GS - The Goldman Sachs Group, Inc.
| Previous close | 210.57 |
| Open | 208.79 |
| Bid | 211.19 x 800 |
| Ask | 211.25 x 1000 |
| Day's range | 207.96 - 214.01 |
| 52-week range | 130.85 - 250.46 |
| Volume | 1,810,201 |
| Avg. volume | 4,476,864 |
| Market cap | 72.405B |
| Beta (5Y monthly) | 1.37 |
| PE ratio (TTM) | 9.41 |
| EPS (TTM) | 22.38 |
| Earnings date | 15 Jul 2020 |
| Forward dividend & yield | 5.00 (2.37%) |
| Ex-dividend date | 29 May 2020 |
| 1y target est | 221.22 |
- Bloomberg
Big Job Gains Are Coming, But Not Yet and Not Enough
(Bloomberg Opinion) -- The economic disruption caused by the coronavirus has led to huge questions about what the employment situation in the U.S. will look like in a few months, let alone in the next year or so. Forecasts of annualized real gross domestic product growth in the second quarter of -40% and an unemployment rate peak of 25% are well within reason. If there's a bright spot for workers, it's that the historic relationship between real GDP and employment suggest that, millions of workers will need to be hired back fairly soon just to keep the economy running at its current low level. Short-term pandemic disruptions are unpredictable, but we should expect a return to the historic relationship between output and employment before too long.We can see how tight the relationship is between real, or inflation-adjusted, GDP and employment by looking at a long-term chart. Over the decades we've had big and small booms and busts, but dividing real GDP by employment shows a relatively stable relationship. The gentle rise accounts for productivity growth, as the economy becomes more efficient. There's nothing magical here; real GDP can be thought of as a function of hours worked and productivity. But it's useful to keep in mind when we're experiencing historic levels of economic disruption.As we await another jobs report that probably will show millions of jobs lost in May, this framework can help us think about how many jobs that have been lost over the past few months will be added back. Through April, total employment had already declined by 21 million since the end of 2019, the starting point we'll use to be consistent with the real GDP data. Estimates for May are a loss of another 8 million jobs. That would be a total decline in employment of 29 million, or 19.1%.That decline would be disproportionate relative to the decline in real GDP. Normally, when we talk about GDP growth we use annualized numbers, but since these declines have been so big it's more useful to look at the raw decline. On Friday, in part due to slight improvements in real-time economic data as state economies reopen, Goldman Sachs "raised" its estimate for second-quarter real GDP growth to -36% annualized, or 9% for the year. That would follow the first-quarter decline of 5% annualized, or 1.3% overall. Combine these figure and the U.S. will have a suffered a cumulative real GDP decline of 10.2% since the end of 2019.A 19.1% decline in employment is inconsistent with a 10.2% decline in real GDP. Assuming there's any kind of economic recovery from here, companies will run out of things to sell or find themselves understaffed at even these lower levels of demand. We don't need a coronavirus vaccine to close some of the gap between the decline in employment and real GDP.To think about what kind of partial employment recovery we should expect, we need to know how much economic output will recover in the short-term. Various real-time indicators have shown economic activity increasing since about the second week of April, and those can give us at least a little bit of an idea for what to expect. Housing has recovered robustly, with mortgage-purchase applications now back to pre-coronavirus levels and up from a year earlier. Mobility data from Apple Maps shows a steady increase in Americans on the move. Applications to form new businesses have largely recovered, a sign that would-be entrepreneurs have confidence in the future.Harder-hit industries such as lodging and air travel still have a long way to go, but even they are showing steady improvement. Hotel occupancy has recovered about 30% of its peak-to-trough decline and passenger data from the Transportation Security Administration shows that air traffic, which at its April lows was about 4% of last year's levels, is now up to about 13% year-earlier levels. Both hotel occupancy and TSA data have shown gains every single week since early April. Those trends should continue for at least a little while as Las Vegas casinos, Disney theme parks and New York City slowly reopen in coming weeks.What sort of near-term employment recovery is possible? Recovering 30% of lost output by the end of the third quarter would mean real GDP would still be 7% below its end-of-2019 level. That would still be much more severe than the 4% peak-to-trough decline of the Great Recession. And if the real GDP-to-employment relationship recovers to its late-2019 level, that would lift overall employment to 141 million -- meaning 10 million more jobs than in April. A less-efficient economy with more safety protocols and lower utilization of factories and facilities could even require more workers to produce the same amount of output for a while.Returning to full employment will require a full economic recovery. But keep in mind that even in this subdued environment, the level of employment is unsustainably low. That means a significant, though still insufficient, rebound in employment should come during the next several months. It can't happen soon enough.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.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.
