GS - The Goldman Sachs Group, Inc.
247.05 0.00 (0.00%)
After hours: 4:47PM EST
| Previous close | 245.70 |
| Open | 246.61 |
| Bid | 246.50 x 900 |
| Ask | 247.01 x 1000 |
| Day's range | 246.34 - 248.52 |
| 52-week range | 180.73 - 250.46 |
| Volume | 2,002,419 |
| Avg. volume | 2,391,667 |
| Market cap | 87.477B |
| Beta (5Y monthly) | 1.37 |
| PE ratio (TTM) | 11.75 |
| EPS (TTM) | 21.03 |
| Earnings date | 12 Apr 2020 - 16 Apr 2020 |
| Forward dividend & yield | 5.00 (2.04%) |
| Ex-dividend date | 27 Feb 2020 |
| 1y target est | 262.91 |
- Yahoo Finance
Going climate neutral will cost trillions of dollars: Credit Suisse CEO
Carbon neutrality will come at a steep price. Here's what Credit Suisse CEO Tidjane Thiam said on the topic at the 2020 World Economic Forum.
- Bloomberg
Carmakers Must Do Better Just to Keep Up in China
(Bloomberg Opinion) -- The world’s largest car market is cratering and there are few signs of a recovery. It was never supposed to get this bad — and even if it got close, a helping hand from Beijing would steer things out of any prolonged trouble. Or so people thought... Instead, passenger car sales in China fell 9.5% last year, more steeply than the 4.3% in 2018, which was the first annual sales decline in over a decade. The drop has dragged down the global automobile industry and its deep supply chain. That leaves automakers in limbo. After years of relying on the Chinese market for its double-digit volume growth, they don't seem too sure about whom to build cars for, or what kind. Beijing’s lackluster stimulus last year included a grab-bag of measures: removal of car-purchase limits, support for buying electric cars and incentives to build infrastructure like rural gas stations. They haven't done much to revive demand. Consumers were waiting for more, which simply led to a steeper slide in sales. With no new sweeteners and the distortions of past stimuli fading, a real picture of demand is emerging. It’s nuanced. There are fewer first-time buyers, and more who are purchasing replacement vehicles. They’re increasingly looking to upgrade, and also buying more used cars. In a word, consumers are being more discriminating.Luxury carmakers account for around 15% of the market and are doing better than the rest. Porsche Automobil Holding SE, for instance, delivered 86,752 vehicles to customers in China last year, up 8% from 2018. In December, BMW Brilliance Automotive Ltd.’s average daily vehicles sales rose 21% on the year, up from 5% in November. Down the food chain, buyers of family-friendly cars are upgrading. Demand for sports utility vehicles and sedans remains depressed but is shifting toward higher-end, in-between cars, according to analysts at Goldman Sachs Group Inc. Buyers of these so-called multi-purpose vehicles, or MPVs, have long bought the same few basic models, priced between 40,000 yuan ($5,800) to less than 100,000 yuan. As the market was flooded with SUVs, aspirational buyers stayed away. Now, manufacturers are improving design and comfort, and raising prices.A slew of MPV models will be released this year. Going by low discounts compared to the rest of the market, demand remains sturdy. Goldman’s analysts estimate that in every 1% of demand that moves to the higher-end MPVs lies an annual revenue opportunity of almost 50 billion yuan ($7.25 billion). Here’s the hard reality: The double-digit growth days of selling nearly 25 million cars a year are vanishing in the rearview mirror. So are outsize profits from China. Much like the U.S. market, the type of demand will evolve and how people get around will change. Younger Chinese are more inclined to use ride-hailing services. The older people get, the less likely they’ll obtain driving licenses. China’s population is aging rapidly. This is a structural slowdown.In theory, China has plenty of room to sell more cars. Penetration rates are low and so is the national percentage of licensed drivers. The carmakers are banking on semi-urban China, ostensibly the most upwardly mobile consumers. But sales are unlikely to top 20-some million a year, even with the push toward electric vehicles (only 5% of cars sold now) and regulations that will eventually force buyers to go green. For now, higher technology only raises the cost of car ownership out of reach.The market is oversupplied, no doubt. The good news is that inventories are coming down as automakers try to stay in the black. Toyota Motor Corp. has increased the types of models it sells in China and gained market share. As weaker players drop out and the industry consolidates, the likes of Honda Motor Co. and Volkswagen AG are taking a bigger piece. Failure to