|Bid||0.00 x 1100|
|Ask||0.00 x 1400|
|Day's range||39.80 - 40.54|
|52-week range||27.20 - 57.57|
|Beta (5Y monthly)||1.45|
|PE ratio (TTM)||8.34|
|Earnings date||16 Jul 2020 - 20 Jul 2020|
|Forward dividend & yield||1.40 (3.49%)|
|Ex-dividend date||29 Apr 2020|
|1y target est||47.02|
(Bloomberg) -- Meituan Dianping’s shares soared after it reported a smaller than expected 13% slide in revenue that drove hopes the world’s largest meal delivery business is starting to recover as China emerges from Covid-19 lockdowns.Its shares climbed as much as 9.7%, extending strong gains since China began to return to normal in mid-March and propelling Meituan’s market value to more than $100 billion. That surge came after Meituan reported better-than-expected sales of 16.8 billion yuan ($2.4 billion) in the three months ended March. Morgan Stanley and CICC were among the brokerages that lifted their targets on Meituan, citing resilience across business lines and easing competition.Backed by Tencent Holdings Ltd., Meituan’s sprawling services from food delivery to in-store dining and hotel booking were among the most vulnerable to nationwide shutdowns. But its businesses had begun to climb out of the trough, offsetting severe slumps in areas such as hotels, executives told analysts on a Monday conference call. As of March’s final week, more than 70% of restaurants surveyed had recovered more than half their normal order volumes, while 30% had exceeded pre-pandemic levels, Chief Executive Officer Wang Xing said.“COVID-19 had a negative impact on Meituan but results beat on top-line and bottom line by a wide margin,” Bernstein analysts led by David Dai wrote. In food delivery, the “long run potential is still there and the profitability level can be much higher” after the company pushes advertising, they added.Longer term, the internet services giant will have to grapple with China’s worsening economy, which may further dent consumer spending. Subsidies and measures to help restaurants and merchants during the outbreak will again pressure profitability in the June quarter, executives said.Meituan reported a lower-than-projected net loss of 1.58 billion yuan, but that was after three successive quarters of profit.“Looking into the next three quarters, we believe there will still be challenges as there are still uncertainties and potential downside from the ongoing evolution of the COVID-19 situation,” Wang said on the call. “Meanwhile, a large number of local service merchants are still struggling for survival. Short-term profitability is not our top priority.”What Bloomberg Intelligence SaysMeituan’s near-term growth may weaken as its in-store dining, hotel and travel businesses take time to fully recover from China’s coronavirus outbreak. Operating efficiency will likely improve in the longer term as the company expands its market-leading scale and competition with Alibaba moderates. Broadening service categories and providing technology solutions for merchants will aid sales and profit growth.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.Before the outbreak, Meituan had pushed aggressively into adjacent arenas from online travel to ride-hailing. While revenue from the business that encompasses hotels and travel plunged 31% plunge during the March quarter, Meituan’s much smaller new initiatives segment -- which includes bike- and car-hailing -- grew sales 4.9%, aided by the launch of a new grocery delivery service. Hotels remained hardest-hit: in the week of May 11, domestic room nights were at about 70% pre-pandemic levels.While Meituan is expanding offerings to sell things like handsets and farm produce, rivals including Ant Group and SF Express, both backed by Alibaba Group Holding Ltd., are elbowing their way into Meituan’s core takeout business. Alibaba’s food-delivery arm Ele.me is also engaging in a subsidy battle with the startup for market leadership.(Updates with target increases by brokerages in second 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 Opinion) -- China’s decision to impose a national security law on Hong Kong has spurred speculation of capital flight and an erosion of the city’s status as an international financial center. As a venue for share offerings, at least, the near-term future is looking bright. For that, the territory can thank worsening U.S.-China relations.U.S.-listed Chinese technology companies are lining up to sell stock in Hong Kong, seeking refuge from an environment that has become increasingly less hospitable. Nasdaq-traded JD.com Inc. and NetEase Inc. are planning secondary listings in the city next month, following a trail blazed by Alibaba Group Holding Ltd. in November. Optimism that more companies will join them drove shares of Hong Kong’s exchange operator up more than 6% on Monday.There’s every reason to expect these stock offerings to do well, and push Hong Kong back up the rankings of the world’s largest fundraising centers. So far this year, the city is the sixth-largest market by capital raised. It topped the table for the whole of 2019 when New York-listed Alibaba sold $13 billion of stock, underscoring the existence of a strong local investor base for China’s most successful companies.The reception for Alibaba suggests that Asian institutional investors want to be able to trade China’s leading enterprises in their own time zone. JD and NetEase are also among the nation’s technology champions. Beijing-based JD competes with Alibaba in e-commerce, while Hangzhou-based NetEase is behind some of the most popular mobile games in China. Beyond these two, search-engine operator Baidu Inc. is considering delisting from Nasdaq and moving to an exchange nearer home, Reuters reported last week. The coronavirus has exacerbated tensions between Washington and Beijing, while scandals such as fabricated sales at Luckin Coffee Inc. have spurred politicians to push for tighter regulation, giving Chinese companies an incentive to list elsewhere.Hong Kong is an obvious choice. The city burnished its appeal for U.S.