- Yahoo Finance
Will protests and looting permanently damage the economy?
Here's how investors should be thinking through the impact of social unrest sweeping the country.
- Bloomberg
Older Crowd Embraces Online Banking, Rewards Firms’ Digital Push
(Bloomberg) -- It took a global pandemic to get many baby boomers to bank online. Lenders have taken notice.Over the past two months, Americans flocked to websites and apps to manage their finances as the coronavirus limited access to branches, according industry executives. For JPMorgan Chase & Co., existing online clients are using the offerings more frequently, while Bank of America Corp. found that older customers are seeking out its digital services.“We may have opened some people’s eyes to the future,” Bank of America Chief Executive Officer Brian Moynihan told investors at a conference last week. “We’re just on a relentless push.”The coronavirus has given a boost to digital banking, which entails less paper, greater use of electronic services and fewer in-person meetings. Tech has been viewed by banks as both an offensive and defensive tool. Online services have the potential to bring in customers, help cut costly branches and pare workforces, while also making it harder for new competitors to poach clients with the allure of better technology.In April, 23% of new logins to Bank of America’s online and mobile products were by seniors and boomers, Moynihan said. They also accounted for about 20% of customers who deposited checks using mobile phones for the first time. In its business catering to wealthy people, the use of technology has risen over the last six weeks to levels that the bank projected would take six years, according to Andy Sieg, president of Merrill Lynch Wealth Management.One in four people surveyed by Boston Consulting Group said they plan to use branches less or stop visiting altogether when the crisis is over, according to a global poll from April 13 to April 27. The pandemic sparked 12% of the people polled to enroll in online or mobile banking.“We’ve seen tremendous increases in the frequency of use,” said Mindy Hauptman, a BCG partner based in Philadelphia. “If you talked to someone a year ago, they would have said digital was critical to their future. I think that’s been reinforced and accelerated.”Customers were steered toward online banking for a multitude of reasons, Hauptman said. Many stayed home to comply with government orders, while others weren’t able to visit branches because of closures or limited services. As clients flooded call centers to request payment deferrals and inquire about government relief programs, others opted to go online.“This crisis is accelerating the trend toward digital banking,” Goldman Sachs Group Inc. President John Waldron told the conference last week. That’s translated to a 25% jump in active users on the bank’s institutional platform, while its retail arm, Marcus, has seen a 300% surge in visits for financial articles and videos.But the bank’s move to boost online services hasn’t always been smooth -- it delayed until next year the digital offering for its wealth-management unit.The pace of digital adoption remains uneven. In the April survey, only 16% of respondents in the U.S. said they would use branches less often after the crisis, the lowest of any nation in the survey.“We’re a little surprised of seeing in the consumer business that the folks who are already digital are doing more of it,” said JPMorgan CEO Jamie Dimon. “The folks who aren’t digital aren’t exactly picking it up. And I wish we could find a way to incent them to do that better.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’s Eccentric Couch-Surfing Trader Plans a Credit Fund
(Bloomberg) -- Not many Goldman Sachs partners seek out citizenship in a tiny Caribbean island to speed through airports. Ali Meli wasn’t your typical Goldman partner.Couch-surfing inside the investment bank, an almost $10 million paycheck as a junior trader and clashing with peers are all parts of the legend of Meli, described by colleagues as an unlikely figure in Wall Street’s most elite club: Abrasive but brilliant, subversive but successful, and above all one of its most “eccentric” figures.Now, after exiting the investment bank last year, Meli is setting up his own venture in some of the most treacherous markets in generations. The 38-year-old plans to recreate a model of doing business that he learned in an especially profitable part of Goldman’s trading division, putting together complex financing deals.“Everything about Ali was unusual but he was one of the most incredible people we’ve ever hired,” said Ram Sundaram, who brought Meli into his team, which went on to become the Principal Funding & Investments group. “He could think through all aspects of a deal to a degree that was abnormal. He was in a league of his own.”Meli is now seeking the backing of many of his former mentors as he looks to raise money for a structured credit fund, ramping up at a time of severe economic disruption.As companies seek out capital amid market distress, Meli hopes he finds himself in the center of transactions, borrowing a playbook from his Goldman days.Passport ShoppingBorn in the shadow of the Iran revolution, Meli’s earliest memories of Tehran, where he spent 20 years, was the conflict with Iraq, as his family shuttled between houses to shield themselves.