American banking giants are top of the global pile

Following a drop for Deutsche Bank in the world investment bank rankings, U.S. banks now occupy the top five places in the list.

The benchmark ranking takes data related to revenue from market activity and more conventional investment banking practices to make up the list, and is compiled by industry specialist monitor Coalition.

Deutsche was leapfrogged by Morgan Stanley to mark the first time American banking institutions have monopolised the top rankings since Coalition started the coveted table five years ago. The rankings reveal how U.S. banks have dominated the investment banking sector since the global financial meltdown of 2007-2009.

Deutsche went through a harsh restructuring program last year as then CEO John Cryan opted to streamline the German lending firm. Until then, Deutsche had consistently ranked in the top three banks in the world.

After the reshuffle, according to Coalitions report, Deutsche fell behind the pack in key areas such as commodities trading, fixed income and currency exchange, not to mention equity capital markets. The bank had been a top earner in those fields but slid down the rankings until it eventually sat at sixth place by March this year.

“Deutsche could be forgiven for arguing that the results of the Coalition tests are a reflection of the huge streamlining process that has taken place in the last year,” said a spokesperson at CTI China Renaissance in an email to investors on Friday. “The restructuring is going to mean that clients will need time to adjust to the new policies. I’m sure the bank will be back bigger and better in 2017.”

Deutsche will take heart that they are still the best performing bank outside the U.S. and among the best overall in the euro zone, although many observers feel that the in-house fighting at the company has distracted traders from performing at their best levels.

Optimists insist that while fruit of the changes might take some time, the German bank is capable of recovering some of its prestige in the short term. However, a looming settlement of $15 billion to the US Department of Justice related to mis-sold mortgage bonds during the financial troubles of 2008 has battered Deutsche’s already flagging stock price, hitting prices for 8 percent in a short space of time.

Deutsche are not the only euro zone bank having problems. Credit Suisse have slipped from 7th place in the rankings to 8th after their own restructuring policy went into action earlier in the year.

Sony looks to solidify links with Chinese film market

China has been touted to become the world’s largest movie market as early as 2018 and Sony have been solidifying their ties to the nation as they announced a joint venture with Dalian Wanda Group, a media company owned by China’s richest man.

The two companies said in a joint statement to the press that Wanda’s massive theatre chain will be utilised to access the Chinese market at the maximum possible scale.

Sony will also be hoping to moderately reform the nation’s restrictive movie market.

Wanda’s owner, Wang Jianlin, has been desperate to make the company a world player in the entertainment sector and the current tie-up will help him increase the group’s Hollywood footprint. In the statement Wanda said the venture would allow them to use their consumer-orientated infrastructure to build Sony’s reputation in China.

According to industry experts, China will overtake the U.S. as the world’s biggest movie market, most likely by the end of 2017.

“It’s a perfect partnership for all parties concerned,” said a key advisor at CTI China Renaissance in a phone interview. “Wanda will have greater prominence on the world stage and be able to get more involved with content development. For Sony, their distribution network in China and Asia will be vastly improved, and obviously there will be a massive market for its new blockbusters.”

“The trend towards film financing as a form of investment is gathering momentum, so we expect to see more action in the sector,” he added.

Wanda has previously invested in the movie business having put funds into several films produced by Sony rivals Viacom, specifically their Paramount Pictures operation. This would be the firm’s first dealing with Sony.

Industry investors have been heartened recently as Universal’s $170 million hit “Warcraft” nearly recouped its entire production cost in the first week it was released in China. The economy has slowed and ticket sales have been low this year but Universal has shown that a targeted release can be a big winner.

The only downside in the deal could be the government’s restrictive policy on foreign movies entering the Chinese market. Theatres are currently allowed to show only 30 imported releases per year, and Sony will be hoping their lobbyists can try and have some impact on sector watchdogs in the country.

Neither company involved in the deal responded to questions regarding the tie-up.

Action in tech M&A as Twitter enters sale talks

News is swirling that Twitter are in early negotiations with tech sector giants Google and cloud computing company Salesforce regarding a potential sale of the social media pioneer in a deal that could be worth around $17 billion.

