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Daily Scan: Stocks climb; McCarthy drops from House speaker race
Capital Markets
<p>&nbsp;</p> <p>Updated throughout the day</p> <p>October 8</p> <p>Good evening, US stocks rose modestly Thursday after the Fed's meeting minutes showed how badly the central bank wants inflation to rise. The Dow gained 0.8%, the S&amp;P 500 rose 0.9%, and the Nasdaq added 0.4%. Earnings season kicked off with a report from Alcoa Thursday. The aluminum company lost 3.8% in after-hours trading after its earnings and revenue fell short of expectations. Oil broke $50/barrel for the first time since July.</p> <p>Here's what else you need to know:</p> <p>Kevin McCarthy drops out of speaker race. House Majority Leader McCarthy was expected to succeed House Speaker John Boehner when he resigns at the end of October. McCarthy expressed skepticism that he would win the Speaker race outright, and didn't want to divide his Republican party further. The vote for speaker has now been delayed. CNN</p> <p>Russian missiles fall in Iran. Four Russian missiles meant for Syrian antiregime forces fell short of the country and landed in Iran. Russia and Iran are allies in their support of Bashar al-Assad as leader of Syria. Wall Street Journal</p> <p>Save the drama for your mama, Bill Gross. Gross is suing Pimco for $200 million. The Bond King says a "cabal" of executives drove him from the firm he founded so they could claim his bonus for themselves. Pimco's directors were "driven by a lust for power, greed, and a desire to imporve their own financial position and reputation." Gross left the firm in September 2014. The year before, his pay topped $300 million. Reuters</p> <p>Chrysler Fiat averts strike. Again. The four-year contract affects 40,000 workers in the U.S. Last month workers rejected a deal. This new agreement also requires UAW member ratification. Reuters</p> <p>Svetlana Alexievich wins Nobel Prize for literature. The chair of the Swedish academy called the work by the Belarussian author a “monument to suffering and courage in our time.” The Guardian</p> <p>Dell reported in talks to buy storage company EMC. No price yet on the deal, but it is likely to exceed the $37 billion offer Avago Technologies made for Broadcom. Dell is valued at $50 billion. Reuters</p> <p>Uber China is toast. Didi Kuaidi, Uber’s Beijing-based rival, scored a massive win against its San Francisco-based nemesis after it secured a license to operate private cars in Shanghai. This is a huge blow to Uber, not only because Shanghai is a major market, but also because other Chinese cities typically follow suit. Wall Street Journal (paywall)</p> <p>Sony to sell stake in world’s largest music publisher. Sony, the embattled Japanese electronics giant, is selling its stake in Sony/ATV Music Publishing – which it co-owns with the estate of Michael Jackson. Sony/ATV owns the copyrights to songs from the Beatles, Marvin Gaye, and Taylor Swift, and i</p>
Rubenstein gives $25M to Duke
Lifestyle, 4:01
<p>Carlyle Group co-founder David Rubenstein is giving $25 million for the art program at Duke University.</p> <p>Rubenstein, a Duke alum, has given almost $100 million to the school over the years, Art News. The latest gift will help fund a new 71,000-square-foot arts building. The $50 million building will include a dance studio, theater, and classrooms.</p> <p>Rubenstein recently gave $4.5 million to the National Zoo's giant panda research and conservation program as well.</p> <p>&nbsp;<br /> Photo: See-ming Lee</p>
Samsung red-faced with China hack on LoopPay
<p>This week it was revealed that LoopPay, a US subsidiary of Samsung, was targeted by a group of government-affiliated Chinese hackers earlier in the year,</p> <p>The New York Times reports that the data breech by the so-called the Codoso Group, also called the Sunshock Group, was only discovered in August. It appears they were after LoopPay’s technology, known as magnetic secure transmission (MST).</p> <p>This is a big worry for Samsung which bought LoopPay in February for $250 million and had put its MST tech at the core of mobile payment service Samsung Pay.</p> <p>The hackers are said to have broken into LoopPay’s corporate network, but thankfullly not the system that manages payments. The breech was only found when an organization tracking the hackers unearthed LoopPay’s data during a separate investigation.</p> <p>Samsung and LoopPay have assured the public that the infected machines have been removed, that the service is uaffected, and that customer data is secure.  But the timing could not be worse. Samsung Pay launched in the U.S. just 38 days after LoopPay discovered the attack.</p> <p>Samsung Pay will now not only have to convince consumers of it advantages of its Google and Apple rivals, but will also need to reassure them of its security.<br /> Photo: Charles Roper<br /> &nbsp;</p> <p>&nbsp;</p>
Asian PE funds continue to grow