“To some extent it was awesome -- the night lights up,” Meli said of the artillery and warplanes that thundered over the city. “When you’re a kid and you see these things, you don’t feel fear. It feels like a movie and it’s so cool. You don’t have the right context.”Meli’s ticket to escape the mandatory deployment in Iran’s army was a world physics competition. He later left the country altogether on a scholarship to the Massachusetts Institute of Technology.After a delay in his security clearance, Meli landed in Boston on Sept. 10, 2001. Terrorists attacked the U.S. early the next morning, prompting unprecedented scrutiny of recent arrivals from the Middle East. Meli soon had to submit to a government registry tracking his movements. But it didn’t end there.Every time he flew, the Iranian emigre was singled out for more rigorous checks. Even years later, while jet-setting with Goldman bankers to set up billion-dollar trades, the airport ordeals continued. So he solved it in a way only the wealthy would -- he went passport shopping.Meli settled on St. Kitts and Nevis, a haven for the rich where a property investment can buy citizenship outright. When Goldman published its full list of partners last year, he was the sole member of the group professing ties to the island nation.Ali Meli’s name is itself a bureaucratic mishap. Someone in the Social Security office misspelled the fairly common Iranian name “Melli.” He chose to live on with the new identity, not wanting to get into any paperwork battle that could jeopardize his status in the U.S.Harvey’s OfficeFor Meli, the worry of being sent back to Iran was paramount. His response was insane work hours.During his early days at Goldman, after other traders went home, Meli would sneak into one of the plush partner offices to sleep. He often found refuge on the office couch belonging to Harvey Schwartz, then a senior deputy to trading co-head Gary Cohn. Both men nearly went on to become the bank’s CEO.Meli’s justification: “Harvey had an open-door policy.”“I was worried about losing my job because it would have meant deportation to Iran,” Meli said. “I didn’t want to risk that. But I wasn’t stupid -- I never slept on Gary’s couch.” Cohn, known for his hard-charging ways, eventually joined President Donald Trump’s White House.Word of Meli’s antics started making the rounds soon after his arrival.The reception he got on the trading floor in the mid-2000s wouldn’t fly today. He was branded “Smelly Ali” -- a riff on his name, Ali S Meli -- and “Chemical Ali” -- after Saddam Hussein’s trusted adviser accused of gassing Kurds and executed in 2010. Meli said he reveled in the attention.“I had a few nicknames and I enjoyed it,” he said.There were also awkward moments. At one point he copied lyrics from a love ballad into a performance review of his manager, to express adoration. He was promptly told off.Yet Meli charted quick success, becoming a pillar of Sundaram’s group. Known as PFI, it had latitude to use Goldman’s own money to take on positions that wouldn’t be easy to quickly offload. Some of its big-ticket financings around the 2008 credit crisis generated massive gains for Goldman even as the rest of Wall Street struggled.The group came to be seen as a clique inside Goldman’s trading operation. Once a loose coalition of fewer than a dozen executives, it has been at the forefront of some of the most knotty transactions that can churn out big “P&L,” jargon for profits and losses. Its deals ranged from helping Sprint raise cash backed by airwaves, to financing Mexican toll roads. The group even structured bonds for Malaysia’s 1MDB investment fund after Goldman investment bankers clinched the troubled business. Officials in the country later looted the money.Insulated from the rest of the trading division, PFI’s stature grew as it tackled outsize risks and generated eye-popping returns.Meli just happened to be its quirkiest and most outspoken member, unafraid of challenging colleagues’ views. Some senior partners came to rate others based on how they fared in confrontations with him.$10 Million PaydayJust a few years into his banking career, Meli was already eyeing big risks. He encouraged his team to pile on short positions as the housing market headed into the 2008 credit crisis.“Bottom line: housing is in free fall,” he wrote in an email in August 2006 after poring through reports. Sundaram’s crew ramped up wagers against asset-backed indexes and bond-insurance companies. Meli said he framed a printed copy of that email after the hedges paid off for Goldman.Meli also had a hand in another incident that reverberated across financial markets. He helped his team come up with the valuation for marking down positions in its swaps transaction with AIG, which forced the insurer to put up more cash as others followed suit. AIG insisted for years that Goldman’s aggressive move was what led to its failure.