According to un-named sources close to the discussions, Twitter have been exploring a sale of the company for a month or more and are being assisted by Allen & Co and Goldman Sachs to find interested parties.

Prior to the recent talks, Goldman Sachs had sent out feelers to several global media conglomerates, but responses were cold to neutral at best, even though many prominent observers feel the San-Francisco based company would be a good fit for industry titans like Walt Disney, Comcast or Fox.

After news agencies leaked that Twitter were in sales talks the company’s share price leaped 25 percent to $22.83 in the Thursday morning session on the New York stock exchange.

None of the companies involved in the potential deal were officially answering emails or phone enquiries regarding the matter although in a personal tweet the chief digital officer at Salesforce, Vala Afshar said, “Lots of good reasons to look at Twitter. Great place to promote ourselves, context rich news, and real-time learning network.”

Twitter have received criticism from activist investors in recent months for failing to grow its user base in line with 2016 projections, and rumours have been rife on social media regarding speculation over a possible sale to a rival.

“Twitter is a great place for keeping a fast paced diary of your life. However, that’s a pretty niche market which suits celebrities and professionals, but hasn’t attracted a broader user base,” said an analyst at CTI China Renaissance in a TV interview on Friday. “It’s hard to compete with Facebook in terms of pure user volume, not with Twitter’s current platform model anyway.”

The assistance Twitter are receiving from Goldman Sachs regarding the sale could be traced back to when they helped the company go public nearly three years ago. Just after that, Anthony Noto left the investment banking giants and became CFO at Twitter.

Many analysts feel that a deal is critical for Twitter at this stage in their development as the pressure builds from their shareholders. Stock in the firm had previously plummeted since its heady days of two years ago when it hit an all-time high of $70 per share.

Euro zone growth on 2 year dip led by German downturn

According to data from a set of closely-watched market-moving indicators, the economic growth of E.U. member states has plummeted to its lowest level in 20 months, and the biggest loser has been Germany.

The Markit Purchasing Managers' Index (PMI) revealed that European Union growth fell to 52.7 on the gauge, a bottom that has not been seen since February last year.

The PMI showed that one of the biggest factors was the downturn in the financial bloc’s largest economy, Germany, as its production levels slumped to 15 month lows combined with a steep drop in its service industry.

Germany’s poor form has even seen its growth eclipsed by France for the first time in five years.

Sentiment for a positive upturn next year is also at a 20 month low, as is service sector expansion across the E.U.

One bright spot was manufacturing, which climbed to a quarterly peak, but it wasn’t enough to change the overall outlook of the E.U. which Markit say is on a downswing.

“It’s not the most encouraging end to the third quarter,” said a senior spokesman at CTI China Renaissance on the firm’s blog.

“The fragility of the economic expansion in the euro zone member states in general is of growing concern on the trading floors. Close to 0.4 percent growth on the PMI is not going to help build traction and it could hit sentiment hard in the coming few months. If manufacturing can remain strong then that would provide some kind of momentum,” he added.

The downswing is clearly having a negative effect on job creation as employment gained at its slowest rate since March. It’s widely believed by analysts that if the trend continues policymakers at the world’s most prominent central banks could provide further support packages towards the start of the holiday season.

Both the U.S. Fed and the Bank of Japan decided to leave interest rates unchanged in recent meetings.

IBM seeks joint venture with Chinese payment processor

With blockchain projects all the rage in the tech world, IBM have thrown their hat into the ring as they announced a loyalty scheme partnership with payment settlement network China UnionPay.

The two companies have said the venture would require the use of blockchain technology, which underpins the online crypto-currency bitcoin, as using conventional methods will prove overly complicated and expensive.

The aim of the two companies is to eventually add more loyalty type schemes into the project such as shopping reward cards and air miles.

Large banks and tech companies are looking very closely at the latest fintech blockchain developments, after initially being sceptical over concerns related to fraud. The technology basically comprises of specialised cryptography and complex algorithms, and was originally developed to facilitate the trading of bitcoins electronically, and without a central ledger, on a global scale.

“What IBM and UnionPay seem to be interested in is the ability of customers to quickly and painlessly trade in their loyalty scheme bonus points from one organization to another,” said a chief advisor at CTI China Renaissance in a note to investors. “For corporate usage, fintech is exciting because banks will be able to make back-office settlements much quicker, which could free up billions in cash normally spent on conventional trading.”