<p>Private equity fundraising has supposedly stalled across the globe, but apparently, Asia didn’t get the memo.</p> <p>Hot on the heels of RRJ Capital’s record-breaking $4.5 billion fund raise, Preqin reports that Asia-focused private equity funds are continuing to grow despite all the turmoil in the region.</p> <p>26 Asia funds apparently raised $15 billion in the third quarter, more than double what they raised in Q2, and two of those funds actually cracked Preqin’s top 10 list:</p> <p>This underscores just how investors love Asia at the moment. Despite their apparent exit from the region, North American investors were among the largest contributors to RRJ’s third fund, while GLP’s CLF Fund II – currently the world’s largest China-focused infrastructure fund – seems to have attracted its fair share of foreign investors as well.</p> <p>A lot of these funds are dry powder though. With the contagion from China’s downturn still a huge matter of concern, capital deployment within the region has certainly not been what it used to be.</p> <p>As equity prices creep lower however, these guys should have more than a few options to work on pretty soon.<br /> Photo: Pictures of Money</p>
Startup heavy-hitters in Indonesia launch $150 million fund for early stage companies
Venture Capital
<p>Three top startup investors are putting together a new band with support from the Indonesian family conglomerate Lippo Group.</p> <p>The new firm, Venturra Capital, will target Series A and B deals in Southeast Asia raising between $2 million and $5 million -- but will also consider seed candidates.  This will be an interesting group to follow -- the founders have impressive credentials: Stefan Jung is co-founder of German incubator Rocket Internet; Johny Riady, was a director at Lippo Group, and Rudy Ramawy was in charge of Indonesia for Google.</p> <p>Tech in Asia reports the fund has already raised $15o million, mostly from  Lippo. The fund is successor to Lippo Digital Venture (LDV) - Lippo's corporate VC arm where Ramawy was managing partner.</p> <p>Venturra has absorbed LDV's portfolio of investments previously made off of Lippo's balance sheet. However, Lippo's role will be restricted to limited partner.</p> <p>Between them the founders have an investment track record the covers start-ups such as GrabTaxi, Traveloka, HappyFresh, Bridestory, Munchery, and MatahariMall. The fund will focus on e-commerce, fintech, and healthcare.  Jung - who last set up Monk's Hill Ventures' Jakarta office - says the firm is open to earlier stage investments:<br /> "We are considering ourselves agnostic in terms of stage preference. We are still keeping ourselves open to early stage and seed rounds. If we’ve known the entrepreneur for a while and want to support them from day one, then we will surely consider investing.”<br /> Photo: The Diary of a Hotel Addict<br /> &nbsp;</p>
Vietnam, Malaysia may be the TPP’s biggest beneficiaries: Credit Suisse
Capital Markets
<p>Who is the biggest winner of the TPP deal? If you guessed the US middle class... you were wrong</p> <p>The biggest beneficiaries from the Trans Pacific Partnership struck on Oct. 5, are expected to be Vietnam and Malaysia, while the impact on non-TPP Asian countries is likely to be slightly negative, believes Credit Suisse Group AG (ADR) (NYSE:CS) analyst Michael Wan. He said in his Oct. 7 research report on “Asia Economics” that he thinks the manufacturing sector will be the biggest beneficiary from the TPP.<br /> Vietnam could witness a 10% boost to GDP by 2025<br /> Wan terms the TPP a historic agreement, as after almost seven years of negotiations, the U.S., Japan and 10 Pacific Rim countries finally came to an agreement. The analyst points out that if the trade agreement is ratified through the various countries’ parliaments and implemented, it will cover 40% of global output and aim to eliminate over 18,000 tariffs.</p> <p>In another report from CS published jointly by Dan Fineman and Chate Benechavitvilai, the analysts say that most likely, Vietnam is the top winner in Asia from the TPP. Though details on the agreement are currently lacking, the analysts anticipate that the biggest gains for textiles, garments and footwear exports to the U.S. could lead to shifts in production from China and Thailand. Citing estimates from the Peterson Institute, the analysts point out that the TPP could boost Vietnam’s GDP by 10% by 2025-- twice as much as is estimated for any other Asian market.</p> <p>Fineman and colleague point out that the key problem for investors is the lack of large and /or liquid stock that directly benefits from the TPP. However, the analysts point out that given the overall positive impact on the economy, the agreement could also have a spill-over effect on some sectors, including banks, consumer and property. Within their Vietnam coverage, the Credit Suisse analysts maintain their Outperform rating on Vinamilk (consumer) and Vingroup (property).</p> <p>Malaysia’s GDP could see 5% boost</p> <p>Tan Ting Min of Credit Suisse believes the TPP is generally positive for Malaysia as the country is very dependent on trade, and the TPPA will open up four new markets to Malaysia: the U.S., Canada, Mexico and Peru. Min believes the TPPA is positive for Malaysia in the long term, though the analyst doesn’t envisage benefits until 2018, assuming the Cabinet approves it. The CS analyst also thinks export industries in Malaysia such as plantations, electronics, textile, automotive parts and</p>
Will the Fed lift rates this month?
