Banks

RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Archive | November, 2016

Investors beware, chill winds are coming

Posted on 31 August 2016 by

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August was a soporific, a gentle susurration of stock markets ebbing and flowing without force. The month was a collective holiday from excitement after the mania of Brexit, a stark contrast to last year when a surprise devaluation of the Chinese currency was followed by generalised, if temporary, financial mayhem around the world.

The worry may be that investors could awake with a start, given a US election is approaching as well as a vote on the Italian constitution. Yet to decide what will influence markets in the months ahead it may help to look back and ask a question: an eventful year later, what has really changed?

    Consider the apparently divergent paths of the UK and Europe. At first glance British stocks were the smart choice as September began last year. Including dividends, an investor in the FTSE All-Share is 12 per cent richer. By comparison, MSCI’s broad index of European shares which excludes the UK has lost the imaginary shareholder 1 per cent of her capital, after dividends. The markets took their own routes to different destinations.

    Yet, if the comparison is approached from the perspective of a US dollar investor, suddenly the difference becomes hard to spot.

    Before UK voters decided to leave the EU, the two markets marched in lockstep. Since then they have diverged only slightly. In dollar terms, and with dividends, the UK is down 4 per cent while the rest of Europe has dropped by 2 per cent.

    So, for all the political and economic developments of the past year, a form of stasis appears to have set in. Estimates for corporate profits in the UK and Europe have been declining, largely offset by central bank measures which help to support asset prices. With calm restored, little underlying movement has occurred.

    Or, to cut it another way, the rising value of UK companies can be considered a form of money illusion. They are broadly worth the same as a year ago, but the pound is not. What it suggests is an evolution of the complaint often heard in recent years, that central banks are the cause of all market movement. All that now matters is the value of currencies, and where they might go from here.

    dan.mccrum@ft.com

    Danish payments processor Nets plans IPO

    Posted on 31 August 2016 by

    nets group logo

    Scandinavia’s biggest payment processor aims to announce plans for an initial public offering on Thursday that could value it at as much as DKr35bn ($5.2bn), according to people briefed on the plans.

    The planned flotation of Nets Holding on the Danish stock exchange comes only two years after it was bought by the US private equity groups, Bain Capital and Advent International, in a consortium with Danish pension fund ATP Group.

      The American private equity groups are aiming to repeat the success they enjoyed last year with the £5bn IPO of Worldpay, the UK-based payments processor they bought from Royal Bank of Scotland seven years ago.

      The move marks an attempt to reopen the European IPO market for larger companies, which suffered a stuttering start to the year and has been effectively closed since the British vote to exit the EU in June.

      The $18.5bn raised from European IPOs so far this year is down 55 per cent from the same period of 2015, according to Thomson Reuters.

      The plans also underline how the Nordic region is punching above its weight in the IPO market because of its relative economic strength — Denmark’s Dong Energy pulled off the biggest flotation in the world this year, debuting at about $16.5bn in June.

      Nets has sharply improved its performance since the consortium bought it for DKr17bn from a group of 189 Nordic banks in 2014.

      The payments processing group has produced strong growth on the back of rising use of the internet and mobile devices to transfer money, an area in which the Nordic region is particularly advanced.

      Nets handled 7.3bn transactions last year, up from slightly more than 6bn two years earlier. Its revenues rose 6 per cent in 2015, while its earnings before interest, tax, depreciation, amortisation and special items were up by a third.

      The company is expected to use much of the IPO proceeds to reduce the debt used by the private equity consortium to fund its acquisition two years ago. Bain and Advent are expected to keep a “significant stake”, according to people briefed on the plans.

      The company is expected to be valued at between DKr30bn and DKr35bn. Morgan Stanley and Deutsche Bank have been appointed as global co-ordinators, while Nordea and Danske Bank are acting as arrangers.

      Since it was bought by the private equity consortium two years ago, Nets has overhauled its senior management team, promoting former JPMorgan banker Bo Nilsson from chief financial officer to chief executive.

      The company has completed seven smaller acquisitions to bulk up in markets where it lacked scale, such as Sweden. It has also invested in its IT platform to improve security and strengthen its digital and mobile payments offering.