“It’s one of those things you wish you weren’t right,” Meli said. “But what caused the marks to go down was not because we put the marks down, but a real housing recession had started to hit.”Some of the most profitable transactions were trades Goldman designed with the likes of CIT Group and European banks. That helped Meli score his giant paycheck for 2009. But as his success mounted, so did his skirmishes. Often passionate, he wouldn’t hold back in disagreements over transactions -- incidents that sometimes left more-senior colleagues red-faced.“He was unusually bright and eccentric,” said Joe McNeila, a former colleague in the PFI group. “It was a business of natural conflict. He could be very formidable and he was a tough guy to go up against.”Meli was one of the youngest people in Goldman’s class of new partners in 2014, but looking back, he figures that his combativeness probably slowed him down.“There was a period when I would get into these arguments sometimes with people more senior than me,” he said. “I was told I needed to learn to be more humble, and it was a valuable lesson.”Days after he was named partner, he bought his first car: a second-hand Mercedes.Over the years, people familiar with the situation said, his bosses fielded grievances that ranged from the ordinary to the bizarre.For a stretch of time, Meli tried commuting daily from Toronto to New York, raising concerns among colleagues about his manic schedule. He launched a crusade to support higher pay for junior bankers, which raised hackles. He proposed transactions that, while legal, were so novel or aggressive that bosses would sometimes squirm, worried about the optics.His political views on government overreach and the impact of regulation on daily life also made some colleagues uncomfortable.He jumped on the Trump train before many on Wall Street. And since becoming a permanent resident in 2018, he’s become a prolific political operative, dispensing more than a quarter million dollars to mostly conservative and libertarian candidates.Meli gave up butting heads at Goldman and officially exited the bank last year.This year, markets are presenting a once-in-a-century opportunity for brave credit traders. Meli’s firm has already announced a transaction, a credit line to a fintech company in Colombia. He’s named his new venture Monachil Capital Partners after a Spanish village that traces its name to the word monastery -- to try to denote inner calm, he said.(Updates with detail on investment in final 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.
- Motley Fool
Goldman Sachs Delaying Launch of Robo-Advisor
For now, if you want financial advice from Goldman Sachs (NYSE: GS), you'll have to obtain it from a human associate of the company. In remarks made during a presentation at a financial services industry conference, the company's president and COO John Waldron said it wouldn't launch its planned robo-advisory service this year. "We have decided to slow our advisor hiring activity for this year and we will defer the launch of our digital wealth offering into 2021."
- Zacks
Goldman Mulls to Shift Launch of Its Robo Advisor to 2021
Goldman (GS) seeks to delay plans of bolstering its wealth management business due to the coronavirus outbreak-induced mayhem.
- Bloomberg
SoftBank Doubles Vision Fund Chief’s Pay Despite Record Loss
(Bloomberg) -- The head of SoftBank Group Corp.’s Vision Fund received a substantial increase in compensation even as the investment business delivered a $17.7 billion loss.Rajeev Misra earned 1.61 billion yen ($15 million) in the year ended March 31, more than double his pay a year earlier, SoftBank said in a statement on Friday. The Vision Fund lost 1.9 trillion yen in the period, triggering the worst loss ever in the Japanese company’s 39-year history.SoftBank had to write down the valuations of companies like WeWork and Uber Technologies Inc. because of business missteps and the coronavirus fallout. Its return on the fund was negative 6%, compared with 62% just a year ago. Still, Misra was SoftBank’s second-highest-paid executive last year after Chief Operating Officer Marcelo Claure, even though Misra received no bonus and most of his compensation was in base pay. Founder Masayoshi Son took a 9% compensation cut, earning 209 million yen.