STAN.L - Standard Chartered PLC

LSE - LSE Delayed price. Currency in GBp
+14.70 (+3.62%)
At close: 4:35PM BST
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Previous close406.40
Bid421.80 x 0
Ask422.10 x 0
Day's range410.20 - 426.20
52-week range391.70 - 742.60
Avg. volume9,976,764
Market cap13.291B
Beta (5Y monthly)1.49
PE ratio (TTM)7.47
EPS (TTM)56.40
Earnings date29 Jul 2019 - 02 Aug 2019
Forward dividend & yieldN/A (N/A)
Ex-dividend date05 Mar 2020
1y target est8.78
  • Reuters - UK Focus

    INSIGHT-Crisis haunts British banks in coronavirus relief effort

    With the future of many coronavirus hit firms in their hands, British banks, still scarred by the financial crisis, are worried that they are being asked by a desperate government to make loans that will never be repaid. This caution, combined with the challenges of an unprecedented demand for loans, is testing the British public's fragile faith in the lenders, which have spent a decade trying to rebuild their battered reputations and capital positions. "We've got to only make loans that we can reasonably believe people will be able to repay after the crisis has gone; to businesses which will still be there," Ian Rand, who runs business lending at Barclays, told Reuters.

  • HSBC Refugees May Find a Stable Home in China

    HSBC Refugees May Find a Stable Home in China

    (Bloomberg Opinion) -- China’s banks may be about to assume the mantle of the ultimate widows-and-orphans home for Hong Kong’s small investors.For decades, HSBC Holdings Plc has held that status — a reliable provider of investor income that even carried on paying dividends through the global financial crisis in 2008-2009. Hong Kong’s biggest bank hadn’t missed a payout in Bloomberg-compiled data going back to 1986. That changed Wednesday when London-headquartered HSBC scrapped its interim dividend in response to a request from the Bank of England. The lender’s stock plunged 9.5% in Hong Kong, the most in more than a decade.It’s difficult to overstate the importance of HSBC to individual investors in the city where it was founded more than 150 years ago. The stock is unusually widely held. Institutions own just 61.5% of the shares, compared with 94% for Standard Chartered Plc, HSBC’s London-based and Hong Kong-listed rival. Standard Chartered also cancelled its dividend along with other British banks after the BOE called on them to conserve cash amid the coronavirus pandemic.HSBC’s dependable payouts have also been a lure for institutional investors. Shenzhen-based Ping An Insurance Group Co., the bank’s second-largest shareholder, cited the dividend as an attraction for taking its 7% stake. Mainland Chinese investors will also be feeling the pain: As much as 8.2% of HSBC’s Hong Kong-listed stock sits with investors who bought via trading pipes that connect the city’s exchange with counterparts in Shanghai and Shenzhen. That’s risen from about 2% three years ago.HSBC said it would cancel an interim dividend slated to be paid this month and make no payouts or buybacks until at least the end of the year. That raises the question of where investors will turn in search of the stable income that they used to take for granted from HSBC. The answer may lie in the bank’s giant, state-controlled rivals across the border in mainland China.That might seem surprising. Shares of Industrial & Commercial Bank of China Ltd., and three fellow Chinese lenders that are members of Hong Kong’s benchmark Hang Seng Index, have languished over the past decade. Their poor performance reflects investor concerns that China’s post-financial-crisis buildup of debt will eventually lead to a surge in bad loans. ICBC’s Hong Kong-traded shares are 13% lower than they were a decade ago, and Bank of China Ltd. has slumped 27%. While China Construction Bank Corp. has lost only 1%, Bank of Communications Co. has fallen 44%.Yet all have been steady dividend payers. Including dividends, ICBC has returned 46% in the past decade, Construction Bank 65% and Bank of China 28%. Only Bocom has lost money for its investors. The four banks have typically traded at high dividend yields over that period. Yields for ICBC, Construction Bank and Bank of China have all averaged more than 5%, with peaks higher than 8%. Elevated yields often indicate that investors expect payouts to be cut or omitted altogether, but dividends have actually been rising at the Chinese banks in recent years.China’s opaque financial system and the state-owned banks’ status as policy tools of the government have helped to deter some investors. Yet with the coronavirus shutting down economies from the U.S. to Europe and pressuring financial systems, it’s debatable whether Chinese institutions should be seen as any more risky than their overseas counterparts. For one thing, having been first into the coronavirus outbreak, China’s economy is also the first to start getting back to normal. For another, the government has an incentive to ensure that the banks keep paying dividends because it relies on that income to fund social security spending. An unofficial rule has mandated the big state banks to pay at least 30% of their profits out as dividends, another reason to be sanguine that payouts will be sustained.In 2016, HSBC chose to keep its headquarters in London rather than move back to Hong Kong, a call that it may now be tempted to revisit. It would be ironic if a decision by its adopted jurisdiction helped send shareholders in the bank’s home city — and biggest market — scurrying into the hands of Chinese rivals.    This column does not necessarily reflect the opinion of 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 now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Reuters - UK Focus

    UK investors tell companies to rethink bonuses if scrapping dividends

    Britain's investment managers would expect banks and other companies to rethink bonuses if they are scrapping payouts to shareholders, the Investment Association said on Wednesday. Top UK banks have scrapped dividends for 2019 and interim dividends for 2020 after being asked to do so by the Bank of England, with other firms also stopping payouts as the economy remains in lockdown. The current situation should, however, not be used to "rebase or reduce" dividends unneccesarily, IA Chief Executive Chris Cummings said in a statement.