      Staff numbers have been trimmed, as full-time employees fell from 2,618 at the end of 2014 to 2,413 at the end of last year. But the private equity owners boosted capital expenditure, which rose by a third to DKr539m last year.

      ‘Massive demand’ greets Saudi bond sale

      Posted on 31 August 2016 by

      Saudi Arabia's Deputy Crown Prince Mohammed bin Salman reacts upon his arrival at the Elysee Palace in Paris, France, June 24, 2015. REUTERS/Charles Platiau/File Photo - RTX2GJ9P©Reuters

      Prince Mohammed bin Salman is spearheading a sweeping reform programme aimed at diversifying the kingdom’s economy

      Saudi Arabia’s first international debt sale has generated so much interest from Asian investors that the kingdom is weighing a full pipeline of bonds to follow a $15bn initial auction as early as October, according to bankers briefed on the sale.

      The clamour for Saudi sovereign debt, which could be the largest emerging market issuance in history, comes as record-low interest rates in mature economies has prompted investors to pour money into developing markets at a record pace, overlooking the risks in some of the world’s least stable economies.

        “We are seeing massive, massive demand,” said one banker of the Saudi debt. “Asian banks are throwing around billion-dollar numbers.”

        Saudi Arabian leaders are expected to discuss their plans with potential investors at next week’s Group of 20 meeting in China, bankers say.

        Deputy Crown Prince Mohammed bin Salman, the 31-year-old responsible for the kingdom’s ambitious economic and social reforms, is also planning to visit Japan this week and will chair the kingdom’s G20 delegation in China.

        Saudi officials surprised the financial markets earlier this year by hiring bankers to raise international debt, underlining the extent of the economic downturn after an extended oil boom had erased the memory of previous crashes.

        Spurred by the collapse in energy prices, Prince Mohammed has spearheaded a sweeping reform programme aimed at diversifying the kingdom’s economy away from dependence on oil reserves. The $15bn offering, expected to come as early as October, is also expected to pave the way for the biggest initial public offering of all time by state oil producer Saudi Aramco.

        Detailed plans for the sovereign debt sale are unlikely to be set until after the Islamic holiday of Eid al-Adha, with many government offices not expected to reopen until September 18.

        A roadshow to sell the landmark issuance — which will set the final size and tenor of the deal — could then begin at the start of October with the deal potentially closing around the time of the annual meetings of the International Monetary Fund and World Bank in Washington on October 7-9.

        Bankers say Saudi government entities, lenders and private corporations are also lining up their own debt issuance to follow in the wake of the sovereign launch.

        “Everyone is waiting to see how the appetite will turn out for the government, and at what price, which can then be used as a benchmark,” said a second banker. “There should be some other issuance before the end of the year.”

        Saudi Arabia is seen as a safer investment than other emerging economies because it remains nearly debt free and has the world’s largest oil reserves. But it is also benefiting from the desperate hunger for yield among investors starved by record-low interest rates in Europe, the UK and Japan.

        Bankers say Asian investors not previously seen in emerging market bond transactions are helping to raise order books to new highs as negative interest rates in Japan leave the majority of Japanese government bonds trading in sub-zero territory.

        The demand has prompted countries from Qatar to Mexico to ramp up their borrowing plans, leading JPMorgan to predict that 2016 will set a new record in emerging market sovereign bond sales.

        Earlier this year, Argentina ended 15 years in market exile with a sale of debt that attracted bids of more than $70bn. Like Saudi Arabia, the Latin American country had originally planned to borrow $15bn but raised the sum issued to $16.5bn as the result of investor interest.

        Initial soundings have shown strong Asian demand for the Saudis’ 30-year paper, while US investors prefer a 10-year maturity.

        Riyadh may return to market with a second tranche next year if oil prices remain below $50 a barrel, the second banker said.

        Government finances have been hit hard by the sustained slump in oil prices, slowing the overall economy and forcing Riyadh to plunder its foreign reserves and borrow locally, which is further squeezing a private sector already hit by late payments from state entities.

        The world’s three largest credit rating agencies — Moody’s, S&P Global Ratings and Fitch — all downgraded Saudi Arabia’s credit rating this year, citing the impact of lower oil prices.