“What kind of message is Son sending by giving Misra a raise despite the disastrous results he delivered?” said Atul Goyal, senior analyst at Jefferies Group. “The optics is just not good.”The pay hike for Misra comes at a time when the Vision Fund is planning deep cuts in staffing. The reductions across all levels of staff could affect about 10% of the fund’s workforce of roughly 500, according to people familiar with the matter. The Vision Fund, which has stopped making new investments after spending 85% of its capital, lists 30 people as investors on its website, including all of its managing partners, partners and directors.The fund has struggled since WeWork botched its efforts to go public last year and SoftBank stepped in to bail the company out. The Vision Fund currently manages more than 80 portfolio companies, but Son expects about 15 of the fund’s startups will likely go bankrupt while predicting another 15 will thrive.Separately, SoftBank is moving two managing partners at the Vision Fund into new roles. Akshay Naheta will become senior vice president, assisting Son in investments and providing strategic advice. Kentaro Matsui will transition to a senior advisory role at SoftBank Group.Claure, who helped close Sprint Corp.’s merger with T-Mobile US Inc. and is leading the effort to turn around WeWork, made 2.11 billion yen, a 17% raise. He also oversees a Latin American investment fund for SoftBank.SoftBank declined to comment on the reasons for changes in pay.Chief Strategy Officer Katsunori Sago earned 1.11 billion yen, a 13% increase for the former Goldman Sachs Group Inc. executive. Ken Miyauchi, head of SoftBank’s domestic telecom operation, made 699 million yen, a 43% drop. Simon Segars, head of its ARM Holdings Plc chip unit, did not make the list because his pay dropped below 100 million yen. Segars earned 1.1 billion yen the previous year.Ronald Fisher, Son’s long-time lieutenant and SoftBank Group vice chairman, saw his pay plunge 79% to 680 million yen. Fisher’s remuneration from the Vision Fund, where he runs the U.S. operations, totaled 1.27 billion yen, including a 767 million yen bonus. But he lost 701 million yen in compensation not related to the fund. SoftBank said the drop reflects a decline in stock price, but didn’t provide further details.SoftBank’s disastrous bet on WeWork has been viewed internally as Fisher’s project. Before SoftBank first invested in the company in 2017, Fisher met with executives at IWG Plc, a European competitor with a much lower valuation and many more sites, according to people familiar with the matter. Fisher interpreted the unfavorable metrics as a sign of growth potential. A month later, the Vision Fund led a $4.4 billion investment round into WeWork at a $20 billion valuation.Last year, after WeWork’s effort to go public fell apart, SoftBank stepped in to organize a bailout and put Claure in charge of turning around the business. But the pandemic has hammered its operations as workers shy away from gathering in shared office spaces. Earlier this month, SoftBank wrote down the value of its stake to $2.9 billion, more than 90% lower than its peak.(Updates with analyst comment in fourth 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
Wall Street Has Billions to Lose in China From Rising Strain
(Bloomberg) -- Wall Street giants such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. have tens of billions of dollars at stake in China as political tension risks derailing the nation’s opening of its $45 trillion financial market.Five big U.S. banks had a combined $70.8 billion of exposure to China in 2019, with JPMorgan alone plowing $19.2 billion into lending, trading and investing. That’s a 10% increase from 2018.While their assets in the country are comparatively small, they have big expansion plans there that may come undone if financial services firms are dragged into the tit-for-tat between the two countries. Not only would that cloud their growth plans, it would also threaten the income they have generated over the years from advising Chinese companies such as Alibaba Group Holding Ltd.Profits in China’s brokerage industry could hit $47 billion by 2026, Goldman estimates, with foreign firms gunning for a considerable chunk. There are $8 billion in estimated commercial banking profits as well as a projected $30 trillion in overall assets to go after, also being pursued by fund giants such as Blackrock Inc. and Vanguard Group Inc.“If you’re an American financial institution and you have an approved plan to expand into China, you’re going to continue that plan to the extent that the U.S. government allows you to because you see great future profits,” said James Stent, a former banker who’s spent more than a decade on the boards of two Chinese lenders. “A U.S.-China cold war is not good for your plans to build business in China.”After years of trade war turmoil, U.S. policy makers are now starting to take aim at the financial industry amid growing skepticism over American firms plowing money into a country perceived as a big geopolitical foe. Policy makers and lawmakers are looking at restricting U.S. pension fund investments in Chinese companies and limiting the ability of Chinese companies to raise capital in the U.S.A body advising the U.S. Congress this week questioned Wall Street’s push, saying lawmakers need to “evaluate the desirability of greater U.S. participation in a financial market that remains warped by the political priorities of a strategic competitor.” Add to that potential sanctions against China and even its banks over the crackdown on Hong Kong, and the situation