Attack on HSBC


JF-Expert Member
Nov 14, 2006
Activist investor steps up attack on HSBC

Tue Oct 16, 2007 9:16 AM BST

LONDON (Reuters) said:
- U.S. activist investor Knight Vinke stepped up its assault on HSBC Holdings by urging Europe's biggest bank to consider "radical solutions" such as liquidating the majority of its investment bank arm.

Knight Vinke Asset Management, in an open letter to shareholders published in national newspapers on Tuesday, said HSBC was obsessed with diversification and had failed to achieve scale in retail or investment banking.

"The Emperor needs to be told that he is not wearing any clothes: there are almost no synergies associated with being the 'world's local bank'," it said in the letter, citing HSBC's <HSBA.L> marketing slogan. Knight Vinke, headed by Eric Knight, went public on September 6 with a call for HSBC to revamp its strategy to increase its focus on Asia and consider selling businesses.

It has since taken its case to 40 of HSBC's biggest shareholders, the letter said. "The responses we received were far more supportive than we had been led by HSBC to expect," it said, saying only two shareholders refused to meet it. "Most of the rest agreed that there are real areas of concern to be addressed by the board concerning strategy, execution and/or governance."

The letter said the board "needs to consider some radical alternatives" to unlock value in the group, which it says is undervalued by as much as 50 percent. For its capital markets business it should consider a merger with a competitor with global scale or the liquidation of the majority of the business, the letter said. It said the bank's retail and commercial banking strategy was also spread too thin. "HSBC's obsession with diversification has also resulted in a substantial portfolio of minority stakes in companies which it does not fully control."

Knight Vinke has a stake of about 0.3 percent in HSBC and wants to get backing from other investors for its plans -- a strategy it has followed with past campaigns. HSBC has rejected the calls from Knight Vinke, saying its board backs its strategy and it is already in the process of increasing its focus on Asia and other emerging markets. It declined to comment immediately on the latest letter. By 8:40 a.m. its shares were down 0.6 percent at 948-1/2 pence, valuing the bank at about 112 billion pounds.

Knight Vinke has a stake of about 0.3 percent in HSBC and he can pull strings in its entire direction in business. I wonder what measures has the Government in Tanzania taken to encorage wananchi to buy shares which can make their lives easy/worse depending on the markert values at the point of sale. Eitherway major projects can be supported and the finances can be readily available through local ventures.

I would like to encorage DSE (Dar Es salaam Stock Exchange) to enter into joint ventures with would be brokers through the internet where they can tap the resources of any nationality outside Tanzania who wishes to invest. I know they've started but its not enough.
George Soros, 'the man who broke the Bank of England', tells Edmund Conway of his fears for the economy

Last Updated: 12:53am BST 27/05/2008

'This is a period of wealth destruction. The people who make money will be few and far between. There will be a lot more money lost than made." When George Soros - the phenomenally successful hedge fund manager - says this, you know something is wrong, very wrong. And indeed it is. The 77-year-old billionaire sinks back into the sofa in his Chelsea townhouse and exhales.

He has managed to make money almost consistently for over half a century - from his early days as one of the world's first major hedge fund traders to his involvement in Black Wednesday as the man who "broke the Bank of England", and in the latter years generating multi-billion-dollar annual profits throughout the 1990s. The conditions today are almost uniquely dismal, however.

"I think this is probably more serious than anything in our lifetime," he says. In short, his feeling is that the United States and Britain are facing a recession of a scale greater than the early-1990s, greater even than the 1970s. "I think the dislocations will be greater because you also have the implications of the house price decline, which you didn't have in the 1970s - so you had stagflation and transfer of purchasing power to the oil producing countries, but here you also have the housing crisis in addition to that."
Such apocalypticisms would be less worrying were it not that Soros was among the few prominent experts who warned of the dire consequences facing the American economy years ago, when the housing bubble was still inflating.

But even cottoning on to the big economic story early on hasn't meant guaranteed success. He returned from retirement last summer, and no sooner had he started trading than he pulled hundreds of millions of dollars of investment out of the US and the UK. It was enough to help him to a 32pc return last year. But amid the turbulence of 2008, he admits he is barely breaking even. One of the problems is that leverage, the juice that has driven the hedge fund and finance trade in recent years, has all but dried up; the other is that the impending economic slump will be far-reaching and painful.

In the UK, the economic clouds are particularly dark, he says. "House prices have risen over the years and are further away from sustainable than in practically any other country, in terms of household indebtedness and the relationship of house prices to incomes." The slump may be more gentle than in the US, he adds, but it will be more drawn out. "This is going to be compounded by the fact that the financial industry weighs more heavily on the economy than in other countries, because London is the centre of the global financial system, and you have the unfortunate condition that the Bank of England is bound into inflation targeting, and is not in a position to lower interest rates until you have an economic slowdown."

The nice decade, he says, borrowing a phrase from Bank Governor Mervyn King, is over and now the Bank has struck a "Faustian bargain between economic slowdown and inflation". Ah, the Bank of England. There can be few more eventful relationships between one man and a bank than this one. There is no doubt he remains proud of his central role in Black Wednesday, when he helped drive Britain out of the Exchange Rate Mechanism, making around a billion dollars in the process. He is reminded of it by the fact that sterling has recently fallen some 20pc against the euro.

"It's much better than the straitjacket sterling was in when I broke the Bank of England." For which, by the way, he is, rightly, unapologetic: "The ERM would have been abandoned even if I had never been born." The son of the ERM, meanwhile, the euro, looks unbreakable in comparison - by speculators, at least. But as hedge funds and other speculators pile in to the current crude oil boom, the Hungarian-born investor instead focuses on the wider picture - maintaining his estimated $8.5bn (£4.3bn) fortune, much of which he spends on his philanthropic and political ventures - most notably his Open Society Institute, which has a particular focus on Eastern Europe. However, don't try to read any of his politics into his trades, he insists.

"As a hedge fund manager, I do not claim to be serving the public interest. I am in the business to make money," he says. "It's a difficult point for people to understand and there's a general attitude when they see people profiting to say that markets are immoral, or making money by speculating is immoral.
"It's really the job of the authorities to set the rules, and there are times when some people break the rules or engage in improper activities, like the sub-prime mortgages. The impact fell particularly heavily on black and Hispanic minorities.

"It is a scandal, and I think you can blame [former Federal Reserve chairman Alan] Greenspan for not regulating the mortgage industry. But that's very different from speculating in government bonds or financial instruments, and that's a difficult point to get across, but I feel very strongly.
"Markets play a very useful role and they are amoral, not immoral."

We saw last month the Bank of England beefing the big four banks by setting aside 50 billion sterling in case of any emergencies. The world economy is goner be in turmoil, lets wait and see but us as a third world country we should brace for the blunt.
stock and credit crash alert

Ambrose Pritchard-Evans said:
– June 18, 2008
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. "A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist. A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century. RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets. "I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names. "Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate. RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said. US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit. The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said. "The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates. "The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said. Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.

Brown ameomba angalau abaki hadi uchaguzi halafu ang'atuke, alipokuwa anafanya sooo alifikiri ni rahisi. The UK economy is in big trouble hata baada ya banks kupewa 50 billion pounds.
0 Reactions
Top Bottom