-traded companies last week when the compiler of the city’s benchmark Hang Seng Index said it would change its rules to admit secondary listings and companies with dual-class share structures. Stocks that join the benchmark can expect inflows from passive investors such as exchange-traded funds that track the index.Citigroup Inc. reckons that 23 of the 249 Chinese stocks traded in the U.S. meet Hong Kong’s criteria for a secondary listing, which require companies to have a market value of $5.2 billion or, alternatively, a combination of $129 million in annual sales and a $1.3 billion market cap. JD tops the group with a value of $73 billion.An even more alluring prize would be inclusion of secondary listings in Hong Kong’s stock-trading links with the Shanghai and Shenzhen exchanges, which would enable mainland Chinese investors to buy these shares. Alibaba wasn’t included in the stock connect, to the disappointment of some investors. China’s government could yet decide to make this happen.It’s a reminder that Beijing has levers at its disposal to help shore up Hong Kong’s economy and financial industry, which accounts for a fifth of the city’s gross domestic product — as it did after the SARS epidemic in 2003, when half a million people demonstrated against the Hong Kong government’s first, aborted attempt to introduce national security legislation. Hong Kong Exchanges & Clearing Ltd. surged the most in 18 months Monday even as unrest returned to the city. Listing of American depositary receipts may double the exchange operator’s revenue, Morgan Stanley said. The Hang Seng Index, meanwhile, stabilized after slumping 5.6% on Friday.An exodus of businesses, people and capital may yet imperil Hong Kong’s role as an international financial center. The IPO outlook suggests that, rather than a sudden demise, that’s likely to be a long drawn-out process. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.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) -- Canbridge Pharmaceuticals Inc., a Chinese drugmaker backed by WuXi AppTec Co., is working with Morgan Stanley as it starts early preparations for a planned Hong Kong initial public offering, people with knowledge of the matter said.The Beijing-based company is in talks with other banks seeking a role on the share sale and could add more arrangers in the coming weeks, according to the people, who asked not to be identified because the information is private. The offering could raise as much as $250 million, the people said, asking not to be identified because the information is private.Canbridge is planning to sell shares as soon as the autumn, the people said. Terms of the offering haven’t been set, and the size and timing of the transaction could change, the people said.The company raised $98 million in a series D financing round in February led by General Atlantic and WuXi AppTec. Canbridge said at the time it intended to use the proceeds to accelerate and expand its pipeline for rare disease drugs, through internal development as well as external partnerships.Canbridge also counts Qiming Venture Partners and Hangzhou Tigermed Consulting Co. among its investors, according to its website.Representatives for Canbridge and Morgan Stanley declined to comment.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) -- Carmen Reinhart -- the World Bank’s incoming chief economist -- just declared that globalization is probably dead, and flaring trade tensions between the world’s two biggest economies is supporting that theory.At the National People’s Congress, the pinnacle of its political calendar, China on Friday reiterated its commitment to implementing the phase-one trade deal signed with the U.S. The agreement, signed in January, compels it to buy goods in goals that seemed lofty even before the Covid-19 pandemic hit demand and battered supply chains.Yet within hours, White House economic aide Kevin Hassett told CNN the U.S. is closely studying economic penalties for China related to the nation’s plan to enact sweeping national security legislation in Hong Kong.That’s not all: President Donald Trump escalated his rhetoric against China over the pandemic, the Senate approved legislation that could lead to Chinese companies being barred from trading on U.S. stock exchanges, and a retirement-savings plan for federal workers deferred a plan to include Chinese stocks in its investments.Beijing’s fight isn’t just with Washington: Last week, it slapped anti-dumping duties on Australian barley for five years and suspended meat imports from four processing plants in the nation after the government in Canberra called for an independent investigation into the origins of the coronavirus.With China’s NPC continuing this week, and Trump never far away from a microphone, investors will be on the lookout for more comments to help decipher the situation.What Bloomberg’s Economists Say...“With the global economy in a historic slump, and growing fears of slide back into U.S.-China trade war, the echoes of the Great Depression are getting harder to ignore. A rapid bounce back from the lockdown recession already looks tough to achieve, add in fresh barriers to trade and capital flows, and it will get even harder.”\--Tom Orlik, chief economistElsewhere in the world economy, Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde address the public, and South Korea and Kenya are predicted to cut interest rates.Click here for what happened last week and below is our wrap of what’s coming up in the world economy.U.S. and CanadaThe weekly jobless claims report will indicate if U.S. workers are getting any relief from the pandemic, while other data will show the depth of damage to incomes and consumer spending in April. Revised figures will show whether the economy suffered a deeper hit in the first quarter than originally reported, and there will also be reports on consumer sentiment, housing and trade.Investors will also be all ears for any insights on the economy from Fed Chairman Powell, who speaks in a virtual event Friday.Bank of Canada Governor Stephen Poloz gives the final speech of his term on Monday, delivering the