could further escalate.President Donald Trump said he’s “not happy with China” after the country passed a new security law on Hong Kong and will announce new U.S. policies on Friday. His top economic adviser said Beijing would be held accountable by the U.S.Here’s a run down on the biggest U.S. banks’ presence in China right now and their plans.GoldmanGoldman, which has spent years lobbying for control of its onshore business, won approval this year. Chief Executive Officer David Solomon has pledged to infuse its mainland business with hundreds of millions of dollars in new capital as the bank plans to embark on a hiring spree to double its workforce to 600 and ramp up a wide variety of businesses.Goldman put its “cross-border outstandings” to China at $13.2 billion at the end of last year. But its two onshore operations had capital of just 1.8 billion yuan ($251 million), making a profit of almost 300 million yuan.A spokesman for Goldman declined to comment.Morgan StanleyHosting an annual summit in Beijing with 1,900 investors and 600 companies last year, Morgan Stanley Chief Executive Officer James Gorman said in a Bloomberg Television interview that the bank is in China “for the long run.” He highlighted its presence there for 25 years and its handling of hundreds of billions of dollars in equity and merger deals for Chinese businesses.Morgan Stanley won a nod to take majority control of its securities venture this year, and last year had a net exposure of $4.1 billion to Chinese clients. Its local securities unit, however, has revenue of just 132 million yuan, posting a loss of 109 million yuan last year.The bank has been overhauling senior management of the venture, installing its staff in key roles. It plans to apply for additional licenses to broaden its products and invest in new businesses, build market-making capability and expand its asset management partnership and ultimately take control.“It’s a natural evolution to bring the global investment banks into this market,” Gorman said in May last year.A Morgan Stanley spokesman declined to comment.JPMorganThe biggest U.S. bank has been doing business in China since 1921. Chief Executive Officer Jamie Dimon has said that his firm is committed to bringing its “full force” to the country. This year it applied for full control of an asset management firm as well as a securities venture, and is expanding its office space in China’s tallest skyscraper in downtown Shanghai.JPMorgan’s China total exposure in 2019 was $19.2 billion, including $11.3 billion in lending and deposits and $6.5 billion in trading and investing.JPMorgan China’s banking unit had 47 billion yuan in assets last year and made a profit of 276 million yuan, while its newly started securities firm had capital of 800 million yuan.A JPMorgan spokeswoman declined to comment.CitigroupCitigroup Inc., which has been doing business in China since 1902, had total exposure to the country of $18.7 billion at the end of last year. Its local banking arm had total assets of 178 billion yuan, making a profit of 2.1 billion yuan.Citigroup, which is setting up a new securities venture in China, is the only U.S. lender that has a consumer banking business in the country with footprint in 12 cities including Beijing, Changsha and Chengdu.New York-based Citigroup said last month that it has doubled its overall revenue from China to more than $1 billion over the past decade.China represents 1.1% of Citi’s total global exposure and includes local top tier corporate loans and loans to US and other global companies with operations in China, a bank spokesman said.Bank of AmericaBank of America Corp., the only major bank to decide against pursuing a securities joint venture, is continuing to expand into the world’s second-largest economy. The Charlotte, North Carolina-based lender is looking to provide a fuller range of fixed income services in the country.Its largest emerging market country exposure in 2019 was China, with net of $15.6 billion, concentrated in loans to large state-owned companies, subsidiaries of multinational corporations and commercial banks. It followed only the U.S., U.K., Germany, Canada and France in terms of exposure for the bank.A spokeswoman for the bank declined to comment.(Adds Trump comments 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.
- Reuters
U.S. judge orders 15 banks to face big investors' currency rigging lawsuit
A U.S. judge on Thursday said institutional investors, including BlackRock Inc <BLK.N> and Allianz SE's <ALVG.DE> Pacific Investment Management Co, can pursue much of their lawsuit accusing 15 major banks of rigging prices in the $6.6 trillion-a-day foreign exchange market. U.S. District Judge Lorna Schofield in Manhattan said the nearly 1,300 plaintiffs, including many mutual funds and exchange-traded funds, plausibly alleged that the banks conspired to rig currency benchmarks from 2003 to 2013 and profit at their expense. "This is an injury of the type the antitrust laws were intended to prevent," Schofield wrote in a 40-page decision.