Several financial institutions, such as Bank of America and Bank of Tokyo-Mitsubishi UFJ, have been working closely with IBM on a number of fintech projects in the blockchain area. Sceptics still argue, however, that there is still the potential for dangerous abuse of the technology, and fintech is not at a level where it can have an impact on the financial services landscape as a whole.

“The impression I get is that the blockchain folks are looking for an itch to scratch,” says Illuminate Finance chief analyst Alexander Ross. “We only back solutions that address real-world issues in the business world. There are new blockchain companies materialising every month but they seem to be planning too far into the future.”

On Monday, Axoni, a capital markets technology firm, announced they had launched a blockchain system for several major players in the banking sector including Citigroup and HSBC. The software will help the companies sort and distribute their trading records more efficiently.

Digital Asset is another fintech company moving forward, partnering with the Switzerland stock exchange for a project involving post-trade securities processing to speed up floor transactions.

Annual investment out of China shows impressive increase in 2015

According to recent government data released on Wednesday, there was a significant rise in outbound direct investment (ODI) by Chinese firms in 2015.

The overall annual figure jumped by around 25 percent to over $24 billion. Regarding outstanding ODI, the figure was up to $170 billion by the end of the year representing a 35 percent rise compared to 2014.

The data came from the National Bureau of Statistics in conjunction with the Ministry of Commerce and the Administration of Foreign Exchange in Beijing. The report revealed that of the total ODI, around 85 percent was ploughed into financial institutions abroad, with the remainder going to firms involved in other industries.

“Some of the bigger Chinese insurance companies have made no secret of their huge overseas investments recently, Ping An Insurance Group Co and Anbang Insurance Group in particular,” said a spokesperson at CTI China Renaissance on the company’s blog. “Beijing has introduced incentives to encourage local firms to invest abroad, and the seeds of that policy are now starting to germinate.”

China is second only to the United States when it comes to overall ODI, with 10 percent of the global total. An official from the commerce ministry said that ODI is currently outpacing foreign investment into the country, making China a net exporter of capital. Foreign incoming capital (FDI) was around $140 billion last year.

The spokesperson also said that China has a “solid foundation for overseas investment due to its standing as the world biggest goods trader and its substantial reserves in foreign exchange currencies.

One downside of the trend will be the pressure created by the ODI on external payments and the vulnerability of the exchange reserves.

“We will be looking very carefully into possible risks that face the foreign exchange reserves as ODI increases and eclipses foreign investment into the country. Policy can be adjusted to compensate as and when necessary,” the official said.

Euro Bank - China slowdown and Brexit might affect world economy

There is a riskier outlook than normal for global economic growth, says the European Central Bank (ECB), partly due to the Brexit vote but more importantly due to the slowdown in trade for the world’s second largest economy China, and other emerging markets.

The ECB bulletin released on Wednesday said that global growth is likely to increase in pace next year but the risks are there nonetheless, as recovery remains lukewarm and unpredictable as uncertainty continues.

The U.S. is expected to lead the recovery and spur domestic and international growth.

“Although the next fiscal year looks promising, helped by strong projections from the leading world economy, the United States, there will be significant downside risks as important emerging economies like China experience a slowdown,” the report said. “The slowdown could be unexpectedly strong, with a number of factors exacerbating the problem such as political uncertainty and macroeconomic fluctuations.”

The ECB presented a similar outlook to the bulletin at its recent meeting this month.

“I doubt anyone will be hugely surprised by the contents of the recent bulletin,” said a spokesperson at CTI China Renaissance in a TV interview. “The pace of growth will obviously fluctuate as investors get used to the new economic landscape.”

The central bank for the euro zone has consistently warned that the full affects of June’s Brexit vote are yet to come. Many analysts predicted much harsher short-term affects than have been observed.

The bulletin continued, “It’s true that many of the instant negative effects of the UK’s decision to leave the European Union that analysts projected have not occurred in a tangible sense. However, we need to wait to see the real economic implications of the vote. We are sure that key factors like investment, business confidence, and uncertainty are all going to be impacted in the longer term.”