        US declares victory in G20 austerity debate

        Posted on 31 August 2016 by

        Jacob "Jack" Lew, U.S. Treasury secretary, speaks during a discussion at the Brookings Institution in Washington, D.C., U.S., on Wednesday, Aug. 31, 2016. Lew said G-20 economies have continued to build on currency pledges, which included a first-ever pact in Shanghai earlier this year. Photographer: Andrew Harrer/Bloomberg©Bloomberg

        Jack Lew, the US Treasury Secretary, has claimed victory in Washington’s campaign for the world’s leading economies to embrace fiscal stimulus, saying they had come round to longstanding US arguments to put growth before austerity.

        Speaking ahead of President Barack Obama’s final Group of 20 summit which takes place in China later this week, Mr Lew said a “consensus” had formed around the US position on the need for countries to “use all policy tools” including monetary, fiscal and structural reforms. That, he said, was being reflected in new policy measures unveiled this year in Canada, China, South Korea, Japan and parts of Europe where governments were either boosting spending or delaying tax increases. 

          “The G20 is no longer debating growth versus austerity, but rather how to best employ fiscal policy to support our economies, and increasingly how to make sure the benefits of growth are more widely shared, while continuing to focus on sustainable long-term fiscal policies,” he said on Wednesday. 

          But at the G20 summit in Hangzhou, Mr Obama would also be pressing his counterparts to do more and to follow through on commitments made earlier this summer by finance chiefs. 

          “More needs to be done, but we have made real progress,” Mr Lew said. 

          The tussle over fiscal policy has been a regular feature of G20 summits in recent years with Germany in particular resisting pressure from the US and the International Monetary Fund to spend more to boost growth.

          An IMF clarion call earlier this year for co-ordinated action from the G20 to inject more life into a lagging global economy was quickly quashed by Wolfgang Schäuble, the German finance minister, who argued that the “debt-financed growth model has reached its limits”.

          Mr Lew conceded that many G20 members were still not willing to join the “public bandwagon” on the need for fiscal action to boost growth. But their actions pointed to a change, he said, citing the UK’s decision to abandon fiscal constraints after the June “Brexit” referendum as one example.  

          The G20 is no longer debating growth versus austerity, but rather how to best employ fiscal policy to support our economies

          – Jack Lew

          The G20, he said, had proved its worth in the wake of that referendum with its co-ordinated response helping to calm financial markets. 

          The US, he also said, remained confident that China was living up to its commitment to allow market forces to play a large role in determining the value of its currency, the renminbi. 

          The tense US economic relationship with China and allegations that Beijing has over time manipulated its currency to gain economic advantage have again been a feature of this year’s presidential campaign. But Mr Lew said Washington was satisfied for the time being that China was living up to its commitments to give the market a greater role in setting its exchange rate. 

          Market pressures were now pressing the value of the RMB down, Mr Lew said, and the US needed to accept that. The real test of the leadership in Beijing’s commitment still lay ahead, however, and would come only when markets were pushing the other way and causing an appreciation of the Chinese currency, he said.

          Banks outperform after volatile year

          Posted on 31 August 2016 by

          ECB announces surprise rate cut to historic low to spur growth...epa04383668 (FILE) A file photo dated 07 August 2014 showing a over-sized barbed wire, part of an installation, seen in front of the European Central Bank (ECB) in Frankfurt Main, Germany. The European Central Bank (ECB) announced surprise interest rates cuts on 04 September 2014 as it steps up its efforts to spur economic growth in the eurozone and to fight the threat of deflation. The Frankfurt-based ECB said it had trimmed its benchmark refinancing rate for the second time in three months, lowering to a historic low of 0.05 per cent. The bank also lowered its deposit rate, which is the rate charged for banks depositing funds at the ECB, deeper into negative territory, cutting it by 10 basis points to minus 0.2 per cent. The move sent the euro down to 1.3 dollars, while shares climbed on markets across Europe. EPA/BORIS ROESSLER©EPA

          Europe and Japan led a rally in global bank shares in August, as investors extended a summer respite to a sector that has been dogged all year by concerns over profitability in a world of negative interest rates.