  • HSBC, StanChart Slide After Halting Dividends at BOE Request

    HSBC, StanChart Slide After Halting Dividends at BOE Request

    (Bloomberg) -- Britain’s biggest banks scrapped their dividends, sending their shares tumbling, after regulators pushed them to free up more money for loans to counter the fallout from the coronavirus pandemic and withhold cash payouts for top staff.HSBC Holdings Plc, Standard Chartered Plc, Royal Bank of Scotland Group Plc, Barclays Plc and Lloyds Banking Group Plc all canceled their outstanding dividends and buybacks and said there would be no payments in 2020.The Bank of England’s Prudential Regulation Authority wrote to lenders on Tuesday, asking them to cancel dividend payments while calling attention to their role in supporting the wider economy. The watchdog included a sharp warning that it “expects banks not to pay any cash bonuses to senior staff, including all material risk takers.”The companies’ subsequent statements didn’t mention bonuses.The U.K. push to cut discretionary awards for senior managers follows a similar stance from the European Banking Authority. In its strongest warning to date, the EBA also said banks should set pay, and especially bonuses, at a “conservative level” during the crisis. Firms should also consider deferring awards for a longer period and paying staff in shares.Banks are under pressure globally from the virus-driven volatility in markets and slumping growth. At the same time, they’ve been at the front end of massive support from central banks and regulators, including relief on some capital buffers and more time to tackle soured loans.The U.K.’s five biggest banks had planned to pay out 7.5 billion pounds ($9.3 billion) in dividends over the next two months; Barclays was due to dole out more than 1 billion pounds on Friday.“It looks structurally bearish for the sector, namely: higher cost of equity, increased regulatory uncertainty, weaker investment cases in the event of future capital raises,” Jefferies analyst Joseph Dickerson wrote, adding that HSBC is likely the most hit.HSBC’s shares plunged as much as 10% in London trading, and were down 8.4% at 11 a.m. in London. Standard Chartered tumbled 7%, Barclays shares declined as much as 8.4%, Lloyds fell as much as 8.8% and RBS 6.4%.HSBC said it would cancel an interim dividend slated to be paid this month and also make no payouts or buybacks until at least the end of the year. In its statement on Tuesday, HSBC said that “we expect reported revenues to be impacted in insurance manufacturing, and credit and funding valuation adjustments in Global Banking & Markets, alongside higher expected credit losses.”The bank, which generated half its 2019 revenue in Asia, has earlier said in the most extreme scenario, in which the virus continues into the second half of 2020, it could see $600 million in additional loan losses.Standard Chartered said any decision on a final dividend for 2020 will take into account the financial performance of the group for the full year and the medium-term outlook at that time.(A previous version of this story corrected the day when the PRA made the request.)(Updates shares)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.

  • Banks forced to axe dividends and may cut bonuses over COVID-19 crisis
    Yahoo Finance UK

    Banks forced to axe dividends and may cut bonuses over COVID-19 crisis

    HSBC, Lloyds, Barclays, Royal Bank of Scotland, Santander, and Standard Chartered all said they would axe dividends after pressure from the Bank of England.