Chinese steel consolidation deal will result in global competitor

As part of Beijing’s latest efforts to revamp its flagging steel industry, two of the country’s largest firms will merge to create what specialists predict will be a new entity that could challenge to be the biggest steelmaker in the world.

A joint statement from the two firms said that Baoshan Iron and Steel (Baosteel) will take-over its debt ridden smaller rival Wuhan Iron and Steel in a deal, which was originally proposed as a merger, that has been months in the making. According to the statement, Baosteel will absorb Wuhan by distributing new shares to its investors, pending watchdog approval from Beijing.

It’s estimated the new entity will produce a massive 70 million tonnes of steel every year, a figure that will place them above the current Chinese leader Hebei Iron and Steel. Figures are based on last year’s capacity reports.

The much fragmented Chinese steel industry has been suffering from a steel glut in recent years, and the current consolidation is designed to remedy the issue. Both companies are run by the state, and experts say the push to consolidate will continue.

“No-one can argue that something had to be done about the nonsensical overproduction that has plagued the Chinese steel sector for years,” said a spokesperson at CTI China Renaissance in a note to clients on Thursday.

“Once this goes through it will most certainly be seen as a blueprint for similar merger proposals that are already on the table. Companies that immediately spring to mind are Benxi Steel and Anshan, who have been in talks for a while now,” he added.

The new company is expected to challenge the number one steel producer, Luxembourg-based ArcelorMittal SA, and the challenge facing Baosteel will be how to integrate Wuhan, which has not turned a profit since late 2015.

Li - China will “open up economy” to spur development

Li Keqiang, the Chinese Premier, said last week that economic stagnation brought on by backward policies will be reversed as he intends to throw the doors of the country’s economy wide open.

Li says that the move will significantly increase economic development.
In a speech to the annual U.N. General Assembly he said, “From past experience we know there can be no benefit from shielding your nation from positive foreign investment, it will only lead to regression and tepid growth. The past decades have shown us this, and we want to be more open to the world.”

Li also mentioned that the world economy was suffering from very low aggregate demand, and development of the major global players could not afford the kind of slow growth that has been experienced recently.

“Sustainable, fast-paced growth can only be achieved if we change demand-management policies and reform the supply chain. We need to look at both short and long-term,” Li said.

The latest comments from the Chinese leader come amid criticism at a business dinner in New York where many foreign company executives voiced their complaints regarding heavily restricted access to the Chinese market.

“In this day and age there needs to be some kind of co-operation on a macroeconomic level,” said a spokesperson at CTI China Renaissance in an email to investors.

“In the current climate more than ever, the bigger world economies need to factor in the health of their major trading partners. It’s a case of love thy neighbour, if they are doing well they are going to increase orders for your products,” he added.

Li has pledged to start the plan by setting up a clearing bank in Shanghai for New York business, starting from 2017.

Land auctions in Hangzhou reveals spiralling prices

An article in China’s National Business Daily has revealed that property tycoons have been aggressively bidding for land in the eastern city of Hangzhou on Monday, despite new rules from the city’s local government that insist auctions cannot sell more than one property to the same buyer.

Since the city council set the restrictions, several parcels of land have already been auctioned off at high prices, some at several times the asking price. For example, the most expensive piece of land started at 12,900 yuan per square metre and went for more than 40,000 yuan.

“It doesn’t look like the recent restrictions set in place in Hangzhou have had much of an effect on the big players in the regional property market,” said a spokesperson at CTI China Renaissance in a phone interview.

“Obviously optimism is at a very high level and they are still prepared to fork out a hefty premium. They are betting against the new rules restricting house sales in the near future,” he added.

These super-charged housing bubbles in some of the country’s second tier cities has also affected some of their smaller satellite cities in the same regions. The domino effect has caused asset increases across the whole spectrum of residential housing and the price rises don’t discriminate between regular cities and business hubs.

Hangzhou has risen in prominence in the last few years due to the influx of medium and large tech firms relocating to the city, such as Alibaba. It also has the honour of hosting the 2016 Group of 20 meeting. Homes in the region have risen by over 20 percent on average compared to prices in 2015.

The article mentioned that at the current rate, all excess homes will be sold in the next 6 months.