annual Hanson lecture via webinar.For more, read Bloomberg Economics’ full Week Ahead for the U.S.Europe, Middle East and AfricaBritain’s finance minister, Rishi Sunak, is expected to spell out how he’ll taper his much-heralded job retention plan. It’s the toughest decision he’s had to make in his short -- yet eventful -- career. If he gets it wrong, he risks cratering businesses and triggering a wave of unemployment.In the euro area, confidence figures may show sentiment is stabilizing after dramatic drops in April, but won’t shift the view that there’s a very uneven recovery ahead.ECB speakers, including President Lagarde, will likely emphasize how getting the euro area out of the worst recession on record will require more action, especially from governments. That view will be backed up by inflation data, which is forecast to show a reading of just 0.1% for May.Elsewhere in the region, the central banks of Israel, Hungary, Poland and Nigeria are predicted to keep rates unchanged, while Kenya may lower borrowing costs yet again.For more, read Bloomberg Economics’ full Week Ahead for EMEAAsiaOn Tuesday, Singapore’s government is set to present a fourth set of stimulus measures to boost an economy that started the year with its worst performance since the global financial crisis and is expected to struggle even more this quarter. On Thursday, the Bank of Korea meets, with economists expecting a rate cut to 0.5%, according to an early tally of those surveyed.For more, read Bloomberg Economics’ full Week Ahead for AsiaLatin AmericaOn Tuesday, Mexico’s statistics agency publishes its final reading on first-quarter output, confirming that the economy suffered its deepest contraction in over a decade. Later in the week, the central bank updates economic forecasts and scenarios in its quarterly inflation report, before posting the minutes from its May meeting where policy makers cut the key rate for the eighth time in 10 months.On Friday in Brazil, first-quarter data should capture the onset of what economists expect to be the deepest recession in at least four decades. Reports from Brazil’s central bank during the week will likely show a sharp deterioration in both the current account and primary budget balance, giving investors added cause to sell their Brazilian assets and currency.Central banks in Colombia, Guatemala and the Dominican Republic hold interest-rate decisions.For more, read Bloomberg Economics’ full Week Ahead for Latin AmericaFor 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.
Morgan Stanley (MS) to strengthen presence in Canada by establishing a new unit dedicated to service employees and executives in the country.
(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.
In the same week that Facebook announced a redoubled effort to make a bigger mark in e-commerce, one of its long-time partners has closed a large round of funding. Ecwid, the startup that sells e-commerce tools directly and via third parties like Square and Wix, letting businesses build e-commerce experiences on their own websites and apps, as well as via Facebook, Instagram, Amazon, Google, and more, has raised $42 million from Morgan Stanley and PeakSpan Capital. Notably, now San Diego-based Ecwid had only raised about $6.5 million since 2009, the year it was founded in Russia as a spinout of X-Cart, a previous company founded by the founder and CEO Ruslan Fazylev; and it's already profitable.
(Bloomberg) -- Beijing is accelerating its bid for global leadership in key technologies, planning to pump more than a trillion dollars into the economy through the rollout of everything from wireless networks to artificial intelligence.In the masterplan backed by President Xi Jinping himself, China will invest an estimated $1.4 trillion over six years to 2025, calling on urban governments and private tech giants like Huawei Technologies Co. to lay fifth generation wireless networks, install cameras and sensors, and develop AI software that will underpin autonomous driving to automated factories and mass surveillance.The new infrastructure initiative is expected to drive mainly local giants from Alibaba and Huawei to SenseTime Group Ltd. at the expense of U.S. companies. As tech nationalism mounts, the investment drive will reduce China’s dependence on foreign technology, echoing objectives set forth previously in the Made in China 2025 program. Such initiatives have already drawn fierce criticism from the Trump administration, resulting in moves to block the rise of Chinese tech companies such as Huawei.“Nothing like this has happened before, this is China’s gambit to win the global tech race,” said Digital China Holdings Chief Operating Officer Maria Kwok, as she sat in a Hong Kong office surrounded by facial recognition cameras and sensors. “Starting this year, we are really beginning to see the money flow through.”The tech investment push is part of a fiscal package waiting to be signed off by China’s legislature, which convenes this week. The government is expected to announce infrastructure funding of as much as $563 billion this year, against the backdrop of the country’s worst economic performance since the Mao era.The nation’s biggest purveyors of cloud computing and data analysis Alibaba Group Holding Ltd. and Tencent Holdings Ltd. will be linchpins of the upcoming endeavor. China has already entrusted Huawei to galvanize 5G. Tech leaders including Pony Ma and Jack Ma are espousing the program.Maria Kwok’s company is a government-backed systems integration provider, among many that are jumping at the chance. In the southern city of Guangzhou, Digital China is bringing half a million units of project housing online, including a complex three quarters the size of Central Park. To find a home, a user just has to log on to an app, scan their face and verify their identity. Leases can be signed digitally via smartphone and the renting authority is automatically flagged if a tenant’s payment is late.China is no stranger to far-reaching plans with massive price tags that appear to achieve little. There’s no guarantee