          The Euro Stoxx banks index, a broad measure of the continent’s major financial institutions, jumped 6.4 per cent. The Topix banks sub-index, home to Japan’s biggest lenders, advanced 7.4 per cent. Meanwhile in the US, where the backdrop has been less troublesome, the S&P 500 Banks index rose about 6 per cent in August.

            Banks in all three developed economies comfortably outperforming their wider markets – a marked contrast to the first quarter of the year. Fears over anaemic economic growth – and, in Europe and Japan, the drag on profits from negative interest rates – drove the shares of many banks to record lows. The immediate reaction to Britain’s vote for Brexit hit banks in Europe and the UK particularly hard.

            “We’re at the point now where the baton needs to be handed over, from extreme oversold conditions post-Brexit . . . to the fundamentals,” said James Sym, a portfolio manager at Schroders.

            The Euro Stoxx banks index is up 24 per cent since early July, when it plumbed its lowest levels in nearly three decades. UK banks have also recovered some of their losses since shortly after the EU referendum, with Barclays rising 36 per cent and RBS and Lloyds Banking Group each adding 17 per cent.

            However, despite the better performance for European and Japanese banks in recent weeks, doubts over profits in a period of low or negative rates remains a key concern.

            “Until you see rates stabilise or on an upward trajectory, then the focus is still going to be on the profitability, like it’s been all year,” said Chris Telfer, a portfolio manager at ECM asset management. “With profitability being squeezed from the rate environment, and on the other side you’ve got capital requirements, it’s just all in all not a good picture for bank equity dividends,” he added.

            While the share price gains reflect a rebound from an extremely low base, they have also come as central banks have sought to ease concerns over the sector. In the US, bank stocks have benefitted as policymakers primedinvestors for a rate rise potentially as soon as September.

            The gains in Japan’s banking sector came after concerns over US dollar funding and the impact of the Bank of Japan’s negative interest rates policy (NIRP) have at least eased.

            In the months since NIRP was first announced by the BoJ in January, Japanese banks have fallen out of favour with investors. At the end of July, however, the BoJ announced additions to monetary easing that were clearly designed to address concerns over the health of the banking sector.

            As well as the announcement that it would double its ETF purchasing programme to Y6tn a year — a move that has provided general support to the Tokyo stock market and raised hopes of further rallies — the BoJ said that it would introduce measures to alleviate US dollar funding problems for Japanese financial institutions.

            Other central banks have introduced measures designed to support banks. The European Central Bank is running a long term refinancing operation that lends to institutions at extremely low rates. The Bank of England in Augustintroduced a new funding scheme for UK banks, in which it lends to institutions at a generous rate.

            “The action of the bank of England — that is not positive for profitability, no matter how they they’re trying to smooth the impact,” said Filippo Alloatti, an analyst at Hermes.

            Swift warns banks about hacker theft

            Posted on 31 August 2016 by

            A stream of binary coding, text or computer processor instructions, is seen displayed on a laptop computer screen as a man works to enter data on the computer keyboard in this arranged photograph in London, U.K., on Wednesday, Dec. 23, 2015. The U.K.s biggest banks fear cyber attacks more than regulation, faltering economic growth and other potential risks, and are concerned that a hack could be so catastrophic that it could lead to a state rescue, according to a survey. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg


            Hackers have carried out a series of successful raids on banks via the Swift global payments network, the organisation has warned its members this week as it pushes them to tighten their cyber security.

            In a letter seen by the Financial Times, Swift told its 11,000 members that “a good number” of the attacks had been repelled after being spotted by its own security programme or by other banks, but some of the hackers had made off with an unspecified amount of cash.

            The non-profit co-operative, which is owned by the banks, has faced concerns about its vulnerability after cyber criminals made off with $81m from the Bangladeshi central bank in February. Several similar cases, some of which were successful, have since emerged at banks in Vietnam, the Philippines and Ecuador.

            Swift — the Society for Worldwide Interbank Financial Telecommunication — warned its members that while there had been fewer publicly reported cases of banks being attacked, hackers were still on the hunt for weaknesses in their security systems.