- Bloomberg
China Isn’t Using Its Currency as a Cold War Weapon
(Bloomberg Opinion) -- The deterioration of U.S.-China relations is fast and furious, with Washington throwing out accusations of unfair trade practices, unlawful technology transfer and an early cover-up of the coronavirus outbreak, which has claimed over 100,000 American lives. The Chinese yuan, this year’s beacon of stability, is now is now at risk of tumbling like other emerging markets currencies.On Wednesday, the offshore yuan, which trades freely, flirted with its weakest level on record, dropping as much as 0.7% to 7.1965. While Thursday morning’s yuan fix came in stronger than expected, the overall sentiment is downbeat.It’s tempting to theorize that a weaker yuan could become a powerful weapon in the new Cold War, yet there’s little evidence of foul play from the People’s Bank of China. Since mid-2017, the central bank has based its fixing on the previous day’s close, dollar movement overnight against a currency basket, and what it calls the “countercyclical factor," a catch-all metric that grants wiggle room to deviate from market fundamentals. The yuan can move in a 2% trading range around the PBOC’s daily target.Take a look at Goldman Sachs Group Inc.'s estimate of the countercyclical factor. Over the last year, the PBOC has been consistently guiding its yuan stronger, not weaker, to artificially track the dollar. For all the theatrics of getting labeled a currency manipulator, Beijing wasn’t making its exports any cheaper.What’s new this year is the PBOC’s Zen-like attitude. Rather than playing the heroic fireman, handling one crisis after another, the central bank has been largely hands-off. It has used the countercyclical factor in a meaningful way only twice since January, on Feb. 4 when China emerged from the Lunar New Year holiday to face a national lockdown, and at the end of March when the outbreak was shaking up global markets.And why should the PBOC adhere to the dollar anyway? The coronavirus downturn has only showcased America’s exceptionalism — it prints the world’s reserve currency. Haven demand for the dollar has surged, evidenced by soaring currency swap rates from the euro zone to South Korea, and the Federal Reserve’s scramble to re-establish swap lines with other central banks. Looking back to 2008, the greenback only started to weaken two months after demand for “emergency dollars” peaked, data provided by Deutsche Bank AG show.So it makes sense for China to adopt a more enlightened approach, allowing the yuan to weaken during periods of dollar strength, and catch up when global tensions recede. From the PBOC’s view, the trade-weighted yuan is certainly stronger now than it was last fall, when the central bank was in fire-fighting mode. China doesn’t want to spend another $1 trillion of its foreign reserves defending its currency. The rapid drawdown in 2015 and 2016 traumatized the Chinese for good.To be sure, the pressure of capital outflows is still there. Just look at the consistent negative value of the “net error and omissions” figures in China’s balance of payment data. However, here’s the beauty of the virus: The Chinese can’t go anywhere. They can’t come to Hong Kong to buy insurance products, and unless you’re ultra-rich (with private bankers around the world apartment-hunting for you), Manhattan real estate is off-limits. The PBOC has less to worry about than before.So now the market can test the true value of the yuan. It could easily drop below 7.30 if the phase one trade deal breaks down and the Trump administration imposes some of the tariffs it had previously threatened, estimates HSBC Holdings Plc.Long-time China bear Kyle Bass abandoned his yuan short in early 2019 for the greenback-pegged Hong Kong dollar. He didn’t profit from his yuan trade because the PBOC established powerful tools, such as selling yuan-denominated bills in the offshore market, to kill anyone betting against the currency. Now that their interests are becoming aligned, it’s time for the bears to wake up.This column does not necessarily reflect the opinion of the editorial board or 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
Can China’s Spenders Lift the World?