this program will deliver the economic rejuvenation its proponents promise. Unlike previous efforts to resuscitate the economy with “dumb” bridges and highways, this newly laid digital infrastructure will help national champions develop cutting-edge technologies.What BloombergNEF SaysChina’s new stimulus plan will likely lead to a consolidation of industrial internet providers, and could lead to the emergence of some larger companies able to compete with global leaders such as GE and Siemens. One bet is on industrial internet-of-things platforms as China aims to cultivate three world leading companies in this area by 2025.Nannan Kou, head of researchClick here for researchChina isn’t alone in pumping money into the tech sector as a way to get out of the post-virus economic slump. Earlier this month, South Korea said AI and wireless communications would be at the core of it its “New Deal” to create jobs and boost growth.According to the government-backed China Center for Information Industry Development, the 10 trillion yuan ($1.4 trillion) that China is estimated to spend from now until 2025 encompasses areas typically considered leading edge such as AI and IoT as well as items such as ultra-high voltage lines and high-speed rail. More than 20 of mainland China’s 31 provinces and regions have announced projects totaling over 1 trillion yuan with active participation from private capital, a state-backed newspaper reported Wednesday.Separate estimates by Morgan Stanley put new infrastructure at around $180 billion each year for the next 11 years -- or $1.98 trillion in total. Those calculations also include power and rail lines. That annual figure would be almost double the past three-year average, the investment bank said in a March report that listed key stock beneficiaries including companies such as China Tower Corp., Alibaba, GDS Holdings, Quanta Computer Inc. and Advantech Co.Beijing’s half-formed vision is already stirring a plethora of stocks, a big reason why five of China’s 10 best-performing stocks this year are tech plays like networking gear maker Dawning Information Industry Co. and Apple supplier GoerTek Inc. The bare outlines of the masterplan were enough to drive pundits toward everything from satellite operators to broadband providers.It’s unlikely that U.S companies will benefit much from the tech-led stimulus and in some cases they stand to lose existing business. Earlier this year when the country’s largest telecom carrier China Mobile awarded contracts for 37 billion yuan in 5G base stations, the lion’s share went to Huawei and other Chinese companies. Sweden’s Ericsson got only a little over 10% of the business in the first four months. In one of its projects, Digital China will help the northeastern city of Changchun swap out American cloud computing staples IBM, Oracle and EMC with home-grown technology.It’s in data centers that a considerable chunk of the new infrastructure development will take place. Over 20 provinces have launched policies to support enterprises utilizing cloud computing services, according to a March note from UBS Group AG. Tony Yu, chief executive officer of Chinese server maker H3C, that his company was seeing a significant increase in demand for data center services from some of the country’s top internet companies. “Rapid growth in up-and-coming sectors will bring a new force to China’s economy after the pandemic passes,” he told Bloomberg News.From there, more investment should flow. Bain Capital-backed data center operator Chindata Group estimated that for every one dollar spent on data centers another $5 to $10 in investment in related sectors would take place, including in networking, power grid and advanced equipment manufacturing. “A whole host of supply-chain companies will benefit,” the company said in a statement.There’s concern about whether this long-term strategy provides much in the way of stimulus now, and where the money will come from. “It’s impossible to prop up China’s economy with new infrastructure alone,” said Zhu Tian, professor of economics at China Europe International Business School in Shanghai. “If you are worried about the government’s added debt levels and their debt servicing abilities right now, of course you wouldn’t do it. But it’s a necessary thing to do at a time of crisis.”Digital China is confident that follow-up projects from its housing initiative in Guangzhou could generate 30 million yuan in revenue for the company. It’s also hoping to replicate those efforts with local governments in the northeastern province of Jilin, where it has 3.3 billion yuan worth of projects approved. These include building a so-called city brain that will for the first time connect databases including traffic, schools and civil matters such as marriage registry. “The concept of smart cities has been touted for years but now we are finally seeing the investment,” said Kwok.(Updates with more details on projects from around China in tenth 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.
Most Canadian banks and insurers have strong wealth and asset management units that compete fiercely to add rich Canadians to their list of clients by offering a range of products and services to cater to their financial needs. Morgan Stanley will offer full-service financial advisers, virtual financial advisers, a discount self-directed investing solution and online investment management as part of its wealth management services. The bank said Morgan Stanley Wealth Management Canada will be a part of the stock plan administrative services that it currently offers through Shareworks, a company it acquired in 2019.
Morgan Stanley today announced its plan to launch Morgan Stanley Wealth Management Canada, a full-service wealth management offering to complement the existing Shareworks by Morgan Stanley stock plan administrative services it provides to executives and employees who reside in Canada (subject to regulatory approval). Morgan Stanley has selected Canaccord Genuity as its local platform provider to support the deployment of this new business.