rigorously manage output will mean a pile of clunkers. Changan Ford Automobile Co. is sitting on some of the highest levels of inventory, as is SAIC General Motors Corp.’s Baojun. GM continues to lose market share. Ford Motor Co. said last week that its sales in China dropped 26% in 2019. European carmakers have also struggled. Making money by churning the assembly lines won’t cut it anymore. The China Road to success is a lot narrower. Only the companies that drive it smarter will survive. To contact the author of this story: Anjani Trivedi at atrivedi39@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis column does not necessarily reflect the opinion of 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
WeWork Sells Its Stake in Women-Focused Co-Working Startup the Wing
(Bloomberg) -- WeWork has sold its minority stake in the female-focused co-working startup the Wing, part of parent company We Co.’s efforts to re-focus on its main office-sharing business.The company had been exploring the sale since last year, Bloomberg previously reported, following the theatrical dissolution of its plans for an initial public offering and the ouster of its chief executive officer, Adam Neumann.“Last quarter, we articulated a long-term plan for disciplined growth and a clear path to profitability, and we continue to execute on this plan each day,” Co-CEO Artie Minson said in a statement.A group of investors purchased WeWork’s stake in the Wing. The group included GV, formerly Google Ventures, as well as existing investors Sequoia Capital and NEA. The Wing also said it had added actress Mindy Kaling as an investor, adding her to a list of backers that also includes athletes Serena Williams and Megan Rapinoe. Fortune earlier reported some details of the sale.“In three years, the Wing has grown from a single location to a global community of women,” co-founder and CEO Audrey Gelman said in a statement.In addition to divesting its stake in the Wing, WeWork said it would sell Teem, a cloud services developer, to iOFFICE, a facility management software company. It also said it was in the process of selling Meetup, a website used to create online groups for in-person events, and Managed by Q, a workplace management platform.On Wednesday, the company also said it is expecting a $1.75 billion credit line from Goldman Sachs Group Inc. that it secured in December to become available within the coming weeks.(Adds investor details in the fourth paragraph.)To contact the reporter on this story: Nikitha Sattiraju in New York at nsattiraju@bloomberg.netTo contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net, Anne VanderMey, Jillian WardFor 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
A Fresh Bout of Italian Political Risk Puts Investors on Edge
(Bloomberg) -- The prospect of a comeback for the populist Italian firebrand Matteo Salvini was hanging over markets on Wednesday after a key political rival stepped down, raising the chances of an early election that could pave the way for him to pursue his euroskeptic agenda.The resignation of Luigi Di Maio as leader of the Five Star Movement has unsettled investors wary of another standoff between Italy and the European Union. Bonds fell as much as eight basis points on fears about the government’s stability but then recovered as the fragile coalition held together.For now investors see a weaker government whose key members are compelled to cling to power and avoid a snap election that they would be likely to lose.“Our economists’ base case is that the coalition government survives through 2020,” George Cole, managing director at Goldman Sachs International in London, said in a client note. He expects the Italian bond yield premium to narrow against Spanish and Portuguese peers as data stabilizes and the European Central Bank continues to snap up assets in the region.Bank stocks in the country bore the brunt of selling, and the FTSE Italia All-Share Banks Index dropped 1.6% as of 3.39 p.m. in London.The key focus now will be local elections this weekend: Gains for the League party could send the spread between benchmark Italian bonds and their German peers to beyond 200 basis points, predicts Peter McCallum, rates strategist at Mizuho International Plc in London. The gap is steady at 162 basis points.“Even a benign election result at the weekend would likely still leave an uncertain political situation,” McCallum said.The developments threaten to add pressure to the nation’s bonds, which have been drifting lower in recent months after a stellar run in 2019. The yield on the benchmark posted the biggest annual drop in five years as the ECB, a key buyer of Italian debt, resumed its stimulus measures.Despite the apprehension there are some who think the market could live with a Salvini government. A general election campaign would likely herald higher volatility and wider spreads, but these could re-tighten even if Salvini wins, according to Antoine Bouvet, a senior rates strategist at ING Groep NV in London.