  • Bloomberg

    Singapore Banks Offer to Defer Mortgage, SME Loan Payments

    (Bloomberg) -- Singapore’s central bank said lenders will offer additional relief for consumers and companies battered by the sharp economic slowdown, including a freeze on mortgage and business loan payments and cuts to credit card rates.Banks and finance companies can defer both principal and interest payments on residential mortgages through Dec. 31, the Monetary Authority of Singapore said in a statement late Tuesday. Small and medium-sized firms can opt to defer principal payments on their secured term loans until the end of the year, the MAS said.The central bank’s latest loan relief adds to several other fiscal and monetary measures the city state is employing after the coronavirus pandemic induced the worst economic downturn in a decade in the first quarter. More than S$40 billion ($28 billion) of existing loan facilities to small businesses will likely qualify for the relief plan.“The shock to the economy from the COVID-19 outbreak is unprecedented,” Samuel Tsien, chairman of the Association of Banks in Singapore, said in the statement. “We must take extraordinary measures to address not just a health crisis, but what has developed to become a deep global economic crisis.”Given deep capital buffers, ample liquidity and low leverage, Singapore lenders “are well placed to not only ride out the economic storm caused by Covid-19, but also provide meaningful relief to individuals and SMEs affected by the crisis,” MAS Managing Director Ravi Menon said in the release.Bank ReliefDBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., Singapore’s three largest lenders, are already taking steps to help small firms and individuals with measures that include deferring principal repayments and liquidity relief.Given the banks’ combined asset books of nearly S$1.5 trillion, “the anticipated impact on the Singaporean banks’ earnings will be small” relative to the estimated S$40 billion for qualifying SME loans, Kevin Kwek, a banking analyst at Sanford C. Bernstein in Singapore, said in an emailed reply to questions. He added the Singapore lenders are unlikely to cut their dividends, as U.K. banks did late Tuesday.“Since the balance sheet isn’t likely at this point to take a big hit and capital ratios are robust, this year’s promised dividends won’t be affected,” Kwek said. “Next year will be a question of how much earnings are affected.”Still, the three major Singapore banks are suffering from the economic slowdown, which has driven down interest rates and increased the risk of loan defaults. DBS shares dropped 2.2% to S$18.16, taking this year’s decline to almost 30%. UOB shares fell by about the same measure, with a year-to-date drop of 28%. OCBC retreated 1.5%, with a loss of 23% in 2020.More MeasuresThe new measures announced by the central bank will also allow life and health insurance policy holders to defer premium payments for up to six months, while customers with property and auto insurance policies can set up an installment payment plan.“Deferring payments increases future obligations and hence borrowers and policy holders should weigh their options carefully,” the MAS said. “Financial institutions will process all applications expeditiously.”International banks operating in Singapore including Citigroup Inc. and Standard Chartered Plc are also joining the relief measures.Other highlights of the new measures:Companies, including SMEs, holding general insurance policies that protect their business and property risks may apply to their insurer for installment payment plans.Banks and finance companies may apply for low-cost funding through a new Singapore-dollars facility for loans granted under Enterprise SingaporeHomeowners can apply for up to nine months relief on principal payments and/or interest payments on their mortgages. Interest will continue to accrue on the deferred principal amount.Consumers with credit card balances whose income has been cut by 25% or more can apply for a term loan of as many as five years. The rate would be capped at 8%, compared with 26% typically charged.Banks can also access the $60 billion of MAS funding established on March 26Deputy Prime Minister Heng Swee Keat last week unveiled a second fiscal support package of S$48 billion to help businesses and consumers hurt by the virus outbreak. Gross domestic product fell an annualized 10.6% in the first quarter from the previous three months, and the government projected a severe recession for the full year.Singapore’s central bank also took unprecedented easing steps Monday to support the trade-reliant economy. The MAS, which uses the exchange rate as its main policy tool rather than a benchmark interest rate, lowered the midpoint of the currency band and reduced the slope to zero. That implies the regulator will allow for a weaker currency to bolster exports.(Updates with estimated size of banks’ assets 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.

  • Oil Posts Worst Quarter Ever While Physical Market Craters

    Oil Posts Worst Quarter Ever While Physical Market Craters

    (Bloomberg) -- Oil posted the worst quarter on record after the coronavirus crushed demand and raised fears about overflowing storage tanks amid a price war that has flooded the market with extra supply.Futures in New York edged higher on Tuesday but still ended the quarter down more than 66%. While Brent and West Texas Intermediate futures held above $20 a barrel, the underlying, physical market flashed signs of distress. The gap between paper market trades and real barrels has widened to multi-decade highs in some cases, suggesting financial flows are supporting the futures market.“The prices of the physical barrels are showing a lot more distress than the paper benchmarks,” said Roger Diwan, oil analyst at IHS Markit Ltd.With demand weakening by the day and producers slow to cut output, Dated Brent, the benchmark for about two-thirds of the world’s physical oil, was assessed at $17.79 a barrel on Monday, the lowest since 2002. Across major shale regions in Texas and North Dakota, oil remains below $10 a barrel, while some lesser known grades have posted negative prices.Read: Key U.S. Crude Oil Grade Has Never Been Cheaper in Modern EraU.S. crude stockpiles were said to have ballooned by 10.5 million barrels last week, according to traders citing the American Petroleum Institute report, with a 2.93 million-barrel gain in Cushing, Oklahoma, the delivery point of the U.S. crude futures contract. If confirmed by the U.S. Energy Information Administration data, the nationwide crude build will be the biggest since February 2017. The market was little changed after the report.From shuttering and reduced throughput at refiners from South Africa to Canada, to major consuming countries like India pulling back, the additional oil supply and lower demand has reverberated around the globe. Saudi Arabia is unleashing a flood of oil to Europe and traders expect Aramco to slash prices for Asia further. To make matters worse, space to store the huge oversupply is quickly running out.Goldman Sachs’s Jeff Currie said on Bloomberg TV that even Russia is “extremely vulnerable” to oil storage and infrastructure limits because its fields require thousands of miles of pipelines to get to buyers.Oil tanks around the world could fill in six weeks, a move that will likely force significant production shut-downs, Standard Chartered analysts including Emily Ashford wrote in a report.“Huge inventory builds, potentially exhausting spare storage capacity, will mean that market balance requires an unprecedented output shutdown by producers,” they wrote.Brent futures are signaling a historic glut is emerging. The May contract traded at a discount of $13.66 a barrel to November, a more bearish super-contango than the market saw even in the depths of the 2008-09 global financial crisis. The WTI equivalent discount is at $12.43 a barrel.The pressure on U.S. producers and drillers is growing as the rout has caused firms to cut capital spending budgets, accelerate restructuring and lay off workers. Now, even Texas oil buyers have been asking for large production cuts as crude flows overwhelm pipelines and storage, according to Pioneer Natural Resources Co. Senators are asking President Donald Trump to take action, after he agreed with Russian President Vladimir Putin that current prices do not suit the interest of either country.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.

