Thursday 27th November 2014
NEWS TICKER: THURSDAY, NOVEMBER 27TH 2014: The Straits Times Index (STI) ended -8.70 points lower or -0.26% to 3340.96, taking the year-to-date performance to +5.56%. The FTSE ST Mid Cap Index declined -0.11% while the FTSE ST Small Cap Index declined -0.43%. The top active stocks were SingTel (-0.26%), DBS (-0.25%), ThaiBev (-4.38%), Suntec REIT (+0.26%) and OCBC Bank (+0.10%). The outperforming sectors today were represented by the FTSE ST Health Care Index (+0.47%). The two biggest stocks of the FTSE ST Health Care Index are Raffles Medical Group (-0.52%) and Biosensors International Group (+2.75%). The underperforming sector was the FTSE ST Basic Materials Index, which declined -2.14% with Midas Holdings ’ share price declining -5.09% and Geo Energy Resources’ share price gaining +2.33%. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (+0.26%), United SSE 50 China ETF (-0.57%), STI ETF (+0.59%). The three most active Real Estate Investment Trusts (REITs) by value were Suntec REIT (+0.26%), Ascendas REIT (-0.86%), CapitaCom Trust (-0.89%). The most active index warrants by value today were HSI24400MBeCW141230 (-15.73%), HSI23800MBePW150129 (+6.45%), HSI23600MBePW141230 (+11.11%). The most active stock warrants by value today were DBS MB eCW150602 (+3.33%), UOB MB eCW150415 (+5.23%), UOB MB eCW150102 (+2.38%) - Moody's has withdrawn the rating of Rossiyskiy Kredit Bank's Caa3 long-term local- and foreign-currency deposit ratings, the Not Prime short-term deposit ratings and the E standalone bank financial strength rating (BFSR), equivalent to a caa3 baseline credit assessment. The ratings agency says the rating has been withdrawn for its own business reasons At the time of the withdrawal, the outlook on the bank's long-term ratings was negative while the standalone E BFSR carried a stable outlook - Malaysian builder MMC Corp Bhd said earlier today that it will list its power unit Malakoff Bhd (IPO-MALB.KL) in a deal bankers expect to raise more than $1bn dollars. The IPO, for up to 30.4% of Malakoff's capital, was deferred earlier this year and approval from the Securities Commission lapsed as a result. MMC, controlled by reclusive Malaysian tycoon Syed Mokhtar Al-Bukhary, will resubmit the application within one month and expects the deal to be completed by second quarter of 2015, according to a local stock exchange filing – According to local press report the newly minted Somalia Stock Exchange expects seven companies in the telecoms, financial services and transport sectors to list when it is set up in 2015. Somalia's economy is slowly recovering from more than two decades of conflict, although the government is still battling an Islamist insurgency. Amid the chaos, some businesses have thrived, including money transfer and mobile phone firms. The Somalia Stock Exchange has opened administrative offices in Mogadishu and other Somali centres like Kismayu, as well as in Nairobi, to help recruitment and in other related issues - Moody's has upgraded to Baa1 from Baa2 the long-term deposit ratings of China CITIC Bank International Limited, and affirmed the bank's P-2 short-term deposit ratings. The bank's senior unsecured MTN program rating and deposit note/CD program ratings are also upgraded to (P)Baa1/Baa1 from (P)Baa2/Baa2, while the short-term deposit note/CD program ratings are affirmed at (P)P-2. The bank's baseline credit assessment (BCA) is unchanged at baa3. The outlook on all the ratings is stable. The rating action concludes Moody's review for upgrade for China CITIC Bank International, which was initiated on September 2nd this year, after the senior unsecured bond rating of its ultimate parents CITIC Group Corporation and CITIC Limited (formerly CITIC Pacific Limited) were upgraded to A3 from Baa2. CITIC Group Corporation, wholly owned by China's Ministry of Finance, owns 78% of CITIC Limited, which in turn owns 67% of China CITIC Bank.