“Historically the League has been seen as a more pro-business party,” he said. “Some of their planned tax cuts would threaten the deficit but it could also boost growth. Once the election is out of the way, with presumably a League victory, I think markets will come to terms with a Salvini-led government.”Here’s what other strategists are saying:MUFG Bank Ltd. (League government could be negative for the euro)Lee Hardman, currency strategist.“It is a more euro-negative threat with respect to the Italian government’s commitment to at least bring public finances in line with euro-zone ideals. If the League were to take over, then at face value there is more risk of confrontation between the EU and the Italian government further down the line, and that is something that could be destabilizing and euro negative. At this stage it is all ifs, buts and maybes.”Societe Generale SA (Politics for now will have little impact on credit)Juan Valencia, credit strategist.“If BTPs really underperform, some Italian credit would widen in sympathy. For the overall market, it won’t matter much, unless things deteriorate badly. There is big demand for credit and people keep buying.”“If you start seeing weakness in BTPs, then the banks are going to come under pressure and some corporates but I would see this as a temporary setback, probably an opportunity to buy.”Rabobank (Sell-off is a buying opportunity)Lyn Graham-Taylor, senior rates strategist.“I would fade today’s sell-off” as the Democratic Party and Five Star are lagging in the polls and have little incentive to call a snap election.Colombo Wealth SA (League win in Sunday’s elections could create opportunities)Alberto Tocchio, chief investment officer.“Of course it could create some unwanted political instability in Italy and Europe and to me the best trade is to go long the widening of the BTP-bund spread.”“If there is an over-reaction on Monday with a substantial sell-off of Italian equities, it could be a nice entry opportunity in a unloved market with some decent stocks that are offering an high dividend yield.”ING Bank NV (Spreads could tighten on a Salvini government)Antoine Bouvet, rates strategist.“There is a more technical reason why spreads will re-tighten even if Salvini is elected: investors cannot stay underweight/short Italian bonds for too long. They offer a much better carry than other government bonds and represent too large a portion of the market for investors to ignore them.”(Adds comment from Goldman Sachs in fourth paragraph and new chart.)\--With assistance from Anooja Debnath, Tasos Vossos and Ksenia Galouchko.To contact the reporters on this story: William Shaw in London at wshaw20@bloomberg.net;James Hirai in London at jhirai3@bloomberg.netTo contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Cecile Gutscher, Sam PotterFor 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
A Decade On, European Companies Are Still Looking for Profit Growth
(Bloomberg) -- Will this finally be the year European companies deliver profit growth?It’s the question that’s been on investors’ lips for a long time. While earnings in the U.S. have steadily risen in the decade since the global financial crisis, European figures have stagnated. Time after time, bullish predictions have given away to a disappointing reality. Now, with equities already at a record high and monetary policy more likely to normalize than ease further, profit growth might be the key factor to make or break the rally.Bottom-up analysts expect profits for Stoxx Europe 600 Index members to grow 8.2%, up from last year’s tepid 1% increase. That’s close to the 8.6% expansion expected for the U.S. However, many strategists are skeptical, calling the consensus too optimistic, and analysts typically tend to slash estimates as the year goes on, neither of which bodes well for a dramatic comeback.