  • India Opens Access to Benchmark Sovereign Bonds in Index Bid

    India Opens Access to Benchmark Sovereign Bonds in Index Bid

    (Bloomberg) -- India opened up a wide swath of its sovereign bond market to overseas investors, taking its biggest step yet to secure access to global indexes as the government embarks on a record borrowing plan. Bonds rallied.Global funds will be able to buy new five-, 10- and 30-year bonds from April 1, the Reserve Bank of India said in a statement late Monday. It scrapped caps on some issued debt including the benchmark and said tenors may be changed or added.The rule change comes as Prime Minister Narendra Modi faces his biggest challenge yet after locking down the country for three weeks to contain a worsening coronavirus outbreak. Already under pressure from a slowing economy, Modi’s government needs inflows to fund a $22.6 billion stimulus package.“It’s certainly a right step moving forward to further open up the local market,” said Arthur Lau, head of Asia excluding Japan fixed income at PineBridge Investments Asia Ltd. “Whether the breadth of the move is sufficient will depend on the frequency and magnitude of the issuance.”Foreigners hold just 2.6% of the 60 trillion rupees ($794 billion) of sovereign bonds issued by India, and the government had set a 6% limit on overseas ownership. They also own under 2% of the outstanding benchmark 10-year debt.Gains were seen in the securities selected by the central bank for full foreign investments. The benchmark 6.45% bond due in 2029 fell eight basis points to 6.13%, while the 7.32% note due in 2024 was down eight basis points at 5.59%.The greater access comes just as global funds are selling emerging-market assets to hoard dollars amid fears of a global recession. They’ve sold $9.1 billion of rupee-denominated debt this quarter, the most in Asia, and the outflows helped send the currency to a record low.“It makes sense at a time when the government is trying to fund fiscal spending,” said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. “Current offshore-onshore rate differentials don’t suggest there is a lot of pent-up demand.”Inclusion in the Bloomberg Barclays Global Aggregate Index may translate into potential inflows of $6-$7 billion, according to HSBC Holdings Plc. A place in the JP Morgan GBI EM Index at a later date can potentially attract $12-$16 billion, the report said.Under existing rules, foreigners can account for a maximum 30% of the outstanding amount of any sovereign security, and the combined upper limit will remain at 3.6 trillion rupees until new limits are given, the RBI said. It didn’t specify whether the bonds falling under the new rules will still be part of the overall cap.The overseas cap in corporate debt will now be 15% of what’s outstanding, the RBI said. The plan to provide wider access to Indian bonds was first announced in the budget unveiled on Feb. 1.Opening up the debt market along with allowing domestic banks to trade in offshore currency markets will help deepen the hedging market for foreign investors, according to Standard Chartered Plc.Huge BorrowingsIndia will detail on Tuesday its borrowing plan for the first half of the fiscal year starting April 1. The government may slash or even cancel debt sales because of the virus outbreak, Reuters reported on Monday, citing finance ministry officials it didn’t identify. Authorities are also looking at selling these bonds to the RBI or to the state-owned Life Insurance Corp. of India, according to the report.“Lower oil prices should be positive to India’s economy and this should help RBI and the government to have more room to support,” PineBridge’s Lau said. “That being said, the ongoing public health issue remains the major risk factor of how things will evolve especially after the lockdown.”The yields on the benchmark 10-year bond fell to 5.98%, the lowest in more than a decade, on Friday after the RBI slashed the key rate by 75 basis points. It has since risen more than 20 basis points through Monday on concerns over new borrowings.The idea of tapping the global debt market more aggressively was floated September when Modi was in New York. Bloomberg LP, the parent company of Bloomberg News and Bloomberg Barclays Indices, announced it would help Indian authorities navigate a course to inclusion in international bond benchmarks.Investors who don’t have direct access to Indian debt can come via the International Central Securities Depositories, the central bank said.“This is potentially the first milestone in the path toward global bond index inclusion,” said Mayank Prakash, fixed income fund manager at BNP Paribas Asset Management India. “Euro clearing shall be the next probable task.”(Adds HSBC’s estimates in ninth paragraph, closes prices)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.