            “We have seen new cases of input fraud since we last wrote to update you on these issues,” Swift said in its letter. “The attackers have followed a broadly similar modus operandi, but have specifically tailored every attack to each individual target.”

            How cyber criminals targeted almost $1bn in Bangladesh Bank heist

            Theft sends tremors around the world among banks and large corporations that keep big balances

            The letter added: “The customers that have been targeted have varied in size and geography; used diverse connectivity methods and a range of interfaces from different vendors. The targeted customers have, however, shared one thing in common; they have all had particular weaknesses in their local security.”

            Swift declined to comment on the letter or to say which banks had been victims of the new attacks. Its letter said: “Fortunately a good number of these attacks have ultimately been thwarted.”

            In some cases, the correspondent banks that received the fraudulent payment messages spotted something suspicious and blocked the transfers, Swift’s letter said. In other cases, a new package of security measures that it has put in place recently helped to thwart the attempted robberies.

            Regulators across the world have been alarmed by banks’ vulnerability to being hacked and having money stolen over the Swift network.

            The US Federal Reserve in June called on banks to review their defences against fraudulent money transfers. The Fed was itself caught out in February, when hackers gained access to the Swift codes of Bangladesh’s central bank and tried to transfer $951m from its accounts at the Fed, before making off with $81m.

            To help banks fight the hackers, Swift recently established a “customer security intelligence team” that combines its own cyber security experts with specialists from consultants BAE Systems and Fox-IT.

            This team both investigates cases of security breaches at Swift members and provides them with details of earlier cyber heists on other banks, while advising them on how to protect themselves from similar attacks.

            Traders love big round numbers

            Posted on 31 August 2016 by

            File photo dated 21/05/16 of a 1 euro coin and a One Pound coin placed on a backdrop of The European flag, as Sterling found some respite in overnight trading on Tuesday after taking a Brexit battering that saw it fall to a 31-year low. PRESS ASSOCIATION Photo. Issue date: Tuesday June 28, 2016. The pound rose 0.7% to 1.33 dollars, a rebound from Monday's 1.31 dollars, its lowest level since 1985. See PA story CITY Pound. Photo credit should read: Yui Mok/PA Wire©PA

            Traders love big round numbers.

            They provide a talking point, and just by dint of their huge fat simplicity can sometimes seem to display a gravitational pull on the market.

              Once reached, or breached, they can provide more fun as those stops placed around the figure get swiftly triggered, exacerbating momentum.

              Popular right now is the idea that the ultimate fallout from the Brexit vote will help deliver a euro to pound exchange rate of 1.

              But with EUR/GBP currently about £0.85, how feasible is parity anytime soon?

              Not very, many analysts reckon.

              Helping sterling weaken to one euro would be a more aggressive than expected easing by the Bank of England relative to the European Central Bank, argue pound bears.

              But Bank of America Merrill Lynch says such policy divergences are unlikely to be so great that they deliver a 15p fall for sterling, especially since, against a number of metrics, the UK unit is not especially overvalued right now.

              Further more, the market is already very negative on the pound.

              As Capital Economics notes, the record net short positions in sterling futures represent “selling that has already taken place”.

              Still, from the euro’s side there seems to be a growing view that the ECB next week may not deliver the aggressive easing the market expects.

              If so, that may be expected to boost the euro, yet traders know the single currency sometimes can react counter-intuitively to ECB actions.

              jamie.chisholm@ft.com

              EU budget talks will be tricky

              Posted on 31 August 2016 by

              ©Getty

              Budget negotiations among EU member states are never a pretty sight. With Britain on its way out of the 28-nation bloc, they are at risk of turning very ugly indeed.

              Britain is one of the largest contributors to the EU budget. It pays in much more than it receives (according to the UK Treasury, Britain’s net contribution was £10.5bn in 2013, £9.8bn in 2014 and £8.5bn in 2015).

                Once Britain is out, the other 27 governments will face a range of politically unpalatable choices. First, they could leave the EU’s 2014-20 budget unchanged at €1.087tn and ask each member state to compensate for Britain’s departure on a scale proportionate to its gross national income.

                Barbara Böttcher and Laura Rosenberger of Deutsche Bank Research calculate that, under this formula, Germany would pay an extra €1.9bn a year, France would stump up €1.4bn and Italy €1bn.