“With Europe on a relatively low valuation compared to the United States, investors can be more patient for earnings to develop as we continue into 2020,” said Edward Park, deputy chief investment officer at Brooks Macdonald Asset Management. “That said, for European equities to continue to rally from here we would need to see earnings come through.”What could help is an economic recovery, with recent releases showing tentative signs of stabilization. While political crises in Europe have played a part in keeping investors at bay, the region has also been plagued with weak macro data and corresponding lack of earnings growth in recent years. Banks, once the heavyweights for profits, have seen their might dwindle amid a lower-for-longer rates environment.So despite higher dividends and a near record-low valuation discount, the Stoxx 600 has underperformed the S&P 500 Index.Deutsche Bank AG strategists noted last month that European equities have lagged U.S. peers in the past eight years, after 40 years of keeping pace. Excluding the period around the European financial crisis and adjusting for the impact of U.S. corporate-tax cuts, they say earnings growth has been identical. Their baseline view, which assumes a pickup in European and global growth, is for the region’s earnings-per-share growth to match that of the U.S. in 2020.Not everyone is as bullish. The reporting season, which kicked into full gear on Tuesday with UBS Group AG’s annual release, is likely to bring mixed results, according to Morgan Stanley strategists. They say consensus expectations for 2020 are “optimistic but not implausible,” and note that European equities have been increasingly resilient to earnings downgrades in the past year.Goldman Sachs Group Inc. strategists led by Guillaume Jaisson say that analysts have been reluctant to slash earnings forecasts because of the stock market rally and cyclicals’ outperformance, which explains why fourth-quarter profit downgrades have been limited to just 1%. The current level of economic activity would suggest a 6% negative earnings revision, according to Goldman.The Stoxx 600 surged 23% last year in its best performance in a decade, even as a Citigroup Inc. index shows profit downgrades have mostly outnumbered upgrades since May. The dissonance shows that equity gains were driven purely by an expansion in valuations, which presents a risk to further stock gains, according to Alain Bokobza, Societe Generale SA’s head of global asset allocation.“We do not expect earnings growth to deliver any significant good news in 2020, under our assumption of a slowing global economy,” said Bokobza by email. “A valuation expansion process can’t continue forever.”While overall earnings growth has disappointed, digging deeper into sectors shows that most defensives have reported “solid growth” in recent years, according to Christian Stocker, a strategist at UniCredit SpA. The trend is likely to continue, he said.Among European sectors, telecoms, technology, retail, utilities and oil firms are projected to show double-digit growth this year, according to Bloomberg data. The slowest pace of expansion -- less than 7% -- is seen in financials, basic resources and media companies.Energy and mining sectors, which saw double-digit earnings contraction in 2019, remain vulnerable to weaker global manufacturing and commodity price swings, according to Brooks Macdonald’s Park. Oil has had a particularly volatile start to 2020 following the spike in U.S.-Iran tensions.Forecasts are most bullish for tech earnings, even as a gauge tracking shares in the sector is near levels last seen in the dot-com bubble days. That’s driven by increased automation and corporate investments into the sector that will enhance margins, says Park.Global GrowthFor the exporter-heavy Stoxx 600, global growth and the strength of the euro will be key factors for corporate profits.The single currency has been on the rise since September, when it reached its lowest since 2017, while the International Monetary Fund this week trimmed its outlook for world economic expansion to 3.3%. Although that’s slower than the 3.4% projected in October, it’s still the first pickup in three years.The Stoxx Europe 600 advanced 0.2% on Wednesday following two days of declines. Gains were limited by declines in Italian banking stocks after the resignation of the leader of the anti-establishment Five Star Movement raised political risk.“Europe is traditionally more cyclical and globally exposed in many ways, so if and when a firm global recovery develops, this side of the pond has room to step up,” said Tim Craighead, a European strategist at Bloomberg Intelligence.(Updates with today’s market move in penultimate paragraph.)\--With assistance from Namitha Jagadeesh, Michael Msika and Jan-Patrick Barnert.To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Namitha Jagadeesh, Morwenna ConiamFor 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.
- Zacks
Big Bank's Q4 Earnings Synopsis: Near-Term View Constructive
Retail banking will continue to aid big banks since American consumers are in good shape.
