is. But through our careers, there are going to be humans needed, just maybe not as many.”(Updates with JPMorgan report in 14th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- On the night of May 12, India’s Prime Minister Narendra Modi set the nation of 1.3 billion people abuzz with promises of unleashing a massive stimulus to shore up an economy facing its deepest recession in decades.A week later and after five drawn-out press conferences by his Finance Minister Nirmala Sitharaman, the entire package of about 21 trillion rupees ($277 billion), or 10% of India gross domestic product, underwhelmed economists and investors alike. Many worked out that the actual fiscal cost amounts to just about 1% of GDP, sending stocks and the rupee down in the immediate aftermath.Read More: $277 Billion Package May Not Give Immediate Boost to IndiaThe looming threat of a credit rating downgrade to junk may have held officials back from delivering a more immediate boost to the economy through, for example, direct cash handouts to citizens. India is facing public debt levels of 77% of gross domestic product, according to Fitch Ratings Ltd., and a fiscal deficit in double digits this year, putting it on the path for a rating cut.Authorities are already opening up the bond market and need to borrow more to plug a revenue hole, so they can’t afford to lose an investment grade rating by straining the deficit further.“The government appears to have given a fair degree of weight to the risks of a downgrade on account of risks from a high fiscal deficit and rising debt-to-GDP ratio -- a clear recipe for future instability in macros, especially currency depreciation,” said Shubhada Rao, head of economics at QuantEco Research in Mumbai.Even after the latest package, “the threat of a downgrade still exists” because of the likely sharp slump in the economy, she said.Job LossesAccording to Prachi Mishra, chief India economist at Goldman Sachs Group Inc., GDP will contract an annualized 45% in the second quarter from the prior three months. For the full year through March 2021, GDP is forecast to decline 5%, which would be deeper than any recession India has ever experienced.Businesses have been clamoring for more state support to cushion the blow from the harshest stay-at-home rules in the world, which has left millions jobless. Former government officials and central bankers have increasingly called for extraordinary measures to counter the fallout.What Bloomberg’s Economists SayEven though we expect India’s GDP to contract and debt-to-GDP ratio to vault up in fiscal 2021, we don’t think a ratings downgrade would be justified. Looking ahead, recent structural reforms announced by the government should, in fact, continue to support the country’s investment grade rating.\-- Abhishek Gupta, India EconomistFor more research and insight, click hereIndia was already under fiscal stress before it entered the current crisis. The economy had been steadily slowing on the back of a credit crunch and slump in consumption, reaching an estimated 5% in the fiscal year through March, the lowest in more than a decade. The government missed its budget deficit target last year and set a goal of 3.5% of GDP for the current fiscal year.Now, that’s likely to blow out even more as revenues suffer due to slowing growth. Citigroup Inc. is forecasting a fiscal deficit of 7.4% of GDP, a level last seen in 1991. Adding the shortfall from India’s 28 states would push up the deficit to 11.4% of GDP.HSBC Holdings Plc estimates the true fiscal cost, after including borrowings by public sector entities, would stand at 13.3% of GDP this fiscal year. Moreover, the economic package includes government guarantees worth 2.1% of GDP to small and mid-sized businesses and shadow banks -- and while that’s not a problem immediately, it would add to the fiscal deficit over time as defaults rise, HSBC said.That’s a frightening prospect for many, and may invite a downgrade. Fitch Ratings and S&P Global Ratings rate India’s debt at the lowest investment grade level, while Moody’s Investor Service has an assessment one notch higher.While none have commented after the recent measures, Fitch said last week it saw India’s public debt zoom to more than 77% of GDP in the current fiscal year, from its previous forecast of 71%.With a downgrade likely to derail India’s ambitions of being included in global bond indexes and be part of a massive investment pool, Sitharaman is hoping rating companies will hold off on any move.