Hedge Funds
<p>Here’s an intriguing thought. Yra Harris, the low-key futures vet who was featured in Steven Drobny’s “Inside the House of Money,” recently opined that he thinks the Fed is going to lift rates this October.</p> <p>Why? Well, apparently San Francisco Fed President John Williams telegraphed the move in his latest speech:<br /> “Why do I think the rate increase is coming? Williams gave three hints in a speech he delivered today, ‘The Economic Outlook:Live Long and Prosper.’</p> <p>1. ‘In addition, an earlier start to raising rates would allow us to ENGINEER a smoother, more gradual process of policy normalization. That would give us space to fine-tune our responses to react to economic conditions. In contrast, raising rates too late would force us into the position of a steeper and more abrupt path of rate hikes, which doesn’t leave much room for maneuver. Not to mention, it could roil financial markets and slow the economy in unintended ways.’</p> <p>2. ‘I am starting to see signs of imbalances emerge  in the form of high asset prices, especially in real estate, and that trips the alert system;’ and</p> <p>3. ‘When unemployment was at its 10 percent peak during the height of the Great Recession, and as it struggled to come down during the recovery, we needed rapid declines to get the economy back on track. NOW THAT WE’RE GETTING CLOSER, THE PACE MUST START SLOWING TO MORE NORMAL LEVELS. LOOKING TO THE FUTURE, WE’RE GOING TO NEED AT MOST 100,000 NEW JOBS EACH MONTH.’ [emphasis all mine]”<br /> The man has a point. Williams’ speech, while littered with Fed speak meant to offset Yellen’s post-decision presser, is absolutely hawkish at its core. And the fact that he’s one of the FOMC’s members should make it something more of note. Timing however was not quite apparent, though Harris does have a compelling reason for October:<br /> “I say October because I believe December is too late as year-end funding issues will cause unwanted volatility in the REPO MARKET.”<br /> It’s still a little too early to call though. Federal fund futures are still giving a 2015 hike the thumbs down, but the FOMC minutes are coming up tonight and that could change the entire ball game. Stay tuned.<br /> Photo: Anne-Lise Heinrichs</p>
PLDT builds SoftBank-style web of influence
Venture Capital
<p>&nbsp;</p> <p>The recent decision by PLDT (Philippines Long Distance Telephone Company) to launch its own venture capital unit is the latest in a series of moves by telecoms giant that are reminiscent of its larger Japanese counterpart SoftBank.</p> <p>Just as SoftBank has grown its internet and media empire by drawing on an expanding global web of early stage investments, PLDT is also turning to venture capital to help build its own kingdom.</p> <p>The new investment unit - PLDT Capital - will not be based in the Philippines but instead it will be based in Los Angeles. But its remit will be to try and tap innovative Silicon Valley and Southeast Asia-based startups that can contribute to its own ecosystem. Winston Damarillo, Managing Director of PLDT Capital, had this to say:<br /> “The PLDT Group serves more than 70 million mobile and internet customers in the ASEAN region,”In addition to investments, PLDT Capital aims to become the gateway for the most promising startups to expand their opportunities to the fast growing digital consumers in the ASEAN region.”  <br /> This is by no means its first foray in venture capital. The firm made headlines earlier this year when it bought a 10% stake in Rocket Internet, the German incubator and venture capital investor that is currently driving an e-commerce revolution in Southeast Asia and other emerging markets globally.</p> <p>The firm also recently swallowed up Singapore's Paywhere, the start-up  behind TackThis, an ecommerce platform that operates on a software-as-a-service (SaaS) model, through its digital innovations unit: Voyager Innovations.</p> <p>Corporations using venture capital investments to tap innovation is neither new nor unique. That said, the way PLDT (a telecoms company like SoftBank) is using VC to broaden its global influence and access new verticals - notably e-commerce - shares a few parallels with the Japanese giant.</p> <p>Of course PLDT has nowhere near the size, or the war chest, of a firm like SoftBank. Perhaps PLDT looking for that one big hit in same the way SoftBank had its home run with Chinese e-commerce Alibaba. Setting up shop in Silicon Valley certainly increases their chances of finding it.<br /> Photo: Rod </p>
Equity outlook fourth quarter 2015
Capital Markets