Morgan Stanley Bank, N.A., a national bank subsidiary of Morgan Stanley (NYSE: MS), has been recognized with the highest rating from the Office of the Comptroller of the Currency (OCC) for its work meeting the credit needs of the communities it serves. The Firm received a rating of "Outstanding" for the Bank’s community reinvestment activities for the sixth consecutive time, and the fourth since being examined by the OCC.
Morgan Stanley (NYSE: MS) made a big splash in mid-February when it announced plans to buy E*Trade (NASDAQ: ETFC) for $13 billion. Morgan Stanley got no significant stock bump from the news of the acquisition or a strong fourth quarter as the COVID-19 pandemic hit the broader market hard shortly after the Feb. 20 announcement. In the long run, the E*Trade deal should be good for Morgan Stanley.
(Bloomberg Opinion) -- About two years ago, I wrote my first column on collateralized loan obligations. It followed a Barron’s article pointing individual investors to funds that buy the riskiest equity and junior debt of CLOs and offer double-digit yields. I posited that the peak must be close, based mostly on a hunch that markets only get truly frothy when mom and pop show up.With the benefit of hindsight, that turned out to be about right. Oxford Lane Capital Corp., a fund flagged by Barron’s that traded at $10.53 in July 2018, would top out at $11.50 a month later. It’s now worth just $3, not far from its low in March. Eagle Point Credit Co., which traded at $18.65 at the time, would climb by less than a dollar over the following year and is now hovering around $5.75. While these investments are known for their high yields, that’s still a steep loss in total value. And unlike public equities and even high-yield bonds, the funds show little evidence of rebounding anytime soon.What’s happening here? In the words of S&P Global Ratings: “The CLO structures are working as intended during periods of economic stress.”It truly is as simple as that. The equity and mezzanine tranches of CLOs offer huge returns but carry the risk that at the first sign of trouble, they’ll get nothing. It’s all part of how the structure is designed to protect the highest-rated portions, which famously never defaulted during the financial crisis and are owned widely by conservative investors like Japanese banks.And trouble has surfaced. Since early March, some 440 of the more than 1,500 obligors held in broadly syndicated U.S. CLOs rated by S&P have either been downgraded, placed on a negative CreditWatch, or both. Consequently, S&P has gradually put lower-rated CLO tranches themselves on negative CreditWatch, with the tally reaching 418 as of May 8. That usually either results in a downgrade or no change within 90 days. Meanwhile, Moody’s Investors Service has 859 CLO tranches worth $22 billion on downgrade watch.That portends more pain ahead for those who have tried to ride out the worst of the market’s swoon. Oliver Wriedt, chief executive officer of DFG Investment Advisers, said last week in a Bloomberg TV interview that “weaker hands” in the CLO market could be forced to sell in the coming months. Some investors might “be unable to hold tranches that are downgraded or tranches that are no longer current-pay,” he said. Many CLOs are next scheduled to distribute cash in early July. According to Bloomberg News’s Adam Tempkin, it’s likely more of them will breach key compliance tests by then, meaning some payments will shut off.“We’re excited about picking winners and avoiding losers in a market where that skill will be richly rewarded,” Wriedt said. Thus far, his company has been active in investment-grade tranches while treading cautiously among riskier parts of the debt stack.While the complete story of this economic collapse has yet to be written, one of the core themes of the first few months has been the short-lived opportunities for those investors looking to scoop up bargains. Legendary market gurus like Berkshire Hathaway’s Warren Buffett and Oaktree Capital Group LLC’s Howard Marks have pointed out that the Federal Reserve’s interventions across asset classes have kept prices from falling to levels they deem attractive. CLOs and leveraged loans are proving to be something of an exception. Triple-B and double-B CLO tranches have lost roughly 14% and 24%, respectively, so far this year. “We’re not expecting the support programs to meaningfully include the loan or CLO market,” Wriedt said. He’s buying with the expectation that “we’ll have to work this out by ourselves.” For its part, the Fed is well aware of the potential pain ahead for CLOs. Its latest Financial Stability Report, released May 15, doesn’t mince words when it comes to the structures:Defaults on leveraged loans ticked up in February and March and are likely to continue to increase, with the specific contour highly dependent on the path of overall economic activity. Such developments would weaken the balance sheets of lenders, including CLOs that hold leveraged loans, and amplify the economic effects of COVID-19.…Many lower-rated CLO tranches have been put on negative watch by rating agencies, indicating that material downgrades to those tranches are likely in the future. Some CLO investors such as hedge funds purchase lower-rated tranches using leverage. Downgrades of CLO tranches could result in margin calls on leveraged investors, forcing them to reduce their exposure by selling their holdings. Such sales have the potential of putting additional pressures on leveraged investors.It’s hard to spin this as anything other than ominous. Which, naturally, seems to be precisely why opportunistic credit funds are starting to circle this market waiting for the right time to pounce.Just last week, Bloomberg News’s Sally Bakewell reported that Tubkal Credit Partners, a fund set up with family office capital, is aiming to raise $100 million to invest in beaten-up European and U.S. lower-rated CLOs. That follows similar moves from Napier Park Global Capital and Neuberger