                Germany, having racked up an €18.5bn budget surplus in the first half of 2016, equivalent to 1.2 per cent of annual economic output, might fork out this extra money without much domestic political controversy.

                But would the same be true for France and Italy, where economic growth ground to a halt in the second quarter of this year? The French and Italian political classes and voters might resent paying more into the EU coffers, when their governments are under persistent pressure from Brussels to curb their budget deficits.

                Under the Deutsche Bank scenario, Poland, Spain and other net beneficiaries from the EU budget would receive less EU money after Britain’s departure. How would that go down in Madrid, Warsaw and other capitals?

                As a House of Commons Library briefing paper explains, Britain is, on a per capita basis, the third largest net contributor to the EU budget. In 2015 the largest was the Netherlands (€331 per head), followed by Sweden (€262), Britain (€215), Germany (€211), Denmark (€175), Austria (€109), Finland (€96), France (€92), Italy (€59) and Cyprus (€32).

                All other 18 EU nations were net recipients — though the data are somewhat distorted for Belgium and Luxembourg, which are classified as net recipients largely because the EU spends billions of euros on administrative costs in these two countries.

                The conclusion is clear. If the EU decides not to change its 2014-20 budget, Britain’s departure will push up the contributions of some states and push down the receipts of many more.

                Of course, other possibilities exist. For example, all net contributors could pick up the British tab. That would go down like a lead balloon in the Netherlands and Sweden, where suspicions of EU spending appetites run high.

                Perhaps all net recipients might agree to receive less? It is hard to see Greece, Hungary, Slovakia and others accepting this.

                Why not, quite simply, cut the EU budget? That will never happen — the uproar at the European Parliament would be off the Richter scale.

                The final option would be to soften the blow of Britain’s departure by letting it keep access to the EU’s single market in return for a helpful but smaller UK budget contribution. This seems politically impossible in present British conditions.

                To sum up, among all the awkward consequences of Brexit, the difficulties surrounding the EU budget promise to be among the most acute.

                Sign up here to receive Brexit Briefing as a daily email.

                Background reading

                Theresa May is meeting her cabinet at Chequers today for what is being described as a brainstorming session over Brexit. As the FT reports, she has ruled out holding a referendum or an early general election to ratify whatever deal the UK strikes with the EU.

                The FTs Chris Giles reports that the Bank of England’s interest rate cut in early August persuaded some consumers to reject saving and spend instead — before prices of imported goods increased.

                People who felt that they had been pushed to the margins of society were the driving force behind Brexit, according to research from the Joseph Rowntree Foundation. (Guardian)

                Fosun chairman calls P2P market a ‘scam’

                Posted on 31 August 2016 by

                Fosun Group Chief Executive Officer Guo Guangchang Interview...Billionaire Guo Guangchang, chairman and chief executive officer of Fosun Group, pauses during an interview in New York, U.S., on Thursday, April 23, 2015. Guo is the largest shareholder of Shanghai-based Fosun Group, China's biggest closely-held investment firm, with interests in real estate, retailing and gold mining. Photographer: Michael Nagle/Bloomberg *** Local Caption *** Guo Guangchang©Bloomberg

                Guo Guangchang, chairman of Fosun Group

                China’s self-styled “Warren Buffett” and billionaire businessman Guo Guangchang on Wednesday called the country’s Rmb440bn ($65.9bn) peer-to-peer lending market “basically a scam”, becoming the latest high-profile executive to attack an industry that has been plagued by scandal.

                The comment from Mr Guo, chairman of Fosun Group, China’s biggest privately owned conglomerate, has added to the fierce debate over China’s P2P lending market and comes just days after the government imposed new rules on the size of such operations.

                  The industry, which has grown rapidly over the past four years, is based on a business model in which individual lenders are matched with borrowers via online platforms. The loans often pay out high yields.

                  The sector has been lauded for providing an alternative to low-interest deposits but has more recently gained a reputation for hosting some of the biggest scams involving retail investor cash in China’s recent financial history, incurring the wrath of some of the country’s top business people as well as the regulators.

