China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Categorized | Banks

Take off shades to peer behind numbers

Posted on January 31, 2015


It has been a week to be blinded by the big numbers. Apple produced the largest quarterly profit in corporate history — $18bn of it. Alibaba said on Thursday that $126bn of goods were sold over its website in the three months to December. Oil major Shell is to reduce its capital spending by $15bn over the next three years. And Greek bank shares fell 40 per cent in the first half of the week as fears grew about exactly how radical the new leftwing government will be. Wow.

    But take off your shades and squint at the smaller numbers too — they can often be more revealing. Take Apple, for example. Lots of people are getting excited about its potential in China, but the $700 average cost of an iPhone 6 is 10 per cent of per capita GDP of $7,000. It will be hard for the company to achieve the same penetration there that it has in the US.

    Or at Alibaba, look at the $160m that the company has spent over the past two years to combat counterfeits. That might sound like a big effort, but will it be enough to please Chinese regulators who investigated ecommerce sites last autumn? A nasty spat is brewing.

    Yahoo is to spin off its Alibaba stake into a separately listed company. A big move (and a welcome one) for sure, but the spun off company will contain some smaller businesses that Yahoo no longer wants, as well as the Alibaba stake. Those small businesses will muddy the valuation.

    Over at Deutsche Bank, the small number to look at was 7 per cent — that’s the return on equity that the core part of the bank made last year. It was 3 per cent if non-core losses are included. Not good enough. There are big hopes, then, for a strategy review due to be unveiled in the second quarter of the year.

    Shake Shack, the US burger chain that got its IPO away this week, says that same-store (sorry, same Shack) sales growth is a skinny 1.2 per cent. For the moment that may not matter too much as it opens new outlets. But eventually, it will need existing stores to be part of the growth story.

    Even that 1.2 per cent, though, looks big next to what McDonald’s reported this week. Same store sales dropped by 1 per cent throughout 2014 as diners switched to more upmarket chains. A new chief executive is in place. One of his aims should be to push same-store sales to even the small level that Shake Shack manages.

    Whether you have big plans or small ones, have a good weekend.

    Oliver Ralph, deputy head of Lex