Berman. These new funds signal that those looking for outsized profits need to act fast. Morgan Stanley strategists wrote last week that most speculative-grade European CLO tranches will ultimately return full par and deferred interest to investors, though not without the potential for wide price volatility in the interim.Which brings it back to individual retail investors, who are often less willing to ride through painful times than institutional managers. It’s hard to say how many of them bought risky CLO exposure a couple of years ago. However, it’s clear institutions are beginning to nibble now. Neuberger Berman added 400,000 shares of the Oxford Lane closed-end fund sometime in the first quarter, or about 0.5% of the shares outstanding, the biggest increase in limited data compiled by Bloomberg. Freestone Capital Management, an independent wealth adviser to high net worth families and institutions, piled the most into the Eagle Point fund in the three months through March. Private-equity firm Stone Point Capital holds almost 20% of the Eagle Point shares (though, as it happens, trimmed its position in mid-2018).With all the high-profile investors flummoxed at how stocks and risky corporate bonds can rally through a pandemic, CLOs and leveraged loans will be worth monitoring as some of the few the assets left behind. So far, they’ve inflicted serious pain on those who were left holding the bag when the coronavirus struck.But more risk takers will likely mobilize to buy low-rated CLOs on the brink of downgrades in the next few months. It could be little more than a desperate move, especially if global economy recovers more slowly than anticipated. But it’s about all that can be done to aim for high returns at a time when central banks are doing everything in their power to suppress volatility.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also 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) -- SoftBank Group Corp. is closing in on a deal to sell about $20 billion of its stock in T-Mobile US Inc., accelerating efforts to raise capital after record losses in its investment business, according to people familiar with the matter.The Tokyo-based company, which owns about 25% of T-Mobile US, plans to sell a slice of that stake to Deutsche Telekom AG so the German parent can own a majority and consolidate the unit’s financial results, said the people, asking not to be identified because the matter is private. SoftBank would then sell shares in a secondary offering to other investors and retain a smaller stake itself, one of the people said. The deal could be announced this week, the person said.Talks are still ongoing and the deal could change or fall apart. T-Mobile US’s market value is about $126 billion, while SoftBank’s stake is about $31 billion.SoftBank founder Masayoshi Son landed the stake in T-Mobile US just this year, after U.S. regulators approved the sale of his Sprint Corp. to its wireless rival. He is in the midst of selling 4.5 trillion yen ($42 billion) of assets to raise cash so he can buy back shares and pay down debt. Among his other prime assets are Chinese e-commerce giant Alibaba Group Holding Ltd. and SoftBank Corp., the Japanese wireless business.“If SoftBank Group can renegotiate that sale, it will reduce pressure on SoftBank Group to sell its stakes in Alibaba or SoftBank Corp.,” Atul Goyal, senior analyst at Jefferies Group, wrote in a report.The company already raised $11.5 billion from contracts to sell shares in Alibaba, its most valuable holding. Son said at an earnings briefing on Monday that the sale is the first tranche in a broader unwinding of assets.Dow Jones, which reported the T-Mobile US sale earlier, said Morgan Stanley and Goldman Sachs Group Inc. are working to draw investors for the deal.Long-term ControlAny potential sale could tip Deutsche Telekom’s stake in T-Mobile over 50%. The German carrier currently holds 43.6% and is already the controlling shareholder due to how voting rights were structured following the Sprint deal. A 7% stake in T-Mobile would be worth about $8.2 billion, according to New Street Research analyst James Ratzer.“Another buyer might be willing to pay a higher price than Deutsche Telekom, so going to 50% now would secure longer-term control,” Ratzer said in a note.T-Mobile completed its $26.5 billion takeover of Sprint on April 1, making it the second-largest mobile carrier in the U.S. based on the number of regular monthly subscribers. T-Mobile is the nation’s fastest-growing wireless company, and Deutsche Telekom’s largest source of revenue.On a Deutsche Telekom earnings call last week, Chief Executive Officer Tim Hoettges was asked if the company would be interested in buying a larger stake in T-Mobile from SoftBank.“It’s a great business to have, big attractive opportunities going forward -- we believe in the stock,” he said, adding that he could not “speculate on anything around these M&A talks.”Deutsche Telekom’s shares rose 1.5% in early trading on Tuesday.SoftBank and Deutsche Telekom are in the first months of a four-year lockup period that restricts the sale of T-Mobile shares. But the merger agreement doesn’t stop the companies from transferring stock between SoftBank and Deutsche Telekom. Even though Deutsche Telekom has a controlling stake in T-Mobile, it doesn’t have a majority stake. An outsider could purchase SoftBank’s shares when the lockup expires in 2024.SoftBank Group said on Monday that its Vision Fund lost 1.9 trillion yen in the most recent fiscal year, 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.The Japanese company also said on Monday it plans to spend up to 500 billion yen to buy back shares through next March, on top of an existing repurchase plan of the same size. That has helped SoftBank shares stabilize, rising more than 70% from their low in March.The stock fell about 2% in Tokyo on Tuesday, as Japan’s indexes rose.(Updated with additional context)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.
