China is planning to take over the troubled HNA Group in an effort to contain virus-related economic free fall. Financial firms aren’t hiring in Singapore and Hong Kong due to virus concerns. And China is back in the market for American agricultural goods. Here are some of the things people in markets are talking about today.
In the midst of the coronavirus outbreak, China plans to take over troubled conglomerate HNA Group and sell off its airline assets. It’s the country’s most dramatic step to date to contain the deepening economic damage from the deadly epidemic that’s infected over 75,000 around the world and left over 2,000 dead. The government of Hainan, the southern island province where HNA is based, is in talks to seize control of the group after the contagion hurt its ability to meet financial obligations, according to people familiar with the plans. The once little-known airline operator shot to prominence between 2016 and 2017 after a debt-fueled acquisition spree, becoming, for a time, the leading shareholder of iconic companies such as Hilton Worldwide and Deutsche Bank, while paying top dollar for properties from Manhattan to Hong Kong. As President Xi Jinping seeks to prevent the short-term economic pain from turning into a slump that outlasts the contagion, his government is considering direct cash infusions or mergers to stabilize the hobbled airline industry, while the People’s Bank of China said it will work on supporting domestic consumption. A takeover of a high-profile corporate would take those efforts to a new level. Here’s the latest on the virus.
Markets Mixed, Again
Japanese shares were primed for gains after a slide in the yen, while stocks elsewhere in Asia looked mixed as investors assessed China’s policy measures to fight the impact of the coronavirus. U.S. and European equities closed at record highs. The yen slid to its weakest in nine months amid concern the Japanese economy is heading toward recession and as Chinese stimulus reduced demand for some haven assets. Equity futures in Japan rose almost 1%. The dollar climbed to the strongest since October after data on housing starts and building permits exceeded estimates. Treasuries held steady after minutes showed Federal Reserve officials viewed monetary policy as appropriate “for a time.” Elsewhere, oil gained as U.S. sanctions on Russia’s largest producer and conflict in Libya put the focus on supply threats.
Looking for a finance job in Singapore or Hong Kong? You’re probably not having much luck. Both domestic and foreign firms operating there are delaying hiring as the coronavirus outbreak disrupts their businesses, according to headhunters in the financial hubs. They’ve been affected by quarantines, restrictions on travel to and from China, remote working arrangements and decisions not to conduct face-to-face interviews. It’s another aspect of the fallout from the virus, which has also caused factory closures, disrupted supply chains and initiated the world’s largest work-from-home experiment. Recruiting has become less of a priority as firms including DBS Group have highlighted the revenue impact of worsening business conditions. “Everybody is distracted,” said Gurj Sandhu, a managing director at Morgan McKinley Group in Singapore. Hiring is falling down the “pecking order,” he said, while adding that nobody is canceling roles yet.
India’s shadow banking crisis and revitalized bankruptcy process are creating new opportunities for Deutsche Bank as it steps up lending to cash-strapped tycoons and for purchases of distressed assets. The German lender is seeing three times the volume of financing deals compared with 2018, when the shadow banking problems erupted, according to Rahul Chawla, the head of global credit trading at Deutsche Bank’s India unit. He declined to provide specific numbers, but said the bank’s total exposure to Indian structured finance deals currently stands at “a couple of billion” euros. For Deutsche Bank “this is a very, very high level of commitment,” Chawla said in an interview. He expects to grow the size of his book by another 30% in the next two years. But Deutsche Bank isn’t the only firm to snap up the opportunity. Goldman Sachs and Apollo Global Management are among the other global institutions to have spotted similar rewards in India’s bad-debt woes, which have been magnified by the shadow banking crisis that erupted in 2018 with the default of a major infrastructure lender. As the non-bank finance firms have retreated, Indian companies have been struggling to obtain credit, curbing wider economic growth.
Back To Buy
China is back in the market for American agricultural commodities after issuing a list of products that will be eligible for tariff waivers, according to people familiar with the matter. Buyers are bidding for U.S. sorghum for shipment in the first half of the year and inquiring about prices for soybeans, said the people, who asked not to be identified because the information is private. That comes a day after Chinese importers asked about wheat prices, sending Chicago futures rallying. The new interest in American goods follows China’s publication of a list of 696 American products — including soybeans, pork, beef, corn, wheat, crude oil and liquefied natural gas — that will be eligible for relief from retaliatory duties imposed by Beijing in its tit-for-tat trade war with Washington. The waivers are further evidence that Beijing plans to stick to the pledges made in the phase-one deal, despite the spread of the deadly coronavirus. On Monday, Bloomberg News reported that China was considering making some purchases of U.S. agricultural goods at the end of February or early March.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Parasite backers gain $100 million... On a film that tackles inequality.
- 1MDB fugitive Jho Low was active in Wuhan, according to Malaysian police.
- This Thai banker is making a $2.7 billion bet to secure his family’s legacy.
- The virus outbreak has chilled China's red-hot home rental startups.
- China expelled three Wall Street Journal reporters over an op-ed.
- Risky debt is starting to look the same in junk world.
- Democrats sparred with Michael Bloomberg ahead of his first debate appearance.
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