  • Standard Chartered freezes hiring, warns of bonus cuts: memo

    Standard Chartered freezes hiring, warns of bonus cuts: memo

    Standard Chartered has told staff it is freezing all external and internal hiring for two months and signaled it is likely to cut bonuses for 2020, as the Asia and Africa-focused lender grapples with the fallout from the coronavirus pandemic. The FTSE 100 bank would also re-prioritize discretionary investment for the time being, the company said in a memo seen by Reuters. The memo said the lender expected to have to make "sensible adjustments" to any variable compensation for 2020 given its finances were "likely to be challenged".

  • Standard Chartered freezes hiring, warns of bonus cuts - memo

    Standard Chartered freezes hiring, warns of bonus cuts - memo

    Standard Chartered has told staff it is freezing all external and internal hiring for two months and signalled it is likely to cut bonuses for 2020, as the Asia and Africa-focused lender grapples with the fallout from the coronavirus pandemic. The FTSE 100 bank would also re-prioritise discretionary investment for the time being, the company said in a memo seen by Reuters. The memo said the lender expected to have to make "sensible adjustments" to any variable compensation for 2020 given its finances were "likely to be challenged".

  • China Rejoins Monetary Easing Wave as World Shuts Down

    China Rejoins Monetary Easing Wave as World Shuts Down

    (Bloomberg) -- China’s central bank cut the interest rate it charges on loans to banks by the biggest amount since 2015 as authorities ramp up their response to the worsening economic impact from the coronavirus pandemic.The People’s Bank of China reduced the interest rate on 7-day reverse repurchase agreements to 2.2% from 2.4% when it injected 50 billion yuan ($7.1 billion) into the banking system, according to a statement Monday. The central bank said this will keep liquidity sufficient to help the real economy.The first cut to a PBOC policy rate since February is in line with a pledge by the Communist Party’s leadership on Friday to increase support to the economy through increased sales of sovereign debt, as domestic and international demand slumps due to the pandemic. The step brings the PBOC closer in line with the stance of global peers, who have loosened policy dramatically in recent weeks.“The larger-than-usual rate cut is an expression that China is willing to join the coordinated consortium for economic stabilization,” said Raymond Yeung, chief China economist at Australia & New Zealand Banking Group in Hong Kong. “Small and medium-sized businesses are collapsing for lack of cash flow.”Further Cuts ExpectedA reduction in the central bank’s main tool to adjust the price of market liquidity also signals coming reductions in its main one-year funding tool, and potentially a corresponding cut to the benchmark deposit rate. Reductions to policy rates should also be reflected in the main market benchmark of the cost of lending to companies, the loan prime rate.“Lowering banks’ lending rates without a reduction in the cost of their liabilities will squeeze banks’ net interest margin, eroding their profitability and capital base,” said Ding Shuang, chief Greater China and North Asia economist at Standard Chartered Bank Ltd. “A benchmark deposit rate cut is necessary.”China will increase its fiscal deficit as a share of gross domestic product, issue special sovereign debt and allow local governments to sell more infrastructure bonds as part of a package to stabilize the economy, according to a Politburo meeting on Wednesday, Xinhua reported late Friday.What Bloomberg’s Economists Say...“We expect the authorities to urge banks to expand lending, particularly to smaller and private companies. To achieve this, more liquidity will be injected by the PBOC via both broad-based and targeted methods, such as reductions in the required reserve ratio and offering liquidity via targeted MLFs.”\--David Qu, Bloomberg economistSee full report hereIn a separate statement published late Friday, the People’s Bank of China called for better coordination of global macro policies, while re-emphasizing it will keep liquidity sufficient to help with the real economy and watch out for inflation risks.Plenty of Room LeftThe cut Monday signals the PBOC has entered “a stage with stronger counter-cyclical adjustment,” out of consideration of both domestic demand and the global virus outbreak, Ma Jun, a PBOC adviser, said in a statement sent to the media after the rate cut. “The PBOC doesn’t use its bullets all at once. China still has plenty of room in monetary policy.”Economists have lowered their median forecast for economic growth to 2.9% for 2020, the slowest pace since 1976, when the Cultural Revolution wrecked the economy and society. Until the past few days, China’s policy makers had maintained a relatively cautious program of easing, mindful of the nation’s heavy debt load and of risks to financial stability.While the Politburo statement and the PBOC move signal the response is moving up a gear, it still falls short of a no-holds-barred stimulus.The leaders of the Group of 20 said last week they were injecting more than $5 trillion into their economies to fight the effects of the outbreak. Central banks globally have slashed interest rates and started quantitative easing programs.“Certainly, the policy easing is continuous and today’s liquidity injection at least suggests that the policy aid will be mildly constant and will be more proactive when the authorities deem necessary,” said Zhou Hao, an economist at Commerzbank AG. “China is joining the global easing wave.”(Updates with Bloomberg Economics, details of actions of other nations.)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.