American Express CEO Stephen Squeri lays out his vision for how employees will return to work after COVID-19 quarantines lift.
Morgan Stanley (NYSE:MS) analyst Michael Phillips CFA maintained a Hold rating on Brown & Brown (NYSE:BRO) on Monday, setting a price target of $43, which is approximately 16.22% above the present share price of $37.
(Bloomberg) -- Since its founding more than three decades ago, Taiwan Semiconductor Manufacturing Co. has built its business by working behind the scenes to make customers like Apple Inc. and Qualcomm Inc. shine. Now the low-profile chipmaker has landed squarely in the middle of the U.S.-China trade war, an incalculably valuable asset that both sides are vying to control.The Trump administration opened up a new front in the conflict on Friday by barring any chipmaker using American equipment from supplying China’s Huawei Technologies Co. without U.S. government approval. That means TSMC and rivals will have to cut off Huawei unless they get waivers from the U.S. Commerce Dept. TSMC has already stopped accepting new orders from Huawei, the Nikkei newspaper reported Monday.The move threatens to wreak havoc throughout the complex ecosystem that produces technology for consumers and companies around the world. An attack on Huawei threatens not just its workers and its standing as a world leader in making smartphones and telecom equipment, but also hundreds of suppliers. The Chinese government has vowed to protect its national champion, with threats of retribution against U.S. companies that depend on China like Apple Inc. and Boeing Co.“China likely will retaliate, and investors should brace themselves for a possible trade war escalation,” Sanford C. Bernstein & Co. analysts led by Mark Li wrote in a research note on Friday.Read more: U.S. Tightens Rules to Crack Down on Huawei’s Chip Supply Huawei suppliers across Asia fell on Monday, with AAC Technologies Holdings Inc., Q Technology Group Co., Sunwoda Electronic and Lens Technology all sliding 5% or more. TSMC, which gets an estimated 14% of its revenue from Huawei, dropped as much as 2.5%.The U.S. already blacklisted Huawei last year, preventing American companies from supplying the Chinese company unless they got a license. The latest move tightens those restrictions to prevent chipmakers -- American or foreign -- from working with Huawei and its secretive chip-design unit HiSilicon on the cutting-edge semiconductors they need to make smartphones and communications equipment. The Trump administration sees Huawei as a dire security threat, an allegation the company denies.“We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests,” Commerce Secretary Wilbur Ross said in a tweet.Huawei countered by accusing the U.S. of ulterior motives.“The so-called cybersecurity reasons are merely an excuse,” Richard Yu, head of the Chinese tech giant’s consumer electronics unit wrote in a post to his account on messaging app WeChat. “The key is the threat to the technology hegemony of the U.S” posed by Huawei, he added.The U.S. decision is likely to hurt not just Huawei and TSMC, but also a clutch of American players including gear-makers Applied Materials Inc., KLA and Lam Research Corp. themselves, Morgan Stanley analysts wrote. Disruptions to Huawei’s production will also hurt U.S. customers from Micron Technology Inc. and Qorvo Inc. to Texas Instruments Inc., they said. But “it bears repeating that any escalation of trade tensions is negative for the stocks overall,” they wrote in a research report.It would have been impossible to imagine TSMC becoming such a coveted chit between the world’s great powers when it was founded in 1987. Morris Chang, born in China and trained in the U.S., started the company as a so-called foundry, manufacturing semiconductors for any customer that didn’t want to construct its own fabrication facility, or fab.At the time, the business wasn’t nearly as glamorous as making chips yourself. Dominating the industry at the time were companies like Intel Corp. and Advanced Micro Devices Inc., which made processors for personal computers. “Real men have fabs,” AMD co-founder Jerry Sanders would say, making clear that was an insult.But in the intervening years, the foundry industry has become far more strategic for the technology industry. Customers from Apple and Huawei to Qualcomm and Nvidia Corp. have found they can innovate more quickly if they focus on chip designs and then turn to foundries like TSMC to produce them. Innovators in emerging technologies like artificial intelligence or the internet of things also depend on foundries to crack open new markets.Today, many of the chips for mobile phones, autonomous vehicles, artificial intelligence and any other key technology are made at foundries. TSMC has become the leading foundry in the world by investing heavily in ever more advanced fabs, with annual capital spending of about $16 billion this year.It can now manufacture at 5 nanometers, about twice the width of human DNA, while China’s top foundry, Semiconductor Manufacturing International Corp., or SMIC, is at 14 nanometers. That makes TSMC’s chips far more powerful and energy efficient.Huawei and HiSilicon will have few good options if they are cut off from TSMC. One possibility is to procure off-the-shelf chips from Taiwan’s MediaTek Inc. and South Korea’s Samsung Electronics Co., an option Huawei’s rotating Chairman Eric Xu mentioned in late March. But even that may no longer be viable under the new Commerce restrictions.SMIC itself is keen on moving up the technology ladder, eyeing a secondary share listing that could raise more than $3 billion on top of a large capital infusion