- Bloomberg
Oil Claws Back Some Losses on Prolonged Libyan Export Crisis
(Bloomberg) -- Oil erased some earlier declines as concern mounted about supply disruptions in Libya and Iraq despite ample output from other major producers.Futures trimmed losses to settle little changed near $58 a barrel in New York on Tuesday. The Libyan port crisis that strangled exports from North Africa’s biggest oil supplier extended into a fourth day. Meanwhile, spreading unrest in Iraq threatened shipments from OPEC’s No. 2 producer.The Libyan disruption is significant because “there is a lot demand for light, sweet crude” among refiners working to comply with stricter fuel rules, said Phil Flynn, an analyst at Price Futures Group Inc.Oil prices also were pressured as a deadly virus from China spread to the U.S.“There’s obviously a lot of concern with this virus in China,” said Josh Graves, senior market strategist at RJ O’Brien & Associates LLC.West Texas Intermediate futures for February declined 20 cents to settle at $58.34 a barrel on the New York Mercantile Exchange. The contract expires Tuesday.Brent crude for March settlement dropped 61 cents to $64.59 on the ICE Futures Europe exchange in London.Libyan militia leader Khalifa Haftar has blocked ports in a show of defiance after world leaders failed to persuade him to sign a peace deal. In Iraq, protests halted production at one oil field and rockets reportedly hit the Green Zone in Baghdad after a weekend of unrest.\--With assistance from James Thornhill, Sharon Cho, Saket Sundria and Grant Smith.To contact the reporters on this story: Sheela Tobben in New York at vtobben@bloomberg.net;Jackie Davalos in New York at jdavalos10@bloomberg.netTo contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Joe Carroll, Catherine TraywickFor 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
Jack Ma’s Booming Loan Business Threatens Visa, AmEx in China
(Bloomberg) -- As Visa Inc., Mastercard Inc. and American Express Co. prepare to enter China for the first time, one of their biggest competitive threats will come from a company that doesn’t issue credit cards.Jack Ma’s Ant Financial, already the biggest player in China’s $27 trillion payments market, is leveraging its ubiquitous Alipay mobile app to mount a rapid expansion into consumer lending.Instead of issuing cards, Ant allows customers to borrow with a few taps on their smartphones. The loans are wildly popular among China’s army of mobile-savvy shoppers, who often lack formal credit histories but generate enough financial data via Alipay for Ant to make informed decisions on whether they’ll default. The company’s outstanding consumer loans may swell to nearly 2 trillion yuan ($290 billion) by 2021, according to Goldman Sachs Group Inc. analysts, more than triple the level two years ago.“The consumer loans business has been growing at breakneck speed, but there are so many untapped users,” Huang Hao, president of Ant’s digital finance operations, said in a phone interview outlining the company’s strategy.Ant’s push into China’s 10 trillion yuan market for short-term consumer loans will make it an even more formidable challenger to U.S. card companies, which are counting on the world’s second-largest economy as a source of long-term growth.Many Chinese consumers and businesses are ditching credit cards as Ant and its main competitor Tencent Holdings Ltd. make app-based spending, borrowing and investing increasingly user-friendly. In a Nielsen survey of more than 3,000 Chinese people born after 1990, nearly 61% said they use online consumer credit while only 45.5% had a credit card.“For credit card companies coming to China, the biggest challenge is how to attract people,” said Zennon Kapron, managing director of Singapore-based consulting firm Kapronasia. “A lot of Chinese millennials are digital first, used to using Alipay as their first platform for payments, loans and wealth management.”The card giants appear to be moving forward with their China plans despite the headwinds. AmEx’s application to start a bank card clearing business has been accepted by the country’s central bank, while Mastercard has called China a “vital” market and Visa has said it’s working closely with regulators for a license.As part of its phase-one trade agreement with the U.S., China said it won’t take longer than 90 days to consider applications from providers of electronic-payments services. Regulators are opening the industry to foreign competition amid an unprecedented push to give international firms access to the country’s financial sector.Read more: Visa, Mastercard, AmEx Win Easier Access to China MarketIn response to questions from Bloomberg on the threat posed by Ant, Visa said it sees significant potential to support the growth and evolution of digital payments in China and is approaching