(Bloomberg Opinion) -- The Chinese consumer has been one of the most important drivers of the world economy over the past decade, fueling hopes of prolonged growth and profits. So it’s worth looking at what’s happening to household balance sheets as Covid-19 wreaks havoc on a population now feeling the downside of growing personal leverage from the boom. In the last major financial crisis, big-spending Americans were hit hard, but the Chinese found new ways to open their wallets and took the rest of the global economy along for the ride. China accounted for 31% of growth in household consumption between 2010 and 2017, World Bank data show, bringing its share now to about 10%. That includes around 30% of spending on cars, luxury retail and mobile phones, and hundreds of billions of dollars on travel and tourism.Chinese consumers are the “single most important thing in the world economy,” Jim O’Neill, a former Goldman Sachs Group Inc. chief economist, told the Financial Times last year. They could be key to the next 40 years of growth, and it’s unlikely that any other country could replace them.Will they be able to spend away the global economy’s gloom this time? They’ll have their own worries to deal with first.In the quarter to March, disposable household income shrank sharply for the first time since at least 2013, putting strain on balance sheets in which new forms of credit and financial assets take up a bigger part. Consumer credit – from cards to peer-to-peer loans and other lending – has proliferated in recent years. A central bank survey showed that around 60% of household assets are parked in real estate; some 97% of liabilities are tied up in bank loans, with mortgages almost 70% of the total. As borrowings and incomes diverge, stresses on individuals and families rise. All told, households owe 63 trillion yuan ($8 trillion), or 65% of gross domestic product, according to CLSA Ltd. analysts. Leverage is more than 130% of last year’s earnings. Adjusted on a GDP per capita basis, that puts China among the highest in relation to major countries. The debt service ratio is climbing much faster compared to the U.S., Australia and Japan.Spending patterns are changing due to lockdowns, less money and changes in consumer psychology brought by the coronavirus. Online shopping has increased, of course. The gross merchandise value of essentials and goods like home hygiene products has surged. A UBS Evidence Lab survey in April showed that while people were returning to work, 54% of respondents said their incomes had declined, and 60% had reduced offline spending. Fewer than half expected a pay raise soon and just over a quarter planned to reduce their debts. Property purchases were being put on hold.That austerity is probably a good thing. Early signs already point to trouble. Credit card delinquencies are rising. Consumption loan asset-backed securities are even weaker, with overdue payments rising sharply from 6% in January to over 9% in March. That indicates a deteriorating quality of household balance sheets between prime and weaker borrowers. Non-performing consumer credit is expected to double this year.Middle-class borrowers have been China’s big spenders, but much of the incremental growth was going to come from aspiring buyers trying to enter higher socio-economic strata. Now, they won’t quite make it. If they’re hurting, who will spend? Goldman analysts point out that in China, not only is the marginal propensity to consume for lower-income urban households greater than for higher earners. It also varies widely with migrant workers spending less than those in cities, even at similar levels of income.Since China modernized its economy in recent decades, the new generations of consumers have arguably never faced a lesson in crisis management. The shock for them may be greater in some ways than what American households endured circa 2008. So far, delinquencies in the U.S. have held steady. According to the Federal Reserve Bank of New York, first-quarter national non-housing debt was flat, and fell for credit cards. While there is no doubt that U.S. consumer spending will suffer as income insecurity and joblessness rise, a social safety net is in place. China’s remains underdeveloped and an unemployment problem is brewing.How Chinese deal with these pressures will matter. Sure, it’s comforting that a large portion of wealth is stashed in hard real estate assets. But a change in property values or prices doesn’t really impact consumption of durable goods. What happens when cash flows shrink? The retail spending that the economy needs to revive won’t materialize for countless businesses, incomes will continue to decline, and the vicious circle continues. Beijing’s stimulus for individuals needs to be more robust.Whatever a new normal looks like, the individual Chinese spender may no longer be as reliable a part of it. Those looking for a consumption boost may want to turn elsewhere.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.
- Yahoo Finance
Fatter unemployment checks are hurting the COVID-19 economic recovery: Goldman
Goldman Sachs make a key argument on the economic recovery in its latest piece of research.
- Yahoo Finance
NYSE president: 'While we are reopening, it is not back to business as usual'
The iconic New York Stock Exchange floor is back open for business. Here is what New York Stock Exchange President Stacey Cunningham told Yahoo Finance.
- Motley Fool
Goldman Sachs to Expand Its Cash Management Business
The investment bank plans to launch the service in the United Kingdom in September, and the rest of Europe by end of the year.
- Zacks
Goldman Seeks to Speedup Launch of Cash Management Business
Despite the coronavirus-related woes, Goldman (GS) is planning to launch its new cash management platform globally by the end of this year.
- Bloomberg
China’s Trillions Toward Tech Won’t Buy Dominance
(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
China's Crypto Is All About Tracing — and Power
(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 to Rework Debt Offer After Missed Interest Payment
(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
Voodoo Backers Kick Off Sale of Mobile Game Developer
(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
Jack Ma’s Ant Made About $2 Billion Profit in December Quarter
(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.
- Motley Fool
6 Banks PNC Might Want to Buy
PNC recently came into a large amount of cash after selling its entire stake in BlackRock, making it clear that it is looking to make a big deal.
- Bloomberg
China Abandons Hard Growth Target, Shifts Stimulus Focus to Jobs
(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
Grocery Startup Missfresh Closes In on $500 Million Fundraising
(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 Posts Longest Streak of Gains in More Than a Year
(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.