from the state.Read more: China Injects $2.2 Billion Into Local Chip Firm Amid U.S. CurbsBut that’s a longer-term endeavor and Huawei’s products meanwhile are likely to suffer, putting them at risk of falling behind those of rivals like Apple or Xiaomi Corp.For TSMC, it’s growing ever more difficult to remain neutral amid the growing tensions between the U.S. and China. The company brands itself “everybody’s foundry,” effectively the Switzerland of the tech industry. It supplies Chinese customers like Huawei and the American military, while relying on U.S. producers of semiconductor-making equipment like Applied Materials and Lam Research.TSMC did take one step closer to the U.S. last week, saying it would build a $12 billion chip plant in Arizona. The Department of Defense has expressed concern that overseas fabs may be vulnerable to cyberattacks and domestic manufacturing would assure a more reliable supply of chips.The proposal appears to be carefully calculated to address such security issues without too much damage to profits or its political balancing act. Suppliers to the military, such as Xilinx Inc., would be able to use the U.S. fab, but the facility would likely account for less than 5% of revenue so margins won’t be compromised.It’s not clear if the plans for a U.S. plant will win TSMC leniency in supplying Huawei, however.“TSMC will not be granted or granted a license based on their intent to build a 5 nanometer fab here in the United States. That’s not part of it at all,” Keith Krach, undersecretary for economic growth, energy and the environment at the State Department, told reporters on a call. “There’s no assurance on that and we don’t anticipate that.”Meanwhile, China appears to be preparing to retaliate for the new restrictions on Huawei. On Friday, the Global Times -- a Chinese tabloid run by the flagship newspaper of the Communist Party -- reported Beijing was ready to initiate countermeasures, including imposing restrictions on Apple, suspending the purchase of Boeing airplanes and putting U.S. companies on an ‘unreliable entity list.’The list will cover “foreign entities that cause actual or potential damage to Chinese companies and industries,” the newspaper said.(Updates with Nikkei report in second 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) -- The Bank of England is examining unconventional monetary policy measures more urgently amid the economic slump caused by the coronavirus pandemic, according to its Chief Economist Andrew Haldane.The central bank is reviewing a number of policies -- including negative interest rates and expanding the scope of the bank’s asset-purchase plan to include riskier securities -- as it is running low on conventional easing space, Haldane said in an interview with the Telegraph. He stressed that the BOE isn’t poised to impose any of those polices imminently.“It’s something we’ll need to look at -- are looking at -- with somewhat greater immediacy,” Haldane said when asked if borrowing costs could go below zero. “You mention negative rates, but there are other options beyond that, or alongside that, that we’re looking at as well.”“With QE there is more we can do there on the gilt side and the corporate-bond side in principle -- as we’ve found from other central banks, you could purchase assets further down the risk spectrum,” he added. “I don’t want to imply we’re poised on any of those but we have over a number of years been reviewing all of our options for more, if more is needed.”While the European Central Bank and other institutions have already cut rates below zero, the debate about the effectiveness of negative rates has gathered pace amid market speculation the Federal Reserve and BOE may have to follow suit to ramp up their response to the pandemic.Future Fed OptionsFed Chairman Jerome Powell dismissed the prospect last week, though he didn’t fully rule out the option as a potential tool in the future. BOE Governor Andrew Bailey has made similar comments, saying that while negative rates weren’t something being contemplated, it was important not to rule anything out forever.The BOE’s benchmark interest rate stands at 0.1% and taking it negative would present a communications challenge and prove difficult for banks, Bailey said. That, in turn, could undermine the BOE’s ability to influence borrowing costs across the economy.The track record of negative rates “quite simply, is poor and provides plenty of circumstantial evidence that their damage to confidence and financial stability far outweighs the benefits,” Andrew Sheets, chief cross-asset strategist at Morgan Stanley, wrote in a note published on Sunday.Haldane also warned that the U.K. is heading toward an unemployment crisis comparable to the one experienced in the early 1980s.U.K. High-Frequency Data DashboardU.K. INSIGHT: Tracking the Recession – High Frequency Dashboard(Updates with background on central-bank policy from fifth 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.
Morgan Stanley (MS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
Morgan Stanley (NYSE:MS) analyst Stephen Byrd maintained a Hold rating on Centerpoint Energy (NYSE:CNP) Inc on Friday, setting a price target of $19, which is approximately 12.43% above the present share price of $16.9.
Wrap fee programs offer accounts in which clients pay asset-based fees meant to cover investment advice and brokerage services, including the execution of trades. The SEC said that while Morgan Stanley Smith Barney promised wrap fee clients a "transparent" fee structure, some managers sent most or all of their client trades to third party brokers, causing clients to pay extra fees they could not see.