the market with a long-term focus. Mastercard said it would continue to work with regulators to advance its application and is committed for the long haul. AmEx declined to comment.Ant, an affiliate of Alibaba Group Holding Ltd. that’s widely expected to pursue an initial public offering in coming years, started its consumer-credit business in 2015. Its loans tend to be small: half the users of Ant’s Huabei (translation: “just spend”) service borrow less than $290 and usually pay it back within months.The Hangzhou-based company, which declined to disclose the value of its outstanding loans, keeps delinquencies in check by tapping into a trove of data amassed by Alipay and Alibaba.Many customers have been using the payments and e-commerce platforms for years -- handing over details from ID cards to addresses and spending habits. Once Ant extends a loan, it can track how the money is spent via Alipay. The result is a bad-debt ratio stands at about 1%, below the 1.24% national average for credit cards.Read more: China’s Gen Z, With Little Income, Gets Hooked on Easy CreditAnt keeps some of the loans on its own balance sheet, charging interest rates that range from about 5% to 18%, according to Huang. But most are passed on for a fee to banks and other financial institutions.“We’re set to continue to work with more banks and finance companies,” Huang said. “We are, at the end of the day, a platform.”The risk for Visa, Mastercard and AmEx is that a swathe of Chinese consumers and businesses will view credit cards as obsolete. About 60% of borrowers on Ant’s Huabei platform don’t have one, and many smaller merchants don’t accept cards because they find it’s cheaper and easier to use Alipay or Tencent’s WePay. The former, with more than 900 million users, is Alibaba’s preferred payments provider.“The competitive landscape is full of local players,” said Hang Qian, a partner at Oliver Wyman, a consultancy. “The key challenges are how to promote small merchants to accept credit cards and how to get e-wallet users to switch.”\--With assistance from Alfred Liu.To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.netTo contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net, Jodi SchneiderFor 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.
- Yahoo Finance UK
Goldman Sachs CEO defends work on failed WeWork IPO
David Solomon said WeWork's failed IPO was 'a great example of the process working' during a panel at Davos.
- Zacks
Goldman Sachs (GS) Secures South African Banking License
Goldman Sachs (GS) gets approval to operate as a bank in South Africa. This is in sync with the bank's efforts to expand in the country.
- Reuters - UK Focus
Britain's TalkTalk sells its fibre network to CityFibre for 200 mln stg
- Zacks
Are Earnings Reports Just OK, or Better than Expected?
Are Earnings Reports Just OK, or Better than Expected?
- Zacks
The Zacks Analyst Blog Highlights: Microsoft, American Express, Fidelity National Information Services, Goldman Sachs and Southern
The Zacks Analyst Blog Highlights: Microsoft, American Express, Fidelity National Information Services, Goldman Sachs and Southern
- Bloomberg
Goldman Gets South African Bank License in Expansion Drive
(Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterGoldman Sachs Group Inc. got approval from South African regulators to operate a bank, as the Wall Street firm seeks to tap into fast-growing economies on the continent.The company also became a member of the Johannesburg Stock Exchange’s interest-rate and currency-derivatives market, Goldman Sachs said in a statement Monday. It will offer fixed-income products, foreign exchange and South African government securities, to corporate and institutional investors.Goldman Sachs, which has been present in South Africa for more than 20 years, in December appointed Jonathan Penkin as head of the local business. The firm already provides advisory, wealth- and asset-management services to corporations, investment firms, government institutions and individuals.The expansion comes as brokerages including Macquarie Group Ltd., Arqaam Capital Ltd., Deutsche Bank AG and Credit Suisse Group AG either pare back their operations or close down some businesses because of a moribund South African economy. Still, the country has the biggest, most liquid and most sophisticated capital markets on the continent, which is home to six of the world’s fastest growing economies.(Updates with background starting from third paragraph)To contact the reporters on this story: Jacqueline Mackenzie in Johannesburg at jmackenzie9@bloomberg.net;Vernon Wessels in Johannesburg at vwessels@bloomberg.netTo contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Paul RichardsonFor 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
Can You Get $10 Billion of Stock Orders in 10 Hours?