  • We’re Now In a Bull Market? Thank the Dollar

    We’re Now In a Bull Market? Thank the Dollar

    (Bloomberg Opinion) -- It’s hard to imagine sentiment being any worse than it was coming into this week. The Dow Jones Industrial Average was down 35% from its high for the year in February, and more than a few Wall Street strategists were calling for a drop of 50% or more before it was over. What a difference a few days make. The benchmark briefly entered a (technical) bull market on Thursday, rising 20% over the course of three days from its lows on Monday. False rallies are a hallmark of bear markets, and this could be one of those, but this turnaround has one big thing going for it. Rather the some sudden confidence in the battle against the coronavirus pandemic and a subsequent quick rebound in the economy and corporate profits, much of the recovery in stocks can be tied to the dollar. As equities have soared the past three days, the Bloomberg Dollar Spot Index, which measures the greenback against a basket of major currencies, has tumbled some 3.78% from a record high after surging 8.91% the previous two weeks. Considered a haven, it’s not unusual for the dollar to strengthen in times of crisis. The problem is, the global financial system is tied to the dollar like never before, and its appreciation causes financial conditions around the world to tighten. The most visible example is in the debt markets, with the Institute of International Finance estimating that emerging-market borrowers alone have $8.3 trillion of foreign-currency debt, the bulk of it in dollars, up more than $4 trillion from a decade ago. So, any rise in the dollar makes it that much more expensive for these borrowers to make interest payments or refinance, which would only exacerbate the deep recession already facing the global economy. Much of the dollar’s recent weakness can be tied to one key move by the Federal Reserve to ease the run on the U.S. currency. What the Fed did was provide foreign-exchange swap lines with central banks in both developed and emerging markets, offering dollars in exchange for their currencies. The dollar “may now become a barometer of the efficacy of the policy response to corporate credit difficulties, interbank funding challenges, etc.,” Standard Chartered currency strategists Eric Robertson and Steve Englander wrote in a research note. “Global policy makers have adopted a ‘whatever it takes’ approach to countering financial-market volatility and the expected recession, but this response may also need to have an impact on the (dollar) to be seen as truly effective.”THE ‘SMART MONEY’ BELIEVESThere’s a school of thought on Wall Street that trading in the first 30 minutes after equity markets open represents emotions, driven by greed and fear of the crowd based on news, as well as a lot of trades based on previously set-up market orders. The “smart money,” though, waits until the end of trading to place big bets, when there is less “noise.” This action is what the Smart Money Flow Index tries to capture as it relates to the Dow. What’s encouraging is that this gauge has just risen back to pre-crisis levels, suggesting big institutions are more confident that perhaps equities have reached fair value. It’s also notable that Deutsche Bank AG equity strategist Binky Chadha, who called the S&P 500 Index’s surge higher in 2019, then pivoted to forecast no gain at all in 2020 before the coronavirus crisis hit, is turning more bullish — or at least less negative. Chadha just boosted his recommended equity allocation to “neutral” from “underweight,” according to Bloomberg News’s Joanna Ossinger. Among the main reasons for his shift, Chadha pointed out that equities’ peak-to-bottom decline was in line with historical patterns and that positioning was at a record low. BRING IT ONUsually it could be a warning sign when demand soars at an auction of U.S. Treasury securities. After all, Treasuries are the ultimate haven asset, and a rush into them may signal tough times ahead for the economy. So how should Thursday’s auction of $32 billion of seven-year notes be interpreted? Investors bid for 2.76 times the amount offered, the highest so-called bid-to-cover ratio since the height of the European debt crisis in 2012 and a big jump from the 2.49 times at last month’s sale. Yes, there is still a lot of concern about the future of the economy, but perhaps the jump in demand signals that the government will have no problems selling as much debt as needed to fund the $2 trillion rescue package. There’s even evidence of optimism in the corporate bond market, where the cost to insure investment-grade company debt from default has fallen for four consecutive days to the lowest since March 6. It has fallen three days for junk bonds. Not only that, Bloomberg News reports 34 issuers in the U.S. and Europe were in the market selling debt on Thursday, making it the busiest day in months. They wouldn’t be selling if there was no demand.COMMODITIES AS THE OUTLIERThe market for raw materials doesn’t seem to have received the memo. Some investors feel there won’t be a real recovery in markets until oil prices begin to rise, bolstering the cash flow of many U.S. energy firms that are now in jeopardy of defaulting after West Texas Intermediate crude plunged from more than $60 a barrel in January to as low as about $20 this month before trading at $22.78 Thursday. And it’s not just oil. Bloomberg Economics notes that metals consumption moves closely in line with global gross domestic product growth. As a result, the economists note that metals prices can provide a high-frequency guide to the ups and downs in the economy. “The fit is so strong that Bloomberg Economics uses the S&P GSCI Metals Price Index in our global GDP nowcast,” Tom Orlik and Niraj Shah wrote in a research note Thursday. “A 13% drop in the index since the start of March shows markets pricing in a sharp decline in activity.”TEA LEAVESThe news out of Italy has been grim. The nation reported the most coronavirus infections in the last five days on Thursday, even after weeks of rigid lockdown rules. The civil protection agency reported 6,153 new cases on Thursday, bringing confirmed cases there to 80,539, which is a level approaching China’s. On Friday, we’ll get some sense of what this is doing to consumer confidence when data for March is released. The median estimate of economists surveyed by Bloomberg is for a drop to 100.4, which would be the lowest since December 2014 from 111.5 in February. Such measures will likely gain in importance in the months ahead because market optimists are banking on consumer confidence rebounding quickly once the coronavirus pandemic slows. But no one knows when that will be and whether consumers will have the confidence — or the resources — to go about life as they did before Covid-19.DON’T MISS What More Could the Federal Reserve Possibly Do? A Lot: Tim Duy Euro-Zone Rescue Talks Are Irrelevant: Ferdinando Giugliano We Can’t Dismiss This Rebound as a Reflex Action: John Authers Dollar Crunch Is Europe’s Gift to Asia: Gopalan and Mukherjee Matt Levine’s Money Stuff: Nobody Wants a Margin Call Right NowThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