                  Mr Guo made the remarks at a press conference in Hong Kong following the release of the company’s interim results. Another Fosun executive emphasised that the company, known for using insurance premiums to make investments abroad, had never dabbled in the P2P business.

                  Earlier this month, the president of Ping An Insurance, China’s second-largest insurer, told the Financial Times that most P2P lenders were “fakes” and that the vast majority of China’s P2P lenders would not be able to continue their business in the future.

                  The president of Ant Financial Services, a subsidiary of Alibaba that houses the group’s payments and credit scoring platforms, has also tried to distance the company from China’s broader P2P lending market.

                  That large financial companies would lambast P2P lending comes as no surprise.

                  Within the past year, ordinary Chinese people have fallen victim to scandals in which online financial platforms have disappeared with billions of dollars, provoking angry protests on the streets.

                  In February, more than 20 people were arrested for their involvement in Ezubao, a “complete Ponzi scheme”, that allegedly took more than Rmb50bn ($7.6bn) from investors, China’s biggest case of financial fraud to date. A month later, a court in southern China jailed 24 people for defrauding about 230,000 investors of nearly Rmb10bn in a similar scam.

                  In response to such problems, the regulator last week issued rules forbidding online lenders from accepting deposits or guaranteeing principal or interest on loans they facilitate. It also capped borrowing at Rmb1m for individuals and Rmb5m for companies.

                  Mr Guo has been no stranger to controversy himself. The Fosun chairman disappeared for several days in December, only to re-emerge claiming he had been assisting an investigation in China. The group subsequently walked away from a deal to buy an Israeli insurance company.

                  Fosun is known for its leisure and entertainment holdings such as France’s Club Med and a stake in Canada’s Cirque du Soleil. During the past two months alone, it has acquired Gland Pharma in India, UK football club Wolverhampton Wanderers and Brazilian fund manager Rio Bravo Investimentos, and taken a stake in Portuguese lender Banco Comercial Português.

                  UK housing anxiety highest for 40 years

                  Posted on 31 August 2016 by

                  A couple look at houses for sale in the window of William H Brown estate agents in this arranged photograph in Chelmsford, U.K., on Tuesday, Dec. 15, 2015. U.K. asking prices rose an annual 7.4 percent in December amid a continuing shortage of homes for sale, according to Rightmove. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

                  More people are worried about housing than at any point since October 1974, according to a survey that tracks changes in UK attitudes.

                  The Ipsos Mori Issues Index for August shows the number of people citing it as one of the most important matters facing Britain has risen to 22 per cent and even higher than the levels before the 2007 recession.

                    Ben Page, chief executive at Ipsos Mori, said: “While immigration and the EU remain at the top of public concerns, anxiety about housing has now risen to the highest level in over 40 years, especially among the young and Londoners.”

                    The score is higher among people aged 18-34, with 26 per cent saying it is one of the most important issues facing Britain today, compared with 17 per cent of those aged 55-plus. It is also higher among those who live in Greater London, where it is mentioned by 44 per cent. Renters are more likely to bring it up (27 per cent) than those either paying a mortgage (22 per cent) or who own their home outright (14 per cent).

                    Housing is now the fifth most important issue, behind immigration, the EU, the NHS and the economy.

                    The findings, which since 1974 have provided an insight into the key issues concerning the country, are based on information gathered every month through face- to-face interviews with a weighted sample of 983 adults.

                    Interviewees are asked: “What would you say is the most important issue facing Britain today?” and “What do you see as other important issues facing Britain today?” The interviews, at which respondents were asked an open question with no suggested answers, took place between August 1 and August 11, six weeks after Britain voted to leave the EU.

                    Beyond the Brexit vote, and the fears it may cause a slowdown in the housing market, August also saw the release of a Resolution Foundation report that revealed home ownership in Britain had dropped to a 30-year low, with many younger households priced out of the market, even outside the south-east.

                    UK Housing

                    This month also found a rise in people saying they were concerned about the pound and the exchange rate (up to 4 per cent from 1 per cent), following a post-Brexit fall in the exchange rate.

                    Europe is still seen as the single most important issue, after worries jumped to their highest level in two decades following the referendum result, overtaking fears about immigration, the economy and healthcare.

                    UK Housing