(Bloomberg Opinion) -- The last place on earth where bankers and traders can make real money is opening up. As part of its trade deal with the U.S., China vowed to grant Western financial institutions more access to its $14 trillion wealth-management industry. A number of foreign-controlled joint ventures with banks are in the works. Days before Christmas, Beijing approved the first one, a tie-up between Amundi Asset Management and a unit of Bank of China Ltd. Shortly afterward, China Construction Bank Corp. agreed to partner with BlackRock Inc. and Temasek Holdings Pte, while Industrial & Commercial Bank of China is flirting with Goldman Sachs Group Inc.Millions of dollars are being thrown at this. JPMorgan Chase & Co. and Nomura Holdings Inc. are buying up extra office space in Shanghai, where staff could be paid more generously than in Hong Kong. Goldman plans to double its headcount in China to 600 over the next five years. But why would foreigners want to crowd into the world’s most competitive market? Simple: Investors in China still have faith in active managers. Last year, it took just 10 hours for a star stock picker to attract more than $10 billion in orders for his firm’s debut mutual fund.Foreign firms might reason that they have deep talent pools, too. Bin Shi, a portfolio manager who has been with UBS Group AG since 2006, can churn out profit better than many of his mainland competitors. His Luxembourg-registered All China Fund returned 50% over the past year. By tapping into local banks’ distribution networks, Western asset managers could benefit from the army of retail investors that might come crowding in.If allowed to compete, Wall Street managers could almost effortlessly bat local competitors away. After all, Beijing wants Chinese wealth managers to emulate the U.S. model. In the West, middle-class savers have built up their nest eggs with mutual funds. They get some sense of their risk-return trade-off by checking (sometimes obsessively) the charts and numbers that showcase the historical ups-and-downs of their fortunes.Not so in China. Two years after the government unveiled sweeping rule changes, many products still carry the false perception of guaranteed future returns. It’s not uncommon for money managers to post these forecasts on their websites weekly. The concept of metrics like net asset value remain completely foreign to a money manager sitting in a Chinese bank branch. In that sense, Western competitors are miles ahead.Then consider the options. If Chinese savers looked at BlackRock’s range of offerings, for example, they’d be blown away. Some funds are designed to help you retire by 2040, while others are more tactical in nature. Blending bonds with stocks in a portfolio is commonplace, and financial metrics such as the Sharpe Ratio or effective duration for fixed income funds are readily available for savers to peruse, if they decide to get a bit technical.In China, investments that can deliver steady, stable gains are rare. Moms-and-pops are stuck with either bank deposits, which are essentially subsidies to the state-owned banks, wealth management products — nowadays pretty boring, thanks to Beijing’s sweeping rule changes to limit risk — or speculative private funds that can cost you dearly.To Beijing’s credit, foreigners have a fairly level playing field in the asset-management business. The new rules, which require banks to spin off their wealth units, are re-drawing the landscape entirely. The first such operation opened for business just six months ago, and there are now about half a dozen. It wasn’t until early December that the government even finalized net capital rules for these operations. So assuming the likes of Goldman and BlackRock can get their licenses quickly, their peers won’t be that far behind. That’s quite a positive step for a country that actively blocks Alphabet Inc.’s Google and Facebook Inc. to allow its domestic players flourish.Of course, we all know the realities of marriage: Whether a partnership yields happiness is anyone's guess. But that shouldn't discourage Western asset managers from trying. There's plenty of money to be made.To contact the author of this story: Shuli Ren at sren38@bloomberg.netTo contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.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
U.S. Firms Could Win Lucrative Job of Cleaning Up China's Bad Debt