20-20: Prime broking - balance sheet, funding strength now key

Thursday, 15 December 2011
20-20: Prime broking - balance sheet, funding strength now key Expanding Bank of America Merrill Lynch’s hedge-fund business ranks high on global head of prime brokerage Stuart Hendel’s agenda. “Clients want to do business with us in this area, and so that has been a key focus during these past few months,” he says. Stock prices in the banking sector have been pummelled of late, forcing players such as BofA (whose own shares are off two-thirds since the start of 2011) to address operational redundancies and affect changes where needed. Hendel, however, remains resolute. “At the end of the day, firms need to have a solid return on the assets they use to support these types of businesses. We believe our business is differentiated by the size and strength of our balance sheet—and how we can put it to work for our clients.” http://www.ftseglobalmarkets.com/

Expanding Bank of America Merrill Lynch’s hedge-fund business ranks high on global head of prime brokerage Stuart Hendel’s agenda. “Clients want to do business with us in this area, and so that has been a key focus during these past few months,” he says. Stock prices in the banking sector have been pummelled of late, forcing players such as BofA (whose own shares are off two-thirds since the start of 2011) to address operational redundancies and affect changes where needed. Hendel, however, remains resolute. “At the end of the day, firms need to have a solid return on the assets they use to support these types of businesses. We believe our business is differentiated by the size and strength of our balance sheet—and how we can put it to work for our clients.”

Rapid response a keystone of Stuart Hendel, global head of Bank of America Merrill Lynch’s (BoA’s) prime brokerage unit. When he signed on for the job, early in 2011, from two years as head of UBS AG’s prime brokerage division, he was certain that “anytime you join a new organisation, and particularly when it’s a global business and platform, you start by learning the landscape internally”. He adds: “You also want to ensure that you have the right people in the right seats and that they are supportive of the direction you want to take.” Most of all, says Hendel, you need to act quickly, as you don’t always have the luxury of time once you’ve taken the reins. “This is especially true on the sell side—I made a number of key decisions within the first 60 days.”

The ability to think on your feet in a highly-volatile market is a business imperative and a lifeline of sorts to clients under duress. Whether the news is good or bad is almost irrelevant, says Hendel, as there is only so much market turbulence that hedge fund managers can tolerate. “One day the news out of Europe is positive and the markets move accordingly, then the next it is negative and all bets are off. Therefore, the instinct is to just deleverage. Even funds focused on the macroenvironment can’t always handle being whipsawed like that.”



A cool head is equally vital; particularly as the constant need for hedge fund managers to address counterparty risk, though positive for the industry as a whole, has ultimately kept the sell side from focusing on the job at hand—that is, making money. “This is a sector that continues to deleverage, performance is down and prime brokers are fighting for market share,” says Hendel. “We have some considerable headwinds to contend with.”

Ambiguity surrounding political and regulatory solution—rather than the outcome of regulations themselves—only exacerbates the trend. Even then, there is some upside. “As strange as it may sound, hedge funds react better to negative news than uncertain news,” says Hendel.  “As long as this kind of climate persists, deleveraging will likely continue. In fact, market fundamentals appear to be the least important aspect in determining the health of companies, sectors or valuations.”

One downside of the current environment and inherent lack of investing conviction is the effect on market liquidity. Once clarity returns to the political, regulatory and economic landscape, the market should become more liquid, which will in turn benefit everyone. “Therefore, this is something that needs to be addressed in order to preserve the well-being of both the alternative space and the prime-brokerage industry over the long haul. We believe that once Europe gets its house in order and there is more clarity, that should help markets achieve some kind of foundation,” he says.

From his vantage point, Hendel sees a much greater likelihood of consolidation within the sell side than the buy side. “No matter what happens in Europe or with governments in general, we believe there is going to be a real need for the best and brightest to achieve superior returns on behalf of their clients,” he avers. “Certain investors are questioning the actively-managed, long-only business, but we are still bullish on the hedge fund space.”

Even then, Hendel says he is “flummoxed” by the perpetually thinning margins on banks’ leveraged-based book of business. “Pricing eventually has to go in the other direction,” says Hendel. “If it doesn’t, sell side firms may re-examine the returns being generated by the prime-brokerage business. In an environment where resources are scarce, all balance-sheet businesses may be vulnerable, not just prime brokerage.”

Hendel believes that market-exacerbated balance sheet weakness could ultimately threaten the existence of certain prime brokerage businesses over the near term. “Balance sheet and funding strength are areas that we believe will continue to be distinguishing factors for BofA—having a tremendous deposit base and excellent funding resources will allow us to properly service our clients going forward.”

Tweets by @DataLend

DataLend is a global securities finance market data provider covering 42,000+ unique securities globally with a total on-loan value of more than $1.8 trillion.

What do our tweets mean? See: http://bit.ly/18YlGjP

Related News

Related Articles

Related Videos