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  • The Dollar Crunch Is Europe’s Gift to Asia

    The Dollar Crunch Is Europe’s Gift to Asia

    (Bloomberg Opinion) -- Banks in Asia are suddenly shy to part with dollars. And who can blame them? Many of their corporate clients are borrowing the U.S. currency and depositing it with the same banks — just in case they can’t get the funding when they need it. The caution amid the coronavirus outbreak isn’t all that different from Inc. trying to discourage vendors from cornering toilet paper supplies. “Corporate banks are becoming a bit more discretionary about permitting draws on credit lines where hoarding cash is the sole objective,” according to Greenwich Associates consultant Gaurav Arora. The dollar squeeze is evident, as one of us wrote Monday, in the hefty premiums South Korean banks must fork out to borrow the U.S. currency — a reliable indicator of trouble in the past. It also appears that China’s banks may be less eager or able than before to fund the dollar needs of their corporate borrowers, Bloomberg Opinion’s Anjani Trivedi noted Wednesday.For Asia, the crunch is an unwanted gift from European lenders, whose departure from the region post-2008, as well as regulations that reined in Wall Street firms, have led to a funding hole. Japan’s banks have expanded and lenders like BNP Paribas SA have scaled up trade finance, but they’re yet to fill the void, especially as troubled Deutsche Bank AG shrinks. The German lender was in the top five corporate banks in Asia in 2014; last year, it wasn’t even in the top 10, according to Greenwich. Some countries like Korea have felt the loss more keenly than others. U.K. banks’ exposure to Korea has dwindled to $77 billion from $104 billion in the first quarter of 2008. German lenders’ claims have fallen to $13 billion from $36 billion.Japan’s lenders have taken up part of the slack. Driven by negative interest rates and aging demographics at home, they have dished out funds aggressively in Southeast Asia as well as to global deal-chasing clients like SoftBank Group Corp. The large U.S. operations of megabanks like Mitsubishi UFJ Financial Group Inc. also provide them with liquidity, as does their stack of fully convertible, cheap yen deposits. But some Japanese lenders have piled into off-balance sheet products, which suck liquidity in times of stress. Japan's Norinchukin Bank, a lender to farmers and fisherman, was one of the world’s largest buyers last year of collateralized loan obligations, bundled U.S. leveraged loans.When the Fed extended emergency swap lines to South Korea, Australia, Singapore and New Zealand last week to ease the worldwide dollar shortage, a step that our colleague Shuli Ren called for here, it was a sign that the liquidity problem was serious enough. Overall, the Fed gave temporary access to nine authorities in addition to the five that it has permanent arrangements with for making dollars available.(2) Emerging economies like India, Indonesia, Chile and Peru, though, have seen their requests for swap lines rebuffed in the past. The U.S. only helps those it sees as important to the stability of its own banking system.So what can Asia do? Start with the most extreme case. Australia needs U.S. dollar funding not just for foreign-currency loans but also for Australian dollar mortgages. That’s because the domestic deposit base is small, compared with the size of the banking industry. The average loan-to-deposit ratio of Macquarie Bank Ltd. and other major Australian lenders was 126% versus 68% for the top Asian banks, namely DBS Group Holdings Ltd., Mizuho Financial Group Inc., MUFG, Standard Chartered Plc, and HSBC Holdings Plc, according to banking analyst Daniel Tabbush, founder of Tabbush Report.Offshore funding sustains around one-third of major Australian banks' total worldwide operations. While the International Monetary Fund and others have flagged the reliance on foreigners as problematic, the Australian regulators have so far refrained from discouraging lenders to borrow abroad. Yet, the fact that the country had to seek dollars from the Fed during the epidemic upheaval and auction them to its banks will call into question the sagacity of this relaxed approach. In rest of Asia, one lesson from the dollar squeeze is to shun protectionism. Well-capitalized regional banks like Singapore’s DBS could supplement the three traditionally entrenched foreign lenders: HSBC, StanChart, and Citigroup Inc., a big cash management bank for Western multinationals. DBS could emerge as an Asian global bank, though in good times its expansion has been stymied by regulators playing to nationalist political sentiment, as we saw when it wasn’t allowed to buy Indonesia’s PT Bank Danamon in 2013.The next step may be to seek more intermediaries with scale. JPMorgan Chase & Co. is pumping top dollar into serving corporate treasuries as a safeguard against the fickle fortunes of investment banking. Japan’s lenders could also do more: MUFG is already one of the region’s most aggressive lenders and has the historical advantage of having a dollar clearing license, like HSBC. Unlike 2008, this isn’t a credit contagion yet, though that could change if large, messy financial bankruptcies were to erupt. But beyond the current crisis, the regulators must plan for the next squeeze. Since not everyone can rely on the Fed, the dollar supply chain is each country’s responsibility. At least until a credible alternative to the U.S. currency comes along. (1) The standing facilities are with the Bank of Japan, the Bank of England, the Bank of Canada, the Swiss National Bank and the European Central Bank.This column does not necessarily reflect the opinion of 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.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 now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • The Zacks Analyst Blog Highlights: Royal Bank of Scotland, Barclays, HSBC, Lloyds Banking and Standard Chartered