(Bloomberg) -- U.S. investors won a direct shot at the potentially lucrative job of helping China clean up its heap of bad debt, in the trade deal struck last week. Now the hard work begins. China is embracing foreign capital as it grapples with a tide of soured debt. Some estimate it to have topped $1 trillion as the trade war weighed on economic growth and a long crackdown on shadow banking choked off liquidity.U.S. firms including Oaktree Capital Group and Bain Capital Credit have already been pushing into one of the world’s biggest distressed debt market. The trade deal will allow financial services companies from the U.S. to apply for licenses to buy non-performing loans, or NPLs, directly from banks, cutting out the middle man they have to go through now.The Communist Party-ruled nation is trying to instill more discipline in the market as defaults have hit records for two straight years and its vast regional banking network struggles to cope. Growing participation by foreign investors could relieve pressure on the mainly state-owned firms that so far have been the front-line in dealing with the bad debt problem. It could also result in a more market-driven pricing of soured borrowings.Read more about China’s efforts to curb bad debt“China’s NPL market is large and growing, and opportunities for deeply discounted investments are enticing foreign firms with NPL experience in other markets,” said Brock Silvers, managing director at Adamas Asset Management in Hong Kong.Gaining access is one thing, but succeeding is another. Top-down run China can be an arbitrary place to do business, and local knowledge and contacts are required in the 1.4 billion person nation. Foreign firms have often grappled with unpredictable courts, fraud and challenges of sourcing bad loans. A web of local enterprises are often closely connected to regional banks and the local government, making it hard to navigate.The market has grown significantly in recent years. But lack of experience has been an obstacle and many firms that stuck their toe in eventually pulled back because of difficulties in working out bad loans in China’s system, according to Benjamin Fanger, a managing partner at ShoreVest Partners, a distressed debt firm.“Some foreign investors are still continuing to push forward to try to learn and this new agreement opening to direct deals with banks might add more interest again,” he said. “But doing Chinese NPLs requires a very significant commitment of time and resources to build up local sourcing, underwriting and servicing/exit capability.”The sheer pace in the buildup in soured debt is proving a potent lure. Bad debt held by commercial banks jumped almost 20% in the first nine months of last year to 2.4 trillion yuan, according to the China Banking and Insurance Regulatory Commission.Data shows that overseas purchases of bad loan portfolios nearly tripled in 2018 to 30 billion yuan, Savills has said in a report. Active international players include Oaktree, Loan Star, Goldman Sachs, Bain, PAG and CarVal, according to the real estate and research firm.Savills said the overseas investors typically target loan books as large as $100 million, compared with domestic investors who seek to buy small batches of about $30 million. Targeted returns are usually 12-15%, unleveraged, or 17-22%, with leverage.China’s recent financial tightening has also led to opportunities for some foreign investors since some local investors are struggling to conclude deals, according to Savills.While the trade deal applies to U.S. financial services firms, the government could potentially broaden the scope to include European firms in time, according John Xu, a Shanghai-based partner at Linklaters that advises international funds on buying nonperforming loans.“The challenge is that there is a quota on the licenses per province, so there may not be sufficient licenses in some of the main provinces,” said Xu.ShoreVest Partners wasted no time in moving ahead and is in talks “with several provincial and municipal governments” about the new agreement and what the first steps would be toward obtaining an asset management company license, according to Fanger, a China bad debt veteran who speaks fluent Mandarin.But further steps will be needed to tame the unpredictability of the Chinese market.“If Beijing is to eventually get a handle on China’s over-indebtedness, it will have to allow for a predictable, rule-based nonperforming loan enforcement process,” said Silvers at Adamas in Hong Kong.(Retops)\--With assistance from Alfred Liu and Emma Dong.To contact Bloomberg News staff for this story: Denise Wee in Hong Kong at dwee10@bloomberg.net;Tongjian Dong in Shanghai at tdong28@bloomberg.netTo contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, ;Andrew Monahan at amonahan@bloomberg.net, Jonas BergmanFor 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.
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