“The whole world is hit by coronavirus, so the ratings agencies will obviously have to see each economy in relation to the other,” Sitharaman told the Times of India in an interview published this week. “If my macroeconomic fundamentals are better than many, many other economies, that would come into play,” she added.Concerns over a rating downgrade did not hold the government back from announcing a bigger stimulus, she told a local television channel on Wednesday.The government is planning to boost its domestic borrowing by more than 50% this year to plug the hole caused by sliding revenues and rising spending. That caused a sell-off in bonds and added to calls for the Reserve Bank of India to support the debt market, including directly purchasing government securities.Given the tight spot India finds itself, there’s no easy way out.“This is what you would call the hard place and the rock,” said Subhash Chandra Garg, a former top Finance Ministry official. “It’s definitely a tough situation. As a government you have to manage your finances on one hand and manage the economy, production, GDP growth, income in the country, on the other.”(Updates with comments from finance minister in 16th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Central bank quantitative easing programs may need to be ramped up to stave off a rise in bond yields, according to a JPMorgan Chase & Co. analysis that echoes a conclusion from Goldman Sachs Group Inc strategists.The level of expected increase in supply this year -- about $2.1 trillion -- is offsetting the $1.9 trillion demand for bonds to the tune of $200 billion, the JPMorgan team concluded, implying upward pressure on yields. Goldman Sachs strategists last week said more issuance adds to the case for higher rates and steeper curves.Policy makers have endeavored to force down yields in sovereign markets as governments spend trillions to help soften the blow from the coronavirus pandemic that’s caused economies to almost totally shutdown. A debate about the subsequent recovery and any ensuing reduction in help from central banks is forcing some to conclude yields have hit their lows.Quantitative easing “might need to be upsized from here to prevent a rise in bond yields, especially if there is further fiscal stimulus or if our projections for private sector bond demand prove optimistic,” the JPMorgan group, including strategist Nikolaos Panigirtzoglou, wrote in a May 19 report.Read more on how world monetary policy may not be as easy as it looksDespite the huge surge in demand for bonds from central banks, JPMorgan expects that appetite to wane during this year for commercial banks, pensions funds and insurance companies, and foreign-exchange reserve managers.The Federal Reserve, European Central Bank, Bank of Japan and the Bank of England will ensure demand expands by $4.2 trillion in 2020, though commercial lenders will see demand drop to the tune of $1 trillion, according to the report.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- When private equity firm Sycamore Partners walked away from beleaguered lingerie chain Victoria’s Secret, some of the loudest gasps came from India, Asia’s busiest market for distressed assets.Acquirers felt emboldened to seek legal advice. Could they at least renegotiate prices by arguing that the coronavirus was a material adverse change? Also known as MAC, this is an unforeseen event that durably depresses the value of a target company.Judges usually set the bar high for allowing a deal to be killed because of MAC. In the Victoria’s Secret case, Sycamore argued that the clause had been triggered because current owner L Brands Inc. failed to pay rent and furloughed thousands of workers. The pandemic was “no defense” for L Brands violating terms of the agreement, the buyer said in its complaint in the Delaware Chancery Court.In the U.S., Mirae Asset Global Investment Co. is pleading that Anbang Insurance Group Co. breached the terms of its $5.8 billion hotel chain sale by shuttering properties. That the closures came in response to the outbreak is “irrelevant,” Mirae said in court papers. A unit of Anbang (now known as Dajia Insurance Group) has sued to force the Korean investor to complete the transaction.The MAC risk has come to M&A globally, with 52 publicly filed agreements in the U.S. so far this year excluding pandemics from the definition of material adverse change, the highest in any year, according to Bloomberg Law analyst Grace Maral Burnett. As she explains, a longer list of exclusions typically helps sellers by “limiting the situations in which the acquirer is able to walk away from a deal.”These moves and lawsuits are being watched closely in India. Creditors seeking to recover something from hundreds of billions of dollars of soured corporate loans are