February 19th – The BESA Times
Thirty-first Edition - Sunday, February 19th
Every week, a complete snapshot of what happened around the world in the past seven days
Notable Headlines
European Stocks Drop in an End to Longest Rally in 19 Months. The Stoxx Europe 600 Index lost 0.4 percent at the close. Nestle SA, Cobham Plc and NN Group NV were among shares that declined after their earnings updates. The equity benchmark yesterday extended a one-year high, buoyed by expectations of higher borrowing costs in the U.S. as well as higher inflation globally.
The oldest half-brother of North Korean dictator Kim Jong Un was murdered in Malaysia on Monday, according to a South Korean government official. Kim Jong Nam, the eldest son of former leader Kim Jong Il, had lived outside the country for years. The official, who asked not to be identified due to government policy, said poison was involved in his death, but provided no other details. Kim Jong Nam fell out of favor with his father after he was caught trying to enter Japan using a fake Dominican Republic passport in 2001. Kim Jong Nam had been critical of Kim Jong Un, reportedly saying in 2012 that he “won’t last long” because of his youth and inexperience. The two brothers have different mothers.
China has called an end to a six-month streak of dumping US Treasuries and returned in December to being a net buyer of US government debt again for the first time since last May. The move is part of a series of measures the country has introduced to manage capital flight. China’s foreign exchange reserves slipped below $3tn in January, its lowest for nearly six years.
What to remember of last week's news?
Mongolia reached an initial agreement with the International Monetary Fund for a three-year program that includes a $440 million loan package as part of a $5.5 billion bailout to help the north Asian country with looming debt repayments. “The Asian Development Bank, the World Bank and bilateral partners including Japan and Korea are expected to provide up to another $3 billion in budget and project support, while the People’s Bank of China is expected to extend its 15 yuan billion ($2.2 billion) swap line with the Bank of Mongolia for at least another three years,” the IMF said in a statement on Sunday. “The total external financing package will thus be around $5.5 billion.”
Kraft Heinz Co. made a $143 billion offer for Unilever in what would be the largest-ever takeover in the food or beverage industry, opening a campaign to create a consumer-goods giant with household names from Dove soap to Heinz ketchup. Unilever said Friday it rejected the $50 a share proposal, comprising about two-thirds in cash and a third in new stock. The approach “fundamentally undervalues” the company, Unilever said, adding that it doesn’t see a basis for further discussions. Kraft Heinz said earlier it would seek to gain an agreement on the terms of a transaction. Unilever shares surged 13 percent to a record in London, valuing the maker of Hellmann’s mayonnaise at more than 114 billion pounds ($142 billion). The Anglo-Dutch company’s stock gained 13 percent in Amsterdam, while Kraft Heinz rallied more than 7 percent in New York at 11:40 a.m. local time. Under U.K. takeover rules, Kraft Heinz has a month to make a firm bid -- or else it would have to walk away for six months.
Sarah Al Suhaimi will become the first woman to chair Saudi Arabia’s stock exchange, the largest bourse in the Middle East. Al Suhaimi was appointed chairwoman of the Tadawul, replacing Khalid Al Rabiah, the exchange said in a statement on Thursday. She is expected to keep her position at NCB Capital, the investment banking unit of National Commercial Bank, a person familiar with the appointment said. Al Suhaimi was the first female head of a Saudi investment bank when she assumed the role in 2014. Al Suhaimi’s appointment is significant for Saudi Arabia where the female unemployment rate is more than 34 percent and women aren’t allowed to drive. Women also need a guardian’s consent to travel outside the country or marry. Change is starting to happen with the number of working women jumping 50 percent between 2010 and 2015, and more Saudi women entering male-dominated fields such as banking and engineering.
A Week in the Financial Markets
Our Homemade Article
by Felix Lim for BESA
What to expect for next week?
The United States Department of Labor will release its non-farm payroll figure on March 3. The nonfarm payrolls represents the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months reviews and the unemployment rate are as relevant as the headline figure, and therefore market's reaction depends on how the market assets them all.
Did you know?
That 2016 Nobel Prize in Economics winner Harvard University's Oliver Hart has proved that it may be effective to privatize prisons, hospitals and other important public institutions. He found out that private investors do an excellent job when reducing costs, but it is often accompanied by an unacceptable decrease in the quality of service. Another this year winner MIT’s Bengt Holmström pioneered in linking the executive’s pay to performance-related metrics. He states that contracts should provide the right balance of risk and incentives. For example, when defining the bonus of Oil & Gas manager it is fair to focus not on the oil price, but to compare the results of the company with the average in the industry.
WRITTEN BY THE BESA RESEARCH TEAM
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