    The Zacks Analyst Blog Highlights: Royal Bank of Scotland, Barclays, HSBC, Lloyds Banking and Standard Chartered

    The Zacks Analyst Blog Highlights: Royal Bank of Scotland, Barclays, HSBC, Lloyds Banking and Standard Chartered

  • 3 FTSE 100 dividend stocks I’ve bought in this 30% market crash

    3 FTSE 100 dividend stocks I’ve bought in this 30% market crash

    These FTSE 100 (INDEXFTSE: UKX) high-yield dividend stocks could be among the first to recover from the market crash, reckons Roland head.The post 3 FTSE 100 dividend stocks I've bought in this 30% market crash appeared first on The Motley Fool UK.

  • Reuters - UK Focus

    Bank of England cancels annual stress test of banks

    The Bank of England said on Friday it was cancelling this year's stress test of eight major banks and building societies to enable them to focus on providing lending through the coronavirus crisis. "The recent 2019 stress test showed that the UK banking system was resilient to deep simultaneous recessions in the UK and global economies that are more severe overall than the global financial crisis, combined with large falls in asset prices and a separate stress of misconduct costs," the BoE said. The BoE also said it was delaying other regulatory reports on bank liquidity and climate risk, and a study into open-ended investment funds.

  • Stanchart Kenya confronts coronavirus impact 'day at a time'

    Stanchart Kenya confronts coronavirus impact 'day at a time'

    Standard Chartered Bank of Kenya reported higher earnings and dividend for the full year on Thursday and its chief executive said it was too early to assess the impact of the coronavirus epidemic on its business. StanChart Kenya, which is 75% owned by Standard Chartered Plc , said that if the crisis extends beyond 90 days, its negative impact on its business could become significant. Kenya has four confirmed cases of the COVID-19 disease caused by the virus, and the government has imposed measures aimed at reducing its spread, including banning public gatherings and closing schools indefinitely.


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  • StanChart expects record fall in global oil demand in 2020

    StanChart expects record fall in global oil demand in 2020

    "The demand shock from the spread of the coronavirus had combined with the supply shock from the collapse of the OPEC+ agreement to create a heavily oversupplied market," Standard Chartered said. "However, over the past week the restrictions placed on mobility by European and North American governments as part of their coronavirus response have significantly magnified the negative demand shock." Standard Chartered reiterated its second quarter Brent forecast of $23 per barrel, and Q3 Brent forecast of $27 per barrel adding the Q2-low will likely be well below $20 a barrel.

  • Why I’d invest £1k in these 2 cheap FTSE 100 dividend stocks after the 35% market crash

    Why I’d invest £1k in these 2 cheap FTSE 100 dividend stocks after the 35% market crash

    These two FTSE 100 (INDEXFTSE:UKX) shares could offer good value for money, in my opinion.The post Why I’d invest £1k in these 2 cheap FTSE 100 dividend stocks after the 35% market crash appeared first on The Motley Fool UK.

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