nervous. Successful bidders may try to use the pandemic to wriggle out of commitments — or stall payments. Buyers are wary of overpaying for assets whose future earnings potential may have been permanently damaged by Covid-19 and the ensuing lockdowns.For buyout firms, the clock is ticking. They have raised money globally to pick up an interest in the debt of stressed Indian businesses. India’s 2016 bankruptcy law brought them to the country. Long delays in concluding large transactions, like the $5.9 billion sale of Essar Steel India Ltd. to ArcelorMittal, weren’t unexpected, but they did eat into the typical seven-year life of a fund.If wranglings around MAC drag on in tribunals and courts, India’s appeal may fade amid an oversupply of distressed assets everywhere. More than $38 billion in defaulted Indian loans are awaiting resolution, according to an analysis of 245 cases by restructuring services firm Alvarez & Marsal.A yearlong suspension of new bankruptcy filings ranks among the relief measures recently announced by the government of Prime Minister Narendra Modi. The logic is easy to see. Even before the pandemic, only one or two bidders were showing up in small in-court bankruptcies. With the economy in a tailspin — Goldman Sachs Group Inc. forecasts it will shrink an annualized 45% this quarter — the ratio of four liquidations to one corporate rebirth will balloon. A quarter of the workforce is without jobs. A further spike in unemployment could ignite social strife. Yet by acknowledging that the pandemic merits special treatment in bankruptcy, India may have unwittingly shown buyers a way out.So far, there’s only one reported case of an Indian company citing the lockdown to renegotiate a bid, involving the sale of a small auto-parts maker. Large acquirers are hesitant. No one wants to be first to tell creditors they want to pay less: Lenders would seek to get the errant buyer barred from future auctions. The government might not take kindly to such moves, either. State-owned banks are carrying the can of dud loans; the less the buyers put up, the higher the taxpayers’ burden. However, if there’s a barrage of bankruptcy litigation — for instance, around the Covid-19 related debt the government says will be excluded from the definition of default — then those seeking to use MAC to renegotiate or stall may quietly join the slugfest. In light of the pandemic’s extreme impact, “there may be circumstances” in which a court might find a material adverse change occurred when it wouldn’t have under more normal conditions, M&A counsel Gail Weinstein of Fried, Frank, Harris, Shriver & Jacobson LLP and others wrote in a Harvard Law School article last month.Buyers in India’s distressed market are hoping for just this outcome. Lawyers are tingling with anticipation. Banks are dreading it. And investors who bought defaulted debt are praying that any fresh proceedings will be conducted swiftly, on merit, and won’t end up derailing the bankruptcy gravy train. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- How does one build out the merchant-banking arm of a firm such as Goldman Sachs? If you are Henry Cornell, this week's guest on Masters in Business, you start in Asia. In the late 1980s, Japan was the hottest country in the world and Cornell went there to expand the firm’s local footprint. He hired hundreds of employees and helped establish Goldman’s reputation in the market as a savvy private-equity investor. From there, he moved to Hong Kong in the early 1990s, just as China was beginning to become a more market-based economy.Returning to the U.S., he rose to become Goldman’s vice chairman before starting Cornell Capital in 2013. The firm now manages $3 billion in long-term investments in closely held companies.Cornell co-invests with Goldman Sachs, Alibaba and a number of well-known private-equity funds. Because he knows literally hundreds of chief executive officers and their networks, the deal flow for private investments is a substantial advantage for the firm. Cornell explains how he developed an expertise in insurance, packaging and consumer-product companies, including KDC and Purell.His favorite books are here; a transcript of our conversation is here.You can stream and download our full conversation, including the podcast extras, on Apple iTunes, Spotify, Overcast, Google, Bloomberg and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.Next week, we speak with Michael Lewis, author of "Moneyball," "The Big Short," and so many others. The second season of his podcast, "Against the Rules," focuses on coaching and not just in sports.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.