<p>The Committee upgraded our view on U.S. large cap equities following the recent correction, and maintained a slightly overweight view on European equities. Our view on MLPs has also improved following a challenging year.</p> <p>U.S. Large Cap Equities<br /> We upgraded our view of U.S. large cap equities to slightly overweight for the next twelve months. The S&amp;P 500 registered its first correction since 2011, declining more than 10% from its high in May. The key question for investors today is whether the pullback represents a momentary pause in the current economic cycle, as in 2011, or anticipates something more serious, such as a global recession. In our view, the latter prospect is unlikely, given the resiliency of the U.S. economy and, importantly, broad policy commitment to cushion economic shocks. The Federal Reserve, in particular, is likely to be cautious in light of recent events and the absence of inflationary pressures as it assesses the timing and pace of any rate hikes.</p> <p>Still, it bears noting that the past seven years have seen extraordinary gains in U.S. equities with a near absence of major (10%-15%) corrections. The recent swoon may be overdue, and actually healthy, as it creates more attractive valuations.<br /> U.S. Equities: Corrections of 10% or More<br /> Shading Indicates Bear Markets of 20% or More</p> <p>Source: FactSet, Goldman Sachs. As of August 31, 2015.<br /> Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.</p> <p>Developed Market Non-U.S. Equities<br /> Europe: The Committee as a whole remained at a slight overweight for Europe. Although growth and inflation forecasts for the region are subdued, the European Central Bank (ECB) stands ready to increase and/or lengthen its quantitative easing program as needed in support of its objectives. We anticipate that ECB stimulus will support European equities and maintain that there is more catch-up potential for the region from an economic recovery and earnings perspective.</p> <p>Japan: Our view on Japanese equities moderated slightly from the third quarter. Japanese stocks are benefiting from a weak yen and reallocation of pension fund assets, but are threatened by a slowing Chinese economy. While we continue to believe that Japanese equities have upside potential, a contraction in second quarter GDP gives us concern about growth and the efficacy of Abenomics.<br /> Emerging Markets Equities<br /> China volatility, commodity weakness and dollar strength persist, creating headwinds for emerging markets equities, while corporate profitability remains under pressure. Against this backdrop we are maintaining our neutral view of emerging markets equities and believe selectivity from a regional/country and sector/company perspective remains paramount in today’s environment.</p> <p>Brazil: With the country mired in recession, we have downgraded our view on Brazilian equities and further believe that the country may encounter meaningful risks with respect to its debt.</p> <p>Russia: Russia has held up reasonably well in recent months compared to other emerging markets but Committee members remain cautious on the long-term outlook for the country’s equities due to a weak growth forecast, sizeable exposure to energy prices and the potential for ongoing geopolitical risk.</p> <p>India: Thanks to some respectable policymaking and a solid fiscal position, India is hanging on to its position as a relative bright spot within our emergi</p>
Deutsche Bank expects $7 billion losses after charges for the third quarter
Capital Markets
<p>Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB) is expecting to report a net loss of €6.2 billion (approximately $7 billion) after charges for the third quarter of this year.</p> <p>Deutsche Bank estimated an IBIT loss of approximately €3.3 billion and a net loss of €4.8 billion year-to-date through the third quarter.</p> <p>Excluding the impact of the impairment of goodwill and intangibles, its IBIT loss would be approximately €200 million and the net loss would be around €400 million.</p> <p>Deutsche Bank expects to remain profitable year-to-date until the third quarter with IBIT of approximately €2.5 billion and net income of approximately €900 million.</p> <p>The global investment bank also disclosed that its management board will recommend a reduction or possible elimination of the common share dividend for the fiscal year 2015. Deutsche Bank said the move was part of the planning for the implementation of its Strategy 2020.</p> <p>The stock price of Deutsche Bank declined more than 4% to $27.50 per share during the extended hours, around 4:55 in the afternoon in New York.<br /> Deutsche Bank huge write-down<br /> Deutsch Bank said its third quarter financial performance will be affected by a huge write down including a €5.8 billion of goodwill and certain intangibles related to its Securities (CB&amp;S) and Private &amp; Business Clients (PBC) divisions.</p> <p>The global investment bank also incurred a €600 million impairment of the carrying value of its 19.99% stake in Hua Xia Bank Co. Ltd. Deutsche Bank said its holding was no longer strategic.</p> <p>Additionally, Deutsche Bank said its litigation provisions are worth approximately €1.2 billion. The bank expected that majority of the amount are not tax deductible. It is also anticipating that its final litigation provisions in the quarter will be affected by further events prior to the release of its final results for the third quarter.<br /> Deutsche Bank regulatory capital ratios<br /> According to Deutsche Bank, the impairment of goodwill and intangibles as well as its Hua Xua investment has no material impact on its regulatory capital ratios.</p> <p>It is currently expecting to report a fully-loaded CRR/CRD4 Common Equity Tier 1 ratio of around 11% for the third quarter. The expected regulatory capital ratio included the impact of European Banking Authority Regulatory Technical Standards (Prudential Valuation) adopted during the period.</p> <p>This story first appeared in ValueWalk.<br /> Photo: </p>